The role of a creditor in the making of a debt crisis: the French government's financial support for Poland, between cold war interests and economic constraints, 1958-1981

Emmanuel Mourlon-Druol

Financial History Review, 2020, vol. 27, issue 1, 73-94

Abstract: In spite of considerable attention granted to sovereign debt failures, we still have limited knowledge of the incentives which induced creditors to lend at unsustainable levels. This article looks at the French government’s policy towards Poland from 1958, when economic cooperation between the two countries started, until Poland's announcement in 1981 that it could not service its debt. Export credit guarantees supported France's financial involvement, and this implied the government's strong influence on the decision to lend. This article brings out the tension between economic and political priorities in French policymaking during the cold war. Archival evidence reveals that as early as 1975 the French finance ministry warned that French risks were excessive; that Poland’s growing economic difficulties would render the country unable to repay its debts; and recommended limiting France's financial commitments. The French government, however, decided not only to carry on but also to increase lending, in order to support its political objective of using economic and financial means to relax East–West tensions. This article illustrates how creditors play a part in sovereign debt crises by voluntarily turning a blind eye to a country’s growing inability to repay its debts, and thus reinforce a vicious circle of indebtedness.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:fihrev:v:27:y:2020:i:1:p:73-94_4

Access Statistics for this article

More articles in Financial History Review from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().