Lagging Confidence in Dollar Offers Chance to Raise Euro's Profile, Lagarde Says

Wall Street Journal

27-05-2025

Europe must maintain a steadfast commitment to open trade and bolster its legal and institutional foundations to raise the profile of the euro currency as confidence in the dominance of the U.S. dollar wanes, according to European Central Bank President Christine Lagarde.
'We should make clear that we support a win-win approach to trade, ensuring that we are the most attractive partner to make deals with,' Lagarde said in a speech in Berlin on Monday.
Lagarde also flagged her support for increased defense spending to support the euro, seeing that investors seek assurances by investing in assets of regions that are reliable security partners and can honor alliances with hard power.
The ECB president added that while geopolitical strength and faster growth go a long way toward strengthening the euro's international role, helping demand for the currency will also depend on the ability to uphold a robust legal and institutional foundation.
'When doubts emerge about the stability of the legal and institutional framework, the impact on currency use is undeniable,' Lagarde said.
These doubts materialized in the U.S. after President Trump's 'Liberation Day' announcement in early April, when the dollar and U.S. Treasuries experienced selloffs even as equities fell, she noted.
Despite rolling back some of his proposed tariffs, including on China and the U.K., President Trump has continued to pursue a hard line against the EU. He announced Sunday that he would delay the 50% tariff on European Union goods imports threatened last week until July 9, following a call with the European Commission's President Ursula von Der Leyen.
The EU's trade chief, Maros Sefcovic, said in a social media post Friday that the EU was fully engaged in talks, but trade 'must be guided by mutual respect, not threats.'
Lagarde also said the EU needed to move forward with policies that included completing the single market, helping startups, reducing regulation and building a savings and investment union.
That also would include making it easier for the EU to agree to new rules collectively, avoiding the single vetoes that had previously prevented that held back collective interests, she said.
The euro nevertheless has a long way to go to challenge the U.S. dollar as the world's reserve currency. Lagarde said the euro accounts for around 20% of global foreign-exchange reserves, compared with the dollar's 58%–though this is the lowest percentage since 1994.
The fracturing of the global trade order under Trump poses risks for Europe, she added.
But the shift in how investors viewed the U.S. and the dollar create a 'prime opportunity' for a 'global euro moment,' in which Europe could take greater control of its own destiny, she concluded.
Write to Ed Frankl at [e-mail]