Gabriel Makhlouf, a European Central Bank (ECB) Governing Council member, shared his opinion on the growing talks about the euro’s potential to replace the dollar as the world’s dominant currency, stating the currency is just not ready.
European Central Bank (ECB) Governing Council member, Gabriel Makhlouf has pushed back against the narrative that the euro is on the verge of replacing the US dollar as the anchor of the global financial system.
The euro is not ready to challenge the dollar
Makhlouf, who also serves as the Governor of the Central Bank of Ireland, was speaking at an economic conference in Aix-en-Provence, France, when he emphasized that Europe still lacks the structural and fiscal integration necessary to support such a shift.
“Frankly, Europe’s economic system is still not formed,” he said. He also pointed out that the eurozone lacks critical elements such as a unified fiscal authority or a common safe asset comparable to the US Treasuries.
Makhlouf cautioned against misinterpreting recent currency movements as signs of a fundamental transition in global financial leadership. “It’s a bit far to say that’s suddenly going to lead to the euro replacing the dollar because the euro is not ready to do that,” he explained.
Makhlouf calls for deeper EU integration from the ECB
Europe’s incomplete economic and fiscal integration is often cited as an obstacle to the common currency’s placing on a global stage. While the euro is used by 20 countries and serves as the second most traded currency in the world, the eurozone still lacks a central fiscal mechanism equivalent to the United States’ federal budget or debt issuance system.
The absence limits the euro’s appeal as a global reserve currency. Without a unified fiscal policy or a large, liquid market for safe euro-denominated assets, international investors and governments are hesitant to fully shift their reserves or financial instruments away from the dollar.
“The euro cannot quickly supplant the dollar as the anchor of the world’s financial system,” he said, reinforcing that while there may be increasing demand for alternatives to the dollar, Europe’s economic tools and institutions must first evolve.
Makhlouf did not ruffle any feathers when he called on the ECB to take bold steps to increase the European Union’s economic sovereignty. He also encouraged EU leaders to view the current climate of global uncertainty as an opportunity to strengthen the currency.
“These opportunities to actually increase the standing of the EU, to strengthen its sovereignty and autonomy matter, and they need to be taken,” Makhlouf urged. He advocated for reducing internal barriers in the EU’s single market and expanding joint-financing mechanisms for common priorities.
Aside from Makhlouf’s remarks, several ECB officials have, in recent months, highlighted the importance of completing the EU’s banking and capital markets union, enhancing cross-border investment, and building fiscal tools that match the scale and coordination of those in the US.
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