Private credit growth was much slower in Poland, although it was still pretty rapid. Some of this was because of Poland’s history with corporate nonperforming loans from the late 1990s and the early 2000s. The IMF and World Bank wrote a paper about lending in Poland at the end of 2006 and came up with an additional explanation: Poland’s institutions were relatively unfriendly to creditors.

If you want to understand why Poland had a good crisis, you need to understand three things. First, you need to know that Poland’s currency, the zloty, was never pegged to the euro. This was immensely helpful both on the upside and on the downside. From 2004-2008, credit sloshed into the new member states of the European Union from Western European banks. The biggest victims were those that borrowed in currencies they could not print: euros, Swiss francs, and Swedish kronor. Worst hit were the Baltics, which had rigidly pegged their currencies to the euro since the early 2000s. Private credit doubled in those countries and all three endured punishing recessions afterwards.

WHILE it gets less attention than India or China, Poland has been one of the world’s great development success stories of the past two decades. This is due in no small part to the policies it pursued after the end of Communist rule. One of the architects of those policies, Leszek Balcerowicz, was the subject of a long interview in this weekend’s Wall Street Journal. The article is worth reading, although Mr Balcerowicz’s narrative of Poland’s success and its applicability to the beleaguered nations of the euro area leaves something to be desired.

It is hard to say how much this mattered in the grand scheme of things, since European lenders were not exactly discriminating back then. In the absence of a currency peg, they were perfectly willing to make loans in zloty through their Polish subsidiaries. These inflows from the West caused the zloty to appreciate by more than 50% against the euro during the credit boom. While the strong currency made foreign-currency-denominated debt relatively more attractive to people who unwisely assumed that the zloty would continue to appreciate indefinitely, it may have dampened loan growth overall. The strong currency also provided flexibility to respond to a downturn.

Sure enough, when the crisis hit and Western European lenders started pulling their money out of Poland, the zloty lost more than a third of its value against the euro. (Matt O'Brien highlighted this yesterday.) While it has appreciated somewhat since then, the zloty is still about one-fourth cheaper than it was in mid-2008. Since Poland’s private sector denominated most (but not all) of its debt in zloty, the devaluation was unambiguously stimulative. Between the middle of 2008 and the beginning of 2009, Poland’s trade balance swung from a deficit of more than €1.7 billion to a surplus of more than €100m. The trade balance returned to deficit as world trade rebounded, but at about €500m, it is now far smaller than it was. None of this was mentioned by Mr Balcerowicz.

Of course, the devaluation of the zloty would not have been sufficient to keep Poland out of recession had it not been for an act of flagrant government intervention into the private financial system: the Vienna Initiative. This is the second thing you need to know about to understand Poland’s post-2008 performance. In one of the wiser acts of European policymaking, the Vienna Initiative encouraged Western European lenders to maintain their exposures to Central and Eastern Europe. While it was not entirely successful, as the Bank for International Settlements noted in their most recent quarterly review, this programme definitely made a difference to nations like Poland. It was not mentioned by Mr Balcerowicz.

The last thing you need to understand about Poland is that it practised robustly counter-cyclical fiscal policy. During the boom years, its government budget deficit shrank from more than 6% of GDP to less than 2%. Then, in response to the downturn, the deficit ballooned to nearly 8% by 2011. The government explicitly rejected austerity and was the only nation on the European continent to avoid a recession. Again, Mr Balcerowicz does not mention this. In fact, he recommends cutting government spending during downturns because it will encourage private investment through the “confidence effect”.