ECB’s Lagarde says euro could be viable alternative to US dollar

According to Christine Lagarde, president of the European Central Bank, the euro may replace the US dollar as the world’s standard currency for international trade.

Lagarde stated in a speech in Berlin, Germany, on Monday that the unpredictable economic policy of the US has spooked global investors into restricting their recent dollar exposure. Many people chose to invest in gold without having a workable alternative.

She said, “The ongoing changes make the opening for a “global euro moment.”

According to Lagarde, investors seek “geopolitical assurance in another way: they invest in the assets of regions that have trustworthy security partners and can respect alliances with hard power.”

According to the US leadership, “the global economy thrived on a foundation of openness and multilateralism, but it is fracturing today.”

The dollar’s share has declined over the years, reaching its lowest level in decades and still well above the euro’s 20% share.

According to Lagarde, any expansion of the euro’s role must be accompanied by a stronger military base that can support partnerships.

She suggested that Europe should use the euro as the primary method for billing international trade. Forging new trade agreements, enhanced cross-border payments, and liquidity agreements with the ECB could help with this.

looming difficulties

Since the financial institutions of the European Union are still in its early stages, and governments have shown little interest in further integration, the euro’s global role has stagnated for decades.

According to Lagarde, Europe needs a more robust, liquid capital market, stronger legal foundations, and support its commitment to open trade through security measures.

However, she suggested that domestic economic reform is more urgent. The capital market of the euro area is still stifled, ineffective, and lacking in a truly liquid, widely-available safe asset that investors would be drawn to.

“Public goods must be co-financed, according to economic logic. And this joint funding could help Europe gradually increase its supply of safe assets, Lagarde said.

Some important members of the eurozone, particularly Germany, are against the idea that their taxpayers will end up having to pay for their own fiscal incompetence.

The advantages, Lagarde claimed, would be significant if Europe were to succeed. The investment inflow would shield the bloc from fluctuating exchange rates and protect it from international sanctions. It would also allow domestic players to borrow at lower interest rates.