EUSDRO and the Unthinkable Monetary Union — Could the Euro and US Dollar Ever Become One Currency?
A hypothetical Atlantic currency would promise enormous financial integration, but it would require a transformation of law, monetary institutions, fiscal governance, and political sovereignty on a scale far beyond anything currently contemplated
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Imagine a currency that could be used seamlessly from Zagreb to New York, from Paris to Los Angeles, and from Berlin to Washington. Imagine businesses no longer needing to hedge EUR–USD exchange-rate movements, travelers crossing the Atlantic without exchanging money, and financial markets operating around a single enormous monetary area.
That hypothetical currency could be called EUSDRO — a conceptual fusion of the euro and the US dollar.
It is a fascinating idea. But turning the concept into reality would be extraordinarily complicated.
The central problem is not simply designing a new banknote or choosing an exchange rate. A genuine currency union would require the United States and the European Union to decide who controls monetary policy, how central-bank decisions are made, how banks are supervised, how financial crises are handled, how fiscal transfers work, and ultimately how much monetary sovereignty governments and citizens are prepared to surrender.
The uploaded EUSDRO study therefore treats the idea as a theoretical exercise rather than an imminent policy proposal.
The first obstacle is legal
The United States and the European Union currently operate under completely different monetary constitutional arrangements.
The US Constitution gives Congress the power to coin money and regulate the value of US and foreign coin. A US–EU currency merger would therefore not be equivalent to simply deciding that the dollar and euro should have the same value.
On the European side, EU treaties establish the euro as the currency of the Union's economic and monetary union and assign monetary-policy competence to the EU for the Member States whose currency is the euro. The European Central Bank also has the exclusive authority to authorize euro banknotes within the Union.
That means EUSDRO would not simply be a new version of the euro or an enlarged dollar.
It would require a new legal framework.
The United States would have to determine how an Atlantic monetary institution could coexist with the constitutional role of Congress and the Federal Reserve. The EU would have to determine how a new currency could fit within — or fundamentally replace — the treaty architecture governing the euro.
The legal question therefore comes before the technical question:
Who would have the authority to create EUSDRO in the first place?
From exchange-rate cooperation to a genuine currency
There is a huge difference between coordinating currencies and abolishing the distinction between them.
A relatively modest arrangement could involve closer coordination between the Federal Reserve and European Central Bank. Another possibility could be a managed exchange-rate relationship between the euro and dollar.
More ambitious arrangements could involve parallel use of both currencies, a currency board, or some form of joint monetary council.
Only the final step would create a genuine EUSDRO: one currency, one monetary policy, and ultimately one central monetary authority.
The executive summary identifies these possibilities as a spectrum, from a flexible peg through dual-currency arrangements and a currency board to a joint monetary council and finally a complete merger.
This distinction is crucial.
A EUR–USD peg could reduce exchange-rate volatility while leaving the dollar and euro intact.
A dual-currency system could allow both currencies to circulate.
A joint monetary council could coordinate policy without creating a new currency.
But a true EUSDRO would eliminate the exchange rate between the two economies altogether.
That would be the revolutionary part.
The economic paradox
At first glance, removing the EUR–USD exchange rate looks like an obvious advantage.
European and American companies trading with each other would no longer face direct currency conversion risk. Consumers could compare prices more easily. Financial contracts would become simpler. Cross-Atlantic investment could become more straightforward.
But exchange rates also perform an economic function.
Different economies experience different shocks.
An energy shock, demographic change, recession, fiscal expansion, housing boom, banking crisis, or productivity surge can affect two economies differently. Under separate currencies, central banks can respond to those differences.
Under EUSDRO, they could not.
A single Atlantic central bank would have to establish a monetary policy appropriate for an enormous economic area containing economies with different structures and different economic cycles.
The executive summary highlights this problem using ECB research on US and euro-area shocks. A surprise US Federal Reserve rate increase can initially raise euro-area inflation through exchange-rate and import-price channels before subsequently reducing inflationary pressure as weaker global demand takes effect.
With separate currencies, exchange rates provide an adjustment mechanism.
With one currency, that mechanism disappears.
The adjustment would have to happen elsewhere — through wages, prices, migration, capital flows, fiscal transfers, productivity, or changes in employment.
The missing piece would probably be fiscal integration
Currency unions are not simply monetary arrangements.
They also create questions about who absorbs economic shocks.
The United States already has a federal fiscal system. Federal taxation, spending, unemployment programs, and other mechanisms redistribute resources among states and provide some degree of automatic stabilization.
The European Union does not have an equivalent federal treasury operating at the same scale and with the same fiscal architecture as the US federal government.
An Atlantic currency union would therefore confront a fundamental question:
If one part of the Atlantic economy enters a severe recession while another is booming, who pays for stabilization?
A genuine EUSDRO system might need an Atlantic treasury, shared fiscal rules, common financial backstops, or large-scale transfers.
That would move the project far beyond monetary integration.
It would become a form of political and fiscal integration.
Banking would have to become Atlantic as well
Currency integration would also require deep financial integration.
Imagine a major bank operating simultaneously across Europe and the United States.
Who would supervise it?
Who would insure its deposits?
Who would provide emergency liquidity?
Who would resolve it if it failed?
Under a unified currency, these questions could no longer be treated purely as national issues.
An Atlantic Central Bank would potentially need a lender-of-last-resort function. Banking regulation and resolution would have to become compatible across jurisdictions. Deposit-insurance arrangements would have to address cross-border institutions.
