Episode 116 · 2022-01-09 · 28:58 · Original in Finnish
The Finnish Economy in Trouble Again | Stefan Törnqvist | Negotiator 116
Originally published as “Suomen talous taas ongelmissa | Stefan Törnqvist | Neuvottelija 116”
Stefan Törnqvist returns to the channel and holds to the most provocative claim of his previous appearance: everyone benefits from the euro except the Finnish national economy, while for the trade unions it has become, from what he hears, a fight for survival. The sharpest observation is about timing — because pay in Finland can only go up, large increases could never really be granted in a boom either, and asked by the host whether the mood resembles 2007, he sees the same signs and warns of another 12 years without growth. As a county election candidate he names the end of municipal boundaries as the reform's best feature. On monetary policy he agrees with the host's forecast that the Fed will tighten and the European Central Bank cannot, because a market rate cannot be imposed on Italian debt without a banking crisis that Basel regulation has built into the balance sheets; his most likely endgame is a world record in inflation, unless a war changes the calculation.
Core theses
- Wages that cannot fall cannot safely rise much either, which turns a distributional argument into a timing one.
- The 2007–2008 comparison is specific: a boom in which large settlements are granted is the condition that makes the following downturn unmanageable.
- The ECB's constraint is not inflation but Italian debt, and Basel put that debt on bank balance sheets by design — which is why Törnqvist calls the Basel Committee the real master of the universe.
- The claim that everyone gains from the euro except Finland is stated as a conclusion about one economy's structure, not as a general case against monetary union.
Watch and listen
Key moments
- 00:00 — Guest Stefan Törnqvist
- 02:01 — Esko Aho, 1991 and the missing culture of agreement
- 03:27 — The social and health reform and public sector growth
- 05:38 — Why the National Coalition rather than RKP or the Finns Party
- 07:41 — The euro does not suit any euro area state
- 09:22 — In the United States tightening is a political question
- 11:12 — The best feature: municipal boundaries disappear
- 12:54 — What municipalities want to transfer to the county
- 14:26 — Choosing care by where you work
- 15:50 — The endgame of monetary policy
- 17:19 — Basel regulation forces banks into government bonds
- 18:59 — The most likely outcome: a world record in inflation
- 20:21 — The Gosbank scenario and central bank money
- 22:38 — Digital currency and the redundancy of the banking sector
- 24:04 — Could the development be slowed
- 25:20 — The Basel Committee as master of the universe
- 26:47 — The short and the long run in history
- 28:02 — Closing words
Summary
Stefan Törnqvist returns to the channel and holds to the most provocative claim of his previous appearance: everyone benefits from the euro except the Finnish national economy, while for the trade unions it has become, from what he hears, a fight for survival. The sharpest observation is about timing — because pay in Finland can only go up, large increases could never really be granted in a boom either, and asked by the host whether the mood resembles 2007, he sees the same signs and warns of another 12 years without growth. As a county election candidate he names the end of municipal boundaries as the reform’s best feature. On monetary policy he agrees with the host’s forecast that the Fed will tighten and the European Central Bank cannot, because a market rate cannot be imposed on Italian debt without a banking crisis that Basel regulation has built into the balance sheets; his most likely endgame is a world record in inflation, unless a war changes the calculation.
Ratchets work in both directions
The argument is neater than it first sounds. If pay cannot fall in a downturn, then a large increase granted in a boom is permanent, and the adjustment has to come out of employment and growth instead. That makes restraint during good years a condition of survival in bad ones rather than a preference.
Why 2007
The comparison is the host’s, and Törnqvist accepts it on one mechanism: generous settlements at the top of a cycle, with order books full and the public sector growing. Narrow claims of that kind are the checkable ones.
Italy, not inflation
His reading of the ECB’s position is that the binding constraint is sovereign debt held by banks and pension funds under Basel rules that treat it as risk-free. Whether or not one accepts the conclusion, it locates the constraint somewhere specific, which most commentary on central bank hesitancy does not. Recorded six weeks before Russia’s invasion, his caveat that a war in Ukraine would change the politics reads differently now.
Watch
The recording lives on the Neuvottelija channel: Suomen talous taas ongelmissa | Stefan Törnqvist | Neuvottelija 116. A Finnish edition of this episode is published at www.neuvottelija.fi.
In depth
The Neuvottelija AI editions carry a long-form write-up of this episode: English · suomeksi.
Go deeper
People and topics
Guests: Stefan Törnqvist