When eurozone finance ministers gathered under the banner of the Eurogroup this June, the agenda went far beyond Europe’s usual inside baseball. On the table was a fresh report from the European Central Bank, underscoring both the euro’s solid standing as the world’s second-most important currency and its built-in vulnerabilities in a fast-shifting global financial order.
According to ECB figures, the euro made up 20.3% of global currency reserves by the end of 2024, holding steady from 20.1% a year earlier. That stability, analysts at the European Stability Mechanism argue, reflects solid trust in the eurozone’s political and institutional framework—even after a string of internal crises, from the energy shock of 2022–2023 to renewed debt jitters in Italy in spring 2024.
For context, the dollar’s share of global reserves, per IMF data, slipped from 60% in 2023 to 58.1% by the end of 2024 and continued to shrink in early 2025, down to a preliminary 57.5%. Back in 2015, that number stood at 65%. The slide is clear and, it seems, irreversible. Markus Kühn, head of analysis at the Bundesbank, put it bluntly: “The politicization of the dollar, using it as a sanctions weapon, has nudged many regulators toward a more diversified reserve portfolio.”
The IMF’s latest quarterly survey points out that since its peak in 2000—when the dollar commanded 71.1% of global reserves—it has lost nearly 13 percentage points. The euro, by contrast, has hovered around one-fifth of global reserves for two decades, a figure the Bank for International Settlements calls an “institutional anchor” in the global system.
Cross-border payment data tell another revealing story. According to SWIFT figures for May 2025, the euro was used in 32.4% of all global transactions, while the dollar led with 41.8%, and China’s yuan came in third at roughly 4%. That may seem small, but it’s a giant leap from the yuan’s 0.6% share in 2010. In the words of Julian Moretti, an economist at the London School of Economics, this sixfold jump over 15 years “reflects not just China’s economic muscle but Beijing’s ambitions to build out its own currency ecosystem.”
The Eurogroup paid close attention to these shifts. Leaked working papers, seen by the Financial Times, warned that “the long-term resilience of the euro depends not only on fiscal discipline at home but also on strengthening payment infrastructure to handle competition from rising regional currency blocs.” That means Europe has to think seriously about how its payment systems connect with alternatives like China’s Cross-Border Interbank Payment System (CIPS) and the BRICS Pay initiative, both gaining traction since early 2025.
For Azerbaijan, these discussions are far from academic. In the first five months of 2025, its trade with the eurozone reached €5.7 billion, with nearly 70% of payments denominated in euros. As the dollar’s share of global reserves shrinks and more trade shifts to multi-currency settlements, Azerbaijan has a clear opening to diversify its export contracts and cushion itself against currency shocks.
One other factor looms large: the rising influence of the yuan. In Azerbaijan’s trade with China—which totaled $2.1 billion from January to May 2025—almost 11% of transactions were already denominated in yuan, up 4.5 percentage points from the previous year. Deputy Economy Minister Emin Huseynov put it plainly: “A multilateral settlement system reduces dependence on a single reserve currency and strengthens the resilience of our trade deals.”
Step back and connect the dots, and it’s clear the global currency architecture isn’t just tweaking proportions—it’s undergoing a structural reset. The dollar is losing its monopoly as the world’s anchor, even if it still holds the top slot thanks to the depth and liquidity of American financial markets. The euro remains the world’s second pillar but shows little sign of expanding beyond its long-standing 20–21% share. The Chinese yuan, on the other hand, is slowly but steadily growing its footprint in tandem with Beijing’s trade and investment push.
Much of this realignment is being driven by Washington’s own sanctions playbook. In 2024 alone, U.S. restrictions froze more than $300 billion in assets worldwide, including reserves in Russia and parts of the Middle East. According to a June 2025 report from the Institute of International Finance, that “undermined trust in the dollar as a neutral settlement unit” and sped up diversification efforts.
Still, the eurozone faces a double-edged challenge. A stronger euro works to the advantage of European businesses, bringing cheaper financing and a more predictable currency environment. But tight fiscal rules and strict debt targets—especially in countries like Portugal, Greece, and Italy, where government debt is set to top 130% of GDP this year—could leave the eurozone dangerously short of flexibility if another crisis hits.
