Lagarde calls capital markets union key to euro’s global reserve status

European Central Bank President Christine Lagarde told lawmakers in Brussels on Monday that the euro will not become a global reserve currency "overnight," calling the completion of the capital markets union the single most important step toward strengthening the single currency's international standing.Euronews+1

"If you look at history, no currency has been an international reserve currency unless it had the capacity to defend itself and sufficient military force to stand against other powers," Lagarde said during the event.Euronews+1

Payment Dependence and the Digital Euro

Lagarde highlighted Europe's reliance on American payment infrastructure as a vulnerability. Visa ↘ 1.17% and Mastercard ↘ 2.34% account for 61% of card payments in the eurozone and handle nearly all cross-border transactions, according to 2025 ECB data. Reducing that dependence, she argued, is part of a broader push for European financial sovereignty.Euronews+1

The EU is advancing legislation on a digital euro — a public digital currency backed by the ECB intended to complement banknotes. The legislation is expected to be approved by the end of 2026, with a decisive vote in the European Parliament scheduled for Tuesday.Euronews+1

The EU's approach contrasts with that of the United States, where President Trump has abandoned the pursuit of a Federal Reserve digital dollar in favor of privately issued stablecoins. The GENIUS Act, signed into law earlier this year, creates a regulatory framework for dollar-backed stablecoins, with roughly 95% of global stablecoins currently pegged to the US dollar. Supporters describe the law as a tool to "cement" the dollar's global role and "buttress" demand for US Treasuries.Euronews+2

Capital Markets Fragmentation

Lagarde's remarks build on months of momentum behind the capital markets union project. In late May, the EU's six largest economies jointly called for an acceleration of the initiative, urging Brussels to overcome political gridlock and allow capital to flow freely across borders. The bloc's fragmented markets have long been seen as the chief structural obstacle limiting the euro's global reach — the currency accounts for about 20% of foreign exchange reserves worldwide, compared with 57% for the dollar.RTÉ+1

Lagarde's appearance on Monday also covered monetary policy. She defended the ECB's decision earlier this month to raise interest rates by 25 basis points, citing inflation driven by rising energy costs tied to the war in the Middle East, while playing down fears of dangerous second-round effects.ecb.europa+1