“Euro Can Topple Dollar—But Only If Europe Acts Now,” Says ECB Chief

The Euro stands at a historic crossroads with the potential to dethrone the dollar as the world’s dominant currency, European Central Bank President Christine Lagarde declared Monday. But in a stark warning to EU leaders, she cautioned this opportunity will slip away unless Europe urgently strengthens its financial systems and security alliances.

Addressing an audience at Berlin’s Hertie School, Lagarde revealed global investors are actively seeking alternatives to the dollar amid growing concerns over unpredictable U.S. economic policies. Yet rather than embracing the euro, these investors are flocking to gold—a troubling sign that Europe’s currency still lacks the infrastructure and trust to serve as a true global reserve.

“The shifting landscape presents what I call a ‘global euro moment,'” Lagarde stated. “But let me be clear: currency dominance isn’t bestowed—it must be earned through decisive action.”

The ECB chief outlined three critical areas where Europe must improve. First, the bloc needs deeper, more integrated capital markets with truly liquid safe assets that can compete with U.S. Treasuries. Second, Europe must pair its economic ambitions with stronger security guarantees, as investors increasingly favor currencies backed by reliable military alliances. Third, the EU should aggressively promote euro usage in global trade through new payment systems and trade agreements.

Lagarde delivered a particularly striking message about the link between money and military power. “When official investors choose reserve currencies, they’re not just evaluating economic fundamentals—they’re assessing which nations can defend their interests and honor alliances with hard power,” she explained. This blunt assessment suggests the euro’s future may depend as much on Europe’s defense capabilities as its economic policies.

The speech also confronted Europe’s most sensitive political fault line: shared debt. While acknowledging German fears about mutualized liabilities, Lagarde insisted that “the economic case for jointly financing public goods is irrefutable.” She suggested such cooperation could finally create the deep pool of safe assets needed to make the euro truly competitive.

With the dollar’s share of global reserves recently falling to 58%—its lowest in decades—while the euro remains stuck at 20%, Lagarde framed this as a make-or-break moment. Success could mean cheaper borrowing for European businesses and greater protection from financial shocks. Failure would condemn the euro to permanent second-tier status.

“The window of opportunity won’t stay open forever,” Lagarde concluded. “Either we seize this moment together, or we’ll watch it pass us by—with consequences that will echo for generations.”