Finance Ministers (FMs) of European Union (EU) member nations recently met in Copenhagen and agreed on a road map for launching a digital euro currency, an electronic wallet backed by the European Central Bank (ECB), which may turn an alternative to the US-based credit card systems.

The decision is expected to give the ministers a say on whether a digital currency is issued and how many such euros each resident will be able to hold, which is seen as crucial for assuaging fears of a run on bank deposits.

EU Finance Ministers recently met in Copenhagen and agreed on a road map for launching a digital euro currency that may turn an alternative to the US-based credit card systems.
The decision is expected to give the ministers a say on whether a digital currency is issued and how many such euros each resident will be able to hold.
A compromise was reached on the procedure for setting the holding limit.

The meeting was also attended by ECB president Christine Lagarde and European Commissioner Valdis Dombrovskis.

“The compromise that we reached is that before the ECB makes a final decision in relation to issuance…there would be an opportunity for a discussion in the Council of Ministers,” Paschal Donohoe, who chaired meetings of Finance Ministers, told a joint press conference.

Donohoe, Lagarde and Dombrovskis also celebrated a compromise on the procedure for setting the holding limit, without offering details, global media reported.

Discussions on a digital euro gathered momentum this year as the EU is now keen to reduce its dependence on other countries in strategically important sectors.

But the ECB is yet to secure legislative approval for it, with lawmakers and bankers complaining it may erode banks’ coffers, may prove expensive or reduce privacy.

Though the European Commission proposed digital euro legislation in June 2023, the other two institutions that have to sign off on it, the European Parliament and the European Council, have yet to do so. The Council aims at wrapping up its side of the work by the year end.

“The digital euro is not just a means of payment, it is also a political statement concerning the sovereignty of Europe and its capacity to handle payment, including on a cross-border basis, with a European infrastructure and solution,” Lagarde told the press conference.

“The digital euro must guarantee the strategic autonomy and resilience of our financial system in the face of external threats. In short, it is a tool to defend our financial sovereignty,” said Italian Minister of Economy and Finance, Giancarlo Giorgetti, calling the joint Commission-ECB proposal “a solid compromise, which takes into account political and economic factors”.

Giorgetti feels having clear and appropriate spending limits on holdings is essential as “it will encourage their use, prevent them from becoming a sort of store of value, and allow for a meaningful response to private sector concerns about the potential impact on financial stability.”

Today “we have reached a political agreement on how to define the entire process between the ECB and the member states. The hope is that the digital euro project will materialise quickly,” he added.

Fibre2Fashion News Desk (DS)