August 10, 2026

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The European Post

Policy • Diplomacy • Strategic Insight

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August 10, 2026

Newsletter

The European Post

Policy • Diplomacy • Strategic Insight

LATEST
Five Joint Defence Projects Launch Europe’s Military ShieldElectrification Plan Aims to Make Europe First Electro ContinentHorizon Europe Budget Fight Heats Up as Ministers Push BackGoogle’s DMA Fine Sets Off a Transatlantic Tariff ClashTwenty New University Alliances Join Erasmus for Two YearsForeign Subsidies Case Puts Temu in the EU’s SightsVan Tachographs Now Mandatory for Cross-Border FleetsStress Test Exposes Gaps in Euro Area Bank DefencesEurope Bets on a Gulf Partnership Before the Riyadh SummitWhy the Atlantic Route Now Runs Through MauritaniaKyiv and Chisinau Advance as the EU Accession Talks Gather PaceEurope’s New Digital Border System Beds In After a Rocky RolloutBrussels Mounts Its Largest Wildfire Response as the Fires SpreadRetail Spending Slipped in June, Wrong-Footing EconomistsHeatwave Warning Puts Brussels on Alert for Vulnerable GroupsKANAL’s 230 Million Euro Museum Sets a November Opening DatePension Savings Rules Get a Reset as the EU Scraps the 1% CapMedicine Shortages Move to the Heart of Europe’s Pharma ResetJapan Becomes Europe’s Closest Security Partner in AsiaCan Europe’s New Zealand Deal Anchor It in the Pacific?Five Joint Defence Projects Launch Europe’s Military ShieldElectrification Plan Aims to Make Europe First Electro ContinentHorizon Europe Budget Fight Heats Up as Ministers Push BackGoogle’s DMA Fine Sets Off a Transatlantic Tariff ClashTwenty New University Alliances Join Erasmus for Two YearsForeign Subsidies Case Puts Temu in the EU’s SightsVan Tachographs Now Mandatory for Cross-Border FleetsStress Test Exposes Gaps in Euro Area Bank DefencesEurope Bets on a Gulf Partnership Before the Riyadh SummitWhy the Atlantic Route Now Runs Through MauritaniaKyiv and Chisinau Advance as the EU Accession Talks Gather PaceEurope’s New Digital Border System Beds In After a Rocky RolloutBrussels Mounts Its Largest Wildfire Response as the Fires SpreadRetail Spending Slipped in June, Wrong-Footing EconomistsHeatwave Warning Puts Brussels on Alert for Vulnerable GroupsKANAL’s 230 Million Euro Museum Sets a November Opening DatePension Savings Rules Get a Reset as the EU Scraps the 1% CapMedicine Shortages Move to the Heart of Europe’s Pharma ResetJapan Becomes Europe’s Closest Security Partner in AsiaCan Europe’s New Zealand Deal Anchor It in the Pacific?

Why the Euro’s Global Role Is Stuck at One-Fifth of Reserves

Mustafa Kamal
Lead Analyst, Economic and Monetary Policy

Frankfurt: The European Central Bank’s annual stocktake of the euro’s international standing, published this month, reads less like a victory lap than a careful warning. The single currency held roughly 20 percent of global official foreign-exchange reserves through 2025, a figure that has barely moved since Russia’s full-scale invasion of Ukraine in 2022. The ECB describes the year’s progress as moderate and adds, pointedly, that there is no room for complacency. That phrasing matters, because it captures a structural reality that ambition alone cannot dislodge.

The headline number conceals a more interesting story about what reserve managers are actually doing. Since 2022, central banks have been quietly rebalancing toward an asset that pays no interest and answers to no government. China has bought more than 350 tonnes of gold, with Poland adding around 320 tonnes, Turkiye roughly 220 and India about 130. The motive is not yield but insurance. Watching Western capitals freeze Russian reserves taught monetary authorities a lesson in counterparty risk, and gold sitting in a domestic vault carries none of the political vulnerability that a foreign-currency claim does.

The same caution is visible at the other end of the ledger. The value of US Treasuries held in custody for official institutions at the New York Federal Reserve fell by 82 billion dollars to 2.7 trillion in March, the lowest reading since 2012. Read alongside the gold data, the pattern is one of gradual diversification away from concentrated dollar exposure rather than a decisive pivot toward any single rival. The euro is a beneficiary of this hedging instinct, but only a partial one.

Why does the euro absorb so little of the flow leaving the dollar? The answer lies in the architecture of the currency itself. A reserve asset needs a deep, unified pool of safe instruments that investors can buy and sell in size at any hour. The United States offers that through a single federal Treasury market. The euro area, by contrast, parcels its sovereign debt across nineteen national issuers of varying credit quality, and the genuinely common safe asset created during the pandemic recovery programme remains modest and finite. Without a larger, permanent stock of joint debt, the euro cannot match the dollar’s liquidity, and reserve managers know it.

Fragmentation in the wider monetary system compounds the problem. The ECB notes that the international order is splintering into competing blocs, with more trade settled outside the dollar and more bilateral arrangements bypassing the established clearing networks. In principle a fractured system could open space for a credible second pillar. In practice fragmentation tends to reward whoever already commands the deepest markets and the most trusted institutions, and it pushes nervous holders toward the apolitical refuge of gold rather than toward an alternative currency.

There is also a demand-side ceiling that policy in Frankfurt cannot lift on its own. The euro’s external use is heaviest in the bloc’s immediate neighbourhood and among partners with close trade ties, and it thins out rapidly beyond that perimeter. Expanding the currency’s reach would require the euro area to run the kind of large, sustained external deficits that supply the world with euro-denominated claims, something its surplus-oriented economic model is not built to do. A currency cannot become the world’s preferred store of value while its issuers are reluctant to export it in volume.

The realistic conclusion is that the euro’s international role will rise only as fast as the bloc’s willingness to integrate. A standing common safe asset, a completed banking and capital markets union, and a credible joint fiscal capacity would each widen the pool of euro instruments that foreigners can hold with confidence. Each remains politically contested. Until that changes, the 20 percent share looks less like a launch pad than a plateau, held steady by the currency’s evident strengths and capped by the structural gaps the ECB is too disciplined to ignore.

For policymakers the report is therefore a mirror rather than a scoreboard. The euro is stable, trusted and used worldwide, yet it advances at the pace its own institutions permit. The geopolitical winds that are loosening the dollar’s grip will not, by themselves, fill the euro’s sails.

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