Olli Rehn on the Big Competitiveness Challenge Facing Europe

The 2010s saw economic weakness across Europe's periphery. Countries like Greece, Spain, Italy, and so forth were the sites of so much stress. In the 2020s, however, it's reversed. The periphery is holding up well, but the industrial core is facing stress. Germany, in particular, the old powerhouse of the continent, has been slammed by the surge in electricity costs and competition with China. Other Northern states have felt similar pain. So what is the future for Europe? Can the EU project itself continue to evolve and integrate? On this episode, we speak with Olli Rehn, governor of the Bank of Finland and a member of the ECB's Governing Council. We discuss the near and medium-term challenges facing the EU and the prospects for finding a robust growth path in the future. Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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• 0:00Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next, about the time it takes to grab a coffee. So, search Barclays Brief wherever you get your podcasts.

• 0:26Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk, and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices, but according to recruiters, advisors,

• 1:11Speaker 01

  and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

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• 2:37Tracy Alloway?

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

• 2:41Joe Weisenthal?

  And I'm Joe Weisenthal.

• 2:42Tracy Alloway?

  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?

• 2:52Joe Weisenthal?

  See, you know, I always think about is for the two of us, for a long time of our careers, one of the sub many sub themes that we go, it's like, when is like Europe going to turn on the fiscal taps? When do they start spending money in Germany? All these questions? When are they going to be less 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. It was like five minutes and everyone was really excited about some of the defense stocks and the euros railing and it looked, you know, a little bit more politically stable perhaps than the US. What's happening, though? I like, how's that going? I'm not sure. I haven't followed it as closely as I should have.

• 3:32Tracy Alloway?

  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?

• 3:54Joe Weisenthal?

  Totally. 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 right, the sort of

• 4:29Tracy Alloway?

  Productivity, regulation.

• 4:31Joe Weisenthal?

  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.

• 4:47Tracy Alloway?

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

• 5:02Speaker 05

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

• 5:04Tracy Alloway?

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

• 5:10Speaker 05

  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 terranist 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.

• 5:41Tracy Alloway?

  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?

• 5:54Speaker 05

  Certainly, things have changed in Europe a lot for the worse, as we know, because of Russia's unjustified brutal war in Ukraine.

• 6:04Speaker 05

  But second, as a wake up to that situation, including the impact of President Trump as well. And I would 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 a 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.

• 6:48Joe Weisenthal?

  That's great. I'm glad we jumped right into this question of further integration and some of the stakes here, particularly as it relates to defense, because this has been something that's been on my mind a lot, and I wanted to get in with you. When we're thinking about industrial capacity or thinking about industrial competition, scale is really important. The size of the market is very important, and this is part of the whole premise of the Euro area, which is let's have an integrated market. And yet, on the other hand, domestic politics are still a thing. I have to imagine in defense specifically, there must be a lot of anxiety at each individual country. Do we want our national maker of

• 7:28Joe Weisenthal?

  X rolled up into some larger conglomerate? To what degree, whether we're talking about defense or other, any other industrial, any other industrial sector, does there still remain a tension between the scale required for competitiveness and the desire for some sovereignty within each country to have their maker of X or Y?

• 7:50Speaker 05

  Yes, there is that tension, but that's why we do, we make policy, and that's why we try to change things in Europe. Actually, that brings to my mind an anecdote concerning precisely common defense, how things have changed.

• 8:05Joe Weisenthal?

  Okay.

• 8:05Speaker 05

  The country I know best, Finland, joined NATO in April 2023. And I recall my own time in military service in the 19, early 1980s, in the Savo Brigade in eastern Finland, in the city which used to be the headquarters of Mässen Mannerheim during the winter war. Today, that Garrison area is actually

• 8:30Speaker 05

  A regional sub headquarters of NATO. So you see the change in terms of defence in this regard in Northern Europe. Talking about economies of scale. Yes, we lack a genuine single market in many areas like services and to some extent capital. And that's why we are very committed to move forward with, for instance, the savings and investment union, which aims at, say, transforming the formidable savings of Europeans, 10 trillion, that's the estimate, to productive investment by some kind of, say, popular capitalism. That's, in my view, one essential element of creating a more unified Europe and creating

• 9:14Speaker 05

  a more competitive Europe.

