Has Euro’s moment come?

For decades, the global financial system has revolved around one undisputed anchor: the US dollar.

• Global trade in goods and commodities is largely priced in dollars.
• Governments and corporations issue debt in their local currencies,
• central bank reserves are still predominantly held in US dollars — mainly through US Treasury securities. The system has been dollar-centric for so long that it often feels permanent.

But what happens if confidence in the dollar begins to erode? Could the euro step into the gap? And what would it actually take for the single currency to get there?

Let’s be clear: the US dollar is not about to vanish.

It remains the world’s primary reserve currency, accounting for roughly 60% of global foreign exchange reserves. The euro ranks second, but far behind.

Yet three structural forces are shaping the dollar’s dominance story today.

1. The geopolitical weaponisation of finance

The freezing of Russian central bank reserves after the invasion of Ukraine was a turning point. It demonstrated that access to the dollar-based financial system is conditional — tied to political alignment with the United States.

Since early 2025, shifts in US trade and geopolitical policies have further strained relationships with parts of the world, including US allies.

The message to many countries is clear: dollar access is powerful, but it is not neutral!

That realization alone has prompted governments to explore alternatives.

2. The US fiscal Trajectory

The United States continues to run large fiscal deficits. Debt-to-GDP levels are climbing, and political realities make long-term fiscal consolidation unlikely. Major tax and spending decisions reinforce that trajectory.

Investors still trust US Treasuries. They remain the world’s benchmark safe asset. But questions are being asked:

• Is the US debt growth sustainable?
• Is US debt safe?
• Are US sovereign holdings reliable?

At the margin, some investors are diversifying — and gold has been one notable beneficiary.

3. Fragmentation of global trade

Globalisation is no longer expanding seamlessly. The world is increasingly divided into blocs. “Friendly” and “unfriendly” nations are building parallel trade and financial channels.

Local currency settlement agreements, bilateral swap lines, regional payment systems — all of these are being explored to reduce reliance on the US dollar.

A stronger global role for the euro would bring tangible advantages for Europe.

Lower currency exposure for European businesses

Today, much of global trade — even transactions that do not involve the United States — is denominated in dollars. That means European importers and exporters are exposed to dollar volatility.

When the dollar strengthens, it raises the local-currency cost of imports, especially commodities and energy that are priced in dollars. That feeds directly into corporate margins and, ultimately, inflation.

If more trade were invoiced in euros, European firms would

• reduce transaction costs,
• lower hedging expenses and
• stabilise profits.

The pass-through of dollar swings into European inflation would diminish.

That is not a minor benefit. It is structural.

Protection against imported inflation

Europe imports large amounts of energy and commodities, most of which are dollar-priced. When the dollar surges, Europe effectively imports inflation.

A stronger international euro — particularly in energy contracts and commodity pricing — would reduce that vulnerability.

For the European Central Bank, currency-driven inflation shocks complicate monetary policy. Greater euro pricing would provide an additional layer of insulation.

Structural demand for Euro assets

If governments and corporations outside Europe began issuing more euro-denominated debt, two powerful shifts would occur:

1. Structural demand for euro assets would rise.
2. The euro would increasingly become a funding currency.

A funding currency deepens capital markets, increases liquidity and strengthens global standing. It also attracts capital into European financial markets, benefiting European businesses and sovereign borrowers.

The good news is that euro-denominated bond issuance has indeed picked up since last year, as global borrowers increasingly take advantage of the euro area’s predictable policy backdrop and relatively lower interest rates.

Several large US corporates have tapped the European market to secure cheaper funding. For example, Alphabet Inc. (Google’s parent company) has repeatedly issued multi-tranche euro bonds to diversify its funding base and lock in lower borrowing costs. Similarly, Apple Inc. and Coca-Cola Company have accessed the euro market in recent years, benefiting from strong investor demand and attractive pricing conditions compared to dollar markets at the time of issuance.

These examples illustrate a broader pattern: even non-European blue-chip issuers are increasingly comfortable raising capital in euros, reinforcing the currency’s growing role in global debt markets.

And that’s a big deal!

There is also a strategic dimension. Economists refer to the reserve currency advantage as an “exorbitant privilege” — a term long associated with the United States.

The dollar’s reserve status allows the US to borrow more cheaply, run persistent deficits and exercise significant financial influence globally.

If the euro’s share in global reserves increased meaningfully, Europe could capture a fraction of that privilege:

• lower borrowing costs,
• deeper bond markets,
• stronger financial autonomy and 
• greater geopolitical leverage — without firing a single shot.

The benefits are clear.

The feasibility is another matter.

The euro is already the world’s second reserve currency. But there is a vast gap between second place and first.

To seriously challenge the dollar, Europe would need

• stability,
• scale,
• unity and — critically
• safe assets!

 The Safe Asset problem

The United States has one Treasury market. Europe has many sovereign bond markets.

Without a full fiscal union — shared taxation and permanent joint debt issuance — the euro area lacks a single, deep, unified safe asset comparable to US Treasuries.

After the sovereign debt crisis, Europe strengthened its institutional architecture. Banking union mechanisms were created, fiscal oversight improved and, during the pandemic, joint EU bond issuance emerged.

That joint borrowing was historic. It created a quasi-supranational safe asset Europe had long lacked.

But it is not yet permanent or large enough to rival the scale and liquidity of the US Treasury market.

Political divides remain substantial: North versus South, fiscally frugal countries versus higher-spending members, federalists versus nationalists.

With populism rising, unifying Europe under a full fiscal roof appears unrealistic in the near term.

This is the euro’s core constraint.

Energy dependence

The euro area remains dependent on energy imports. The green transition may gradually alter that dependency, but not fast enough to eliminate current account sensitivities in the near term.

Persistent energy imports expose Europe to external price shocks and currency pressures. These factors complicate any ambition to become the world’s primary currency anchor.

The Dollar-Centric infrastructure

Finally, shifting the world away from the dollar is not simply about preference. It requires changing deeply embedded infrastructure:

• Trade contracts
• Derivatives markets
• Payment systems
• SWIFT-based financial plumbing
• Commodity exchanges

All of these are heavily dollar-centric.

For the euro to scale meaningfully, it would require not just European political will but broad global coordination and trust. And any aggressive push to displace dollar pricing — especially in energy markets — would likely meet resistance from the United States.

The European Union does not have the geopolitical leverage, nor the will, to force that shift against the Big and Powerful US’ will.

Realistically, no — not imminently.

But is the era of unquestioned dominance over? Possibly.

We may be transitioning from a unipolar currency world toward something more diversified:

For Europe, the opportunity is not to replace the dollar outright. It is to narrow the gap. To increase strategic autonomy. To reduce imported volatility. And to ensure that when geopolitical tensions flare, it is not entirely dependent on someone else’s currency system.

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