WEBVTT 1 00:00:01.000 --> 00:00:04.000 All right, welcome to the Neuvottelija channel. 2 00:00:04.000 --> 00:00:23.000 Good signs in the Finnish economy. Finland's economy has turned a corner. First-quarter growth this year came in at 0.9%. My guest is Juho Romakkaniemi from the Finland Chamber of Commerce, and he points out that, American-style, if you annualized that by multiplying by four, we'd be well over 3% annual growth. 3 00:00:23.000 --> 00:00:30.000 That's not exactly likely, but there are plenty of good signals. Consumption is rising. 4 00:00:30.000 --> 00:00:45.000 Juho says the real estate agent (LKV) qualifications the Chamber of Commerce administers are seeing strong growth. So it could be that sensible people are sensing the property market is on the rise too. VAT revenue has been climbing. 5 00:00:45.000 --> 00:01:12.000 The slight uptick in interest rates doesn't seem to be that big a deal. People are spending a bit more again. Card data from Nordea is trending up. People's activity is increasing. Trump's odd politics, the Iran war, the tariffs — turns out they're not as big a shock as they seemed at first glance. 6 00:01:12.000 --> 00:01:39.000 The YEL bomb has been partly defused by this kind of structural fix, and yeah, there's just this momentum now. The stock market in Helsinki already rose nicely last year among the big companies, so this is a bit of a boost period for once. Vote with your wallet, and let's get Finland back on the rise. And there's still the public sector that needs to be reined in, to head off this kind of... 7 00:01:39.000 --> 00:01:43.000 ...socialist backlash. 8 00:01:43.000 --> 00:01:54.000 But it looks good, so let's get into the episode. All right, welcome to the Neuvottelija channel. Juho Romakkaniemi. Hey there. 9 00:01:54.000 --> 00:02:12.000 Thanks for having me, Sami. And we were talking backstage about how it'd be nice if you just represented yourself — but can a person ever really do that? As CEO of the Finland Chamber of Commerce, I also represent my organization everywhere. But I do have a lot of freedom to speak my mind. 10 00:02:12.000 --> 00:02:38.000 That's a nice position to be in — when you represent an organization whose views largely line up with your own, it's easy to operate. Yeah, but that's not always how the media wants to see it: whenever some side remark can be twisted, it gets pinned on the organization as a sin too. But if that happens, I'll absolve you of the sin anyway, even if the media doesn't deserve... 11 00:02:38.000 --> 00:03:05.000 ...to deserve it, but I don't think we have hugely differing views. I'm also an unaffiliated right-leaning guy myself, so I'm sure we'll find common ground. It's an interesting time to think about how these right-leaning structural reforms in Finland get moving — once the upturn comes back, that's when these supply-side reforms should really give the economy a proper boost. The upturn... 12 00:03:05.000 --> 00:03:16.000 ...is coming back. Aki Kangasharju flagged this earlier in the year [unclear], and now Nordea's economic review has also seen positive signals in credit-card data. But what's the Chamber of Commerce's signal? 13 00:03:16.000 --> 00:03:43.000 Well, the Chamber of Commerce's signal is that our goods exports to third countries haven't done very well so far this year — a bit of a step back from last year. But Finland's services exports to the euro area have done quite well. Our exports to the EU area have grown; last year they were positive. So yeah, this downturn has really come down to general uncertainty, which has led to... 14 00:03:43.000 --> 00:04:08.000 ...both consumer caution — in the housing market, in spending — but also caution in corporate investment. Now there are a lot of signs that this might be changing. Yeah. And we treated ourselves to some fancy desserts at lunch there — that's always a nice little extra. So that feeds a bit of VAT revenue too. VAT was raised to 25.5%. 15 00:04:08.000 --> 00:04:33.000 That's been more of a brake, but now came the big change: the moderation of marginal tax rates for high earners. I think it definitely shows. It clearly shows in consumption early this year — card payments have picked up a lot, and the economy has, in a sense, started moving. VAT revenue has actually been growing faster than forecast so far this year. So, yeah... 16 00:04:33.000 --> 00:05:01.000 ...that shows up in the state's tax take too — that consumption has picked up. Yeah. Then, whether it was the mid-term budget review or the annual budget, there was some grumbling that the real estate transfer tax wasn't scrapped, but still, I think it's now at a fairly reasonable level by global standards. But what about the property side? Do you have anything on that? Yeah, we held... 17 00:05:01.000 --> 00:05:30.000 ...LKV exams — the Chamber of Commerce administers these qualifications for real estate agents — and normally there are about a thousand candidates a year, but for the past couple of years it's been down around 500, so it's dropped by half. That's a sign that when the housing market isn't moving, people aren't interested in the LKV qualification either. But now, early this year, after two exam rounds, we're looking at about 40%... 