It is hard for the euro to be a reserve currency when the euro zone has excess savings

Since 2012, the euro zone has had excess savings, resulting in an external surplus and dwindling external debt. This makes it difficult for the euro to play an international reserve currency role: euro-denominated bonds are only available for non-residents if euro-zone residents sell these bonds to buy assets in the rest of the world (in which case the euro zone’s gross external debt and gross external assets rise in parallel ). It would be easier for the euro to be a reserve currency if the euro zone had an external deficit and net external debt, like the United States. If we look at the euro’s share of global foreign exchange reserves, we see that it has declined significantly since its peak in 2009.