Europe's reliance on American payment providers exposes it to economic coercion, warned European Central Bank chief economist Philip Lane, highlighting a significant risk amid the deteriorating relationship with the U.S.
Concerns have grown since President Trump claimed the EU had benefited at the expense of the U.S., prompting threats of retaliatory measures. Currently, Visa and Mastercard handle approximately two-thirds of card payments in the euro zone, while tech firms like Apple Pay, Google Pay, and PayPal represent a substantial share of retail transactions.
Lane noted that "Europe’s reliance on foreign payment providers has reached striking levels," emphasizing that this dependence jeopardizes Europe’s economic autonomy and limits control over crucial components of its financial infrastructure. He pointed out a global move towards a multipolar monetary system, where payment systems and currencies become tools of geopolitical influence.
With national card schemes now wholly replaced by international alternatives in 13 of the euro zone's 20 countries, Lane underscored the urgency for the ECB to advance the initiative for a digital currency. The proposed digital euro aims to mitigate these risks and empower the euro area in maintaining control of its financial future.
The digital euro would operate similarly to cash, enabling direct retail payments without reliance on a card service provider. Funds would be stored in a digital wallet, likely an app on a smartphone, representing a direct claim on the central bank, akin to banknotes. This would allow transactions to occur without involving Visa or Mastercard.
The ECB has been preparing for a digital currency for years but requires EU-wide legislation to proceed. However, the legislative process has been slow, leading to frustration among some policymakers. The ECB has indicated that a decision on advancing to the next phase of preparations will be made by the end of 2025.