What if the euro doesn't want to replace the dollar?

When Donald Trump took office, one euro could buy $1.04. Now, it can buy $1.12, and some analysts already see it reaching $1.20. This isn't just a figure; it's a sign. Is this a change of era, as some analysts predict? For months, there has been speculation about the end of the dollar's reign, partly due to growing international distrust of US economic policy under Trump, the rising fiscal deficit, and a less predictable foreign policy.

The Federal Reserve (Fed), moreover, has been criticized for its lack of clarity and uneven response to recent economic shocks, which has fueled the dollar's weakness against other major currencies. There may be reasons to believe the euro can play that role for some time, but there are also compelling reasons to believe it has no intention of doing so .

Europe attracts capital, but doesn't want the crown

Bloomberg 's April 17 headline surprised many: "The euro is emerging as an alternative safe haven, along with German bonds." The European Central Bank (ECB) and other institutions also agree that the single currency is taking on a new role as a global financial haven.

On the other hand, German bonds, according to data from JP Morgan, are attracting inflows from international investors at a rate not seen since the euro crisis in 2012. And the European currency, as a result, has strengthened by 9% so far this year . So far, so good. If the dollar falls, someone has to take its place. And the euro, given its economic size and institutional stability, is the natural candidate.

But it's one thing to be a temporary refuge for investors fed up with Washington's blunders, and quite another to want to be the global reserve currency. Because being the hegemonic currency of the global financial system isn't a reward but a burden . And Europe, unlike the United States, doesn't seem to have much desire to shoulder that burden.

To begin with, there isn't one European Treasury. There are many. Germany, France, Italy, Spain... each with its own debt, its own accounts, its own problems. And while it's true that the joint issuance of Next Generation bonds marked a milestone in fiscal integration, it remains an exception. There's no firm commitment to mutualizing debt on a large scale . And without that, the markets don't trust us.

The Greek crisis of 2012 is also all too fresh in our minds. That was when the euro was on the brink of collapse, and only Draghi's words ("whatever it takes") saved the project. Since then, the euro has lived with the existential doubt of what would happen if another country threatened to leave or if the markets lost faith in Italian or French debt.

Deutsche Bank analysts point out that the euro is strong when things are calm, but extremely vulnerable in a crisis . Because the ECB is not the Fed . It lacks the capacity or mandate to act as a global lender of last resort. And above all, it lacks a single political government to back its decisions.

The strong euro is already causing collateral damage.

On the other hand, the strength of the euro is already starting to hurt. Companies like SAP, Porsche, and Schneider Electric have issued clear warnings. Every cent the euro rises against the dollar reduces revenue by millions of euros. SAP's own CFO estimates that the company loses €30 million for every 0.01 cent of appreciation. Heineken has warned of a loss of €180 million. And Schneider, up to €1.25 billion.

And many of these companies have currency hedges in place. But 2026 is just around the corner, and those hedges are about to expire. If the euro remains strong, the blow will be real . And European exporters are already starting to price it in.

The market reaction is also revealing. The FTSE Europe index has seen its profit growth forecasts cut from 4% to 2.9%, according to HSBC. Barclays and Morgan Stanley agree that for every 5% rise in the euro, profits are reduced by between 1.5% and 2%. Goldman Sachs puts it another way: a strong euro inspires confidence, but reduces stock market attractiveness.

So, back to the original question. Does the euro want to replace the dollar? It could, perhaps. But is it interested? That's another question. To become a global reserve currency, you have to flood the planet with euro debt. And that means issuing euro debt, borrowing, and taking risks . The exact opposite of what Germany and other Nordic countries want. And because it also means assuming a political and financial role of global leadership. Being the anchor in times of panic. Being the lender of last resort. Europe simply isn't structured for that.

And if the euro were to occupy that throne by inertia, unintentionally, it could become a burden. A currency that is too strong, stifles exports, reduces competitiveness, and exacerbates internal tensions between countries in the South and North.

The paradox is obvious. The euro strengthens because there is trust. But if it strengthens too much, it can end up destroying that same trust. Because it creates inequalities, because it generates political tensions, because it exposes the cracks in an incomplete union.

Perhaps, in the end, the euro is more comfortable as a second option. As a partial refuge. As a temporary alternative. And not as the dominant currency of the global financial system. And perhaps that decision isn't a weakness. It may be a long-term strategy. And Europe has a lot of experience in that.