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Is strategic, monetary independence Europe’s impossible dream? | View

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By Alina Bârgăoanu

Where do we draw the line between working without the United States and working against the United States, given the war of words over defence strategies and, lately, on a financial front?

Alina Bârgăoanu Romanian Communication scholar currently affiliated with Center for European Studies at Harvard University

Where do we draw the line between working without the United States and working against the United States, given the war of words over defence strategies and, lately, on a financial front?

The dust has only just settled after recent calls by French president Emmanuel Macron for a European army to protect us Europeans “against Russia, China and the United States.” After raising eyebrows amongst officials and analysts alike on both sides of the Atlantic, the statements have since been softened somewhat; “don’t take them literally,” “it’s an empty phrase,” “do you imagine the French giving up their Ministry of Defence?” And, of course, the eternal German question: “where will the money come from?” While one can agree with all these throwaway comments, one still can wonder why a politician who is media savvy and excels in public communication would resort to such fighting talk with the US.

The surprise around Macron’s comments is amplified by the fact that calls for an EU army or, to phrase it another way, “strategic autonomy”, have been connected with those for “financial autonomy”; a so-called “European Monetary Fund” or “an independent SWIFT system”.

Writing in the German newspaper Handelsblatt in August, the German Foreign Minister Heiko Mass exposed the transatlantic rift over the Iran deal, underlining that: “It is essential that we strengthen European autonomy by setting up payment channels independent of the US, creating a European Monetary Fund and building an independent SWIFT system.”

Are these comments not to be taken literally, either? Don’t be so sure, especially given several statements in the same vein have followed them. On 26 November, during a speech at the 33rd International ZinsFORUM in Frankfurt, Klaus Regling, the managing director of the European Stability Mechanism (ESM), touched upon the issue of “the international role of the euro.” German Finance Minister Olaf Scholtz, who was addressing the students of the Humboldt University in Berlin on 28 November, stated that: “We want to further develop the ESM into a powerful European Monetary Fund."

References to the Trump administration policies were made on all these three occasions, but those in the ESM managing director’s speech stand out. “Shouldn’t Europe become more independent, now that the US administration is questioning multilateralism, and is not shying away from using the dollar as a ‘weapon’ to achieve foreign policy goals?” Regling asked.

He continued: “Unfortunately, the Trump administration is increasingly using the dollar as a tool for foreign policy goals. The goal should not be to replace the dollar. We should aim for a multipolar system, in which several currencies have a comparable role, including the dollar, euro and renminbi.”

He concluded that: “…it is time to strengthen the international role of the euro."

These unveiled references to the Trump administration “using the dollar for foreign policy goals” raise three key points.

First of all, the dominant role of the dollar in the financial system is hardly anything new and it can hardly be associated with one administration. We need only remember the outburst in the 1960s by then French Finance minister Valéry Giscard d'Estaing about the “exorbitant privilege” of the dollar as global reserve currency.

Secondly, one can persuasively argue that the dollar (and its dominant position in the global financial architecture) has been one of the strong pillars of the global liberal order, a return to which is much longed for - at least rhetorically - these days. One cannot simultaneously agitate for “restoring the global order”, the “multilateral system” and for challenging one of its pillars, the dollar.

Thirdly, one could argue that a multilateral system and a multipolar one are not exactly the same thing.

The expression “the international role of the euro” became the official language of the European Commission, which published its Recommendation on the international role of the euro in energy transactions’ earlier this month.

During a conference hosted by the Harvard Kennedy School on 3 December, Federica Mogherini, the High Representative of the European Union for Foreign Affairs and Security Policy, told the audience that: EU could not accept assaults on its sovereignty by secondary sanctions as a result of the US withdrawal from the Iran nuclear deal.

“There are people asking why we buy oil in dollars and not in euros if we don’t buy it from the US, which is not a question I like to hear," Mogherini said, underlining that these issues, originating in a non-proliferation debate, have spill overs into the financial realm. Furthermore, they have nothing to do with Iran or with the nuclear problem, but may become a financial problem. The side effect and the corresponding risk of this would be opening up competition between the dollar and the euro and “separating the US and the EU in financial terms."

For the High Representative for Foreign Affairs and Security Policy, these are questions that “she doesn’t like to hear." And yet, not only were they asked, but they also received an official response in the ‘Recommendation on the international role of the euro in energy transactions.’ Is this document a turning point? Is its importance overblown? Does the Commission have the green light of the European Council for bolder moves on this front?

Its consequences cannot be foreseen right now. As Henry Kissinger underlined in a recent interview for Harvard Kennedy School’s Belfer Center, the lesson of the First World War was to “not get into situations whose consequences you cannot foresee.” So, why hurry now and come up during the span of only one month with a twin proposal of strategic autonomy (aka European army) and financial autonomy (aka dedolarisation)? The European Union’s response to the 2008-2009 global crisis was encapsulated in the expression “too little, too late."

Will we later see this moment as being the opposite: “too much, too soon?"

Alina Bârgăoanu is a Romanian Communication scholar currently affiliated with Center for European Studies at Harvard University. Her research project is focused on ‘The East-West Divide in the European Union and Consequences for the Transatlantic Relationship’

Opinions expressed in View articles are solely those of the author.