The Myth of the Consolidated Account

I. The Blackboard Identity vs. European Institutional Law

Whenever French and European economists debate proposals to finance the ecological transition through central-bank debt cancellation or targeted monetary refinancing – most recently in response to Jézabel Couppey-Soubeyran's analysis of the Draghi Report's EUR 800 billion annual investment gap (Le Grand Continent, October 2026) – orthodox critics invariably fall back on a single accounting reflex. Constructing a closed-economy Flow-of-Funds table (Tableau des opérations financières – TOF) or textbook Stock-Flow Consistent (SFC) matrix, they merge the State and the Central Bank into a single consolidated public sector (la puissance publique) and declare the operation a mirage.

Their argument rests on two ex post accounting claims:

1. The Reserve-Remuneration Claim: Whether an ecological investment is financed by issuing sovereign bonds (such as French Obligations Assimilables du Trésor – OATs) or by central-bank money creation, the expenditure ultimately credits commercial bank accounts and increases commercial bank reserves held at the central bank. If the central bank remunerates those excess reserves at its deposit facility rate, the public sector allegedly pays the exact same interest bill either way.
2. The Dividend-Recapture Claim: Treating the national central bank as a wholly owned 'financial subsidiary' (filiale financière) of the State, critics argue that any interest saved by the Treasury – or any balance-sheet loss recorded by the central bank – reduces the central bank's annual dividend transfer to the Treasury euro for euro, leaving the consolidated fiscal constraint unchanged.

While neat on a blackboard, this consolidated identity confuses a closed-economy textbook convention with the actual legal, prudential, and statistical architecture of the eurozone. Under the European System of Accounts (ESA 2010 / Regulation (EU) No 549/2013) and the Treaty on the Functioning of the European Union (TFEU), there is no consolidated account between General Government (Sector S.13) and the Central Bank (Sector S.121). Treating them as a single ledger erases three decisive institutional asymmetries.

II. Rollover Risk, Quantitative Tightening, and the Anglo-American Fallacy

The first asymmetry lies on the liability side of the balance sheet. Unlike the UK Treasury – which operates alongside a single national central bank in its own sovereign currency and formally indemnifies the Bank of England's Asset Purchase Facility (APF) under the 2009 Treasury Indemnity – twenty eurozone national Treasuries issue debt in a currency that none of them individually controls, without a federal fiscal backstop or an unconditional ECB guarantee.

Even when evaluating the past stock of sovereign bonds acquired by the Eurosystem during Quantitative Easing (QE), static Flow-of-Funds models miss what happens dynamically at bond maturity under Quantitative Tightening (QT). While cancelling or perpetually rolling over sovereign bonds held by Sector S.121 does not alter the volume of commercial bank reserves created upstream at the time of the initial QE purchases, it fundamentally alters the refinancing constraint of Sector S.13 as those securities mature:

Under Quantitative Tightening (Without Cancellation or Rollover): As sovereign bonds held on the Eurosystem balance sheet reach maturity and are not rolled over, national Treasuries (S.13) must return to private primary bond markets to issue new OATs at prevailing market yields (around 3.2% to 3.5%, with the 10-year French OAT–German Bund spread hovering near 146 basis points) in order to repay the Eurosystem (S.121).
Under Cancellation or Perpetual Rollover: Extinguishing (or perpetually rolling over at 0%) the claim of S.121 on S.13 reduces the central bank's accounting equity, but creates no new payable liability that the ESCB must reimburse, while sparing the State from reissuing EUR 3,000 billion in interest-bearing securities to private bondholders.

III. Sovereign Liability Rules: Minimum Reserve Tiering at 0%

The second flaw in the orthodox TOF equivalence is the assumption that the interest rate paid on commercial bank reserves is an immutable law of nature. When a national Treasury (Sector S.13) issues OATs on primary capital markets, it is a price-taker: it must pay the market-clearing yield demanded by private institutional investors.

