Will inflation lead to a new Covid-related economic crisis?


Before and during the pandemic, we might have thought that all European economic indicators were in control... Before the pandemic is over, there are concerns about supply chain bottlenecks, rising transportation costs, worsening trade deficits, and labor shortages. Is it temporary? Many economists believe that soaring industries will put pressure on inflation in the long run. The combination of the European Union’s reconstruction plan, the € 750 billion European Union reconstruction plan, and the very large compulsory savings (600 billion euros) by European households will certainly lead to a very large increase in consumer demand.

ECB limits …

The ECB today faces its own limitations in pursuing its core mission. : “”Maintain price stability“The ECB interpreted it as controlling inflation so that it does not exceed 2% in a year. In the face of the financial crisis in 2008, the ECB injected € 4 billion between 2011 and 2017. That’s one-third of the euro’s GDP. Reduced the zone key rate to zero (minimum) and bought public and private debt. Today, the ECB wants to reduce its debt buying program. There is a lot of pressure. Debt policies in some European countries, including France, are tragically high. The ECB no longer has many means to generate liquidity. European tightening policies are avoided It may disappear.

ECB follows Fed policy It has just declared that it is trying to raise the key rate as soon as two conditions are met: inflation above 2% and maximum job creation. Inflation will average 2.2% in 2021 in Europe. Inflation rates of 1.7% in 2022 and 1.5% in 2023 will not be achieved. Inflation tends to rise longer than the ECB thinks. Analysts have not seen it fall below 2% in 2022 and 2023, although it may decline. “We need to pay close attention to the development of inflation. “ Said Christalina Georgieva, Managing Director of the IMF. In the second condition, the unemployment rate should return to pre-crisis levels at the beginning of 2023. This decline requires growth to largely offset the increase in layoffs following the abolition of the partial unemployment system that has been in place since the onset of the health crisis. In France, according to OFCE, the unemployment rate should drop to 7.8% of the active population at the end of 2021 and rise to 8% by 2022. This forecast is close to the Bank of France’s forecast (8.2%). 2022). Is there a rate hike in 2022?

Impact of growth on employment

The Bank of France predicts that GDP growth will rise to 6.3% in 2021, 3.7% in 2022 and 1.9% in 2023. This recovery of the French economy will occur after a historic recession of 8.2% of GDP in 2020. Given this recession, growth will average around 2% in 2022 and 2% in 2023. Economic growth only sets an absolute upper limit for employment growth below that. According to several economists and institutions, including OFCE, it is believed that the unemployment rate begins to decline from the lowest growth rate of 1.5%. This threshold of 1.5% growth is not fixed. With the necessary budget, the state can create more jobs for growth, but that can only be felt later. These budgets are heavily invested in long-term projects such as climate. With a € 30 billion investment in advanced technology, the France 2030 plan is a very good start, but has not met its net zero CO2 emission target.

We need to avoid rising ECB key rates and avoid fiscal slumps.. “”1974-1975Developed countries are witnessing the deterioration of key economic indicators such as inflation, slowing growth and unemployment. At that time, few economists understood that these indices announced their entry into the economic crisis of more than 20 years in the developed world. Larousse Encyclopedia. We must transform society as a whole and move to another economy.


Towards an environmental socio-economic to overcome the crisis When “Establishing true economic and social democracy, including the expulsion of great economic and financial feudalism from economic control“Stéphane Hessel resents in 2010. It’s time to conclude the liberal period that began in 1973 and reform the ECB for ecological and human development. Eco-social and economic acceptance. There is one definition: when the central bank reaches its limits, balancing efficient economics, social solidarity, and environmental protection based on citizens’ investment. Is the government now forced to persuade savers to lend their savings?

In the case of post-covid France, where inflation has recovered, normalization of the economy and health needs to involve changes in the application of convergence criteria. Demand for household savings (6% to 10% of GDP in 10 years) for investment funds aimed at funding nature, dependence, rural areas, businesses, etc. It will be the surest way to restore France’s macroeconomic balance in the euro area. Borrowing from households within a regulated framework like Libre A is easy and you have to pay for inflation. This is the safest approach to reducing public debt. It also means preventing preventative savings and promoting growth. By making huge investments in the country without relying on foreign borrowing, monetary creation, excess liquidity and stock market spikes are reduced. It is more growth without inflation and a return to the pre-oil unemployment rate of the 1970s.


(1) Inflation is rising, growth is slowing, and the unemployment rate should rise in 2022.

(2) The acceleration of inflation is temporary.