That very morning, US President Donald Trump had taken another step in the trade war, imposing 25% tariffs on steel and aluminum. The European Union (EU) had retaliated with its own tariffs, which will begin to apply in April. And yet, despite these tremors, there was a slight sense of optimism on the campus of Goethe University, in Frankfurt, Germany, on Wednesday, March 12.
The annual conference of the Institute for Monetary and Financial Stability was being held there. It brings together the top brass of the European Central Bank (ECB), including its president, Christine Lagarde. The audience was made up of economists and financiers, and the atmosphere was one of gray hair, suits and ties, and strong pro-European convictions. All were dismayed by Trump’s vituperations, contradictory announcements and his support for the Russian president, Vladimir Putin.
But they do have one hope, summed up by Klaus Adam, an economist at University College London and formerly of the ECB: “The current situation could promote the eurozone as a safe haven and help it become a reserve currency.” In other words, a currency favored by central banks to build up their reserves, because they have confidence in it. For decades, this role has mainly been played by the greenback. What if the American president, by alienating the majority of the planet, started to unravel the dollar’s “exorbitant privilege”?
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