The European Central Bank (ECB) finds it wonderful to see that the euro is gaining popularity around the world, now that the image of the US and, in its wake, the dollar, is suffering from US policy and the country’s stance on the global stage.
The ECB is delighted because the bank would like to see the international role of the euro expand. To make the euro more attractive, according to Philip Lane, executive board member and chief economist of the bank, there should be more so-called safe assets denominated in euro, to meet the growing demand for them. At the moment, that supply is falling short, Lane said in a recent speech.
There are too few German government bonds, which currently play that role, he said. At which point I thought: that will change in the near future, given the defense, infrastructure, and energy plans of the German government. And then there is the pension bill on top of that.
Lane therefore argues in favor of more joint government bonds, the so-called eurobonds. According to the Irishman, this should be the way to finance defense spending as well as support for Ukraine. In his view, those eurobonds are precisely the kind of safe asset the euro needs as a catalyst for a greater global role for the currency.
There are several question marks to be raised here, and I am not referring to why eurobonds themselves are undesirable (I have already written about that earlier).
To begin with, the firmness with which an ECB executive board member speaks out on this kind of political issue. Recently, the ECB also put its signature under an international statement of support for the Fed and Fed chair Jerome Powell, who are under fire in Washington. It is fine to stand up for the independence of central banks, but by simultaneously involving yourself in purely political matters—the question of how governments should finance spending certainly qualifies—you open the door for politicians to interfere with you as the central bank and with your policy.
“But Lane and the ECB are talking about this in the context of the international role of the euro,” I hear you think. Then it is allowed. I understand that reasoning, but then I point to something else.
The US dollar fell sharply in value against the euro in 2025. At the end of January, EUR/USD fell to 1,20. You could see it coming that voices from within the ECB would emerge labeling the rise in the euro as undesirable. That has indeed happened. If the euro were to strengthen further, the ECB might have to do something about it.
I have great difficulty reconciling that with the desire to give the euro a more important role in the world. What kind of message are you sending to all those investors and governments around the world whom you hope will use the euro more, if you threaten action to weaken the currency precisely when it rises in value? And also: if you want the euro to play a larger role globally, then if that succeeds, demand for the euro will increase and its value will rise.
Dear ECB, you will really have to choose: if you want the euro to become more global, you must stop threatening intervention when the currency becomes more valuable. You cannot have it both ways—not even in the magical world of monetary policy.
Edin Mujagić is an economist, manager of the Hoofbosch investment fund, and author of the book Keerpunt 1971. He writes a monthly ECB Watch for Investment Officer on the monetary policy of the European Central Bank.