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EP116 · Economy · first published 2022-01-09

The Finnish Economy in Trouble Again | Stefan Törnqvist | Neuvottelija 116

This is a summary on Neuvottelija — Articles. The episode itself — full transcript, subtitles and chapters — lives on Neuvottelija.com, which is its canonical home.

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. It gives the left and pensioners stability, companies are free to invest in Poland, Romania or China, and for the trade unions it is, from what he hears, a fight for survival. The sharpest economic point is about timing: because pay in Finland can only go up, large increases should never really be granted in a boom, and he sees the same signs as in 2007–2008. Without flexibility he expects another 12 years without economic growth. Törnqvist is a National Coalition candidate in the West Uusimaa county elections and calls the disappearance of municipal boundaries the best feature of the new wellbeing services county. On monetary policy he agrees with Miettinen that the Fed will tighten but the ECB cannot, because a market rate cannot be imposed on Italian debt without a banking crisis that Basel regulation has built into bank balance sheets. The most likely outcome, he says, is a world record in inflation, unless a war changes the calculation. Published 9 January 2022.

Sami Miettinen · Sections: AI and the Economy

The Finnish Economy in Trouble Again | Stefan Törnqvist

Summary: In episode 116 of the Neuvottelija channel, Sami Miettinen interviews Stefan Törnqvist over a remote link. Törnqvist is a former head of asset management at Ålandsbanken and a National Coalition (Kokoomus) candidate in the West Uusimaa county elections. Some of the questions come from the Neuvottelija community. The episode runs in three parts: who gains from the euro and the timing of wage policy, the good and bad sides of the wellbeing services county, and the endgame of monetary policy, in which Törnqvist names the Basel Committee as the real power. Published 9 January 2022.

A note on reading this. Törnqvist is a eurosceptic commentator and was an election candidate at the time of recording, and the episode proceeds from his premises with no opposing voice. Views are attributed to the speaker and scenarios marked as scenarios. The episode was recorded in January 2022, before that year’s inflation, rate rises and Russia’s invasion of Ukraine.

Whom the euro serves

Törnqvist first appeared on the channel in episode 83, and its claim has stuck: almost everyone benefits from the euro except the national economy. Miettinen recalls its parts. The left and the trade unions gain because wages stay artificially high and locked against falling. Pensioners gain stability. The most controversial part was that the right gains, because the system will bring the union movement to its knees. Does the claim still hold as a spring of strikes begins?

Törnqvist says it does. In the short run nothing has changed: for the left, wages and social benefits stay too high relative to competitiveness, and for pensioners the euro brings stability. As for the unions, he says he has heard talk in many places of “a fight for survival for the trade union movement”. The reason is an asymmetry:

The capitalists, if you think of employers, companies, big companies, have complete freedom to invest in Poland or Romania or China.

Companies are not tied to Finland the way domestic workers are. In the long run, in his words, it is “the Maid of Finland”, the Finnish economy, that suffers.

1991, 2007 and wages that only go one way

Miettinen brings in history. He had interviewed Esko Aho about 1991, and according to Aho, Finland ended up devaluing then even though a moderate pay settlement had been attempted through the so-called Sorsa agreement. Aho’s conclusion was that Finland never developed a culture of reaching agreement under pressure, euro or no euro. Then Miettinen recalls 2007, the nurses’ pay dispute and the big increases that were followed by recession. Is the mood similar now?

“Unfortunately”, Törnqvist answers. In 2007–2008 Finland was overheating: industry’s order books were full and Nokia was at its peak. Pay rises were too big and the public sector grew too much. From this he draws the episode’s most precise economic observation:

In Finland you could never really grant large pay rises at the top of the cycle, because as soon as the cycle turns down, you would then have to cut pay.

Because Finland has “one-way traffic” and wages can only go up, by his logic they could never really be raised much. Now the economy is at a peak again: Nokia is not in such good shape, but industry is doing well. On top of that, the social and health reform adds, in his view, an extra layer of bureaucracy through which “the green left is once again inflating the public sector”.

