Golden opportunity for the euro: Europe challenges the power of the dollar

Photo caption — The ECB urged the EU to take strong action to make the euro a new symbol of confidence for the world, while the US dollar is gradually shaken by political and financial instability in the US (in photo: The euro symbol in Frankfurt, Germany). Photo: AFP/TTXVN

European news network euractiv.com reported on October 7 that amid volatile global geopolitics and growing policy uncertainty, European Central Bank (ECB) President Christine Lagarde has made a strong call for the European Union (EU) to act quickly. According to Ms. Lagarde, the current time is a "unique opportunity" to strengthen the global role of the euro, thereby weakening the dominance of the US dollar.

The US dollar has held a dominant position in global finance since World War II. However, this position is being questioned.

“Geopolitical volatility and growing policy uncertainty remind us that no currency’s global role is guaranteed. It has to be earned,” Ms. Lagarde warned before the European Parliament’s economics committee.

Investor concerns about the future of the US dollar have been fueled by controversial US policies, including sweeping tariffs and attacks on the independence of the US Federal Reserve. As a result, the US dollar has fallen nearly 12% against the euro since the start of the year as investors reduce their holdings of dollar-denominated assets as a hedge against risk.

The gap is still very large

Despite the decline, the greenback still accounts for about 60% of global foreign exchange reserves. This is significantly more than the euro’s 20% share. The gap is even wider when compared to other competing currencies, such as China’s yuan, which accounts for just 2% of global reserves.

Ms Lagarde said the US dollar's global popularity had given Washington what she called an "undue privilege" – the ability to maintain low interest rates despite years of growing budget deficits.

Strengthening the euro's role would help businesses, households and governments in the 20-nation currency zone enjoy lower borrowing costs, similar to the benefits the United States enjoys.

The ECB president stressed that to realise this ambition, “Europe must be realistic and strengthen its foundations”. She outlined a series of necessary actions that EU policymakers should take: Integrate EU capital markets. Protect the independence of the central bank. Strengthen trade links with third countries.

Next is to develop a “digital euro” that is not dependent on the US payment infrastructure. Issue a “safe and liquid EU public debt fund”.

In addition, the trend of "de-dollarization" of the global payment system is also being promoted by many non-Western countries, including the BRICS group of countries (including China and Russia), despite threats from the US.

“The euro can be more than just a continental currency and a symbol of unity; it can become an anchor of global confidence,” Ms. Lagarde concluded, urging policymakers to help “make that vision, that dream, a reality.”

Source: https://baotintuc.vn/the-gioi/co-hoi-vang-cho-dong-euro-chau-au-thach-thuc-quyen-luc-dong-usd-20251007174951772.htm