HELSINKI, April 14 - The conflict in the Middle East has highlighted the strategic importance of the shift to greener energy for Europe’s economic resilience and competitive standing, European Central Bank policymaker and Bank of Finland governor Olli Rehn said on Tuesday.
Rehn cautioned against pausing or slowing that shift, arguing that "Slowing the green transition now would be a serious mistake." He framed the energy transition as central to the region’s ability to withstand external shocks and maintain competitiveness.
On the outlook for inflation, Rehn said the medium-term effects of the war remain unclear, while adding that a rise in headline inflation this year would be unavoidable. He underlined that monetary policy choices are not predetermined, stating that "Interest rate decisions are not locked in beforehand."
The ECB, Rehn said, is keeping close watch on the developments in the Middle East conflict and on any spillover effects that may reach the euro area economy. He emphasized the institution’s attentiveness to how the situation evolves.
Rehn also stressed that the intensity of the war’s impact varies across euro area countries. "The impact on the Finnish economy is moderated by the fact that Finland has made more rapid progress in the energy transition than many other countries," he said, noting Finland’s relative position in adopting cleaner energy sources.
The remarks combine a policy warning with a reminder of uncertainty: the green transition should not be delayed despite the conflict, but the precise path for inflation and wider economic effects is not yet settled. Rehn’s comments signal that the ECB’s approach to interest rates will be responsive to incoming data and to the evolving international situation rather than fixed in advance.
Summary takeaways
- The Middle East conflict reinforces the case for accelerating the green energy transition to bolster Europe’s resilience and competitiveness.
- A rise in headline inflation this year is expected to be unavoidable, though medium-term inflation effects from the war remain unclear.
- The ECB is monitoring developments closely and will not consider interest rate decisions as pre-committed.