Odd Lots: Olli Rehn on the Big Competitiveness Challenge Facing Europe
Date: October 22, 2025
Hosts: Joe Weisenthal & Tracy Alloway
Guest: Olli Rehn (Governor of the Bank of Finland, ECB Governing Council Member)
Episode Overview
This episode explores Europe’s current “moment of opportunity” amidst mounting geopolitical, economic, and industrial pressures. Joe Weisenthal and Tracy Alloway speak with Olli Rehn about the region’s quest for greater competitiveness, the challenges of industrial policy and integration, the energy crisis, and Europe’s evolving role in the global monetary system. Olli Rehn offers insight into the tensions between European integration and national politics, the push for defense spending, and how Europe can foster innovation and growth in a challenging environment.
Key Discussion Points & Insights
1. Europe’s “Opportunity Moment” and Shifting Priorities
- Backdrop: Recent optimism about Europe’s markets, euro strength, and relative stability compared to the U.S. ([02:43])
- Growing attention on whether Europe can “seize this moment” for lasting reform and progress, especially in industrial competition, defense, and energy.
Notable Quote:
“We have one issue which is above others, and that is common defence and spending on common defense. ... It is a financial opportunity in a sense that the best argument for safe assets in Europe is indeed defence spending.”
— Olli Rehn [05:06]
2. Defense Spending and European Integration
- Finland & NATO: Dramatic shifts since Finland joined NATO in April 2023 ([07:01])
- Challenge of Scale: Europe still lacks a true “single market” in services and capital, limiting its industrial competitiveness.
- Savings and Investment Union: Aims to mobilize Europe’s massive savings (~€10 trillion) into productive investment and “popular capitalism.”
Notable Quote:
“It’s the scale up phase and internationalization phase where we have to do better.”
— Olli Rehn [16:45]
3. Defense Procurement and Durability
- Focus on Joint Procurement: The need for coordinated, long-term investment and procurement to ensure the European defense sector’s stability and cost-effectiveness ([08:58])
- Balancing U.S. & European Products: Europe will keep buying from the U.S. (e.g., Finland’s purchase of F-35s) but is also building up domestic capacity.
Notable Quote:
“It’s essential that we purchase those arms and arms technologies by common procurement and by investing in joint research and innovation projects. That’s the way to get more bang for the euro.”
— Olli Rehn [08:58]
4. Impact of U.S. Trade Policy and Global Tensions
- U.S. tariffs and “trade anxieties” have real economic costs—estimated to reduce Eurozone growth by about half a percentage point next year ([10:33]).
- Yet, European economies show resilience, with modest but positive growth outlooks despite headwinds.
5. Expanding the Euro’s Global Role
- Intentional Push: Europe is consciously working to increase the euro’s influence as the global monetary system undergoes transformation ([12:04]).
- Constraints on China’s Yuan: Capital controls and lack of legal certainty limit China’s ability to challenge dollar dominance.
- Outlook: The monetary system is likely to become more multipolar, with the euro strengthening its “reserve role” if Europe improves its economic and digital sovereignty.
Notable Quote:
“US dollar dominance will prevail for quite long ... but we may move towards a more multipolar monetary system and the Euro can have a significant reserve role there.”
— Olli Rehn [13:47]
6. Addressing Europe’s Innovation & Startup Challenges
- Vibrant Startups, But Scale Up Issues: Finland and other European countries have strong startups, but many relocate to the U.S. to access capital and larger markets ([15:54]).
- Policy Focus: Efforts in Finland center on funding for scale-ups and growth.
7. The Energy Conundrum & Green Transition
- Energy Cost Disparities: High energy prices remain a critical challenge for competitiveness, especially for industries and countries like Germany ([19:47]).
- Finland as a Model: Cool climate and cheaper electricity help attract energy-hungry data centers ([20:27]).
- Path Forward: Accelerate the green transition (renewables & potentially nuclear), making Europe more cost-competitive in the long run.
Notable Quote:
“Once you are far enough in the green transition, preferably supplemented by nuclear energy ... then our cost competitiveness in terms of energy will also be much better.”
— Olli Rehn [21:56]
8. Decomposing Industrial Pressures: China vs. Energy Costs
- In 2022, Europe paid €800B for fossil fuels—€500B more than average, or roughly 3% of GDP ([23:24]).
- The end of Russian gas necessitated major adjustments still ongoing in countries like Germany.
