Europe Considers Shared Dollar Fund to Guard Against Fed Pressure

Financial leaders in Europe are worried that they depend too much on the US Federal Reserve for access to the US dollar in times of crisis. Their fears stem from the Trump administration pressuring the Fed to be politically influenced, making it risky to hold emergency dollar loans. The EU is worried that the swap lines, a mechanism where the Fed lends dollars to other central banks, are being weaponized, reported Reuters.

A handful of officials in Europe are now considering pooling their US dollar reserves to limit any potential damage. They are persuading the European Union to allow the central banks of member countries to combine their dollar holdings into one “safety pot.” The pool would act like a backup fund, so during a financial crisis, they don’t have to depend on the Federal Reserve.

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Also Read: Trump & MBS Meet: US To Cash-in On Saudi Arabia’s $600 Billion Pledge## Europe Eyeing Shared Dollar Fund To Combat Fed Pressure

Source: iStock photoSource: iStock photoThey are also thinking about other ways to make their system more resilient. This includes telling central banks in Europe to plan for procuring dollars from non-US sources. The non-US countries would hail from Asia or the Middle East. They intend to stress-test what happens if the US dollar funding dries up.

The uncertainty and doubts about weaponizing the dollar come after Trump imposed tariffs on the EU. The tariffs and trade wars come despite the EU being the closest ally of the US. Trump’s Liberation Day did not spare allies and enemies alike and painted them with the same brush. However, not every official in Europe agrees with the dollar pooling ideology and doesn’t find it encouraging.

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Also Read: Something Bad is Coming, Says Wall Street’s Most Trusted Valuation ExpertNot just Europe, even Japan is considering the same move against the Fed. “It would be important to keep trying a multi-layered approach to things like swap lines. Doing something similar, or continuing to do something similar, would be important,” said Governor Kazuo Ueda.

“It would be important to keep trying a multi-layered approach to things like swap lines. Doing something similar, or continuing to do something similar, would be important,”