East Tyavyli debt crisis

The **East Tyavyli debt crisis** is a debt dispute between East Tyavyli, the federal government of Tyavyli, the Central Bank of Paludumia, the League of Palus, and Great Thornia.

Great Thornia, under the NRSP regime, forgave East Tyavyli's debt in April 2020. However, no formal resolution has been negotiated, nor has any other government recognised or acknowledged this.

## History

### Background (mid November 2019 - 10 March 2020)

In November 2019, the Central Bank of Paludumia (when it was the central bank for the Holy States) granted what was then the Democratic Republic of Tyavyli (under Dimithri's rule) a loan of 128 iron ingots, with the principal amount provided by Great Thornia. Dimithri (the then President of Tyavyli) stated that the iron would be used for the coal-powered Ty Town rail network.

It was believed that Tyavyli would repay these debts by the end of the year. However, it soon became apparent that that wouldn't be the case based on comments from other senior leaders in Tyavyli.

#### Introduction of interest rate (26 November 2019 - January 2020)

On 26 November, the bank enforced a 10% interest rate on all current and future loans. Leaders of the Holy States became concerned with intelligence that suggested that an armed conflict with Tyavyli was imminent. Whether or not it was related to the loan was unclear. On 4 December the bank doubled the interest rate to 20%. Between then and early March 2020, none of the parties involved voiced any further concerns around the loan. The emergency doubling of the interest rate was not reduced back to pre-emergency levels.

#### Mounting cost of the Pillager War (January 2020 - 10 March 2020)

The re-enabling of mobs in early 2020 saw Great Thornian authorities scramble to handle various pillager insurgencies throughout its territories. As it had only recently committed to contributing to the League of Palus' defence stockpile, it had to quickly come up with its own stockpile for internal defence.

The newly created, iron-golem-centric, Royal Iron Guard allowed Great Thornia to independently defend itself from pillagers but the high cost of building new golems and repairing heavily damaged ones nearly halved Great Thornia's iron holdings. In early March, the Crown of Great Thornia began issuing public statements to remind East Tyavyli and the Central Bank of Paludumia of the loan.

### The Crisis (10 March 2020 - Present)

On 10 March 2020, the Tyavylian Prime Minister, Tarn, and the Governor of the Central Bank, Wey Yao, both expressed shock at how the sum of the principal value and accumulated interest value was now 4.5 times the size of the original principal value.

Dimithri, the Governor of East Tyavyli, publicly stated that it was leave it to the federal government of Tyavyli to repay the debt (essentially offloading the debt). The Prime Minister then stated that repaying the loan would be his main objective. Great Thornia then responded by condemning East Tyavyli for its reckless handling of the debt and announced a trade embargo on East Tyavyli, while suggesting future trade deals with other states of Tyavyli.

#### Road to Resolution (10 March 2020 - Present)

The federal government of Tyavyli, the Central Bank of Paludumia, and Great Thornia held talks on having the debt repaid via trade (Tyavyli would provide materials worth the amount owed).

On 11 March, East Tyavyli's government finally relented and announced that it will cooperate with the federal government to repay the loan. Governor Dimithri also rebuked Great Thornia's criticism of the Tyavyli rail network, calling it a progressive achievement. He also stated, "I don’t expect a dictatorship to understand truth from fiction."

On 17 April, Great Thornia (under the new NRSP regime) cancelled East Tyavyli's debt. However, neither the federal government of Tyavyli nor East Tyavyli have acknowledged this. The League of Palus has not acknowledged this either (it is important that they do as they are the overseer of the debt via the Central Bank).