ECB Official Warns: White House Attacks on Fed Independence Threaten Dollar’s Global Dominance
The world's reserve currency faces an unprecedented internal threat—not from foreign rivals, but from its own political backyard.
The Independence Under Siege
Political pressure on the Federal Reserve isn't just a domestic squabble. It's a direct assault on the institutional credibility that underpins the U.S. dollar's global standing. When central bank decisions appear politically motivated, international trust evaporates faster than liquidity in a flash crash.
The Crypto Angle Everyone's Missing
While traditional finance frets about yield curves and forex reserves, decentralized networks operate 24/7 with algorithmic predictability—no political appointments, no election-cycle pressures, just immutable code executing as programmed. The very instability warning from Europe creates the perfect narrative for digital asset adoption as a hedge against centralized monetary uncertainty.
The Real Domino Effect
It's not about one administration or one policy dispute. The damage comes from establishing a precedent—that monetary policy can be a political football. Once that genie's out of the bottle, every future decision gets scrutinized through partisan lenses, eroding the neutral foundation global markets require.
Meanwhile, Bitcoin's mining difficulty adjustment ticks along on schedule, Ethereum validators reach consensus without congressional hearings, and stablecoins settle cross-border payments while bureaucrats debate procedure. The ultimate irony? Political meddling in legacy finance might accomplish what crypto advocates couldn't—proving the value of decentralized alternatives through traditional system failure.
Because nothing says 'sound money' like watching politicians discover they can bully the printers of the world's reserve currency—until the rest of the world decides to stop using it.
Dollar weakness creates an opening for euro
He added that worries about Washington potentially using dollar-based payment systems as a political weapon are pushing other countries to build their own alternatives. These developments are shaking investor trust in dollar-backed investments and will likely speed up the slow but steady movement toward using multiple currencies in international trade, he said.
Officials at the European Central Bank have been saying for some time that the uncertainty surrounding the dollar – largely stemming from President Donald Trump’s public criticism of Fed Chair Jerome Powell – creates an opening for the euro to take on a bigger role in global finance. However, Villeroy suggested that a world with several major currencies sharing power might actually be more steady than the current system.
During his remarks, he brought up the idea of creating a SAFE investment product denominated in euros, saying “the creation of a euro-denominated safe asset merits our renewed attention.” He mentioned possibilities like converting some national government debt into European-level debt and combining existing multinational borrowing programs.
Villeroy’s criticism comes at a time when economic conditions in France support his arguments. Fresh data shows France’s yearly inflation rate dropped to 0.8% in December 2025, marking its lowest point in seven months. This figure came in below the 0.9% recorded in both October and November, and under what analysts had predicted. The decline happened mainly because energy costs fell more sharply, dropping 6.8% compared to a 4.6% decrease previously, with fuel prices leading the way down.
This puts Villeroy in a strong position to make his case. While the American government is pushing the Fed to lower interest rates to help a struggling economy, Villeroy can point out that the ECB’s independent, numbers-based strategy has already brought inflation well under the 2% goal without any political meddling.
Search for new Fed chair intensifies debate
Meanwhile, the debate over Fed independence is moving from theory to practice as Trump’s search for Powell’s replacement heats up. Fed Governor Stephen Miran told Fox Business on Tuesday morning that he hasn’t discussed becoming the next Fed chair with TRUMP and isn’t pursuing the position. He said he’s not on the shortlist, calling the actual candidates “extremely credible.”
Trump is now looking at a final group that includes Kevin Warsh, who previously served on the Fed’s board, and Kevin Hassett, who advises the White House on economic matters. Powell’s term running the Fed ends in May.
Right now, betting markets show Hassett as the front-runner, given his close ties to Trump. However, experts quoted in recent reports from Investopedia and the Wall Street Journal caution that picking Hassett could result in a Fed that coordinates with the White House on interest rate decisions – precisely the kind of arrangement Villeroy argues will damage worldwide confidence in the dollar. Andrew Brenner, vice chairman at NatAlliance Securities, wrote: “The Fed is a process, not a one-man show.“
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