NEW YORK, Jan. 26 (Xinhua) -- The greater role of euro and higher self-reliance of the financial system in the European Union (EU) depend upon better policy coordination among the EU and eurozone members on fiscal, banking, financial and other sectors, said an expert at research firm MRB Partners.

Such policies should be designed to reduce perceived downside risk to euro and the process will likely be gradual, said Peter Perkins, global strategist at MRB Partners on Tuesday.

"The main barriers are simply the absence of a unified banking or financial system across countries and the lack of political cohesion among the euro area member countries," said Perkins.

Markets will perceive there to be risk of a break-up of the euro until such political and financial sector cohesion exists, thereby reducing the appeal of the euro as a reserve currency, according to Perkins.

Still, it is not clear when the market will conclude such risks have declined sufficiently, Perkins added.

On Jan. 19, the European Commission issued a policy paper to boost the euro's status and reducing the EU's reliance on foreign institutions.

The new strategy "aims to better enable Europe to play a leading role in global economic governance, while protecting the EU from unfair and abusive practices," the European Commission said in a statement.

Brexit has reinforced the EU's desire to strengthen its financial system so that the bulk of financial transactions in euro assets occur within the EU, especially transactions in government bonds, said Perkins.

London has been the major financial center in Europe for decades and a number of financial institutions are expected to go back to continental Europe after the Brexit.

The EU's push to boost euro's role and reduce its dependence on foreign institutions is unlikely to wane after the United States has a new administration as the EU better recognizes that it does not want to be dependent on or subject to potential political pressure from the United States, according to Perkins.

The EU's efforts to issue euro-denominated green bonds and digital euro or develop euro-denominated commodity products could help lift euro's role, "but won't have a major impact," said Perkins.

As for the long-term outlook, Perkins said "we believe the world will shift to a multi-currency reserve system as the post-WWII U.S. dominance of the global economy gradually wanes."

Perkins noted that a multi-currency reserve system is difficult to manage, as it effectively requires agreement among the major currency governments about the framework and management of the system.

As of the third quarter of 2020, the U.S. dollar and euro respectively took 60.46 percent and 20.53 percent shares of total foreign exchange reserves in the world, according to data issued by the International Monetary Fund. Enditem