Europe needs to strengthen its financial architecture and be ready to play a larger role in global markets as the U.S. dollar retreats, European Central Bank policymaker Martin Kocher said. The comments come amid rising geopolitical tensions and greater economic competition from China, prompting EU leaders to rethink the bloc’s position on the global stage.
Euro Gaining Safe-Haven Status
Kocher, Austria’s central bank governor, highlighted that the euro has been steadily appreciating and is increasingly viewed as a safe-haven currency. “We are seeing more interest in the euro by counterparts, and I think that’s one of the reasons why we’re seeing some appreciation,” he said. Over the past year, the euro has risen 14% against the dollar, bolstered by confidence in Europe’s defense and infrastructure investments and by waning trust in U.S. trade and economic policy.
Potential for a Larger Global Role
While more than half of global foreign exchange reserves remain in dollars, Kocher noted this share has steadily declined over the past decade. “It’s not an objective to play a larger role internationally, but we might be forced to do so,” he said. To prepare, the ECB is exploring international repos, swaps, and other instruments to stabilize the financial system, while EU leaders are expected to receive a checklist of tasks to enhance the euro’s global standing.
Monetary Policy Remains Steady
On the policy front, Kocher expressed comfort with the ECB’s current steady-hand approach. Rates have been unchanged since June, and the outlook indicates no adjustments this year. He emphasized that the exchange rate would only be a concern if it caused inflation to deviate significantly from target, and for now, the euro’s firming is fully incorporated into ECB projections.
Analysis: Europe’s Emerging Financial Influence
Kocher’s remarks signal that Europe may increasingly be compelled to assume a greater role in global finance, not by ambition but by necessity. The retreat of the U.S. dollar, coupled with Europe’s stronger fiscal and defense profile, positions the euro as a credible alternative for reserves and cross-border trade.
However, the ECB faces structural challenges. Expanding the euro’s international footprint will require robust liquidity support, institutional coordination, and credible instruments to reassure global markets. While current policy is stable, Europe’s broader geopolitical context including strained U.S. relations and competition with China means the bloc must be ready to act swiftly if market volatility threatens financial stability. The euro’s rise is both an opportunity and a test: it may cement Europe’s role as a global safe haven, but only if institutional and monetary frameworks keep pace with its expanding influence.
With information from Reuters.