18 00:05:30.000 --> 00:05:57.000 ...growth in exam participants compared to last year. 40% versus last year definitely tells you something — there's activity in that sector now. Yeah, that's more than one would have hoped for. Globally we have a pretty odd interest-rate structure — or maybe it's market-driven — where many borrowers again base their mortgage on the three-month Euribor, or the six-month or 12-month Euribor, and then the winners are... 19 00:05:57.000 --> 00:06:24.000 ...on the one-month Euribor, like me. But the downside there, in terms of how interest costs are managed, is that when rates rose in recent years, it passed straight through and ate into demand. So I don't see an interest-rate shock as very likely. Maybe not — well, that Strait of Hormuz situation does push prices up, and we ran a business survey a couple of weeks ago — 1,300 companies responded — and all of them had seen signs... 20 00:06:24.000 --> 00:06:52.000 ...still fairly positive expectations for the rest of the year on revenue growth, exports, and labor needs, but profitability was seen as developing a bit weaker than before. Companies are reading this exactly right: that oil prices and gas prices will come through as rising costs here in Finland too. Even though Finland and the Nordics are actually in a relatively favorable position in terms of direct effects, compared to... 21 00:06:52.000 --> 00:07:19.000 ...competitor countries, since we have a fossil-free power system, and on top of that, in transport, the share of electric-powered mileage is world-class in the Nordics. Oh wow. Yeah. The Norwegians might be sitting on gold, and the Ukrainians have run something like 'kinetic sanctions' — really wrecked the Baltic Sea ports for the Russians — so they don't get much benefit from this fossil-fuel shock. No. And now it's... 22 00:07:19.000 --> 00:07:36.000 ...interesting to see, overall, how this Strait of Hormuz situation, this Iran affair, has stirred up market uncertainty, and it's already being estimated that it has cut at least half a percentage point — maybe even a full point — off this year's growth that would otherwise have happened. 23 00:07:36.000 --> 00:07:54.000 At the same time, our preliminary growth figures for early this year have been pretty wild, so it comes down to how these two things weigh against each other, and where we end up — because if we Finns decide to invest and spend, then we really can get this economy growing. 24 00:07:54.000 --> 00:08:12.000 That's right. And I myself just took a fair amount out in dividends, so I can cover this spending and vacation trips — some of it's going to the Greeks now. We're heading to the island of Kos again this time, but yeah, some of it flows into the domestic economy too. I'm personally fairly confident. 25 00:08:12.000 --> 00:08:37.000 And also — I was a guest on your show, I don't want to jinx this with AI talk, but I've bought a ton of AI hardware, computers and so on, so that shows up in VAT revenue too. Thanks, by the way, Sami, for coming on the Romakka Podcast. That was a very popular episode — apparently there were visitors from the Neuvottelija side coming over to the Romakka Podcast too. Everyone's welcome to follow both. 26 00:08:37.000 --> 00:09:06.000 Yeah, let's keep doing this. I mean, I'm always very happy to be a guest on other people's shows, because they handle the editing and everything, and you just get to show up at the set table and hold forth. And I think your podcast is good — you're an interesting person, and I think this is a tip for anyone watching companies and so on: it's worth centering things on one charismatic person and building the podcast around them. If you built, say, a 'Chamber of Commerce Association' podcast, sure, someone might watch it, but I think it's better to personalize it, and I think... 27 00:09:06.000 --> 00:09:34.000 ...it works pretty well for you. Well, of course my joy is getting good guests — that's where the interest comes from too. Actually, the whole idea for the podcast originally came about because, in my current role as CEO of the Chamber of Commerce, I met so many interesting people, had really interesting conversations, and many times thought, damn, I wish I'd saved that for myself — or it probably would have interested other people too. So that's why I started the podcast, and apparently... 