The European Central Bank’s (ECB) ambitious digital euro project is facing increased scrutiny from European lawmakers following a major outage in its existing payment infrastructure. The technical failure has raised significant questions about the central bank’s readiness to manage a new digital currency system.
The digital euro initiative, which began in July 2021, aims to create a central bank digital currency (CBDC) that would function as a fast, secure electronic payment method. This currency is designed to complement physical cash and traditional bank accounts while being issued by the European System of Central Banks across the Eurozone.
The recent concerns emerged after a major breakdown in the ECB’s Target 2 (T2) payment system disrupted financial transactions for thousands of businesses and households. The outage, which persisted for nearly a full day last month, was further extended due to central bank technicians initially misdiagnosing the problem.
In response to this technical failure, four of the eight political groups in the European Parliament have expressed doubts about the ECB’s capability to implement the digital euro effectively. Their main concern centers on whether a new payment system accessible to all Eurozone residents might suffer from similar vulnerabilities.
Markus Ferber, representing the European People’s Party (the largest political group in the European Parliament), criticized the ECB’s handling of the situation: “This instance is a blow to the ECB’s credibility… People will ask legitimate questions about how the ECB will be able to run a digital euro when they cannot even keep their day-to-day operations running smoothly.”
Green Party politician Rasmus Andresen, who serves on the parliamentary committee overseeing the ECB, stressed the urgent need to rebuild public trust. He cautioned that without reassuring citizens about the digital euro’s reliability, the project risks failure.
Johan Van Overtveldt of the eurosceptic European Conservatives and Reformists Group took a more critical position, arguing that the ECB should first demonstrate its ability to maintain secure and uninterrupted financial infrastructure before proceeding with the digital euro initiative.
Not all lawmakers have withdrawn support. Jussi Saramo continues to back the project while acknowledging the recent challenges, emphasizing the importance of strengthening the ECB’s internal systems before launching the digital euro.
The digital euro would operate as an electronic wallet backed by the central bank, with distribution handled by financial institutions and payment service providers. While the ECB has been preparing for implementation, the system failure raises questions about meeting the October target deadline for finalizing preparations.
It’s important to note that the digital euro was never intended to replace cash but to provide an additional, secure digital payment option. During the current preparation phase, the ECB is conducting further tests, consulting stakeholders, and finalizing the regulatory framework. After new regulations are established, the EU’s Governing Council comprising ECB President Christine Lagarde, board members, and national central bank heads, will decide whether to officially launch the digital euro.
Addressing concerns, an ECB spokesperson stated: “The recent outage doesn’t undermine the robustness of the digital euro infrastructure, which is being designed to ensure payments continue to function smoothly for users, even in the face of technical issues.”
Christine Lagarde acknowledged leadership changes within the project, noting that Fabio Panetta had been replaced by Piero Cipollone. She emphasized that the new leadership team is working diligently to advance the initiative while engaging with key stakeholders, including the European Parliament, European Council, and European Commission.