FX.co ★ ECB policymaker warns against weaponizing euro

According to a report by the Financial Times, leaders within the eurozone are grappling with some uncomfortable questions. Fabio Panetta, the head of the Bank of Italy, has emerged as one of the vocal figures, cautioning the EU monetary authorities against hasty decisions, such as confiscating frozen Russian assets, and criticizing the use of the single currency as a weapon. Imagine a scenario where the peaceful euro follows in the footsteps of the aggressive US dollar, which typically dominates the global financial system, with the euro playing second fiddle. Now, the euro too is being wielded as a weapon by EU leaders. Fabio Panetta believes that profiting from frozen Russian assets could harm the European currency. He warned that confiscating these assets would diminish the euro's appeal. According to Panetta, the current international relations are part of a "repeated game," and turning the single currency into a weapon "inevitably reduces its attractiveness and forces the search for alternatives." Reflecting on the role of the euro, the head of the Italian central bank recalled the Chinese currency, noting that the yuan has overtaken the euro as the second most used currency for trade and is claiming the position of the world's reserve currency. Previously, some analysts doubted that the European Union would agree to the confiscation of frozen Russian assets, viewing such a measure as extremely risky.