Euro Faces Long Road to Challenge Dollar's Global Dominance

European Central Bank Governing Council member Gabriel Makhlouf recently addressed the euro's readiness to challenge the dollar's dominant role in the global financial system. He emphasized that countries using the euro still have significant ground to cover before the currency can effectively compete with the dollar. Makhlouf's remarks underscore the ongoing challenges faced by the euro in establishing itself as a primary reserve currency, despite its widespread use within the Eurozone.

Makhlouf highlighted that the euro's journey towards greater international acceptance is a long-term endeavor. While the euro has made strides in becoming a more prominent currency, it still lags behind the dollar in terms of global usage and trust. The dollar's status as the world's reserve currency is deeply entrenched, and shifting this dynamic would require substantial changes in global financial practices and policies.

Makhlouf noted that the euro's recent performance against the US dollar has been influenced by investor concerns about the rule of law in the US. He cautioned that while the euro has shown resilience, this does not yet indicate a readiness to challenge the dollar's supremacy. Makhlouf's comments suggest that while the euro has potential, it will take time and concerted efforts to achieve parity with the dollar.

Makhlouf also discussed the long-term prospects of the dollar's dominance. He acknowledged that the dollar's position as the world's leading currency may gradually decline over time, but this process will be slow and incremental. The euro's ability to challenge the dollar will depend on various factors, including economic stability within the Eurozone, the strength of the European economy, and the effectiveness of monetary policies implemented by the European Central Bank.

Makhlouf echoed the calls of his colleagues at the ECB for Europe to use the current environment of global uncertainty as an opportunity to bolster its own security, lift barriers within its single market, and increase joint-financing for shared objectives. He emphasized that these opportunities to strengthen the EU's sovereignty and autonomy are crucial and need to be taken.