The US administration’s ever more volatile foreign policy actions make accelerating the internationalisation of the euro an imperative.
After bombing Venezuela and capturing its president and his wife last week, the US pivoted to threatening a takeover of Greenland, an autonomous territory of NATO member Denmark.
European leaders protested in a letter this week. US president Donald Trump and his associates — not renowned for their epistolary sophistication — responded with more threats. Talks with Denmark will take place next week, with the outcome uncertain.
The odds of a US invasion remain low. This is not the first time Greenland has been on the receiving end of a Trump diatribe. Previous occasions have thankfully led to little action of note.
While the Venezuelan incursion is further confirmation the US will not be held back by international law or national sovereignty, invading a NATO member would be a radical departure from the norm, even for this administration.
Yet the EU cannot be complacent. US attacks on European sovereignty can take many forms short of invasion.
Last month, the Trump administration sanctioned five Europeans for their role in combatting hate speech, including former European Commissioner Thierry Breton.
Travel bans, while a real threat to free speech, remain comparatively benign. A much greater vulnerability is Europe’s dependence on the dollar.
The EU institutions and member states need to act now to protect their monetary sovereignty by making the euro a truly global currency — one which can provide an alternative to the dollar for Europe and its allies, free from US sanctions.
Thankfully, solutions exist to rapidly ramp up the euro’s global role.
Shahin Vallée, a senior associate fellow at the German Council on Foreign Relations (DGAP), set out some of these in a recent report.
Vallée argues the ECB should expand euro swap lines to match the US Federal Reserve’s more expansive network; accelerate and expand its digital euro plans; tightly regulate private stablecoins; issue a euro safe asset regularly and at scale, which it could be argued it already does through EU bonds; and complete the capital markets union, now called the savings and investment union, including through an expanded ECB operational framework.
European policymakers should be encouraged by record euro bond issuance this week, which confirms that companies and investors trust the currency in uncertain times.
Vallée's recommendations are clear and actionable. What has been lacking is political will. Trump’s latest threats ought to provide the necessary urgency to act.