• 9:16Tracy Alloway?

  The other thing when it comes to building up a defence industry that is sometimes debated is this idea of should you spend money on investing in defence programmes or should you spend money, you know, buying the products that these defence companies are actually producing because what's the point of building out this massive capacity if you don't have a dependable customer for the foreseeable future? How would you structure that sort of spending to make sure that it's durable, I guess, and effective?

• 9:47Speaker 05

  That's a very critical question in the European context and that's why, as we are conducting joint European funding exercises in this regard, like the 150 billion euro safe instrument by the European Commission, 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. And that's now the effort which the European countries and the Commission are engaged with. In fact, it is clear, it's quite clear that we are going to, in Europe, we are going to purchase both, say, domestic European

• 10:32Speaker 05

  Products and also American products in some areas. The US is more advanced. For instance, Finland is purchasing sixty four F thirty fives to replace our existing fleet of sixty four F eighteen s, which date from the early nineteen nineties.

• 10:50Joe Weisenthal?

  How costly is it? I guess to put it bluntly, I don't know, that the US is not the reliable trading partner. It might have seemed to be. I mean, I know there's still a lot of trade and you just mentioned, you know, replace the plane fleet, et cetera. But clearly, we all read the news. We all know what's going on. How costly is it for Europe? And do you perceive there to be a lot of, frankly, unnecessary duplications of investment efforts across the Atlantic currently because of trade tensions?

• 11:22Speaker 05

  We do expect that, and that's having a negative impact on productivity and thus on the economy, growth and well being. As far as the impact of US tariffs is concerned, we have tried to estimate that it's a bit difficult as policymaking is fairly volatile. So it depends on the day or the week.

• 11:42Joe Weisenthal?

  We've noticed.

• 11:42Speaker 05

  When you take the cut of data.

• 11:45Joe Weisenthal?

  Yeah.

• 11:45Speaker 05

  You know that, Peps. But our estimate, which is roughly done on the basis of the current US tariff regime, is that it will hit growth in the eurozone roughly by half a percentage point next year. But the good news is that the European economy is actually demonstrating resilience. We are still growing this year, probably around one percent or so, one point two percent. And we are projected to grow by one, one point three percent in the next two years, despite the headwinds of both geopolitical tensions and tariff wars.

• 12:22Tracy Alloway?

  So you wrote something for Vox a few months ago called Europe Must Not Waste Its Currency Moment. And, you know, reading it, it sounds very much like there's perhaps an ambition to maybe replace some of the influence or some of the global role of currently fulfilled by the US and the dollar with the euro. Is that how we should be reading it? Is there like a conscious effort underway currently to expand the euro's influence in the world?

• 12:53Speaker 05

  There is a deliberate, conscious effort to enhance the euro's global role in the currently changing international monetary system. And if I put the background first, I think we are seeing the international monetary system or the global financial system in transformation for the moment. And you have two main drivers in broad sense. On one hand, the geopolitical confrontation, and on the other hand, we have a technological disruption thanks to digital assets, cryptos, stablecoins, central bank digital currencies. How this will play out will be quite crucial as to the evolution of the monetary system.

• 13:35Speaker 05

  Concerning the geopolitical competition, we see China's efforts to strengthen the role of renminbi of the yuan, for instance with the Rod and Belt Initiative and linking trade agreements to an enhanced role of the yuan. But, and there is a major but, there are still capital controls in China and there is no legal certainty in China in the in the Western sense. So that creates quite significant limitations for the renminbi. In the technological side, we've seen the growth of stablecoins more recently. We've seen a certain volatility of cryptos last week, last Friday.

• 14:15Tracy Alloway?

  Just a little.

