Baring, Wellington and the Resurrection of French Public Finances Following Waterloo

Following Waterloo, managing French public finances represented a daunting task as the country had lost a substantial part of its population and territory and had to pay huge amounts as reparations to the victors. Despite this, in just ten years, France managed to issue substantial amounts of debt with a spread, compared to the British consol, falling from more than 400 to 100 basis points. We argue that the Duke of Wellington was key in creating an environment in which Baring had an incentive to lend to France and all actors had an incentive to see French debts reimbursed. This paper analyzes the evolution of the French sovereign debt in the ten years following Napoleon's defeat at Waterloo. At the end of 1815, incentives for an investor to buy French sovereign bonds were low as France's prospects looked terrible. Following Waterloo, France lost 5,000 square km of territory as it was returned to its 1790 borders, it also agreed to pay 700 million francs as war reparations and to shoulder the occupation costs of the coalition's 150,000 men. At the time, the track record of French public finance was also terrible. Not surprisingly, the yield on traded debt jumped to 8.6 percent in 1815, whereas comparable yields on British consols did not even reach 5 percent.