It's a first in 10 years. The European Central Bank, through the voice of its president, Christine Lagarde, announced on Wednesday that it will raise its interest rates this summer.

What is the objective? To fight against the galloping inflation that has shaken Europe since the beginning of the year. A decision that will not be without consequences on the debt of European countries.

Fighting inflation

Since the beginning of the war in Ukraine last February and the marasms resulting from two years of pandemics, Europe, and the world, has been hit hard by inflation not seen for more than a decade.

It reached 7.5% in April and is expected to continue to rise. Several IMF and ECB studies estimate that inflation will reach 8.1% in May and exceed 9% during the summer.

Accused of inaction for several months to deal with this inflation, and rather reluctant to tighten its monetary policy as the FED and other central banks around the world have done since the beginning of the year, the ECB has finally agreed to normalize its monetary policy.

This is expected to happen early in the third quarter of this year, early in the summer.

By ending its asset purchase program and raising rates, the ECB hopes to curb price increases in Europe. These measures are in line with market expectations.

A policy not without consequences

Christine Lagarde has been clear on this subject, however: the measures taken by the ECB will not be without consequences. Indeed, the policy will have to be accompanied by an effort to reduce the public debt of the European Union states.

According to various sources, each 1% increase in the ECB interest rate represents an additional cost of 40 billion euros per year.

Costs that must be covered by reducing public spending. This situation occurs in a context where the French increasingly consider that debt has become "limitless and costless".

In any case, the measures taken by the ECB would have the objective of bringing inflation down to around 2% per year over the next few years. 

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