The euro consolidates its position as the world's second largest currency despite geopolitical turbulence and changes in monetary policy.

The euro has managed to maintain its relevance on the international financial scene, consolidating its position as the world's second-largest currency. This is revealed by the latest analysis from the ECB, which highlights the remarkable stability of the euro in 2024, despite economic and geopolitical challenges. Its share in various indicators of international currency use has remained around 19 % since the Russian invasion of Ukraine.

This period has been particularly dynamic, with the ECB initiating a cycle of interest rate cuts following the decline in inflation. At the same time, there has been a record gold accumulation by central banks and an active search for alternatives to traditional cross-border payment systems. There is also clear evidence of how changes in global trade invoicing patterns are linked to geopolitical alignments, especially since the conflict in Ukraine.

Christine Lagarde, president of the ECB, underlined the importance of these findings: "This stability was remarkable in a year that saw the ECB begin to lower policy rates, following further declines in inflation and continued geopolitical tensions."

They have also emerged new challenges for the international role of the euro, including initiatives that promote the global use of cryptocurrencies. However, the recent tariffs imposed by the US administration have generated atypical correlations between assets, a scenario that, according to Lagarde, "could strengthen the global role of the euro and underscores the importance for European policymakers to create the necessary conditions for this to happen."

To this end, the number one priority The key objective should be to advance the Savings and Investment Union, with the aim of making the most of European financial markets. Removing barriers within the European Union is crucial to improving the depth and liquidity of euro funding markets, a prerequisite for greater use of the currency. In this regard, the planned issuance of EU-level bonds, as Europe assumes responsibility for its own defense, could make a significant contribution.

The ECB, for its part, is committed to playing its part. In a more volatile geopolitical environment, accelerate the progress of a digital euro It is essential to strengthen European sovereignty. Improving cross-border payment systems between the euro and other currencies will also increase resilience. Furthermore, offering solutions for settling wholesale financial transactions recorded on distributed ledger technology (DLT) platforms with central bank money will increase the efficiency of European financial markets and the global attractiveness of the euro. The ECB's euro liquidity lines to central banks outside the euro area, which signal the ECB's willingness to provide support in stressed market conditions, also encourage the use of the euro in global financial and trade transactions.

Finally, the global attractiveness of the euro is based on solid policies in the eurozone and in strong, rules-based institutions. Maintaining the rule of law remains essential to preserving and potentially increasing global confidence in the euro. The ECB will continue to monitor developments and regularly publish information on the euro's international role.