Lagarde urges stronger global role for the euro
In a speech in Paris, ECB President Christine Lagarde called for enhancing the euro's international status to turn Europe's openness into economic strength. She highlighted how recent safe-haven flows into the euro amid US turbulence pressured the exchange rate, underscoring the need for deeper markets and integration. Lagarde emphasized that a more global euro could shield exporters and foster resilience against external shocks.
Christine Lagarde, President of the European Central Bank, delivered her speech titled 'Turning openness into strength: the moment of the euro' on October 7, 2025, at the Business France event 'Business en Européens' in Paris. She opened with a reference to John Connally's 1970s remark: “The dollar may be our currency, but it’s your problem,” noting its resonance today as investors sought the euro as a safe haven earlier in 2025 amid US policy turbulence, leading to exchange rate appreciation.
Lagarde explained that Europe's exports reached nearly €4 trillion last year, making it the most open major economy but vulnerable to intertwined trade and geopolitics. She clarified there is no mechanical long-term link between a currency's global role and its exchange rate strength, citing the dollar's history of fluctuations despite its reserve dominance. For the euro, its global role and exchange rate rose together in the first decade, declined post-financial crisis, but decoupled in the third decade.
The euro area benefits from deep foreign exchange markets—USD/EUR turnover is 20 times higher than EUR/CHF or EUR/JPY—and 52% of imports invoiced in euro, cushioning volatility. However, its AAA and AA-rated sovereign bond market totals €6.6 trillion, one-fifth the US size, and equity markets are less than half as large with lower returns since 2009. Over €11.5 trillion in household savings sit in deposits, hindering productive investment.
Safe-haven inflows risk inflating the euro and hurting exporters, positioning Europe as 'innocent bystanders' to US decisions. To counter this, Lagarde advocated completing the Single Market, building a savings and investments union, and forging trade agreements that could boost EU exports by 40% by 2032. The EU leads trade for 72 countries, covering 40% of global GDP, with two-fifths of world trade invoiced in euro.
Enhancing cross-border payments, like a digital euro and TARGET Instant Payment interlinking, plus ECB liquidity lines, would promote wider use. Upholding institutional integrity, with trust in the EU at its highest since 2007, is key. A 2% rise in intra-euro area trade could offset a 9% drop in US exports from new tariffs, worth €66 billion.
In conclusion, Lagarde quoted Antoine de Saint-Exupéry: “L’avenir n’est jamais que du présent à mettre en ordre,” urging reforms to make the euro a pillar of stability.