• 14:16Speaker 05

  Just a little, yes. And for instance, stablecoins, they are clearly intended to increase demand for US treasuries to fill the federal deficit of the United States of America. And thus to enhance the role of US dollar and US dollar dominance. I believe that on the basis of historical experience, let's say, for instance, by the writings of Professor Barry Ahen Green of Berkeley, that historical shifts in the international monetary system take place slowly and on the basis of the structural changes in the economy and security structures. That's why I believe that US dollar dominance will prevail for quite long, perhaps less

• 14:56Speaker 05

  as a single unipolar hegemon in the monetary system than before, and we may move towards a more multipolar monetary system. And the euro can have a significant reserve role there. On the condition that we can strengthen the foundations of the European economy, insecurity in terms of economic dynamism and in terms of digital sovereignty.

• 15:24Joe Weisenthal?

  When it comes to economic dynamism, people are pretty pessimistic about Europe these days. They look at an industrial sector that is maybe being hobbled by a competition with China. They see the country, the various countries as not being at the forefront of the AI investments. With tech in general, there's a perception that the economies are still overregulated. It's not a great place to have a startup and so forth. What is the sort of the bull case, or maybe the sales pitch for sort of the Euro Inc., the European economy? Where does growth come from in a dynamic, durable manner?

• 16:07Speaker 05

  There is a vibrant startup community, for instance, in Finland.

• 16:11Joe Weisenthal?

  Yeah, Finland is actually, Finland's probably the exception. You do hear about Finnish startups.

• 16:14Speaker 05

  Sweden, France, many other countries. We actually, we have a rather vibrant startup community in Europe. By the way, welcome to SLUS, even though I'm not the organizer, but SLUS is the well-known major conference in Helsinki.

• 16:32Joe Weisenthal?

  We'd love to come to that sometime. If you can introduce us next, 2026, we'd love to come.

• 16:36Speaker 05

  That's the major startup.

• 16:38Joe Weisenthal?

  That sounds great.

• 16:39Speaker 05

  Global startup event since early 2010s.

• 16:42Joe Weisenthal?

  Okay, that's good to know.

• 16:43Speaker 05

  The name SLUS comes from November because you have so much slash in November. That's why it's for SLUS. But it's a very bright event in the darkest time of the year.

• 16:54Joe Weisenthal?

  But this is why everyone goes into the saunas the rest of the time to get out of the slush.

• 16:57Speaker 05

  Yeah, well, I do it 12 months per year, a few times per week.

• 17:01Joe Weisenthal?

  Sounds great. It sounds fantastic.

• 17:03Speaker 05

  Not bad, not bad. But even more seriously, so we have startups, we have some unicorns, but the general challenge in Europe is that in the scale-up phase, many companies choose the US, say Silicon Valley or New York Stock Exchange or combination of both because it's easier to get venture capital. You have a large market which is culturally fairly similar, even though there are certain differences between California and.

• 17:29Joe Weisenthal?

  Helsinki.

• 17:29Speaker 05

  Helsinki, California and, say, South Carolina.

• 17:34Joe Weisenthal?

  Right, yes, okay.

• 17:35Speaker 05

  So in any case, it's the. Scale-up phase and internationalization phase where we have to do better. And that's why, for instance, our government's efforts to enhance growth in Finland are very much focused on funding of scale-ups and growth companies.

• 18:06Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

• 18:33Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 19:16Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 19:55Speaker 06

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• 21:03Tracy Alloway?

  So when I think about a business being competitive, especially in the areas that people seem to be very excited about nowadays, things like AI, data centers, I guess, defense nowadays, I think about one aspect of competitiveness is price, right? And if your input costs are higher than a lot of other people, then you're going to struggle to provide these things at a low cost. And in Europe, the big input cost that people seem to struggle with is energy, right? How in the world does Europe start to compete in terms of global competitiveness with energy prices so high? And what can you do about it?

• 21:43Speaker 05

  We have to go back, I have to go back to Finland metaphysically, mentally now again, because we have an X number of data center investments coming in Finland, mostly with foreign direct investment, thanks to the combination of relatively inexpensive electricity and relatively cool climate, which is conducive for data centers. So in that sense, there are differences within Europe as well. The key is very much to continue the green transition with consistency.

