Global Leader Advocates Euro as Competitor to Dollar Amid Growing World Fragmentation
Berlin, Germany - European Central Bank President Christine Lagarde has proposed a strategic vision to elevate the euro's global standing, potentially challenging the dominance of the US dollar. On Monday, during a speech at the Hertie School in Berlin, Lagarde outlined a plan to position the euro as a principal global reserve currency.
Lagarde argued that the euro could replace the dollar as the preeminent reserve currency, particularly in a world grappling with geopolitical tension and the loss of confidence in the US dollar. She underscored that the euro's monetary credibility increasingly depends not just on economic and financial factors but also on the European Union's geopolitical and military power.
This ambition reflects a desire to provide the European Union with the necessary financial and geopolitical levers to shape global monetary power relations, with the euro at the center of a new global balance of power.
To achieve this goal, Lagarde advocated for a collective political commitment within the EU to evolve the euro’s global role. Essential policies she suggested include completing the single market, supporting startups, reducing regulation, and building a savings and investment union within the EU. Simplifying and reforming the decision-making process in the EU would also enable stronger collective action to shape the euro’s influence.
The planned launch of the digital euro, potentially from October 2025, is part of the strategy to enhance the euro’s international appeal and usage, positing the digital currency as a competitive and technologically advanced reserve currency.
Key factors in promoting the euro internationally include the ECB's expansion of its repo and swap lines to additional non-euro area central banks, facilitating euro liquidity globally and encouraging its use as a reserve currency. The potential expansion of the eurozone to include additional countries, such as Poland, Sweden, and Denmark, could also boost the euro's global influence, though political challenges within those countries currently limit this possibility.
In her speech, Lagarde pointed out that the euro currently accounts for about 20% of global foreign exchange reserves, compared to the dollar’s 58%. She sees the current fracturing of the global trade order and the declining confidence in the US dollar as a "prime opportunity" for the euro to seize a more prominent position in the global economy.
The proposals put forth by Lagarde, should they be adopted, could significantly reshape the global monetary landscape, potentially diminishing the dominance of the US dollar and bolstering Europe's financial and geopolitical clout.
The European Central Bank President, Christine Lagarde, has proposed strategies to elevate the euro's global standing, aiming to challenge the dominance of the US dollar in both finance and business industries. To accomplish this, she advocates for collective political commitment within the EU to evolve the euro’s global role, implementing essential policies such as completing the single market, supporting startups, reducing regulation, building a savings and investment union, and simplifying the decision-making process. By doing so, Lagarde envisions the euro becoming a principal global reserve currency, thereby strengthening the European Union's geopolitical and financial power.
