This paper proposes a theoretically-informed and empirically-grounded cognitive approach to analyse how financial elites from China, the Gulf Cooperation Council states and Brazil interpret the euro vs. dollar debate. At the theoretical level, we argue that the debate should be reframed in order to capture not only the material, but also the ideational footprint of the euro, as well as to better conceptualise change in the International Monetary System (IMS). Our empirical work shows that the euro is perceived by financial elites as a useful diversification tool to avoid over-exposure to dollar weaknesses. However, despite its appeal as a valuable investment alternative, the European currency has a series of structural flaws that prevent it from substituting the dollar as the main international currency. Therefore, in purely material terms, the euro-sceptical literature is correct. However, we also find that the hitherto material inroads of the euro, while limited, have been sufficient to ideationally convince these elites that a multicurrency IMS is possible and might be more stable (and therefore preferable) to current dollar unipolarity. Therefore, the euro-optimist literature is far from wrong when it argues that the creation of the euro represents a challenge to the greenback, for it could be a stepping stone towards the formation of a multipolar IMS.

Federico Steinberg
Elcano Royal Institute and Department of Economics, Universidad Autónoma de Madrid

Miguel Otero-Iglesias
ESSCA School of Management, Centre for European Integration, Lunam University

(*) This paper was originally published in the Review of International Political Economy (March 2012). Read the full text at http://www.tandfonline.com/doi/abs/10.1080/09692290.2012.658736