In the context of recent US trade policies causing concerns for global investors, Ms. Lagarde said this is a favorable opportunity for the euro to enhance its international position. The euro could replace the US dollar if the European Union (EU) conducts financial and security reforms, RT reported.
The US dollar has recently fallen to a three-year low, largely due to concerns about President Donald Trump's tax strategy. Lagarde stressed that the US's current economic policies are causing global investors to reconsider their dependence on the greenback.
Concerns about soaring public debt and the US use of the US dollar as a geopolitical tool through sanctions and asset freezes further erode the currencys position.
However, the euro cannot avoid challenges. Since Western sanctions were imposed on Russia over the conflict in Ukraine in 2022, Moscow and its trading partners have gradually switched to using local currencies, reducing their dependence on both the euro and the US dollar. According to data from Russia, 90% of trade between the country and the BRICS countries last year was conducted in domestic currency.
However, Lagarde is still optimistic about the potential of the euro. She said that the fluctuations in US trade policy have created a global moment for the euro, but noted that the influence of the euro will not come naturally - the EU must proactively take that.
To shorten the gap with the US dollar, Ba Lagarde said that the EU needs to improve the general market, improve consistency in the legal system and reform the internal financial system. Promoting the use of Euro in international trade transactions, improving the efficiency of cross -border payment and enhancing the liquidity support mechanism led by ECB are also essential factors.
In addition, she emphasized that increasing general financial resources, especially in the defense sector, will contribute to strengthening the global position of the euro.
Although the potential is clear, but in the short term, Euro can hardly overtake the USD. According to the International Monetary Fund (IMF), EURO currently accounts for about 20% of the global foreign exchange reserve, compared to 57.3% of the USD. Although the dollar's proportion is decreasing and at the lowest level in nearly three decades, it is still the dominant reserve currency in the world.
