The State Debt in the Reign of Felipe II

ASU HST 200 (Historical Themes) THE STATE DEBT IN THE REIGN OF FELIPE II Under Philip II, the debt grew along with the changes in political and military events. Although the precise amount of the floating debt is unknown, it was transformed into juros "of twenty" (at 5%) in June 1557. The Indies merchants received payment in juros of fourteen (7.14%) and certain persons with legal status of eighteen (5.5%). The maximum of juros "de fourteen" (the 7, 14%) was imposed in November 1560 upon all the ancient juros with the greatest revenue, juros de "a ten" (10%) and juros de "a twelve" (8.5%). Following the completion of this twofold operation in October 1563, the juros' average interest rate clearly decreased to a level below its new maximum rate, which was less than 7.14%. The projected yearly value of all juros, redeemable or not, in 1560 was 1,490,000 ducats; this puts the debt's total value beyond 20 million ducats, roughly between 20 and 25 million ducats. It should be seen as a minimal estimate when the monarch himself admitted in 1560 that "almost twenty million ducats" would be required to pay his debts (Ulloa, 1977). The second conversion of carrying debt, which was mostly implemented in juros of twenty, was decreed in 1577 as a result of the expenses incurred by the Holy League and the Duke of Alba's battles in the Netherlands. The President of the Cortes of 1573 stated that by that time, the debt promised in juros upon removal would amount to around 36 or 37 million ducats. However, because of the direct sales of juros that were conducted at that time, the number of juros had already reached 2.75 million ducats. As a result, on the day after Lepanto, the entire debt in juros may surpass 40 million ducats. Even after 1577, when the assentistas from Genoa temporarily withdrew and were replaced with Castilian money, sales of juros continued to rise. Due to the Portuguese campaign, the war against England, the English military intervention in the Netherlands, the Spanish intervention in the French civil wars, and the financial support given by Philip Il to the French Catholic party, the Monarchy's military spending has skyrocketed since 1580 and it has had to rely more on credit, in the form of sales of juros. A 1584 state of the Treasury report states that the juros' revenue had increased to 3,273,000 ducats by that date, taking up 75% of the fixed income, which was valued at 4,364,432 ducats yearly, and half of the Crown's overall income, which was valued at 6,730,000 ducats for that year. We understand that in this situation the principal of the debt in 1584 must have already exceeded 50 millions of ducats, given that the juros of twenty already constituted a significant portion of the total and that at the time the dominant capitalization rates were still the juros of fourteen. An further connection from 1594 places the worth of the juros at 3.5 million ducats upon removal, and the total value of the juros at 3.9 million ducats (Ulloa, 1977). This amount, in our estimation, must translate into a debt principal of almost 65 million ducats at the juros average interest rate at the time. Since the deficit and floating debt had risen above average income, a further payment suspension-the final one of the loth century-was required. A further decree, issued in November 1596, mandated the consolidation of the floating debt into consolidated debt, which was mostly traded for twenty juros. Since the location grew by almost 750,000 ducats as a result of this conversion, this operation must have consolidated a debt volume of very nearly IS million ducats, on top of the over 65 million that already existed. A report that was given to the Cortes in December 1599 said that the total of the juros would be 4,634,240 ducats following Philip Il's final debt conversion. The estimate based on that situation of a debt close to 80 million ducats at the end of Philip Il's reign seems to be in line with the average type of income, interest of the judges, and be consistent with the evolution of the figures, taking into account the types of income that were then predominant (juros of fourteen and juros of twenty). The 4,634,240 ducats of the position accounted for 96% of the ordinary revenue and over half of the Crown's entire income, which currently stands at 9,731,405 ducats, according to the same relationship from December 1599. Another report from 1598 states that at the time of Philip II's death, the Crown's fixed income was estimated at 5.5 million ducats, its non-fixed income at little over 4 million, and its overall revenue at almost 9.7 million ducats. These estimates are consistent. According to Ulloa (1977), in 1598, the location would account for 47% of the Crown's overall revenue and 85% of the amount of fixed income.