Euro uses Trump-shaped world order to encroach on U.S. financial power

European leaders are trying to carve out a bigger global role for their currency in a Trump-shaped world order. If they are successful, it could chip away at America's biggest economic advantage: the outsize demand for dollars and U.S. debt.

Other dollar alternatives look less likely, since the world generally distrusts China.

Squeezed by Russia, China, and an increasingly belligerent United States, Europe is reacting by bolstering its common efforts in both national security and monetary affairs.

Even if the euro's shift doesn't dethrone the dollar as the global reserve currency, its broader influence could narrow America's margin of financial power.

The European Central Bank is launching a permanent facility that allows eligible global central banks to borrow euros when needed, a step to strengthen the currency's role in the financial system.

The move expands crisis-era arrangements that aimed to prevent international funding strains from spilling back into the eurozone.

The facility will help the euro "move from a regional to a global perimeter," ECB president Christine Lagarde said in a speech at the Munich Security Conference over the weekend, adding that it also "reinforces the role of the euro."

"The availability of a lender of last resort for central banks worldwide boosts confidence to invest, borrow and trade in euros, knowing that access will be there during market disruptions," Lagarde said.

The ECB's move echoes the Federal Reserve's dollar swap lines, deployed at massive scale during the 2008 financial crisis and revived in 2020 when pandemic panic triggered a global dash for dollars.

The Fed opened standing lines with major central banks and a temporary backstop with others. That helped cement its role as the lender of last resort to the world, reinforcing the dollar's dominance in trade and finance.

Now, Europe is taking a similar step, a sign of more favorable attitudes toward the euro. That's a huge turnaround from over a decade ago, when a sovereign debt crisis in Greece and other southern European countries pushed member states to the brink of default and cast doubt on whether the currency union itself would survive.