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Deutsche Bank’s Role in the Global Debt Crisis of the 1980s

Expansion into International Markets

In the 1960s and 1970s, Deutsche Bank expanded its operations into international markets, becoming a major player in issuing sovereign bonds and corporate bonds.

  • Issuing Sovereign Bonds: The bank took a leading role in issuing large bonds for international development agencies such as the World Bank and Inter-American Development Bank.
  • Growing Presence: Deutsche Bank’s presence grew significantly during this period, establishing itself as a key player in the global financial market.

Credit Operations with Soviet Bloc Countries

Deutsche Bank became involved in large credit operations with Soviet bloc countries, including the Soviet Union, Poland, and the GDR.

  • Office in Moscow: The bank opened an office in Moscow in 1973 to enhance its position as a major financial partner of the USSR.
  • Substantial Exposure: Despite the risks, Deutsche Bank maintained substantial exposures to these countries, which would later contribute to its involvement in the debt crisis.

Debt Crisis in Eastern Europe

The foreign debts of COMECON states reached alarming levels by the early 1980s, with annual debt service growing from $1.6 billion to $24 billion between 1971 and 1981.

  • Warning Signs: Deutsche Bank’s economic research department warned about Poland’s impending insolvency in 1980, but the bank still had significant exposures to the country and other Eastern European countries.
  • Growing Instability: The debt crisis marked a growing instability in the global financial system, which would eventually lead to a broader global debt crisis.

Global Debt Crisis

The debt crisis in Eastern Europe marked the beginning of a global debt crisis that quickly affected developing countries around the world.

  • Similar Factors: Similar factors contributed to the crisis, including overborrowing by poor countries when surplus liquidity from oil-producing countries entered the international financial system.
  • Broader Implications: The global debt crisis had far-reaching implications for the global economy, leading to widespread economic instability and recession.