European Central Bank president Christine Lagarde sees a unique opportunity for the euro to expand its global influence. Speaking at the Hertie School in Berlin on Monday, Lagarde argued that recent global instability has created “the opening for a ‘global euro moment.’”
Currently, the US dollar remains dominant as the world’s most-used reserve currency with a 58 per cent share. But that share is declining: geopolitical uncertainty, following the erratic economic policies of former US president Donald Trump, has led many investors to seek alternatives.
The euro ranks, meanwhile, is ranked second, accounting for around 20 per cent of global foreign reserves. Lagarde believes the euro could take over the dollar’s role, but warned that European governments must act to make it happen. “The euro will not gain influence by default – it will have to earn it,” she said.
Military strength
Achieving this would require both structural economic reforms and efforts to promote the euro as the preferred currency for global business transactions. Lagarde also highlighted the importance of military strength in building investor confidence.
“This is because investors – and especially official investors – also seek geopolitical assurance in another form: they invest in the assets of regions that are reliable security partners and can honour alliances with hard power,” she said
If Europe can rise to the challenge, Lagarde said, the potential rewards would be significant. Cheaper borrowing costs for governments and businesses, increased investment inflows, and greater protection from exchange rate volatility and external sanctions are among the key advantages.
