Few projects capture Europe’s struggle to combine integration, innovation, and sovereignty as clearly as the digital euro. Despite being a key strategic tool for monetary and financial sovereignty, the project remains mired in political and industry disagreements – primarily from commercial banks, but also within the European Parliament – where discussions over its design and purpose have dragged on.
Spanish MEP Fernando Navarrete of the European People’s Party (EPP), the Parliament’s rapporteur on the digital euro, has been one of its most vocal critics, repeatedly questioning whether the project is necessary at all. In the private sector, scepticism is also widespread: while some welcome the digital euro (especially in its wholesale form) as a step toward innovation, many raise concerns about its architecture, potential market distortions, and unclear added value.
However, one of the primary aspects of Europe’s strategic autonomy is reducing dependence on external payment infrastructures. Europe’s heavy reliance on US-based systems such as Visa and Mastercard exposes a core vulnerability in its financial system. In this regard, the digital euro (both wholesale and retail) is not just desirable but increasingly necessary. The real debate is how far the European Central Bank (ECB) should rely on – or diverge from – existing market infrastructures when building it.
The choice, then, is between a fully public system built from scratch, a hybrid model that leverages Europe’s existing though still incomplete European private solutions, or an offline-only ‘digital cash’ proposed by Navarrete’s draft report.
The Eurosystem’s ambition is to provide a seamless payment experience across peer-to-peer transfers, e-commerce, and in-store transactions throughout the eurozone. And it argues that achieving this vision would require building a completely new infrastructure from scratch: connecting thousands of payment service providers across twenty countries, onboarding merchants, integrating with existing payment gateways, and creating a user-friendly digital wallet.
At first sight, building the digital euro entirely as a public system would be an ambitious choice – one that offers clear strategic benefits but also major operational and financial challenges. Yet a system designed from the ground up for all member states could bridge the legal, technical, and cultural divides that still fragment Europe’s payment landscape. Under this logic, the case for a public infrastructure is not only about uniformity and control but also about resilience – a just-in-case safeguard in case the private sector cannot deliver. It acknowledges that some forms of sovereignty in critical infrastructure are worth pursuing and preserving, even at a higher cost.
But the challenge is more than just technical. In this scenario, the public sector would also need to prove it can deliver innovation and user experience at the pace of private competition – something the ECB was never designed to do. Critics also warn that a one-size-fits-all model like the digital euro could struggle to adapt to Europe’s diverse payment landscape, where local schemes and consumer behavior vary widely across countries.
Why a Hybrid Model Makes Sense
Under these circumstances, a hybrid model offers Europe the most logical path forward: it builds on private payment infrastructure where it already performs well, while ensuring a fully public backbone remains in place as a strategic safeguard. A purely public model would be costly and slow to deploy, while a purely private one would leave the continent dependent on infrastructure that may never achieve full EU-wide interoperability.
By weighing cost, speed, and sovereignty, this hybrid path offers a pragmatic way forward for Europe’s payment infrastructure. Progress remains fragmented across markets – several EU countries still lack national schemes capable of connecting to this emerging network – but private initiatives of instant payments have advanced toward interoperability.
Over the past few years, Europe’s private sector has been developing digital payment solutions built on the Eurosystem’s own infrastructure. At its core lies TIPS, the ECB’s Target Instant Payment Settlement system, which enables instant transfers between banks across the EU.
Building on what already exists could make the digital euro cheaper, faster to deploy, and more relevant.
On top of this backbone, two regional initiatives are driving digital payment interoperability. In Southern Europe, the European Payments Alliance (EuroPA) – led by Bizum (Spain/Andorra), Bancomat (Italy), and MB WAY (Portugal) – already connects (at least in theory) tens of millions of users, and plans to expand to Poland, Greece, and the Nordics. In Central and Northern Europe, the European Payments Initiative (EPI) and its wallet “Wero” unite banks from Germany, France, Belgium, and the Netherlands. In June 2025, EuroPA and EPI agreed to collaborate toward full interoperability across roughly 15 countries – covering about 84 percent of the EU population.