By contrast, the Eurosystem (Sector S.121) sovereignly sets the rules and remuneration of its own liabilities under Article 19 of Protocol (No 4) on the Statute of the ESCB and of the ECB. As Paul De Grauwe and Yuemei Ji (CEPR, 2023) and Jézabel Couppey-Soubeyran demonstrate, the fact that commercial banks (Sector S.122) currently receive massive interest transfers on excess reserves deposited at the Eurosystem is a discretionary policy choice, not an accounting necessity.

By raising the non-remunerated minimum reserve requirement ratio (coefficient de réserves obligatoires non rémunérées) – or by applying a two-tier reserve remuneration system (système de paliers, as deployed by the ECB itself in 2019) – the Eurosystem can sterilise at 0% the interest cost of the central-bank reserves sitting on its liability side. Even if private households and firms subsequently reallocate their portfolios (choix de portefeuilles) between sight deposits and remunerated bank savings accounts within Sector S.122, commercial banks in aggregate cannot extinguish the central-bank reserves created by the Eurosystem. Once those reserves are locked into a 0% mandatory reserve tier, private portfolio shuffling recreates neither new OAT issuance nor an interest burden for the public sector.

IV. Asymmetric Dividends and Negative Central-Bank Equity

Finally, the claim that central-bank losses automatically pass through to the State via reduced dividends ignores the strictly asymmetric legal boundary between Sector S.121 and Sector S.13:

1. The Zero-Dividend Floor Is Already Reached: Following the 2022–2024 monetary tightening cycle, the Banque de France, the Bundesbank, and the wider Eurosystem are already recording substantial net interest losses on their asset-purchase portfolios and paying zero dividends to their national Treasuries.
2. No Statutory Recapitalisation Obligation: As Éric Monnet and Thomas Humann (CEPII, 2024) document, because a central bank is classified under Financial Corporations (S.121) rather than General Government (S.13) and enjoys a monopoly on base-money issuance, it can operate indefinitely with negative net equity (fonds propres négatifs) – carrying losses forward as a contra-asset item (report à nouveau négatif) to be offset against future seigniorage without any legal obligation for the State to recapitalise it out of tax revenue.

V. Beyond Statist Chartalism: Zero-Rate Refinancing and the Proudhonian Mutuum

It is striking to observe that both Anglo-American Modern Monetary Theory (MMT) and its fiercest French circuitiste critics start from the exact same accounting premise – consolidating the State and the Central Bank into a single unitary leviathan – only to draw opposite conclusions. Where MMT invokes consolidation to argue that a sovereign currency-issuing State faces no financial constraint, orthodox French circuitistes invoke the same consolidated ledger to claim that central-bank monetary action is a useless accounting wash (opération blanche) and that ecological investment must be funded exclusively through taxes or sovereign bond issuance.

Both positions remain trapped within statist Chartalism: the assumption that the only alternative to private bond-market discipline is centralised fiscal direction by the nation-state. From the perspective of the Social and Solidarity Economy – and the classical mutualist tradition of Pierre-Joseph Proudhon's 1849 Banque du Peuple and his theory of the zero-interest mutuum (gratuité du crédit) – the central problem of capitalist finance is the rentier toll (droit d'aubaine) levied at the gate of credit creation.

When the Eurosystem pays 3.25%–4% on commercial bank excess reserves via the deposit facility, or forces national Treasuries to pay 3.5% on primary bond markets to fund non-profitable ecological public goods (thermal renovation, biodiversity restoration, agroecological commons), it institutionalises that rentier toll. Yet replacing private bond markets with a monolithic State bureaucracy is not the only path. Once the myth of the consolidated account is set aside, the Eurosystem (S.121) can function as a neutral, zero-rate public clearing house – using 0% reserve tiering and targeted zero-interest refinancing to channel liquidity through a federated ecosystem of public, cooperative, and mutualist financial institutions (FEBEA, Banca Etica, Crédit Coopératif) bound by statutory social utility (ESUS), indivisible reserves, and the Ternary Relationship. That is how democratic monetary governance and democratic credit governance converge: abolishing usurious extraction at the monetary source while keeping capital allocation anchored in self-governing territories and commons.