For nearly fifty years, Europe has lived under a monetary glass ceiling. What might be called the "Fifty Gloomy Years" is the result of a decision made in the aftermath of the oil shocks: to set an arbitrary 2% inflation target.
That figure, brandished by the ECB like a sacred totem, is now the main obstacle to our industrial sovereignty and our prosperity.
The ECB's current mandate is economically destructive. In its determination to "stabilize" prices at all costs, Frankfurt is undermining the productive base. Raising real interest rates when producers are already weakened by successive crises and Asian competition is a grave mistake with far-reaching consequences. We are treating a supply shortage - in oil and gas - by destroying our own productive capacity and imposing widespread impoverishment.
Provided it is channeled into investment, inflation is not the cancer of the economy, it is its oxygen. It is the only lever capable of solving the impossible equation of the 21st century: investing hundreds of billions in energy, defense, and industry without raising taxes.
The return of a virtuous circle: r < g
The secret of the postwar economic boom lay in a simple formula: the 10-year interest rate (r) must remain below the nominal growth rate (g).
When inflation is present - it averaged 5% during the postwar economic boom - debt quite literally melts away. It ceases to be a burden and becomes a balance-sheet item that economic activity eventually absorbs.
The tools needed to keep 10-year interest rates below nominal growth already exist: halting the current quantitative tightening cycle, or even considering renewed quantitative easing; using Eurobonds to finance investment projects, and, within the framework of the Capital Markets Union and the Savings and Investment Union, introducing tax incentives to channel private savings into productive investment, whether through capital increases or investment loans.
By refusing this natural debt reduction through inflation, because greater support for activity also means higher inflation, the ECB is protecting rentier income and idle savings at the expense of those who actually drive the economy: producers and workers, and ultimately consumers.
For contrary to popular belief, a "hot" economy with higher inflation and heavy investment, as during the postwar economic boom, is the only kind capable of generating the productivity gains and employment levels that allow wages eventually to catch up with and surpass prices, delivering real gains in purchasing power.
A new mandate for the ECB
There is another taboo we must break: the strong currency. Higher inflation in Europe would mean a weaker euro against the yuan, yen, or won (the won has fallen 30% against the euro since 2020, the yen 45%). Far from being a weakness, devaluation is a powerful tool for economic reconstruction. A weaker euro would instantly make our cars, machinery, and technologies more competitive on export markets. It would mark the end of Europe's complacency: instead of passively enduring global competition, we would become contenders again.
Faced with this dead end, the solution is institutional. We must break free from Frankfurt's straitjacket by redefining the ECB's missions. Its mandate must be changed so that absolute priority is given to growth and productive investment, rather than to an inflation target disconnected from economic realities.
The central bank's role should be to guarantee financing for the productive sector and for major sovereignty projects. That is the price Europe must pay to emerge from its lethargy and regain control of its destiny. Money must once again become what it should never have ceased to be: a tool serving the real economy, not an idol to which we sacrifice our industry.
As during the postwar economic boom, the ECB must once again support economies through negative real interest rates. That is not its current mandate, but that mandate must be changed.
An opinion piece by Stéphane Faure, president of Astyrian Patrimoine.