28 00:09:34.000 --> 00:09:54.000 ...people are interested. The best episodes have racked up a combined quarter of a million viewers, or views, across different channels, and even this spring — take, say, the Jari Sarasvuo episode — that's already at around 35,000 views right now. So clearly it interests people. 29 00:09:54.000 --> 00:10:08.000 Yeah, and you know, you can actually scrape that with AI too. I've got some scripts for that. Sami, by the way, your episode is the fifth most-watched in the podcast's entire history. Yeah. Nalle and Sarasvuo are still a little outside my league, but not by much. It'll definitely keep climbing from here. 30 00:10:08.000 --> 00:10:35.000 Well, let's get back to the economy. So, this Orange Man. I've tolerated the Trump movement and the Republicans quite a lot myself, but now I've just made this call: the guy has simply gone senile, and he went and started this war at Israel's instigation, and that doesn't fit his MAGA line at all. It's kind of another nail in the coffin — it's a bit, a bit sad, if over there... 31 00:10:35.000 --> 00:11:02.000 ...things in the States go too far away from democracy, because that would still be left-wing behavior, in a sense. So let's move on to politics — in Finland I'm actually fairly satisfied. I do want to say one thing about Trump, though: the biggest thing I expected, and which was positive, was paring back the public sector and putting America's chronic budget deficit in order. That was a big theme, and then... 32 00:11:02.000 --> 00:11:28.000 ...then Elon Musk and his coders, and the DOJ, were brought in. And it was done completely like an elephant in a china shop — cutting costs here and there however it happened, with no strategic approach at all, and a lot of good things got wrecked along the way — for instance, really well-functioning intelligence-agency units, or State Department expertise that had been world-class... 33 00:11:28.000 --> 00:11:55.000 ...in the US. And yet the end result right now is that the federal government is running record deficits across the board — so the debt buildup hasn't slowed at all, it's actually accelerating. Yeah. So the intention was good, the execution was bad, the outcome is dismal. Well, that's how it is. And I have to say, about this tariff business too — I had a lot of sympathy for the idea that it's just... 34 00:11:55.000 --> 00:12:21.000 ...because they don't have a federal value-added tax, so they have a really low tax burden on consumption. State taxes are quite small, sometimes even zero. So they were basically trying to get something like a VAT on imports, and they did pull it off — if only there hadn't been all this Trump chaos, with it being 100% one day, 30% the next, and now 15%, if he'd just brought it in steadily. Now his own Supreme Court has to walk back his own move here, because he, he... 35 00:12:21.000 --> 00:12:48.000 ...wanted to do it himself, wouldn't listen to anyone else, and then used legal grounds that weren't actually lawful. Yeah, so if he'd worked with Congress instead, say — since Congress is ultimately the one the Constitution gives that authority to — he could have made a clear proposal: 15% for everyone, say, except you can still negotiate separate trade deals, but there's a general tariff, so that... 36 00:12:48.000 --> 00:13:07.000 ...it's meant to replace these kinds of taxes and so on. I think it would have sailed through Congress easily with the Republicans, and the legal basis would have been clear. And the process would have been clear too. But instead there's been all this flip-flopping again, and everyone else has had to pay for it, and the world economy is suffering. 37 00:13:07.000 --> 00:13:34.000 That's right, and in a way it's also kept the dollar weak and interest rates high in the US, which doesn't help Europe either. But Europe has finally grown some balls. So now we've got this kind of defense cooperation, and money is being spent on defense. Now if we could just get qualified-majority decisions in foreign policy too, so that countries like Hungary, or others, can't just extort... 38 00:13:34.000 --> 00:14:02.000 ...one or two countries there holding the whole Union hostage. We can't build a coherent foreign-policy line. That would be a great thing. And Trump, with all his flip-flopping, has also achieved one positive thing: big trade deals that had been stuck for decades have started moving in just a few years now. The Mercosur agreement with Latin America, a trade deal with India, Indonesia, Australia... 39 00:14:02.000 --> 00:14:28.000 ...these are really massive things, because I just remember, back in the last decade, when Finland — sorry, the European Union — and South Korea signed a trade agreement, trade between the two grew 55% over five years, and growth in trade means growth in prosperity, improved productivity. Yeah, that's certainly something to hope for. I remember, by the way, back when it was still, in a way, the Katainen government... 