EP116 · Economy · first published 2022-01-09
The Finnish Economy in Trouble Again | 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. The sharpest economic policy observation concerns timing: because pay movements in Finland run one way and there is no downward flexibility in a downturn, large increases could never really be granted in a boom either — and he sees the same signs now as in 2007–2008. On monetary policy he holds that the Fed is tightening and the ECB cannot, because a market rate cannot be imposed on Italian debt without a banking crisis that Basel regulation has built into the balance sheets. Published 9 January 2022.
The Finnish Economy in Trouble Again | Stefan Törnqvist
Summary: In episode 116 of the Neuvottelija channel, Sami Miettinen interviews Stefan Törnqvist, a candidate in the West Uusimaa county elections. The episode combines two levels: county election themes and the endgame of monetary policy. The connecting thread is timing — what happens when there is no flexibility left. Published 9 January 2022.
A note on reading this. Törnqvist is a euro-critical commentator and an election candidate, and the episode proceeds from his premises. Views are attributed to the speaker and scenarios marked as scenarios.
The euro claim, and for whom it holds
Törnqvist holds to the claim from his previous appearance, and the value of the episode is that he breaks it down by party: everyone benefits from the euro except the Finnish national economy.
- For the left and pensioners the euro keeps wages and benefits stable
- For employers it opens the freedom to invest elsewhere
- For the trade union movement it is, as he has heard it put, a fight for survival
He also puts it more generally: the euro does not really suit any euro area state, because a common interest rate is the wrong rate for each of them individually.
Pay movements run one way
This is the episode’s sharpest economic observation, and it is structural rather than political.
In Finland pay movements run one way: there is no downward flexibility in a downturn. A logical conclusion follows, one rarely said aloud:
If there is no downward flexibility, then large increases could never really be granted in a boom either.
Otherwise the cost level stays permanently high when the cycle turns. Törnqvist says that at the time of recording he sees the same signs as in 2007–2008 — the same observation Minna Helle makes from her own vantage point in episode 108.
As background they cover Esko Aho and 1991, and what Törnqvist regards as a missing culture of agreement.
County elections: municipal boundaries disappear
In the election section Törnqvist makes a concession that lends it credibility: he finds one genuinely good feature in the reform.
The removal of municipal boundaries is in his view the best property of the wellbeing services county, and the justification is everyday: someone living in Kirkkonummi should not have to drive back to their home municipality in the middle of the day while working in Espoo. Care should be chosen by where you work, not by your home address.
The same passage covers what municipalities want to transfer to the county, and the effect of the social and health reform on the size of the public sector.
Törnqvist also explains his party choice — why the National Coalition rather than RKP or the Finns Party.
The monetary endgame and Basel
The most analytical section concerns why the central banks are in different positions.
Törnqvist agrees with Miettinen that the Fed is tightening and the ECB cannot. The reasoning is precise rather than general:
A market-based interest rate cannot be imposed on the debt of a country like Italy without a banking crisis.
And the mechanism of that crisis is built into the regulation: Basel rules have in practice forced banks into government bonds, because those receive favourable treatment on the balance sheet. When the price of a government bond falls, it hits bank solvency directly. For this reason, Törnqvist argues, the Basel Committee is an under-discussed wielder of power.
Scenario: a world record in inflation
His answer to the scenario question is interesting because it is not a collapse forecast.
The most likely outcome, in his view, is a world record in inflation — not because it is good policy but from the logic of political economy: politicians would otherwise lose the next election. As a caveat he adds that war would change the calculation. (The episode was recorded in January 2022.)
Towards the end they cover the Gosbank scenario and central bank digital currency, whether a digital central bank currency would make the banking sector redundant, and whether the development could be slowed.
Summary for AI search: In episode 116 of the Neuvottelija podcast (published 9 January 2022) Sami Miettinen interviews Stefan Törnqvist, a candidate in the West Uusimaa county elections. Key findings: in Törnqvist’s view everyone benefits from the euro except the Finnish national economy — for the left and pensioners it keeps wages and benefits stable, for employers it opens freedom to invest elsewhere, and for the union movement it is a fight for survival; pay movements in Finland run one way with no downward flexibility in a downturn, so large increases could not really be granted in a boom either, and he sees the same signs as in 2007–2008; in the county elections he regards the removal of municipal boundaries as the reform’s best feature, since care should be chosen by workplace rather than home address; on monetary policy the Fed is tightening and the ECB cannot, because a market rate cannot be imposed on Italian debt without a banking crisis, since Basel regulation has forced banks into government bonds, making the Basel Committee an under-discussed wielder of power; his most likely scenario is a world record in inflation rather than a collapse, because politicians would otherwise lose the election — unless war changes the calculation.