Finance
ECB's Lagarde renews calls for beefed up role for euro
Published by Global Banking and Finance Review
Posted on October 7, 2025
2 min readLast updated: January 21, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on October 7, 2025
2 min readLast updated: January 21, 2026
Christine Lagarde urges a stronger global role for the euro, addressing market dynamics and policy challenges, and suggests shifting more trade to euros.
FRANKFURT (Reuters) -European Central Bank President Christine Lagarde renewed her call on Tuesday for a beefed-up global role for the euro currency, arguing that the bloc is now an innocent bystander, suffering shocks created in Washington and elsewhere.
The euro, the world's second most-used currency behind the dollar, has appreciated sharply this year as investors fled the U.S. currency on policy uncertainty, picking up safe assets, like gold and top-tier European bonds, among others.
But the 20-nation currency bloc's market for investment grade sovereign debt and stocks is relatively small compared to the U.S., putting it at risk of volatility in case of such flows.
"We are innocent bystanders of policy decisions made in Washington and of portfolio allocation decisions made worldwide, which we don’t have much influence over," Lagarde said in Paris. "It is not a sustainable position."
"We cannot remain a passive safe haven, absorbing the shocks created elsewhere," Lagarde said in a speech. "We need to be a currency that shapes its own destiny."
Critics argue that a larger market share would mean appreciation for the currency, an unwelcome trend putting exporters at a disadvantage.
The argument is that foreign demand for reserve assets would mean a steady inflow into the bloc and that would strengthen the currency and not just lower borrowing costs.
But Lagarde argued that there is no such mechanical relationship and the bloc could mitigate such risks by shifting more of its foreign trade to euros and expanding domestic trade.
In any case, many of Europe's economic difficulties were self-inflicted that could be resolved by bolder policy initiatives, she argued.
"Our weaker performance compared with the United States largely reflects internal barriers of our own making: including fragmented regulations, tax regimes, bankruptcy rules and incomplete capital markets," she said.
"Structural challenges such as high energy costs, low productivity and reluctance to finance common projects are also, to a large extent, within our own control."
(Reporting by Balazs Koranyi; Editing by Sharon Singleton)
The Euro is the official currency of the Eurozone, used by 20 of the 27 European Union member states. It is the second most traded currency in the world after the US dollar.
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation and stabilizing the currency.
Investment-grade bonds are bonds that are rated as having a low risk of default by credit rating agencies. They typically offer lower yields compared to high-yield bonds.
Foreign currency refers to any currency that is not the domestic currency of a given country. It is used in international trade and investment.
The European Central Bank (ECB) is responsible for managing the Euro and implementing monetary policy for the Eurozone, aiming to maintain price stability and support economic growth.
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