Writing in the European Central Bank’s annual report on the international role of the euro, Lagarde said means of payment were becoming more varied amid rising geopolitical tensions and innovations such as stablecoins, threatening to leave currencies like the euro in the lurch.

“There is no room for complacency. Forces of fragmentation are becoming more pronounced,” she said.

“For the euro to evolve into a truly global international currency, the euro area must build scale and deeper, more liquid capital markets,” she added.

Though the report pointed to several occasions where the euro seemed to act as a safe haven currency — rising against the dollar in times of market stresses including during tariff announcements last year by US President Donald Trump — it also noted that it was far less popular than the greenback internationally.

The euro last year made up about 20% of foreign exchange reserves worldwide, the report said, compared to 57% for the US dollar, putting it in second place.

China’s renminbi was also increasingly important for global trade, the report said, though it remained less widely used than the euro.

Activity on China’s Cross-Border Interbank Payment System (CIPS) also rose by over a third around the outbreak of the war in the Middle East, the report noted.

“Shifts in the global geopolitical landscape underscore the importance of a stronger international role for the euro,” Lagarde said.

“There is an opening for the euro to enhance its global appeal — provided that European policymakers create the necessary conditions and put words into action.”