40 00:14:28.000 --> 00:14:57.000 ...and we sometimes argued about the structures of the euro back then. I've been on a pretty winding journey on this myself — I co-wrote, with [unclear] and others, something like 'The Future of the Euro — Finland's Options,' and then also how Finland could be saved for liberalism. And back then I was very much a fan of the decentralized model — going back a bit to pre-euro-style arrangements, and a bit to the Sweden and Poland situations. And I still think their growth rates are strong there, because they have their own currencies. But now I've become a bit — because this... 41 00:14:57.000 --> 00:15:11.000 ...the security situation is so harsh, both from the US side and from the Russian side, that maybe Poland and Sweden should be forced into the euro, and we should build something like a 'Fortress Europe' — basically cutting out this free-rider going-it-alone from the edges. 42 00:15:11.000 --> 00:15:28.000 I think that's kind of the same phenomenon as Hungary, in foreign policy again — I don't know, maybe. And when it comes to the euro, you have to understand that currencies and currency areas are always imperfect. They're compromises. 43 00:15:28.000 --> 00:15:57.000 I think the euro, despite its problems, has been a net positive for Finland, and especially for Europe — and especially for Sweden and Poland. Well, when it comes to Sweden's competitiveness — and actually Poland's too — having their own currency wasn't a major factor. It brings flexibility during cyclical swings, but it doesn't deliver structural advantage over the longer term. They've made the right policy choices there, by the way, which Finland could learn from too. But the euro... 44 00:15:57.000 --> 00:16:26.000 ...area, a big opportunity has also opened up now, because dollar hegemony is on its way down. The dollar's share of world trade is trending downward now, and the euro's share is rising. Yeah, so if we make the right moves, and the euro becomes a global reserve currency at some point, that will bring our economy the kind of benefits the US has enjoyed for the past few decades... 45 00:16:26.000 --> 00:16:48.000 ...but those only work if you have a federation that can create that demand — that is, create the euros used to buy demand into the euro area. If we just have a kind of union of states with a strong currency, but no central mechanism that actually taps the reserve-currency status, then it's just a drawback. We won't be able to capture those benefits even though they're within reach. 46 00:16:48.000 --> 00:17:09.000 Right, but in practice that would mean the federation getting the right to borrow and to spend. So that's why we come back to this: in that situation, we can't have a free-rider side like Poland and Sweden — they'd have to be told, you need to join this federal mechanism, or you're out. So that's my current thesis, and it's pretty radical talk coming from me, since I've always been a fan of a decentralized setup. 47 00:17:09.000 --> 00:17:38.000 Right, but take, for example, this rapid ramp-up in defense spending — how fast we as Europe now need to prepare — it really would have made sense to have a much bigger European instrument that raises money on everyone's behalf, allocates that debt on everyone's behalf, and channels it into growing member states' defense spending, so this could be rolled out quickly. Right now we've got a pretty awkward situation, even for Finland, where our debt brake kicks in at the same time as defense spending... 48 00:17:38.000 --> 00:18:03.000 ...needs to increase. Well, that's exactly right. So in that sense, I'd say specifically that reserve-currency status should be leveraged for things like defense-debt structures at the EU level. And then there's just the problem that once you start building that federation — right now the EU budget is one and a half percent of GDP. So a really, really, really small share. The EU's budget — in the US it's 20 percent. 49 00:18:03.000 --> 00:18:29.000 So if we actually move to that reserve-currency system, where we have the euro and we take on joint debt at the EU level and spend it on EU structures, then we also need to push that down to the local level. In the US right now, state-level public finances run around 10 to 15 percent [of GDP]. For us it's 40. Well, that's how it is, but this is all completely theoretical talk at the moment, but... 50 00:18:29.000 --> 00:18:56.000 ...it's worth bookmarking for the future that, with the right choices, the euro becoming a global reserve currency would benefit EU countries. Yeah, that's right. If you can create that debt and put it to use, you could basically finance deficits without any problem in practice. That's exactly what the Americans have done with their reserve currency. Okay, good — but the Strait of Hormuz, hopefully that's... 51 00:18:56.000 --> 00:19:26.000 ...a passing phenomenon. Because unfortunately, here, Iran is learning that it's a lasting leverage mechanism. Yeah. Strategically, Iran's position has actually strengthened here — even though they lost militarily, they won strategically. So this is a worse outcome in almost every conceivable scenario — for the United States, for the neighboring countries, and really for the whole world — except perhaps for Iran's partners... 