Banking 2025

INSIDE BANKING SPECIAL EDITION 2025

CONTENTS

INSIDE BANKING 2025

04 B anking Sector Strengthens with NBS Support Jorgovanka Tabaković Governor of the National Bank of Serbia

08 M ental Health as a Priority Association of Serbian Banks (Udruženje banaka Srbije)

10 The Seamless Evolution of Payments Ana Drašković Vice President and General Manager of Visa Southeast Europe

12 Safe ONLINE Rosanda Milatović Skorić Member of the Executive Board responsible for IT, OTP Bank

13 Regulation Should Keep Pace With Tech Development Đorđe Đokić Senior Partner, Djokić + Partners

14 Prepare For the Global Euro Feature

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COMMENT

BANKING SECTOR STRENGTHENS WITH NBS SUPPORT Thanks to the backing and regulatory role of the National Bank of Serbia (NBS) and the concerted efforts of the banking sector, we now have a system that is more stable, attuned to the needs of both the economy and citizens, and firmly oriented towards the development of digital services

JORGOVANKA TABAKOVIĆ Governor of the National Bank of Serbia

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he banking sector in Serbia, like all others, must share the fate of the wider economy and its citizens – only then can we ensure longevity. In recent years, this sector has witnessed accelerated consolidation, an ever-stronger focus on financing small and medium-sized enterprises, increased investment in innovation and digital infrastructure, and a clear profiling of the social role of banks within society.

The consolidation of banks in Serbia has brought greater stability and benefits to citizens through more efficient services and record-high savings – as neither banks nor any other institution should exist solely for their own sake, but for their clients. Only within this mutual relationship, where all interests intertwine, can achieved success be preserved and advanced.

Over the past several years, Serbia’s banking sector has seen a continuing trend of mergers and acquisitions. This process was predominantly driven by changes in the ownership structures of individual banks, initiated by their parent companies in response to developments in their countries of origin. Global consolidation trends and the pursuit of stronger market positioning have also played a key role.

Today, the banking sector in Serbia comprises 19 banks – 15 with majority foreign ownership, two privately owned by domestic shareholders, and two stateowned. Given the growing fragmentation of financial markets globally, maintaining an optimal balance between foreign and domestic investment has proven to be a significant factor of stability for the banking sector. Moreover, the diverse origins of capital on the

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Serbian banking market attest to the benefits of the diversification of the sources of funding, which is vital for the sector’s stability.

Thanks to the timely and appropriate supervisory and regulatory measures of the NBS – particularly during the procedures for granting prior consent for bank mergers – the consolidation process has enhanced operational efficiency and improved the range of products and services on offer. Citizens and businesses today have access to more efficient and varied financial services.

The success of this process is also reflected in the banking sector’s performance indicators. Since December 2012, the total balance sheet assets of the banking sector have more than doubled, reaching RSD 6,640 billion (€55.8 billion) at the end of March 2025. Credit activity has nearly doubled, driven by growth in both household and corporate lending, while total deposits have almost tripled. Foreign currency savings increased from €8.3 billion in 2012 to €15.7 billion in May 2025, while dinar savings rose from under RSD 18 billion to RSD 193 billion – an almost elevenfold increase.

It can therefore be concluded that the consolidation of Serbia’s banking sector has had a positive impact on both citizens and the economy, with stability and trust in the sector preserved. Today, it stands as one of the key pillars of the country’s overall financial system.

Thanks to decisive and necessary reforms, and the NBS’s responsible approach, an appropriate framework has been established in recent years, enabling banks to orient their operations towards specific market segments in line with their business models.

Accordingly, the Serbian market

today includes banks focusing on financing SMEs, while others are steering towards full digitalisation.

The financing of SMEs has a particularly significant impact on Serbia’s economy, as this sector forms the backbone of the country’s economic activity. It employs more than two-thirds of the workforce and generates a substantial share of GDP. Providing SMEs with favourable loans tailored to their specific needs is a fundamental mechanism for encouraging sustainable economic growth.

This segment of lending has recorded continuous growth, with a year-on-year increase of 10.5% in March 2025.

