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The Political Economy of Failure: The Euro as an International Currency

Schwartz, H. (2014). The Political Economy of Failure: The Euro as an International Currency. Review of International Political Economy, 21(5), pp. 1095-1122. doi: 10.1080/09692290.2014.891242


How do international currencies get established and consolidated? What domestic and international political foundations support an international currency? And what kinds of macro-economic flows enable an international currency? In this essay we consider these perennial questions of modern IPE scholarship in reverse order to ask whether the euro could ever have become, or seek to become, a true international currency rivalling the US dollar, used not only for passive foreign exchange reserves but also as a major commercial currency outside the EU. We argue that the EU lacks the will, the ideas and the capacity to promote the euro into the status of an international currency. In this article, we concentrate on this final issue of capacity, as the will and ideas issues have already been well explored. Capacity is an issue coeval with, if not prior to, the first two issues. The EU's current institutional arrangements and its economic geography create macro-economic consequences that diminish the euro's capacity to operate as a top currency. These conflicts go beyond the well-recognized issue that the euro-zone is not an optimum currency area. Examining the euro's debilities sheds light not only on the euro's (in)capacity to rival the dollar as an international currency, but also on the future of both the euro and the dollar in the aftermath of the euro-zone crisis.

Publication Type: Article
Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis in Review of International Political Economy on 19 Mar 2014, available online:
Publisher Keywords: euro, euro-zone crisis, international currency, international monetary and financial system, global political economy
Subjects: H Social Sciences > HB Economic Theory
J Political Science
Departments: School of Policy & Global Affairs > International Politics
SWORD Depositor:
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