ALPBACH, Austria (Reuters) - Euro zone countries need to increase efforts to establish a single capital market to defend their interests and counter the dominance of the U.S. dollar, a veteran European Central Bank policymaker said.
“The economic policy of the United States is currently one of the substantial risks to the global economy,” Austrian central bank governor Ewald Nowotny told journalists at an economic forum in Alpbach, Austria.
He said an unpredictable trade and economic policy, biased rulings in U.S. courts and the dominant role of the U.S. currency were bad for Europe and must be met with measures that strengthen the euro.
“The (U.S. dollar’s) role is very strong, you shouldn’t be under any illusions,” Nowotny said. There was an increasing interest “to free oneself from a one-sided dominance.”
As one example, he listed the European Union’s political initiatives to protect its companies from U.S. sanctions on Iran. They did not work because the firms’ priority was to protect their businesses, which is why they complied, he said.
“I therefore believe it is very important that we strengthen and intensify the single European capital market project,” said the policymaker, who also sits on the ECB’s Governing Council.
The European credit sector would have a chance to flourish and the common currency could increase its role as a foreign exchange reserve if its liquidity were comparable to that of the U.S. dollar, Nowotny said.
“What is crucial is that the economic foundations are laid step by step in order to achieve a certain degree of de facto independence.”
Reporting by Kirsti Knolle; Editing by Peter Cooney