Alright, welcome to the Neuvottelija channel, and the year 2025 is coming to an end, and we have Joona Räsänen here, MP for the SDP from the Uusimaa electoral district. Hello. A very good day to you, and thank you for the invitation. Yeah, and doesn't the year look quite... well, 2025 is a bit ruined, but let's hope for a better new year. Well, it's always like this in December when people ask what your thoughts are on the past year and the coming one,
so one probably always hopes for better, across the board, but I've sort of learned that if you always think about it so that hopefully next year will be a bit better than this year, but then again a bit worse than the following year, then usually you get by, if there is a bit of that optimism in the air about what what to expect. Yeah, and then almost an hour away
from each other, Ville Valkonen from the Varsinais-Suomi electoral district, and this is of course a joke regarding the infamous "One-Hour Train".
Hello, hello. Nice to be here again Sami, thanks for the invite. Yeah, and Joona, since you are here for the first time, and I haven't had too many Social Democrats on, so I think you have an interesting background, maybe a bit similar to Ville there, in that Ville is a diligent Coalition Party member with a very sharp background preparing papers, chair of the Tax Subcommittee. So couldn't one say that you have a bit of the same role there in the SDP? Well yeah, I guess
each of us always has different responsibilities in our own "sports clubs," and for me, it has fallen to me, or I've received—depending probably on the point of view—more responsibilities related to thinking about my "sports club's" economic policy, and through that then of course during a term like this, where public finances in general are in such bad shape that the topic is emphasized a lot, so
of course through that, probably more and more responsibilities have come, and then probably due to the background that these things have always somehow interested me, and when I started back in the day—I remember in the 90s getting a bit interested in politics, and when thinking about those times, so I've probably grown up in a somewhat Lipponen-esque Social Democratic family, so through that, somehow these topics have
felt somehow perhaps natural, and that's why working with these topics is quite nice to dabble in. My absolute favorite Social Democrat role model is Väinö Tanner. I think Lipponen has been a bit spoiled here by the gas pipeline, but tell me a bit more about your background. You are, aren't you, in terms of seniority as an MP, more experienced than Ville. So, so...
what kind of background do you have? Well yeah, I'll actually start with Tanner, because I do get these quips all the time, that Tanner's...
heirs and, you know, keep Väinö's legacy alive, and actually last time...
on Independence Day, Lasse Lehtonen, who is a...
well-known, well-known Tannerite, came...
came to thank... sorry, yes, Lehtinen...
came to thank me, saying it's good that there are heirs even a bit after his time. I guess one can also call oneself a Tannerite, but indeed, my own background is probably reasonably typical, nothing special, an average guy from a reasonably medium-sized city, who then got interested in societal issues, and my background lies in the fact that...
at 15, I went to work at a shop, and from there...
gradually, after being there long enough, I thought maybe now I need to study for a profession, because that's what you're supposed to do, and then I...
got employed in the finance sector, I went to work at a bank and well, at some point other things started to interest me, and then I pondered with a few friends whether we should also set up a company and we did set one up, and then it just happened funnily, as it sometimes goes in this world, that politics sucked me in, and since about 15 years ago, I've pretty much been more or
less involved in this societal decision-making, and back then in my own party, in those roles, back then I led our party's...
youth organization, and then in the '15 elections I was elected as an MP. Then when I lost my seat in the '19 elections, I spent a moment leading content preparation for the party, and after that, I went for a stint over in the communications agency world, and then, as it sometimes happens, the people changed their minds and wanted me back again, so I had to go to Parliament, and here we are. So, like, I've often joked that, well, it might have happened that
politics ruined a good man, that it sucked me in. Why did you, Joona, join the Social Democrats specifically back then? Well, I do probably have... I guess this heritage is one thing I always, always say. My father is a long-time Social Democrat who has had a long career in municipal decision-making, so...
You wouldn't have been welcome at the Christmas table if you had cho- Well, I probably would have, because he always said I have to make my own decision. And I am the type who... back in the day, when I turned 18...
since that was the only advice I got from home: when you turn 18, you get to decide for yourself. I looked at the three big parties at the time, since the Finns Party hadn't risen up there yet. The league of big parties consisted of three: the Social Democrats, the Coalition Party, and the Centre Party. I read their programs back then. We're living in the year 2005. And as I was reading them, somehow, perhaps for myself as well...
that red armband, at that stage, or at least confessing the color, perhaps this sort of freedom, solidarity, human rights, and equality issues really spoke to me. And then somehow this rather pragmatic view on managing societal affairs, which was probably a result of having started to follow politics in my childhood back in the 90s, and what the government led by Paavo Lipponen did back then. But
then, one thing that has of course influenced this, perhaps more regarding this sense of justice, is indeed due to the fact that quite...
I remember having those conversations sometimes with my grandparents, back when I was younger. On my mother's side, the background is more from evacuees who came from Karelia, and then on my father's side, my grandfather was actually one of those auctioned pauper children in early 20th-century Finland.
So perhaps that's where that sense of justice has somehow come from.
But then on the other hand, this strong work ethic—that ultimately, it really is the case that every one of us must primarily support ourselves through work, and hopefully enough people do so, so that society is then able to help those who genuinely cannot do it.
Alright, that's great. I wrote this book "Neuvotteluvalta," and I interviewed Martti Ahtisaari, who also had somewhat similar Karelian roots, and he became a good president, or perhaps he wasn't really appreciated enough. So, now we find another favorite of mine from the Social Democrats.
And now, while filming this, a new poll came out, and the SDP is in an overwhelming lead with over 25% support.
The Coalition Party has remained quite strong. Government responsibility is a burden, but it really looks like... well, we need an election, but maybe we need a sort of "Democrat support brake." That might be it, or we just accept the fact that it's quite hard to cook up any other Prime Minister party from this situation than the Social Democrats. But let's not get ahead of ourselves. Let's get to the issues.
Let's consider the probable scenario here, that Lindtman and Orpo—unless miracles happen in the Coalition Party camp and they change the leadership—will find themselves in a Blue-Red coalition.
And it actually feels possibly quite good that you two are put into the second line there. After the election victory, of course, you will get your mandate from the people, and then a Blue-Red government will be set up. So, how does that sound, Ville? Would that be the worst possible partner for this kind of Blue-Red...
what about the government negotiations then, Joona?
