Why China’s Yuan, not the Euro, could become the dominant global currency

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In many ways, it might seem like the obvious thing the Euro is used by more people than there are Americans using Dollar.

So surely that should mean that the Euro becomes a dominant currency, right? After all, both trading blocks are made up of very big spenders indeed. So surely the Euro should be in ascendancy.

It hasn’t quite happened just as yet. What we have seen is the Euro when it was launched, was launched as a currency that represented a very disparate range of countries with very different fortunes.

That meant because you had to have one interest rate to represent all those countries what you saw was their economies doing wildly different things. You had an interest rate that was set to suit the economies largely of the largest countries like Germany and France.

Whereas you needed relatively low interest rates because you had problems of German unemployment that meant there was a property boom in Dublin instead because the Irish economy needed much higher interest rates.

So what you had there was a set of economies all pulling in different directions which damaged initial confidence in the Euro. Perhaps things would have settled down but along then came the financial crisis and there were concerns after that about some of the members of the Eurozone. In particular, of course, Greece and whether that could upset the whole project.

That has brought questions over the stability of the Euro and its future as well. At the moment, what you are seeing is the fact that the Euro hasn’t really become that challenge to the Dollar that indeed many thought it would do.

In fact, many central bankers when the Euro was launched around the turn of the millennium did express openly their concerns that this could threaten the Dollar’s position. Not quite yet. We might see the Yuan gets there before the Euro.

The Euro always was going to be an experiment and it’s a bit harsh to judge the fate of the Euro whether or not it has been a success on the back of, frankly, a few years’ experience.

Will the Euro last? It has lasted so far and it has been through a pretty major test over the last decade. If you look at the what happened with the financial crisis If you look at the what happened with Greece, in particular, and the way Germany and the richer neighbours had to turn around and say “Well, what are we going to do about this crisis?”

I think it is going to last but we have seen what has happened with Brexit and that could, of course, cause nerves and restlessness across the continent. We are seeing it already.

I don’t think you can take anything for granted when it comes to the Euro but I think for it to fall apart now or in the near future would be absolutely Catastrophic for the economies’ concerns.

I think what you would see would be central bankers and politicians do everything they can to ensure this experiment does continue for a while, at least.

Produced by Claudia Romeo. Filmed by Leon Siciliano. Special thanks to Fraser Moore.