Fiscal dominance is not currently an established regime within the euro area. Nevertheless, the combination of rising inflation and a sharp increase in long-term rates represents an important test of the credibility of the ECB's monetary dominance framework.

The risk of a bond market crash has increased significantly in recent weeks, and borrowers should exercise heightened caution.

It is not the hawks of the ECB who are expressing their views, but rather the financial markets who are anticipating it: the rise in short-term rates in the euro zone has now become a likely scenario in 2026.