Properly directed credit policy – supported by guarantee funds and incentive schemes – can have a multiplier effect across various economic areas such as employment, exports, regional development and innovation.

As part of their support to the population, banks in Serbia actively participate in housing loan programmes. The housing loan programme for young people enables significantly lower down payments for first-time buyers – allowing them to secure property with a minimum contribution of just 1% of the total property value. This significantly eases access to financing for young people. The programme also includes subsidised interest during the first six years of repayment, along with a one-year grace period, thereby easing the financial burden on young families at the start of independent living.

In addition, the state guarantees the loan during the first ten years of repayment. The popularity of this programme, as shown by high demand and efficient loan approval by banks, is the best indicator of its success. I would also remind readers that, at the proposal of the

PROACTIVITY Thanks to reforms and the responsible approach taken by the NBS, a framework has been created that allows banks to focus on target markets in line with their individual business models

STABILITY In the context of increasing fragmentation of financial markets, maintaining a balance between domestic and foreign investments has proven crucial to the stability of the banking sector

COMMITMENT The housing loan scheme for young people facilitates the purchase of a first home with minimal down payment, subsidised interest rates and state guarantees – significantly easing the path towards independent living

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IN A PERIOD MARKED BY HEIGHTENED INFLATIONARY PRESSURES, GLOBAL CRISES AND GROWING SOCIETAL CHALLENGES, BANKS IN SERBIA ARE INCREASINGLY RECOGNISING THEIR BROADER ROLE NBS, four exceptionally important laws were adopted by the Serbian National Assembly – legislation that benefits financial service users, the banking industry, and the system as a whole. These are part of our broader response to the new realities in which we live and work.

As a leader in the development of digital payment services, the NBS

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plays a crucial role in the modernisation of the payment system, enabling users to execute transactions more quickly and securely.

The collaboration between banks and the NBS further encourages the advancement of digital infrastructure, creating a stable and transparent environment for the development of financial services.

In recent years, mobile banking has emerged as one of the key drivers of the digital transformation of the financial sector. Payment service providers have recognised that mobile phones are now central to their users’ daily lives and, accordingly, view mobile devices as platforms for enabling a fully-fledged digital ecosystem of financial services. By investing in the development of sophisticated applications, they are working to ensure continuity and reliability in service provision.

This commitment to technological advancement is clearly reflected in the NBS IPS system, which has been implemented to meet stringent standards of security and reliability. Through secure authentication, integration of diverse payment channels, and improved transaction methods, the NBS IPS system provides a modern framework for the development of mobile banking services. It contributes to faster transaction processing, lower costs, enhanced data security and increased transaction volume. The growing adoption of modern payment methods is also evidenced by the fact that the number of registered users of mobile banking services reached 4.6 million at the end of 2024, compared to 1.7 million at the end of 2019. In 2024 alone, a total of 251.9 million payments were processed via mobile and online banking.

In a period marked by heightened inflationary pressures, global crises and growing societal challenges, banks in Serbia are increasingly recognising their broader role. Through support for education, financial literacy, entrepreneurship, sustainable development and environmental initiatives, the banking sector is helping to strengthen public trust in the financial system. The NBS will continue to support all those who understand the importance of stability – a matter of collective interest.

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MENTAL HEALTH AS A PRIORITY “Mental Health for All” is a project implemented by the Psychosocial Innovation Network (PIN), with the support of the Association of Serbian Banks, aimed at providing free and accessible psychological support to those who need it most

ASSOCIATION OF SERBIAN BANKS (UDRUŽENJE BANAKA SRBIJE)

Удружење банака Србије п.у.

Association of Serbian Banks b.a.

n Serbia, over 700,000 people are faced with challenges such as depression, anxiety, and alcohol abuse, while systemic support is often lacking – primarily due to a shortage of psychologists in health centres, a limited number of community mental health centres, and the stigma that still surrounds this topic.

The project is being implemented in several cities across Serbia,

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mental health as a private issue and instead treat it as a matter of social responsibility that we must all, as a society, prioritise.

