Christine Lagarde proposes the euro as a global alternative to the dollar.

European Central Bank President Christine Lagarde warned on Monday that the US dollar-backed global economic system is "cracking" and floated the idea of ​​transforming the euro into the global reserve currency.

Lagarde said in a speech at the Hertie School in Berlin that "the global economy has thrived on openness and multilateralism, underpinned by American leadership."

She continued that Washington's support for a rules-based international system and the dollar as the reserve currency "paved the way for thriving trade and financial growth."

She added that the continuation of this US-led economic system over the past 80 years "has proven to be enormously beneficial for the European Union... but today it is cracking," in a clear reference to the tensions in global trade amid US President Donald Trump's threat to impose broad tariffs on key partners.

Lagarde emphasized that "multilateral cooperation is being replaced by bilateral conflicts. Protectionism is replacing openness."

She considered that the recent turmoil threatens "the dominant role of the US dollar," noting that the disintegration of the global economic system "exposes Europe to risks." While noting that "any change in the international order that leads to a decline in global trade or fragmentation into economic blocs harms our economy," she emphasized that the decline of the dollar would "open the door for the euro to play a greater international role."

Lagarde explained that increasing the euro's international role could reduce the cost of borrowing for EU countries, protect the bloc from exchange rate fluctuations, and "allow Europe to better control its destiny."

To achieve this, the EU will need a "firm commitment to open trade" and strengthen its position with adequate security capabilities.

It must also strengthen its economy and defend the rule of law, she said, noting that this "is not an advantage that will be given to us easily. We must earn it."