The head of the Finnish central bank, Olli Rehn, warns that Germany’s nuclear phase-out will increase dependence on Russia and destabilize the energy market. “The decisions about energy policy in Germany affect price fluctuations and thus the uncertainty about inflation,” the ECB council member told the “Handelsblatt” (Monday edition). “For me, switching from coal to natural gas is not a green transition, and this transition phase will take a long time in Germany.”

Rehn expects “that the drivers of inflation will subside over the course of the year” and that the inflation rate in the euro area will be around two percent in the next two years. The further pace of the normalization of monetary policy in the euro area depends on the data. “Personally, I expect the economic data to remain relatively good despite the impact of the Omicron variant.”

For this reason, he considers interest rate hikes in 2023 to be “logical”, at least “if there are no new economic disruptions.” In the debate about the EU fiscal rules, the head of the Finnish central bank is calling for adjustments. The rules must be consistent, realistic and flexible at the same time.

“A debt limit of around 60 percent of gross domestic product, as prescribed by the previous regulation, is clearly unrealistic.” He pointed out that Italy’s debt ratio after the pandemic is expected to be around 160 percent. “If goals are unattainable, they will not achieve anything either.”