Well, let's not get ahead of ourselves regarding the election result. The people decide in Finland, and that's a good thing. Of course, it's good that the Finnish political system is such that we can cooperate quite broadly on a factual basis, because a completely blocked-up, rigid system where, just purely because someone happens to belong to a different team, you can't discuss issues or agree on programs, for example, that would probably be quite destructive at its worst. Of course,
the Social Democrats and the Coalition Party have fundamental, major differences of opinion in many sectors of politics. Perhaps the biggest are in economic policy, but also in the basic understanding of, say, social and health services and many things like that, but I don't see that our party has any difficulties cooperating with really any other group, except perhaps the Left Alliance.
The differences there are so big that maybe it's unrealistic, since their thinking goes over to the side of socialism, whereas for us, a free society and a market economy are such a central part of our thinking. But we can certainly discuss things even with the Social Democrats, because the people deal the cards, of course, and then we play the hand we're dealt. And of course, we are working for the common good of Finland.
I think it's really essential in Finland that everyone remembers, including our good listeners who are smart and photogenic on this podcast too, that people who are of a different opinion aren't evil. They might be wrong, or they might be of a different opinion. Sometimes both. Sometimes you might be wrong yourself.
And then you have to correct your views, but people who think differently are not enemies. No, no... in this country, we can't build a future by somehow categorically dividing people here and there.
And it's obvious that the next government has a big task specifically in fixing this economy, because Finland is now sailing in such dangerous waters and facing such difficult problems that the task will be massive. And of course, the Coalition Party strives for as good a...
government specifically in fixing this economy, because Finland is now sailing in such dangerous waters and facing such difficult problems that the task will be massive. And of course, the Coalition Party strives for as good a...
the election result as possible, and also to the government afterwards to take care of matters. Yeah, I'll pick up on two things there. So, this politics is, unfortunately, a zero-sum game. You are now in different electoral districts, so for you it's not that cutthroat, but if you were both there from Uusimaa or Southwest Finland, then this wouldn't be so relaxed. So it would be... I see it all the time when I have someone from the same district, even the same. On the other hand, we probably don't have quite that much shared voter interface. It probably shows in that. We tour quite a lot of discussion events with Jona.
We go around and it's nice, because we don't have that kind of... we are like maybe, well, competitors, partners, but it's not bloody in that way. Yeah. But then, another point: the Left Alliance was mentioned and this cooperation. Sanna Marin decided, regarding election tactics, that the Finns Party won't fit in the government, so it inevitably became a leftist bloc plus the Centre Party from the previous government. The current one became
a right-wing bloc by the skin of its teeth with 101 MPs, so in a way, there is a temptation to go into bloc elections, which could then at worst prevent, say, a Blue-Red coalition, which in my opinion is still a quite logical government option. So I, for one, don't hope that next year we end up in a zero-sum game where Blue-Red would be impossible, because I think that would just be too drastic, because then we would automatically drift into bloc elections. At least it needs to be
kept on the table. And now, the Left Alliance... in a way, you came up with this cross-parliamentary mechanism called debt brakes. So my experiences regarding Yle are really bad in that regard, in my opinion.
It doesn't work there. But in this debt discussion, I think that was a quite brilliant, brilliant discussion forum and you can see the zero-sum game there; the Left Alliance, in my opinion, quite cynically opted out of this mechanism. I don't know if you Do you share that interpretation? Well yes, maybe I'll go back a bit to Ville's good reflections here, that this competitive setup actually, like, between parties or MP colleagues, or when we are in elections, between candidates, actually due to this
Finnish election system, it is always more inside the parties than actually between the parties, because in a way, since Finland's semi-open list election is based on the fact that everyone collects votes for the same list, and then on the list the ranking determines who gets elected, so in reality the biggest competitor is actually always that teammate from your own sports team on that same list, whom you basically have to be able to beat so that
you would be higher up. This kind of explains why sometimes people at the House joke that it might even be the case that MPs from different parties coming from the same electoral district might even get along better with each other than those from the same party and district, especially if they happen to be from the same city, for example, and especially if they coincidentally might also be in different factions within the party.
So I find it sometimes even a bit amusing that it might be easier to get on the same wavelength with a representative from another party coming from there. Well, yeah. Then maybe a bit more about these polls. I think that of course, since there's still a year and a half left, and in politics a lot can happen in that time. As such, this support situation has been quite stable in Finland for a longer time, which I think
is visible in these changes too, as they have been very small for quite some time now. No such big change in one direction or another can be found in individual polls. So it's maybe worth looking at these trends a bit, how they have gone. But the general fact is also that the closer we get to the elections, the smaller...
margins start to change. That's how it has always gone. That's how it went in the last elections, that's how it went in the '19 elections, that's how it went in the '15 elections, and so on. So that's why I have stated, at least to my own people, that now is certainly not the time to take it easy and say that this is how we're going now, because with these good numbers, which these undeniably are, there is sort of this...
when a journalist asked me what my thoughts were, I said "scared," because here there is like...
I don't mean that one needs to be terribly afraid of people, but that when you look at this from the inside, a good situation always has that bad side, that sometimes it makes you a bit slack, and usually, well, you shouldn't let that happen. Well, then regarding this bloc issue, I am actually a bit inclined to think the same way, that in my opinion, into this Finnish political system, this kind of bloc thinking fits really poorly, and it
should be avoided, due to the fact that firstly, we have a very, if you look internationally, a very fragmented party system, so in a way, within the framework of this current system, with the current support ratings, roughly speaking, creating these kinds of blocs always becomes, in one way or another, a bit artificial, and that's why I wouldn't go for this, and I'm not so sure that if in those countries where this kind of system
is used, whether it has actually improved things, because in reality, a bloc always means that the swings in politics are always wider.
