By Francesco Guarascio
BRUSSELS (Reuters) – The European Commission published on Wednesday non-binding proposals to boost the role of the euro in international payments and its use as a reserve currency to challenge the dominance of the dollar.
The move follows the decision by the United States to withdraw from an agreement with Iran on its nuclear program. That has forced many European companies to stop trading with Iran to avoid U.S. sanctions.
The European Commission called on companies and states to increase their use of the euro in energy contracts. It said it would study possible measures to promote the European Union currency in financial and commodity markets.
“The decision to use a currency is ultimately made by market participants,” the Commission acknowledged. The most effective way to widen the euro’s international role was to overhaul the 19-country currency union and adopt financial reforms that have been blocked for years by conflicting national interests.
In the 20 years since its adoption, the euro’s international role reached its peak at the beginning of the last decade. Its use dropped during the 2007-08 financial crisis.
The euro has not recovered since, and the dollar remains the currency most used in the world. Sixty percent of sovereign debt issuance and global foreign exchange reserves are in dollars. The euro is the second global currency, but its share of each market is just 20 percent.