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France is encouraging other EU nations to commit to new strategies that would enhance the euro’s status as a global reserve currency, as part of its ongoing campaign for increased collective borrowing.
A draft EU statement, which the Financial Times has reviewed, has been shared ahead of an upcoming leaders’ summit, suggesting that the bloc’s institutions, including the European Central Bank, “explore actions to strengthen the euro’s international role”.
This initiative was sparked by the unpredictable trade and economic policies of US President Donald Trump, which have diminished the dollar’s traditional dominance, creating an opportunity for the Eurozone’s currency, now 25 years old, to be seen as more appealing for international transactions.
According to officials familiar with the matter, France believes investors are seeking a refuge from US Treasury bonds, hence the EU should issue more collective debt to meet market needs.
France, along with other highly indebted nations like Italy and Spain, has long advocated for increased joint borrowing to allow for enhanced spending on priorities such as defense without overburdening their national finances.
“This is a significant chance for the euro to assume a larger global role,” stated IMF managing director Kristalina Georgieva during a meeting of EU finance ministers in Luxembourg on Thursday.
Georgieva noted, “The demand for quality safe assets is currently constrained. It is not surprising that so much is being invested in gold,” referencing ECB data indicating that gold has surpassed the euro as a reserve asset for central banks.
ECB president Christine Lagarde mentioned in the FT this week that this represents a “global euro” moment, while indicating that the bloc will need reforms to capitalize on this, including establishing a “sufficient supply of safe assets”.
“Even with a solid overall fiscal position—debt at 89% of GDP compared to 124% in the US—there is still a lag in high-quality safe asset supply,” Lagarde wrote. “Current estimates suggest that outstanding sovereign bonds rated AA or higher constitute just under 50% of GDP in the EU, while in the US, it is over 100%.”
An EU official remarked that this aligns with Lagarde’s traditional advocacy for French initiatives like joint borrowing.
Philip Lane, chief economist at the ECB, noted in a speech earlier this month that the structure of the eurozone has led to an “undersupply of safe assets”, and one possible response is to issue new common bonds to finance European projects.
Alternatively, he suggested creating “a larger supply of safe assets from the existing national bonds,” referencing a study by Olivier Blanchard from the Peterson Institute and Ángel Ubide of Citadel, which proposes replacing a portion of bonds issued by individual European nations with Eurobonds.
However, the decision to increase joint EU debt requires unanimous agreement. Germany and the Netherlands, who would face higher repayment obligations, strongly resist further common borrowing.
A senior EU diplomat indicated that the commission will consider Berlin’s dissent. Yet, if conditions worsen, “pressure will mount, especially as some member states are not in great economic shape.”
The EU is already grappling with repaying nearly €800 billion in common debt accrued during the Covid-19 pandemic for economic stimulus efforts.
The European Commission predicts that from 2028, €30 billion annually—one-fifth of the budget—will go towards repayments, unless it refinances. France contends that issuing additional debt would generate enough liquidity to attract investors, as stated by two sources close to the situation.
“If more member states improved their credit ratings, there would be a sufficient supply of euro-denominated safe assets,” suggested an EU diplomat.
A representative for the French permanent mission in Brussels opted not to comment.
European Council President António Costa, who will lead the summit from June 26-27, has prioritized the euro’s role in a broader dialogue about enhancing the still-divided single market in the face of current geopolitical challenges.
Costa told the Financial Times that improved integration of the single market along with unified EU regulations on savings and investments would “strengthen the euro’s global position, enhancing the EU’s status as a stable and reliable partner”.
The dollar’s influence was already on the decline prior to Trump’s administration. At the end of 2024, it represented 58% of global foreign exchange reserves, down from 65% a decade earlier, based on data from think tank Chatham House.
Presently, the euro accounts for roughly 19% of foreign exchange reserves, according to the IMF, aligning with its level when it was established in 2000.
Additional reporting by Sam Fleming in London
