A European pension fund buys US Treasury bonds to protect retirement savings. Across the Atlantic, a German importer asks its bank to pay an Asian supplier in dollars. The two transactions reveal different kinds of financial power.

The fund owns an American government security. The importer depends on banks able to move dollar funds. Ownership gives the investor the right to receive interest and principal. Access to the payment chain determines whether a commercial transaction can proceed.

I find this distinction more useful than the suggestion that European governments could simply order investors to dump US debt whenever Washington threatens European interests.

Europe’s Treasury holdings are large. Who actually owns them?

The US Treasury’s August 2026 data record about $1.01 trillion of Treasury securities under the United Kingdom, $490.5 billion under Belgium, $448.2 billion under Luxembourg, $363.4 billion under France and $352.1 billion under Ireland. Together, these five jurisdictions account for roughly $2.66 trillion. The UK, of course, is not an EU member.

There is a catch in the figures. The Treasury itself warns that its country breakdown relies heavily on custody records. Securities held through an institution in Belgium or Luxembourg may belong to investors living elsewhere. A country appearing in the table is not necessarily the country of the ultimate owner. The Treasury’s October 16 release explains this limitation.

It follows that the figures cannot be treated as a portfolio controlled by the European Commission. Pension funds, insurers and asset managers operate under different mandates. Some institutions are public; others invest on behalf of private clients. A government cannot ordinarily issue a foreign-policy instruction and expect every private fund manager to obey it.

What would happen if investors sold?

A large, rapid sale of Treasury securities could depress bond prices and raise yields, depending on demand from other buyers and the response of financial markets. Higher yields could eventually increase Washington’s refinancing costs.

But a bond sold in the secondary market does not disappear. Another investor buys it, and the United States still owes the scheduled payments. European investors might also suffer losses on their remaining holdings. Even the dollar’s reaction would be uncertain: it would depend partly on what sellers did with the proceeds.

Europe could therefore inflict financial pressure, but not without risk to its own institutions. Nor could elected leaders easily coordinate the actions of thousands of separate investors.

The more immediate power sits inside the payment chain

Consider a German importer paying a supplier in Asia. The importer’s bank may have no direct account with the beneficiary’s bank. It could instruct one or more correspondent banks to transfer funds through accounts they maintain with each other.

If an American bank participates, that bank must observe applicable US sanctions rules. Other parties may also be subject to US law, depending on the transaction and sanctions programme. Even when a foreign bank is not directly prohibited from handling a payment, it may decline the business because of enforcement exposure or the risk of losing an important correspondent relationship.

The result can be practical rather than dramatic. A bank asks for documents. A correspondent rejects the instruction. The importer must seek another payment route, and the supplier waits.

Here the technical distinction matters. SWIFT supplies financial messaging services; it is not a universal vault holding the dollars that banks transfer. A SWIFT message can carry an instruction while the movement of funds occurs through correspondent accounts and settlement systems. The ability to send a message does not guarantee that a bank can settle the payment.

Washington does not own SWIFT or control every dollar transaction. Its influence arises from the reach of American sanctions law, the role of US financial institutions and the commercial importance of dollar access. OFAC, the US Treasury’s sanctions authority, is central to that legal framework.

Europe has infrastructure, but not a replacement for dollar liquidity

Europe is hardly without financial power. Its banks use Eurosystem settlement infrastructure, while European authorities can regulate access to their own markets and impose sanctions of their own.

Yet a European payment platform cannot automatically supply the dollars needed for an invoice or replace the deep market in American government securities. An importer buying dollar-priced goods still needs dollar funding. An investor holding dollar liabilities still needs suitable dollar assets.

The European Central Bank reported in June 2026 that the euro’s international role had increased moderately during 2025, reaching around 20% across its composite indicators. In official foreign exchange reserves, the dollar accounted for roughly 57% and the euro around 20%, according to the ECB’s detailed review.

Europe also lacks a single sovereign bond market identical to the US Treasury market. German, French and Italian debt serves important investment needs, but the securities carry different sovereign risks. EU-level borrowing has grown without yet creating an equivalent stock of unified safe assets.

Building a more independent financial position would mean expanding liquid euro markets and strengthening cross-border investment. It would also require sustained confidence in European institutions. Installing another messaging network cannot accomplish those things.

Financial pressure can undermine the system that makes it effective

The United States benefits from foreign demand for Treasuries and from the willingness of international banks to conduct business in dollars. Repeated use of financial restrictions gives other governments an incentive to diversify. Such adjustments are expensive and slow, which is precisely why the existing system remains powerful.

This is not a story of an all-powerful America and a powerless Europe. It is a story about different instruments, owned or operated by different institutions, with different legal limits.

A pension fund can sell its American bonds tomorrow. The US Treasury will still owe the money to the new holder.

A European bank that loses a major dollar correspondent, by contrast, may have to reroute payments, pay more for access or turn customers away. That disruption can reach a trading company long before any argument over Treasury yields is settled.

Related reading

For the wider European debate, see Europe Wants Payment Independence. But Can It Escape American Financial Infrastructure? and America Controls the Money. China Makes the Things.