Lagarde: US Policies Could Bolster Euro’s International Role

Christine Lagarde, President of the European Central Bank (ECB), stated on Monday that “US policies are strengthening the euro’s international role.” However, she did not directly discuss the central bank’s interest rate decisions.

Lagarde also noted that “global fragmentation and the shift away from multilateralism pose risks to the European economy, which is heavily reliant on exports.” She warned that protectionist trade policies and the instability of the US dollar would negatively impact European economic growth.

She highlighted that “the euro is currently the world’s second-largest reserve currency, accounting for 20% of global foreign exchange reserves, trailing only the US dollar, which represents 58%.”

The ECB President expressed her belief that “the euro’s time has come,” seeing opportunities for the single European currency to achieve a more prominent position among reserve currencies. These opportunities, she indicated, include reduced exchange rate risks, lower borrowing costs for governments and and companies, and enhanced protection for Europe from sanctions.

However, Lagarde emphasized that achieving greater international standing for the euro would not be without challenges. She suggested that this could be accomplished through:

Geopolitical credibility: encompassing strong trade networks and military alliances.
Economic strength: driven by high growth, robust financial markets, and safer assets.
Legal and institutional confidence: underpinned by the rule of law, the independence of the ECB, and political unity.