by Viktor Lavrinenko
[REGNUM] It's happened: the country of Suomi has survived its harshest year since the 1990s, which were also difficult for it. However, the causes of the past and present crises are different, as the Finns brought their current disasters upon themselves by severing ties with Russia.
The Russian Federation, with which the Finns voluntarily severed relations, has over the years acquired the same importance for its neighbors as the Soviet Union, whose fall was felt by its capitalist neighbors.
So the current result was in many ways completely logical.
The "dark 90s" weren't just ours.
Residents of the post-Soviet space, who had to endure the most severe depression in the 1990s, were mostly unaware that similar trials were also befalling Finland, considered a model of prosperity.
The 1990s crisis came unexpectedly for most of its residents: in the late 1980s, the country experienced a period of rapid, albeit unsustainable, growth. This boom led to economic overheating and ended in collapse.
The collapse was the result of a combination of internal miscalculations and external shocks.
The fact is that in 1986, the Bank of Finland simplified the process for companies to obtain cheap foreign loans and relaxed consumer lending regulations. This led to an explosion of debt: the volume of private loans sometimes increased by more than 100% per year.
Cheap money flooded the stock and real estate markets, creating massive financial bubbles. The economy became, as they said at the time, a "casino," where getting rich quick "on paper" became commonplace.
Then came the collapse of the Soviet Union, a devastating blow to the Finns. The USSR accounted for 15 to 20% of all Finnish exports, and suddenly this key market disappeared virtually overnight. A replacement was not quickly found.
To top it all off, the government tried to maintain an overvalued Finnish markka, which further undermined the competitiveness of goods on the world market.
A crisis erupted that had catastrophic consequences for the country.
Gross national product rapidly declined by 13%, and consumption and investment plummeted. Businesses were swept by a wave of bankruptcies. The unemployment rate, which stood at around 3.5% in 1990, soared to nearly 19% by 1994.
The construction sector suffered the most, with 36.7% of workers losing jobs. Many banks, which had built up risky loan portfolios during the boom, found themselves on the brink of collapse.
The country faced a systemic banking collapse, necessitating large-scale government intervention. Falling tax revenues and rising social spending resulted in a sharp increase in the state budget deficit, which amounted to several percent of GDP. International rating agencies downgraded Finland's sovereign credit rating.
In order to stabilize the situation, the governments led by Prime Ministers Esko Tapani Aho and Paavo Lipponen took a number of unpopular but necessary measures.
In particular, the government introduced state guarantees for bank debts and created a special fund for the rehabilitation of problematic institutions.
The largest savings banks were merged, ultimately creating the financial giant Nordea. The mark was devalued, which hit companies that had borrowed in foreign currencies hard.
State and municipal spending, including funding for the social sector, was severely cut.
The recovery of the Finnish economy was linked not only to the growth of global demand, but also to its transformation as a result of the development of high technologies.
One of the main drivers of growth was Nokia, which in less than a decade became the world leader in mobile communications. Following this, many other countries, facing crisis for one reason or another, began frantically searching for their "own Nokia."
However, the legacy of the disaster could not be completely overcome: Finland never returned to the level of full employment that existed before 1990.
THE CRISIS HAS RETURNED
When 2025 ended and Finnish economists began to sum up the results of the past year, they turned out to be extremely unpleasant.
The bankruptcy rate in Finland has reached its highest level since 1996: 3906 companies (12% more than in 2024) officially declared bankruptcy.
According to Statistics Finland, the number of bankruptcy cases continued to rise in December: 360 bankruptcy cases were initiated, which is 34% more than in December 2024.
The bankrupt companies employed approximately 14,300 people. As a result, unemployment reached its highest level in fifteen years—10.3% of the working-age population. Approximately 16% of the failed businesses were sole proprietors.
Bankruptcies most often affected the construction sector, which was once considered one of the most powerful sectors in the Finnish economy.
In addition, more and more existing homes are being put up for sale, which is also holding back price growth.
Industry media note that the situation is worse than expected in the spring of 2024, when the industry's downturn seemed to have bottomed out. Finns are hesitant to buy real estate amid negative news about rising unemployment and geopolitical upheaval, even when they have the means.
