Circumventing credible commitment: Groningen’s default and the Dutch Republic’s federal escape route, 1666-1761
The Dutch Republic is frequently depicted as an early example of a state’s crediblecommitment to debt. Yet these studies tend to overlook the implications of the Republic’sfederal structure. This paper analyses the default by the province of Groningen during the1680’s, at the expense of its creditors in the province of Holland. It argues that Groningen’sunique position within the federation prevented the market to punish the province for itsmisbehaviour. This was not a carefully thought-out plan, but the coincidental historicaloutcome of the interaction between creditors and provincial and federal authorities.Ultimately, the creditors resorted to essentially medieval sanctions to enforce a solution.