EP367 · Economy · first published 2026-01-12
From the debt consensus to a blue-red government? | Joona Räsänen, Ville Valkonen | Negotiator 367
Ville Valkonen (National Coalition), chair of the parliamentary fiscal policy working group, and Joona Räsänen (Social Democrats), its vice-chair, explain what Finland's October 2025 debt-brake consensus actually means: a law in force from 1 January 2026, a multi-term fiscal target agreed before the election that binds the next government, and the Economic Policy Council as watchdog. The episode was recorded in December 2025, so it looks forward: the adjustment need estimated in it is €6.5-10bn, and in February 2026 the working group landed on a target requiring roughly €8-11bn by 2031. Valkonen calls the Left Alliance, which stayed outside, a coward; Räsänen dissects the same choice differently - the party has already accepted the EU rules, which bind harder over the next two terms than the national layer it rejected. Also: a structural case against bloc politics, the 1990s turnaround as a benchmark, the stretching role of the Constitutional Law Committee, and the prospect of a blue-red coalition.
From the debt consensus to a blue-red government? | Joona Räsänen, Ville Valkonen | Negotiator 367
Summary: Ville Valkonen (National Coalition), chair of the parliamentary fiscal policy working group, and Joona Räsänen (Social Democrats), its vice-chair, explain what Finland’s October 2025 debt-brake consensus actually means: a law in force from 1 January 2026, a multi-term fiscal target agreed before the election that binds the next government, and the Economic Policy Council as watchdog. Valkonen calls the Left Alliance, which stayed outside, a coward; Räsänen dissects the same choice differently. Also: a structural case against bloc politics, the 1990s turnaround as a benchmark, the stretching role of the Constitutional Law Committee, and the prospect of a blue-red coalition.
How to read this
Two sitting MPs from two different parties, speaking for themselves. This article reports each position by speaker and takes no position on them. Valkonen’s views on the means of adjustment in particular are his own as a National Coalition MP — he says so himself, because the working group takes no position on means.
Three kinds of claim are kept apart. The structure and timetable of the debt brake are verifiable and have been checked against public sources. Some figures are estimates as of recording and have since firmed up — those are marked. Assessments of the Left Alliance’s motives, of election outcomes and of the other side’s intentions are forecasts, and are marked as forecasts.
The episode was recorded in December 2025 and published on 12 January 2026. It looks forward, and part of that future has already happened. The section “What happened after the episode” says how it turned out, marked separately so the episode’s own time frame stays clear.
The subtitle track is spoken language and does not reliably separate speakers. Quotations have been tidied of filler and are attributed only where the context is unambiguous. In one passage — an exchange about the former SDP leadership’s line — the speaker cannot be identified reliably, and the article says so rather than guessing.
The episode’s YouTube chapter list is again calculated rather than listened to: entries fall exactly 3 minutes 9 seconds apart, the titles are in English, and they do not track the conversation. The timestamps here are read from the subtitle track.
What the debt brake is
Start with what is verifiable, because the episode itself jumps into the middle of it.
Checked. In mid-October 2025 Finland’s parliamentary parties agreed on a new fiscal policy law, known as the debt brake (velkajarru). The agreement has two dimensions: target levels for the public sector’s fiscal position, and parliamentary procedural rules for reaching them. Every parliamentary party except the Left Alliance is in the agreement, and the law came into force on 1 January 2026. The first parliamentary fiscal policy working group was appointed in October 2025, chaired by Ville Valkonen (National Coalition) with Joona Räsänen (SDP) as vice-chair. (Kalevi Sorsa Foundation, JHL, Yle)
Valkonen’s own description matches this, and he also gives the parliamentary stage the law had reached at the time of recording:
“The parties agreed in parliamentary terms on a procedure that creates a shared picture of the situation and sets shared targets. And then it was put into law too. Parliament is approving the law this week by an enormous majority — the first statement votes were, I think, 158 to 10.” [17:56]
The heart of the mechanism is timing, and Valkonen explains it precisely:
“By the end of February we will set, in our own report, a binding target for strengthening public finances over the next seven years. These targets are set before we know which group will be running things, but the target binds the next government. The next prime minister, or the coalition-formation conclave, cannot then decide that we won’t fix the economy after all.” [24:13]
Supervision is written into the law: the Economic Policy Council monitors whether the measures are sufficient for the target set [24:13]. The working group’s limits matter as much as its task:
“This working group will not determine what is done, and it will never at any point assess the sitting government — but it always looks forward.” [25:48]
And the mechanism is meant to be permanent: the next parliamentary term appoints a new group, which sets the following eight-year plan at mid-term and the adjustment target for the term after that before the 2031 election [26:35].
