Economists: Europe must get rid of dependence on Visa and Mastercard — a digital euro would strengthen monetary sovereignty

60 prominent economists have asked members of the European Parliament, through an open letter, not to dilute the provisions of the current digital euro project, warning that otherwise the euro zone will lose control of its own currency and become even more dependent on American digital payment service providers.

Economists say that Europe should no longer depend on Visa and Mastercard. Archive photo

The letter was initiated by the think tank Sustainable Finance Lab and Triodos Bank, both entities from the Netherlands, and was signed by numerous economists and personalities from the academic world, states BNR advisor Cristian Bichi.

The appeal was publicized in view of an upcoming meeting of the Economic and Monetary Affairs Committee (ECON) of the European legislative forum, where the proposed amendments to “The digital Euro legislative package”, before its presentation to the full Parliament in the middle of this year.

“If the digital euro project is approved, pilot tests will be carried out in 2027, and the issuance of the new digital currency will take place in 2029, according to the estimates of the European Central Bank (ECB)”states the BNR advisor.

According to him, the European Council supports the ECB's decision to launch the digital euro, but at this moment it is not clear whether the European Parliament will give its consent, as there are differences of opinion among its members regarding the single digital currency. Against this background, the signatories of the open letter point out that the existence of “a strong digital euro is not a nice to have, but an essential precaution for European sovereignty, stability and resilience”.

Europe is too dependent on Mastercard and Visa

Economists warn that Europe's payments system is currently dominated by a few non-European corporations and that in thirteen European Union countries, “core retail payments now rely on international card schemes (not like Visa and Mastercard, plus platforms like PayPal) – without any domestic alternatives“.

“The signatories of the open letter do not get bogged down in diplomatic niceties, stressing that “this reliance on foreign (US) payment providers exposes European citizens, firms and governments to geopolitical influences, foreign commercial interests and systemic risks beyond Europe's control”. Without naming anyone, the letter warns that “recent developments have made this more than a hypothetical risk.” writes Cristian Bichi, emphasizing that, “indeed, there are more and more economic analysts and policy makers who no longer consider it a fanciful hypothesis the possibility that, under political pressure, American payment service providers will unilaterally change the rules of the game (payment terms and costs, affecting economic life in a large part of the European Union. And this would harm not only financial intermediaries, but also ordinary citizens who use cards or phone applications to make payments).

A digital euro would protect Europe's monetary sovereignty

Referring to the advance registered in recent years by stablecoins, which are overwhelmingly linked to the US dollar, the signatories of the letter sent to the European Parliament also warn that “without a meaningful digital euro, our (nn Europeans') dependence will deepen as US-backed private digital currencies gain ground”.

Compared to the situation described above, the authors of the call appreciate that “Europe will lose control over the most fundamental element of our economy: our currency. A robust public digital euro is our only defense”.

According to the letter, the digital euro will have to work both online and offline, be designed to protect privacy and be available to all European residents, including those with bank accounts at commercial banks. Economists point out that if many companies will be excluded or allowed to refuse the digital euro, or if the holding limits will remain so low that the new digital currency will not be seen by citizens as actually fulfilling the function of storing value, then the digital euro will not reach its potential.

“In the words of economists, Europe will have created a digital currency, but not one that matters. For the signatories of the call, the digital euro is a public good. That is why it is necessary for political decision-makers to resist the short-sighted efforts of financial lobbying and not let the new European digital currency become, as a result of a compromise, only something symbolic. The open letter ends with the warning that: “Europeans may not get a second chance. The problem facing EU decision-makers is simple: will Europeans exercise control over their currency in the digital age, or will we will we let others control it for us?”, notes BNR advisor Cristian Bichi.