The EU expects sanctions to increase inflation

After the weekly meeting of the EU Commission members in Brussels, Dombrovskis made a statement to the press.

Reminding that the EU has introduced sanctions that will have serious effects on Russia, Dombrovskis said, "Russia feels the pain of these sanctions."

Some Russian banks were excluded from SWIFT and strict measures were implemented against the Russian financial sector. Dombrovskis mentioned, "The ruble has lost 25 percent of its value just this week. Investors are losing confidence in the Russian economy and financial sector."

Pointing out that these are the prices to be paid for the Kremlin's aggression and gross violation of international law, Dombrovskis explained that their aim is to weaken the Russian economy, deprive it of critical technology and markets, and ensure that it cannot finance the war.

"European sanctions will naturally have consequences and a cost for the EU economy as well," Dombrovskis said.

Stating that it is difficult at this stage to accurately calculate the cost of the sanctions in question, he said, "As the sanctions begin to take effect, we may see scenarios such as higher inflation, more pressure on energy prices, and a negative impact on financial markets."

As Dombrovskis pointed out, growth will continue at a slower pace in this process, and all these are prices worth paying.

Reminding that the EU has suspended the Union's financial rules that limit public expenditures of member countries until 2023 due to the Covid-19 outbreak, Dombrovskis said, "However, considering the uncertainty ahead, we will reevaluate this in the spring."

According to EU rules, budget deficits of member states should not exceed 3 percent of their GDP and public debt should not exceed 60 percent of their GDP under normal conditions.

Due to the Russia-Ukraine war, these financial rules are expected to be suspended for a longer period of time.