02
JUNE
2025
The current weakness of the US dollar has been causing intense debates since the world's leading currency began to fall sharply in March. At the beginning of February, 1.02 US dollars was still enough to acquire one euro, you now need almost 1.14 US dollars. The ICE U.S. Dollar Index - a key figure that compares the dollar with a basket of six other currencies - fell by eight percent by mid-April, more strongly than ever since the introduction of the index in 1973.[ 1] This is generally attributed to the fact that Trump's trade policy is unpredictable and its consequences are hardly foreseeable; thus, the usual certainty that the US dollar is a safe currency port has faltered. For US President Trump's plans to help the United States become stronger industrial again, the weaker US dollar is favorable: imports become noticeably more expensive, which gives companies based in the USA clear advantages over their foreign competition. This effect is in addition to the effects of the tariffs imposed by Trump, which also aim to protect the US industry against overpowering imports, and which are already making life difficult for the previous suppliers of the United States around the world.
The president of the European Central Bank (ECB), Christine Lagarde, addressed the weakness of the US dollar and its consequences in a speech at the Hertie School in Berlin last Monday. Lagarde classified them in the main lines of current world political and global economic development. "Multilateral cooperation" is replaced by "zero-sum thinking and bilateral power games," Lagarde said; open markets gave way to protectionism. This brings great risks for the entire EU, as "our economy is deeply integrated into the world trading system". Exports reacted "almost a fifth of our added value" and secured 30 million jobs. 2] At the same time, however, the development also offers unexpected opportunities for the euro. Currently, there is "uncertainty" regarding the "dominant role of the US dollar", explained the ECB Vice President. This could open the door for the euro to a greater international role. Currently, only 20 percent of all currency reserves worldwide are held in euros, 58 percent in US dollars. A persistent phase of weakness of the US dollar could for the first time shift the situation significantly in favor of the European single currency.
In her speech, Lagarde pointed out that "a stronger international role of the euro" would have significant "positive effects" for the eurozone. This will make it possible to "take out loans at a lower cost"; this will help to strengthen domestic demand at a time when "external demand is becoming more uncertain". 3] In addition, a larger volume of trade could be settled in euros, which gives the EU more independence. All this also creates greater protection "against sanctions and other coercive measures": a clear indication of new opportunities to defend against US attacks in the current global economic war. However, the EU must work on its foundations in order to make the euro attractive for investors and states, Lagarde said. Thus, a "solid and credible geopolitical foundation" as well as "an unwavering commitment to open trade" are indispensable. Both must be underpinned not only politically, but also with strong military capabilities. In addition, the EU must finally create the single capital market, which it has been string for so long. And finally, it must become more politically powerful, for example by expanding majority decisions; this has also been demanded for years - so far in vain.
Berlin and Brussels have already harted the hope of strengthening the euro against the US dollar and possibly replacing the latter as the world's leading currency in the past. For example, in September 2008, the then Federal Minister of Finance Peer Steinbrück judged under the impression of the global financial crisis that the United States was about to lose its "status as a superpower of the world financial system". 4] Shortly before, the SPD-related Friedrich Ebert Foundation had said in an analysis that "the long-standing trust of foreign investors and central banks" in the US dollar was "slowly exhausted"; the US dollar threatened to "lose its function as a world currency". 5] It is important that there is now - unlike in previous periods of weakness of the dollar - "an alternative currency": the euro, which could easily replace it. As you know, this did not come about. Lagarde points out that the US dollar has now lost its dominance; with only 58 percent, its share of the currency reserves worldwide is as low as it has not been since 1994. 6] In addition, efforts have been underway for years to switch to other currencies in trade [7] and to an increasing extent to dispense with the US dollar for loans [8]. The dominance of the US dollar is thus also attacked.
The pursuit of a stronger role of the euro and an associated weakening of the US dollar is coming to light at a time when the demands in Berlin and the EU to achieve a global power position independent of the USA are getting louder. Chancellor Friedrich Merz had declared - with a view to the countless attacks of the Trump administration on Berlin and Brussels - immediately after his election victory that it had to "have an absolute priority to strengthen Europe as quickly as possible" so that it could achieve "independence" from the United States. 9] Last Thursday, EU Commission President Ursula von der Leyen said to her on the occasion of the awarding of the Aachen Karlspreis that it was "time for Europe to get up again and realize the next, great European project". 10] The previous "international order" had "turned into international disorder within a very short time", from which "a new international order will emerge in this decade". "This new order" must be "designed": "Our mission is called - European independence". To this end, it is important to "invest in our security"; von der Leyen stressed that the EU had made future military spending of up to 800 billion euros possible. In addition, the economic situation must be improved: "Europe has everything," said von der Leyen, "to take on a leading role in the world economy of tomorrow."
[1] Chelsey Dulaney, Alistair MacDonald: What the Weak Dollar Means for the Global Economy. wsj.com 16.04.2025.
[2], [3] Earning influence: lessons from the history of international currencies. Speech by Christine Lagarde, President of the ECB, at an event on Europe's role in a fragmented world organized by Jacques Delors Centre at Hertie School in Berlin, Germany. ecb.europa.eu 26.05.2025.
[4] Steinbrück accuses the USA of massive failure. spiegel.de 25.09.2008.
[5] S. on this From the dollar to the euro.
[6] Earning influence: lessons from the history of international currencies. Speech by Christine Lagarde, President of the ECB, at an event on Europe's role in a fragmented world organized by Jacques Delors Centre at Hertie School in Berlin, Germany. ecb.europa.eu 26.05.2025.
[7] S. Western currencies under pressure.
[8] BRICS Bank to finance its members' projects in local currencies. tvbrics.com 10.10.2024.
[9] Berlin Direct, 02/23/2025. S. on this "Independence from the USA".
[10] Speech by President von der Leyen on the occasion of the awarding of the International Charlemagne Prize in Aachen. ec.europa.eu 29.05.2025.