After the armistice in 1944 a coalition government was formed under the leadership of Juho Kusti Paasikivi. When conditions had been stabilized, Mannerheim resigned, and Paasikivi was elected president in his place in 1946. In 1956 the leader of the Agrarian Party, Urho Kekkonen, who acted as prime minister a number of times during the period from 1950 to 1956, was elected president. He was reelected three times to the office, with an extension of his third term by the Parliament. When he resigned in 1981 because of ill health, he was succeeded by the Social Democrat Mauno Koivisto, who was reelected in 1988. Koivisto was in turn succeeded in 1994 by another Social Democrat, Martti Ahtisaari. Foreign policy
Under the leadership of Paasikivi and Kekkonen, relations with the Soviet Union were stabilized by a consistently friendly policy on the part of Finland. A concrete expression of the new foreign policy—designated the Paasikivi-Kekkonen line—was the Agreement of Friendship, Cooperation, and Mutual Assistance concluded between Finland and the Soviet Union in 1948 and extended in 1955, 1970, and 1983. The agreement included a mutual defense provision and prohibited Finland from joining any organization considered hostile to the U.S.S.R. After war reparations had been paid in full, trade with the Soviet Union continued, rising to more than 25 percent of Finland’s total during the 1980s. Further signs of the détente were evident when the Soviet Union returned its base at Porkkala in 1955.
Relations with the Soviet Union, however, were not entirely without complications. After the elections of 1958, a coalition government under the leadership of the Social Democrat Karl August Fagerholm was formed, in which certain members considered anti-Soviet were included. The Soviet Union responded by recalling its ambassador and canceling credits and orders in Finland. When the Finnish government was reconstructed, relations were again stabilized. During the autumn of 1961, when international relations were severely strained because of the Berlin crisis, the Soviet Union requested consultations in accordance with the 1948 agreement. President Kekkonen succeeded in solving the “Note Crisis” by inducing the Soviet Union to abandon its request. In 1985 the Soviets warned that a split in the Finnish Communist Party between the nationalist-reformist majority and the pro-Moscow minority would jeopardize Soviet-Finnish relations, but the split occurred in 1986 without incident.
Following the demise of the Soviet Union in 1991, Finland moved to end the old mutual defense agreement. A new agreement was reached with Russia in 1992, in which the two countries simply pledged to settle disputes between them peacefully. Finland, now freed from any restrictions, applied for membership to the European Community (from 1993 the European Union [EU]), which it joined in 1995. In 1999 it adopted the euro, the common currency of the EU, phasing out its markka by 2002. Despite shifting much of its foreign trade to EU nations, Finland’s relationship with Russia remained pivotal if precarious. Nordic cooperation
Finland became a member of the United Nations and of the Nordic Council in 1955. Nordic cooperation has led to many legislative and political similarities between Finland, Denmark, Iceland, Norway, and Sweden. These include free movement across the borders of these five countries, the gradual development of a common and free labour market, and other similar measures in the fields of politics, economics, and culture. In 1986 Finland became a full member of the European Free Trade Association. It left that organization in 1995 when it became a member of the EU. Tensions arose within the country when its Baltic Sea neighbours joined the North Atlantic Treaty Organization (NATO) in 1999 (Poland) and 2004 (Estonia, Latvia, and Lithuania). Finland initially resisted pressure from the other Nordic countries to join the international ban on antipersonnel land mines but then declared its intention to join by 2012. Domestic affairs
During the early postwar years, Finland’s domestic affairs were marked by economic difficulties. After World War II the country was left with the task of absorbing about 300,000 refugees from the areas ceded to the Soviet Union and at the same time paying war reparations. Despite these obstacles, Finland quickly recovered. The war reparations brought about rapid expansion in the metal and shipbuilding industries, and the timber trade soon resumed exporting and quickly exceeded its prewar level. The rebuilding and colonization required to resettle the refugees, however, were such a drain on the country’s economic resources that inflation could not be avoided; as a result Finland had to devaluate its currency on a number of occasions.
After the armistice, the new Finnish Communist Party held a strong position, which it retained in the subsequent government. When in the spring of 1948 it was alleged that the party had planned a coup, Parliament forced the Communist minister of the interior to resign. After the parliamentary elections in the autumn of 1948, a Social Democratic government came to power under the leadership of Fagerholm. Governments changed rapidly and consisted of various party coalitions during the 1950s, in most cases under the leadership of the Agrarian Party or the Social Democrats. During this period, however, both the Conservative National Coalition Party and the leftist Finnish People’s Democratic League, which included the Finnish Communist Party, were excluded from the government.
Forming and keeping a government in Finland is very difficult because of the proliferation of political parties; no one party, and often no party group, can command a majority in Parliament. As a consequence, there have been many nonpolitical cabinets composed of civil servants appointed by the president. With continuing economic growth and because of internal disputes, Communist Party influence diminished after the 1970s, and after the party’s split in the mid-1980s the Communists suffered severe losses in the 1987 election. The Conservatives gained a long-desired victory, and, with a compromise aided by President Koivisto, the Social Democrats and Conservatives, together with some smaller parties, formed a coalition government under Conservative Prime Minister Harri Holkeri. This allowed the Conservatives to return to the cabinet after more than 20 years and forced the Centre Party into opposition for the first time since independence. The Conservative–Social Democratic coalition did not satisfy the traditional constituencies of the two parties, however, and in 1991 the Centre Party reemerged as the largest party.
A new cabinet, formed by major nonsocialist parties and with the Centre’s Esko Aho as prime minister, immediately faced Finland’s worst peacetime economic recession. During the early 1990s production dropped sharply and unemployment skyrocketed, largely because trade with Russia had shrunk to a fraction of the Soviet-era level. There was also a general policy of privatizing state-owned assets throughout the 1990s, which promoted rationalization in many industries. Recovery came slowly, as export markets shifted toward the EU countries. The government also tried to cut expenditures, notably on social programs. The public expressed its displeasure with the slow pace of recovery by again ousting the Centre from the government in the elections of 1995. Social Democrat Paavo Lipponen formed a cabinet from a broad-based coalition that included, for the first time, members of the environmentalist Green Union.