Eurogroup Sounds the Alarm: Europe’s Currency Holds Steady, But Faces a New, Harder Game
The latest Eurogroup meeting sent a clear signal: the euro still has staying power, but in a world of intensifying regional currency blocs and an increasingly politicized dollar, Europe’s currency will have to adapt to a far more complex and multipolar financial architecture. For Azerbaijan, these shifts open a window of opportunity, allowing its economy to operate in a more diversified, more resilient currency environment — a crucial hedge given the region’s geopolitical risks and the persistent pressure Baku faces from certain Western capitals.
The fate of the euro, the dollar, and a rising yuan will, over the next few years, shape the contours of a new global currency order — more fragmented, perhaps, but also more balanced and fair, one in which Azerbaijan can stake out its own confident place and safeguard its strategic interests and economic sovereignty.
The appetite for euro-denominated assets among emerging economies is hard to overstate. According to the European Central Bank, by May 2025 central banks across Africa and the Middle East had poured €350 billion into euro assets — up nearly 11% from the end of 2024, setting an all-time record. This surge reflects both the expansion of EU trade with these regions — Eurostat put EU-Africa trade in 2024 above €380 billion — and a determination among developing nations to hedge currency risks in a world of rolling geopolitical shocks. Tensions over Taiwan and instability across parts of the Middle East have only accelerated the search for alternatives to dollar-based holdings.
Yet this flood of cash into Europe’s financial instruments doesn’t erase the eurozone’s internal contradictions and challenges. According to the European Commission’s latest forecast, eurozone GDP growth will struggle to break 1% in 2025, with inflation hovering around 2.4%. That’s a lukewarm performance, made more precarious by the euro’s recent rally: since January 2025, the euro has strengthened about 5% against the dollar, a move analysts at ING Research warn is already undermining the competitiveness of Europe’s key industries, from carmakers to high-tech exporters.
Oxford Economics estimates that Europe’s auto industry could lose up to €4.2 billion in export revenues in the second half of 2025 if the euro keeps climbing, after seeing exports to the U.S. drop 6.5% year-on-year in the first quarter alone. Similar trouble is brewing in industrial electronics, where exports to Asian markets fell 4.1% between March and April 2025 — again blamed on currency swings.
That’s raising real fears of industrial stagnation. BusinessEurope, the eurozone’s main industry lobby, warned its composite industrial production index could slip below the 50-point threshold — the line between growth and contraction — as soon as September 2025 if the euro keeps appreciating and GDP growth fails to pick up speed.
Against that backdrop, European Central Bank President Christine Lagarde struck a cautionary note on June 24 in Brussels, warning that Europe’s “euro moment” could slip away without a serious institutional push. She once again called for accelerating capital market integration, deeper banking ties, and a tech upgrade. “If Europe wants to claim global leadership, it cannot settle for second place,” she declared — a line many analysts read as a signal that the ECB stands ready to maintain fairly loose credit conditions to spur growth.
Investors wasted no time responding. According to Bloomberg Economics, portfolio inflows into eurozone bonds hit €128 billion in the first quarter of 2025, up 12% from the same period a year earlier. Much of that was driven by stronger yields on government debt from France, Italy, and Spain, plus signs of stabilizing balance sheets among Europe’s biggest banks.
Eurostat also posted fresh numbers on foreign direct investment into the EU for 2024, showing a 7.3% jump to a record €500 billion. Much of that came from Gulf states and Southeast Asia, underscoring just how vital currency and financial diversification have become for emerging markets.
For Azerbaijan, these dynamics demand close attention. The EU is one of Baku’s top trade and investment partners. In 2024, trade between Azerbaijan and the EU topped €17 billion, according to the State Customs Committee, with euro-denominated payments making up 42% of the total. As much as a stronger euro poses risks for Europe’s industrial exports, it could in fact boost European interest in diversified energy supplies from Azerbaijan — since a stronger euro makes importing fuel relatively cheaper.
Still, Baku will have to keep a watchful eye on the flipside: a stronger euro could dent the purchasing power of some European partners when it comes to goods and services from third countries if the EU economy stays sluggish. That means Azerbaijan must keep a sharp focus on trends in Europe’s industrial sector, especially in machinery and construction, where Azerbaijani suppliers have a chance to grow their exports of raw materials and semi-finished products.
Europe’s Currency Moment Brings Promise — and Plenty of Risks
At the end of the day, the surge of interest in the euro across emerging economies reflects both a pragmatic drive for currency diversification and hopes that Europe can deliver political and economic stability. But that enthusiasm is fragile: industrial stagnation, an overheated exchange rate, or foot-dragging on structural reforms could easily erode it. For Azerbaijan, this “euro moment” creates opportunities, but also imposes a duty to closely track macroeconomic and institutional shifts within the eurozone, keeping its own trade and investment strategies nimble.