Currently, three support programmes are active: support groups addressing workplace burnout, support groups for youth, and support groups for parents of children with developmental disabilities. The first two groups are held in Belgrade, at PIN’s premises, while the programme for parents takes place in Ruma, at the Marriage and Family Counselling Centre. Following the initial cycle, further workshops are planned in the same locations.

“When mental health is compromised, the consequences are not only felt by the individual – they extend to the family, the work

THE IDEA IS TO STOP VIEWING MENTAL HEALTH AS A PRIVATE ISSUE AND INSTEAD TREAT IT AS A MATTER OF SOCIAL RESPONSIBILITY THAT WE MUST ALL, AS A SOCIETY, PRIORITISE through services made available within local communities, where PIN professionals provide support to young people, parents of children with developmental difficulties, individuals experiencing work-related stress, and anyone encountering psychological challenges. The idea is to stop viewing

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environment, and the wider community. Our model is based on the principles of community mental health, which are also advocated in national strategies. It’s important that people know – support exists, and it’s not far away,” says Maša Vukčević Marković, Director of PIN.

However, in order for the project to truly become accessible to all, additional support is necessary. On the occasion of the second Banking Summit, to be held at the end of 2024, a charity dinner was organised, with funds raised sufficient to cover support for 100 beneficiaries. The goal now is to secure additional funding in order to reach over 400 people across the country.

“Banks in Serbia have recognised the importance of this initiative and have shown their willingness to help. But this is an opportunity for all of us – both companies and individuals – to contribute to a better society. When we invest in mental health, we invest in people,” states Marina Papadakis, Secretary General of the Association of Serbian Banks.

Statistics confirm the urgency: one in three people in Serbia experience mental health difficulties, yet there are fewer than two psychologists per 100,000 citizens within primary healthcare. For years, Serbia has been among the top European countries in terms of the consumption of sedatives – often the only available solution, though one that does not address the root of the problem.

Over the past ten years, the PIN organisation has implemented more than 75 projects, with the support of numerous donors, including the World Health Organization and the Ministry of Health of the Republic of Serbia. More than 12,000 people have taken part in their programmes.

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rom Cards to AI-Powered Commerce: The Payments of Tomorrow Will Be an Integral Part of Everything We Do, says Ana Drašković, Vice President and General Manager of Visa Southeast Europe, with whom we spoke about digital payments, the influence of cashless transactions and other innovative electronic payment models on both the local economy and the global market.

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ANA DRAŠKOVIĆ Vice President and General Manager of Visa Southeast Europe

THE SEAMLESS EVOLUTION OF PAYMENTS By leveraging its global infrastructure, user trust, and expertise in digital payments, Visa is emerging as a key player in building trust between consumers, banks and merchants in the new AI economy

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Visa has been synonymous with innovation for decades, and recently you marked the beginning of a completely new era of commerce globally – AI commerce.

What exactly does it entail, and how does it impact the future of digital payments?

— We are at a pivotal moment for digital payments. At Visa, we recently unveiled an initiative that has been in development for years, marking the beginning of a new era in commerce – AI commerce. Powered by artificial intelligence, it fundamentally changes how consumers discover, purchase and manage products and services. At the same time, Visa’s network is becoming open to developers and AI collaborators, enabling a seamless, secure and personalised payment experience.

By leveraging its global infrastructure, user trust and longstanding experience in digital payments, Visa is emerging as a key player in fostering trust between consumers, banks and merchants in the new AI economy. Our collaboration with leading technology partners such as Microsoft, OpenAI, Stripe and Samsung further reinforces this vision. AI is no longer simply a tool for fraud prevention – it now underpins a wholly new, intuitive and automated form of commerce.

In practical terms, this means an AI agent could book a table at a sought-after restaurant in New York – or secure villa accommodation in the Maldives – within seconds, all without exposing card data or triggering fraud alerts.

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In what way does the growth of cashless payments via innovative electronic transaction models affect the local economy’s reach into the global market? Can it be said that Serbia, in this regard, is part of the developed world?

