The economic security case for the digital euro – Interview with Professor Maria Demertzis

Maria Demertzis, Professor of Economic Policy at the European University Institute, explains why the possibility of economic coercion – not innovation – is the real argument for the digital euro.

Introduction

On June 23, 2026, the European Parliament's economic committee approved draft rules for the digital euro, moving Europe's central bank digital currency from a largely theoretical concept onto a formal legislative path, with issuance now targeted for 2029.

The discussion surrounding the digital euro has never been straightforward. Critics continue to question whether a eurozone CBDC addresses a genuine market need or risks competing with private sector payment solutions that are already serving consumers and businesses effectively. At the same time, broader geopolitical developments have added new dimensions to the debate that extend beyond traditional monetary policy considerations. Questions around sanctions, dependence on foreign payment infrastructure, and control over the systems that underpin European transactions have all become increasingly relevant.

Among the most thoughtful and consistent voices in this conversation is Maria Demertzis, Professor of Economic Policy at the European University Institute. Prior to joining the EUI, she spent many years as Bruegel’s Deputy Director, one of Europe's leading economic think tanks, and also held roles at The Conference Board, the European Commission, and the Dutch Central Bank.

We spoke with Ms. Demertzis to understand where the digital euro project stands today, how the debate around it has evolved, and what its future could mean for Europe's payments landscape.

Your career has taken you through academia, policymaking, central banking, and one of Europe's most influential economic think tanks. What perspective has that given you on economic policy and financial systems that others might not immediately see? And how has moving between those worlds shaped your approach to debates like the one on the digital euro?

Moving between academic research, central banking, the European Commission, and eventually a think tank gave me something specific: the ability to hold rigorous, evidence-based analysis alongside the reality that policy doesn't wait for perfect data or complete research. In academia, you choose the question, the methodology, the timeline. In policy, the questions come to you – immediately, with incomplete information – and you must respond.

The think tank sits between those two worlds. You still pursue rigorous analysis, but you have more distance from the institution and therefore more independence. That distance is what lets you be genuinely critical but also influential by the sheer fact that you aim to answer concrete policy questions.

That background shaped how I approached the digital euro from the start. I came to it as an economist asking two foundational questions: what is the value added, and why does a public authority (specifically a central bank) need to intervene rather than letting markets resolve this? For a long time, I was not satisfied with the answers being given. The European Central Bank (ECB)'s early rationales were not compelling. There were no strong arguments that markets were failing here, and no clear case for what the consumer would gain.

My views changed because events changed. And that is the other thing moving between worlds teaches you: you have to address policy from multiple dimensions (economic, social, political), not just from your disciplinary corner.

The rationale behind the digital euro has evolved over recent years. What do you see today as the strongest case for its development, and how has that changed from earlier discussions?

The original debate centred on two arguments. First, as payments become more digital, there was a legitimate worry that the system was going to lose its anchor, namely, cash. A provision of digital cash, effectively what the digital euro is, was thought of as the vehicle for maintaining the anchor in digital form.  Second, European retail payments are heavily intermediated by American companies. Approximately 60% of consumer payments in Europe, according to the ECB, flow through American firms. That concentration raises two distinct concerns: 1. Competition – are consumers getting fair pricing, or are these effective monopolies? 2. and economic security, in that a big proportion of our payments is intermediated by non-European players.

That second concern has become decisive for me over the past two to three years. Payment systems concentrated in non-European hands represent a potential chokepoint. Private companies cannot fully internalise this risk; doing so is expensive and requires coordination across the entire system. That is, by definition, a market failure, and it is precisely what justifies public intervention.

I used to say: I don't care that payment systems are run by American companies. They have good technology. We benefit, and this is how markets work. I don't say that anymore. We have seen the current American administration's posture toward Europe on trade and how economic leverage is applied. I would not rule out that American companies – not by choice, but under political pressure – are coerced into disrupting their European operations. Companies themselves have no interest in this; they have a large, profitable market here. But they may not be given a choice. This is no longer science fiction.

The European Parliament, which just approved draft legislation to advance the digital euro toward a 2029 issuance target, clearly sees the urgency. So does the European Commission.

If the digital euro did not exist ten years from now, what problem do you think Europe would still be struggling with?

Let me answer in two ways. The ECB has always framed the digital euro not only as a payment product but also as infrastructure, a modern settlement layer on which private actors can build payment solutions. It is entirely possible that by creating this infrastructure, Europe enables enough private payment solutions that the digital euro as a consumer-facing product becomes unnecessary. Ten years from now, we may not see the digital euro widely used in people’s wallets, but we could have strong European alternatives that solve the same underlying challenge, and all as a result of the ECB pursuing the digital euro agenda, to begin with. I would be comfortable with that outcome.

