ABSTRACT
This chapter analyzes the causes of strain in East-West financial relations as well as why they have been overrated. The West regards Eastern Europe as a region with unusually high credit risks. This poor image has negative economic as well as political consequences. The abrupt change in the credit policies of Western banks towards East European borrowers was caused by a highly complex and primarily economic set of factors. These economic factors were, however, temporarily intensified and superseded by political developments. Poland has received by far the most credit, about US $ 27 bn. at the end of 1982, which amounted to one third of the total loans to Eastern Europe. The starting point for the change in credit granting policies was a shift in the structure of lenders and borrowers on the particularly sensitive Eurocreditmarkets that was induced by the wave of oil price changes in 1980.
