Finland 1948

By | December 17, 2021

During the two wars fought with unfortunate outcome against the Soviet Union, Finland did not experience foreign occupation in the territory and there were no obvious restrictions on its sovereignty, but the country suffered serious mutilation and devastation especially in Lapland and its economy is undergoing a profound evolution.

Following the Moscow agreement (March 12, 1940) which ended the first war, which lasted just over 100 days, Finland had to cede to the Soviet Union: 1) the Karelian Isthmus and the territory located at N. of Lake Ladoga, with the cities of Viipuri and Sortavala; 2) the islets of the Leningrad Bay and the Gulf of Finland; 3) a strip of land along the eastern border (Salla salient); 4) the Finnish part of the Fishermen’s peninsula. In addition, the peninsula and the port of Hankö, opposite the Estonian base of Porto Baltic, were leased to the USSR for 30 years, with the right to keep armed forces there and to equip a maritime base there. The construction of a railway line was also planned from the Russian base of Kandalaša to the Finnish railway junction of Kemijarvi, to facilitate the USSR’s relations with Sweden and Norway. Overall, Finland had to cede 35,084 sq km. (not including the area of ​​Ladoga). Over 400,000 people lived in the occupied territories (just under one eighth of the total population), most of whom moved to this side of the new borders.

The peace treaty signed on February 10, 1947 with the United Nations (which only contemplates commitments towards the USSR, not towards other nations) re-established the border line of 1940; moreover, it contemplates the sale of the Petsamo territory (10,480 sq. km.), which in 1940 had remained in Finland, and the replacement of the 50-year lease of the Porkala naval base (380 sq. km.), just 13 km away. from Helsinki, instead of that of Hankö. The treaty confirms the demilitarization of Åland and sets the maximum military strength of Finland. The main consequences of this second treaty are the following:

  1. Finland was forced to surrender the Karelian isthmus with Viipuri (which was the second Finnish city) and most of its defensive positions in the SE region, lengthening the course of the border in open land. It has lost one of the few territories which was suitable for cultivation. Particularly serious is the loss of Viipuri (55,750 residents in 1930), the capital of Karelia and natural outlet for south-eastern exports, connected with the interior by the Saimaa canal (opened in 1856), as well as the sale of the Vuoksi, with metallurgical, electrochemical and woodworking plants.
  2. With the cession of the Fishermen’s peninsula and the Petsamo fjord, Finland lost its outlet to the Arctic Sea, free from ice all year round, while the Soviet Union now borders directly on Norway. It has also lost its rich nickel mines. The Petsamo area was not yet well known and represented a reserve for Finland.
  3. The rent for fifty years of the Porkala base, located near the capital, is a decrease in prestige for the country, especially since it has been cleared by Finnish citizens and is inaccessible to them.
  4. The Russian economic expansion towards the Scandinavian countries was favored by the purchase of the Salla area.
  5. Finland bears the burden of many reparations in kind; must supply the USSR with various goods (wood and its derivatives, machines and metal products, transport material), according to a monthly delivery plan, from September 1944 to September 1952.
  6. Finland had to settle citizens, refugees from lost territories (400,000 from Karelia, 10,000 from Petsamo district, 15,000 from Porkala peninsula), in south-western Finland, resorting to confiscation (agrarian law 1945), against compensation, of 10% of the enterprises from 25 to 100 ha., of 40% of those from 100 to 200 and of 75% for higher extensions.

Already during the Second World War, traffic with Great Britain and the United States had to be suspended (except for small shipments through Petsamo) and exchanges intensified instead with Germany, with which Finland was involuntarily allied, being in war with Russia. Having lost the war, the exchanges instead turned, forcibly, towards Russia. Finland had to change its economy to meet its commitments; Thus new industries (mechanical and metallurgical) have arisen, in which people hitherto employed in agriculture have found work. On the other hand, to feed the industries it must procure raw materials (especially iron) abroad, which is possible only through exchanges or through loans (granted by Sweden and Great Britain). Tekoplan) fixed for 1947-48 the volume of trade for goods to be exported and imported. Thus Finland, which since 1918 had tried to loosen ties with Russia and turn to Western countries, is now tending to return to its primitive orientation.

An island of Western culture on the fringes of the Soviet world, it is the only defeated country in Eastern Europe that is governed by the political and economic principles of Western nations; and although forced to work for the Soviet Union, he tries to succeed intact, both from the point of view of the social structure and from that of political independence.

Finance (XV, p. 408 and App. I, p. 599). – The deficit in the state budget was able to be covered by issuing internal loans and by resorting to the central bank and commercial banks; income and expenses varied as follows in the period:

The public debt has consequently increased significantly: from 2,476 million marks in 1938, the internal debt had risen in April 1948 to 76,204 million. The foreign debt, which in 1938 was 1,078 million, amounted at the same date to 41,137 million marks. For Finland public policy, please check

The reparations, which Finland is obliged to pay to the USSR under the peace treaty, constitute a significant burden on its economy. The repairs proper, to be carried out in 8 years, and set at 300 million dollars, were reduced by the USSR (July 1948) by 75 million “repair dollars” equal to about 175 current dollars.

During the war the monetary circulation had undergone a notable expansion; from 2,086 million in 1938 it had gone up to 13,598 million as of December 31, 1945. During 1945 the mark was officially devalued several times and on 1 January 1946 the exchange of the currency was ordered and the volume of circulation was thus drastically reduced to 7,952 million. The official exchange rate with the US dollar was set at 136 Finnish marks = $ 1. However, inflationary developments could not be stopped; the rise in production costs, the heavier tax burden, the growing need for investments have accentuated the requests for bank loans, while deposits have developed only slowly. The concurrence of these phenomena has led to a growing expansion of monetary circulation, which in the April 1948 had reached 27,850 million. In March 1948 the gold reserves of the Bank of Finland amounted to 1.1 million dollars. At the end of April 1948, deposits with various credit institutions amounted to 89,047 million marks. Finland’s stakes in the Fund and the International Bank amount to $ 38 million for each of the two institutions.

Finland 1948