The Sustainable Debts of Philip II: A Reconstruction of Castile’s Fiscal Position, 1566-1596
Journal of Economic History 70(4), 2010
38 Pages Posted: 30 Sep 2010 Last revised: 10 Oct 2012
Date Written: September 29, 2010
The defaults of Philip II have attained mythical status as the origin of sovereign debt crises. We reassess the fiscal position of Habsburg Castile, deriving comprehensive estimates of revenue, debt, and expenditure from new archival data. The king’s debts were sustainable. Primary surpluses were large and rising. Debt/revenue ratios were broadly unchanged across Philip’s reign. Castilian finances in the sixteenth century compare favorably with those of other early modern fiscal states at the height of their imperial ambitions, including Britain. The defaults of Philip II therefore reflected short-term liquidity crises, and were not a sign of unsustainable debts.
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