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News, 5/8/2006 | Embassy of Finland, Washington

The Country That Paid its Debts

Modern Finland has little need for the kind of national branding campaign seen in the 1930s. Then Finland was known only as the country that paid its debts to the United States.


The Bank of Finland office in the 1930s. Photo: Courtesy of the Bank of Finland.

Modern Finland has little need for a national branding campaign. The country of five million has been recognized in recent years for its formidable competitiveness, innovation, transparency and literacy rates. Nokia telephones are ubiquitous as are Marimekko’s bold retro chic fabrics. Famous Finns, among them world-renowned architect and designer Alvar Aalto and Tove Jansson, whose Moomin fairytales have been translated into more than 30 languages, have left lasting global legacies. It was not always this way.

In the early 20th century, Finland was a little known country saddled with debt to the United States, incurred when Finland borrowed just over eight million dollars between 1918 and 1920 to ease acute post war food shortages. Finland agreed to repay the loans over a 62-year period, with an interest rate of 3% for the first ten years, and 3.5 % thereafter.

Finland was not alone in owing significant relief and reconstruction monies to the United States. In 1922, the United States negotiated loan agreements totalling slightly more than 11.5 billion dollars with 15 European countries. But Finland alone strategically turned an ill-deserved reputation for being a “bad debtor” around with a public relations coup when it was the only country that repaid its debt in full.


Cartoon in Philadelphia Public Ledger. Photo: Courtesy of the Bank of Finland.

In 1931, in the face of worldwide economic depression, the United States announced a one-year moratorium on all inter-governmental loans. Debtors, with the sole exception of Finland, took this moratorium to be a pardon. In 1933, only six countries made token payments on their loans. The following year, Finland earned the distinction of being the only country to continue to pay its principal and interest payments in full.

3,000 Stories Touting Finland

Finland’s hopes for a rehabilitation of its reputation were satisfied. Between 1933 and 1936, when widespread economic hardship in the United States stoked public resentment of the European loan defaults, American newspapers published nearly 3,000 stories trumpeting Finland’s faithful repayment of the loan. Finland was widely portrayed as a small northern country willing to give the shirt off its back, while its more affluent neighbors left their debts unpaid.

Finnish authorities were well aware of the public relations value of their resolve. In December 1934, then Governor of the Bank of Finland and later wartime President Risto Ryti remarked in a widely quoted interview that Finland could do nothing less than repay its debt in full: “It is only natural. We signed the contract. We promised to pay. It is the only honest thing to do.”


Armi Kuusela crowned Miss Universum in 1952.

Finland continued to make regular payments on the loan until the 1940s, when a second moratorium was granted because of World War II. At that time, U.S. and Finnish authorities agreed that future remissions would be invested to benefit Finland. In 1949, the U.S. Congress passed a law allowing Finnish payments to fund travel in the United States for Finnish researchers and acquisition of American scientific and scholarly literataure and technical equipment for Finland’s institutes of higher education. Finland’s final loan payment in 1976 created the Finnish-U.S. Educational Trust Fund.

History Repeats Itself

Finland was also quick to pay its dues, which took the form of war reparations to the Soviet Union, after World War II. Although the United States had tried to persuade Soviet leaders not to exact reparations from Finland, Finland was obliged to pay 300 million dollars – a punitive 7% of its national income - to the Soviet Union in the form of goods. Finland paid in full by the early 1950’s; its last remittance, the brigantine Zarja, set sail for the Soviet Union on 18 September 1952.

That year, in which Helsinki hosted the summer Olympics and Finland’s Armi Kuusela was elected Miss Universe, may well have set the stage for modern Finland’s broader capacity to dazzle and amaze.

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Updated 5/8/2006


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