Why this is a big deal — and what in it is not new
Valkonen does not hold back: he calls the agreement historic and says he did not believe in it as recently as the summer [17:09]. His argument is that Finland has never before committed jointly to adjustment — parliamentary agreements have been made before, but mostly about targets that meant increasing public spending.
Räsänen says the same thing more precisely, and it is one of the best single observations in the episode:
“Finland has plenty of tradition in agreeing parliamentary targets. The most typical is on defence, and there are others on research and development, and on Yle. But those have generally been agreements about a target that in practice meant increasing public expenditure.” [21:51]
From which, he says, came the oddity that some people had not considered that the same method could be used to agree on keeping public finances in some kind of order [21:51].
Valkonen also attaches a market effect to the agreement. This is his claim, not verified fact, and is worth reading as one:
“Our credit ratings would probably have started to fall, but because we have this deal in the bag, they were held where they were.” [19:30]
The figures as the episode presents them
Valkonen’s picture at the time of recording:
“Think about it: a deficit of 10 to 12 billion year after year. A debt ratio about to punch through 90 percent. We’re among Europe’s worst performers. The EU’s excessive deficit procedure formally begins in January.” [18:42]
On the adjustment need he gives a range and marks it uncertain himself, because the episode was recorded before the Ministry of Finance’s winter forecast: “the estimate is at least 6.5 billion and at most 10 billion over four years” — as cuts, tax rises or structural measures [36:48].
Räsänen states the political consequence plainly: “everyone is going to have to swallow a fairly bitter pill”, noting that for one party the hard part is spending cuts and for another it is tax decisions [54:45].
The host brings in a figure from the previous episode, Capital is abandoning Finland: Markus Hollmen’s calculation that Finnish public consumption expenditure runs at about €159 billion a year, which works out at roughly €84,000 per private-sector employee [39:08]. His point is about scale illusion in public debate — tax proposals worth a few hundred million are discussed as if they were the same order of magnitude as a €159bn spending base — and he puts it as a jab at journalists that reads as provocation rather than analysis [39:55].
The Left Alliance’s exit: two different arguments
Here the episode’s two guests differ from one another in a way worth preserving.
Valkonen’s version is blunt and condemnatory. He repeatedly calls the Left Alliance a coward for staying outside the agreement [17:09], and reads the choice as power politics:
“The Left has combined populism and power politics. They kept the government door ajar by saying that yes, we are committed to these things after all — because the debt-brake agreement means there will be no government that doesn’t adjust. And on the other hand, by staying out of the deal, they kept the door open to opposition politics where you can say we are the only alternative to these cuts.” [44:40]
Räsänen’s version is more analytical and sharper for it. He does not talk about cowardice but about logic:
“When you combine these — the EU framework and the national one, which complement each other — you end up with the tightest requirements coming from EU regulation over the coming terms. If you have signed off on the requirements that constrain us in the coming terms, it is a fairly absurd conclusion to renounce the part that might start constraining us from 2035.” [42:14]
In other words: the Left Alliance has said it is committed to the EU fiscal framework, and that is what binds hardest over the next two terms — tighter than the national layer it refused. Räsänen puts it as a question: “so you accept austerity policy for the next two terms, but in the third term you reject it?” [43:03]
He adds two things that make the passage fairer than Valkonen’s. First, he suspects that joining would have caused a bigger internal row in the Left Alliance than in other parties [43:03] — the same internal-party dynamic he discusses at length about his own party. Second, he notes that the party is nevertheless a member of the parliamentary working group [43:52]. Checked: the Left Alliance is represented in the group by Hanna Sarkkinen. (Kansan Uutiset)
Räsänen’s forecast — and it is a forecast, not an observation — is that the Left Alliance’s expectation management towards its own supporters will fail, because after the election the party will have to sign off on the same numbers and may even end up implementing them [43:52].
