Digital Euro Faces Growing Headwinds Despite ECB Push for “Rescue Solution”
The future of the digital euro remains uncertain as debate intensifies within the European Union, despite strong advocacy from the European Central Bank (ECB). While the ECB argues a digital euro is crucial for maintaining financial sovereignty and providing a safety net in an increasingly digital world, concerns regarding its necessity, cost, and potential risks are gaining traction among EU lawmakers and finance ministers.
The Commission initially proposed the digital euro project in June 2023,sparking a series of 14 exchanges. Initial momentum stalled when rapporteur Stefan Berger (Germany/PPE) presented his draft in February 2024, with no subsequent vote occurring before his resignation as a Member of the European Parliament in December 2024.Fernando Navarrete (spain/PPE) has since taken over the file and recently published a 27-page document questioning the core rationale for a digital euro, titled “Do we really need the digital euro: a solution to what problem exactly?“. Navarrete,a state economist,argues the digital euro isn’t the answer to reliance on non-European payment providers like Visa and Mastercard. He points to the hesitancy of other major economies to pursue Central Bank Digital Currencies (CBDCs) as evidence of “collective prudence” stemming from concerns about financial stability, low consumer demand, and cost-effectiveness. Navarrete advocates for focusing on stablecoins instead, suggesting the circumstances have changed since the initial project proposal, and envisions the ECB taking on a role as a “neutral facilitator.”
The ECB, however, is pushing for accelerated progress, warning that declining cash usage necessitates a digital counterpart. Cash payments within the Eurozone have fallen from 68% to 40% of all transactions, and from 40% to 24% of their value in just five years. Piero Cipollone of the ECB board emphasized to MEPs that a digital euro would act as a vital “rescue solution” in times of crisis, offering a public alternative should private payment systems fail, particularly in the face of rising geopolitical tensions and cyber threats. He stated, “Payment services are not a luxury, they are as essential as electricity or drinking water for the daily life of our citizens.”
EU finance ministers are aiming to reach a common position by the end of 2025,but significant hurdles remain. several governments are calling for further technical work before offering approval. Key sticking points include establishing a fair compensation model for banks, ensuring robust privacy protections for citizens, the impact on non-Eurozone countries, limits on digital euro holdings, and ultimately, determining who has final say over the project’s launch. German Finance minister Lars Klingbeil highlighted the need for “good distribution conditions for banks and… a high level of privacy protection from the first day.“