— Digital payments are a key driver of economic development and one of the primary engines of future growth. In the region’s least developed countries, expanding access to the digital economy could increase GDP per capita by as much as 46% over the next thirty years.

Major changes are under way, and we are part of this transformation. Digital payments enable small and medium-sized businesses to more easily access global markets, optimise their operations, and increase their competitiveness. Serbia is making notable progress, both in adopting digital solutions and in its openness to innovation.

According to the National Bank of Serbia, a record 82.4 million online purchases were made in 2024 – averaging over 225,000 transactions per day.

This represents a 39.2% increase compared to 2023, and a 288.5% rise compared to 2020.

The banking and financial sector has long been evolving beyond its original boundaries. Are we seeing more collaboration and reliance on fintech companies that provide efficient digital payment solutions?

— The line between traditional financial institutions and the fintech sector is becoming increasingly blurred.

This type of collaboration delivers optimal results by combining the agility and innovation of start-ups

with the trust and expertise of established banks.

In the near future, thanks to the concept of “agentic commerce”, users will be able to delegate tasks like browsing, purchasing and managing financial transactions to AI agents.

But for this model to succeed, it’s essential that AI agents earn the trust not only of users, but also of banks, merchants and other stakeholders.

Visa plays a central role in building that trust by providing simple and secure access to its network for partners across the AI industry, tech companies, the banking sector, financial institutions and retailers.

DIGITAL PAYMENTS ARE A KEY DRIVER OF ECONOMIC DEVELOPMENT AND ONE OF THE PRIMARY ENGINES OF FUTURE GROWTH. IN THE REGION’S LEAST DEVELOPED COUNTRIES, EXPANDING ACCESS TO THE DIGITAL ECONOMY COULD INCREASE GDP PER CAPITA BY AS MUCH AS 46% OVER THE NEXT THIRTY YEARS

Visa has always been synonymous with innovation, but also with secure and reliable transactions. Does the advancement of modern technologies call for more public education on the benefits of cashless payments?

— Absolutely. While technology is advancing rapidly, public perception tends to evolve more slowly. Many users still harbour concerns, largely due to a lack of information and fear of the unknown. In terms of security, Visa has invested over $9 billion in new technologies and the development of 100 distinct tools. This enables us to protect users and stay several steps ahead. In just one year, Visa prevented $27.1 billion worth of fraudulent activity.

commerce of tomorrow – from AI-integrated payment tools to partnerships such as the one with X (formerly Twitter), Elon Musk’s platform.

Through the new X Money service, we are part of a ‘super app’ that integrates social media, communication and financial tools – offering limitless potential. This also provides an opportunity to redefine the user journey and make financial services more accessible, especially to younger generations seeking connected digital experiences.

Visa has swiftly evolved from a card payment technology provider into a catalyst for change and a pioneer of digital transformation in the financial sector. What comes next?

— We remain committed to advancing innovations that will define the

SOON, CONSUMERS WILL BE ABLE TO DELEGATE PAYMENTS TO AI AGENTS THAT CAN USE VISA CARDS WITH ANY OF THE MORE THAN 150 MILLION MERCHANTS THAT ACCEPT THEM, FOR VIRTUALLY ANY PURPOSE cordmagazine.com

Can you predict where technological advancement will take us?

How do you personally see the future of financial services?

— I see payments becoming invisible and effortless – intelligent, secure, personalised and universally available, all powered by AI. Visa aims to expand the infrastructure and frameworks of both traditional and digital commerce to embrace AI-powered commerce.

Soon, consumers will be able to delegate payments to AI agents that can use Visa cards with any of the more than 150 million merchants that accept them, for virtually any purpose. This evolution will transform everything – from everyday tasks to complex processes. I believe this is the moment where Visa, through its innovations and approach, will reshape the way we think about finance.

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SAFE ONLINE Digital banking today is not merely a matter of convenience but an ongoing battle against sophisticated cyber threats. OTP Bank reveals how it protects and educates its clients in the world of digital risks

ROSANDA MILATOVIĆ SKORIĆ Member of the Executive Board responsible for IT, OTP Bank n conversation with Rosanda Milatović Skorić, we learn how this institution approaches security in the digital environment. The focus is on current cyber security challenges, user education, and cooperation with regulatory bodies to ensure client protection and financial system stability.

