[Text/Observer Network, Xiong Chaoying] According to a Reuters report on May 26, European Central Bank President Christine Lagarde said in Berlin on the same day that if governments could strengthen the financial and security architecture of the eurozone, the euro might become a viable alternative to the US dollar and bring great benefits to the Group of Twenty (G20).

The report stated that due to the uncertainty of US economic policies, global investors have been reducing their exposure to US dollar assets over the past few months, but many have turned to gold without finding a direct substitute. In fact, due to the incomplete financial system of the EU and the lack of willingness among governments to further integrate, the global role of the euro has stagnated for decades.

"Ongoing changes are creating an opportunity for the 'euro globalization moment,'" Lagarde said. "The euro will not automatically gain influence; it must be earned through effort." She believed that for this purpose, Europe needs a deeper and more liquid capital market, must strengthen its legal foundation, and needs to consolidate its commitment to open trade through security capabilities.

On May 26, Lagarde delivered a speech at the Hertie School of Governance in Berlin, as reported by German media.

Reuters reported that the status of the US dollar has been declining for years, currently accounting for 58% of global foreign exchange reserves, which is the lowest level in decades, but still far exceeds the euro's share of 20%.

Lagarde pointed out during her speech at the Hertie School of Governance in Berlin that in order to enhance the role of the euro and play a more important role, military strength must also be enhanced simultaneously to support various partnerships.

"This is because investors—especially official investors—are seeking geopolitical assurance in another form: they invest in regional assets that can become reliable security partners and ally with hard power."

In Lagarde's view, Europe should also make the euro the preferred currency for companies to issue invoices for international trade. This can be supported by concluding new trade agreements, strengthening cross-border payments, and reaching liquidity agreements with the European Central Bank.

However, she emphasized that reforming the internal economy may be more urgent, as the eurozone capital market remains fragmented and inefficient, lacking a truly liquid and widely accessible safe asset that would attract investors.

"Economic logic tells us that public goods require joint financing. This joint financing can lay the foundation for Europe to gradually increase the supply of safe assets." Although Lagarde said so, Reuters pointed out that joint borrowing has always been taboo for some major eurozone countries, especially Germany, where Berlin was concerned that its taxpayers might ultimately have to pay for other countries' irresponsible fiscal behavior.

Lagarde believed that if Europe can break through bottlenecks and succeed, the gains will be significant—inflow of investment will enable domestic enterprises to borrow at lower costs, make the eurozone immune to exchange rate fluctuations, and protect it from international sanctions.

On May 7, Reuters reported that Andriy Pyshnyi, Governor of the National Bank of Ukraine, said that against the backdrop of global trade fragmentation and the increasingly close relationship between Ukraine and Europe, Ukraine is considering abandoning the US dollar as a reference currency and instead more closely pegging its national currency, the hryvnia, to the euro.

In an email, Pyshnyi revealed that Ukraine's potential "European integration" prospects, the EU's growing role in strengthening Ukraine's defense capabilities, the dramatic fluctuations in global markets, and the trend toward global trade fragmentation are forcing the National Bank of Ukraine to reassess whether its currency system should replace the US dollar with the euro.

He further disclosed that in the foreign exchange market, although US dollar transactions still dominate all fields, the share of euro-denominated transactions is gradually rising in most fields, but "the increase so far has been small."

"This work (transition to the euro) is very complex and requires high-quality and comprehensive preparation," Pyshnyi added. Reuters noted that Pyshnyi's remarks were the "most direct" comments made by Ukrainian officials on the possibility of transitioning to the euro.

This article is an exclusive contribution by the Observer Network and cannot be reprinted without permission.

Original source: https://www.toutiao.com/article/7508920245474705954/

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