European Central Bank (ECB) President Christine Lagarde said the euro could emerge as a serious alternative to the U.S. dollar as the world’s reserve currency, provided the bloc deepens its financial and security architecture.
She said U.S. President Donald Trump’s trade policies are shaking the foundations of the dollar-based global economic order.
The ongoing changes create the opening for a “global euro moment” that could challenge the “dominant role of the U.S. dollar” in world finance, Lagarde said during a May 26 lecture at the Hertie School in Berlin.
Her remarks came just hours after Trump agreed to delay a sweeping 50 percent tariff on European Union (EU) goods, a move that sent European stocks and the euro higher while the dollar pulled back.
Lagarde warned that a retreat from multilateralism is threatening the international rules-based system that has underpinned global trade for decades.
“Openness is giving way to protectionism,” she said. “Any change in the international order that leads to lower world trade or fragmentation into economic blocs will be detrimental to our economy.”
The ECB president said that while the dollar still dominates global finance, its central role is increasingly being questioned amid geopolitical uncertainty and unilateral U.S. policy moves.
But while Lagarde said that “the changing landscape could open the door for the euro to play a greater international role,” she also acknowledged that Europe is not yet ready to seize the opportunity.
For the euro to mount a serious challenge to the dollar’s dominance, the EU must first complete its long-stalled push for deeper integration. This would mean a unified capital market, closer legal and institutional ties, and less dependence on the United States for its security.
Her message echoed recent remarks by ECB Vice President Luis de Guindos, who said in April in Madrid that Europe must make decisions “based on shared interest rather than the national one” if the euro is to gain ground as a global reserve currency.
“I think we’re at the best position to become one in some years, [but only] if an additional integration process happens,” de Guindos said.
The calls for greater EU unity by the bloc’s finance leaders come as Trump’s trade policies continue to ripple across global markets. On May 25, Trump delayed the planned 50 percent tariffs on EU goods from June 1 to July 9. The decision came after European Commission President Ursula von der Leyen asked for leniency, saying the 27-nation bloc needed more time to come up with a deal.
Trump, who has often used tariffs as leverage in both economic and diplomatic disputes, has argued that a trade reset is needed to undo decades of unfair treatment of the United States by other countries. He said it will trigger an economic boom in the United States, despite a potentially painful adjustment period in the near term.
Christopher Waller, member of the Federal Reserve Board of Governors, offered a sharp counterpoint to speculation about the euro displacing the dollar as the world’s reserve currency during a speech earlier in 2025.
While the euro is the second-most-used global currency, it continues to trail the dollar by a wide margin in each of these roles, Waller said. He pointed to the unmatched size, liquidity, and trust in U.S. Treasury markets as core reasons why the dollar remains the cornerstone of global finance.
Even amid geopolitical tensions and efforts by countries such as China to diversify away from the dollar, the euro has not gained significant ground in global trade, international banking, or foreign exchange markets, Waller said. Outside of Europe, most cross-border transactions—including those settled in digital assets—remain dollar-denominated.
“In times of global financial stress, investors and governments seek a safe haven to protect the value of their assets and stabilize their own financial markets,” he said. “When this happens, there is almost always a ‘flight to the dollar’ and heightened demand for U.S. dollar assets.
“We saw this in 2008 and again in 2020. This is the ultimate vindication that the U.S. dollar is the world’s reserve currency and is likely to remain so—in times of global stress, the world runs to the dollar, not away from it.”