Well, if we were in a situation where everything was going well, then why not. In that case, society could probably withstand swinging a bit in one direction and another, but especially in a situation like the one Finland is in, where we are doing reasonably poorly in many areas, especially here in the economy, then I don't think it is justified that we would start pulling this kind of 180-degree turn every four years in a different direction. So that's why I don't hope for it, and also because in many situations, I could actually imagine that
since in many situations, I could actually imagine that inside those potential blocs, there might actually be quite significant disagreements on many matters of principle, and then again it might be possible to find, between the blocs, perhaps even more natural cooperation patterns with certain parties, and that's why I think the approach followed in Finland, where we go into elections, and hopefully everyone goes into elections with the mindset that
there aren't terribly high thresholds for different issues, or terribly restrictive opinions or exclusions. And then, based on the election result, we see what kind of functional majority government can be formed, and then we go with that. Yeah, I'll just...
before Ville speaks, yeah, let's get back to that, but for me a market-liberal minority government would also be fine, supported by strong blocs parliamentarily, but of course that's not the Finnish tradition. But yeah, Ville, regarding this debt brake... others... it was absolutely... I really didn't believe at all that something like this would be found in Finland, and then I'll repeat, the Left Alliance was the only coward, in my opinion, that stayed out of it. The debt brake relates perhaps specifically to this
whole picture. If we had a situation where a significant part of the political field didn't share this situational picture of the economy, that big actions are needed, then we would inevitably perhaps be in this kind of bloc thinking. But the debt brake agreement is a historic deal that dismantles this. I didn't believe in it myself back in the summer, but now that it was achieved, it is indeed historic and an exclusively positive
piece of news for Finland. It's about the fact that we agreed parliamentarily on a procedure to create a shared situational picture and set shared goals. And then this was also put into law. So Parliament is, this week, approving the law with a huge majority. The first votes on statements were I think 158 to 10, so a massive majority, almost NATO numbers. It shows we have a mutual understanding that this
debt problem will be handled together. The tools will be decided by each governments. So the people get to express their views on how this is tackled. Of course, elections are about other things too, but the commitment to the fact that no one is rushing anymore to hide behind populism to avoid bearing responsibility, well, that is a big, significant agreement that hasn't existed before. And it now gives us
the opportunity as a nation to deliberately and systematically curb this debt trend, because we are truly in a situation—think about it—with 10 to 12 billion in deficit year after year. A debt ratio that will soon breach 90 percent. We are among the worst performers in Europe. The EU deficit procedure will formally start in January. We are on a path
that will lead to a total collapse if nothing is done, but fortunately, we are doing something. This government has already started fixing the economy, and now we have a deal that the next government, and the one after that, and even the ones following will continue this in one way or another. And this is excellent news for Finns, excellent news for international financial markets. This is visible, for example, in the fact that our credit ratings would likely have started to drop, but because
we have this deal wrapped up, they were kept unchanged. Our figures would actually give grounds for credit rating agencies to lower our creditworthiness. I am very happy and also grateful to all parties that they were able to join this. This was...
this will remain in Finland's fiscal policy history as one of the most significant turning points.
Yeah. What about this, Joona? Since it sort of goes against the opposition's ethos a bit, that this supports the government more than the opposition, so how heavy of a concession was this for the Social Democrats? Well, maybe it's good to start framing this by looking at the situation we are in. And as Ville just described the state of the public finances,
so even if we didn't have any rules from the EU...
domestic, we would still probably be reasonably widely in society of the opinion that we cannot continue like this, and then I think it is clear that a corrective move is needed. Well, then in politics, the means to commit different political actors to act in the same direction are these kinds of parliamentary agreements.
And here, of course, legislation was also enacted, because these EU rules oblige us to do so, which hopefully ensures, in a way, that the commitment to achieving that goal is also genuine. And here in Finland, we have a strong tradition of being able to agree parliamentarily on various goals, towards which we have then moved. The most typical example that always comes up is here on the defense side, where there has hardly been any such disagreement. Uh
then there are many others, like in research, development, and innovation activities, or regarding Yle during the last term, where this parliamentarism was followed, really due to the fact that it is an institution under Parliament, and so on. Well, usually these have been more like agreements on a goal which, in reality, has meant increasing public spending. Mm.
And that is probably partly why this discussion became a bit odd, as some perhaps didn't think that we could agree also on keeping the public finances in at least somewhat decent shape, or aiming to proceed towards getting this situation under control. And that's why it maybe caused some people a bit of difficulty, but I think it's great that this
was achieved. Then I'll just say one thing about this, in a way, that since these kinds of fiscal policy agreements, legislation, steering frameworks—whether we look at it at the EU level or domestically—they are ultimately, in their technical details, absolutely damn complicated, so I've sometimes said that if someone suffers from bad insomnia, it helps to start reading this
to digest the European Union's fiscal policy framework or this our domestic one, and well, that's how it always is when we of course in a complex world, when we try to take into account various...
twists, then the regulation always becomes, in one way or another, a bit...
compl— actually, go read the agreement, listeners, it's not very long exactly, and coming to this, that ultimately, whatever the legislative clauses were, I think the central thing is that since we have in any case committed, together with other EU countries, to managing this public economy within the EU framework, within those agreements. And now with this national, sort of additional regulation or agreement, whatever one wants to call it, we ensure that we really want to follow those rules to which we have already also
globally committed. And I hope that this leads exactly to the fact that in a way, this struggling free— the national add-on struggling free happens less, since this is sort of so broadly...
signed off. And then luckily, the Left Alliance has also stated that these EU rules are accepted. And now, regarding the next two terms, with all the information that has been available, we are proceeding purely with these EU rules, so I suppose they too should, through that, now at least accept the minimum level anyway. Yeah. Let's move to that Left Alliance dissent, which I think is... I could still explain what this debt rule means in practice from now on. So now that we have a deal made, we shook hands on it, everyone signed it except the Lefties
put their names to it. Uh, and now we also have legislation in force from the start of the year, so currently the parliamentary working group on fiscal policy, where I am the chair, Joona is the vice-chair, and there is representation from all parties so it has been working since the beginning of October, and by the end of February we will set out in our report a binding target for the public finances of the next seven years
strengthening. So, a goal to which all parties regardless of the government commit, that this is how much we will fix this debt challenge, and also the next electoral term's more detailed goal, which will be refined further in December '26. And these goals are set now before we know which group will go manage things, but the goal binds the future government. So
the next Prime Minister or government negotiation conclave cannot then decide that we won't fix the economy after all, but it is agreed in advance and and the monitoring procedures are written into law. The Economic Policy Evaluation Council will then monitor whether this goal setting is being followed sufficiently. That government then, after the next elections
in April-June '27, will choose the means, that okay, this much spending is cut and this many legislative changes are perhaps made, which strengthen public finances, this much with taxes, depending quite certainly on the government coalition, but we will have information before the elections about how much public finances will be strengthened. This is of course much better procedure than one where at the House of the Estates during government negotiations they would start guessing what should be
done here. Then it is much harder, and this is the big benefit. This debt brake group, or rather this fiscal policy parliamentary working group will not outline what is done nor will it at any stage evaluate the sitting government, but it always looks forward and it is a really important place for our party to stay on the map, the whole parliament on the map about where Finland's economic situation is going and what must be done in the future
regarding the scale, and then in the next term when the new government has started, a new working group is set up which sits for the next parliamentary term, which looks forward again and it will, in the middle of the term, set the next long-term eight-year plan and again before the next elections, meaning before the '31 elections, the '31-'35 government term's adjustment goal and then again forward from there in the 30s
in the 40s, so this becomes a kind of permanent mechanism with which we slowly can push the debt ratio to a reasonable level and take care that the public economy stays in shape and we don't end up on this kind of uncontrollable Greek path. So Finland, fortunately, isn't on that path yet, but not very far from it. Actually, maybe we would want to be on the Greek path, because they are lowering it at a pretty hard, pretty hard pace, and this kind of procedure has been in place in Sweden for decades, for example; in the 90s they were able to do the same thing there.
