In a context of geopolitical instability and shifting alliances, the European Central Bank is opening its euro liquidity facility to nearly all countries, aiming to enhance the global standing of the single currency.

The ECB stated on Saturday that, in principle, "all central banks" outside the eurozone can now borrow euros from it by using euro-denominated assets as collateral. This move is designed to make it easier for central banks to obtain euro funding during periods of financial strain. It represents the latest step in a European strategy to secure economic, trade, and political allies and to solidify its competitive position.

This initiative aligns with the broader agenda of ECB President Christine Lagarde, who has described the current period as a "global moment" for the euro. Uncertainties surrounding U.S. economic policy have reignited questions about the long-term dominance of the U.S. dollar.

The following are the key details of the ECB's revamped Eurep facility, which is scheduled to become operational in July.

What is Eurep? Eurep, which stands for Eurosystem repo facility for central banks, was established during the 2020 pandemic. Participating central banks can borrow euros from the ECB by pledging high-quality, euro-denominated collateral. Such repo facilities strengthen a country's ability to withstand foreign exchange liquidity pressures and are crucial for stabilizing its domestic banking system.

Which central banks can use Eurep? All foreign central banks are now eligible to join the expanded facility, except for those from countries under international sanctions or central banks involved in money laundering or terrorist financing. Previously, Eurep was available only to eight neighboring countries of the European Union. Central bank governors can submit a formal application to the ECB President to obtain standing access.

What is the borrowing limit? Under the new terms, each central bank can borrow up to 50 billion euros (approximately $59.34 billion) per transaction. Eligible collateral includes eurozone government bonds with strong credit ratings, among other assets. This new limit is significantly higher than the previous cap. As an emergency tool, usage of this repo facility has remained low recently.

Why is the ECB expanding Eurep? The objectives are to encourage foreign institutions to increase lending, trading, and investing in euros; to elevate the euro's status on the international stage (where it currently ranks a distant second to the U.S. dollar); and to help insulate the eurozone from spillover effects of external market pressures.

How does Eurep work in practice? Repo operations will be conducted by some of the 21 national central banks within the Eurosystem, though the ECB has not disclosed the specific list. Funds obtained by foreign central banks can now be used without restrictions, whereas previously they were limited to lending to their domestic banks.

Will the public know which central banks use Eurep? No. The ECB will cease publishing usage data for individual countries and will only disclose the aggregate weekly euro liquidity drawn from all repo facilities.