“The French economy is subject to the most restrictive monetary policy in the Western world” | EUROtoday

Lhe political disaster that’s shaking France as we speak just isn’t an institutional accident. It breaks out on the exact second when the French financial system shows a troubling singularity: it is likely one of the international locations the place inflation has been the bottom within the euro zone, however the place financial coverage has turn into, comparatively, one of the crucial restrictive within the developed world. A political disaster arises on the very second once we are squeezing the financial system already at a standstill. This is not any coincidence.

The occasions appear to observe a identified situation: defeat within the European elections, hasty dissolution, National Assembly and not using a majority, paralyzed finances. We see a political mechanism that’s seizing up. But if we broaden the framework, one other mechanism seems, silent and older: for 3 years, the dynamics of the French financial system have been compressed. The political disaster doesn’t begin this cycle: it’s its overflow.

The story begins in the summertime of 2021. Energy costs are returning to their pre-Covid-19 pandemic ranges, however Moscow is regularly decreasing its gasoline deliveries. First in small steps, as if to check European resistance. Then, month after month, the stress elevated till the invasion of Ukraine. In one yr, till June 2022, power costs leap by greater than 30%. Inflation exceeds 7%, leaving the markets to enter payments, procuring carts, rents. Russia is not only hitting gasoline: it’s hitting the guts of the European financial system.

This is when the European Central Bank (ECB) adjustments course. In June 2022, it turns the web page on greater than a decade of rates of interest near zero and initiates a tightening of historic brutality: from –0.5% to 4% in a little bit over a yr. It reacts to an imported value shock as if it had been inner overheating. It applies to the euro zone a remedy designed to curb demand whereas inflation was coming from imported power.

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