Debt Diplomacy and Trust: Lessons from the European Recovery Plan

Rosier, Kevin J.

doi:10.2478/ecdip-2025-0010

Abstract

This study examines the European Recovery Plan (ERP) through the lens of debt diplomacy, arguing that its success was rooted in a departure from ad hoc, transactional debt relief towards a structured, trust-based approach. The ERP, a $13 billion financing program spanning 1948–1951, is often viewed as a Cold War containment strategy or a neoliberal economic intervention by the United States. However, this paper situates it within a broader historical framework of debt diplomacy, analyzing it as a large-scale effort to stabilize transatlantic financial relations and prevent a post-war balance of payments crisis. We reassess the ERP as a model for international financial assistance, emphasizing the roles of encapsulated trust, intellectual generalism, shared responsibility, and transnational polylateralism. Through a historical review of pre-ERP aid (1945–1947), the study highlights how earlier, fragmented debt-relief efforts failed to address systemic financial instability in Europe. It further explores the unique conditions that enabled the ERP’s success, including high trust relations between the U.S. and Europe, geopolitical imperatives of Cold War containment, and deep economic interdependence. By revisiting the Marshall Plan through the lens of debt diplomacy, this paper not only offers new perspectives on the ERP, but also contributes to debates on debt diplomacy and efforts to achieve global debt sustainability.

