The idea that our problems are always caused by others is a familiar refrain. Economist Nicolas Goetzmann adopted this view in his op-ed published by Le Monde on December 16, suggesting that the monetary policy pursued in Frankfurt, at the headquarters of the European Central Bank (BCE), is the main reason for France’s difficulties, in particular the deterioration of public finances and even the political crisis.
Goetzmann’s argument rests on two claims. First, that the BCE misdiagnosed and mistreated the situation by raising its key interest rate from –0.5% to 4% in response to inflation originating from imported energy. Second, that despite the rate being lowered from 4% to 2% over 18 months starting in June 2024, the French economy, in his view, remains “subject to the most restrictive monetary policy in the Western world,” even though inflation has now fallen to just under 1%.
The surge in inflation across the eurozone, which exceeded 10% in autumn 2022, was indeed triggered by soaring oil and gas prices. Yet, in the post-Covid-19 context of supply chain tensions as demand rebounded, inflation then spread to the prices of other goods and services, as well as to wages. Monetary policy, of course, cannot address energy price hikes directly, but it can and must curb the contagion mechanisms that would otherwise fuel a self-sustaining inflationary spiral. This is precisely what central banks on both sides of the Atlantic have successfully accomplished.
Thanks to their independence and credibility, they have managed to defeat inflation without causing a recession or a significant increase in the unemployment rate, unlike during previous oil shocks and contrary to many analysts’ predictions. In fact, it is within the eurozone that the inflation rate has already returned close to the 2% target. The BCE’s key interest rate, at 2%, is by far the lowest today, compared to 3.7% for the US Federal Reserve and 3.7% for the Bank of England.
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