Reagan's No-Default Policy

The U.S. decides not to declare Poland bankrupt—yet

When a private borrower cannot pay back a U.S. Government guaranteed loan, he is declared in default. His credit rating and his good name are ruined. But when the debtor is another nation, especially a sensitive case like Poland, life is more complicated. Amid much internal debate and controversy, the Administration agreed to pay $71 million in January installments on money borrowed by Poland to finance grain purchases, deferring for now the option of declaring the military regime in default.

Allowing Warsaw and its overbearing Soviet sponsors to avoid the real and symbolic consequences of...

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