The shock of President Trump of the global commercial system has sent tremors through the vision of long hero that the United States is the source of the safer financial assets in the world. That is He created an opportunity for Europe.
The tumult of the market in which investors simultaneously sold the US dollar, US shares and treasure bonds of the United States decreased last week, since Trump retreated their threats to fire the president of the Federal Reserve, Jerome H. Powell, and Treasury Secretary, Scott Besent, tried to survive foreign officials who would be surprised.
But many European officials attending spring meetings of the International Monetary Fund and the World Bank in Washington last week, uncertainty about Mr. Trump’s commercial policy would dissipate in the short term. They said that the unpredictable nature of the Trump administration approach to establish the policy would not be easy. Instead, they saw the potential of the attractors of European assets, from the euro to the bond market.
“We see that our stability, predictability and respect for the rule of law is already testing a strength,” said Valdis Dombrovskis on Wednesday, the responsibility of the European commissioner of the economy of the trade block, in a discussion on the meetings of the IMF. “We already have a greater interest of investors in assets called in euro.”
The most complete indication that the funds flow to Europe: since the beginning of April, the euro has earned 5.4 percent against the dollar, increasing above $ 1.13, the highest level since 2021.
The question between those in charge of formulating policies and investors is whether the recent jump in the euro and other assets called in Euro is simply a short -term rebalancing of the portfolios that strongly favored the dollar or the beginning of a long -term trend in the currency of the company’s company.
A problem adjusts
“There is a lot of enthusiasm for Europe,” said Kristin J. Forbes, economist at the Massachusetts Institute of Technology, in an interview.
She said the emotion about the euro reminded the coins they founded in 1999, when some economists and policy formulators increased the possibility of replacing the dollar. In its early years, the international use of the euro exceeded the combined use of the currencies it replaced.
But then the euro was hit by crisis. Despite having a monetary union of members of the boxes, including Germany, the largest economy in Europe, the region remained politically fragmented, stirring confidence in the currency. The sovereign debt crisis in 2012, followed by a decade of ultra -casual interest rates, meant that the bonds of the region offered low yields.
The euro is now used by 20 member countries and repeats about 20 percent of the foreign exchange reserves of the world’s central banks, a figure that has barely moved in the last two decades. Thirty percent of global exports are billed in euros, while more than half are in dollars.
Speculation about the new dominant currencies should be “cautious,” said Forbes, but there is more impulse behind the euro.
“This seems to have more legs because it is a combination of a stronger and more unified Europe,” he said. “At the same time, there are more problems that arise with the assets of the US dollar.”
Improvements have been made on some of the issues that previously dissuade foreign investors. Today, European bonds provide better returns, and investors trust that the European Central Bank will be the lender of the last resort, minimizing the risk that the economic problems of a country can affect all euro assets.
Safer assets
For investors, the new most promising development is the perspective that Germany issues approximately 1 billion euros in additional government debt, known as Bunds and is considered the safest assets dominated by the euro.
For years, the strict tax conservatism of Germany has restricted the supply of Bunds. But last month, the Parliament altered the indebtedness limits anchored in its constitution, the so -called debt brake, to allow the government to borrow hundreds of millions of euros to invest in the army and infrastructure.
“There are cheers in Europe” because either the fiscal stimulus of Germany, said Kristalina Georgieva, managing director of the IMF. “And add something that is not tangible, but it is important: trust.”
The demand for German debt has preceded any additional broadcast. Duration The recent market agitation, BUND prices increased, lowering yields, a clear sign of investors’ interest. At the same time, the yields of the United States government bonds have moved in the other direction. At the end of last week, 10 -year Bundds yield was 2.47 percent, reversing almost all the increase that followed the stimulus announcement.
Investors also anticipate an increase in debt together issued by European governments, an idea that has proposed to finance more military expenses throughout the block. Economists have indicated that this happened before: the European Union issued more than 600 billion euros in bonds to finance post-pandemic recovery programs. But that loan faced a fierce opposition, and future issuance would also have difficulty gaining the support of all Member States.
There has been confusion and frustration with the commercial policies of Mr. Trump, many European officials, including central bankers, emphasized the need for Europe to evaluate this moment.
“This will be a moment of creativity and pragmatism, making things move,” said Olli Rehn, governor of the Finnish Central Bank, in a speech. “I look forward to this period as a positive challenge because we take very seriously forcing the common defense in Europe. Which, by the way, will need safe assets.”
‘A long and hard path’
Optimism is growing on the role of the euro. Klaas Knot, the governor of the Dutch Central Bank, said he had gone from being agnostic about the international use of the euro to a “cautious believer.”
But he added that “the external force” of the euro “is a reflection of internal force” in Europe, and governments must go further to increase that force, he said in a speech out of meetings in Washington.
Officials must continue with the single market that connects more than 448 million people in the block and allows them to trade and do business, Knot said. Legislators, he said, also needed to build a unique capital market that facilitated money crossing European borders. “We still have enough work to do in Europe.”
Alfred Kramer, the director of the Department of Europe of the IMF, warned against the “intervened” the recent change towards the euro. A “movement towards European exceptionalism,” he said, is “a long and hard path of distance.”
The region, he said, needed many structural changes that allowed a more dynamic business sector in which companies could reach markets and capital groups.
Many officials said it was more likely that the euro was one of several assets that become more prominent as investors reduce their dollar shares. In recent weeks, for example, the price of gold has shot, exceeding $ 3,300 per ounce of Troy, and the Swiss Franco has also increased, earning almost 7 percent against the dollar this month.
“I do not see that everyone leaves the dollar to a large extent and suddenly move towards the euro; I think it is more healthy diversification,” said Forbes. But private investors abroad who have accumulated many participations in debt in the United States and are now seeing the decline in dollars want alternatives.
“Europe,” he added, “is a natural place to diversify.”
Melissa Eddy Berlin contributed reports.
