- Wars disorganize and reorient production
- They reshuffle trade flows
- They provoke inflation
- They are mostly paid for by public debt monetization
- At the cost of an extreme curtailment of liberty, price controls and rationing may succeed in suppressing inflation until peace returns
- The aftermath of wars is replete with challenges, deflation being the first of them.
- Economically and financially, Ukraine is at risk of winning a Pyrrhic victory.
- Ultimately, its cost will have to be borne by NATO member countries.
Returns on private financial assets in selected EMU countries
War revisited after the Seventy-seven Years’ peace
Between the end of World War II in May 1945 and Russia’s attack on Ukraine in February 2022, Europe has enjoyed an exceptionally long period of peace on its soil: 77 years. The decolonization wars of Indochina (1946-1954) and Algeria (1954-1962) took place far away in what were still French colonies. The Yugoslav wars (1991-2001) were ethnic wars within the borders of the former Socialist Federal Republic of Yugoslavia. The lightning annexation of Crimea in 2014 by Russia, followed by the low intensity but lasting conflict between Ukraine and Russia-supported separatists in South-Eastern Ukraine should have awakened Western public opinions to the risk of war more than they did. Three generations were born and have grown up during the Seventy-seven Years’ peace, hearing about war from their parents, grand-parents or great-grandparents, and witnessing the peaceful end of the Cold War in 1989. Before February 2022, the experience of war, and more specifically of its economic and financial impact, was in the process of being erased from collective memory.