"Euro, a greater international role" - ECB President Lagarde: Dollar dominance is facing growing uncertainty
The President of the European Central Bank (ECB), Christine Lagarde, called for a greater international role for the euro, warning that the global dominance of the US dollar is facing growing uncertainty. Lagarde expressed her concerns about the risks that the fragmentation of the international system poses for Europe.
"Multilateral cooperation is being replaced by zero-sum thinking. Openness is giving way to protectionism, and there is even uncertainty about the cornerstone of the system, the dominant role of the US dollar," she said.
The ECB chief suggested that the changing global landscape could open up the possibility for the euro to take on a greater international role. Lagarde highlighted the benefits of the euro's expanded global role, including lower borrowing costs for governments and businesses across the euro area, stronger domestic demand and greater economic stability. This change, she said, would allow Europe to better control its own destiny.
The euro currently accounts for about 20 percent of global foreign exchange reserves, making it the world's second-most-used currency after the dollar. To enhance the euro's global status, Lagarde proposed three main pillars: maintaining "an unwavering commitment to open trade" backed by credible security capabilities; strengthening the economic foundation of the euro area to make it a leading destination for global capital; and strengthening the legal framework by upholding the rule of law.
Lagarde also noted that the US dollar's share of global foreign exchange reserves has fallen to its lowest level since 1994, as gold has been accumulated by central banks around the world.
Citing previous turning points in the evolution of the international monetary system, Lagarde said the current changes create the possibility for a “global euro moment.” This is a key opportunity for Europe to take greater control of its own destiny, she said.
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