The Euro by default. The EU wants to abandon the dollar

Евро по умолчанию. ЕС хочет отказаться от доллара

EU launches de-dollarization

The European Commission has published a plan to strengthen the global role of the Euro in strategic markets.

The European Commission has published the plan for strengthening the international status of the Euro. Brussels proposes to abandon the dollar in oil trading, gas and strategic sectors.

The European Union to make the Euro more attractive to international transactions and global financial system. Корреспондент.net tells details.

It’s time for euros

Next year the Euro will be 20 years old. The single European currency is more important than any national currency after the Second world war. However, in comparison with the dollar, the Euro value is small.

Approximately 60% of global financial turnover falls in the American currency. And Central banks around the world hoard their foreign exchange reserves mainly in dollars – the Euro accounted for about 20 percent.

5 December the EC released a plan to strengthen the global role of the Euro, which are intended to make the common European currency more attractive to international payments and for use in the global financial system, and expand the use of the Euro in the oil and gas markets and in strategic sectors such as Aeronautics.

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In the working report on the promotion of the international role of the Euro in the field of energy notes that historically, the US dollar dominates the European trade in hydrocarbons.

The EU import of energy to Evol 300 billion per year, and 85 percent of these transactions are paid in American dollars. And despite the fact that only two percent of imports go to the US.

The European Commission invited the EU member States in international agreements, to prescribe the Euro the default currency.

“The time has come when the Euro needs to develop its global role. The Euro should reflect the political, economic and financial weight of the Euro area and to maintain a balanced, rules-based international political and economic order”, – quotes RBC Vice-President of the European Commission Euro and social dialogue Valdis Dombrovskis.

The European Commission has published several policy documents on expanding the role of the Euro. Are not explicitly referred to the need of abandoning the dollar, but implied.

So, the document notes that European companies still are doing business on strategic markets in the U.S., even among themselves.

“This exposes the business of foreign exchange and political risks, such as unilateral decisions that directly affect dollar transactions”, – is spoken in the report of the EC.

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European Commission President Jean-Claude Juncker earlier called “absurd” a situation where European companies are buying European planes for the American currency instead of their own.

All transactions at the benchmark grades of oil, such as Brent, WTI, Dubai and Urals are in dollars. The gas market is more favorable for the Euro, as transactions in the European gas hubs are in British pounds and euros. However, in other cases, in dollars.

What does the European Commission:

  • to include in agreements with third countries on the supply of energy provision for the use of the Euro as the default currency
  • to expand the pool of euroactive, available to international investors, in particular through private sector bonds, secured by state securities in the Euro zone
  • to create a European system of instant payments
  • to begin consultations with industry players to find ways to expand trade in the Euro in the markets of metals and minerals, agricultural products, transport sector

This has led a trump

US President, Donald trump declared economic war the tenth part of the world, inhabited by nearly two billion people. The total volume of GDP of these countries exceeds 15 trillion dollars.

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American authorities are thus trying to “cleanse the world”, fighting against human rights violations, terrorism, nuclear weapons, corruption, or unfair trade policies and the theft of intellectual property.

Among them – China, Russia, Iran, Venezuela, Cuba, Sudan, Zimbabwe, Myanmar, Democratic Republic of the Congo, North Korea and other countries against whom the us authorities have imposed sanctions. In addition, China, Pakistan and Turkey, though not under sanctions, but suffer from other punitive economic measures.

The economic sovereignty of these countries may be at risk without access to financial instituon USA. Why Russia and China have developed their own versions of SWIFT, a worldwide network allowing it to conduct international financial transactions among thousands of banks.

Trump has frozen a trade war with the EU, but it applies to important European trading partners such as Iran and Russia.

So, Russia confirmed its plans for the use of European currencies for all business transactions with European companies, including the purchase of oil and gas.

For transactions with Iran, the EU is developing a plan to create a “special mechanism”.

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“The EU will create a legal entity to conduct legal financial transactions with Tehran, and this will allow European companies to continue to trade with Iran in accordance with the legislation of the European Union”, – said the head of EU diplomacy Federica Mogherini.

One of the ideas is to create a government-funded organization that would be less vulnerable to U.S. actions than a private company or the Bank, to organize the exchange of Iranian oil products from Europe and possibly Russia and China.

Recall, the US sanctions imposed against Iran after the release of the trump of the nuclear deal, makes it virtually impossible to conduct business with Iran for any company, or otherwise present in the United States – including having a correspondent account in us banks.

Note that even before the arrival of the trump in White house leadership of China, the second largest economy in the world, has set a goal to increase the Renminbi’s role in the world, particularly in international trade transactions involving companies from China. Including talking about the oil trade. Policy and trump, of course, only strengthens Beijing in the correctness of his decision.

Experts on sanctions tirelessly sounding the alarm about the fact that the US is abusing the position of the dollar in the international financial system.

Much more energetic after starting to apply fiscal measures and trade sanctions against its trading partners, the administration trump provoked active attempts to create a financial architecture that are needed in order to challenge the dollar, said Daniel Drezner, Professor of international politics school of law and diplomacy of a name of Fletcher at tufts University.

“If China, Russia and the EU will join forces to create an alternative payment system, this will pave the way for much closer cooperation without the participation of America. Although it can be quite costly initiative, aggressive behavior of the administration, trump will increase the likelihood that these entities will want to incur such costs,” he said.

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