Postwar: A History of Europe Since 1945

by Tony Judt

The IMF, the World Bank and private bankers were all happy to lend to Soviet bloc countries: the Red Army was a reassuring guarantee of stability, and Communist officials misrepresented their countries’ output and resources to convincing effect.16 In the course of the 1970s alone Czechoslovakia’s hard currency debt rose twelve-fold. Poland’s hard currency debt increased some 3,000 percent, as First Secretary Gierek and his colleagues sucked in subsidized Western goods, introduced expensive new social insurance programs for peasants and froze food prices at 1965 levels. Once borrowing at these levels took off it was hard to contain. Gierek’s food price increases of 1976 triggered angry riots and were quickly repealed, the regime choosing instead to keep borrowing: between 1977 and 1980 one-third of Poland’s external line of credit was used to subsidize domestic consumption. Communist economists in Prague recommended phasing out subsidies and introducing ‘real’ prices, but their political masters feared the social consequences of such a retreat and preferred to increase their debts instead. As in the inter-war years, the fragile little states of eastern Europe were once again borrowing capital from the West to finance their autarkic economies and avoid hard choices. Miklós Németh, the last Communist prime minister of Hungary, was to acknowledge as much a few years later. A loan of one billion Deutschmarks from Bonn, granted in October 1987 and portrayed by West German politi...