9. Reforms for Competitiveness: Completing the Single Market
- If Olli Rehn Had a Magic Wand: “I would complete the single market without delay and also create a genuine savings and investment union with a deep and liquid capital market” ([25:17]).
- Concrete Proposals: Introducing a European safe asset and incentives (à la Sweden’s model) to encourage household investment in capital markets.
10. Politics: The Persistent Roadblock
- National politics remain the biggest hurdle to deeper integration and reform. Populist movements persist, but the EU remains structurally cohesive ([28:17]).
- Despite political turbulence, public support for European institutions is relatively strong.
Notable Quote:
“The European Union works as a glue that helps to keep together the policy making structure of Europe.”
— Olli Rehn [29:41]
11. Fiscal Policy: Breaking the “Black Zero”
- Germany’s move away from strict fiscal rules (“Black Zero”) signals wider, more strategic investment across the Eurozone, especially in defense ([33:22]).
- Other countries, including the Nordics and Eastern Europe, are also increasing defense spending.
12. Looking Back: The Eurozone Crisis and “Whatever It Takes”
- Joe revisits the euro crisis of the 2010s—did it take too long to reach Draghi’s famous “whatever it takes” intervention?
- Olli agrees the ECB could have acted faster, but foundational tools (like the European Stability Mechanism) had to be created on the fly ([36:12-39:38]).
Memorable Exchange:
Joe: “You are talking like I was talking to my wife in the sauna during the eurozone crisis…”
Olli: “So pretty much I share your view.”
([38:29])
13. Measuring Success & What’s at Stake
- Success Metrics: Well-being, freedom, entrepreneurship, social protection.
- Consequences of Inaction: If Europe doesn't act, it risks “muddling through” and a “gloomy future.”
- Vision: Stay united, reform, and boost global influence—committed to multilateral cooperation ([40:24]).
Notable Quote:
“If Europe won’t be able to do the necessary things ... some kind of muddling through will continue. And that is a very gloomy future for the Europeans.”
— Olli Rehn [40:53]
14. Europe-China Relations: Future Trajectory
- Despite trade ties, China’s support for Russia in Ukraine has severely damaged its image in Europe ([42:38]).
- Ongoing debate on the balance between economic ties and geopolitical realities.
Memorable Moments & Quotes
-
Sauna as a metaphor and workplace:
“You are talking like I was talking to my wife in the sauna during the eurozone crisis…”
— Olli Rehn [38:29] -
On Slush (Helsinki’s startup conference):
“The name slush comes from November because you have so much slush in November. But it's a very bright event in the darkest time.”
— Olli Rehn [15:54] -
On what makes success in Europe:
“Access to saunas. That's a basic human right.”
— Olli Rehn [40:44]
Notable Timestamps
- [05:06] Common defense as the leading European issue
- [07:01] Finland’s integration into NATO and changes in defense policy
- [10:33] Impact of U.S. tariffs and global trade tensions
- [13:47] Euro's potential as a global reserve currency
- [19:47] Energy costs and competitiveness challenges in Europe
- [23:24] The real cost of energy shock in 2022
- [25:17] Olli Rehn’s “magic wand” reforms for Europe
- [28:17] The persistent challenge of domestic politics
- [36:12] ECB’s response to the eurozone crisis—“whatever it takes”
- [40:24] How to measure European success and stakes for the future
- [42:38] The shifting perception of China in Europe
Tone & Language
Throughout, the conversation is candid, nuanced, and at times playful. Tracey and Joe blend serious macroeconomic questions with moments of levity (e.g., “Access to saunas” as a human right, and joking about the perils of European slush). Olli Rehn’s tone is pragmatic yet optimistic, balancing acknowledgment of Europe’s challenges with a call for persistent reform and integration.
Summary for New Listeners
This episode provides a comprehensive, candid look at the economic and political crossroads facing Europe. Olli Rehn, drawing on his dual vantage as Governor of the Bank of Finland and ECB policymaker, details the challenges and opportunities amid shifting global dynamics, trade disputes, and defense imperatives. The discussion covers everything from the need for deeper financial integration to the hard realities of the energy transition, and features revealing reflections on the eurozone crisis and Europe’s trajectory in an increasingly multipolar world.
If you’re interested in the future of European competitiveness, integration, and the continent’s place in the changing global order, this episode is an essential listen.