The international role of the euro and the Covid-19 pandemic – crisis experience and outlook for the future

Purpose: The main study objective is to examine the impact of the COVID-19 crisis on the euro’s international position, primarily in comparison with the financial and debt crisis, against the backdrop of the overall evolution of the euro. Design/methodology/approach: In accomplishing this objective, a critical study of international economics and finance literature was carried out, followed by an analysis of mainly the European Central Bank data characterizing the euro as an international currency, against other international currencies. To confirm the main research hypothesis - the COVID-19 crisis caused a decline in the euro's importance as an international currency - an analysis of the composite index of the euro's international role was conducted. Findings: In the eurozone authorities' response to the COVID-19 crisis, crucial to mitigating the effects and facilitating economic recovery were the mutually reinforcing stability-oriented fiscal and monetary policy instruments. Indicated is that the above instruments impacted positively the international role of the euro in some of its functions, and contributed to the growth of its composite index in 2020-2022. The main research hypothesis was therefore not confirmed. During the global financial and debt crisis, the euro area was hit by asymmetric shocks, to which its authorities failed to react appropriately. This led to deep economic, social and political divisions, and consequently to a decline in the composite index between 2009 and 2016. Although not all crises are equally severe, the eurozone authorities can adapt to them easily. The prerequisite entails a joint, swift and decisive response with the right policy tools, often contributive to the international role of the euro. Faced with new shocks since 2022, such as Russia's invasion of Ukraine, the euro area authorities should intensify their commitment to fostering the common currency’s development. To strengthen its internationalization, steps should be taken to complete the Capital Markets Union, complementing it with, first and foremost, a European safe asset and a fully-fledged banking union, along with the adoption of a central bank digital currency. The target audience here is the eurozone’s policy makers and institutions. Originality/value: The article highlights the euro's weaknesses, particularly against the U.S. dollar, which prevent its international role from increasing, and formulates a set of recommendations aimed at breaking this deadlock. Keywords: euro; currency internationalization; coronavirus crisis. Category of the paper: Research paper.