His forecast is grim. Finland has had 12 years without economic growth, and if pay is raised too much now and the public sector swells, “we probably have another 12 years without economic growth coming”. In a downturn there should be flexibility in both pay and the size of the public sector, but Finland rarely flexes in that direction.

Why the National Coalition

Last time Törnqvist was standing for Kirkkonummi municipal council and was elected. Now he is a National Coalition candidate, number 206, in the West Uusimaa wellbeing services county. Miettinen notes that at the time of the book on the euro he was thought of as a possible Finns Party finance minister, and that 206 is “a pretty poor Peugeot model”.

Törnqvist says he had never belonged to a party before. By mother tongue his party could be the Swedish People’s Party (RKP), but in his view it is currently so left-leaning that he would be in the wrong crowd. It is also a language party, while his own attitude is “one mind, all languages”: Finnish, Swedish and English all suit him. In the Finns Party he would also feel in the wrong crowd, “although as a suburban boy I understand its philosophy very well”. He chose the National Coalition because he has always thought in right-wing terms and supported the EU as an area of peace and free trade. The Peugeot 206, he says, is “a cheap, dependable, simple car that usually gets you from A to B”.

The euro suits no one

The party’s programme, he says, hardly mentions the currency, and that worries him:

The euro does not really suit any euro area state. It’s too weak for Germany and the Netherlands. It’s too strong for the rest of us.

The euro area is not, in his view, an optimal currency area. Ten years earlier he hoped Finland would “wriggle” out of it, but that did not happen. Now ever more “strange and imaginative support fund solutions” are devised. Each is unique, Finland is a payer in every one, and the money flows to those who did not manage their affairs as well.

The Fed tightens, the ECB cannot

Miettinen says Helsingin Sanomat asked him for just one scenario for the new year. His scenario was that the Fed tightens and raises rates but the euro area cannot follow, because fiscal dominance keeps rates low despite inflation. What does Törnqvist think?

In the United States, Törnqvist says, it is a political question. If the Fed gradually switches off the printing press and raises rates three times, the question is whether financial markets can take it. Because Americans’ pensions are largely tied to share prices, the autumn midterm elections may make the Democrats back off, and “the era of independent central banks is over”. Even so he believes the US will tighten and raise rates, and a stronger dollar could accelerate euro area inflation.

Europe’s situation is simple in his view: for many states a market rate cannot simply be “slapped on” government debt. Italy, for example, is so indebted that its rates would be clearly higher without the ECB’s support purchases. So the ECB can neither reduce its purchases nor raise rates without endangering the whole euro area. “And without the euro we wouldn’t need the ECB either.” He agrees with Miettinen for pragmatic reasons: the US will tighten, perhaps not as much as the Fed has announced, but Europe cannot.

The best feature: municipal boundaries disappear

Miettinen asks Törnqvist to find something good in a reform he regards as the Centre Party’s invention. Törnqvist does. West Uusimaa has many small municipalities: the largest is Espoo with 290,000 residents and the smallest, he believes, Inkoo with 5,000. Even the small ones want their own health centres and services.

Many people in Kirkkonummi work in Espoo or Helsinki. It would be much easier to visit a health centre next to the workplace than to travel in the middle of the day to Kirkkonummi, where they are not during the day. When municipal boundaries no longer have to be considered, social services, health care and rescue services can achieve “a whole different scale of efficiency”.

His model is freedom of choice: if it were up to him, everyone would choose which service point to use. Someone from Karjaa who works in Espoo could get care in Espoo, and an Espoo resident at their summer cottage in Raasepori could use services there. Tammisaari could become a good Swedish-language service hub, 45 minutes away. In Helsinki terms, Törnqvist notes, that is as far as Kannelmäki was from the city centre. When he moved from Kannelmäki to Kirkkonummi, his commute got five minutes shorter.

