EU seeks to cut reliance on U.S. dollar, other financial centres
19/01/2021 16:06
* Commission to make proposals next year
* Trump's Iran deal withdrawal exposed EU
* Commission offers no details on plans
By Jan Strupczewski
BRUSSELS, Jan 19 (Reuters) - The European Commission said on
Tuesday it would seek to boost the international role of the
euro and build European financial infrastructure so that the EU
becomes more independent of outside financial centres and the
dominance of the U.S. dollar.
The initiative, which is an announcement of a long-term
strategic direction rather than a action plan, follows Britain's
EU departure, which took Europe's biggest financial hub -- the
City of London -- outside the EU's jurisdiction.
"With the withdrawal of the UK from the EU, there is a
strong need and opportunity to develop domestic market
infrastructures," the Commission said in a paper addressed to EU
governments, the EU parliament and the European Central Bank.
The EU is also still smarting from the fallout in 2018 when
U.S. President Donald Trump withdrew from the nuclear deal with
Iran and reimposed sanctions, leaving the Europeans unable to
continue to trade with Iran under the terms of the accord.
EU-based securities depositories Clearstream and Euroclear
were affected by the Iran decision and the EU-based SWIFT bank
payment and messaging system had to disconnect Iranian banks.
"The EU should develop measures to shield EU operators in
the event a third country compels EU-based financial-market
infrastructures to comply with its unilaterally adopted
sanctions, or through other means that interfere with legitimate
EU operations," the Commission said.
But the EU executive arm offered no immediate solutions,
saying only it would first assess EU vulnerabilities and then
"develop tools to counteract" them.
The Commission said that to strengthen the effectiveness of
the EU's own sanctions regime, it would review how they were
circumvented, including via cryptocurrencies and stablecoins,
and make proposals in 2022.
BEYOND BREXIT
The Commission will also reach out to market participants to
encourage trade in euro-denominated debt securities, commodities
and other instruments, especially that the EU is to issue 750
billion euros ($910.65 billion) of joint debt to fund its
post-pandemic recovery.
EU market players should cut their reliance on clearing
houses, called central counterparties, outside the EU and use
more the ones based in the 27-nation bloc, it said.
The EU also wants to develop euro-denominated energy
indices, increase the attractiveness of euro bonds through a
reform of its "MiFID" securities and benchmark rules. The ECB is
also looking at the possibility of launching a digital euro.
The Commission, ECB and the bloc's banking and markets
watchdogs will work with industry to assess "possible technical
issues" related to shifting derivatives positions from London to
the EU, the Commission paper said.
This means the EU is unlikely to grant UK financial services
access to the EU beyond the temporary access it has granted for
derivatives clearers to mid-2022.
When looking at company takeovers, the Commission would also
check whether they make an EU company "more prone" to complying
with sanctions from third countries, the paper said. There is
also a need to cut the bloc's "excessive reliance" on foreign
investment banks and funding in foreign currencies, it said.
($1 = 0.8236 euros)
(Reporting by Jan Strupczewski, editing by Robin Emmott)
((jan.strupczewski@thomsonreuters.com; +32 2 585 28 64; Reuters
Messaging: jan.strupczewski.reuters.com@reuters.net))