By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Joachim Nagel said on Wednesday that Europe should seek to strengthen the international role of the euro, arguing that doing so would increase strategic autonomy in a fragmenting global environment.

Nagel, who heads Germany’s Bundesbank, said in a speech to the Hohenheimer Gesprächskreis Corporate Governance in Stuttgart that the euro was the world’s second most important currency after the US dollar, but that the dollar remained dominant by a wide margin.

“A stronger role for the euro would make us less vulnerable to foreign influences,” he said.

If a large part of Europe’s trade were conducted in euro, exchange rate fluctuations would matter less, he said. Higher demand for euro assets would also dampen financing costs in the Eurozone, he said.

The dollar was unlikely to lose its dominant role in the near future, given the importance of the US economy and financial markets and the high cost of a system change, Nagel said.

At the end of 2025, the dollar accounted for 57% of global foreign exchange reserves, while the euro’s share was around one fifth, he said. In foreign currency debt, the euro’s share rose markedly last year to about 30%, but the dollar’s share remained much higher at around 60%, he said.

Still, the dollar was “not invulnerable,” Nagel said.

The announcement of new US tariff policy in spring 2025 led to noticeable tension in global financial markets, and the dollar did not appear to be sought to the usual extent as a safe haven currency, he said.

Bundesbank research also suggested that political pressure on the Federal Reserve had affected markets not like monetary easing, but like “a loss of confidence,” Nagel said. Equity prices fell, measures of uncertainty rose, and gold prices increased particularly strongly, he said.

“The active government in each case has it in its own hands to ensure continued trust in its own currency,” he said.

The euro benefited only little from the dollar turbulence, while gold was one of the main beneficiaries, Nagel said. The gold price in US dollars rose almost 70% between “Liberation Day” and the attack on Iran, though it had since given up about half of that gain, he said.

Stablecoins could strengthen the dollar’s position in future, Nagel said, given that stablecoins were currently based almost exclusively on the US dollar and backed in particular by US Treasuries.

The euro’s strong position in the international monetary system was “not automatic,” he said.

The first requirement for strengthening the euro was trust in the stability of the currency, Nagel said. The Eurosystem worked on this every day by fulfilling its price stability mandate, for which central bank independence was essential, he said.

“If the independence of a central bank is called into question, trust in a currency can quickly be shaken,” he said.

But trust in the euro required more than an independent, price-stability-oriented central bank, Nagel said. It also required an institutional and legal framework in Europe based on the rule of law, legal certainty and reliability, he said.

Europe’s economic strength was also central to the international role of the euro, Nagel said. The Savings and Investment Union was therefore important because it would help direct savings to where they could be used most productively, he said.

Nagel also pointed to the Eurosystem’s decision earlier this year to make the EUREP repo facility permanently available globally to central banks. Supplying euro liquidity to other central banks helped prevent market turbulence and contributed to the smooth transmission of monetary policy, he said.

The international role of the euro also depended on efficient, sovereign and innovative European payments, Nagel said.

The digital euro would be a euro-area-wide digital payment solution, reduce fragmentation and lower dependence on non-European payment infrastructures, he said.

“That is not a protectionist argument, but a question of strategic capacity to act and digital sovereignty,” he said.

Nagel stressed that the digital euro would not be programmable money.

“Neither the state nor the central bank could determine what it may be used for,” he said. “Control over its use remains with users.”

From this autumn, the Pontes project would provide central bank money using distributed-ledger technology, Nagel said. Although the wholesale version of central bank money was initially aimed only at the financial industry, it would also lead to future services for companies, he said.

The digital euro and wholesale central bank digital currency were not only new means of payment, but part of a broader European payments strategy, he said.

These measures would also help increase the euro’s attractiveness and strengthen its international role, Nagel said.