European Central Bank President advocates for a stronger euro to counteract Trump's influence.
Berlin - European Central Bank (ECB) President Christine Lagarde voiced concerns over the escalating trade dispute with the United States, characterizing it as a significant economic threat. In a speech at the Hertie School in Berlin, Lagarde described the current global order as being shaken to its core, with multilateral cooperation giving way to zero-sum thinking and power plays.
"Cooperation has been supplanted by a mindset favoring individual gains at the expense of others," Lagarde criticized, without explicitly naming US President Donald Trump or his recent tariff threats against the European Union. "Instead of openness, now we see protectionism."
The uncertainty surrounding the dominant position of the US dollar as a system pillar could potentially pose risks for Europe, where exports account for nearly one-fifth of GDP and secure around 30 million jobs.
Opportunities for a More Influential Euro
Despite the challenges, Lagarde identified new possibilities for the euro's increased international standing. "Given the current transformations, the opportunity appears ripe for a more prominent international role for the euro," she said. At present, around 20 percent of global foreign exchange reserves are held in euros, compared to the US dollar's 58 percent share. Since Trump unveiled his global tariff package, the euro has been stronger against the dollar than it has been in over three years.
"A more prominent global role for the euro could have a positive impact on the eurozone," Lagarde noted. Improved domestic demand could be spurred by cheaper loans within the EU, and currency fluctuations would have less impact as more trade transacted in euros and Europe gained better protection against sanctions.
Strengthening the Euro's Global Influence
To expand the euro's international role, Europe requires reinforcement on multiple fronts: geopolitically, economically, and legally. Lagarde called for more trade agreements, encouraging Europe to catch up in military capabilities, and completing the internal market and deepening the capital market. Additionally, Europe should uphold the rule of law and act as a political unit to withstand external pressure.
Enhancement initiatives for cross-border payments in euros and the introduction of the digital euro, a central bank digital currency, are part of the broader strategy to increase the euro's attractiveness and utility in international transactions, aiming to elevate its geopolitical influence and economic role.
(Román Álvarez Pérez, based on Enrichment Data provided by Thyra González Rodríguez)
"The escalating trade dispute between the US and Europe, as voiced by ECB President Christine Lagarde, could provide opportunities for a more influential role of the euro in the global economy and politics."
"To achieving a more prominent global role for the euro, Europe needs reinforcement not only economically but also geopolitically and legally, as suggested by Lagarde, which includes more trade agreements, military modernization, completion of the internal market, and deepening the capital market, as well as upholding the rule of law and acting as a political unit."