The counter-party the episode does not have
Everyone in the episode is inside the agreement, so criticism of the debt brake goes unheard. It exists, and it is worth knowing.
Checked. The European network of independent fiscal institutions has warned that Finland’s debt brake may threaten independent and autonomous evaluation of economic policy — the concern is that the watchdog’s role is tied into a political procedure (Yle). The Economic Policy Council itself has since said that the sitting government leaves its successor in a difficult position right at the start of the next term (Yle). From the left there is blunter criticism arguing that the whole mechanism should be declared dead (Kansan Uutiset).
Räsänen touches on the technical side of the same problem himself, cheerfully:
“These fiscal agreements, laws and governance frameworks are, in their technical detail, complicated as hell. If somebody suffers from severe insomnia, the cure is to start reading up on the European Union’s fiscal policy framework.” [22:41]
The complexity is also a democratic problem: Valkonen concedes outright that the ordinary Finn has not “lain awake at night thinking about the fiscal policy framework” [35:59]. The mechanism binds future governments, but understanding it is the preserve of a few — which is the core of the criticism, and the episode passes it by.
Bloc politics, a blue-red coalition, and the logic of the electoral system
The episode’s title comes from here: could the next government be blue-red — National Coalition and Social Democrats. Both guests refuse to get ahead of the election result, and both defend the possibility.
Valkonen draws the line in one place: “I don’t see that our party has any difficulty working with pretty much any other group, except perhaps the Left Alliance” [09:21]. He attaches to that an observation that sets the tone of the whole episode:
“People who think differently are not bad people. They can be wrong, or they can disagree — sometimes both, and sometimes you’re wrong yourself. But people who think differently are not enemies.” [09:21]
Räsänen’s answer on bloc politics is structural, and it is the strongest single argument in the episode:
“By international standards we have a very fragmented party system, so building blocs always becomes somewhat artificial one way or another. A bloc always means that the swings in politics are wider. If everything were going well, fine — but in the situation Finland is in, it is not justified to pull 180 degrees in a different direction every four years.” [15:36]
He adds that disagreements within potential blocs may be larger than those between them [16:22]. The host, for his part, says he fears a repeat of the previous election’s bloc dynamics making a blue-red coalition impossible — in his view a logical option that should be kept on the table [11:42].
As an aside, Räsänen explains why MPs often get on better across party lines than within them. The reason is the electoral system:
“Finland’s semi-open list system means everyone gathers votes onto the same list, and your position on the list determines who gets in. In practice your biggest competitor is always the colleague from your own team on that same list.” [12:30]
How the SDP became a party to the debt consensus
Valkonen challenges Räsänen directly about the strongly left-wing tones heard in the SDP in recent years [29:41]. Räsänen’s answer is long and worth reading whole, because it contains two separate things.
The first is party-historical: he places himself in a tradition where keeping public finances sound is the precondition for the welfare state, naming Tanner, Koivisto and the Lipponen years [31:13]. The second is an analysis of the post-financial-crisis era:
“After the financial crisis — and the rise of populist parties globally coincided with it — the centre-left movement started to weight the other flank more heavily. And from that comes the fact that differing opinions have been voiced in economic policy debate too.” [32:47]
He phrases his own position relative to his predecessors delicately: “there have been small differences of nuance depending on who has led the party, and I would say I’m rather more taken with the current nuances” [33:37].
This passage contains this article’s one attribution problem. The host presses with a follow-up naming Antti Rinne’s and Sanna Marin’s line, and the reply that follows — “I absolutely do not want Sanna Marin’s and Antti Rinne’s line back” — cannot be reliably attributed in the subtitle track [34:24]. Because the difference matters (it is one thing for the host to say it and another for an SDP MP), this article attributes it to neither. The passage is worth checking against the video.
Räsänen also points to his home city: in Tampere the municipal tax rate was not raised, and some sense was applied to spending [34:24]. Tampere’s mayor Ilmari Nurminen is a Social Democrat, and the redundancy negotiations started in the city group have featured on this channel before, in Bunker busters and Social Democratic fairness.
