Family Matters: Language Transfer and Merging for Adapting Small LLMs to Faroese

We investigate how to adapt small, efficient LLMs to Faroese, a low-resource North Germanic language. Starting from English models, we continue pre-training on related Scandinavian languages, either individually or combined via merging, before fine-tuning on Faroese. We compare full fine-tuning with parameter-efficient tuning using LoRA, evaluating their impact on both linguistic accuracy and text comprehension. Due to the lack of existing Faroese evaluation data, we construct two new minimal-pair benchmarks from adapted and newly collected datasets and complement them with human evaluations by Faroese linguists. Our results demonstrate that transfer from related languages is crucial, though the optimal source language depends on the task: Icelandic enhances linguistic accuracy, whereas Danish boosts comprehension. Similarly, the choice between full fine-tuning and LoRA is task-dependent: LoRA improves linguistic acceptability and slightly increases human evaluation scores on the base model, while full fine-tuning yields stronger comprehension performance and better preserves model capabilities during downstream fine-tuning.