Frankfurt (Reuters) – The euro could become a viable alternative to the dollar and bring in immense profits to all 20 countries sharing the single currency, if their governments reinforced the financial and security architecture of the euro zone, said Christine Lagarde, president of the Central Bank (ECB) on Monday.

Worried about the United States erratic economic policy, global investors have reduced their exposure to dollar assets in recent months, but many have opted for gold instead, not seeing a direct alternative.

The global role of the Euro has been stagnating for decades because the financial institutions of the European Union (EU) remain unfinished and governments have not shown any interest in deeper integration.

“The changes in progress pave the way at a global moment of the Euro ‘,” said Christine Lagarde at a conference in Berlin. “The euro will not gain in default influence, he will have to deserve it,” said the president of the ECB.

For this, Europe needs a deeper and more liquid capital market, must strengthen its legal foundations and must support its commitment to the opening of exchanges by security capacities, explained Christine Lagarde.

The role of the dollar has been declining for years and today represents 58% of international reserves, the lowest level for decades, but still much higher than 20% of the euro.

Any strengthening of the role of the euro must coincide with greater military power capable of supporting partnerships, according to Christine Lagarde.

“Indeed, investors, in particular institutional investors, also seek geopolitical guarantees in another form: they invest in regional assets which are reliable partners in matters of security and which can honor their alliances by military power,” said Christine Lagarde during a conference given at the Hertie private university.

Europe should also make the euro money preferably companies that charge their international commercial transactions, she added. To do this, it could conclude new trade agreements, improve cross -border payments and conclude liquidity agreements with the ECB.

However, the reform of the national economy could be more urgent, said Christine Lagarde. The capital market in the euro zone is still fragmented, ineffective and does not have a truly liquid and largely available asset to which investors could flow, she said.

“Economic logic tells us that public goods must be financed jointly. And this joint funding could allow Europe to gradually increase its offer of safe assets,” said the president of the ECB.

The spouse is a taboo for certain key members of the euro zone, notably Germany, which fears that its own taxpayers will end up having to pay for the budgetary irresponsibility of others.

If Europe succeeded, the advantages would be considerable, said Christine Lagarde. The investment flows would allow national actors to borrow at a lower cost, protect the euro zone from exchange rate fluctuations and shelter it from international sanctions.

(Written by Balazs Koranyi, Mara Vîlcu for the , edited by Blandine Hénault)

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