Strengthening the Euro Initiative by President EZB in Response to Trump's Policies - ECB Head Pushes for a Fortified Euro to Counter Trump's Strategies
The trade spat between the EU and the US, as emphasized by ECB President Christine Lagarde, poses a significant threat to the global economic landscape and Europe's economy in particular. In a speech at the Hertie School in Berlin, Lagarde expressed concerns about the current world order, which she believes is being shaken "to its very foundations."
The multilateral cooperation that once characterized international relations has been replaced by zero-sum thinking and power struggles, Lagarde noted without explicitly referring to US President Donald Trump and his threat of tariffs against the EU. According to Lagarde, protectionism is on the rise, replacing openness.
The dominant position of the dollar as a pillar of the system is uncertain, leading to potential risks for Europe. Approximately 20% of global foreign exchange reserves are held in euros, while the dollar accounts for 58%. The ongoing trade dispute between the EU and the US has resulted in a strengthening of the euro against the dollar, reaching its highest level in over three years since Trump announced his global tariff package.
Lagarde views this as an opportunity for Europe, suggesting that a greater international role for the euro could have a positive impact on the eurozone. Loans could become cheaper in the EU, boosting domestic demand. Additionally, fewer currency fluctuations would occur, as more trade would be conducted in euros, offering greater protection for Europe against sanctions.
However, Europe needs to strengthen itself in several areas to further the global status of the euro: geopolitically, economically, and legally. This includes concluding more trade agreements, catching up militarily, completing the internal market, deepening the capital market, and defending the rule of law.
The ongoing trade dispute between the EU and the US highlights the strategic importance of strengthening the euro's global position. While negotiations offer hope for de-escalation, Europe must bolster economic resilience and trade diversification to preserve the euro's significance and support Europe's economy amid global uncertainty.
In the context of the ongoing trade spat, Europe's economy faces potential market volatility and strategic challenges. However, accessing the EU's LNG and defense equipment imports, adopting fairer trading practices, and removing non-tariff barriers could foster new market opportunities and stabilize economic relations between the EU and the US.
According to some reports, the US's aggressive tariff threats and the ensuing trade dispute have generated uncertainty for EU businesses, making business planning and investment more difficult. Interestingly, key EU industries could suffer from steep tariffs on metals, chemicals, agricultural products, and processed foods, as the EU has already retaliated with tariffs on US goods worth about €21 billion. This tit-for-tat tariff escalation strains trade relations and disrupts supply chains critical for various sectors.
In summary, the ongoing EU-US trade dispute poses challenges to Europe's economic stability and highlights the strategic importance of strengthening the euro's global position. While negotiations offer hope for de-escalation, the dispute underscores the need for Europe to enhance economic resilience and trade diversification to preserve the euro's status and support Europe's economy amid global uncertainty.
- The employment policy in EC countries could be impacted by the ongoing trade dispute between the EU and the US, as businesses face uncertainty and potential difficulties in planning and investment.
- As the EU and the US engage in trade negotiations, the financial sector of these countries might need to adapt, given the potential risks and opportunities that may arise from a strengthened euro and changes in trade practices.
- The ongoing trade spat between the EU and the US, marked by politics and policies, has highlighted the importance of strengthening Europe's economic resilience and legal framework, not only to preserve the euro's global position but also to mitigate the effects of war-and-conflicts and general-news events on the employment policy within EC countries.
