- Record debt. Euro-denominated international bond and loan issuance reached $1.1 trillion in 2025—a 30% increase from 2024 and the highest on record—with the euro’s share of foreign-currency debt rising to nearly 30%, the ECB’s June 2026 annual report shows.
- Green finance milestone. For the first time, the euro overtook the dollar as the leading currency in green and sustainable international bond issuance, cementing Europe’s position as the anchor of global sustainable finance.
- Reserve stability. The euro held approximately 20% of global foreign exchange reserves in Q4 2025, broadly stable at constant exchange rates, as central banks diversify away from a dollar constrained by tariffs, geopolitical risk, and elevated US deficits.
The European Central Bank published its annual review of the international role of the euro this week, presenting data showing the single currency making measured but sustained gains across several dimensions of global finance. The backdrop is an unusual combination of pressures: US tariffs have raised the cost of dollar-denominated trade, while geopolitical fragmentation—accelerated by the Iran war and the erosion of multilateral frameworks at the G7—has nudged central banks and sovereign borrowers toward diversification.
Euro-denominated international debt issuance of approximately €1 trillion ($1.1 trillion) in 2025 was the headline figure. The 30% increase from 2024 reflects demand from non-eurozone borrowers who found European capital markets more accessible following the ECB’s mid-2025 rate normalisation and less exposed to US legal jurisdiction than dollar-denominated instruments.
The green bond lead
The euro has long been strong in sustainable finance, but 2025 was the first year it surpassed the dollar in the broader category of international green and sustainable bonds. Europe’s regulatory infrastructure—the EU Green Bond Standard, Taxonomy Regulation, and SFDR disclosure requirements—gives euro-denominated ESG instruments structural advantages that dollar markets lack at the federal level. The shift coincides with a period of accelerating European clean energy investment driven by the Net Zero Industry Act and rearmament-related industrial policy.
The ECB’s rate cycle, which reached 2.25% at its June 2026 meeting, has kept eurozone real yields marginally positive, making euro bonds viable holdings for reserve managers who had stepped back when rates were negative.
Reserve share and the dollar’s position
The euro’s 20% share of global reserves is stable—but that stability now sits against a backdrop of deliberate diversification by emerging market central banks, which have been accumulating gold and, in smaller quantities, renminbi-denominated assets. The dollar still accounts for roughly 58% of allocated reserves, a level that has declined by about 12 percentage points since 2000. The IMF revised its methodology in 2025, adjusting the euro’s measured share downward by approximately 0.8 percentage points; at constant exchange rates, the share increased slightly.
Foreign portfolio inflows into euro area assets exceeded €850 billion in 2025, approaching historical highs, as non-European investors sought exposure to a currency that had strengthened roughly 13% against the dollar year-on-year by February 2026—a reflection of narrowing rate differentials and improving eurozone growth relative to a tariff-constrained US economy.
Limits and vulnerabilities
The ECB’s report identifies structural gaps that constrain further progress. European capital markets remain fragmented along national lines, and a company raising funds in Warsaw or Athens still faces materially different terms than one based in Frankfurt. Completing the Capital Markets Union, the ECB argues, is essential to sustaining the euro’s international role—without deeper integration, gains from current favourable conditions will plateau.
The euro’s participation in global foreign exchange trading has also declined: it appeared in 28.5% of over-the-counter transactions in the April 2025 BIS survey, down roughly two percentage points since 2022. The dollar’s dominance in currency trading—which underpins trade invoicing and cross-border payments infrastructure—remains intact even as debt markets slowly shift.