{"id":245867,"date":"2025-07-07T17:59:09","date_gmt":"2025-07-07T17:59:09","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/245867\/"},"modified":"2025-07-07T17:59:09","modified_gmt":"2025-07-07T17:59:09","slug":"a-chance-for-europe-to-rise","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/245867\/","title":{"rendered":"A chance for Europe to rise"},"content":{"rendered":"

This article is an on-site version of our Swamp Notes newsletter. Premium subscribers can sign up here<\/a> to get the newsletter delivered every Monday and Friday. Standard subscribers can upgrade to Premium here<\/a>, or explore<\/a> all FT newsletters<\/p>\n

Hello readers, I\u2019ve returned from my first tranche of book leave and eager to wade back into the Swamp with you. As my partner, I\u2019m lucky to have with me Jonathan Barth<\/a>, a senior adviser at the Cambridge Institute for Sustainability Leadership, co-founder of ZOE Institute for Future-Fit Economies and a Brussels expert with a particularly interesting view on Europe today.<\/p>\n

The United States celebrated its birthday last week, but my thoughts these days are on Europe. A couple of weeks ago, I attended a CEO conference in Italy, and I was struck (yet again) by how eager investors are to diversify away from the dollar and into euros. That\u2019s not to say they are doing it yet, but we are, I think, at a tipping point moment where this may change.<\/p>\n

As Currency Research Associates noted in a recent paper: \u201cNot only are the dollar exposures of [global] pension funds and insurance companies large and excessive at 50 per cent or more, but aggregate country exposures are frightening large,\u201d with Taiwan holding more than 90 per cent of its GDP in dollars, followed by Japan at 60 per cent and Australia and South Korea at 30 per cent.<\/p>\n

Diversification at this moment would make a ton of sense, even if Donald Trump weren\u2019t upending the global trading system and calling into question the independence of the US Federal Reserve, which is, I think, the one risk issue that market participants can\u2019t afford to overlook. Without a free Fed, US markets would very quickly correct.<\/p>\n

You can of course make the counter case. Last week\u2019s strong US jobs report bolstered the narrative of American exceptionalism and dynamism amid political chaos. And yes, stocks rose off the passing of the \u201cbig, beautiful bill,\u201d because equity markets always love tax cuts. But the truth is that serious investors are also very worried about the longer-term debt and deficit picture for the US, as well as political risk and populism.<\/p>\n

For all these reasons, the euro has seen some long-term momentum relative to the dollar and may see more if Europe can get its act together and really integrate its capital markets. So far, gold is the world\u2019s second largest reserve asset after the dollar. But, at the CEO conference, I asked 29 global leaders whether they\u2019d rather invest in Eurobonds (if they existed) rather than the US bond market right now, and 18 said yes. To me, this indicates that if Europe could truly recommit to integration, fix its capital markets, and offer investors the scale that they need to diversify, the euro would soar.<\/p>\n

European Central Bank president Christine Lagarde wrote a piece<\/a> in the FT recently, calling for a \u201cglobal euro\u201d moment. And European Commission president Ursula von der Leyen has made capital markets integration<\/a> a key priority in her second term. <\/p>\n

So what are the obstacles to making this happen? Politics as usual, of course, inertia, and the normal technocratic hurdles of pulling together 27 member states with 27 different legal and regulatory systems. But Jonathan, you\u2019ve made the case that there is something deeper and more psychological at work here. So tell us, what does Europe need to do to craft a new and better future at what seems to be a very opportune moment?<\/p>\n

Recommended reading<\/p>\n