- "There is actually reason to fear that the euro may lose its international currency status due to the appearance of sovereign risk on the public debts of a certain a number of countries and the deterioration in the quality of the ECB’s balance sheet. Given the amounts of euro-denominated assets held by non-residents, a sale of these assets would lead to a huge crisis."
- "For the time being there is no reduction in the share of the euro in official reserves, but the capital flows from non-residents into bonds and liquid assets in the euro zone have declined."
- "However, quite a large number of factors indicate that the euro will keep its international currency status:
· only French and German public debts are widely held outside Europe;
· non-residents hold a large amount of euro-zone equities, and European listed companies are very international;
· the quality of the Federal Reserve’s balance sheet is far worse than that of the ECB’s balance sheet, and the financial situation of US households is far worse than that of European households;
· the US external deficit is reappearing, which is likely to create mistrust towards the dollar;
· the euro zone will definitely adopt a new, far more substantial governance, i.e. supervision of budgets and macroeconomic situations."
Natixis Flash Economics 322 20100623
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