• 22:19Speaker 05

  For the moment, still, countries like Germany are suffering from higher electricity and energy costs, that is true, largely because Germany was so dependent on Russian fossil fuel, especially because its energy-intensive chemical and other industries were, or have been so dependent. But the green transition is moving forward. We lean much more on renewable energy than before. Of course, energy efficiency and smart electricity systems play also a key role here, and I would expect that this green transition will be, I mean, not concluded, but will be very far by the end of this decade, so that we have a much more competitive condition in Europe

• 23:04Speaker 05

  in this regard. I add one thing. Often, when you compare fossil energy and you compare fossil energy to, say, renewable energy, the capital costs in renewables are often higher, like, say, investing in wind parks or solar energy, but the running costs are quite low. Meanwhile, in fossil fuels, it's often, let's say, the reverse, so that the capital costs are not that huge, but they are very significant running costs. So, once you are far enough in the green transition, preferably supplemented by nuclear energy, in my view, then our cost competitiveness in terms of energy will also be much better.

• 23:48Joe Weisenthal?

  It sounds like the solution to some of what ails Europe is just everyone needs to be more like Finland. Sounds like you have it figured out and everyone else in Europe needs to be more like that. No, for real, when it comes to broad, like, industrial pressure, can you, like, attribute, and maybe this is more of a German-specific question, but I think it probably applies more broadly, is it possible to decompose the degree to which competition with China

• 24:17Joe Weisenthal?

  Especially things like chemicals, China's very competitive chemicals, though it doesn't get much attention. Obviously, cars globally is just a huge story. When you look at like sort of the sputtering out of industrial production in Germany or just Europe more broadly, is it possible to decompose how much of it is undercutting on price from China versus the higher costs that have surged particularly since early 2022?

• 24:40Speaker 05

  Well, it's it is possible, but I don't have the figures of the of the cuff. But I recall that in 2022, which was the high point of energy costs in Europe. So we calculated with a friend of mine and then we verified that by our economists. That year, Europe paid 800 billion euros for fossil fuels instead of the long term average of 300. So we paid 500, 600 billion euros more that year, which then was roughly 3% of GDP.

• 25:16Speaker 05

  So in 22, we had, you can say that it was kind of an extra tax of every European of 3% of the income on average, which of course created quite a lot of popular opposition and criticism. Fortunately, we have been, it's not actually about fortune, it's about political will and action. We have been able to broadly adjust to the end of Russian gas in Europe. But we still have some work to do in many countries. You mentioned Germany. Germany still has work to do in order to reduce its energy costs in its industrial production.

• 25:59Tracy Alloway?

  If you could wave a magic wand and do one thing to boost European either productiveness, productivity, or competitiveness, basically make all of Europe more like Finland, what would it be, other than installing saunas in everyone's house?

• 26:17Speaker 05

  That's a good idea, actually, even though fairly electricity.

• 26:20Joe Weisenthal?

  Yeah, we say that's not helping with the energy.

• 26:22Tracy Alloway?

  Yeah, that's fair.

• 26:23Speaker 05

  Depending if you use electricity or wood in heating, I have both. In the summer, it's wood by the lake.

• 26:31Joe Weisenthal?

  Oh, that's so good.

• 26:32Speaker 05

  More seriously, more seriously, if I could do one thing, I would complete the single market without delay. And also create a genuine savings and investment union with a deep and liquid capital market. Because this would help address the challenge of venture capital and financing of European startups and growth companies.

• 26:55Tracy Alloway?

  What would it do, what would that sort of cohesive market do that you can't do right now at a national level?

• 27:04Tracy Alloway?

  Would it just lower capital costs for everyone or?

• 27:07Speaker 05

  For instance, concerning the savings and investment union, you have actually a long list of concrete decisions that it will require. But the key things are in many ways to have a

• 27:20Speaker 05

  safe asset, a European safe asset, which would facilitate the creation of a genuine European capital market. And then in addition to that, there are quite reasonable proposals of creating either tax incentives or other decisions that encourage people to invest, people meaning individual citizens and households. Sweden actually is a very good example of this. So that in Sweden, for instance, you have a certain portion of your retirement payments that you have to invest to the stock market or funds.

• 27:56Tracy Alloway?

  Oh, I see, yeah.

• 27:57Speaker 05

  Which has helped to create a culture of investment in Sweden. And we are actually, even though Finland was mentioned as a role model, but we are benchmarking Sweden in this card. Because they have the most vibrant venture capital market also, thanks to this quite well functioning capital market.