52 00:19:26.000 --> 00:19:52.000 ...aside, because Iran now knows it can develop nuclear weapons in the future without facing any real military pressure to stop it. Yeah. So, I think Finland and Sweden should launch a 'Stockholm Project' and develop a nuclear weapon, because this is clearly a bargaining chip, and a pretty powerful one — and we'd have the technological know-how for it anyway. This is of course pretty radical talk, but I think we're living in times where, if these old... 53 00:19:52.000 --> 00:20:16.000 ...truths no longer hold. So I think it's worth — I've got Pekka Virkki coming on later to talk about communism in Finland — Finland still has a bit of this old-fashioned thinking, these really strange ways of thinking from the '70s, '80s, '90s, and early 2000s that are still around. And in a way, when these geopolitical changes are this massive, they also change a lot about what we as Europe need to do. 54 00:20:16.000 --> 00:20:42.000 Yes. Yeah. To me it shows up culturally, for instance, in feminists who champion the Palestinian cause, or the LGBT community championing the Palestinian cause, in a place where women have essentially no rights, and homosexuality is a crime punishable by death — that strikes me as... 55 00:20:42.000 --> 00:21:12.000 ...a completely illogical cultural phenomenon. That's how it is, and it's fading a bit too, by now. But as someone who speaks up for individual freedom, equality, and equal rights for everyone, I find it hard to understand when Western countries, liberal democracies, get blamed by these communities relative to autocratic, conservative states. 56 00:21:12.000 --> 00:21:38.000 Yeah, I've had Jarkko Tontti on many times — his classic line was that the left's long march through the institutions has indeed happened, and in a way it partly shows up as this cultural confusion, but also as a kind of left-wing hegemony. And to touch a little on Finnish politics too — we now have a right-wing government that, in the view of a lot of my friends and past guests, has been pretty toothless in making these kinds of cuts. But compared to the alternative, say... 57 00:21:38.000 --> 00:22:07.000 ...the previous government — actually quite a lot has been done here, specifically these structural reforms. I think they've been fairly sound. So, 9 billion euros needed to be consolidated by the Chamber's measure — 3.5 billion euros have been consolidated so far. But let's say these structural reforms — dismantling the income trap, cutting taxes, and reforming the labor market... 58 00:22:07.000 --> 00:22:35.000 ...will certainly bring, over the long run, 6 billion euros — 5.5 billion euros — more in economic growth than a society without those reforms would have been able to generate. So the growth is there over the long term too. But take, say, the labor-market situation — it tells the whole story: right now we have a record amount, a record-high level, of labor available to the market, which came about because... 59 00:22:35.000 --> 00:23:02.000 ...cuts were made to social security so that it doesn't pay to be unemployed and passive in a situation where you could be available to the labor market. Mm. So our unemployment figure has risen to a record because people have moved from passive benefits over onto unemployment benefits, in effect, since that supply has been massively increased at the same time we've had a recessionary environment with no strong demand in the labor market. 60 00:23:02.000 --> 00:23:08.000 Mm. So we've had both the number of employed people holding steady and the number of unemployed people growing. 61 00:23:08.000 --> 00:23:29.000 And the benefits of that will show up once demand also picks up in the labor market. Yeah. Lack of available labor won't be the bottleneck. Yeah. And that's also been a pretty good change, I think — shifting the employment obligations, and the penalties that come with them, from the state down to the municipalities, so that they, in a sense, have to fight that battle locally. 