And now it's really important that since the deal is made and it has started to be implemented, that we get this kind of permanent arrangement in Finland, where this thing, well, also stays for a timeframe of decades. That is really awesome and good that you opened that up, because I also change my mind about these things.
I mean, I'm no Nalle fanboy, but I remember sometime back in the day he wrote a book saying we should go for a constitutional court.
But then when I had a discussion about this, I have actually moved to support this Constitutional Law Committee of ours and who was here by chance, the chair of said instance, or this Westman.
Yeah, yeah, but in a way, and I'm still of that opinion, so in a way this kind of parliamentary working group where smart MPs... is this an institution made up of MPs, by the way?
Yeah, so I'll just throw out a wild one here, haven't done that in a while, but Joona is starting to heat up at me too. So, like, if you want these guys to continue as number one and two, then you should consider voting, because if some guy comes along who really doesn't know how to count, then it's a terrible loss for this thing too. A bit in the same way as in the Constitutional Law Committee. So, like, if some pretty random types end up there who then listen to some pretty, pretty delusional legal scholars, then it becomes quite...
insane harm to the national economy.
This wasn't a paid ad. Thanks Sami, but if I may just...
...challenge Comrade Räsänen a bit on this...
...so this whole pod doesn't just become mutual back-patting.
This was really great. It was a really great thing that the SDP...
...is now involved in this shared situational picture of the public finances, and...
...we have a procedure to handle this job, and you are permanently...
...even historically one of Finland's major parties, like us, and both have...
...a big responsibility for the fatherland because of this, but it has indeed been sometimes...
...a bit awkward and, shall we say, even sad to watch from the outside...
...to see that there have been quite strong, very leftist tones...
...during the last chairman's term in the SDP, for example, and apparently still...
...you had a dispute about whether one can be involved in this kind of...
...responsible procedure. So Joona, could you open up a bit about how...
...this awakening of the SDP to responsible economic management has happened?
Well, yeah. Without any malice, and just to explain to everyone...
...it's worth explaining that in big parties there's always this...
...so-called "wide walls and high ceiling" situation, where...
...which means that, especially inside large parties, there are...
...people who think differently and have slightly different priorities.
And then perhaps our besetting sin, historically speaking, has been...
...that usually these differences in thinking also perhaps more easily...
...come to public attention than perhaps with many other...
...sports clubs, which actually stems from the fact that there is this...
...tendency to also have this, perhaps more internal...
...discussion more or less publicly at times. But if I look...
...at the long run, if I think back to Tanner...
...or Lipponen, or anyone, Koivisto or so on, ...then in my own thinking, and probably one such...
...thing that has weighed in on why my party has acted this way is that...
Actually, when you look at this even a little bit more closely, quite a few key players who have had the ability and desire to ensure that public finances in Finland are kept in shape, so that it enables the maintenance of the welfare society and so that it enables people to utilize their own potential and through that bring more room for maneuver to the national economy, have been at the
center of it, and somehow I consider myself to belong to this school of thought.
Well, then it's clear that for some politicians it is probably more typical that there isn't always so much interest in the baking of the cake, but then there is a lot of interest in sharing the cake, which is visible, for example, when you follow the Parliament, so different parties, I think you can recognize this well. That for some it is more important whether we could improve a service now or raise a benefit or
something else, regardless of whether there are actually possibilities for it. Well then, perhaps what has been more visible here now in Finland too and globally, this discussion, well this stems perhaps more from the time following the financial crisis and in a way from this development. That when we saw that in a way there in the 90s and the first decade of the 2000s, so yes, here in the center-left
parties quite globally, the way of thinking emphasized perhaps, if one can generalize a bit, leaning more towards the center rather than the far left. Well then came the financial crisis, and after that, when in a way at the same time there was the rise of these populist parties globally in many countries, so we also kind of came to the point where
it has started, also in this center-left movement, partly probably in the center-right movement too, to emphasize more the other side. So in this case, if thinking about center- left parties, then this left side. And this leads to probably to the fact that in this economic policy discussion, there have also been different opinions presented. And it's probably clear that if you just look at this objectively and try to push your own subjective
experience down a bit, knowing that having been part of these discussions, that if one puts it politely, then there have probably been small nuances depending on who has led the party, for example. And now I would think somehow that perhaps I myself prefer these current nuances, let's
say it like that. Now you really danced around it. You've had people in the party leadership who have said that debt doesn't matter and nothing needs to be cut and we must stimulate and there is money. Yeah, so I don't in any case want Sanna Marin and Antti Rinne's line back, so there... but it's better that you say this, that...
Antti Rinne doesn't seem like a blurter either...
basically Sanna Marin was one...
Antti Rinne assembled the last government, not Sanna Marin. And Antti Rinne kicked the Coalition Party out of there, among others. Yeah, yes, but that has gone in the right direction. And I think they're learning the hard way in that too, that perhaps the leftist forces... I just noticed last night regarding my former hometown Tampere, that Ville Ilmari too has matured, in that they didn't go and raise the municipal tax, but brought some sense to the spending of money. Maybe I have to roast the only coward, or
the Left Alliance. I think that was... even the Greens struggled really hard with it, but they saw the light and joined this. But in my opinion, they immediately distanced themselves, like out came the millionaire taxes and wealth taxes and so on. And now even Hesari condemns it, saying this is idiotic leftist populism.