• 28:15Joe Weisenthal?

  It makes total sense that, you know, I think of. The Euro area, whatever version of it we want to talk about is it's an ongoing project, it's always a work in progress, it'll probably never be completely finished, there's always more to do. But this, to my mind, gets to the sort of like the challenge of domestic politics, right? And like, we all see what's happening here, we're October 16th, our government is shut down, but it feels like various versions of this stress are replicating themselves across the sort of rich, developed, Western countries. France, their government always seems to be like two weeks away from collapsing, who knows if they'll have a government? I don't know if Belgium has a government these days, I

• 28:59Joe Weisenthal?

  think the Dutch have an election coming up, who knows what's happening there? If you look at polls in Germany, we all know that parties like the AFD, which are on a very different trajectory, are doing very well in the polls there, etc. Like, how much of the, yeah, it's great to say, like, people here in DC at these conferences and here at Bloomberg love, love the idea of like integrated markets, but how much is the roadblock that you foresee to get to where you want, essentially the reality of domestic electoral politics in each of the member countries?

• 29:33Speaker 05

  It's a continuous challenge, and you're right, so when you said that Europe or the European Union or the Eurozone is a community or community of states that is in constant movement, I would wish that it would be in a more, more rapid movement, but it is indeed an unfinished business and will continue to be so. That's why it is actually so fascinating and meaningful to work for, for Europe. On these two, two brief points, first, the political battles or the political competition of the souls of the people are done in Europe, in the member states.

• 30:07Joe Weisenthal?

  Yeah.

• 30:07Speaker 05

  National politics are key here, and that's why I have a high regard for national politicians who face this challenge in the town hall meetings and in the social media or elsewhere, and of course, in, in terms of policymaking. So we have to be able to do such concrete policies that help alleviate the concerns of the citizens and boost sustainable growth and job creation in, in Europe. That's the essence. Second comment is that it's quite interesting that even though we have had and continue to have populist movements challenging, say, the more centrist parties in almost all countries of Europe, still the European Union is holding together. And it is structurally kind of.

• 30:50Joe Weisenthal?

  And it's still fairly popular, isn't it? Like, actually, the polls still show a fair amount of popularity of these, like, multinational European.

• 30:57Speaker 05

  It is, it is. For instance, in France, the right-wing party, ARN, has toned down its criticism concerning the euro in recent years. And Europe, or in this case, the European Union, works as glue that helps to keep together the policymaking structure of Europe. So in that sense, it has a certain impact, kind of second-level reverse impact on domestic politics as well. Quite illustrative is that in Finland, on Monday, after many years of discussion, we were able to agree, or the eight parliamentary parties were able to agree on a long-term commitment to balanced budget and debt anchor, which is historic.

• 31:41Speaker 05

  And it is also respecting the EU fiscal rules. Even the parties that have been quite critical on Europe are part of this agreement, which, in my view, is actually quite encouraging.

• 32:10Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk, and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 32:52Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at chatgpt.com.

• 33:33Speaker 06

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• 34:18Speaker 06

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• 36:10Tracy Alloway?

  Earlier this year, everyone got very excited about Germany finally wanting to spend, right? We weren't going to be terrorized by the black zero, the Schwarzenegger, forever. Do you get the sense that things are changing in other countries? Because again, here in the US, the headlines we see for a place like France is worries over the deficit, political, I don't want to say incoherence, but certainly a little bit of political chaos. Does it feel like all of the Eurozone is becoming more comfortable with the idea of spending for strategic purposes at this moment in time? Or is it primarily still Germany?

• 36:48Speaker 05

  It is primarily majority of all the member states. But you are right, there is a certain variety of concerning the emphasis. And Germany plays a key role here. The decisions of the German government, and in fact, German government and opposition earlier this year, are now taking effect. They are budgetary laws, so they will be implemented. That's critical. But so are other countries, like all the Nordics. The Nordics together are 27 million people and relatively wealthy area in the globe. And all the Nordic countries are expanding their defense expenditure significantly. So are all the Eastern European countries

• 37:31Speaker 05

  and several of the Western European countries. So overall, the picture is, I would say, encouraging. I don't shout for victory yet, but we are on the right road here.

