Could sustainable finance be key to unlocking world reserve currency status for the euro?

Authored by Montana Craven, ESG Intern Introduction The euro is yet to convince the world that it could be a viable alternative to the US dollar as a reserve currency, falling over the hurdles of fiscal unity, growth outperformance and political stability. However, sustainable finance currently offers an alternative avenue for the fission of euro-denominated …read more

COVID-19 and Currency Risk

From 2008 to COVID-19, currency market volatility trended down. Volatility was elevated in 2015-2017 after its 2014 record low (measured by CVIX), but this fit within the trend, as December 2019 levels tested the previous record. This trend can be attributed to: convergence in the drivers of currency value like growth and inflation aligned monetary …read more

Agreekment: Mapping out the flows

• The initial details of the bail-out suggest that over the next three years, Greece’s hard-line creditors could be largely ‘paid-off’, leaving the door open to debt renegotiation further down the line.

• While Greece is required to make further sacrifices in the form of asset privatization, the deal postpones economic and humanitarian consequences of Euro exit.

• As always, there are significant uncertainties surrounding long run feasibility including primary surplus and asset sale revenue assumptions.

Circular Flow of Euros

• Courtesy of the ECB we have allowed a costless exit route to any middle class and wealthy Greeks to park their money elsewhere in the Eurozone, free of charge, with full protection.

• There is no formal mechanism to prevent this circular flow of Euros short of the ECB putting a maximum limit on ELA financing to the Bank of Greece and thus setting the pre-conditions for the erection of capital controls in Greece.