For much of the past decade, the euro looked fragile — a currency tested by sovereign debt crises, political rifts and questions about whether the eurozone itself would hold together. Today, it is staging a quiet comeback.
Europe’s Strategic Push for Global Influence
European leaders see an opening in what many describe as a Trump-shaped world order. With Donald Trump back in the White House and taking a more confrontational stance on trade and alliances, officials in Brussels and Frankfurt believe this is the moment to push the euro beyond its traditional regional role and onto a larger global stage.
Challenging U.S. Financial Dominance
The U.S. dollar has long enjoyed unrivaled status as the world’s primary reserve currency. Governments hold dollars in their foreign exchange reserves. International trade — from oil to aircraft — is often priced in dollars. During times of crisis, investors rush into U.S. Treasury bonds, increasing demand for American debt and giving Washington a powerful economic cushion.
That privilege has allowed the United States to borrow cheaply, impose financial sanctions with global reach and maintain a central role in the global financial system. If the euro gains broader acceptance, it may not dethrone the dollar — but it could narrow that advantage.
ECB’s Initiative to Boost the Euro’s Global Role
A key step in Europe’s effort came from the European Central Bank (ECB). The ECB is launching a permanent facility allowing eligible central banks worldwide to borrow euros when needed, transforming temporary crisis tools into a standing backstop.
Enhancing Liquidity and Confidence
In practical terms, the facility gives foreign central banks confidence that, during market turmoil, they can quickly access euro liquidity. That assurance matters. When policymakers and investors know a safety net exists, they are more willing to hold, trade and borrow in that currency.
Christine Lagarde, president of the ECB, described the initiative as helping the euro “move from a regional to a global perimeter.” The presence of a lender of last resort, she argued, strengthens confidence in using the euro for trade and investment, particularly in times of financial stress.
Learning from the Federal Reserve’s Playbook
The strategy mirrors one long used by the Federal Reserve. During the 2008 global financial crisis, the Fed established extensive dollar swap lines with major central banks. When the pandemic triggered another global scramble for dollars in 2020, the Fed revived and expanded those arrangements.
Those swap lines did more than calm markets — they reinforced the Fed’s role as the world’s lender of last resort and strengthened the dollar’s dominance. Countries learned that in a crisis, the dollar system had a dependable safety net. Europe now aims to build similar credibility for the euro.
From Crisis to Opportunity
This marks a striking reversal from the early 2010s, when the eurozone faced existential threats. Debt crises in Greece and other southern European nations pushed members toward default and sparked doubts about the currency’s survival. At the time, talk of the euro challenging the dollar seemed unrealistic.
But the geopolitical landscape has shifted. Relations between Europe and the United States have grown more complicated. President Trump has imposed sweeping tariffs — the steepest in over a century — and has used trade policy as leverage. European leaders increasingly emphasize “strategic autonomy,” spanning defense, energy and financial independence.
Geopolitical Tensions and Market Forces
Lagarde and others argue that heightened geopolitical tensions and assertive industrial policy increase the risk of financial shocks. Supply chains are more fragile, and trade disputes can escalate quickly. In that environment, Europe wants its currency to serve as a stronger stabilizing force.
Market forces are also contributing. The dollar has weakened roughly 9% over the past year amid trade concerns and investor unease about political pressures on U.S. institutions. That decline has pushed the euro to its strongest level against the dollar in about three years, providing fresh momentum.
Toward a Multipolar Currency System
Currency strategists increasingly envision a “multipolar” system in which the dollar, euro and China’s renminbi share influence. Yet China faces trust barriers, including capital controls and opaque policymaking. Many central banks remain cautious about relying heavily on the renminbi. Europe, by contrast, offers deep financial markets, legal transparency and longstanding political alliances that many nations view as reassuring.
Internal Debates and Expansion
The euro’s renewed strength is influencing internal European debates. In Sweden, lawmakers are discussing whether to adopt the euro, potentially marking one of the currency’s largest expansions in years. Sweden’s recent NATO membership after Russia’s invasion of Ukraine signaled deeper Western integration; euro adoption would extend that alignment into monetary policy.
The Limits of Dollar Displacement
Still, dethroning the dollar appears unlikely in the near term. The U.S. Treasury market remains unmatched in size and liquidity. The dollar is deeply embedded in trade invoicing and global reserves, and network effects strongly favor established currencies.
However, dominance need not collapse to erode. If more trade is priced in euros, if more reserves are held in Frankfurt rather than Washington and if more central banks rely on the ECB during crises, the global balance of financial influence could gradually shift.
Resilience and Strategic Independence
For Europe, the push is as much about resilience as ambition. Facing pressure from Russia, economic rivalry with China and a less predictable United States, European leaders seek to reduce dependence on any single financial partner.
For the United States, the euro’s revival serves as a reminder that monetary power — while durable — is not immutable. In a changing geopolitical landscape, even the foundations of global finance are subject to gradual renegotiation.
