Lagarde sees euro as strong rival to US dollar

European Central Bank President Christine Lagarde said on Monday that the euro could become a strong alternative to the US dollar if the European Union strengthens its financial and security frameworks.

Speaking at a lecture in Berlin, Lagarde highlighted that despite recent shifts in global investor sentiment away from the dollar, the euro’s global role has remained stagnant due to incomplete financial integration and limited political will.

Lagarde called for deeper capital markets, stronger legal foundations, and enhanced security capabilities to build geopolitical confidence in the euro. She stressed that any rise in the euro’s international influence must be backed by Europe’s military strength, as investors seek reliability in security partnerships.

The euro currently accounts for about 20 per cent of international reserves, far below the dollar’s 58 per cent share. Lagarde also urged reforms to reduce fragmentation in the euro area’s capital markets and suggested that joint financing of public goods could help create more safe assets for investors.

If successful, Lagarde said, a stronger euro would lower borrowing costs for domestic players, shield the bloc from currency volatility, and offer protection against international sanctions. However, challenges remain, as some member states remain wary of joint fiscal responsibility.

Attribution: Reuters
Subediting: M. S. Salama