62 00:23:29.000 --> 00:23:52.000 Think about it — before these reforms, we had a situation where, say, in the service sector — take the worker at the restaurant we just ate at — if she had two kids, Mm, and was a single parent, her net income was the same whether she worked a three-day week or full time. 63 00:23:52.000 --> 00:24:14.000 Mm. Or if there was a middle-income spouse too — a proper standard family, two parents, one middle-income, the other in the service sector, two kids — the difference between a three-day work week and full-time work was 93 euros net per month. 64 00:24:14.000 --> 00:24:42.000 Yeah. Completely absurd. With good intentions, a system of various social benefits was built in Finland that has, in effect, created incentives telling rational people it doesn't pay to work full-time — that you're better off part-time. And what does that do, not just to work ethic, but to this society's growth, when the incentives push people toward working fewer hours? 65 00:24:42.000 --> 00:25:11.000 Yeah. Neutralizing that cash-flow effect is honestly one of the dumbest ideas you can implement politically. That's why, at the dawn of this AI era, I no longer believe we could ever go back to a universal basic income either, because its basic idea was that the basic income would be funded through earned-income tax, but I have a pretty negative view of the future of earned-income taxation. Another thing — there's been a lot of criticism that the unemployment benefit's protected income threshold was scrapped... 66 00:25:11.000 --> 00:25:37.000 ...and I myself was in government service back in the dark ages, when it was created. The idea was that as an unemployed person it should pay to do a bit of work — you could do a little work and keep all of it, without your benefits being cut. Good idea, positive thinking. It just wasn't realized, when that earned-income threshold — the protected-portion limit — was raised at some point, what that would create within our whole benefits-and-tax machinery, relative to... 67 00:25:37.000 --> 00:25:57.000 ...quite a monster in the end — such that, while unemployed, it paid to work one day a week at a really low tax rate, essentially tax-free for that one day. But if you jumped from that into full-time work in a service job, your net income only rose by 200 euros. 68 00:25:57.000 --> 00:26:25.000 Yeah, yeah. Right. So a huge income trap got built in there, and I don't think it's been properly communicated that bringing that back would be crazy, since it effectively created a kind of reasonable standard of living — not a comfortable one, but a reasonable one — with very little work, and it didn't pay to take a job. Yeah. And this is also, in general, that same left-wing thinking — that start-up grants as tax-free income... 69 00:26:25.000 --> 00:26:51.000 ...somehow affect incentives at the low end, but supposedly don't affect things at the high end, at that 59% former marginal tax rate — I've always found that really odd. You should always chart these kinds of cash-flow curves: this much cash flow comes to you in this situation, that much in that one, and taxes affect cash flow like this. People obviously don't run the numbers in Excel or with AI, but they do react to incentives subconsciously. 70 00:26:51.000 --> 00:27:21.000 Yes. Yes. And on average, people in this society, and within people's social circles, react to incentives quite well. And this is a mistake people make: when we talk about 'homo economicus' — the rational-choice actor in economics — that's not referring to any specific individual. Individuals go off and do all sorts of random things, and there are a hundred other motives behind any choice. What's being discussed there is, in effect, the average economic actor, who actually... 71 00:27:21.000 --> 00:27:46.000 ...when you study macroeconomics, does react very efficiently to the incentives society provides — whether that's benefits, taxation, or anything else. Yeah. And this is also, by the way, an international cash-flow game, in that some of us can move our residence, our family, and our company outside the country. And the exact same thing happens here: we can't act like some kind of [unclear] where we have the world's third-highest taxes in every bracket and expect that people won't... 72 00:27:46.000 --> 00:28:14.000 ...react. This too has started being dismantled. So, I was glad to see that the stock-option tax treatment turned out reasonably well. Then there was the YEL bomb — an absolutely terrible thing the Marin government did as its parting shot. We got a pretty good fix there, given the parameters available. Yeah, it's maybe a bit back-loaded before it all fully kicks in, but on the other hand, we now know the path through to 2028, and those Kafkaesque examples will disappear, which was a bad thing, in that... 73 00:28:14.000 --> 00:28:43.000 ...it didn't necessarily affect a huge number of people, but it affected enough that they got such absurd decisions that it created a broader fear that none of it made any sense. Yeah. Fear of arbitrary tax assessment is truly awful — that's an echo of totalitarianism. Now, by the way, I actually didn't like this tax director's data-center jab, where a civil servant starts telling you how the market economy should work in Finland — that's a bit like being back in tsarist times, if you ask me. Yeah, and on data centers too, honestly... 