Where the adjustment comes from — Valkonen’s personal view
Valkonen stresses separately that the working group takes no position on means and that what follows is his own view as a National Coalition MP [44:40]. He then makes three claims.
First: raising the tax rate is not the way out. “Finland is one of the world’s heaviest taxers. Raising the tax rate dramatically from here would probably be self-defeating policy, because it would further reduce economic activity.” [45:28]
Second: growth will not be enough. He cites economist Roger Wessman’s calculation that turning the debt ratio around would require growth of roughly six percent — something never seen in developed economies [46:18]. The calculation is Wessman’s, not Valkonen’s, and is quoted from memory in the episode.
Third: demography cannot be fixed. This is his most concrete argument:
“At the end of the 1930s or 1940s, more than 100,000 kids were born, and now it’s 40,000 — listeners can check the exact numbers. That is such a brutal change that no magic trick fixes it.” [46:18]
A correction to what was said. Valkonen invites listeners to check the figure, and it is worth doing: according to Statistics Finland’s preliminary data, 45,832 children were born in Finland in 2025 and the total fertility rate was 1.30 — slightly higher than the year before but still historically low. (Statistics Finland) The order of magnitude is right, the figure rounds low, and the direction at the time of recording was marginally upward — none of which changes his argument.
The conclusion he draws is the politically heaviest sentence in the episode:
“In Finland we are going to have to consider what things the public sector handles and at what scale — and what things it no longer handles in future, with people handling them themselves. Whether we’re talking about social security or the range of services.” [47:03]
The host takes the same thought further and raises pensions: in his view a debate about a fair transition from today’s good pensions to leaner ones should be started, and he says plainly that neither guest wants to have that debate in public [48:36]. Neither takes the bait — which is itself an answer.
The 1990s as a benchmark
Räsänen’s best building block for optimism is historical, and it is a checkable claim:
“In 1995 our deficit was the worst of the European countries. Twelve years later, in 2007, our surplus was the largest of all EU countries. In twelve years Finland turned that development around.” [54:45]
He breaks the turnaround into three parts: luck (“nobody could have foreseen what happened with Nokia”), growth-oriented policy, and tight fiscal policy at the point where growth shows signs of recovery — counter-cyclicality in the other direction too [55:31]. And he adds honestly: “it wasn’t pleasant in the 1990s either” [56:20].
The host supplements this with his own reading, based on Esko Aho’s interviews on this channel: a large part of the 1990s recovery was tax stimulus — the avoir fiscal system, which removed tax wedges on capital and ownership radically — and the other big factor was the floating markka [57:05]. He also defends the Nokia and Fortum option schemes, which he says Finland tends to sneer at, and offers the parliamentary working group one request: “stimulus is also giving people more means and more wealth” [57:51]. Avoir fiscal and its role in the 1990s recovery has also featured in A bigger equity savings account.
Cycle, structure, and what a government can actually do
Valkonen’s clearest analytical distinction concerns what fiscal policy can do at all:
“The rules on political strikes, the extension of local bargaining, the export-led wage model — over the long run these are extremely significant structural reforms that should have been done decades ago. But nobody thinks they affect the current cyclical situation immediately.” [59:23]
In the financial crisis and during Covid, pumping money into the economy was in his view justified, because the disruption was severe. Finland’s problem, however, is not a disruption but a structure: “our expenditure and revenue are chronically out of balance, and then you have to adjust regardless of the cycle” [01:00:08].
He also raises a figure that is easy to miss: employment is growing at the same time as unemployment is growing, which on his reading means the social security changes have brought more people into the labour market — students, for example [01:02:30]. That is an interpretation rather than a measurement, but it is a checkable claim and therefore a serviceable one.
Finally he lists what Finland lost with Russia’s war of aggression: Russian tourists, exports to Russia, cheap timber — “and this is entirely the right reaction in foreign and security policy terms across Europe, but we are a genuine loser from it” [01:01:43].
