East Europe's Debt to the West: Interdependence Is a Two-Way Street

Abstract

A policy analysis of East--West economic interdependence examines the implications that capital export into Eastern Europe has for the new economic order. Although the East European debt is smaller than that of non-OPEC less-developed countries (LDCs), it is significant in the Euromarket. As an oil exporter, Eastern Europe's debts are not the result of oil deficits and must be considered to have different economic, political, and strategic bases. The possibility of requests to treat these debts with the same arrangements negotiated for the LDCs needs to be taken under consideration as economic policy is formulated. Less debt servicing data are available from these centralized countries, making decisions based on default predications more difficult. Debt reduction by the East European countries can only be accomplished by a movement of manufactured goods to the West and a resistance in the West to trade discriminations. The interdependence that has developed should bring Eastern European countries into the discussions of their economic credibility and their involvement in the international monetary system. (DCK)