The European Central Bank approves a permanent plan to support euro liquidity globally

The European Central Bank (ECB) announced a major strategic shift in its international monetary policy, unveiling ambitious plans to bolster euro liquidity by expanding its repurchase agreement (repo) lines and making them permanently available globally. This decision, set to take effect from the third quarter of 2026, represents a significant transformation in how European monetary liquidity is managed outside the continent.

Details of the new mechanism and expansion of scope

Under the new declaration, the facility, previously limited to a small number of countries—mostly in Eastern Europe and neighboring states—will be transformed into an open, global mechanism. This mechanism includes permanent access to liquidity up to a ceiling of €50 billion . The aim is to enable central banks worldwide to obtain euros in exchange for high-quality collateral, thereby facilitating trade and financial transactions denominated in the single European currency.

Historical background and context of the decision

This move builds upon lessons learned from previous financial crises, particularly the 2008 global financial crisis and the COVID-19 pandemic, which highlighted the critical need for currency swap lines and repo facilities to ensure market stability. Previously, the European Central Bank relied on temporary instruments such as the European System of Repo Facility (EUREP) to address emergency liquidity shortages. This new decision transforms these temporary measures into a permanent safety net, reflecting the maturity of the European financial system and its desire to play a larger role on the international stage.

Strategic importance: Competing with the dollar and protecting markets

This decision has significant geopolitical and economic dimensions, as it aims directly to:

• Strengthening the Euro's International Role: Europe seeks to increase the Euro's share in global reserves and international payments, making it a stronger competitor to the US dollar, which currently dominates the global financial system.
• Protecting markets from disruptions: By providing a "safety valve" for liquidity, the European Central Bank ensures that there are no forced sales of euro-denominated assets during times of crisis, thus maintaining price stability.
• Hedging against political volatility: Amid increasing uncertainty about US economic policies and dollar volatility, this system provides a reliable alternative for central banks to diversify their liquidity sources.

Expected impact on the global economy

This decision is expected to reduce the cost of euro financing for emerging markets and developing economies, as central banks in those countries will have a direct channel to access hard currency when needed. This financial stability will boost confidence in investing in European assets and support intra-euro trade between the eurozone and the rest of the world, thus reinforcing the EU's position as a leading and stable economic bloc.