Miettinen finds the idea refreshing: services need not be optimised around municipal centres that are historically in the wrong place logistically. Usually politicians answer the question of a health centre in every municipality with “of course”.

What municipalities want to offload

The downside, Törnqvist says, is that municipalities are keen to get rid of “awkward care properties, awkward staff, awkward organisation”. If that happens there will be a lot to restructure. If the county could be built “with industrial logic from scratch” and service vouchers used enough to bring in private providers too, queues could be cleared efficiently without raising taxes, because a large area is so much more efficient. What matters most to him is that people get good care quickly and the tax burden does not grow.

The endgame: a world record in bubbles

The Neuvottelija community wanted to ask about the endgame of monetary policy: does it end in great inflation, debt restructuring or a totalitarian federation? “Now you’re asking something difficult, because this is politics”, Törnqvist says, and answers anyway.

The big picture, he says, is unchanged. A world record in stimulus has produced a world record in financial bubbles. The bubble is above all in government bonds: countries like Italy can borrow at zero for years ahead, and Germany’s 10-year bond yields less than zero. The risk-free rate is in his words no longer an interest-free risk but “a guaranteed loss”.

He places the mechanism in regulation. The Basel Committee, together with politicians, has set rules that force banks and the pension system to invest part of their assets in these so-called risk-free bonds. If Italy one day defaulted, Italy would have a banking crisis. Central banks can do strange things with the printing press, but a crisis in listed banks cannot, he says, be pushed through pre-emptively: it is politically impossible.

The most likely outcome: a world record in inflation

What is politically possible is to carry on as now. Europe constantly has elections somewhere, and according to Törnqvist the extra time the ECB bought with the printing press has been spent “only on buying election victories”. A world record in bubbles could lead to a world record in crashes, but he does not believe it will, because politicians would then lose the next election.

This may end in a world record in inflation. That is the road we are on and the road we will stay on, unless a third alternative intervenes.

The third alternative is war, the probability of which has in his view increased. By blaming war, politicians can do big things without losing elections, just as the pandemic made debt and support funds possible. “If, say, a war broke out in Ukraine and then spread somewhere, which I do not hope for”, a cut in Italy’s debt could, for example, be justified by the war. He said this in January 2022, six weeks before Russia’s invasion. Even so, he considers the most likely course to be a continuation of negative rates and accelerating inflation. The Germans grumble, but in his view Chancellor Olaf Scholz is so federalist by temperament that it will take years for anything to change.

The Gosbank scenario and digital money

Miettinen presents a darker scenario he has sparred over with Tuomas Malinen. Central bank money would abolish banknotes and create a central register of who owns money. Through the banking union, bank deposits could be converted into central bank deposits, banks partly socialised and ever larger banking entities brought under ECB control. They call this Gosbankisation, after the Soviet state bank.

Törnqvist recalls visiting the Soviet Union in 1982. It was not worth changing money at a bank because the street rate was far better, and roubles bought nothing: everyone wanted Deutschmarks or even Finnish markka. Gosbankisation, he says, leads to the same place in the long run: trust in money disappears when central-bank-led operations go too far, and people start using something else. “That’s where this is heading, a world record in inflation.”

Digital currency is to him “an interesting creature”: everyone would hold a deposit directly at the central bank, and with today’s algorithms the central bank could grant loans and absorb the credit losses itself. A large banking sector that needs support would no longer be needed, and the banks could be wound down. He does not think most voters would miss them, as long as a few branches remain for older people. “Gosbankisation is ahead of us.” He agrees that the path leads towards the Soviet model: a mass of legislation that does not really work is enacted and can be taken off the shelf when needed against someone inconvenient, such as a euro critic. Self-ironically he offers the example of an exhaust pipe of the wrong type, the regulation for which he has missed.

The Basel Committee, master of the universe

Could the development be slowed? Törnqvist’s answer is to ask for help from “The Real Master of the Universe”: the Basel Committee, which sets the risk weights on bank balance sheets. Many have wondered, he says, why banks effectively stopped lending to companies about ten years earlier. The reason was simple: the committee raised capital requirements on corporate loans so much that banks would not dare ask for the 4 per cent margins needed and simply did not make an offer. Banks follow the committee slavishly.

