The Ottoman Default of 1875 and its Role for Bulgaria’s Liberation

The Ottoman default of 1875 played a pivotal role in resolving the Eastern Question and, consequently, contributed to the emergence of the Bulgarian national state. This article explores the impact of this sovereign default across three main areas, specifically focusing on Bulgaria’s liberation. First, the default's international political consequences were immediate and profound. The outrage of investors who lost approximately 200 million pounds weakened Western support for the Ottoman Empire, paving the way for the Russian-Turkish War of 1877–78. The diplomatic correspondence of Benjamin Disraeli confirms that the Porte's bankruptcy dramatically shifted the balance of power, making it impossible to uphold the territorial integrity of the Ottoman Empire as stipulated in the Treaty of Paris of 1856. Furthermore, a sovereign default of this magnitude set a dangerous precedent, necessitating that Turkey be publicly “punished.” This atmosphere encouraged Russia to take swift and decisive action against its weakened adversary. The significance of financial factors in the Eastern Question is further highlighted by the Treaty of Berlin of 1878, which assigned Bulgaria a portion of the Ottoman debt – a payment Bulgaria ultimately managed to avoid. Second, the domestic socioeconomic effects were debilitating. The default – and the events leading up to it – undermined the vitality of the Empire resulting in heavy taxation, galloping inflation, postponed infrastructure investments essential for war efforts, shortages of supplies, and a demoralized army and administration. Third, the Ottoman default sparked the radicalization of Bulgarian revolutionary intellectuals, who interpreted the Empire’s financial troubles as the “right time to strike.” Special attention is given to Hristo Botev, who was the most astute among his Bulgarian peers in analyzing financial matters. Months before the official default, Botev predicted in his newspaper Zname that the Porte’s bankruptcy was imminent. The article concludes by discussing why Bulgarian historiography has generally neglected the theme of the Ottoman sovereign default. In addition to its central role in the Eastern Question, this significant episode in modern economic history merits further study, as it illustrates the recurring cycle of war, credit, and subjugated debtor.