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Digital banking today involves a continuous struggle against complex cyber threats. How does OTP Bank respond to these challenges, and what measures does it take to protect its clients?

— We face increasingly complex cyber threats, ranging from phishing and malware to attacks on mobile applications and cloud infrastructure. Banks are frequent targets of cybercriminals, with potential consequences including financial losses, erosion of trust, and reputational damage.

For this reason, OTP Bank invests in cutting-edge technologies and multi-layered protection. We implement a Zero Trust architecture, where no access is trusted by default; every access attempt is verified

and limited. We use multi-factor authentication (MFA), which requires, in addition to a password, an extra code or biometric verification, making unauthorised access much harder. Data is protected by encryption both in transit and at rest.

We also employ artificial intelligence and machine learning to detect threats in real time, allowing automatic responses to suspicious activities.

Employees undergo regular training to recognise phishing attacks and other frauds. We conduct security audits and simulate attacks (cyber drill exercises) to improve crisis response. Although incidents do occur, we have a detailed plan for swift threat isolation, user notification, and system recovery.

User education is often the weakest link in the digital security chain. How does OTP Bank inform and empower clients to recognise and avoid potential online scams?

— User education is key, as even the best systems cannot prevent misuse if users carelessly share their data. Therefore, OTP Bank runs the ongoing ‘Safe ON-

IN ACCORDANCE WITH DORA, OTP BANK IS ENHANCING PROCESSES FOR MONITORING, REPORTING, AND EXCHANGING INFORMATION ON CYBER INCIDENTS WITH COMPETENT AUTHORITIES AND OTHER INSTITUTIONS, THEREBY FURTHER STRENGTHENING THE RESILIENCE AND STABILITY OF THE FINANCIAL SYSTEM 12

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LINE’ campaign through social media, the website, emails, and SMS messages. We provide clients with practical advice on recognising phishing, fake surveys, social media scams, and safe use of cards and ATMs. Video clips, infographics, and guides tailored to everyday situations are available. The bank clearly warns it will never request confidential information via email, SMS, or phone. When new scams emerge, we promptly inform clients and the public, as was recently the case with fake investment ads on social media, alongside taking legal action against fraudsters.

OTP Bank is also part of sector initiatives such as FIN-CSIRT, which facilitate threat information sharing and joint actions to strengthen the financial sector’s resilience, including user education.

Enhancing cyber security requires collaboration between banks, regulators, and other financial system actors. What joint initiatives does OTP Bank participate in, and what is their tangible impact on the market?

— Cyber security demands cooperation with regulators, banks, fintech companies, and other stakeholders. OTP Bank actively participates in working groups with the National Bank of Serbia, other banks, and IT experts, exchanging experiences and developing standards for risk management, resilience testing, and incident reporting.

Over the past year, we have placed particular focus on implementing the DORA regulation (Digital Operational Resilience Act), which from 2025 sets strict requirements for financial institutions in the EU and their subsidiaries.

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REGULATION SHOULD KEEP PACE WITH TECH DEVELOPMENT Djokić + Partners boasts nearly two full decades of successful operations, number of satisfied clients, over 60,000 cases handled, and projects valued at up to a billion euros – and the best is yet to come

ĐORĐE ĐOKIĆ Senior Partner, Djokić + Partners e spoke with Đorđe Đokić, one of Serbia’s most prominent lawyers, about innovations in the banking and financial sectors, technological advancement, the link between regulation and new technologies, and the issue of digital assets.

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The pace of business is accelerating.

How can we keep up with the changes?

— All industries are striving to make their services more efficient, faster and of higher quality through the use of new technologies. What I particularly notice, both in the local market and the region, is significant progress in payment systems and the collaboration between traditional banks and the fintech industry. The same trend is evident in the way legal services are delivered. An increasing number of law firms are aiming to make their services more efficient, faster and of higher quality. We are identifying the most advanced tools and integrating them into our day-to-day operations – precisely to meet the demands of clients for rapid and accurate legal advice.

