Austerity Fan Olli Rehn Appointed to Bank of Finland Board

Olli Rehn was named to the board of the Bank of Finland, putting the former chief advocate of European austerity on track for a spot in the decision-making body of the European Central Bank.

The 54-year-old, who was the EU’s economic and monetary affairs commissioner before becoming economy minister in Finland, will take up his new position on Feb. 1, 2017, the Helsinki-based Parliamentary Supervisory Council said in a statement. Marja Nykanen, the current deputy director general of Finland’s Financial Supervisory Authority, was also appointed to the board for a five year term.

As board member of Finland’s central bank, Rehn will be able to shape the Nordic country’s stance on ECB monetary policy. He will also be in a good position to replace Bank of Finland Governor Erkki Liikanen after his second and final seven-year term expires, in 2018.

"I supported" ECB Governor Mario Draghi’s policies while a commissioner in Brussels, Rehn said in in an interview in Helsinki shortly after his appointment Friday. "I think it is important that the ECB continues its strong role in maintaining monetary stability, sustainable growth and employment.”

Rehn also expressed confidence that the "worst is over" as far as the European banking and sovereign debt crises are concerned, noting that German and Italian banks in particular were having to deal with "aftershocks."

While commissioner, Rehn championed strict budget discipline for struggling European states like Greece. His advocacy for euro-area austerity was vilified as harmful to growth and even called a “Rehn of Terror” by Nobel prize laureate Paul Krugman. At the same time, Rehn pushed governments to enact wide-ranging reforms, especially in the labor market, to overcome the economic crisis.

Rehn has a PhD in economics from Oxford University. Since returning to Finland, in 2015, he has overseen the country’s emergence from a three-year recession thanks to a combination of tax and spending cuts. He also played a key role in persuading labor unions to agree to pay cuts to restore competitiveness.

Finnish growth now is “not brilliant, certainly, but it shows that a four-year recession, actually structural stagnation, is beginning to come to an end,” Rehn said in a Bloomberg interview in September.

The former EU commissioner said he would remain at the Economy Ministry until the end of a year.

It will be up to Prime Minister Juha Sipila to decide on a replacement, with local media mentioning three members of Rehn’s Center Party -- state secretary Paula Lehtomaki, deputy parliamentary speaker Mauri Pekkarinen and Mika Lintila -- as possible successors.

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