many countries since the 1980s. a combination of postpandemic consumer demand, supply chain disruptions, accommodative economic policies and russia's invasion of ukraine that shocked europe's energy markets all explain why inflation shot upwards. while there are signs that inflation is starting to ease, it is still expected to remain above the ecb's target of 2 percent in the medium term. the rapid and steep rise in inflation has been a cause of anxiety for many households. distributional effects of inflation have been serious because households in the lower parts of the income distribution are disproportionately affected by the increases in the costs of essential goods. especially low - income households, in finland and elsewhere, spend a large share of their income on basic consumption such as food, electricity and heating, which makes them particularly vulnerable to increases in the living costs. lowincome households, furthermore, are able to save less and are more liquidityconstrained than high - income households. they have less room to buffer sharp increases in their cost of living through savings or affordable loans. secondly, it's worth highlighting that finnish households have more debt than ever before, in the face of fast - rising interest rates. for decades finnish households have constantly accumulated debt in relation to their income. the more debt 2 / 5 bis - central bankers'speeches households have, the more significant the negative impact a rise in interest rates has on other spending opportunities. finnish households are particularly vulnerable to the interest rate increases, because the rates on housing loans are usually variable. according to a survey by the bank of finland, about a quarter of the total housing loan stock in finland is hedged against interest rate rises. however, the most indebted households are less likely to have hedged their housing loans, and this is a cause of concern. finally, the rise in interest rates and the tighter financing conditions have weakened the financial cycle. the housing markets have dampened significantly, and the rate of credit growth has slowed. in addition to high interest rates, the housing market has also been hit by low consumer confidence. the third way in which the cost of living increase squeezes household consumption opportunities is the so - called " wealth effect ". housing wealth forms a significant share of finnish households'assets, and thus declining home prices have a negative impact on household wealth. in turn, lower household wealth makes households reduce their spending. most of the household debt in finland is housing related. i occasionally

lender - of - last - resort role for the eurosystem does not square with the institutional architecture. the monetary union differs from other currency areas in one crucial aspect : while monetary policy is a common undertaking, fiscal policy remains a national prerogative. evidently, the unsound fiscal policies of one member state can have repercussions on the union as a whole. conversely, the negative consequences of bad policies can be better externalised to the rest of the currency area, thereby undermining incentives for sustainable policies. to mitigate this risk, precautions were taken in the form of fiscal rules, the no - bail - out clause and the prohibition of monetary financing. the guiding principle was self - responsibility : bis central bankers ’ speeches member states are free to pursue their own fiscal policies. but they are subject to common rules and market discipline – and they are liable for their decisions. a lender - of - last - resort role would violate this principle of self - responsibility – in that same way as eurobonds in this setting are at odds with it. therefore, it would aggravate, rather than alleviate, the problems besetting the euro area. 3. separating banks and sovereigns if monetary policy cannot disentangle the euro area ’ s fiscal and financial conundrums, what can? central to any stable framework is a balance between liability and control : those who act must also be liable for their actions. substantial measures were taken to contain the sovereign debt crisis. these measures – notably the two european stability mechanisms, the efsf and the esm – stabilised the euro area in the short term by offering financial assistance in exchange for structural reforms. this approach of buying time for adjustment is bearing fruit : current account imbalances have improved structurally and fiscal deficits have been significantly reduced. but in the process, the balance between liability and control has been thrown out of kilter. while fiscal policy remains essentially a national domain, liability has been increasingly transferred to the european level. going forward, the balance between control and liability has to be restored – otherwise the hard - fought gains in fighting the crisis will come at the expense of new vulnerabilities. one possible option to balance control and liability would be a true fiscal union, i. e. a transfer of fiscal decision - making powers to the european level. in this scenario, control and intervention rights would be shifted to the european level. if this prerequisite were fulfilled, a greater