74 00:28:43.000 --> 00:29:09.000 ...that debate is silly. Honestly, quite a few construction companies would have gone under in Finland in recent years if we hadn't had data centers and public construction filling in for construction demand, and the knock-on effects would have been really bad. And sure, data centers aren't some super-high-value-added industry, but we can't... 75 00:29:09.000 --> 00:29:23.000 ...expect the top of the world to come from just anywhere. It's not that investment should be turned away — no, no. There are different shades of gray, so to speak, in terms of what's more productive and better and so on. For those, you need to come up with their own separate incentives. 76 00:29:23.000 --> 00:29:50.000 But if we start heavily sorting these into sheep and goats, pretty soon nobody will invest in that sector at all — not even the ones we consider good. That's right. And there too, you could sort of see it: okay, if this guy's argument is that VAT revenue is even negative — because once investment costs are refunded, the VAT goes back to the company — so it might look like zero for the state's finances at that moment. But then, clearly, he's not remotely interested in... 77 00:29:50.000 --> 00:30:19.000 ...municipal finances, which then rake in huge revenues from it. So somehow this kind of sub-optimization needs to be taken out of the system. All these systems — Finland consists of several levels of government, plus the international economy on top of that, and we can't think of ourselves as some isolated little tin can here. Exactly. But coming back to Finland — these investments really are starting to move. And the economic data is really good. In fact, we've got industrial output growth of over 7%... 78 00:30:19.000 --> 00:30:47.000 ...measured by working days, and cyclically — or working-day adjusted too — growth was over 5% back in March. Those are staggering numbers. Or GDP growth from the previous quarter, according to preliminary figures, was 0.9%, which, since Americans always project this out to... 79 00:30:47.000 --> 00:31:01.000 ...an annualized rate for the following four quarters — so if this trend continues, it would point to 4% economic growth for Finland this year. Incredible, at the same time. In the US it was 2% — half of that. 80 00:31:01.000 --> 00:31:29.000 And Finland, which had been at the very back of the whole EU for the past few years, alongside Germany and dragged down by Germany, was actually at the top of the EU's growth rankings in the first quarter now. So this could be it — Finland's stock market also rose 35% after a long stagnation, so that kind of forward-looking signal was an honest one. Though, for small companies, that hasn't held — they haven't done well at all. This has mainly been driven by large companies... 81 00:31:29.000 --> 00:31:55.000 ...driving this rally. But now comes the GDP signal. Then come these quiet signals — the real estate agent exam numbers, VAT data, Nordea data, card data. And then there's also that corporate-tax cut coming next year — people are already starting to price that in too. Stock options have been sorted out. So, in a way, things on the domestic market side are looking good too. The only thing that bothers me a bit now is that quite a... 82 00:31:55.000 --> 00:32:24.000 ...fair amount — the inheritance and gift tax — Purra and her colleagues didn't have the stomach for it in the end. We were pushing for the same thing. This would have been a really important structural reform for growth, and I have a proposal. The inheritance tax — the inheritance tax isn't happening now. They did raise the tax-free inheritance threshold to 30,000 euros, and there's this 7,500-euro gift-tax exemption now over a three-year period. But I'd propose that — well, in Sweden there is... 83 00:32:24.000 --> 00:32:53.000 ...a 0% gift tax, but we could bring in a transfer tax instead, or a two-percent stamp duty. And I think the government could still consider this. So skip the inheritance-tax reform, but on money transfers — we're stuck a bit in the Stone Age there. I once had [unclear] on twice, whose story fights this Kafkaesque issue, where the lottery authority — the National Police Board's lottery administration — didn't... 84 00:32:53.000 --> 00:33:21.000 ...know whether a payment made toward emissions reduction was even a taxable transaction. They genuinely puzzled