The goal is not to replace human resources, but to automate as many repetitive processes as possible, thereby enabling lawyers to truly focus on delivering high-quality, strategic legal services. In the long term, such innovations cordmagazine.com

may also help reduce working hours and extend the time available for private life and family.

Your firm is known for its strong expertise in banking and finance, with a special focus on the IT sector. How important is it to keep up with developments in the IT sector?

— In our practice, this is not a matter of choice – it is a necessity. The tech companies we work with are advancing rapidly, while regulation is, as a rule, lagging behind. In this context, we are compelled to think creatively, sometimes outside established frameworks, in order to devise sustainable solutions that are not only legally grounded but also technologically viable.

This process is where trust is built – if you succeed in enabling your client to operate in compliance with the law, without stifling their innovative potential, you become far more than a legal adviser – you become a development partner.

Thanks to technological progress, the potential of the banking and financial sectors continues to grow year by year. It’s not easy to list all the new developments...

— I would first highlight the most topical development, which is Serbia’s entry

into SEPA (Single Euro Payments Area), meaning we can soon expect significantly faster transactions with the EU and the region, as well as reduced payment transaction costs. In this regard, harmonisation of regulation is expected over the next year, and I personally see our entry into SEPA as a strategic lever for economic growth.

In addition, a topic I believe will gain increasing relevance – despite the existing regulatory framework established by the Digital Asset Law of 2020 – is that of digital tokens and the conditions they create for alternative project financing. It is vital to demystify this subject through investment education, as this relatively new instrument opens up considerable possibilities for alternative funding.

A digital token, as a form of digital asset, grants certain rights to its holder – the investor – in relation to the token issuer (e.g. entitlement to interest, etc.), with the ownership right existing solely over the digital token, not over the issuer or their assets. In this way, the issuer is able to raise significant funds from various investors to finance projects, without having to sell any part of their own assets.

Meanwhile, investors gain the opportunity to allocate funds to projects they deem promising, and which have been vetted by the Securities Commission.

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FEATURE

PREPARE FOR THE GLOBAL EURO After serving as the world’s hegemon for decades, the US appears to be renouncing the role by refusing to supply global public goods and eroding confidence in the dollar. This creates an opportunity for the eurozone to capture some of the exorbitant privilege long enjoyed by the US

nternational monetary and financial systems may not be immutable, but nor do they change often. That is why the upheaval spurred by US President Donald Trump’s trade and tariff war is so remarkable – and difficult to decipher. To figure out what is going on, it is worth revisiting Charles P. Kindleberger’s theory of hegemonic stability, which he spelled out in his book The World in Depression: 1929-1939. Kindleberger’s theory essen-

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tially states that an open and stable international system depends on the presence of a dominant world power.

In the nineteenth century, that power was Britain. As the world’s financial hegemon – leader of the global economic system and issuer of the dominant international currency – Britain supplied critical public goods. These included, as Kindleberger put it, a “market for distress goods, provided by British free trade,” and a countercyclical flow of capital,

produced by the City of London. Britain also supported “coordination of macroeconomic policies and exchange rates,” through the “rules of the gold standard,” which were “legitimized and institutionalized by usage.” Finally, the Bank of England served as a “lender of last resort.”

But World War I took its toll on Great Britain, which by the 1930s no longer had sufficient resources to underpin the international monetary system. And though the United States was an ascending pow-

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er, it was not yet ready to fill Britain’s shoes. This “Kindleberger gap” – the period between world hegemons – coincided with the Great Depression and the escalating political turmoil that culminated in World War II. Near the end of the war, in 1944, delegates from 44 countries met in Bretton Woods, New Hampshire, where they orchestrated a smooth transition between the old and the new hegemons. In doing so, they validated the de facto supremacy of US trading, financial, and military power.

