ECB's Olli Rehn confident of euro's growing importance as Europe boosts defense spending

Olli Rehn, a member of the European Central Bank's (ECB) Governing Council, argues that European countries should increase defense spending to strengthen the euro’s international role. Earlier, ECB President Christine Lagarde highlighted expanding opportunities for the single currency’s rise amid the new US administration's erratic policies.

Rehn believes enhancing the region’s defense capabilities would support the euro and create a large, liquid safe asset required for the smooth functioning of the financial sector. However, such spending could exacerbate already elevated national debt levels, Reuters reports.

Finland's central bank governor strongly supports the new German Chancellor's strategy of expanding the state's defense spending. Rehn considers these measures more impactful than the years of protracted discussions that preceded them. He also speaks of the need to set a clear timeline to complete the process, suggesting a target of early 2028.

The euro's role will strengthen against the backdrop of recent developments, the official says. Nevertheless, the ECB should remain vigilant, continuing to closely monitor inflation and economic growth in the region.