References

Acheson, Dean. Present at the Creation: My Years in the State Department. New York: W.W. Norton & Company, 1987.
Search in Google Scholar Back to article
Acheson, Dean. The Requirements of Reconstruction. No. 102. US Government Printing Office, 1947.
Search in Google Scholar Back to article
Allen, James S., and Michael Wala. “The Marshall Plan.” Political Affairs (1993).
Search in Google Scholar Back to article
Arkes, Hadley. Bureaucracy, the Marshall Plan, and the National Interest. Princeton, NJ: Princeton University Press, 2015.
Search in Google Scholar Back to article
Behrman, Greg. The Most Noble Adventure: The Marshall Plan and the Time When America Helped Save Europe. New York: Free Press, 2007.
Search in Google Scholar Back to article
Berghahn, Volker R. “The Marshall Plan and the Recasting of Europe’s Postwar Industrial Systems.” In The Marshall Plan (2008): 29.
Search in Google Scholar Back to article
Berolzheimer, Josef. “The Impact of US Foreign Aid Since the Marshall Plan on Western Europe’s Gross National Product and Government Finances.” FinanzArchiv/Public Finance Analysis H. 1 (1953): 114–140.
Search in Google Scholar Back to article
Capaccio, George. The Marshall Plan and the Truman Doctrine. Cavendish Square Publishing, LLC, 2017.
Search in Google Scholar Back to article
DeLong, J. Bradford, and Barry Eichengreen. “The Marshall Plan: History’s Most Successful Structural Adjustment Program.” (1991).
Search in Google Scholar Back to article
DeLong, J. Bradford, and Barry Eichengreen. The Marshall Plan as a Structural Adjustment Program. Harvard Institute of Economic Research, 1991.
Search in Google Scholar Back to article
Duchêne, François, and Jean Monnet. Jean Monnet: The First Statesman of Interdependence. New York: Norton, 1994.
Search in Google Scholar Back to article
Geremek, Bronisław. “The Marshall Plan and European Integration.” In The Marshall Plan (2008): 43.
Search in Google Scholar Back to article
Gerstle, Gary. “The Crucial Decade: The 1940s and Beyond.” The Journal of American History 92, no. 4 (2006): 1292–1299. JSTOR. https://www.jstor.org/stable/4485892. Accessed April 20, 2020.
Search in Google Scholar Back to article
Graham, Frank D. “Keynes vs. Hayek on a Commodity Reserve Currency.” The Economic Journal 54, no. 215/216 (1944): 422–429.
Search in Google Scholar Back to article
Haas, Lawrence. Harry and Arthur: Truman, Vandenberg, and the Partnership that Created the Free World. Omaha, NE: Potomac Books, 2016.
Search in Google Scholar Back to article
Healey, Timothy. “Will Clayton, Negotiating the Marshall Plan, and European Economic Integration.” Diplomatic History 35, no. 2 (2011): 229–256.
Search in Google Scholar Back to article
Helleiner, Eric. States and the Reemergence of Global Finance: From Bretton Woods to the 1990s. Ithaca, NY: Cornell University Press, 1994.
Search in Google Scholar Back to article
Higgs, Robert. “Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s.” The Journal of Economic History 52, no. 1 (1992): 41–60. JSTOR. https://www.jstor.org/stable/2123344. Accessed April 20, 2020.
Search in Google Scholar Back to article
Hill, John S. “American Efforts to Aid French Reconstruction Between Lend-Lease and the Marshall Plan.” The Journal of Modern History 64, no. 3 (1992): 500–524. JSTOR. https://www.jstor.org/stable/2124596. Accessed April 19, 2020.
Search in Google Scholar Back to article
Hogan, Michael J. The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947–1952. Cambridge: Cambridge University Press, 1987.
Search in Google Scholar Back to article
Hunter, Gordon. “The 1940s.” In What America Read: Taste, Class, and the Novel, 1920–1960, 194–268. Chapel Hill, NC: University of North Carolina Press, 2009. JSTOR. https://www.jstor.org/stable/10.5149/9780807887752_hutner.7. Accessed April 20, 2020.
Search in Google Scholar Back to article
International Monetary Fund. “The Post War World.” https://www.imf.org/external/np/exr/center/mm/eng/mm_dr_01.htm. Accessed March 2020.
Search in Google Scholar Back to article
Jackson, Richard. “Prologue to Marshall Plan,” pp. 1044–1046.
Search in Google Scholar Back to article
Kunz, Diane B. “The Marshall Plan Reconsidered: A Complex of Motives.” Foreign Affairs 76, no. 3 (1997): 162–170. https://doi.org/10.2307/20048105.
Search in Google Scholar Back to article
Leffler, Melvyn P. A Preponderance of Power: National Security, the Truman Administration, and the Cold War. Stanford, CA: Stanford University Press, 1992.
Search in Google Scholar Back to article
Leimgruber, Matthieu, and Matthias Schmelzer. “From the Marshall Plan to Global Governance: Historical Transformations of the OEEC/OECD, 1948 to Present.” In The OECD and the International Political Economy Since 1948 (2017): 23–61.
Search in Google Scholar Back to article
May, Stacy. “Measuring the Marshall Plan.” Foreign Affairs 26, no. 3 (1948): 457–469.
Search in Google Scholar Back to article
Milward, Alan S. The Reconstruction of Western Europe, 1945–51. New York: Routledge, 2003.
Search in Google Scholar Back to article
Newton, C. C. S. “The Sterling Crisis of 1947 and the British Response to the Marshall Plan.” The Economic History Review 37, no. 3 (1984): 391–408. JSTOR. https://www.jstor.org/stable/2597288. Accessed April 20, 2020.
Search in Google Scholar Back to article
Paterson, Thomas G. “Presidential Foreign Policy, Public Opinion, and Congress: The Truman Years.” Diplomatic History 3, no. 1 (1979): 1–18. JSTOR. https://www.jstor.org/stable/24909952. Accessed April 20, 2020.
Search in Google Scholar Back to article
Reynolds, David. “The European Response: Primacy of Politics.” Foreign Affairs 76, no. 3 (1997): 171–184.
Search in Google Scholar Back to article
Rieffel, Alexis. Restructuring Sovereign Debt: The Case for Ad Hoc Machinery. Washington, DC: Brookings Institution Press, 2003.
Search in Google Scholar Back to article
Sotiropoulos, Dimitria. “International Aid to Southern Europe in the Early Postwar Period: The Cases of Greece and Italy.” The Annals of the American Academy of Political and Social Science 656 (2014): 22–40.
Search in Google Scholar Back to article
Steil, Benn. “The Dunkirk Diplomat.” Today’s History. Council on Foreign Relations. https://www.cfr.org/content/publications/attachments/Keynes%20BENN.pdf. Accessed April 2020.
Search in Google Scholar Back to article
Taylor, Jason E., et al. “Net Exports and the Avoidance of High Unemployment During Reconversion, 1945–1947.” The Journal of Economic History 71, no. 2 (2011): 444–454. JSTOR. https://www.jstor.org/stable/23018306. Accessed April 20, 2020.
Search in Google Scholar Back to article
Toye, Richard. “Churchill and Britain’s ‘Financial Dunkirk.’” Twentieth Century British History 15, no. 4 (2004): 329–360.
Search in Google Scholar Back to article
Wall, Irwin M., and Philippe-Etienne Raviart. “Les Accords Blum-Byrnes, La Modernisation de la France et la Guerre Froide.” Vingtième Siècle. Revue d’histoire, no. 13 (1987): 45–62. JSTOR. https://www.jstor.org/stable/3769901. Accessed April 19, 2020.
Search in Google Scholar Back to article
Weir, Cecil. “Dollar Exports in the Marshall Plan Period.” International Affairs (Royal Institute of International Affairs 1944-) 28, no. 1 (1952): 9–14.
Search in Google Scholar Back to article
Williams, John H. “End of the Marshall Plan.” Foreign Affairs 30 (1951): 593.
Search in Google Scholar Back to article
Williams, Andrew J. Failed Imagination?: The Anglo-American New World Order from Wilson to Bush. 2nd ed. Manchester: Manchester University Press, 2007.
Search in Google Scholar Back to article

Debt Diplomacy and Trust: Lessons from the European Recovery Plan

Abstract

Paradigm

My account