Can we decide that Europe is in a war economy?

The euro zone currently maintains its normal operating rules: The inflation target is 2% and the ECB has to conduct a monetary policy that will bring inflation back towards this target; There will again be fiscal rules (a Stability and Growth Pact) that limit fiscal deficits to ensure public debt sustainability. But if it were decided that, because of the war in Ukraine, the euro zone is no longer in a normal economy, but is in a war economy, then the functioning of the euro zone’s economic policy would be completely different: The ECB would keep interest rates very low, regardless of inflation; There would be no limit to fiscal deficits or public debt ratios. But we would then have to accept: A very sharp increase in the tax burden during and after the war; Massive taxation of savers, also during and after the war, through drastically negative real interest rates; all aimed at restoring public debt sustainability after the war. In contemporary economies, very powerful macroprudential policies (credit control, capital gains taxation) would also have to be accepted to prevent massive financial imbalances that would result from negative real interest rates. The war economy is not just about monetary and fiscal laxity.