Rethinking currency internationalisation offshore money creation and the EU’s monetary governance

Internationalisation of the euro has for decades eluded EU policymakers. In this article, we develop a novel explanation of the subordinate position of the single currency. To this end, we build on the state of the art in International Political Economy (IPE) scholarship and develop a new conceptual framework for currency internationalisation. We argue that internationalising a currency requires actively fostering the offshore creation of private credit money denominated in the currency. By approaching internationalisation as an entirely market-driven process, EU policymakers have neglected offshore monetary governance. This has discouraged rather than incentivised the expansion of offshore euro creation and thereby undermined the objective of euro internationalisation. We use our conceptual framework to study the failure to recognise the importance of offshore euro creation in fostering cross-border value chains, the prohibitive provision of international lender of last resort facilities for offshore euros, as well as the undersupply of euro-denominated safe assets. Our new account of currency internationalisation emphasises the crucial role of the state in successful internationalisation, in particular for fostering the offshore creation of private credit money denominated in its currency.