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22 September 2025 / Essay
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Copy LinkEurope’s reliance on the US financial infrastructure presents a strategic risk for business. US debt is still the safest asset—that on which all other assets are benchmarked—and the US Federal Reserve still provides liquidity that sustains the global financial system in times of crisis. However, amid global decoupling, Europe’s reliance on the dollar and US payment systems present strategic vulnerabilities rather than mere technicalities. The correct response is not a break with the dollar but a systematic derisking that expands Europe’s room to maneuver and gives it more choices.
The first vulnerability is on European bank balance sheets. Around 30% of EU banks’ assets are in foreign currencies, mostly in the form of loans. On the funding side, 21% are in foreign currencies—with 17% in US dollars, mainly short-term US markets—creating risks if liquidity dries. Moreover, 22% of European banks with US dollar and 38% with UK pound exposure lack adequate foreign currency funding. In the event of a dollar squeeze, these mismatched assets would convert straight into European credit, tightening financing conditions and hitting real activity faster than policymakers can react.
The second is payments. At the retail level, card and mobile transactions are dominated by non-EU firms; at the wholesale level, cross-border dollar flows settle on US infrastructure. Financial messaging rides on SWIFT, where European legal oversight has not prevented the US from using the system as a sanctions lever. The euro’s modest share in extra-EU payments
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