FRANKFURT (Reuters) -Europe’s dependence on American payment providers leaves it open to economic coercion, European Central Bank chief economist Philip Lane said on Thursday, outlining a key risk in the deteriorating relationship between Europe and the U.S.
Europe has been reevaluating its ties with the U.S. since President Donald Trump said the EU had been “formed to screw” his country and promised a host of retaliatory measures.
A key worry is that Visa and Mastercard now process around two-thirds of card payments in the euro zone while tech firms including Apple Pay, Google Pay and PayPal also account for a substantial chunk of retail transactions.
“Europe’s reliance on foreign payment providers has reached striking levels,” Lane said in a speech in Cork, Ireland. “This dependence exposes Europe to risks of economic pressure and coercion and has implications for our strategic autonomy, limiting our ability to control critical aspects of our financial infrastructure.”
“We are witnessing a global shift towards a more multipolar monetary system, with payments systems and currencies increasingly wielded as instruments of geopolitical influence,” he said.
He warned that national card schemes have been entirely replaced by international alternatives in 13 of the euro zone’s 20 countries, making it imperative that the ECB pushed ahead with issuing a digital currency.
“The digital euro is a promising solution to counter these risks and ensure the euro area retains control over its financial future,” Lane said.
A digital euro would function much like cash, allowing people to make direct retail payments without relying on a card service provider.
A digital wallet, possibly an app on a phone, would hold the funds, which would be a direct claim on the central bank, as with banknotes. The funds would then be transferred to the seller without going through Visa or Mastercard.
The ECB has spent years preparing for a digital currency but needs EU-wide legislation before it can move ahead. The legislative process has been slow, however, leaving some policymakers frustrated.
The ECB earlier said that it will decide by the end of 2025 whether to move on to the next phase of preparations.
(Reporting by Balazs Koranyi, Editing by Louise Heavens and Andrew Heavens)