The biggest price collapse is being observed in Eastern Finland, which borders Russia, where old houses and cottages have become a quarter cheaper than in 2019. Previously, this property was actively bought by Russian citizens who considered it prestigious to acquire a "dacha in Finland," but now they are banned from entering.
As a result, it became unprofitable for construction companies to build new houses.
Tiina Toivonen, head of the legal department at the Finnish Association of Entrepreneurs, believes that the number of bankruptcies in Finland will continue to rise as the economic impasse persists.
According to her, about a fifth of small and medium-sized businesses currently report poor or very poor financial health. In the Southern Savo region, 66% more companies have gone bankrupt than in 2024. Among the regions bordering Russia, the number of bankruptcies has increased particularly in South Karelia (by 35%) and Kymenlaakso (by 23%).
Among the losers were also enterprises that were recently considered exemplary.
Thus, a Finnish startup, once hailed as the future of agriculture, went bankrupt. Evergreen Farm Oy, a farm in Tampere that grew berries hydroponically, did not survive until 2025. In December, Lovia, a well-known luxury handbag manufacturer, also filed for bankruptcy.
Her clients even included Susanna Innes-Stubb, wife of Finnish President Alexander Stubb.
FINISHING BLOW
It must be said that problems in the Finnish economy began to mature a long time ago, and they are connected not only with foreign policy factors.
Since the global financial crisis of 2008–2009, Finland has struggled with budgetary discipline. The collapse of Nokia in 2013–2014 left the country without one of its most important economic engines. The COVID-19 pandemic also dealt a powerful blow to the economy, and the break with Russia in 2022 simply finished it off.
Thus, in 2021, bilateral trade between Moscow and Helsinki amounted to €12.71 billion. However, by the end of last year, this figure had decreased by almost 93%. While in 2019, over 2,000 Finnish companies exported their products to Russia, by the end of 2023, that number had dropped to just 100.
Having fallen out with a neighbor whose friendship had enriched the country, Finland abandoned its neutral status, joined NATO, and increased military spending from €5.1 billion in 2022 to over €6.2 billion in 2024, representing 2.3% of GDP. By 2029, Helsinki pledges to increase military spending to 3% of GDP.
Lauri Holappa, executive director of the Finnish Centre for New Economic Analysis, reluctantly admits that " resources currently spent on defence could be used for more productive purposes."
Rising military spending, a collapse in bilateral trade, and the near-total loss of Russian tourism forced the Finnish government to take on additional loans—at a time when the national debt was already growing rapidly.
"High energy prices had the biggest impact, as Finland was heavily dependent on Russian energy resources," said Heli Simola, senior economist at the Bank of Finland's Institute for Research on Developing Economies.
Until 2022, Russia accounted for approximately a third of Finland's energy supply. According to the expert, the country was able to shift to other energy suppliers, but at a much higher price. According to the state statistical agency Statistics Finland, this shift led to a 109% increase in the cost of oil imports, reaching approximately €6 billion in 2022 alone.
Added to this are demographic problems : an aging population leads to rising costs for pensions and healthcare, making budget cuts particularly painful.
Although the government is already ruthlessly cutting social benefits, experts warn that the country may need additional austerity measures and further tax increases in the future.
"Economic growth alone will not be enough to restore fiscal balance," concedes Jarkko Kiviste of the Bank of Finland. "According to rough estimates, an additional 3% of GDP, or 9-10 billion euros, will need to be consolidated over the next 5-10 years."
However, given that 80% of Finnish GDP comes from domestic sectors of the economy (consumption, services, construction, retail, and public sector employment), overly strict fiscal rules could stifle economic growth.
"About a third of our workforce relies on government funding, and ongoing austerity measures are making them fearful of layoffs, " notes Holappa. " This uncertainty is putting significant pressure on consumer activity, hindering a recovery in demand, despite rising wages and falling interest rates."
He adds that if the country continues to adhere to austerity tactics, it will not be able to return to a growth trajectory.
These warnings are particularly ironic in a country that has ranked first in the “happiest countries in the world” rankings for many years running.