In a speech in Berlin, European Central Bank President Christine Lagarde argued that a fracturing global economic order and rising uncertainty about the US dollar’s dominance could create an opening for the euro to play a greater international role, but that this is not automatic and would need to be “earned”. She framed the issue as material for Europe given its deep integration into global trade, with exports accounting for close to one-fifth of value added and supporting 30 million jobs. Lagarde noted that the euro remains the second global currency, accounting for around 20% of foreign exchange reserves versus 58% for the US dollar, while gold has risen to around 20% of global foreign reserves, surpassing the euro, after central banks bought more than 1,000 tonnes in 2024. She set out three foundations for greater international euro use: a geopolitical base anchored in open trade and credible security capabilities, an economic base underpinned by deeper and more liquid capital markets and a stronger supply of safe assets, and a legal-institutional base grounded in the rule of law and political unity. Supporting points included the EU’s large network of trade agreements and the euro’s roughly 40% share of trade invoicing, alongside ECB work on a potential digital euro, initiatives to enhance cross-border payments in euro, and the use of swap and repo lines to mitigate euro liquidity shortages abroad. On the economic side, she pointed to weaker euro area productivity and market returns compared with the US since 2000, home bias in household equity investment, and estimates that AA-or-higher sovereign bonds outstanding are just below 50% of EU GDP versus above 100% in the US, suggesting reforms such as completing the Single Market, enabling start-ups, reducing regulation, and building a savings and investment union, with joint financing of European public goods potentially supporting safe asset supply. A forthcoming June ECB publication on the international role of the euro was referenced as part of the broader analytical context.
European Central Bank 2025-05-26
European Central Bank President Lagarde outlines geopolitical, economic and legal conditions for a larger international role for the euro
European Central Bank President Christine Lagarde, in Berlin, highlighted the euro's potential to expand its international role amid global economic shifts and US dollar uncertainty, requiring strategic efforts. She outlined three foundations: geopolitical stability, economic strength through deeper capital markets, and legal-institutional integrity. Lagarde noted the euro's current position as the second global currency and discussed initiatives like a digital euro and enhanced cross-border payments to support its international role.