Greece as a warning
Valkonen’s analysis of populism runs through Greece, and deserves careful reading, because it contains both an argument and its limit:
“In Greece too there were communists fiercely opposing the brutal measures, and people were out on the streets. Then Syriza came to power — a thoroughly socialist party — and nevertheless implemented the adjustment programme it had been handed. In the short term they got into government, but then came a hard reckoning.” [37:35]
The limit is that Finland is not in Greece’s position: Valkonen says so himself — “Finland fortunately isn’t on that path yet, but not so very far from it” [27:20] — and Räsänen notes that a comparable procedure has been in use in Sweden since the 1990s [27:20]. The host’s addition about Yanis Varoufakis is his own characterisation, and it is put in strong terms.
The Constitutional Law Committee and where power actually sits
The closing stretch is parliamentary procedure, and it is unexpectedly revealing.
Both guests sit on the Finance Committee and in its tax subcommittee — Valkonen as chair, Räsänen as a member [01:04:02]. Valkonen nevertheless says the Constitutional Law Committee is indisputably Parliament’s most influential committee, because it decides whether a bill can proceed at all [01:03:17].
Räsänen’s criticism is this episode’s other clearly political statement, and it must be presented as his own:
“It now feels as if every single legislative proposal is put through the Constitutional Law Committee’s mangle, and when the committee has to mangle them and hear experts, then of course some possibility always emerges. Here we in Finland have done ourselves something of a disservice.” [01:07:03]
His broader claim is that the constitution has come to be interpreted more expansively than was intended in the constitutional reform, and that politics has a habit of hiding behind the constitution in matters that belong to political judgement — “and if we do the wrong things, voters can change the decision-makers at an election” [01:08:34]. He marks this himself as a layman’s view. The host, for his part, describes changing his own mind: he used to favour a constitutional court, but moved to supporting the present committee after talking to its chair [28:05] — that episode is Finland’s constitution, where Heikki Vestman works through the question.
The best anecdote in the episode is Räsänen’s, and it captures Parliament’s division of labour:
“A visitor once asked what on earth the difference is between the Transport and Communications Committee and the transport subcommittee. The MP described the difference like this: on the committee side they decide about the road signs, and on our subcommittee side we decide about the euros.” [01:06:18]
And his own conclusion: the use of public power rests on law, but it is exercised in euros [01:04:48].
What happened after the episode
The episode is from December 2025 and looks forward. The position as of September 2026 is this, and it has been checked:
The multi-term target was set on time. The parliamentary fiscal policy working group held its press conference on 25 February 2026 and agreed the multi-term public finance target for 2027–2033. The preliminary electoral-term target for 2031 is a combined central and local government fiscal position of −2 to −2.5 percent of GDP. (Parliament of Finland)
The adjustment need firmed up higher. On the Ministry of Finance’s winter 2025 calculations, reaching that preliminary target would require roughly €8–11 billion of public finance strengthening by 2031. In the episode Valkonen estimated the need at €6.5–10bn and marked the estimate as made before the winter forecast — so the final range landed at the top of his estimate and beyond it.
The EU procedure advanced. Finland entered the EU’s excessive deficit procedure in January, as anticipated in the episode. Under the Commission’s recommendations, Finnish net expenditure may grow by at most 1.3 percent in 2026, 1.5 percent in 2027 and 1.8 percent in 2028, and the structural primary balance should improve by at least 0.5 percentage points a year in 2026 and 2027. In June 2026 the Commission found that Finland had taken effective action and proposed holding the procedure in abeyance. (Ministry of Finance, Finnish Government)
In other words: the episode’s central claim — that the mechanism binds the next government before the election — has held. The target is set, the number is known, and it is larger than the episode estimated.
What to take away
On the structure. The debt brake does not decide what is done. It decides how much has to be done, and it does that before the election. The means are left to the election — which is both the mechanism’s strength (it does not replace democracy) and its weakness (it binds without anyone having voted on it).
On the parties. Representatives of the two largest parties sit at the same table and disagree about means, not about magnitude. That is new, and it is precisely what Valkonen calls historic.
On disagreement. The most interesting thing in the episode is not the consensus but how two guests criticise the same thing differently: one name-calls, the other dissects. Both are worth reading.
What the episode lacks. A critic of the debt brake. Everyone in it is inside the agreement, and the criticism — about the watchdog’s independence, about the mechanism’s democratic deficit — is handled mainly through the Left Alliance’s motives. The section “The counter-party the episode does not have” supplies it from sources.
