The European Central Bank is advancing plans to make it easier for foreign central banks to borrow euros in times of market stress, a development that forms part of Europe's growing effort to attract trade partners and political allies while competing with the United States and China.
Under the policy changes being prepared by the ECB, central banks outside the euro area would gain enhanced access to emergency euro funding. Officials expect the revised arrangement to strengthen incentives for non-euro area institutions and markets to use the single currency for lending, investing and trading.
ECB President Christine Lagarde has framed the agenda as an attempt to seize what she has called the euro's "global moment" - a window of opportunity that her institution sees as opening amid doubts about the reliability of U.S. economic policy under President Donald Trump. European officials and economists argue that easier access to euro liquidity could reinforce the EU's wider international agenda by complementing recent trade agreements and by assuring investors that euro assets will remain liquid during episodes of market strain.
"The fact that alongside these free trade agreements, we could offer a repo facility would be smart," Ludovic Subran, chief investment officer at German insurer Allianz, said, noting the way such financial tools fit into economic diplomacy. Societe Generale chief executive Slawomir Krupa also expressed support for the plan, saying the initiative "supports growth...and the influence of our region".
How the facility works and the proposed changes
The mechanism at the centre of the plan is a repo facility that allows foreign central banks to borrow euros against euro-denominated collateral. Known as Eurep, the facility was introduced in 2020 during the COVID crisis and has been limited in scope. At present it is available only to eight neighbouring countries, including EU members such as Romania and Hungary as well as non-EU jurisdictions like Albania and Montenegro. Those existing arrangements have been subject to strict limits.
According to officials familiar with the plans, the ECB intends to lower the interest rate charged on these operations, standardise the operational rules and relax tight caps on the amounts central banks can borrow. The package of adjustments, expected to be announced soon, is aimed at increasing the attractiveness and usability of the euro internationally, where it remains a distant second to the U.S. dollar.
The proposal arrives as finance ministers are preparing to consider other measures designed to elevate the euro's role, including discussions about issuing euro-denominated stablecoins and the potential for joint EU debt. At the same time, middle powers across different regions are seeking new alignments and hedges against what some view as the growing unpredictability of the U.S.
Demand for alternative liquidity lines
Central bankers around the world have been deliberating whether they can continue to rely on the U.S. Federal Reserve to supply dollar liquidity during crises through its swap lines. In that context, some economists and market participants see an expanded Eurep as an alternative source of backstop liquidity in euros. Kelly Eckhold, chief economist at Westpac NZ, said an expanded Eurep facility could be "an opportunity for New Zealand." He added that the current U.S. administration's inward-looking stance may reduce the likelihood of the Fed providing swap-line support in a global liquidity crisis - a comment he posted on X.
Risks and policy trade-offs
Officials acknowledge the initiative carries risks even as it seeks to strengthen the euro's global position. Loans under the proposed scheme would be extended only against high-quality, euro-denominated collateral, which should limit direct credit and foreign exchange exposure for the ECB. Nevertheless, the extension of liquidity to institutions outside the euro area raises difficult questions about how the ECB and euro zone governments would respond if foreign borrowers running euro-denominated liabilities encountered trouble.
Subran warned that providing a liquidity facility in the context of distress at a commercial bank abroad could create complex follow-up questions for European policymakers. The dilemma echoes the long-standing critique captured by a 1971 remark from then U.S. Treasury Secretary John Connally that the dollar was "our currency, but your problem" - a formulation pointing to the fact that a currency's international role can shift burdens onto other countries when problems arise. European policymakers are unlikely to be able to adopt such a flippant posture because of the institutional and political differences surrounding the euro.
The euro is comparatively young. Launched 27 years ago, it is not underpinned by a single treasury or a common deposit insurance scheme and still bears the legacy of a sovereign debt crisis in the early 2010s that almost threatened the currency's integrity. Those structural features, experts say, make the euro more vulnerable to contagion from stresses in countries that have unilaterally adopted the currency - in ways analogous to countries that have dollarised.
Rebecca Christie, a senior fellow at Bruegel, said: "The ECB is correct to be wary of euroisation because the euro is not a grown-up currency. The ECB has not had all of the tools that the Fed has and because of that they have to be much more careful about their reputation."
Outlook
The plan to broaden access to euro liquidity represents a deliberate policy choice by European authorities to pair financial instruments with diplomatic and trade outreach. Proponents argue it will encourage the international use of the euro and provide reassurance to investors and trading partners. Critics and cautious observers point to the potential for new exposures and political questions should foreign borrowers be unable to meet obligations denominated in euros.
As the ECB moves closer to formalising the changes to Eurep, markets and policymakers will watch closely for the balance struck between enhancing the euro's global footprint and protecting euro zone financial stability.