Hiding in a Twilight Zone. Credible Commitment in the Dutch Republic and Groningen’s 1680s Default

The Dutch Republic is frequently depicted as an early example of a state’s credible commitment to debt. Yet these studies tend to overlook the implications of the Republic’s federal structure. This paper analyses the default by the province of Groningen during the 1680’s, at the expense of its creditors in the province of Holland. It argues that Groningen’s unique position within the federation prevented the market to punish the province for its misbehaviour. This was the coincidental historical outcome of the interaction between creditors and provincial and federal authorities. Ultimately, the creditors resorted to essentially medieval sanctions to enforce a solution.