In the first half of 2025, the fate of the euro once again took center stage in Europe’s economic conversation. Faced with intensifying global currency rivalries — from fresh regional alliances to the ongoing process of dedollarization — the EU has been forced to accelerate efforts to strengthen the euro’s standing. A key part of that push is the development of a digital euro.
According to the European Central Bank, more than 300 banks and payment providers are already involved in pilot programs testing the digital euro. The ECB’s June 18 report confirmed that these platforms focus above all on streamlining cross-border payments and bolstering defenses against cyber threats. Several independent experts, including voices at Bruegel and the Centre for European Policy Studies, argue that cross-border transactions and e-commerce could be the real triggers for mass adoption.
Their view is echoed by fresh polling from the European Commission, published on June 10, 2025, showing that 67% of Europeans are ready to use a digital euro for online purchases and cross-border transfers. That marks a notable jump from similar surveys in 2023–2024, when support barely topped 55%.
All this points to real potential for the euro to gain a competitive edge over the next three to five years. A mix of technological innovation, lower transaction costs, and greater payment transparency could give the euro a leg up — especially as developing nations look to shrink their reliance on the dollar.
Yet alongside these encouraging trends, a structural risk continues to cast a long shadow over Europe: the eurozone’s chronic debt imbalance. The gap between the so-called northern core (Germany, the Netherlands, Austria) and the southern economies (Italy, Spain, Greece) remains wide. Eurostat data at the end of 2024 showed Italy’s debt burden at 137.1% of GDP — the worst among major eurozone economies. In contrast, Germany’s debt ratio stood at 61.9%, with the Netherlands and Austria at 55.2% and 72.3% respectively. That means any fresh external shock — say, another energy crisis triggered by Middle East instability, a scenario S&P Global still rates as plausible — could threaten the resilience of Europe’s financial system.
These risks were front and center at the European Council meeting in mid-June 2025, where, according to an official Council press release on June 14, structural reform topped the agenda. The final statement stressed that without deeper integration of the single market, stronger investor protections, and a better overall business climate, the euro could remain exposed — vulnerable to pressure from both emerging regional currency blocs and rival blockchain-based assets.
For Azerbaijan, the Stakes in Europe’s Currency Future Couldn’t Be Higher
There’s one angle here that’s especially critical for Azerbaijan. As a country with deepening financial and trade ties to the European Union, Baku has a clear stake in a stable, strong euro. With mutual trade turnover hitting €15.7 billion in 2024, according to Eurostat, even moderate swings in the euro’s value can directly affect pricing, contracts, and the broader predictability of the business environment. From this standpoint, Azerbaijan sees the successful rollout of a digital euro as a way to boost the reliability of settlements — especially in its vital energy and transport logistics sectors.
Analysts, including experts at the Kiel Institute for the World Economy and France’s IFRI, sketch out three basic scenarios for where things could go next.
First, there’s the inertia scenario. If there are no major crises and the European Central Bank sticks with a cautious policy, the euro’s share of global reserves will likely stay in the 19–21% range, with its use in international transactions holding steady.
Second is the optimistic scenario. Here, not only does the digital euro take off successfully, but the EU also manages to complete reforms harmonizing tax and investment rules. In that case, projections from Bruegel and IMF Research suggest the euro could grab as much as 25% of global reserves by 2030, cementing its status as the world’s number-two currency after the dollar.
Third is the negative scenario. That envisions political fragmentation within the EU, a recession across southern Europe, or a renewed crisis of confidence in the euro system. The European Monetary Institute, in its June 2025 forecast, warns that under those conditions the euro’s share could slip to 17–18%, seriously weakening its appeal as a reserve asset.
In other words, the European Union truly stands at a crossroads. On the one hand, technological progress and the global dedollarization trend are giving the euro a powerful tailwind. On the other, without bold structural reforms within the eurozone, those opportunities could prove to be little more than wishful thinking. For Azerbaijan — a trusted EU partner in energy and transit — it is crucial that the euro remains stable and predictable as a platform for trade and investment.
The future of the digital euro is more than just a question of Europe’s competitiveness. It’s poised to become a key pillar of the global currency architecture for years to come. And right now, in mid-2025, the decisions being made will help define its role for decades ahead.