But is that a working tactic, that the Left Alliance's left wing is completely loose? Okay. This commitment to EU rules probably binds...
a bit, but now they can shout and chip away at the Social Democrats' left flank as much as they please.
Well, perhaps I can comment on this as a complete outsider first, because this doesn't concern the National Coalition Party at all.
We don't have an interface with the Left, and in any case, we represent, in a certain sense, the opposite ends of economic thinking in Finland, and I am personally of the opinion that they have both completely erroneous concepts and also quite a lot of populism mixed in with those incorrect economic concepts, but so far, we haven't seen any jump in support.
So, regarding this institutional decision to stay out, people probably haven't been very interested in this debt anchor document. I mean, they aren't able to grasp what this means, what's difficult about it, what's good, and so on.
I'm sure our enlightened listeners here are so well-versed in economic policy that they understand its significance, but I don't believe that the average Finn out there has really woken up at night to think about the fiscal policy framework. But if a situation arises, or when the situation arises where the next government implements this and pushes through a very significant multi-billion... I mean, the current estimate (this episode is being recorded
before the Ministry of Finance's new winter forecast is published) is at least 6.5 billion and up to 10 billion over four years. And now when...
what were they, cuts or adjustments? Yes, either cuts or tax increases or structural measures. In other words, very extensive measures, and now they will have been updated by the time this episode comes out, so once again...
So, very drastic measures that will affect almost all Finns and the basic structures of our society. So in that case, if the Left is in opposition, or any party is in opposition and adopts this populist stance of "not us, but those bad people in the government," then I believe they will probably gain some benefit at that point.
Unfortunately, it is the case that with populism, you can get support in the short term. Well, it's good to remember that in Greece, too, we had communists who fiercely opposed these, uh, rough measures, and the people were on the streets and very angry when taxes were raised and everything was cut, and society was in real turmoil. It was very rough. And then Syriza rose to power there, a complete socialist party, and yet they implemented
the adjustment program that was handed down. The truth hit even the worst communist populist in the head, and the people were even angrier after that.
So, in the short term, they got into government, but then came a hard recoil.
And I don't believe that in the long run you can succeed with this kind of irresponsibility, but in the short term, unfortunately, yes.
Yeah, Yanis Varoufakis is still popular, since he left as a righteous, true communist, and he still gets on podcasts to explain how the monetary system works. A completely delusional guy, by the way, for anyone who knows the type. But just a quick fact from Markus Holmgren here before Joona gets to answer. In the previous episode, we had Mauri Kotamäki and then this Markus Holmgren. So, Markus had calculated that—it's now a bit harsh—but we have the world's largest public spending
relative to GDP. He calculated that it is 159 billion euros per year. And yet, we have an active population— meaning non-public sector employees—of only 1.9 million. So this is 84,000 euros for every single productive Finn to carry in their backpack every year. And in a way, this is...
like, our public spending ratio is approaching 60%. So, in a place like Switzerland, it's like 20% lower. So, of this 84-grand backpack...
in other countries, it's only around 50 grand. So, we have just an absolutely massive pot of expenses in the public sector. So this...
this is different from debt, but this public spending is just incomprehensibly large. So, I'm not just throwing this out there, and the Left wants grow it, and in a way, they want our tax revenue is just a small part of it, and with these additions of a few hundred million, they want to populistically claim that we could cover this burden of nearly 160 billion, which is completely delusional. I just don't understand
in public media analysis, why these kinds of numbers aren't said out loud by anyone. So they let this idea that a millionaire tax would bring, say, 100 million, exist as a bubble on the same level as 159 billion in public spending. I just don't get it, are you journalists stupid?
Are you stupid, journalists? So, go now to your committee. Hopefully, I mean I hope, that this parliamentary, uh, seven-year conclave of yours also starts to educate the people based on facts and numbers, because in my opinion it would be useful, because somehow people are just completely lost when it comes to the numbers.
Well, I'll probably comment soon, but I wanted to hear Joona's take on the Left Alliance. Whenever we get into these numbers, it's...
a certain colleague back in the day, if I recall correctly, coined a catchphrase in a panel, saying that everyone is the architect of their own economic policy, or however it went, but it perhaps describes a bit why we are in this situation.
The root cause is that we have an increasingly smaller group having to support an increasingly larger group promised certain services, so everyone understands that this equation doesn't balance very easily.
And that is why this gap has really been patched up with debt every year, just to keep this society standing somehow. But regarding the Left Alliance, I have to say that I'm a bit surprised by their choice. Not for the reasons Ville described here, that this slightly populist tone surely suits them here, but what happened here is that when this fiscal policy framework was being created, we looked quite a lot at what it...
[End of transcript segment] means regarding different figures and what kind of forecasts can be drawn from this.
How it relates to this EU regulatory framework now, specifically our own...
...additions. And from that, the conclusion was drawn that it might be sensible to proceed with this.
Well, before that, the Left had already stated that they do commit to this...
...EU... mm...
...regulatory framework. And now, as I described earlier, when these...
...are combined – this EU framework and the national one, which complement...
...each other – and conclusions are drawn for the next few...
...electoral terms, we come to the realization that actually the strictest...
...requirements come specifically from these EU regulations...
...in the coming terms. So if you have signed off on...
...those requirements, which will nevertheless limit us in the coming...
...terms, then it is, in my opinion, a reasonably senseless...
...conclusion to then opt out of what possibly starts from the year...
...2035... mm...
...to limit us. So, as they say in Parliament, that they...
...want to reject this austerity policy...
...which they of course oppose, then I ask: so you...
...agree to austerity policy for the next two electoral terms...
...but then on the third term you reject it? Yeah.
And because of this, I find their tactics a bit strange.
This is probably partly due to the internal discussion there...
...that if they had joined this, it would probably have caused...
...even greater internal turmoil for them than perhaps...
...in some other parties. And that explains their approach.
But now they are involved in this parliamentary working group...
...and have stated that they really commit to these EU rules...
...which means that they have now at least signed off on...