However, if we assume none of that happens, no digital euro and no strong European private alternatives, then we remain in the current situation. Retail payment infrastructure continues to be heavily dependent on non-European players, particularly in areas where global payment networks have achieved significant scale. These incumbent players have structural advantages that make it difficult for new European alternatives to compete and scale. Over time, that concentration could increase Europe’s exposure to external geopolitical risks.

The concern is not that companies would deliberately choose to weaponise that position. Rather, companies operating across jurisdictions may face external pressures or obligations beyond their control. We have seen examples where dependencies in critical digital infrastructure have become geopolitical issues.

The challenge with these situations is that they are difficult to predict and often only become visible once a crisis emerges. In payments, however, the dependency is already clear. This is why I think the ECB has done well to be proactive in thinking about this issue. In my view, the weakness has been less in the underlying rationale and more in the communication. The sovereignty and resilience dimension has always been part of the discussion, but it has not received the level of emphasis it perhaps deserved.

More recent ECB communications have placed greater focus on this aspect, recognising that strategic autonomy and resilience are key to Europe’s welfare.

Ultimately, that is the core problem the digital euro is trying to address.

Is that the main thing being misunderstood or overlooked in conversations about the digital euro, or are there others?

The coercion argument is understood. People just disagree on how seriously to take it. Three years ago, I was also sceptical. What has changed is the evidence.

The two things that are, in my view, misunderstood are privacy and anonymity. People conflate them constantly, and they don't understand how the digital euro may actually differ from what exists today.
When you pay in cash, the transaction is anonymous: no one records your name. It is also relatively private: only you and the cashier know it occurred. When you pay digitally today, your bank technically has access to your identity and transaction data. What protects you is law - regulation that constrains who can access that information and under what conditions. Privacy and anonymity are preserved only to the extent that the consumer trusts the regulation and the legal setup.

The digital euro would work the same way. For small transactions, the ECB has said these will be anonymous. Even the ECB itself will not have access to the underlying data. For larger transactions, above a threshold that is actually quite low, a name will be attached to prevent illicit activity. Whether you are comfortable with that depends entirely on whether you trust the EU legal and institutional framework. If you do, this is not concerning. If you don't, it is. But in terms of how different this is to the current system, I would argue that it is not. Cash will continue to exist and be used, and the digital euro will be subject to the same legal framework as current digital transactions.

Consumer associations have raised this persistently, and the anxiety is real. But much of it stems from conflating privacy and anonymity, and from failing to recognise that the current system is not all that different. It is the law ultimately that protects you.

To what extent has a more fragmented, geopolitically uncertain world changed the way policymakers see this project?

Substantially. The ECB used to cite five or six rationales for the digital euro. Today, in practice, it is largely one: the fragmentation of the global financial system and the risks that creates for European monetary sovereignty.

It is worth going back to where this actually started, which was Libra, Facebook's attempt to issue a private global currency. That triggered two realisations. First, private money is not new, but the ability to deploy it instantly across billions of users is. A company with Facebook's network could scale a currency incredibly fast, with serious implications for monetary and financial stability. A Central Bank, the institution mandated to safeguard both, may quickly lose control if private money like Libra were allowed to scale. This was a real concern for them. Second, central banks recognised they needed to modernise the technical foundations of public money to remain credible against private alternatives using modern technology, like the ledger, that public systems did not.

That is where the concept originated. But the urgency now is geopolitical. And I think that urgency is justified.

We are also seeing private initiatives like Wero expanding across Europe. How do you see those fitting alongside the digital euro? Do you think the ECB has done enough to explain why the digital euro is still needed, even as private European payment solutions continue to develop?

The first question any economist has to ask is: why didn't Wero exist six or seven years ago? It is emerging now. That timing matters.

In an ideal world, I want private solutions. Private actors innovate continuously; that is not the ECB's role. And if those private solutions are European-owned, you also eliminate the coercion risk, which is the core problem. 
But Wero currently operates in just five countries: Belgium, France, Germany, Luxembourg, and the Netherlands. It does not operate in all euro area countries. One of the core structural failures in European payments is that countries across Europe have built their own domestic digital payment solutions, like payments with QR codes. The result is a patchwork of national solutions that do not fully interoperate. You cannot use a Belgian app to make a QR code payment in Spain. Wero changes that within its footprint, but we need it to extend across all 27 member states. We hope this happens, but for the digital euro, we know it will be one solution for all countries from the start.

What the digital euro project has done, regardless of whether it itself reaches mass adoption, is concentrate minds on the need for coordination. The pressure from the ECB has prompted payment providers to talk with one another and align on standards. Whether that was the explicit intention, I don't know. But it has been a real effect.

The digital euro and private solutions can coexist. If private European solutions scale across the EU and solve the economic security problem, the digital euro as a consumer product may not be necessary. The infrastructure that the digital euro provides, the public ledger, still has enormous value for private actors to provide pan-European solutions. The application layer may not need to be public.

