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The Sustainable Debts of Philip II: A Reconstruction of Spain's Fiscal Position, 1560-1598

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  • Drelichman, Mauricio
  • Voth, Hans-Joachim

Abstract

The defaults of Philip II have attained mythical status as the origin of sovereign debt crises. The king failed to honour his debts four times during his reign. In this paper, we reassess the fiscal position of Habsburg Spain. New archival evidence allows us to derive comprehensive estimates of debt and revenue. These show that primary surpluses were sufficient to make the king's debt sustainable for most of his reign. Spain's debt burden was manageable up to the 1580s, and its fiscal position only deteriorated for good after the defeat of the "Invincible Armada". We also estimate fiscal policy reaction functions, and show that Spain under the Habsburgs was at least as "responsible" as the US in the 20th century or as Britain in the 18th century. Our results suggest that the outcome of uncertain events such as wars may have more influence on a history of default than strict adherence to fiscal rules.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6611.

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Date of creation: Dec 2007
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Handle: RePEc:cpr:ceprdp:6611

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Keywords: early modern history; fiscal stability; natural resources; sovereign debt; Spain; sustainability;

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Cited by:
  1. Mauricio Drelichman & Hans-Joachim Voth, 2008. "Debt Sustainability in Historical Perspective: The Role of Fiscal Repression," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 657-667, 04-05.
  2. Drelichman, Mauricio, 2006. "License to Till: The Privileges of the Spanish Mesta as a Case of Second Best Institutions," UBC Departmental Archives drelichman-06-04-24-11-33, UBC Department of Economics, revised 03 Oct 2008.
  3. Carlos Álvarez Nogal [canogal] & Christophe Chamley, 2011. "Debt policy under constraints between Philip II, the Cortes and Genoese bankers," Working Papers in Economic History wp11-06, Universidad Carlos III, Departamento de Historia Económica e Instituciones.
  4. K. Kývanç Karaman & Þevket Pamuk, 2009. "Ottoman State Finances in Comparative European Perspective, 1500-1914," Working Papers 2009/05, Bogazici University, Department of Economics.

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