The international standing of the US dollar is showing signs of vulnerability, creating an opportunity for Europe to strengthen the global role of the euro, according to Joachim Nagel, President of the Bundesbank. In a speech delivered on September 22, 2025, he outlined a strategy to enhance European sovereignty through deeper financial integration and the development of digital central bank money.

A Question of Strength: Stability Over Exchange Rate
Nagel defined a strong euro primarily in terms of stability rather than its exchange rate. "A currency’s purchasing power should remain stable over time to ensure price stability," he stated, emphasizing that this provides the foundation for long-term economic planning. While the euro has appreciated significantly against the US dollar in 2025, Nagel argued that effective exchange rate analyses show a more moderate rise, suggesting concerns about lost export competitiveness may be overstated.

He pointed to recent geopolitical events and US fiscal policy as factors eroding the dollar's "safe-haven" status. "It appears that it is no longer seen unreservedly as a safe haven," Nagel noted, referencing market reactions to US policy announcements. While not predicting the dollar's demise, he suggested this creates an opening: "The question of greater global importance of the euro is perfectly justified."

Building Blocks for Sovereignty: Integration and Digital Money
To seize this opportunity, Nagel emphasized two priorities: completing the European Savings and Investments Union and advancing digital central bank money.

He highlighted the high trade barriers within the EU itself as a major obstacle, noting IMF estimates that equivalent tariffs were 44% for goods and 110% for services in 2020. A more integrated financial market, he argued, would channel Europe's high savings more efficiently towards financing the green and digital transitions, while also making the economy more resilient.

Addressing the rise of private stablecoins, particularly those pegged to the US dollar under new US regulations, Nagel warned of risks to monetary sovereignty but also saw an imperative for a European response. "In the digital financial system of the future, Europe must be mindful of its sovereignty," he said.

This response, he explained, is digital central bank money. A retail digital euro, envisioned as a digital complement to cash, would enhance privacy and resilience by reducing reliance on non-European payment providers. For wholesale settlements, a digital euro based on Distributed Ledger Technology (DLT) could streamline and secure financial market transactions. Nagel confirmed that a pilot solution for wholesale settlements, "Pontes," is targeted for 2026, while a retail digital euro would likely not launch before 2028, pending EU legislation.

A Confident Conclusion
Nagel concluded by urging Europe to actively shape its destiny. "In a world of change, Europe should not surrender to its fate, but should confidently take it into its own hands," he stated, expressing confidence that strengthening the euro, enhancing sovereignty, and modernizing the payments system would boost Europe's "economic strength, attractiveness, and independence."