Lagarde Sees Dollar’s Dominance Wobble as Trump’s Chaos Opens Door for Euro

Europe’s top banker spots blood in the water—and it’s green. Christine Lagarde claims political turbulence under Trump gives the Eurozone a rare shot at weakening the dollar’s stranglehold on global trade.

No more ’exorbitant privilege.’ The ECB president hints at coordinated moves to boost euro adoption—just as America’s political circus makes investors skittish. Timing is everything in currency wars.

One banker’s stability play is another’s opportunism. Funny how financial power shifts always seem to align with institutional self-interest—but hey, that’s central banking for you.

Lagarde says Trump is driving investors away from the dollar

The warning signs are everywhere. Christine recalled how in the 1970s, Richard Nixon suspended the dollar’s convertibility to gold, a moment that could’ve hurt the dollar’s global dominance if there had been a viable alternative. Now, in 2025, she says there is one: the Euro.

“Today, there’s the euro — another international currency alongside the dollar,” Christine said. And this time, financial markets are already reacting. She described the Euro’s strength as “counterintuitive” but completely logical, given the current disarray in US policy and the steady deterioration in investor trust.

Christine laid out three conditions Europe must meet if the Euro is going to step into a more dominant role. First, she called for a “solid and credible geopolitical foundation” by defending open trade and pairing it with strong security commitments.

Second, she repeated her long-standing push for economic reform within the EU: build the single market, cut down regulations, support startups, and finish the savings and investment union that’s been in limbo for years. 

Last, she insisted on more joint European financing, especially for defense. “Economic logic tells us that public goods need to be jointly financed,” she said. If that happens, investors will have a bigger pool of SAFE assets to choose from — a requirement for any serious reserve currency.

ECB officials say the euro must be backed by real integration

Christine isn’t the only one at the ECB pushing this. Luis de Guindos, the bank’s vice president, also said the Euro could rival the dollar if Europe ramps up integration. 

Isabel Schnabel, another executive board member, said Europe now has “a historic opportunity to further strengthen the international role of the euro.” Both officials echoed Christine’s demand for a much larger European bond market to support the Euro’s reserve role.

In her speech and a follow-up interview published Saturday, Christine said the chaos in the US — from attacks on the Federal Reserve’s independence to rising questions around the country’s legal system and trade policies — is making Europe look like the more stable option.

“At a time when we see the rule of law, the judicial system, and trade rules being called into question in the US, where uncertainty is permanent and renewed daily, Europe is rightly perceived as a stable economic and political area, with a sound currency and an independent central bank,” said Christine.

She also pointed to new developments like the digital euro and the single capital market, saying there’s “a groundswell more powerful than anything I’ve seen in six years in office.” Christine made it clear that achieving real harmonization of supervision, just like the EU did with banking regulation, is now essential if Europe wants the Euro to be taken seriously on the world stage.

Christine ended her comments with a direct shot at Trump’s repeated attacks on the Fed. “The independence of the central bank is fundamental to monetary and financial hygiene within a country or group of countries,” she said. “In every case where a central bank has found itself under the thumb of a fiscal authority, it has never ended well.”

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