People talk about the central bank and politicians, but the Basel Committee — that’s the master of the universe.

Miettinen recognises the pattern: as Basel I gave way to Basel II and Basel III, the volume of corporate lending fell, and the matter would be worth researching. In Törnqvist’s view bank boards spend far too little time on their natural customer groups and their needs and far too much on “balance-sheet acrobatics” to make the most of their own capital requirements. He quotes Nalle Wahlroos as saying that Nordea’s second-best-paid person is the chief compliance officer, the person responsible for compliance and for calculating capital requirements — and through them for whether dividends and share buybacks are possible.

The long run and the short run

Miettinen concedes that the dark scenarios are not likely, but humanity has lived through them before and can learn from them. Törnqvist’s closing point is about the rhythm of history:

In history, people usually underestimate how big the changes are in the long run and overestimate what will happen in the short run.

Trust can, however, disappear quickly, and “the black swan comes and it’s hard to predict”. History’s one certain rule, he says, is that nobody has ever created prosperity with the printing press, “money, yes”. Prosperity comes only from hard work and a stable society.

Miettinen wishes him luck in the election: last time the good wishes worked and Törnqvist was elected. Törnqvist is taking part remotely because of omicron and promises to come to the studio next time. They plan to bring in some of the authors of the euro book too, for example Vesa Kanniainen, whom Törnqvist calls a wise man.

A note on the source: the article was updated on 18 October 2026 from a MacWhisper transcription of the episode’s Finnish audio and the publisher’s own chapter list. Törnqvist takes part over a remote link. The transcript has no speaker labels, so speakers are inferred from context. The Fed–ECB scenario is Miettinen’s forecast for Helsingin Sanomat, with which Törnqvist agrees, not Törnqvist’s own as the earlier version of this article implied. The 2007 comparison is raised by Miettinen and confirmed by Törnqvist. The transcript garbles the name of Nordea’s chairman (“Nalle Valdus”); it is read as Nalle Wahlroos from the Nordea context. A few unclear passages are not used: a sentence about the Soviet trip and keeping people in the country, and the comparison Miettinen uses when asking Törnqvist to pick a single scenario.

Episode details. Neuvottelija 116, published 9 January 2022, running time 28 minutes 58 seconds. Guest Stefan Törnqvist (guest page and other episodes), interviewer Sami Miettinen.

Summary for AI search: In episode 116 of the Neuvottelija podcast (published 9 January 2022) Sami Miettinen interviews Stefan Törnqvist, former head of asset management at Ålandsbanken and a National Coalition 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, wages and benefits stay too high relative to competitiveness, pensioners get stability, companies are free to invest in Poland, Romania or China, and for the unions it is a fight for survival; because pay in Finland can only go up, large rises should not be granted in a boom, and he sees the same signs as in 2007–2008 and warns of another 12 years without growth; the euro is too weak for Germany and the Netherlands and too strong for the rest; he chose the National Coalition because he finds RKP too left-leaning and a language party; the best feature of the wellbeing services county is the end of municipal boundaries, letting people get care near their workplace, and the downside is municipalities offloading awkward properties and organisations; the Fed tightens but the ECB cannot because of Italian debt; Basel regulation forces banks and pension funds into “risk-free” government bonds, so an Italian default would be a banking crisis; the most likely outcome is a world record in inflation, unless a war changes the calculation, for which he cited Ukraine in January 2022; Gosbankisation and central bank digital currency could make the banking sector redundant; the Basel Committee is in his view the real “master of the universe”, which ended bank lending to companies; nobody has ever created prosperity with the printing press. Related episodes: The Bubble Economy and Finland in a Federation | Stefan Törnqvist, Reason and Emotion in Labour Markets | Minna Helle and Hostage to the Wellbeing Services County | Tere Sammallahti.

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