As a European, the Euro can’t replace the dollar. It’s not about how stable it is, it’s about how many Euros there are. Whichever country will be the world reserve currency will have to produce so much currency to be used all around the world that their non digital exports will never be competitive. The Euro just isn’t produced in large enough quantities to be used as a world reserve currency, its production and distribution is tightly controlled for use in European and European partner markets. At least not right now. A long time ago some OPEC countries wanted to try out the idea of using Euros, but just couldn’t get enough liquidity to trade all the oil in Euros.
Donald Trump wants the US to both be a goods exporting powerhouse and the world reserve currency. He thinks it’s possible, that these diametrically opposed goals have a middle sweetspot where one can be just enough of a world reserve currency not to worry about debt anymore, but also a country that others depend on for manufacturing. That’s what all the tariff dancing is all about. I think he’s nuts, but hey, every economic theory needs to be tested. Just wish we were testing more sophisticated economic theories.
Anyway, as of this moment Europe is not geared for it. Not industrially, not financially and to be honest, i don’t think Europe is even into it. But it’s not impossible. It would just require a lot of changes.
I would say for this to happen, the biggest challenges facing Europe would be to massively develop its services and post soviet democratic countries would have to be on board with their exports losing competitiveness in the global market. Poland, for instance, is industrializing further but interesting to note that 90% of their goods market is the EU and only 10% goes of out EU. So in a way, post soviet democracies can still be goods exporters inside EU’s internal market. Letting go of industry is not something i believe post soviet democracies would ever accept.
Western, central and southern europe already survive on luxury and unique regional products to support their industry despite their high cost of living, so competitiveness is not a big issue there.
As for services, specially tech, European customers are used to having easy access to highly unregulated digital tech from the US, with union busting, privacy invasion and low taxation, that gives them an unfair edge against tech developed in Europe. Europe has begun to subsidize all European tech (you can even see some games and software with EU stickers for receiving subsidies), but i think Europe needs to tax US digital services and goods, otherwise there is no competing with massive billionaire fortunes that are president friends. There’s no competing when your competitor’s workers don’t have maternity leave, work 60-70 hours a week and have 10 days holidays a year and thank goodness nothing like that will ever fly around European unions. Trust me, Elon and Walmart tried. Without taxation motivation, there will never be a European alternative to US tech, but they don’t want to tax tech without an alternative. Catch 22.
And this is the EU. Anything that takes the US 10 years, takes the EU 20. This is good in a way, because everyone is heard and there is no crazy orange lunatic coming to change fundamental laws overnight, but to react against something like this will take a while. In the EU we’re used to wait, we understand why we wait. But international markets might not be so patient. Also by the time the EU starts changing meaningfully, it is very possible Trump is not president anymore, making the change pointless, so i see the EU doing their usual “looking busy and waiting” routine.
It might happen, just not soon.