By Marta Vilar – WASHINGTON (Econostream) – Former European Central Bank Governing Council member Klaas Knot said on Friday that while the euro benefits from strong credibility and respect for international rules, structural weaknesses still limit its role as a top global reserve currency.

In an event organized by the Peterson Institute in Washington DC, Knot, who headed De Nederlandsche Bank until July 2025, said that “[i]f you were to score the euro on some of the well-known criteria needed for an important international reserve currency, it has clear strengths,” pointing to Europe’s commitment to a rules-based international order.

He cited Europe’s much-criticized reluctance to seize Russian assets as evidence of that adherence, adding that “this proves that we really stick to international rules.”

He also said that the commitment of the European Central Bank to price and financial stability is “undisputed,” reinforcing the euro’s credibility among global investors.

However, Knot said that these strengths were offset by persistent structural weaknesses within the euro area economy. In particular, he highlighted the incomplete integration of the single market, which continued to be hindered by remaining barriers.

This fragmentation, he warned, suppressed international investment demand. “If you want to become more attractive as a place to invest, this is something we need to work on,” he said, pointing to the lack of fully integrated capital markets as a key constraint.

Knot also said that progress on long-discussed reforms had been limited.

While much has been written about strengthening Europe’s financial architecture, “when it comes to translating this into action,” national interests and the desire to protect domestic systems often take precedence, he said.

He cited weaknesses in Europe’s pension landscape as another obstacle. The lack of automatic enrolment in pension schemes further limited the development of deep, long-term capital pools, he said.

In addition, Knot expressed concern about the slow progress toward completing the banking union. Banks remain reluctant to expand cross-border operations, partly due to regulatory and supervisory concerns that limit the perceived benefits of diversification, he said.

These areas had to be tackled in order to strengthen the international role of the euro, Knot said. “If we don’t, we shouldn’t have too many illusions about fostering that role.”