In a world facing unprecedented financial, environmental and geopolitical challenges, classic economic recipes may have to quietly recede into the background. The current context calls for boldness, vision and, above all, renewed ideas about what public finances can - and perhaps should - mean. A recent opinion piece by economist Bruno Colmant in L'Echo asks an uncomfortable but necessary question: should Europe revise its dogmas on inflation and debt financing? The answer is complex, but a growing number of voices argue for a paradigm shift.
The context: three existential needs
Colmant starts from a clear analysis: Europe faces unprecedented investment needs. Three major pillars stand out.
- The Draghi Report, which argues for renewed competitiveness in Europe, especially through technological innovation.
- The climate goals, not as an idealistic horizon, but as necessary protection against global catastrophe.
- The need for military investment, in a world where geopolitical stability is under pressure.
For each of these themes, investments are hardly up for debate. They simply must happen. What is under discussion, however, is their financing. Private capital alone will certainly not suffice. The time horizon is too long and the returns uncertain. Venture capital and markets do not focus on projects that will not pay off for decades. So, government comes into the picture. But there, too, we run up against the limits of European budget rules, political divisions and inflation fears.
Monetisation of sovereign debt: a necessary evil?
Colmant advocates partial monetisation of sovereign debt. That is, central banks, such as the European Central Bank (ECB), buy debt from governments to inject liquidity into the economy. In normal circumstances, it sounds like swearing in church. Especially in countries like Germany, where the spectre of inflation is still deep in the collective memory.
But times are changing. The challenges facing Europe are existential. Ecological decline, loss of geopolitical clout, and technological development that is lagging pose real risks. They become palpable and tangible, especially for future generations. In this context, the difficult question must be asked: is limited inflation not an acceptable price for a liveable future?
Inflation as a moral dilemma
The discussion on money creation is also a moral issue. Is it acceptable, in the name of monetary stability, to (continue to) undermine the foundations of our future society? After all, the current economic model protects the value of our money at the expense of the environment. A slight erosion of purchasing power - if manageable - could therefore be a reasonable toll to secure an ecologically sustainable future.
Furthermore, the greatest economic disasters in history were not necessarily caused by inflation, but often by the opposite: monetary tightness. The Great Depression of the 1930s is a striking example. Strict policies of central banks exacerbated the crisis, eventually resulting in social tensions and political derailment.
The geopolitical reality
The rest of the world seems to have already understood that lesson. The United States is investing massively through debt financing. China is developing its own monetary systems independent of the dollar. In that context, Europe cannot afford a monetary status quo. Those who stand still will be caught up. Those who cling to their traditional beliefs will lose geopolitical relevance.
Coordinated European action - with collective investment, central control and fiscal autonomy - is imminent. It requires boldness, political courage and institutional reform, but it is essential to maintain Europe's competitiveness.
What does this mean for businesses?
For companies, it means one thing: uncertainty is the new normal. Classic planning based on annual targets is no longer enough. Scenario thinking becomes crucial: what if raw materials become scarcer, energy more expensive, or geopolitical tensions interrupt the supply chain?
Companies will need to increase their resilience by closely monitoring cash flows, building up reserves and actively managing risks such as fraud and other threats. In this context, strategic credit management, strong liquidity monitoring and operational flexibility are not luxuries, but necessary foundations for the future. Companies should embrace data and insights to minimise prevailing uncertainty. No decisions based on gut feeling but based on facts and figures to protect one's organisation from unexpected setbacks.
Existential challenges do not wait for budgetary balances. Perhaps now is the time to take economically difficult but bold and courageous decisions. Creating money is not a magical solution, but blindly rejecting it may be even more dangerous.