By one estimate, military alliances boost the share of a currency in the partner country’s foreign reserve holdings by about 30 percentage points. [29] See Eichengreen, B., Mehl, A. and Chiţu, L., “Mars or Mercury? The Geopolitics of International Currency Choice”, Economic Policy, forthcoming. This is not a new phenomenon.
Given the severe downturn in the euro area economy and receding inflationary pressures, the Governing Council of the European Central Bank responded by rapidly lowering interest rates to 1%, a historical low for the euro area countries in the post-war period.