Finance
Euro needs enhanced global role but cannot overtake the dollar, Bundesbank says
Published by Global Banking & Finance Review®
Posted on September 22, 2025
2 min readLast updated: January 21, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on September 22, 2025
2 min readLast updated: January 21, 2026
The Bundesbank highlights the need for the euro to enhance its global role amid concerns about the dollar's stability, though it can't replace the dollar.
FRANKFURT (Reuters) -The euro cannot replace the dollar as the world's dominant currency, but needs to strengthen its global role, partly to protect the bloc in case of a sustained loss of confidence in the dollar, Germany's central bank chief said.
The dollar has fallen this year in response to erratic U.S. policies, boosting calls across Europe to beef up the euro's global role to provide investors with an alternative safe haven.
Analysts and central bankers have voiced concern that tariffs make trade policy unpredictable, that large tax cuts, promised by U.S. President Donald Trump, make U.S. debt unsustainable and his attacks on the U.S. Federal Reserve's independence have damaged the dollar's safe haven reputation.
"The U.S. dollar is no longer fully perceived as a safe haven," Bundesbank President Joachim Nagel said.
"While it seems neither realistic nor desirable for the euro to replace the U.S. dollar as the reserve currency in the foreseeable future, a greater international significance of the euro would certainly be possible and desirable," Nagel added.
For the euro to gain international weight, the bloc needs a stability-oriented fiscal stance, predictable policies, military assertiveness, deep, liquid, and open capital markets, and a wide range of high-quality, safe investments, Nagel said.
"The high savings of European households should be better channelled to increase innovation, productivity, and competitiveness," Nagel said. "Our savings are urgently needed to finance Europe's green and digital transition, as well as defence spending."
Although reduced confidence in the dollar has increased the euro's value, Nagel said he was not concerned about its current valuation, especially since the gain was much smaller when based on trade-weighted numbers.
The euro also needs to be able to ward off the stability threat from the growing role of stablecoins in the financial world, Nagel said.
Stablecoins are designed to maintain their value, but without regulation, pose a risk to financial stability since a loss of confidence in them could lead to a fire sale of reserve assets, especially U.S. government bonds.
(Reporting by Balazs Koranyi; editing by Barbara Lewis)
The euro is the official currency of the Eurozone, used by 19 of the 27 member states of the European Union. It was introduced in 1999 and is managed by the European Central Bank.
Stablecoins are cryptocurrencies designed to maintain a stable value by pegging them to a reserve of assets, such as fiat currencies or commodities. They aim to reduce volatility in the crypto market.
A central bank is a national institution that manages a country's currency, money supply, and interest rates. It also oversees the banking system and implements monetary policy.
Foreign exchange, or forex, refers to the global marketplace for trading national currencies against one another. It is essential for international trade and investment.
Financial stability refers to a condition where the financial system operates effectively, with institutions able to withstand shocks and continue to provide essential services to the economy.
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