European Central Bank President Christine Lagarde suggested that the euro could become a viable alternative to the dollar if EU member states enhance the eurozone's financial and security structures. Due to unpredictable U.S. economic policies, investors worldwide have been reducing their dollar asset exposure, often turning to gold in the absence of a direct alternative. However, the euro's global influence has stagnated for decades due to the EU's incomplete financial institutions and lack of integration willingness among member states.
Lagarde emphasized the need for a deeper, more liquid capital market, stronger legal foundations, and security capabilities to support open trade commitments. While the dollar's influence has waned, it still constitutes 58% of international reserves, compared to the euro's 20%. To increase the euro's role, Europe must enhance its military strength and support partnerships.
Lagarde also highlighted the importance of making the euro the preferred currency for international trade invoicing, achievable through new trade agreements, improved cross-border payments, and liquidity agreements with the ECB. However, internal economic reforms are urgent, as the eurozone's capital markets remain fragmented and inefficient.