• 37:44Joe Weisenthal?

  You know, it's really great to have you on the podcast because both Tracy and I covered the eurozone crisis of the early, the first half of the 2010s quite intensely. There are numerous headlines that you would make news, and I saw your name and numerous headlines over time. And maybe next time you come on, I would love to just like do an hour and just talk about that time. Provided, we don't want to give you like Euro crisis PTSD, et cetera. But I do have one, you know, I have a million questions about what that time was really like. But I was talking about this with someone last night, you know, as the crisis metastasized over time, there are all these, we're going to introduce a new bailout fund, and I forget acronym after acronym.

• 38:22Tracy Alloway?

  European Stability Mechanism.

• 38:23Joe Weisenthal?

  Yeah, all this like, yeah, all these acronyms and acronym soup, yeah. But then the crisis ended essentially on the day that Mario Draghi said that sovereign spreads were an impediment to monetary transmission. And once he said that closing spreads were sort of mandate consistent with the ECB, from then on, everything, that was it. That was the moment that the crisis really turned. Couldn't that have happened a lot earlier? Was there a lot of unnecessary pain that was incurred in Europe? Because it took so long to sort of get to the point that the ECB could find a way that it was within its remit to close spreads?

• 39:00Speaker 05

  I think it's a legitimate question, and I have been thinking about that quite a lot. I've actually answered to this question in my book called Walking the High Wire.

• 39:08Joe Weisenthal?

  Okay, yeah, good name.

• 39:09Speaker 05

  It's about the eurozone crisis. In fact, it is true that once Mario said his now legendary words, whatever it takes within our mandate to save the euro, then the animal spirits.

• 39:21Joe Weisenthal?

  That was it, it turned around that day.

• 39:22Speaker 05

  And the market started to believe that the ECB is functioning as the central bank must function as the lender of last resort.

• 39:31Joe Weisenthal?

  That was the moment it became a true central, that was the moment it became a true central bank in some sense.

• 39:35Speaker 05

  Yeah, that's right, that's right. And that's why before that, it was kind of incrementalist firefighting. This was not without value because we were able to keep the euro afloat and support many countries, Greece, Portugal, Ireland, Spain, with the funding of the European Stability Mechanism or its precursor. In fact, now the countries that then were in the EU IMF programs have been in the past years, they have been one of the best performers in economic terms in Europe.

• 40:08Joe Weisenthal?

  Everything has totally flipped since the 2010s.

• 40:10Speaker 05

  So they have reformed their economic structures to a last extent and they are much more competitive for the moment and their public finances are on a sound basis.

• 40:20Joe Weisenthal?

  But there were years of pain in Greece and particularly Italy as well, like truly like incredible economic damage and by some measures they would say like on par with the Great Depression in the United States. Could Europe have gotten to that point? Could Mario Draghi have given the whatever it takes speech in 2009? Did it have to wait as long as it did and all these other mechanisms have to try first?

• 40:42Speaker 05

  Mario Draghi started as ECB president in November 2011.

• 40:47Joe Weisenthal?

  Well, you're right. So there is no way he could have given the speech in 2009. Could Jean-Claude Trichet have given the speech in 2009?

• 40:53Speaker 05

  You have to ask him.

• 40:54Joe Weisenthal?

  Okay.

• 40:55Speaker 05

  But I think it's.

• 40:56Joe Weisenthal?

  But I guess my point is, did it, did all of these.

• 40:59Tracy Alloway?

  Could they have moved faster?

• 41:00Joe Weisenthal?

  Were all of these steps necessary in which the, before the ECB as an institution got comfortable with its role, that it would be much like the Fed and other central banks, some sort of backstop or lender of last resort? Did they're all, did everything else need to be tried first?

• 41:16Speaker 05

  You are talking like I was talking to my wife in the sauna during the eurozone crisis from 2009 onwards. So pretty much I share your view.

• 41:27Joe Weisenthal?

  Okay.

