A digital euro would boost Europe’s relevance
The euro, especially if available also as a digital currency, could be a serious contender as an international trading and reserve currency

An editorial in Times of Malta (February 27) correctly argues: “The digital euro is the future of money and a necessary monetary anchor for the digital era.”
The benefits of the digital euro are, however, not purely operational but, probably more importantly, strategic. I say this as the horror show that developed in the Oval Office between Donald Trump and Volodymyr Zelensky is a sharp wake up call for Europe. In essence, Europe is facing challenges for which it is gravely unprepared.
Let us rewind the tape a bit.
For 80 years of the post WWII era, Europe has relied on US security cover for protection under the NATO shield from potential threats. These were initially from the Soviet Union and the Warsaw Pact and, later, from Russia.
However, it is clear that, under the Trump 2 administration, US protection can no longer be taken for granted as NATO has been undermined by Trump as he moves closer to Russia on a number of issues.
Europe must take direct responsibility for its own security.
The recent competitiveness report by Mario Draghi clearly outlines that the EU should issue common debt instruments to finance joint investment projects that will finance an increased spending to bolster the EU’s security.
For Europe to rely on its own strength for security purposes, it requires a major and costly upgrade to Europe’s defence mechanisms.
Such an increased expenditure cannot sit comfortably within the present political frameworks, especially those related to national budget deficits under the fiscal stability pact underpinning the monetary union for the euro area.
Financing the massive increase in defence expenditure within the current frameworks will involve a choice between ‘guns and butter’, which will challenge the stability of democratic systems, especially in the current social media set-ups where it is increasingly difficult to distinguish between genuine and fake messages, with clear foreign interference to manipulate voter’s perceptions.
While one can understand the humanist appeal that Europe would do better to finance the social and economic advancement of its citizens, we all know that this would not be possible if Europe cannot guarantee its own defence within the new reality of having the US undermine NATO.
The euro, especially if available also as a digital currency, could be a serious contender as an international trading and reserve currency.
It would also permit Europe to re-model its monetary union and fiscal frameworks to permit the issue of common debt instruments to finance the cost of upgrading its military capabilities.
The Rubicon has already been crossed when the EU launched the Recovery and Resilience Facility to support Europe’s economic recovery from the coronavirus pandemic and build a greener, more digital and more resilient future.
The strategic threat caused by the shock and abrupt US weakening of the transatlantic partnership increases the risk that Ukraine in 2025 becomes the equivalent of Czechoslovakia in 1938, fuelling the need for a strong and urgent financing as was the case with coronavirus threat of 2020.
Understandably, adoption of such common responsibilities on a much grander scale inevitably requires progress towards common political frameworks related to European defence policy.
Europe must take direct responsibility for its own security- Silvan Mifsud
The relevance of neutrality from the western side of the Atlantic and the eastern side from Ukraine to the Urals needs re-evaluation when such West and East dimensions seem to be embracing each other and leaving Europe to fend for itself.
US economic and military strength is underpinned by the dominance of the US dollar as an international trading and reserve currency. Most commodity trading, from energy to minerals, from cereals to machinery, is still priced in US dollar. One needs to keep in mind that 58% of official reserves consist of US dollar and 90% of forex transactions involve the US dollar, with 48% of SWIFT payments being held in US dollar.
Many countries, especially the BRICS (Brazil, Russia, India, China, South Africa and others) are unhappy with the dominance of the US dollar but have not been able to come up with a credible alternative of their own. The euro is the next best alternative because it commands 20% of the official international reserves and is already involved in about 30% of forex transactions and SWIFT payments.
As to international trade, however, only Europe’s own trade is priced in euro. This means that here lies a huge strategic opportunity. This does not mean it will be an easy opportunity to grab, as is the case with all great opportunities.
If countries can have enough confidence that there will sufficient liquidity around euro denominated international bonds (EU common assets) with common EU responsibility and if their own inhabitants can gain access to a digital euro portfolio for their personal and investment needs, the euro can seriously challenge the dominance of the US dollar.
In a speech Piero Cipollone, of the European Central Bank, makes a number of points as to why it is strategically beneficial for the EU to have a digital euro.
A digital euro would bring central bank money into the digitalised world and safeguard the EU’s monetary sovereignty in the digital age. The digital euro can help the EU avoid becoming over-reliant on foreign payment solutions (mostly US based) thereby strengthening its autonomy and resilience as excessive dependence on foreign entities in the European payments sector threatens the autonomy and resilience of European payment services.
The digital euro would overcome fragmentation by offering money that can be used for any digital payments in the euro area. The lack of European payment solutions available on a European scale means that Europe is not competitive within its own market.
Ultimately, the introduction of a digital euro could make a significant difference by meeting the diverse needs of consumers, merchants and payment service providers, enhancing economic efficiency, resilience and sovereignty.
Having the euro used more for international trade will augur a great potential recovery to European economies, big enough to finance self-sufficiency for Europe’s own defence and to enhance the status of Europe in international affairs including shifting Washington consensus institutions to European consensus ones.
This would be a massive boost to Europe’s relevance on the world stage, which is so much needed at such a critical stage.
There is also the possibility that, if all the above succeeds, London could reconsider joining Frankfurt and Paris, to challenge New York.
Silvan Mifsud is director at EMCS Advisory.