(Photo by Philipp von Ditfurth/picture alliance via Getty Images)
The European Union must “do its homework” and seize the unprecedented opportunity to strengthen the global role of the euro at the expense of the US dollar, European Central Bank (ECB) President Christine Lagarde urged on Monday.
Speaking to the European Parliament’s economy committee, the ECB chief said that current geopolitical instability provides EU policymakers with a “unique opportunity… to strengthen the euro’s role on the global stage”.
“The world is in transition,” Lagarde added. “Geopolitical shifts and heightened policy uncertainty remind us that no currency’s global position is guaranteed. It has to be earned.”
The remarks come as US President Donald Trump’s sweeping tariffs and attacks on the US Federal Reserve’s independence have sparked deep investor unease about the future of the US dollar, which has dominated global finance since the end of the Second World War.
The dollar has fallen close to 12% against the euro since the start of this year, as investors have sought to hedge against US policy uncertainty by reducing their exposure to dollar-denominated assets.
Despite the slide, the greenback currently accounts for 60% of global foreign exchange reserves, far ahead of the euro’s 20% share, which in turn is well ahead of other competing currencies, including the Chinese renminbi, at 2%.
Many non-Western countries, including the ‘BRICS’ group of nations – which includes China and Russia – have also sought to “de-dollarise” the global payments system in recent years, despite Trump’s threats to impose 100% tariffs on nations seeking to move away from the US dollar.
A more “global” euro would allow businesses, households, and governments in the 20-country single currency area to enjoy lower borrowing costs, Lagarde said – much as global demand for dollar-denominated assets has afforded Washington the “exorbitant privilege” of consistently low interest rates despite years of widening budget deficits.
But for this to be achieved, “Europe must do its homework and strengthen its foundations” by integrating capital markets, safeguarding central bank independence, deepening trade links with third countries, developing a “digital euro” that isn’t dependent on US payment infrastructure, and issuing a “safe and liquid pool of EU public debt”, Lagarde said.
“The euro can be more than the currency of a continent and a symbol of unity; it can become a global anchor of trust,” she said, adding that the bloc’s policymakers should help “transform that vision, that dream into a reality”.
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