Euro possibly to dethrone US dollar
(MENAFN) European Central Bank President Christine Lagarde has suggested that the euro has the potential to rival the US dollar as a global currency, provided the EU undertakes substantial reforms in its financial and security infrastructure.
Speaking on Monday, Lagarde said the US dollar's dominance is being questioned amid growing global unease over Washington's economic policies, including tariffs and sanctions. She pointed out that the dollar hit a three-year low recently, with many investors re-evaluating their reliance on it due to rising US debt and its use as a geopolitical tool.
Still, the euro has its own challenges. Since Western sanctions were imposed on Russia in 2022 over the Ukraine conflict, Moscow and many of its partners have shifted trade away from both the dollar and euro in favor of their own national currencies. Russian data shows that 90% of its BRICS trade last year used domestic currencies.
Lagarde, however, sees a “prime opportunity” for the euro, citing investor uncertainty under President Trump’s trade policies. “The current environment offers a chance for the euro to strengthen globally,” she said, but emphasized that success “won’t come automatically – it must be earned.”
To boost the euro’s international influence, Lagarde called for completing the EU’s single market, unifying legal systems, and overhauling domestic financial frameworks. She also advocated for greater use of the euro in global trade, better cross-border payments, and enhanced liquidity tools managed by the ECB.
Additionally, Lagarde highlighted the need for joint EU financing, particularly in defense, to strengthen the euro’s position. “If we want the euro’s global role to grow, we need more robust military capabilities,” she added.
Despite the long-term potential, the euro remains far behind the dollar in the short term. It currently accounts for 20% of global foreign exchange reserves, compared to the dollar’s 57.3%, according to the IMF. While the dollar's dominance is declining, it continues to lead as the world’s top reserve currency.
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