At the time, the US accounted for 35% of world GDP. But though America’s share of global GDP has declined, the US dollar has retained its dominance as a reserve asset, invoicing currency, and anchor for fixed exchange rates. Moreover, the US Federal Reserve’s policy decisions

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THE ECONOMIC AND FINANCIAL DISTRESS TRUMP INITIATED IN THE US CREATES AN OPPORTUNITY FOR THE EUROZONE – WHICH ISSUES THE WORLD’S SECOND-MOST-IMPORTANT INTERNATIONAL CURRENCY – TO CAPTURE SOME OF THE EXORBITANT PRIVILEGE LONG ENJOYED BY THE US

and the US economy’s performance still shape the global financial cycle.

Nonetheless, we seem to be approaching a new “Kindleberger gap.” The existing hegemon appears to be self-destructing, as it refuses to supply global public goods, and there is no clear candidate to fill its shoes. The European Union is not prepared to take up the mantle, and China is not even integrated into global financial markets.

Whereas the rest of the world views the dollar’s primacy as an “exorbitant privilege,” the Trump administration appears convinced that global demand for dollar assets is a burden, as it believes it drives up the currency’s value. But if the US continues on its current policy trajectory, it will soon be “relieved” of this burden, whether it likes it or not.

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If a currency is to serve an international role, the country issuing it generally needs to enjoy economic preeminence and occupy a central position in global trade. These qualities depend on innovative capabilities and growth potential, with military power and geopolitical alliances also playing a role. None of this is possible without an open economy and high-quality, stable institutions.

By pursuing policies that undermine US institutions, fundamental research, multilateralism, and the economy’s longrun growth prospects, the US under Trump is rapidly eroding trust in the dollar. Never has this been more apparent than in the wake of Trump’s announcement, in early April, of ultra-high tariffs on goods from dozens of countries running bilateral trade surpluses. US Treasury yields rose, the US stock market fell, and the dollar depreciated – a combination often seen in emerging economies.

The economic and financial distress Trump initiated in the US creates an opportunity for the eurozone – which issues the world’s second-most-important international currency – to capture some of the exorbitant privilege long enjoyed by the US. This includes cheaper capital for eurozone governments and businesses – which could support fiscal sustainability – and easier refinancing during times of crises, since demand for “safe” euro as-

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sets would rise. It also includes increased geopolitical clout – crucial at a moment when the EU is working to achieve strategic autonomy.

While internationalization does carry risks, the eurozone is well-positioned to mitigate them. For example, the eurozone’s macroprudential policy frameworks, which are much stronger than those in the US, can help it cope with increased capital-flow and asset-price volatility. Europe also boasts powerful institutions, starting with the European Central Bank, and a robust rule of law.

But more must be done to enable the eurozone to raise the euro’s international profile. For starters, the eurozone must deepen its single market in goods and services, and strengthen its trade relationships wherever possible. Given Europe’s global climate leadership, it could consider starting to invoice climate-friendly products – such as decarbonized energy equipment, electric vehicles, and commodities used in electrification – in euros, while building up corresponding financial instruments (such as those linked to hedging climate risk).

The eurozone should also commit to completing the banking union and the savings and investment union, as spelled out in multiple recent policy reports. To deliver deep and integrated capital markets – crucial for innovation and growth

THE EUROZONE SHOULD ALSO COMMIT TO COMPLETING THE BANKING UNION AND THE SAVINGS AND INVESTMENT UNION, AS SPELLED OUT IN MULTIPLE RECENT POLICY REPORTS – efforts should be made to deliver a true eurozone-wide safe asset. Joint debt issuance for emergency defense spending could be a good starting point.

Moreover, rather than allowing eurozone payments to remain largely dependent on US payment systems, the bloc must increase the sovereignty of its own. This would probably rely on a central bank digital currency (CBDC), complemented with a robust payment system that may or may not involve euro stablecoins. Finally, the ECB’s function as lender of last resort must be carefully structured, so as to ensure widespread and strong confidence in the euro.

These changes will not be easy to implement. But if Kindleberger taught us anything, it is that the world economy will be better off if, as America retreats from global economic and financial leadership, Europe steps quickly into the breach.

By Hélène Rey is Professor of Economics at the London Business School

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