President of the ECB, Christine LaGarde, sounded a muted panic this week in remarks she gave in New York to the Council of Foreign Relations. Acknowledging the tectonic changes occurring around the creation of new economic centers of power, she said: “We are witnessing a fragmentation of the global economy into competing blocs, with each bloc trying to pull as much of the rest of the world closer to its respective strategic interests and shared values.” She went on to say that this will create “more instability” as well as “more multipolarity as geopolitical tensions continue to mount.”
LaGarde also made mention of the obvious, that the weaponization of the dollar and the use of sanctions has played no small part in propelling countries away from dependency on it: “All this could create an opportunity for certain countries seeking to reduce their dependency on Western payment systems and currency frameworks – be that for reasons of political preference, financial dependencies, or because of the use of financial sanctions in the past decade.” This is not a substantial change yet, she said, but it does “suggest that international currency status should no longer be taken for granted.”
In this context, LaGarde gave a nod to the creation of Central Bank Digital Currencies, and said that the ECB is “exploring in depth” the creation of a digital euro to be competitive in the coming years.
