Depicted more often than not these days as the number 1 enemy of the global economic recovery, even we at The Corner cannot help but wonder the big what-if question: couldn't the European Monetary Union just manage to orderly dismantle itself before it causes further damages?
After checking the figures from the Review of the International Role of the Euro paper by the European Central Bank, the answer is that it would be a lot harder than most pro-euro breakup commentators know or tell us. The report was published online this week and examines developments in the use of the euro by non-euro area residents during the year 2011. It reflects a picture of a currency much more alive than generally supposed. The report finds that the international role of the euro remained relatively resilient during 2011 when compared with other major international currencies.
The share of euro-denominated instruments, in fact, fluctuate
d only marginally between 2010 and 2011 in the market segments examined. The share of euro-denominated instruments decreased by 0.4 percentage points in global holdings of foreign exchange reserves when adjusted for valuation effects. With regard to the turnover in foreign exchange markets, the share of the euro increased by around one and a half percentage points, while it dropped by 1.3 percentage points in the stock of internationally issued debt securities.
Of course, any common currency project may be a good idea, provided the usual fiscal and financial structures are built in place and functioning. It is astonishing to think how far the euro has reached without them…