• 41:28Speaker 05

  And if you take a more, let's say, historical view that, so when the euro was created, then the kind of major event like the eurozone debt crisis was not perceived apparently in the minds of the creators of the euro.

• 41:41Joe Weisenthal?

  Yeah.

• 41:42Speaker 05

  Because there was no stability mechanism like the IMF. The European stability mechanism is the IMF in the European context. Actually, the ESM has more capital than the IMF total capital. So.

• 41:55Speaker 05

  That was not in existence when the crisis hit. We had to create in the run, on the flight.

• 42:00Joe Weisenthal?

  Yeah.

• 42:01Speaker 05

  And the second problem was that among the economists, there was much discussion about whether the eurozone or the Economic Monetary Union is an optimal currency area.

• 42:10Joe Weisenthal?

  Yeah.

• 42:11Speaker 05

  But macroeconomic imbalances and financial stability issues were kind of forgotten at the time. So very strong focus also in the economist's community. I think that's something that deserves some self-criticism among the economists as well.

• 42:26Tracy Alloway?

  We have to do an episode just about the eurozone crisis at some point, but we can't do it right now.

• 42:32Joe Weisenthal?

  In our five minutes left.

• 42:34Tracy Alloway?

  In our five minutes left. So just going back to the start of this conversation, which was about whether or not this is a moment potentially for Europe. If Europe doesn't, the eurozone doesn't successfully mount some of the changes that you've discussed, if it wastes this current opportunity, what's the most likely path for the bloc as a whole? And then secondly, how would you know that Europe has kind of achieved this global success? Are there things that you look out for? Is it share of currency used in global trade or something like that?

• 43:12Speaker 05

  Well, first, what's the measure or what's the yardstick of measuring success of, say, European economic policy? I think fundamentally that is the well-being of European citizens and, say, freedom, entrepreneurship, well-being, also social protection of European citizens.

• 43:31Tracy Alloway?

  Access to saunas.

• 43:32Speaker 05

  Access to saunas, that's a basic human right.

• 43:35Tracy Alloway?

  I agree.

• 43:36Speaker 05

  Essential civil liberty.

• 43:37Tracy Alloway?

  My mom had a sauna when she was in Estonia, and it was amazing.

• 43:41Speaker 05

  That's the second part. But then the first part, what if Europe won't be able to? Do the necessary things in order to become stronger in terms of security and the economy. I guess some kind of muddling through will continue. And that is a very gloomy future for the Europeans. So I would very much prefer us stay united, have the capacity of renewal and reform. And thus gain the required self-confidence to also gain a stronger role in global terms. Finally, I want to add that we are very committed, despite the current headwinds we are facing in terms of geopolitical tensions and trade wars.

• 44:25Speaker 05

  So we, as Europeans, we are committed to multilateral international cooperation. And we want to work together with our partners, the US, Global South and beyond.

• 44:36Joe Weisenthal?

  I just have one last question. It feels like here in the US, I sort of expect that for the rest of my life, that we will continue with some sort of ongoing divorce with China. That like we're, we're never going to go back to the early 2010s or the 2000s, where it seemed like we could just be like friends. Maybe I'm wrong, maybe I'm being too pessimistic, et cetera. When you think about the future of relation with Europe and China, where do you see that going? And especially again, because our president has obviously thrown up trade barriers between the United States and the euro area. Is there a pivot to China in the works? Could, could you see that relationship over time actually deepening?

• 45:20Joe Weisenthal?

  Like, what are you thinking about in terms of the trajectory of that relationship? Because here it seems terrible.

• 45:26Speaker 05

  There is an ongoing discussion on that in Europe, both at the European level and in the member states. You have two sides of the coin. On one hand, Europe is trading a lot with China and is quite dependent on China, but it's a mutual dependency in many ways. And it's broadly free trade, not always so fair, but free trade. On the other hand, in China, the Communist Party has taken stronger political control. And China is, let's not forget, China is supporting Russia in its military actions, military aggression in Ukraine. And that has clearly, I'm not sure if the Chinese have fully realized this,

• 46:07Speaker 05

  but that has clearly seriously damaged the image of China in Europe. Because we see that they are an ally of Russia and they are trying to, with that alliance, they are trying to destroy our freedoms in Europe.

