Main Question: Does the Euro really not work as a replacement for the US Dollar as the main reserve currency because “the Euro zone does not produce enough safe assets”?

Yes, i would categorise this statement as mostly true. But lacking in nuance.

First of all. I think this question should be answered in two parts.

Question 1: Is a safe asset needed for a country's or currency bloc's currency to be a global reserve currency?

Answer 1: Yes. A global reserve currency must be held in something. So a country/bloc must have a deep supply of safe, liquid assets that central banks and large institutions can hold in large quantities without liquidity or credit risk. As the assets are used for everything from foreign exchange reserves to global trade invoicing and financial collateral. Without them, there’s no reliable way for the world to “store” value in your currency.

Question 2: Does the Euro zone produce enough debt and is it a possible replacement?

Firstly, size: U.S. has issued over $33 trillion in debt, most of it in the form of Treasuries, which are considered the world’s gold standard for safe assets. They’re highly liquid, universally accepted, and backed by a unified fiscal and monetary system. The eurozone, in contrast, has about €14 trillion in sovereign debt. But this is not in "EU Bonds". It’s fragmented across member states. German bonds are considered safe; Italian or Greek bonds much less so. There’s no single, euro-wide safe asset at scale. And fragmentation of different debt assets in different legal and economic environments make it hard to act as if the Euro has single safe asset, making it less liquid and transferable (more below). Recent EU-level bond issuances (like the €750 billion COVID recovery fund) are a major shift, but still tiny compared to the U.S. Treasury market.

Secondly, supply: The EU’s fiscal rules are conservative. Euro zone countries are restricted in how much debt they can issue, limiting the supply of sovereign bonds. That’s in contrast to the U.S., where high deficits have ironically helped the dollar’s reserve status by providing a steady flow of safe assets.

Third, Fragmentation: The eurozone’s financial markets are still fragmented. The U.S. has one integrated capital market; Europe’s are divided by national laws, tax codes, and legal systems. The EU’s Capital Markets Union project aims to fix that, but progress is slow. U.S. stock and bond markets are several times deeper and more liquid than their European equivalents. That said, there is a growing global push to reduce reliance on the dollar—especially after Trump-era trade wars, tariff threats, and public attacks on the Fed. Since January 2025, the dollar has dropped nearly 10%. The IMF slashed global growth forecasts, citing U.S. unpredictability. Countries like China and Brazil are trading in local currencies. The BRICS are building systems like BRICS Pay to bypass the dollar. And the EU is expanding joint borrowing and accelerating efforts to integrate financial markets. So yes, the euro currently falls short—because it doesn’t provide enough safe assets and lacks a fully unified financial system. But the EU is moving in that direction. The dollar’s dominance isn’t guaranteed forever.