winners and losers

The European Central Bank decides to raise its interest rates, for the first time in more than ten years. Objective: to fight inflation. Seemingly very technical, this decision will have direct consequences on our daily lives. Let’s start with the winners who are few. This upward revision of interest rates will be especially beneficial to savers…those who really have the means to “put aside”. which is not the majority of French people today. Far from there. The mechanism is simple: the rise in rates by the ECB will give back leeway to the banks, which will be able to offer more attractive returns on certain investments.

Two concrete examples: life insurance contracts and the popular Livret A whose the governor of the Banque de France, François Villeroy de Galhau, recently announced on franceinfo the doubling of remuneration to 2% from August 1st.

The first losers are individual investors in real estate: buying an apartment or a house will become more complicated because the rise in interest rates will make it more expensive to repay loans, and bankers will tighten the conditions for granting loans. Businesses are the other losers from this rate hike. In recent years, they have been borrowing on good terms with practically zero interest rates. No more easy money. Consequence: brake on investment. Banks may refuse loans for the riskiest projects, not to mention likely bankruptcies. Finally, States: the burden of reimbursing sovereign debt will increase at a time when countries must invest massively in the energy transition.

Did ECB President Christine Lagarde have a choice in the face of the international situation, soaring energy prices and the war in Ukraine? Criticism is easy, art is difficult. Be that as it may, France will not be the first victim of this decision, unlike a country like Italy which is today one of the most unstable states in the euro zone economically and politically. Real question: how to avoid the domino effect, the chain reaction, in Europe?