Explaining History


Debt, decline and post Prague Spring Eastern Europe 1969-1989

When the Soviet Union and its Warsaw Pact allies drove their tanks into Prague in 1968, crushing the nascent pro democracy movement led by Alexander Dubcek, the last pretense of there being anything emancipatory about Soviet Communism disappeared. Instead, the USSR and its sattelite regimes were shorn of any ideological credibility and now faced sullen and uncooperative populations across the eastern bloc whose only interest in communism was whether it could economically deliver. The next two decades were an exercise in economic failure for the Soviet Union and its satellites, and an opportunity for Western banks, that had injected debt into Eastern Europe, as Soviet backed regimes desperately tried to modernise their economies, but became ensnared in a financial game that the west and its institutions were far better at playing.

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