She said Europe could seize the moment in global trade reforms by deepening integration, boosting security and integrating its financial system.
European Central Bank (ECB) President Christine Lagarde said that as the global reserve currency, the euro could emerge as a serious alternative to the US dollar as the bloc deepens its financial and security architecture.
She said US President Donald Trump’s trade policy is shaking the foundations of a global dollar-based economic order.
The ongoing changes created an opening for the “global euromoment” that could challenge the “dominant role of the US dollar” in global finance, which he said in a May 26 speech at the Hearti School in Berlin.
Her remarks came just hours after Trump agreed to delay wiping out 50% tariffs on European Union goods.
Lagarde warned that a setback from multilateralism poses a threat to the international rules-based system that has supported world trade for decades.
“Openity has replaced protectionism,” she said. “Changes in the international order that lead to declining global trade and fragmentation into economic zones are harmful to our economy.”
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The ECB president said the dollar still controls global finances, but its central role is increasingly questioned amid geopolitical uncertainty and unilateral US policy moves.
However, Lagarde said, “The changing landscape can open the door for the Euro to play a bigger international role,” but she also admitted that Europe is not yet ready to seize the opportunity.
For the euro to pose a serious challenge to the dollar’s advantage, the EU must first complete a long-term push for deeper integration. This means there is a lower dependence on the US for a unified capital market, closer legal and institutional relationships, and its security.
Her message reiterated a recent statement by ECB Vice President Luis de Gindes. He said in April in Madrid that the euro must make a decision “based on shared interests, not national interests” in order to acquire its status as a global reserve currency.
“If there’s an additional integration process, I think we’re in the best position to be one in a few years,” says De Guindos.
As Trump’s trade policy continues to spread across global markets, a larger request for EU unification by the bloc’s financial leaders is coming. On May 25, Trump delayed the planned 50% tariffs on EU goods from June 1st to July 9th. The decision said that after European Commission President Ursula von der Leyen called for generosity, the bloc of 27 countries would need more time to come up with a contract.
Often, Trump, who has used tariffs as leverage in both economic and diplomatic conflicts, has argued that a trade reset is necessary to cancel the US decades of unfair treatment by other countries. He said it will cause an economic boom in the US despite a painful adjustment period in the short term.
During his speech in early 2025, Federal Reserve member Christopher Waller provided a sharp contrast to speculation about the euro replacing the dollar as the global reserve currency.
The euro is the second most used global currency, but it continues to stretch the dollar significantly in each of these roles, Waller said. He pointed to unparalleled size, liquidity and US Treasury confidence in the market as core reasons why the dollar is the cornerstone of global finance.
Even amidst the geopolitical tensions and efforts in countries such as China, the euro has not gained a large base in global trade, international banks or forex markets to diversify away from the dollar, Waller said. Outside of Europe, most cross-border transactions (including those settled in digital assets) are dominated by dollars.
“In an age of global financial stress, investors and governments are seeking safe shelters to protect the value of their assets and stabilize their own financial markets,” he said. “When this happened, there was mostly a ‘flight to the dollar’, which increased demand for US dollar assets.
“We saw this in 2008, but again in 2020. This is the ultimate proof that the US dollar is the world’s reserve currency and is likely to do so. In an age of global stress, the world runs towards the dollar that hasn’t come apart.”