over things like, is this money a gift, or some kind of lottery-tax-type matter, or should it be blocked. So we have this bizarre process where the state wants to monitor every single money transfer between private individuals, classify it, and potentially block it. So this kind of transfer tax would simply mean that... 85 00:33:21.000 --> 00:33:50.000 ...you do whatever you do, pay 2% to the state, cut out the bureaucrats, and everyone wins. That's an interesting proposal, Sami — as I've said before about your ideas — but is it politically achievable? Yeah — well, this would add tax revenue, meaning you get that 2% immediately, without having to wait around for dad or mom to die before you can cash out at that 7% rate, or more... 86 00:33:50.000 --> 00:34:13.000 ...instead, with this you could restructure things right now, because as an investment banker I really do see the big challenge: if you have a company and its ownership needs restructuring, and that restructuring only happens through death, that's genuinely destructive — you'd rather just move to Switzerland to sort things out, or to Sweden, where these things get handled the way they should in Western countries. 87 00:34:13.000 --> 00:34:17.000 Oh right, and actually, financially, this pays off even at fairly small amounts already. 88 00:34:17.000 --> 00:34:26.000 Yeah. So now, Riikka Purra — I know you and Jussi Lindgren are probably watching this like hawks — so, the proposal: skip the inheritance tax. 89 00:34:26.000 --> 00:34:31.000 That's just how it is, but the gift tax with a two-percent stamp duty instead. 90 00:34:31.000 --> 00:34:35.000 Yeah, good. 91 00:34:35.000 --> 00:35:05.000 Yeah. But are there any more expectations along these lines about the economy? Well, let's put it this way: as I said, 0.9% was the first quarter's growth over the previous one, and annualized that points to 4% growth this year if every quarter grows the same. But even if that halved — since preliminary figures have a few times come in a lot more positive than they held up — even if it halved to 0.5%, that would still point to [unclear] growth for this year, which would be... 92 00:35:05.000 --> 00:35:09.000 ...above all the forecasting institutions' current expectations. 93 00:35:09.000 --> 00:35:36.000 Mm. Yeah. Well, that's good. And speaking of which, I had [unclear] on, from Tampere, who was a significant influence on this — that now, really, the risk that if you start a company you'll end up getting arbitrarily taxed on some pension-fund basis, that risk is gone now. So I think that's the message here: it's worth going into business. The economic outlook is pretty good. Even small companies can become big ones, and... 94 00:35:36.000 --> 00:36:04.000 ...now you can also use stock options, and corporate tax comes down next year too, so it's a good moment. And in a way Finland is a bit like a herd of lemmings — if the ketchup bottle is now open and it starts flowing, it's worth doing that planning now. I'll also say that for the past three or four years we've had historically low new-housing construction starts. At the same time, the population... 95 00:36:04.000 --> 00:36:09.000 ...migration into the capital region and other growth centers hasn't gone away at all. 96 00:36:09.000 --> 00:36:35.000 And at the same time, only about a third of the need for new housing has actually been built. So even though there's still some unsold inventory out there and so on, a fairly big housing shortage is emerging in the capital region and the growth centers, and because of that, it's also to be expected that if the economy starts growing, housing prices will, by the end of this decade... 97 00:36:35.000 --> 00:37:02.000 ...start climbing fairly fast. This might now be the best time in 30 years to buy a home. Well, there you have it — and, being a true Helsinki native myself, even though I'm still a Tampere guy at heart, well, the Kruunuvuori Bridge was even built Tampere-style, under budget, and maybe that downtown tunnel will finally happen too, and if HIFK finally gets its wooden arena, then it looks like... 98 00:37:02.000 --> 00:37:05.000 ...things are lining up so that the livability of these Helsinki neighborhoods keeps rising. 99 00:37:05.000 --> 00:37:30.000 Yeah. And everything's moving forward. By the way, if you want to hear more of this economic data — all the good things that have happened this year — the latest episode of the Romakka Podcast features our chief economist Jukka Appelqvist as a guest. He's dug deep into this data, and I grill him thoroughly on it. All right, go check out the Romakka Podcast, and thanks to Juho Romakkaniemi for coming on — and to everyone who's watched or... 100 00:37:30.000 --> 00:37:37.000 ...listened this far, go ahead and subscribe to this channel too. Thanks. Thanks.