Despite the political changes of the past year, there has been no significant decline in European portfolio inflows to the US; with the stock market boom, European equity investors have kept investing in the US, and euro-area inflows into US treasuries show no clear downward trend.

The euro is a solid but distant second to the dollar, accounting for roughly 20% across most international markets (FX reserves, international debt, loan and deposit markets, FX turnover), while the dollar denominates about 54% of global equity market capitalization with about 10% of that foreign-owned.

Large investors would welcome a big, liquid pool of joint euro debt because it lets them move in and out in size without moving the market, unlike fragmented national markets (German Bunds vs Italian bonds) where size constraints bite.

The renminbi accounts for only about 2% of global FX reserves and has not been increasing over the last five years, so it is not a significant player in reserve diversification.

The dollar's share of global FX reserves declined from about 70% at the turn of the millennium to about 58% now, but the dollar's loss was not the euro's gain — the euro held stable around 20% while non-traditional reserve currencies and gold absorbed the shift.

The most important drawback holding the euro back as a global currency is the scarcity of safe assets: the US supplies about 30% of world GDP in safe assets, while Germany alone is far below that, the core safe euro-zone countries together reach maybe 5% of global GDP, and including France brings it to about 10% — leaving a huge gap.

Gold has become the go-to diversification asset for official reserve holders, with about 20% of official reserves now held in gold; scaling everything down, dollars are now less than half of reserves with about 16-17% in euros.

Issuing 1% of GDP per year for ten years would leave roughly 10% of GDP outstanding — adding €1.5 to €2 trillion over the decade to both European defense capabilities and the depth of European financial markets.

The euro could simultaneously address its two key gaps — scarce safe assets and weak geopolitical/security posture — by issuing joint 'team Europe' defense bonds: a variable-geometry coalition (possibly including the UK) issuing future-of-defense bonds to finance strategic dual-use enablers (AI, space, missile shield), achieving sovereign benchmark status and capturing convenience yield such that it could be nearly self-financing.

Investors no longer worry about Greek-style fiscal sustainability in the euro zone to the extent they used to, because it has become 'a contest of ugliness' — many countries are now in fiscally weak positions, so peripheral euro-zone members no longer look so bad by comparison.

Germany's March change to the debt brake relieved financing constraints and made debt issuance possible for defense and (for some time) infrastructure, but the appetite to take the next step toward European joint issuance and integration remains limited.

There is a deep paradox in Franco-German fiscal politics: Germany is fiscally hawkish but nation-state dovish (willing to give up sovereignty toward political union, given its post-1945 DNA and need for a taxation power), while France is fiscally dovish but nation-state hawkish (unwilling to sign the political-union 'marriage contract'); a genuine French crisis requiring euro-zone fiscal support could push toward deeper integration.