The paper re‐examines the Finnish Great Depression of the 1990s, based on an open macro model, with specific dummy variables to identify the initial effects of liberalized financial markets and capital mobility, and of the Russian trade collapse. It is shown that the explosive credit expansion resulting from the simultaneous liberalization of the financial markets and international capital movements in 1986 has played the most important role in explaining the uncontrolled growth and the subsequent depression in 1989 in real economic activity in Finland. Their effects were strengthened by a vicious circle between the financial and asset markets. The Russian trade collapse in 1991 had a smaller partial effect on economic activity than did any other explanatory variable. The results suggest that some of the present day problems in the euro area, especially those occurring post‐2008 in the “Club Med” countries, are very alarming. In many cases, they are results of expansionary policies based on unsustainable capital imports, made possible by the introduction of the euro, and the consequences resemble in many ways those during the 1990s Great Depression period in Finland.