Without these mechanisms, a monetary union could leave financial crises inadequately contained.
So the hypothetical EUSDRO project would effectively require several unions at once:
monetary union + banking union + fiscal mechanisms + political governance.
That is why changing the currency symbol would be the easiest part.
The sovereignty problem
Perhaps the most difficult issue is sovereignty.
Money is not merely a technical instrument.
Control over interest rates, money creation, central-bank policy and financial stability is a major component of economic sovereignty.
The Federal Reserve currently conducts US monetary policy within the American institutional system. The European Central Bank conducts monetary policy for the euro area within the EU treaty framework.
An Atlantic currency would require both systems to accept a new governing structure.
Would the Atlantic Central Bank have one American vote and one European vote?
Would voting power be based on GDP?
Population?
Financial contributions?
Equal representation?
Would smaller EU member states receive the same representation as the United States?
Would the Federal Reserve disappear, coexist with the new institution, or become a regional branch?
These are not technical details. They would determine who controls the most powerful monetary institution in the hypothetical Atlantic system.
EUSDRO and the global monetary system
The international consequences would be enormous.
The US dollar and euro already occupy central positions in global foreign-exchange reserves. The IMF reported that in the first quarter of 2026, the US dollar represented 57.13% of allocated official foreign-exchange reserves.
For comparison, the IMF reported a euro share of 20.25% in the fourth quarter of 2025.
A mechanical combination would therefore represent a very large share of existing reserve holdings.
However, it would be misleading to assume that simply adding today's dollar and euro shares means EUSDRO would automatically capture exactly that combined percentage. Reserve managers could diversify into other currencies, gold, or other assets in response to the creation of a new monetary bloc.
The important point is structural:
EUSDRO would combine two of the world's most important reserve currencies into one monetary system.
That could transform international finance.
Trade invoicing, sovereign borrowing, cross-border banking, foreign-exchange markets and central-bank reserves could all be affected.
At the same time, concentrating monetary power could create a new systemic vulnerability. If an enormous Atlantic currency area experienced a major policy mistake or financial crisis, the consequences could propagate through a much larger portion of the global financial system.
What would the transition look like?
The uploaded study sketches a deliberately hypothetical multi-decade pathway. It begins with political dialogue and institutional research, followed by treaty negotiations, institutional design, fiscal harmonization and eventually technical preparation for a new currency.
Its illustrative timeline begins with transatlantic dialogue in 2026, treaty negotiations from 2029, institutional design during the 2030s, technical preparations toward the end of the 2030s, and a hypothetical currency transition in the early 2040s.
That should not be interpreted as an actual roadmap.
It is better understood as a thought experiment demonstrating how many separate stages would have to occur before a currency merger could even become technically conceivable.
The process could involve:
Enhanced Federal Reserve–ECB cooperation.
A permanent transatlantic monetary council.
Joint economic and financial research.
Negotiation of a new legal framework.
Agreement on monetary-policy objectives.
Creation of common banking rules.
Development of fiscal stabilization mechanisms.
Establishment of an Atlantic monetary institution.
Development of common payment infrastructure.
Introduction of a digital or limited pilot currency.
Gradual conversion of financial contracts.
Eventual replacement of national currencies.
Every stage would create opportunities for political disagreement or failure.
What could EUSDRO actually become?
The most interesting conclusion may be that a full currency merger is not the only way to pursue deeper transatlantic financial integration.
A much less radical future could involve greater monetary cooperation while retaining the euro and dollar.
For example, the US and EU could coordinate financial regulation, strengthen payment interoperability, cooperate during financial crises, improve currency-swap arrangements, coordinate responses to systemic banking problems, and develop common standards for digital payments.
A managed exchange-rate relationship would still be considerably different from a single currency.
And a joint monetary council would preserve the independent currencies while creating an institutional mechanism for dialogue.
These intermediate possibilities matter because monetary integration is not binary.
There is a vast territory between “completely separate” and “one currency.”
So, what is EUSDRO?
EUSDRO is best understood as a thought experiment about what would happen if two enormous monetary systems attempted to become one.
Its attraction is obvious: fewer exchange-rate barriers, deeper financial integration, enormous international liquidity, and potentially a much more integrated Atlantic economic space.
Its difficulties are equally substantial: constitutional law, EU treaty law, monetary-policy conflicts, fiscal transfers, banking supervision, institutional representation and the political question of sovereignty.
The fundamental challenge is therefore not:
“Can we design a new currency?”
Technically, designing a currency is relatively straightforward.
The real question is:
“Can two political systems agree to create one monetary sovereignty?”
Under the legal and institutional arrangements described in the source material, there is currently no straightforward mechanism for simply merging the euro and dollar.
That makes EUSDRO an intriguing concept for thinking about the future of the Atlantic economy — but, for now, a hypothetical rather than an existing monetary project.
References
U.S. Constitution, Article I, Section 8 — Congress's monetary powers. (Congress.gov)
Treaty on the Functioning of the European Union — EU monetary-policy competence and the euro framework. (Eur-Lex)
TFEU Article 128 — ECB authority concerning euro banknotes. (Eur-Lex)
IMF COFER, Q1 2026 — US dollar share of allocated official foreign-exchange reserves. (IMF Data)
IMF COFER, Q4 2025 — Dollar and euro reserve shares. (IMF Data)
Uploaded EUSDRO Executive Summary — hypothetical institutional models, macroeconomic issues, transition scenario and risk analysis.
