The EU commission on Wednesday presented its plan to reduce the dollar’s overwhelming dominance of the global economy and to strengthen the role of the euro, particularly for energy transactions.

European capitals are increasingly frustrated with the global dominance of the dollar as a reserve currency, which hands the United States unparalleled diplomatic and economic power in a globalized world.

Governments, banks and multinationals are at the mercy of US authorities, which have the legal power to switch off access to the world economy if any company or country should run afoul of Washington.

“In the current context of incertitudes — trade conflicts, extra territorial sanctions by the US — the market participants are looking for alternative,” said EU economics affairs commissioner Pierre Moscovici at a news conference in Brussels.

The most frustrating recent example for the EU is Iran, where international companies that choose to trade or invest with the Islamic Republic despite US sanctions are vulnerable to punishment by Washington in part through their use of the dollar.

The single currency — born on January 1, 1999 — “should reflect the political, economic and financial weight of the eurozone”, the single currency bloc of 19 EU countries, said European Commission Vice-President Valdis Dombrovskis.

The EU executive arm intends to hold consultations with market actors, in particular on imports of oil, gas and other commodities where the dollar is king.

In the summer of 2019, the Commission will report the results of the various consultations and explore options.

In the air transport sector, where aircraft are systematically sold in dollars even if they are built by the European Airbus, Brussels would like to “launch a consultation to see what actions are possible to promote the role of the euro.”

The share of the euro in global holdings of foreign exchange reserves currently stands at around 20 percent, according to the commission. The US dollar, by comparison, is over 60 percent.

While no other currency exceeds five percent, the EU is also worried about the rise of the Chinese yuan, which Beijing hopes will one day become a reserve currency on par with the dollar.

After a strong start, the international stature of the euro suffered greatly during the eurozone debt crisis as the financial markets lost faith in the single currency.

(Source: AFP)