ECB to Expand Euro Liquidity Globally to Boost Int'l Role of Currency

The European Central Bank (ECB) unveiled plans to expand its euro liquidity support mechanism to a global and permanent framework, aiming to strengthen the euro’s international role and promote its wider use in global markets.

Previously, repurchase agreement (repo) lines, a key source of funding during market stress, were limited to a small set of countries, mainly in Eastern Europe. 

Under the new framework, central banks worldwide will have permanent access starting in the third quarter of 2026, provided there are no reputational risks such as money laundering, terrorism financing, or violations of international sanctions.

ECB President Christine Lagarde said at the Munich Security Conference that the central bank must prepare for a more volatile financial environment. She noted that offering a “lender of last resort” facility to global central banks would enhance confidence in investment, borrowing, and trade in euros, while reducing fire sales of euro-denominated assets during crises.

The new mechanism will provide permanent access to up to €50 billion, replacing previous arrangements that required periodic renewals.

Repo lines allow banks to obtain euro funding against high-quality collateral when market financing is unavailable, with loans repaid with interest at maturity.

The ECB’s move comes amid global reevaluation of the U.S. dollar’s dominance, driven by economic policy volatility under President Donald Trump. Lagarde emphasized that the euro has an opportunity to increase its global share, contingent on further strengthening the eurozone’s financial and economic infrastructure.