What design principles will be most important to ensure the digital euro works?

Privacy and anonymity protections need to be technically robust and publicly understood. That requires continuous stakeholder engagement, not a one-time consultation, and I think the ECB has been doing this consistently throughout the whole period.

Offline functionality is, in my view, critical because internet connections are interrupted. A digital currency that only works online is not a genuine substitute for cash. Offline operation means storing digital euros on a device, which, on the other hand, introduces a risk of loss. If you lose your phone, you lose the funds. The design needs mechanisms analogous to blocking a lost card, adapted for a digital bearer instrument.

Cost is a structural constraint. When public authorities manage a payment system, costs fall on taxpayers. That is an argument for designing the digital euro to maximise private-sector participation in the operational layer. Innovation and cost reduction come from competition, not from central bank management.

In a few words: what would success look like for the digital euro?

Productive coexistence between the digital euro and private European payment solutions, with private solutions carrying most of the innovation load, would be my definition of success.

But even in a scenario where European private solutions are operating successfully, there is one justification for the digital euro to remain: the systemic anchor function. Cash is what people and institutions turn to when confidence in the financial system breaks down. We have manyhistorical examples of this, even recent ones. If cash usage continues to decline, we might risk losing that anchor. The profession is not clear on this issue, but more research is needed to understand whether digital cash can have the same anchor property of actual cash in times of stress, as the public's unconditional claim on central bank money. That need exists regardless of how strong private payment alternatives become, and in my view, it is sufficient to justify the digital euro’s existence, even if we have not understood all finer details.

Beyond retail payments, cross-border, wholesale transactions between financial institutions don't get much attention in the digital euro debate. Should they?

The volume of global financial flows has increased dramatically over the last two decades, driven by deeper global trade, China’s growing role in the world economy, the expansion of capital markets, and sheer transaction volume. Yet the infrastructure supporting those flows has not kept pace. Cross-border payments outside Europe remain slow and expensive. That is not a marginal inefficiency; it is a structural cost embedded in global trade and capital allocation.

The ledger technology that originated with Bitcoin has created a technical basis for addressing this. Central bank digital currencies, including the digital euro, are one instrument for modernising wholesale cross-border infrastructure. Stablecoins – what we might call the second generation of crypto – are another. Both are being seriously evaluated.

But the wholesale conversation is deeply entangled with geopolitics. Sanctions have become a primary instrument of economic statecraft. Who controls cross-border settlement infrastructure is now a strategic question, not just a technical one. That changes the nature of the debate significantly.

And as trust in the dollar as a neutral reserve and settlement currency comes under pressure, or at least becomes more contested, the euro’s potential international role becomes directly relevant to the digital euro project. The ECB needs to think not only about what the digital euro delivers for European consumers, but also what role it gives the euro in a global financial system that is becoming more fragmented and geopolitically divided. The wholesale dimension is the larger strategic question and can generate very tangible economic benefits for global financial flows.

Finally – what role should public institutions, central banks, commercial banks, and private payment providers each play in building the future of European payments?

They have fundamentally different roles. Private institutions – banks, payment providers – are for-profit entities competing for market share by offering better services. Their role is to innovate, use the latest technology, and drive prices down through competition. The ledger technology that originated with Bitcoin, and everything that has developed from it, is where that innovation needs to go.

Public institutions are there to monitor, ensure a level playing field, and intervene only when there is a genuine market failure, such as the economic security problem I described. The goal should be as little intervention as possible, supported by clear regulatory frameworks that give markets the predictability they need to function.

There will always be a role for a trusted public intermediary operating within a legal framework and accountable to the public. That is what central banks and regulators provide. Bitcoin, in my view, failed partly because it tried to eliminate that intermediary entirely. That will never be the right answer, in my view. Markets need rules, enforcement, and a backstop they can trust. Public authorities provide that. Private actors provide everything else.

About Maria Demertzis

Maria Demertzis is a Professor of Economic Policy (part-time) at the European University Institute and a private consultant. She has been the Chief Economist for the Conference Board, Europe, and prior to that, the Deputy Director of Bruegel, a Brussels-based economics think-tank that specialises in European policy. She has worked at the European Commission and the research department of the Dutch Central Bank, where she focused on issues of macroeconomic forecasting, modelling, and policy advice. She has also held academic positions at the Harvard Kennedy School of Government in the US, the University of Amsterdam and the University of Strathclyde in the UK, from where she holds a PhD in economics. She has published extensively in international academic journals and contributed regular policy inputs to both the European Commission's and the Dutch Central Bank's policy outlets. Professor Demertzis writes a regular column in several national European economic daily newspapers and regularly contributes opinion pieces to broader national and international newspapers. She is a prolific writer and a sought-after speaker. She currently writes, teaches, and speaks about geoeconomics and the EU's economic security.