Europe eyes moment to challenge US dollar’s supremacy in age of Trump

BRUSSELS ― The policies of U.S. President Donald Trump have given Europe a window of opportunity to fulfill a long-held dream of challenging the dollar’s supremacy in global finance, according to European Central Bank leader Christine Lagarde.

Speaking to EU leaders during a summit on Thursday, Lagarde said a single EU financial market can attract investors searching for alternatives to the dollar and U.S. financial markets, according to an EU diplomat and an EU official aware of the talks behind closed doors.

Lagarde reportedly drew attention to recent trends in global financial markets, notably a tendency of foreign investors not to reinvest money in U.S. Treasury bonds as their existing holdings mature. Net purchases of Treasuries by foreign investors have fallen well short of expectations this year and turned negative in January for only the second time in over four years.

Analysts have commented that investors are unsettled both by Trump’s willingness to launch a trade war and by his intention to make a temporary tax cut permanent at a time when U.S. public finances are on an unsustainable trajectory. Trump’s enthusiastic embrace of cryptocurrency has also raised questions about his long-term plans for the dollar.

At the same time, however, Trump’s encouragement of private digital currencies linked to the dollar, so-called stablecoins, may expand and entrench the greenback’s dominance, European Stability Mechanism head Pierre Gramegna said last week. Both Gramegna and the ECB see this as a potential threat to Europe’s own monetary sovereignty.

Jacopo Barigazzi contributed to this report.