ECB’s Panetta Sees Gradual Shift Toward Multipolar Monetary System; Says Europe Could Play Larger Global Role

9 December 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Fabio Panetta said on Tuesday that the long-term evolution of the international monetary system will hinge on slow-moving structural forces and that both the dollar’s traditional supports and the architecture of its main contenders are undergoing gradual change.

In a speech at the Whitaker Lecture at the Central Bank of Ireland, Panetta, who heads the Banca d’Italia, said that “[l]ooking ahead, the evolution of the [International Monetary System] IMS will depend on slow-moving forces such as the weakening of some of the dollar’s traditional pillars, China’s rise and Europe’s progress toward deeper integration.”

He said that the USD was still at the center of financial world but suggested this position could no longer be considered immutable, as “the foundations of this dominance are gradually weakening.”

The guarantees behind US securities seemed less clear than in the past, generating uncertainty over what had been the anchor of the global political and monetary order, he said.

Other major economies had elements of global currency status without yet fully achieving it, Panetta said.

“China and Europe show that major economies can have some ingredients of a global currency yet still fall short of full reserve-currency status,” he said.

China, he argued, “has scale, but may still lack the confidence underpinning a fully international currency.”

On the other hand, Europe met all necessary criteria but was constrained by having an incomplete financial, political and fiscal architecture.

“Fragmented capital markets and the slow pace of institutional integration prevent the euro from achieving the scale and coherence of the US system,” he added.

Panetta suggested that none of these processes operate on a short time horizon, but collectively they point to a steady rebalancing of the global system.

“Slow-moving processes could progressively open the way to a more multipolar IMS, where the dollar remains a major anchor, but other currencies gain importance,” he said.

Europe had the potential to play a larger role in the international monetary system, he said, and had to revitalize its economy, deepen its capital markets and make them more liquid and complete the digitalization of its financial infrastructure.