Given this private-led progress, many in the payments industry question the need for yet another layer of infrastructure when Europe is already investing in a continent-wide instant payments network. Incidentally, since October 9, 2025, new EU rules have made instant euro transfers available within seconds across the eurozone. Payment service providers must now offer clients the ability to send and receive instant payments, verify recipients’ names free of charge, and ensure that these services cost no more than standard transfers.
These changes bring Europe a step closer to a more connected payments landscape driven by private European actors. They reinforce the role of existing private infrastructures as the basis for deeper integration. Thus, building on what already exists could make the digital euro cheaper, faster to deploy, and more relevant within Europe’s evolving payment ecosystem.
However, progress toward interoperability could become difficult if the digital euro continues down the road of building its own parallel infrastructure. Hence, advocates of a hybrid model argue that the digital euro could fit naturally within this ecosystem rather than competing with it. Integrating it into existing services, such as Bizum or Wero, would ensure continuity for users and merchants alike – same apps, same habits, but with an added layer of public trust.
What the private sector asks for is time and fair regulation: space to let these systems mature, and a level playing field so that public and private solutions can coexist without distorting competition. Yet this approach relies on the uncertain assumption that private infrastructures will eventually reach full interoperability, and overcome the governance hurdles across the EU. Should that fail, Europe could once again find itself dependent on external providers for one of its most strategic functions: money itself.
Among these debates, an alternative line of thinking – advocated by the Parliament’s rapporteur and popular among banking associations – argues that if the digital euro is meant to replicate the key features of cash, it should focus solely on its offline functionality. In this approach, the digital euro would act as a complement to physical money, allowing people to make digital payments without an internet connection, while leaving the online payments space to private providers.
This perspective stems from concerns that a full-scale public rollout could overwhelm the financial and technical capacity of banks already stretched by a web of regulatory mandates. Introducing a new digital euro infrastructure on top of this would require banks, merchants, and payment gateways to integrate yet another system – diverting limited resources from existing European initiatives such as Bizum, Wero, and Bancomat.
The risk, critics warn, is a crowding-out effect: if the ECB’s digital-euro infrastructure becomes the new priority, banks may shift focus toward compliance with the ECB requirements for the digital euro – and the global networks like Visa and Mastercard – at the expense of developing Europe’s own private payment solutions.
These concerns are certainly valid, but the reality is that the private sector may never be able to deliver a comprehensive pan-European payment infrastructure, so the case for a fully public option – just in case, and available both offline and online – remains a safeguard for resilience and strategic autonomy.
Recent ECB comments challenge the idea that a digital euro offline should be the way forward. As Alessandro Giovannini argues, an offline-only solution would not suffice. Both online and offline capabilities should be available from the start. This stance aligns with a hybrid model with a public core, as argued here.
As the project moves from concept to implementation, Europe must decide whether payment sovereignty should come from public infrastructure or from regulated private innovation. A fully public model may bring greater certainty, but at a higher cost. A private-led path builds on existing innovation yet depends on greater industry coordination and time to mature. And a more limited, offline-only version could preserve the cash-like nature of money while easing pressure on banks and domestic networks.
Still, if Europe invests in public infrastructure for offline payments, would it not make sense to use it for the online mode as well?
In any case, it is important to highlight that none of these paths would spell the end of traditional cash. Both the European Commission and the ECB insist that the digital euro is meant to complement, not replace, banknotes and coins. Yet questions persist about how the two would coexist in practice – how much digital money people could hold and whether its use would remain optional.
The European Parliament now faces one of its most technically demanding financial debates in recent years. To navigate it responsibly, policymakers will need to rely on expert insight, private innovation, and public trust – ensuring that informed voices, not fear or disinformation, guide the debate on how Europeans will understand and use money in the digital age.
© IE Insights.
