GDP fell steeply and unemployment grew fast. Unlike many other Finnish companies, Oras had not taken major risks in its foreign operations. So it avoided exchange rate losses but benefited from improved competitiveness. Trade to the Soviet Union had a smaller role for the company than for many others. So in the difficult conditions of depression, Oras did relatively well.
Even though financial fragmentation was diminishing, banks began to shrink their balance sheets and became less willing to lend. This produced a renewed cycle of contracting credit growth and weak demand dynamics. Inflation drifted downwards. With inflation now well below our objective, the ECB faced a new type of policy challenge. We needed not only to repair the transmission problems created by deleveraging banks.