The Country That Paid Its Debts Exhibition 2004

Opening Remarks by Ms. Salo, Member of the board, Bank of Finland at the Reception of the Exhibition in the Fulbright Center,  17 November 2004.

Your Excellency, Ambassador Mack, Mrs Mölsä, Ladies and Gentlemen,

I am honoured and pleased to have been invited to open this exhibition. Its theme "The country that paid its debts" refers to an interesting episode in relations between the United States and Finland. The exhibition also reveals how deep and good these relations are. Not only does the exhibition provide a fine example of the importance of sound reputation and fame, but also how to establish such a "brand". It may well be that this "brand" of being a country that pays its debts is one of the most successful promotion campaigns ever, for Finland.

Let me provide you with some background on the exhibition and its theme. I'll start by quoting of the Times Sunday newspaper on 31st of May 1936, a large article entitled Why Finland pays its debt? which illustrates how, at that time, we Finns were known internationally.   

"The Finn is a rather dour, unsmiling fellow, who makes a fine friend but who takes life with great seriousness. He has a sturdy pride and self-respect. He wants to rely on himself. He asks no favours, and accepts no advice. He has an obstinacy and dogged determination that drives him on against tremendous odds. This doggedness has made him till the poor, rocky Finnish soil and to grow corn under conditions, which an English farmer would call impossible. It has enabled him to survive triumphantly six centuries of war and famine. And it is driving him to pay Finland's debt".


Finland’s reputation as a reliable debtor was established in 1933, when Finland paid the food loan it had obtained from the United States in 1919, in full and on time. Finland was the United States’ only debtor country that continued to pay its war-related debt until the end.

To understand what this all was about, we need to go back to the times after World War I. International economic relations were fairly complicated as almost every European country was in debt to the US for loans used to finance the war and reconstruction. Germany, on the other hand, according to the Versailles Peace Treaty, owed reparation debts to the allied countries. The situation was later worsened by the emergence of international deflation which increased the real value of the obligations. 

Several international conferences were held in the 1920s, in order to resolve these international debt relations, and several plans were agreed, and institutions established, for example, the Bank for International Settlements (BIS). However, the debt situation was not progressing well.

In 1931, US President Herbert Hoover granted its European debtor countries a year-long moratorium in an effort to facilitate international economic relations. The intention of the Hoover Moratorium was to postpone repayment of the debt by one year. The Moratorium did not mean the pardoning of debts, only their postponement. Payments to the US were to recommence in December 1932.  Nevertheless, every other country with the sole exception of Finland took the moratorium to mean a pardon and left their debt unpaid from 1933 onwards.  Thereby, Finland became the United States’ only debtor country that continued to pay its debt until the end – and this is why Finland got its reputation as a reliable debtor. 

Why did Finland pay its debt?  This too has its own background. Finland's decision to pay the debt was not a mistake, but a conscious plan to improve Finland's bad reputation!  In the 1920s, Finland had, indeed, the reputation of a bad debt payer. That was the result of a law issued in 1921 providing for the loan taken from France at the beginning of the 1920s to be paid back in Finnish markka. Since the markka was suffering from a strong inflation at the time, France ended up losing a significant amount of money – at least in terms of gold. This pleased neither France nor the international financial markets. Officers in our Foreign Ministry were aware of the problems regarding reputation, and tried to find a way to mend it.

Their hopes were fully satisfied when the US press paid a great deal of attention to Finland’s being one of only a few nations to continue its repayments. Indeed, as I mentioned earlier, paying back the debt was maybe the best promotion campaign ever for Finland – and furthermore it was not expensive. One should mention that the size of the debt as a percentage of Finland's GDP was small, and its share of the US total receivables from Europe was actually negligible. So, the huge attention paid to the matter in the United States' media was, may I say, perhaps a bit out of proportion.  But there was a principle at stake. The reason for the US media's strong reaction was naturally the Great Depression and the rage felt by American taxpayers against countries not paying their due.


Between 1933 and 1936, almost 3,000 stories were published in American newspapers on Finland and the debt. Finland was portrayed as a small northern country that gives the shirt off its back, while its richer neighbours leave their debts unpaid.  A quote from Christian Science Monitor of July 28 1933 goes:

"The Finns are so pink-cheeked; they are gay, vital, and their hearts are so full of the joy of living. They know the true happiness to be derived from simple pleasures. A walk or a boat ride means more than a silly cinema in a too ornate movie palace".

In December 1934, Finland’s continued payment of debt received plenty of attention in the press and, for example, a radio broadcast speech by President Roosevelt paid recognition to Finland on the debt matter.

As an example of how well the Finnish authorities understood the PR value of repayments I quote the Governor of the Bank of Finland, Mr Risto Ryti. He visited the US in December 1934 and gave a widely quoted interview to the AP, in which he said that Finland could do nothing less: "It is only natural that we should. We signed the contract. We promised to pay. It is the only honest thing to do."

Another quote in the Indianapolis Times 7th of December 1935 shows, how American citizens were taught some Finnish, too: "Hauskaa Joulua! On December 15th Finland will pay her semi-annual war-debt instalment of about a quarter of million dollars - - - It's sure nice to think one nation will drop a remembrance in the lean old sock this year. In our best Finnish we wish her a Merry Christmas! Hauskaa Joulua!"

From 1935 onwards, newspapers almost seemed to be waiting for June and December to gloat over others’ default and Finland’s exemplary payment of debt. Small articles described our geographical location, the country’s brave fight for independence and tendency to drink a lot of coffee. 

Instead of the small news and caricatures used so far to describe Finland, 1935 saw a turnaround, with more extensive and somewhat more truthful articles being written on the country – like the article I quoted at the beginning. Even today, many American school children recall Finland as ‘the country that pays its debts’, since the fact is pointed out in at least a few text books.


Finland continued to meet regular instalments until the 1940s, when a few years’ moratorium was called because of World War II. At that time, Finnish and US authorities also discussed whether it would be possible to invest the money repaid by Finland into something that would benefit Finland. This aim was met through the ASLA grant fund and Fulbright Center established at the beginning of the 1950s. The last payment on the debt was made in accordance with a renewed, faster schedule in 1976.

Plans for a scholarship fund were raised in public discussion already quite early on; a quote in the Tiffin Tribune on 26th of December 1935 says: 

"A recent Washington dispatch remarks, that some State Department officials have been wondering if part of these Finnish payment might not be set aside for a scholarship fund, for the education of Finnish students in American universities; and the idea has a good deal to recommend it. It would strengthen the bond of friendship and understanding between the two nations – and it would be a tangible way of showing how this country appreciates the presence of one good debtor among a flock of deadbeats."


Let me conclude my remarks by saying that the exhibition you are about to see shows some funny, some perhaps moving examples of the reflections in the US media. It is certain that the media and taxpayers were not only happy to receive the Finnish payments but also furious at the irresponsibility of the other countries. So, I hope you do not take the exhibition and the cartoons too seriously. But there is a lesson to be learned here nevertheless. And moreover, I am happy to confirm that according to the latest studies, Finland is still the least corrupted country in the world. I hope, that despite our reputed seriousness, developed as the result of centuries of wars and famine, we have learned to smile a little bit more by now!

With this short introduction I wish all the success to the exhibition, which in a rather peculiar but nice way illustrates good relations between our nations!

Published in the Fulbright Center News 1/2005.