...the figures Ville mentioned. So, all in all...
we come to the point that they first opposed this, and now they come to endorse it, and then after the elections, we'll see what role they play, and possibly they'll even be implementing it, which brings me to the point that I think their management of expectations for their own supporters is going to fail, which then leads to the fact that I don't believe their line is very sustainable, when looking at what lies ahead of us. Now, in any case,
it depends entirely on whether they are in the next government or not. In my opinion, the Left has sort of combined populism and power politics, aiming for it to some extent, meaning they've kept the government door ajar by stating that yes, we are indeed committed to these, because the debt brake agreement means that there won't be any government that doesn't make adjustments. And then on the other hand,
by staying out of the deal, they've kept the door open for successful opposition politics, where they can say that we are the only alternative in this country to these cuts, which is of course complete populism in my opinion. I'll come back to Sami's excellent description of the size of the public sector. And to make it a bit more concrete, I must now emphasize that our working group, which is currently working, does not take a stand on the means. And these are my personal views as a National Coalition Party
MP, but the very reasons for Finland's difficult situation are the lack of growth and excessively high public spending. Our tax rate is comparably high. Finland is one of the strictest taxers in the world. So, raising the tax rate significantly from here upwards would likely be self-destructive policy,
because it would further reduce economic activity.
Especially if it were used very strongly as a tool, which would further worsen the fact that our GDP has unfortunately been treading water for nearly twenty years now in the big picture, and consequently, given our population structure...
as the background for this growth and public spending is so strong, and that cannot be changed quickly by any means. It can perhaps be improved somewhat with work-based immigration and lengthening careers, or extending working hours, but in a way, the big picture doesn't change. In the late 30s or 40s, over 100,000 kids were born, and now about 40,000 are born. Listeners can check the exact figures, but it is
such a drastic change that it can't be fixed with any magic trick. And thus, we need to generate economic growth, but it won't in any way compensate for this whole deficit situation. Roger Wessman, an economist, calculated that economic growth would need to be roughly six percent for indebtedness to turn downward. And that is never possible to see in developed economies. Instead, completely different figures are realistic for us. And consequently, it means that this problem can only be managed significantly
by reducing public spending. Maybe somewhat with taxes too, and here there will likely be differences between parties. I bet the SDP and the Coalition Party have a particularly different view on these taxes. And likewise surely the Greens, the Left Alliance, maybe the Centre Party and the Finns Party too. This is the core of politics in the future, but inevitably we in Finland have to consider what things the public
sector handles and to what extent, and what things it will no longer handle in the future, but people will handle themselves. Whether we're talking about social security or the range of services. So we have to finance about one-sixteenth of our public welfare society funding in some other way, meaning leaving it undone or having someone else pay. There is no getting around this, that our spending level is too high relative to the revenue base. In my
opinion, that cohort figure is roughly correct, meaning from 100,000 to 40,000. And I don't think it has really been understood how earth-shatteringly big that is. And also, in a way, we could like, and then you combine that with life expectancy increasing... but, I mean, we could actually just based on those numbers alone, like, drop this to half, educating the youth, um, these daycare services, schools,
the infrastructure related to that. In a way, we have absolutely increased the gross expenditure on that.
Of course, these were children in the 50s, and the youngest in the 60s, but still, it's just not discussed, because people want to keep the absolute consumption level high, and not focus on the per capita figure. But then again, regarding the older population, there are pretty good pensions coming their way, but then again, this small population simply cannot keep the pensions running for this departing group. So, this pension discussion should
be started. Like, how do we make a fair transition from these good current pensions to a sort of meager pension. I'm stirring the pot a bit here. I know your party doesn't want to have either of these discussions in public. So, I think I can, as a non-aligned person, quite freely throw these ideas around inside these walls, in this podcast. Like that, and you don't even have to take a stand, but that's just how it is. And in a way, this should be discussed at least in the parliamentary chambers, you can then amongst yourselves
talk about these topics with the tripartite system, but we really must get some discussion, some edge to this. I mean, surely, based on the numbers, the Coalition Party or the government promised that debt accumulation would break and employment would rise. Now we have, in a way, the last year starting, and my observation is that you did it wrong. You took those expenses away first, first you took away these strike protections. I mean, I support both of these, but the tax stuff should have
been done at the start too. So now, these tax cuts are coming, in a way, during the last year. And I think, that they will definitely have an impact, and dropping the corporate tax was left even until the election year, 2018, so I think there's a really big risk that next year will also be totally shitty for Finland, and only then will they start to take effect. But, well, things aren't exactly going well for Finland and the government's promises don't seem to be materializing. So in that
sense, I believe that with this momentum, the SDP will win the election. I don't know if I can comment on that yet, although a lot can still happen, and usually it goes that the closer we get to the parliamentary elections, the fact is that the government is always its own worst enemy.
Yeah, that's just how it is. And the electoral term always goes the same way, regardless of who is in the government. First there's the excitement phase. Yeah. Like, damn it, now we have power, now we're going to change the world. And this lasts until the midterm at most. Then the suffering phase begins, where you start getting pissed off at your colleague's face. Like, goddammit, I wish the elections would just come already, how can I stand this? And that leads to
always this situation where, more or less, the messing around that always exists in politics gets concentrated at the end of the term. Don't roll your eyes at me here...
at the end of the term. And then in the opposition, this is sort of the other way around. So, in the opposition, it starts with being pissed off, because usually you end up in the opposition likely after losing elections. You claim it wasn't just joy?
Sometimes you can end up there after winning elections too, but mainly after losing. That's when you have that feeling, that you realize, damn it, the power is gone, so you no longer have those sycophants and back-slappers, and people asking, "So what are we doing now?" And that usually continues until...
until the halfway point of the term. Mm.
And because our election cycle works in such a way that we also have these Finnish midterm elections always at the halfway point, meaning our municipal and county elections. Well, if you succeed in those, it usually might be the case that the opposition parties succeed, and that starts the phase of excitement, and then you start hoping all the time that the parliamentary elections were already just around the corner, because the longer we have to wait, the risk that support starts to drop increases. So this is just, in a way, these general laws of nature regarding how things usually work in politics. But
then regarding this shift from frustration to excitement and back, well, that's how it goes, and then always when the roles change, we swap papers, like "you take my lines and I'll take yours." But perhaps regarding the economy as a whole, what might be good to describe is how on earth we ended up here, so really I think it's illustrative that when you look at this last, sort of, 15-year period that we've been through, that when looking from the situation before the financial crisis, where our debt ratio was
largely around 40 percent, now in 15 years we've come to a point where it has roughly, well, more than doubled; soon we'll cross 90.