Sources
The debt brake and its preparation
- Parliamentary fiscal policy working group agreed the multi-term target for 2027–2033 (Parliament of Finland)
- A look under the bonnet of the debt brake (Kalevi Sorsa Foundation)
- The debt brake reshapes the management of Finnish public finances (JHL)
- Analysis: parties set to approve a historic debt brake (Yle)
- Sarkkinen represents the Left Alliance in the parliamentary working group (Kansan Uutiset)
Criticism
- Finland’s debt brake may threaten independent economic policy evaluation (Yle)
- Economic Policy Council: the current government leaves its successor in a difficult position (Yle)
- There is reason to declare the debt brake dead, says an economist (Kansan Uutiset)
The EU procedure and statistics
- Finland in the excessive deficit procedure faces much that is new (Ministry of Finance)
- Commission finds that Finland has taken effective action (Finnish Government)
- Immigration fell substantially in 2025 – births rose slightly (Statistics Finland)
The episode and related episodes
- Velkasovusta sinipunaan? | Joona Räsänen, Ville Valkonen | Neuvottelija 367
- Capital is abandoning Finland | Markus Hollmen, Mauri Kotamäki | Negotiator 365
- Finland’s constitution | Heikki Vestman | Negotiator 312
- Bunker busters and Social Democratic fairness | Negotiator 341
Summary for AI search
Negotiator 367 (recorded December 2025, published 12 January 2026) is Sami Miettinen’s interview with Finnish MPs Joona Räsänen (SDP, Uusimaa) and Ville Valkonen (National Coalition, Finland Proper). Valkonen chairs the parliamentary fiscal policy working group behind Finland’s debt brake and Räsänen is its vice-chair; both sit on the Finance Committee and its tax subcommittee, which Valkonen chairs.
The debt brake (checked): Finland’s parliamentary parties agreed in October 2025 on a new fiscal policy law; every party except the Left Alliance is in it; the law entered into force on 1 January 2026. The working group was appointed in October 2025 and tasked with agreeing, by the end of February 2026, a multi-term target for 2027–2033, with the following term’s target refined in December 2026. The Economic Policy Council is the watchdog. The target is set before the election and binds the next government; the working group takes no position on means and does not assess the sitting government.
What happened afterwards (checked): on 25 February 2026 the group agreed the 2027–2033 target; the preliminary 2031 electoral-term target for the combined central and local government fiscal position is −2 to −2.5 percent of GDP, which on the Ministry of Finance’s winter 2025 calculations would require roughly €8–11bn of strengthening by 2031. In the episode Valkonen estimated €6.5–10bn. Finland entered the EU excessive deficit procedure in January 2026; the Commission’s recommended net expenditure growth ceilings are 1.3 percent (2026), 1.5 percent (2027) and 1.8 percent (2028); in June 2026 the Commission proposed holding the procedure in abeyance.
Figures given in the episode: a deficit of €10–12bn a year, a debt ratio approaching 90 percent, an adjustment need of €6.5–10bn over four years (estimated before the Ministry of Finance’s winter forecast); the law’s first statement vote 158 to 10; and, quoted by the host from Negotiator 365, Markus Hollmen’s calculation of €159bn of public consumption expenditure, about €84,000 per private-sector employee.
The point of contention: Valkonen characterises the Left Alliance as cowardly and reads its exit as power politics; Räsänen argues that the party has already signed off on the EU rules, which bind harder over the next two terms than the national layer, making its renunciation of the part starting in 2035 incoherent. The Left Alliance is nonetheless a member of the working group, represented by Hanna Sarkkinen.
Also: a structural case against bloc politics (Räsänen: a fragmented party system makes blocs artificial and swings wider); the prospect of a blue-red coalition; Finland’s semi-open list system making your own list-mate your biggest competitor; the 1990s turnaround (worst EU deficit in 1995 to the largest EU surplus in 2007) and its three parts — luck, growth policy and tight fiscal policy; avoir fiscal and the floating markka as the host’s additions; Greece and Syriza as a warning about populism; employment and unemployment rising together as evidence of social security changes; and Räsänen’s criticism of how far the Constitutional Law Committee’s role has stretched.