Europe plans euro-backed stablecoins, joint EU debt to reduce dollar reliance

Finance ministers across Europe will meet on February 16 to decide how to fight back against the global control of the US dollar. According to a document prepared by the European Commission, they’ll talk about launching euro-denominated stablecoins and expanding joint EU debt.

This is a survival plan.

The euro makes up only 20% of global currency reserves, while the dollar holds about 60%. Europe’s leaders want to change that before they lose more ground.

The paper, reportedly seen by Reuters, says the EU needs to act now. It warns that the global financial system is being “weaponised” and that the bloc must protect its economic power.

“Faced with the risk of increasing weaponisation of the international monetary and financial system, the EU needs to act to strengthen its economic and financial security and the capacity to promote its own interests,” the document reads.

Finance ministers push for euro-backed stablecoins and digital euro tools

The euro is used by 21 of 27 EU countries, but it’s still not dominant in digital finance. Dollar-backed stablecoins like USDT and USDC make up nearly the entire stablecoin market. Euro-based ones barely crack 1%.

That’s quite embarrassing, and also dangerous. If things stay like this, capital will keep flowing out of Europe and straight into US markets, which boosts American assets and leaves European ones weaker.

The Commission said it’s time to flood the market with euro-based digital assets. They want to introduce stablecoins, tokenized deposits, and even central bank digital currencies (CBDCs), all backed by the euro. At the same time, they’re telling governments to deal with the risk of stablecoins pegged to foreign currencies, especially the dollar.

They also want to grow the euro-denominated debt market. That means more joint EU debt, and not just for show. The paper calls for “EU issuance to jointly finance common projects with a clear EU value added.”

Right now, the EU only has €1 trillion in joint debt compared to the $27 trillion in US Treasury bonds. The lack of liquidity makes EU bonds less attractive to big investors.

Markets are hungry for more AAA-rated EU bonds, but there’s a snag. Countries like Germany still don’t like the idea of more pooled debt.

The Commission is hoping to push through anyway, by convincing other nations and companies outside the eurozone to issue their own debt in euros too.

Commission wants to control payments, aid, and savings across the bloc

The paper also calls for cutting Visa and Mastercard out of the EU’s payment systems. Right now, those two American companies dominate digital payments in Europe, which doesn’t sit well with the Commission. They want a new EU-run system, one that’s fully independent.

On top of that, the document recommends that all foreign aid and loans to outside countries should be paid in euros only. That includes deals in oil, gas, weapons, and industrial goods. Companies should also start billing in euros for international trade, especially in strategic sectors.

To keep capital inside Europe, the Commission wants rules that allow money to move freely. That includes harmonizing investment, tax, trading, and supervision laws across the EU.

They estimate that nearly €10 trillion is sitting idle in savings accounts across the bloc. With smoother rules, they think more of that money could be invested directly into European businesses.

Another major idea is to turn the European Stability Mechanism, currently a €500 billion bailout fund, into a full EU institution. That way, it could manage all future EU debt issuance like an EU-wide debt agency, rather than staying a tool owned by just eurozone countries.

The European Central Bank is also involved. It’s already working on new liquidity agreements with other countries to boost the global reach of the euro.

According to three unnamed sources cited by Reuters, this is already underway. ECB President Christine Lagarde confirmed that the central bank would present EU leaders with a list of “significant reforms” needed to increase growth and stay competitive. That includes building tools to “unleash the talent of Europe.”

From trade to savings, from stablecoins to joint debt, every part of this paper is designed to do one thing: make Europe less dependent on the dollar. Whether or not it works is up to the finance ministers. But the clock is ticking.

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