European officials have been debating the need to be more autonomous and less dependent on other parts of the world for several years, but talks accelerated in the wake of the Covid-19 pandemic and then after Russia’s invasion of Ukraine.
Peter Adams | Stone | Getty Images
European Central Bank working on a digital currency as the region tries to insulate itself from tensions with China and the United States.
The central bank launched an investigation into the feasibility of a digital euro in October 2021. This fall, EU heads of state will have to decide whether the ECB should proceed with next steps, including testing the technical arrangements required by the European Union. Digital Euro can be spent.
“The ECB is concerned that the euro zone will end up in a geopolitical and economic sandwich between the big tech companies of the United States and the payment systems of China without a digital euro. Right now, Europe lacks a digital platform,” Guido Zimmermann, senior economist at German bank LBBW told CNBC on Wednesday.
ecb president Christine Lagarde acknowledged that point during a speech in November. “The entry of big tech into payments could increase the risk of market domination and dependence on foreign payment technologies, with consequences for Europe’s strategic autonomy,” he added.
“Already more than two thirds of European card payment transactions are handled by companies headquartered outside the EU,” he added.
master card, Visa, paypal, Alipay and UnionPay make up the top global companies for payments. None of them is European. The first three are American and the last two are Chinese.
It is a fixation for some to ensure the sovereignty or power of the EU.
Daniel Gross
Distinguished Fellow, CEPS
Zimmerman said politicians in Europe do not want consumers or firms in the region to depend on US Big Tech companies for payments.
He said European authorities are also trying to avoid a situation in which China becomes the sole determinant of payments on the “Digital Silk Road” – a landmark Chinese project to invest in digitization around the world.
“The goal, I think it is a fixation for some, is the main driver for the digital euro in Brussels, and in Frankfurt, to ensure the sovereignty or power of the EU,” Daniel Gross, distinguished fellow at the think tank CEPS , told CNBC via email.
pursuit of sovereignty
European officials have been debating the need to be more autonomous and less dependent on other parts of the world for several years, but talks have since gained momentum. COVID-19 pandemic and then Russia’s invasion of Ukraine.
“The ECB’s recent speeches and publications for the digital euro have increased relevance to preserve geopolitical sovereignty. This certainly has to do with the outbreak of the Ukraine war and rising global geopolitical tensions,” Zimmermann said.
Lagarde said in November that a digital euro is “a common European project” and that “it would essentially serve broader public policy objectives, such as strengthening Europe’s strategic autonomy.”
euro vs us dollar
Recent discussions about autonomy in Europe include the raw clay and magnet value chains, which are seen as critical to the transition to a carbon-neutral society. They have also included energy supplies, medical equipment and electric cars.
“Concept [strategic autonomy] It has its roots in the defense and security sector of the European Union. However, it has become increasingly prominent in recent years as a result of the changing geopolitical context characterized by increased competition between the US and China,” Teneo Managing Director Antonio Barroso told CNBC.
But there’s more behind Digital’s plan euro,
Zolt Darvas, senior fellow at the Brussels-based think tank Brueghel, attributed the ECB’s action in this area partly to “growing demand for crypto assets” and the fact that several other central banks are also considering the development of a digital currency. have been
“The ECB probably would not like to be left behind in terms of adopting new technologies,” he said.
