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As part of Paris’s long-standing joint borrowing campaign, France has lobbyed fellow EU countries to pledge additional measures aimed at raising the euro profile as a global reserve currency.
The draft EU statement, distributed ahead of the leadership summit seen by the Financial Times later this month, calls on bloc institutions, including the European Central Bank, to “explorate actions to strengthen the euro’s international role.”
This push was driven by US President Donald Trump’s volatile trade and economic policies. This weakened the dominant role of the dollar and opened up space for the eurozone’s 25-year-old currency to become more attractive to international trading.
Paris argues that the EU should issue more joint debts to serve the market, according to officials familiar with the idea, as investors are looking for safe shelter from the US Treasury debt.
Other critical countries, including France, Italy and Spain, have long pushed more general borrowing to allow them to spend more on priorities such as defense without putting a burden on their citizens.
“There is a great opportunity for the Euro to play a major role globally,” said IMF managing director Christarina Georgieva at the EU finance ministers’ meeting in Luxembourg on Thursday.
“If you look at searching for high quality safe assets, you’re faced with constraints on the provision of these assets at this point. It’s no coincidence that so many are parked in gold,” Georgieva added, in connection with ECB data showing that gold has overtaken the euro as a reserve asset for the central bank.
The president of ECB Christine Lagarde wrote in the FT this week that “this is a ‘global euro’ moment,” but the block will need to reform to seize it, including creating a “sufficient supply of safe assets.”
“Despite its strong total financial position, with a debt-to-GDP ratio of 89% compared to 124% in the US, the supply of high-quality safe assets is lagging behind,” writes Lagarde. “Recent estimates suggest that unresolved sovereign bonds with an AA rating of at least 50% of EU GDP are more than 100% in the US.”
EU officials said this was a “classic Lagarde move to market French ideas,” such as joint borrowing.
In a speech earlier this month, ECB chief economist Philip Lane said that designing the Euro area will result in a “slow supply of safe assets,” and one way to respond is by issuing new common bonds to fund projects across Europe.
However, another option involves generating “a large inventory of safe assets from current inventory of government bonds.” He cited Olivier Blanchard of Peterson Institute and Abydo paper paper from Citadel, who suggested that some of the bonds issued by individual European governments be replaced with Eurobond.
The decision to issue more joint EU debts can only be taken unanimously. Germany and the Netherlands have to pay off more debts, but are stubbornly opposed to more common borrowings.
A senior EU diplomat said the committee would take into account Berlin’s opposition. But if the situation gets worse, “there are “economies in some member countries in particular – well – not so good.”
The EU is already struggling to repay the nearly 800 million euros of common debt it issued during the Covid-19 pandemic to fund economic stimulus.
The European Commission estimates that 30 billion euros per year, or a fifth of the budget starting in 2028, will be spent on repayment unless the debt is refinanced. France says issuing more debts to the top creates enough liquidity to seduce investors, according to two people familiar with the issue.
“If more member states improve their credit ratings, there will be no shortage of safe assets for the Euroites,” the EU diplomat said.
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A spokesman for Brussels’ permanent French representative declined to comment.
Council of Europe President Antonio Costa, who chairs the June 26-27 summit, has placed the role of the euro on the agenda as part of a broader discussion about deepening the bloc’s still fragmented single market amid the current geopolitical turmoil.
Costa told the Financial Times that better integration of the single market on savings and investment and EU cross-rules will “strengthen the Euro’s global position and establish it as an open, stable, reliable partner.”
Before Trump took office, the dollar’s role had already diminished. At the end of 2024, the dollar accounted for 58% of the world’s foreign exchange reserves, from 10 years ago, 65%, according to think tank Chatham House.
According to the IMF, the euro currently accounts for around 19% of its foreign exchange reserves. This is on a similar level to the 2000 it was created.
Additional Reports by Sam Fleming of London