Yeah. So this is the thing, and well, what caused it is exactly this: that every year, public spending has risen faster than public revenue, and that gap has been covered specifically with debt. And regarding this expenditure-revenue question, I think it is quite correct to think about it this way: when we look at how our revenue and spending have behaved, our revenue sort of dropped back during the financial crisis, due to the fact, of course, that our growth dropped,
employment dropped. We were also hit by this really difficult structural change, which was visible specifically in the ICT sector and here in the forest industry side, which permanently caused us to...
income decreased, but at the same time, our expenses didn't drop, which would be somewhat natural, for people to think that okay, if income drops, then expenses are cut too, but our spending growth rate actually continued as before. And I think this leads to the conclusion that this cannot be fixed just by thinking that we'll just raise revenue through taxation to match the pressure of growing expenses, but rather we come
specifically to measures where this pressure for spending growth must be brought down.
I'd also say that I don't believe, when I'm crunching these billions, that this could be done with just a single silver bullet, but instead, everyone will probably have to swallow a pretty bitter pill, so that if, typically, for one's own "team" or others, certain spending cuts might be harder, while for others, it might be some of the tax decisions, but probably both...
So the glimmer of hope regarding whether this is doable, is to look at a good point of comparison, the last time we were in a somewhat similar situation, and back then we bounced back in a big way, and that was specifically related to the 90s recession.
And in '95, the situation was indeed that when looking at different European countries, our deficit was right at the bottom. A few other countries had a large deficit too, but 12 years from that, by 2007, our surplus was actually the largest of all EU countries, so in 12 years Finland turned this trend around. And well, then unfortunately came the financial crisis and so on. So what was it based on? In my opinion, it's a combination of several things. You always need luck.
No one could have predicted that things would go the way they did with Nokia.
So luck is always needed, and unfortunately that is not in our politicians' hands. Well, then of course we need very growth-oriented...
policy. We do things that, in the longer term, raise these conditions for growth, so that different kinds of successes can emerge.
And then we need pretty strict fiscal policy, so that in a situation where growth shows signs of recovery, one must be ready to act as Keynes once taught: counter-cyclically.
You have to be able to adjust the economy as well. And if all these three align... And of course, the difficult part is luck, because we don't know how the economy will develop.
There are so many factors involved everywhere. So, I do think it is possible to turn this around, but it won't be pleasant. It wasn't pleasant in the 90s either, when the decision-makers of that time tried to adjust the economy.
Quite rough measures were taken, but when looking at it in the long term, I think they succeeded in what we are now starting to attempt.
Yeah. While you answer that, Ville... I had Esko Aho here a couple of times discussing those books, which I think are quite accurate.
He speculated that this kind of stimulus is also tax stimulus, meaning this 'avoir fiscal', a perfect landing. They liberated capital and ownership tax wedges really radically, and then... I raised the point that the floating Markka was the other factor that gave us an almost equally big boost, which catapulted us in a couple of years, along with the Lipponen government's quite sensible decisions, into this surplus you described.
Then along the way there were all sorts of things... actually even...
since Lasse Lehtinen was mentioned... he wrote Peter Fagernäs's book.
When he was here on the episode— he was one of my first bosses— he defended these stock options. And I know that in Finland it's the kind of stuff people spit on, like giving options to the rich and Nokia...
options and Fortum options. That's how it's framed, but they also...
helped. So, I'm offering a small defense here for the...
owning class as well: keep in mind in that parliamentary working group that stimulus is also about giving people more means and wealth.
Alright, go ahead. That was a really good message from Joona, that this is manageable, and that's probably the shared message of all parties committed to the debt brake.
So, Finland can survive this without us plunging into the depths of Greece.
We have time now. The task is really big. It will probably take about 10 years.
It has already started during this government term, but there will be a lot of work and big decisions, but it's all doable. Around the world, we have crisis countries that have managed to handle this, dug themselves out of even bigger crises onto a very good path. And indeed, Finland also succeeded after the 90s in lowering the debt ratio from 70 down to under 40 before, within our lifetime.
I don't know how young the kids listening are, but this is manageable, though it does require determined measures. Well, that brings us to the distinction between long-term, short-term, economic cycles, and structural policy. And it is essential to be able to distinguish between them. So, of course, for example, the rules on political strikes, the expansion of local bargaining, or the export-driven model, all of which have been pushed through this term, are very significant structural reforms in the long run, which should have been done in Finland decades ago. But of course, no one thinks
that they would immediately affect the current economic cycle in any way.
Likewise, the incentive structure of social security and the incentives in taxation, they have an impact in the long run and improve people's incentives to work in all conditions, as well as the investment environment for companies, which should have been done in Finland decades ago, but of course no one thinks that they would immediately affect this economic cycle situation in any way. Likewise, the incentive structure of social security, and the incentives in taxation, they have an impact in the long run
and improve people's incentives to work in all conditions, as well as the investment environment for companies, labor market dynamics and so on. And that is what this government has above all done. Now, the economic cycle is a completely different matter. Even there, each government can do something small. Especially during the financial crisis and during COVID, I think it was very justified that money was pumped into the market, or society, using various tools, because there was such a serious
disruption. But Finland's long-term problem isn't some short-term disruption, but a long-term structural problem. Uh, so, our expenses and income are chronically out of balance, and so regardless of the economic cycle, we have to adjust the situation. And when the government started in '23, the forecasts looked quite different. Back then, all the forecasts indicated that the economy would start to turn and '25 would already see strong growth. That's what the forecasts looked like a year ago too, but then
we've constantly had things come up: Putin walking on a red carpet in Alaska, Trump's trade wars, and now a possible unjust peace and many other factors, which no government can influence in any way. And consequently, yes, here in Finland we have stimulated the economy like hell for 20 years.
Soon we've taken 10-12 billion in debt, not raised through taxes.
