Gabriel Makhlouf, member of the Governing Council of the European Central Bank (ECB), asserts that the euro is not yet qualified to replace the USD as the dominant global currency.
He emphasized that the European economy still lacks the necessary structural integration and fiscal policy, while calling for deeper linkages within the European Union to enhance the role of the euro.
MAIN CONTENT
The euro is not ready to replace the USD due to a lack of deep economic and fiscal integration.
Lack of a central fiscal mechanism and common safe assets such as US government bonds.
Strengthening EU economic sovereignty through reforms and closer financial cooperation is necessary.
Is the euro ready to replace the USD in its role as a global currency?
Gabriel Makhlouf, Governor of the Central Bank of Ireland and member of the ECB Governing Council, confirms that the euro is not yet qualified to replace the USD as the primary global reserve currency. He emphasizes that Europe lacks the necessary synchronization in economic and fiscal policy to assume this role.
He stated at the Economic Conference in Aix-en-Provence, France in 2025: "The European economic system is still not fully developed structurally." Factors such as the absence of a unified fiscal authority or safe assets equivalent to US Treasury bonds are major weaknesses of the eurozone.
The euro cannot replace the USD due to a lack of financial integration and synchronized support mechanisms, which can only be addressed when the EU achieves more comprehensive economic and fiscal development.
Gabriel Makhlouf, Governor of the Central Bank of Ireland, member of the ECB Governing Council, 2025
Why is the euro less attractive as a global reserve currency?
In-depth analysis indicates that the eurozone lacks a sufficiently strong financial system and overall fiscal policy to attract international investors and governments. The absence of a federal budget or a large-scale safe euro bond market creates significant limitations.
This makes investors and international organizations hesitant to shift reserves away from the USD. The potential for instability and policy risk reduces the euro's reliability compared to the US dollar.
Lack of a centralized financial mechanism
Unlike the United States, which has a federal budget and issues government bonds to maintain liquidity and safety, the eurozone remains financially fragmented. EU member states have separate fiscal policies that create significant barriers to the role of the global currency.
The role of common safe assets
US government bonds are considered the world's safest reserve assets, while the EU still lacks a similarly effective and widely available financial product to replace them.
What changes does the euro need to compete effectively with the USD?
Makhlouf urges the ECB and EU leaders to take advantage of the current unstable global context to strengthen the common economic and fiscal sovereignty of the bloc. Minimizing internal barriers and expanding collective funding mechanisms are seen as essential steps.
Enhancing cooperation and completing a common banking and capital market is a necessary requirement for establishing a solid foundation for elevating the euro's status internationally.
"The opportunity to enhance the position and sovereignty of the EU is crucial and must be seized right now."
Gabriel Makhlouf, Governor of the Central Bank of Ireland, member of the ECB Governing Council, 2025
Specific steps that need to be taken
Completing the Banking Union and capital markets to increase liquidity and stability.
Expanding collective financial mechanisms to meet the volume of deficits and common development costs.
Strengthening fiscal policy linkages between EU countries.
What policy adjustments are proposed to strengthen the euro?
ECB officials have repeatedly emphasized the need to consolidate fiscal tools and enhance banking and capital market integration within the EU. This will help the euro establish a strong position and increase its attractiveness.
Cooperation and consensus on financial measures will be the foundation for developing a euro that can confidently compete with the USD in the future.
Comparison table of financial characteristics between the eurozone and the United States
Criteria Eurozone United States Central fiscal mechanism Incomplete, fragmented by country Large, synchronized federal budget Common safe assets Lack of large, high-liquidity common bonds US government bonds are the global standard Financial market size Not developed synchronously like the US Largest in the world, high liquidity Economic and fiscal linkages Limited and not synchronized Tight and synchronized
Frequently Asked Questions
Can the euro replace the USD soon?
Experts assert that the euro needs significant improvements in fiscal policy and economic integration before it can replace the USD.
Why does the euro lack strength like the USD?
The eurozone has not established a central fiscal mechanism and common safe assets like the United States, leading to limitations on its global appeal.
What solutions has the ECB proposed to strengthen the euro?
The ECB calls for completing the Banking Union, expanding collective financial mechanisms, and enhancing EU fiscal policy cooperation.
What is the role of fiscal policy in strengthening the currency?
Synchronized fiscal policy helps create stability, increase liquidity, and reliability for national or regional currencies.
What must the eurozone do to attract more international investment?
There is a need to develop a large common financial market, safe assets, and improve economic and fiscal linkages among member states.
Source: https://tintucbitcoin.com/euro-chua-du-suc-thach-thuc-usd/
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