• 46:22Tracy Alloway?

  All right, Oliver, and thank you so much for coming on All Thoughts. Really enjoyed it.

• 46:26Speaker 05

  Thank you very much. Thanks for the discussion.

• 46:41Tracy Alloway?

  Joe, that was really interesting to get a European perspective. I gotta say, you know, saying that the EU could have acted quicker on the debt crisis. I think you could almost always level that criticism at central banks.

• 46:54Joe Weisenthal?

  You could.

• 46:54Tracy Alloway?

  And to some respect, I mean, this is what we saw during the financial crisis, right? So 2008, it took a while for the Fed and everyone else to realize what was going on. And then they came up with all these programs. And then when you had subsequent crises, they could roll them out really quickly.

• 47:10Joe Weisenthal?

  You know, it's like a cliche, oh, you try everything else until you get to the right answer. It is total logical, isn't it? Of course, like, I guess by definition, when you get to the last thing.

• 47:20Tracy Alloway?

  Right, you stop. You don't keep going.

• 47:22Joe Weisenthal?

  At that point, it still seems like they took a while. And I have certainly never been, I've never asked a guest a question and then been told, oh, I talked about this in the sauna with my wife, this very same topic. So that was sort of a response I wasn't expecting.

• 47:37Tracy Alloway?

  You don't talk in the sauna with your wife about-

• 47:40Joe Weisenthal?

  I just don't expect guests to have had the same conversation with their wife.

• 47:46Tracy Alloway?

  But I do think, in general, it does feel like things are changing enormously. And I know a lot of it is still talk at this point.

• 47:54Joe Weisenthal?

  Yeah.

• 47:54Tracy Alloway?

  But certainly, speaking with Ollie, you do get the sense that there is a conception in Europe that now is the time when actually you kind of have a news peg or an opportunity

• 48:06Joe Weisenthal?

  Yeah.

• 48:07Tracy Alloway?

  to actually do some of the things you've said you were going to do for a long time.

• 48:11Joe Weisenthal?

  It's funny to think about policymakers having a news peg, as if they're like, oh, let's do a podcast on this episode. But-

• 48:17Tracy Alloway?

  They're just waiting for the headline. Now they can do it.

• 48:19Joe Weisenthal?

  That they're gonna do. But like, it does feel like, whatever cliche you want to use, the rubber is hitting the road. There are serious constraints, right? The industrial economy is deeply stressed. The energy situation is stressed. President Trump is putting trade stress. They have industrial powerhouses that are like being undercut by China or facing very stiff competition with China. There is a war going on in Europe. And as you mentioned, when thinking about the future of China, is the fact that China has been a important trading partner.

• 48:52Tracy Alloway?

  That was really interesting.

• 48:53Joe Weisenthal?

  Very interesting. So, you know, there are a lot of big issues that are being forced upon Europe right now in multiple directions, whether we're talking about the war, whether we're talking about trade, whether we're talking about President Trump. So if they're gonna do something that sort of changes the trajectory of the European project, I see why now is the time.

• 49:15Tracy Alloway?

  It's not the rubber hitting the road, Joe. It's the birch branch hitting someone's back-

• 49:19Joe Weisenthal?

  Yeah.

• 49:20Tracy Alloway?

  in the sauna.

• 49:21Joe Weisenthal?

  That's right.

• 49:21Tracy Alloway?

  That's what's happening.

• 49:22Joe Weisenthal?

  Ollie, we had a title, "Ollie ran on the birch branch hitting the back in Europe." That's our title.

• 49:28Tracy Alloway?

  Let's leave it there before we go any further.

• 49:30Joe Weisenthal?

  All right, let's leave it there.

• 49:31Tracy Alloway?

  Okay, this has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at TracyAlloway.

• 49:37Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at TheStalwart. Follow our producers, Carmen Rodriguez at CarmenArmond, Dashil Bennett at Dashbot, and Cale Brooks at CaleBrooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have a daily newsletter on all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 49:58Tracy Alloway?

  And if you enjoy Odd Lots, if you want us to go to Finland and talk about Eurozone crisis days with Oli Renn, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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