Well, now this government is doing that too, but one shouldn't think that those measures would suddenly turn this into growth. This is very long-term work, and it is true that we have been in gloomy years, downcast years, but once this world situation starts to calm down, hopefully so, then I am completely sure that the Finnish economy will also pick up quite a lot of speed, because as Russia's neighbor, we have been an exceptionally big sufferer from this war, both due to this uncertainty and
for example, through the fact that ten years ago we still had Russian tourists. We don't have a single one anymore. We had significant exports to Russia. Not anymore at all. We got cheap timber from Russia. Not anymore at all. And while this reaction in Europe is completely correct in terms of foreign and security policy, we are genuinely suffering from it. And thus...
the right things that, in the long run, improve the functioning of our labor market, the incentives of social security, and the operating conditions for companies, then they must be done. No matter what the economic cycle is.
And for example, right now employment is growing, even though unemployment has also increased. And that means that changes to social security have brought more people to the labor market.
For example, more students have entered since student financial aid was cut, and otherwise social security incentives were increased, and at the same time, especially our industrial export sector is currently able to increase employment quite well already, and well, we can only get rid of this high unemployment through growth. Like, no government could have prevented unemployment with a magic bullet in a situation where there is a major war in Europe. Yeah, but absolutely...
awesome. So, Ville Valkonen and Joona Räsänen, well...
the chair and vice-chair of this parliamentary debt working group, so...
you are doing important work. And I've really warmed up... I really didn't believe in these parliamentary working groups and committees, so actually it was Heikki West... no wait, you should come here, Mr. Chairman... so Heikki Westman's discussion completely changed my mind about the fact that these are important institutions.
By the way, do you actually have a favorite committee? I've been heard by the Commerce Committee a few times myself, but I have... in a way, this clearly increases my knowledge, and I'm very happy to talk more about these.
Well, the Constitutional Law Committee is undeniably the most influential committee in the whole Parliament, because if it gives a thumbs up or down, then no law can proceed, or it enables moving it forward.
But of course, we are both members of the Finance Committee and the Tax Subcommittee as well. I am the chair there and Joona is a member, so economic policy is the king of sports, isn't it? Yeah, I was about to say that my own experience of the different committees I've sat in... when I was...
I actually started counting here, that I have been back in the day in the Administration Committee, the Transport and Communications Committee, the Committee for the Future, that was the most cent— the Constitutional Law Committee, the Grand Committee, the Legal Affairs Committee, then the Finance Committee, so yes I just... or maybe sometimes the sauna committee, but anyway, out of these I do choose the Finance Committee. So
it's partly due to my own interests, of course, but also because when ultimately, however, when we think about the exercise of public power, even though it's always said that the exercise of public power is based on law, well, so it is, but how it is implemented, well it is implemented with euros. M so ultimately it is the case that one must, in a way, realize how the euros behave here, and that's why it is um, interesting. By the way, I could tell an anecdote about this, when
we in the Finance Committee have, according to these main budget classes, um, divided into these sub-committees or ministry... so we go by ministry, so that we have, for example, the Tax Sub-committee, which is a bit different as it handles also purely legislative questions, but mainly, from a budget technique perspective, it is divided into sub-committees, so there is for example the Transport and Communications Sub-committee,
which focuses on the Ministry of Transport and Communications' matters, and then we do have in Parliament, however, a separate Transport and Communications Committee m whose task is to consider it more from the legislative side, how things in transport... and well, once there was a visitor group in Parliament and there were then representatives, two representatives there, one was from this Transport and Communications Committee and the other was from this Transport Sub-committee and then an observant visitor asked what on earth is the difference between these, that
he doesn't understand that there's a committee and then there's a subcommittee, so this representative described the difference by saying that he sat in the transport subcommittee, and that over on the committee side, they decide on traffic signs, while here on the subcommittee side, we decide on the euros, and for this reason, any day, I'd rather choose deciding on the euros than deciding on the traffic signs. You can use this as a metaphor, but
then, like Ville said, of course, if you think about it purely from the perspective of an MP exercising power, then yes, of course, the Constitutional Law Committee's role is different in the sense that, regardless of the government-opposition setup, it is the committee that acts as a guardian of how individual pieces of legislation will actually proceed. But I will say this: I am somewhat inclined to think that here, too,
—I won't say the interpretation of the Constitution— but things have sometimes been taken extremely far. It feels like every single legislative proposal, no matter what it concerns, is sent to the Constitutional Law Committee to be put through the wringer, and then, of course, the committee has to scrutinize them, has to hear experts, and even if, on the surface, there doesn't seem to be terribly many problems regarding the Constitution, then sure as hell, when you read that proposal
for a long time, some possibility always pops up that it might be that because of this and that, it links to this. And I think we have done ourselves a bit of a disservice in Finland, in that we have started... perhaps if you think about the constitutional reform back in the day, we've started interpreting it perhaps slightly more broadly than was intended back then. This is maybe more of a layman's perspective, based purely on
sitting around that table, and having watched this discussion a bit and read some of the committee statements, this sometimes comes to mind, because it's often the case that...
Politics has become a bit such that we always sort of hide behind the Constitution, in a way. Depending on the setup, of course, we start using the Constitution to justify that this or that cannot be done. Even though, in principle, it should belong to political discretion. And if wrong decisions are made, then voters can always change their minds in the elections and choose different decision-makers—though don't replace us! It's, well, you can replace anyone else, but... Yeah, but... you seem to be quite
sensible guys, and it's really extremely important that...
no, no, but that we don't take some of those leftist thinkers there, who then vote against everything in these important matters that the government should be able to do. But yeah, let's hope, or it's quite possible now that you'll get into the subcommittees and even ministries to wield that euro-power.
So, perhaps this episode will be named "Architects of a Potential Blue-Red Coalition" or something grand like that. But let's not go that far yet. Elections first.
But I suggest we go, Joona Räsänen and Ville Valkonen. By the way, you can email them at eduskunta.fi. So let's move to the Inner Circle side, since this is so interesting in my opinion, this negotiation process on how these parliamentary working groups can be formed. So let's go through this debt brake negotiation a bit more over on the Inner Circle side. Thank you very much, Sami and Joona. This was an interesting discussion. Dear listeners, please share this and follow us on
social media. Yeah, absolutely. And let's do this again during the election year. I think things will heat up as we head towards the election year. So, those times are soon ahead of us. Since you've watched or listened this far, please subscribe to the channel. Thank you. Thank you very much.
Thank you.