Index: django/template/defaulttags.py
===================================================================
--- django/template/defaulttags.py	(revision 5428)
+++ django/template/defaulttags.py	(working copy)
@@ -4,7 +4,7 @@
 from django.template import TemplateSyntaxError, VariableDoesNotExist, BLOCK_TAG_START, BLOCK_TAG_END, VARIABLE_TAG_START, VARIABLE_TAG_END, SINGLE_BRACE_START, SINGLE_BRACE_END, COMMENT_TAG_START, COMMENT_TAG_END
 from django.template import get_library, Library, InvalidTemplateLibrary
 from django.conf import settings
-from django.utils.encoding import smart_str
+from django.utils.encoding import smart_str, smart_unicode
 import sys
 
 register = Library()
@@ -58,8 +58,8 @@
             except VariableDoesNotExist:
                 continue
             if value:
-                return str(value)
-        return ''
+                return smart_unicode(value)
+        return u''
 
 class ForNode(Node):
     def __init__(self, loopvar, sequence, reversed, nodelist_loop):