ECB President Intends to Strengthen Euro as a Reaction to Trump's Statements - ECB leader advocates for a more robust euro to counteract Trump's measures.
ECB President Advocates for Stronger Euro Amid US Trade Disputes
In a speech at the Hertie School in Berlin, European Central Bank (ECB) President Christine Lagarde called for a stronger Euro as a strategic response to the ongoing trade dispute between the European Union (EU) and the United States. Citing the current global order as being shaken "to its very foundations," Lagarde criticized the replacement of multilateral cooperation with zero-sum thinking and bilateral power plays.
Lagarde did not explicitly mention US President Donald Trump or his recent threat of tariffs against the EU, but she did express concern over the diminishing role of the dollar as a system pillar. This uncertainty could pose significant risks for Europe, where exports account for nearly 20% of value creation and support around 30 million jobs.
While acknowledging the uncertainties, Lagarde pointed out new opportunities for the Euro, stating, "Given the current changes, the time seems ripe for a greater international role for the Euro." The dollar has been under pressure since Trump announced global tariffs, and the Euro has strengthened against the dollar more than in over three years.
To strengthen the global status of the Euro, Europe needs to become stronger on several levels: geopolitically, economically, and legally. This includes completing the internal market, deepening the capital market, reducing regulatory fragmentation, strengthening financial and legal frameworks, and enhancing defense and security collaborations.
A stronger euro could have a positive impact on the EU, making loans cheaper and boosting domestic demand, lessening the impact of exchange rate fluctuations, and better protecting Europe against sanctions. However, success depends on Europe building trust and demonstrating resilience in its institutions and policies.
Investor sentiment still shows caution, with many preferring gold as a safe asset over the euro, reflecting persistent concerns about the euro’s credibility and the EU’s incomplete financial and political integration. Nevertheless, a more robust euro could present unique advantages, enhancing Europe’s strategic autonomy, economic sovereignty, and geopolitical power. It could also help offset the negative impacts from external trade disputes by reducing dependency on the dollar and offering lower borrowing costs.
In a broader context, Lagarde's call for a stronger euro highlights the importance of closer EU integration in multiple domains, such as security, defense, and regulatory convergence. A united EU front could better withstand external pressures and present a more formidable player in global affairs. Despite the challenges ahead, the pursuit of a stronger euro may pave the way for deeper intracontinental cooperation and bring about lasting benefits for the EU economy.
- In the light of US trade disputes and the ECB President's call for a stronger Euro, the European Union (EU) might need to reconsider its employment policy, focusing on the sectors heavily reliant on exports, such as manufacturing and trade, to strengthen economic resilience and shield 30 million jobs from external uncertainties.
- As the Euro gains strength amid global trade tensions, EU policymakers should seize this opportunity to finance infrastructure projects and create jobs, adopting an ambitious employment policy that fosters growth and reinforces the Euro's international role, thereby increasing Europe's strategic autonomy and geopolitical power.
