Olli Rehn on the Big Competitiveness Challenge Facing Europe

Olli Rehn (0:02)

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Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:23)

Joe, do you remember earlier this year, there was a moment when everyone got really excited about Europe for the first time in probably decades.

Joe Weisenthal (0:32)

You see, you know what I always think about is, for the two of us, for a long time of our careers, one of the many sub-themes that we go, it's like, when is Europe gonna turn on the fiscal taps? When are they gonna start spending money in Germany, all these questions? When are they gonna be less on us, so focused on austerity or balanced budgets, et cetera? And then finally, and maybe Trump had something to do with it and defense spending had something to do with it, or politics, finally we're getting spending. There was like five minutes and everyone was really excited about some of the defense stocks and the euros rallying and it looked a little bit more politically stable perhaps than the US. What's happening though? How's that going? I'm not sure. I haven't followed it as closely as I should have.

Tracy Alloway (1:12)

I will say, I mean, the euro is still pretty strong against the dollar. And if you look at the euro stocks, that's still doing pretty well as well. So there is some optimism that is still circulating the market, but you're absolutely right. We should talk about what this means. What does it actually mean for Europe to quote, unquote, seize this moment, right? This very particular moment. And what exactly does Europe want to achieve? Totally.

Joe Weisenthal (1:35)

And you know, a lot of the conversations that we have in the US context certainly apply in the European context. So industrial competition with China, whatever we're feeling here in the US, certainly very heightened anxiety in Europe with the stress on the auto industry and the chemicals industry and so forth. Energy prices, obviously electricity costs in the US becoming a major topic, et cetera, just as big in Europe, if not bigger, especially in the wake of the Ukraine War, the shutting off of the nuclear power plants in some countries, et cetera. So pretty much everything that we're sort of wrestling with here, the sort of-

Tracy Alloway (2:09)

Productivity, regulation.

Joe Weisenthal (2:12)

The splintering of the traditional parties within domestic politics. Our parties have a bit more of a monopoly than the European ones do, but there's similar stresses going on. So anything that we're talking about here, it's very useful to see how it comes across from the European lens.

Tracy Alloway (2:28)

Absolutely. So I'm very happy to say we do in fact have the perfect guest. We're going to be speaking with Olli Rehn. He is of course the governor of the Bank of Finland. He is also a Governing Council member over at the ECB. So Olli, thank you so much for coming on Odd Lots.

Olli Rehn (2:42)

Thanks very much for the invitation. Great to be here.

Tracy Alloway (2:45)

So from your seat in Europe, wait, where are you actually based in Europe? Where do you spend most of your time?

Olli Rehn (2:51)

I have a dual life, not schizophrenic, but dual life. I have two home fields, two home terrans. One is Helsinki and Finland. The Bank of Finland is the national central bank of Finland. But we also at the same time, we are a member of the Euro system. And my second home terrain is Frankfurt and the Governing Council of the ECB. And the same goes for the large part of our civil servants, economists and lawyers at the Bank of Finland, like in the other 19 national central banks. That's the Euro system.

Tracy Alloway (3:22)

Perfect. So from your seat in Helsinki and Frankfurt, does it feel like something's changed within Europe? Does it feel like there is the sense that maybe the current time period is some sort of opportunity?

Olli Rehn (3:36)

Certainly, things have changed in Europe a lot for the worse, as we know, because of Russia's unjustified brutal war in Ukraine. But second, as a wake up to that situation, including the impact of President Trump as well. And I will say that if you look at Europe for the moment, we have one issue which is above others, and that is common defense and spending on common defense from air defenses to drone production and other elements of military technology and production. And that's also very much an economic issue. Actually, it's a financial opportunity in the sense that the best argument for safe assets in Europe is indeed defense spending. We need both national and European funding. This is, in my view, a possibility to pave the way for a deep and liquid European capital market.