Austria, the League of Nations, and the Birth of Multilateral Financial Control

The end of the First World War marked a turning point in the practices of sovereign borrowing. The League of Nations loan for Austria issued in 1923 precluded foreign creditor control of Austrian assets and policies. Instead, financial control and oversight were placed in the hands of the League of Nations Council and the technocrats advising it. International negotiation and collaboration in Geneva preempted Austria’s neighbour countries from turning economic reconstruction into a tool of their particularistic foreign policy interests. Neither foreign bondholders nor guarantor governments were granted direct oversight over Austrian policies. In order to keep emergency borrowing by bankrupt states free from the machinations of international power struggles and coveted spheres of interest, the World Bank and International Monetary Fund continued the practice of multilateral oversight and control following the Second World War.