At a recent speech in Berlin, European Central Bank President Christine Lagarde highlighted the potential of the euro to take on a greater international role amid growing uncertainty in the global monetary system. With the dominance of the US dollar increasingly under scrutiny and central banks turning to gold at levels unseen in decades, Lagarde outlined how a digital euro could be pivotal in shifting the balance of global finance.
Lagarde emphasised that the euro already accounts for around 20% of global foreign exchange reserves but still lags far behind the US dollar's 58%. She argued that a more internationally accepted euro would shield Europe from exchange rate volatility, reduce borrowing costs, and help protect the EU from coercive economic measures.
One of the key steps in this direction is the ongoing development of a digital euro-an initiative the ECB is pursuing to modernise cross-border payments and reinforce the euro's international utility. The ECB President noted that trade alone won't be enough to elevate the euro to global reserve status.
For the euro to increase its global status, we need to build on three foundations:
a credible geopolitical foundation
a strong economic foundation
a robust legal and institutional foundationhttps://t.co/9L6Nc6F34w pic.twitter.com/umZ6VOmeWV
Investors also need confidence in Europe's geopolitical strength and legal institutions. She linked the US dollar's global standing to its economy, military alliances, and legal predictability-areas where Europe must step up.
A digital euro, supported by robust capital markets and legal credibility, could become a cornerstone in this strategy. Lagarde concluded with a call for bold action.
The global economic landscape is shifting, and Europe must seize this 'global euro moment.' But success is not guaranteed, she warned.
For the euro to rise as a true rival to the dollar, the EU must act decisively, invest in unity, and deliver on reforms that inspire trust and stability, both politically and economically.
