TIMELINES: What European nation declared bankruptcy Jan. 31, 1627, for the fifth time in 70 years?

Tuesday, Jan. 31, 2012

What European nation declared bankruptcy Jan. 31, 1627, for the fifth time in 70 years?

THEN

On Jan. 31, 1627, overwhelmed by the financial strain caused by waging war against the rebellious Dutch and engaging in the Thirty Years War, King Philip IV of Spain issues a decree of bankruptcy for the Spanish government—the country’s fifth bankruptcy in about 70 years. After a period of devaluing the Spanish currency and taxing citizens to help pay for the war, Philip defaults on the country’s debts. The Spanish monarchy freezes all payments on loans to the British crown and in some instances declares both the principle and any interest forfeit. In order for creditors to be entitled to getting anything back on their loans, they have to accept an agreement allowing them to receive a percentage of the principle in the form of treasury bonds, royal lands, and titles. In addition, the agreements are contingent upon the creditors granting new lines of credit to the Spanish king.

NOW

Last Friday, in an effort to salvage an ailing economy and prevent further damage during the European debt crisis, Spain announced a bill calling for significant budgetary reforms. The reforms are focused primarily on penalties for government overspending and oversight for public accounts. The reforms come at a time when Spain is dealing with 5.3 million people out of work—the highest jobless numbers in the eurozone. During a news conference, Spain’s Treasury Minister Cristobal Montoro said, “The reform is necessary to help to return to growth and create jobs as soon as possible, and steer the country out of a crisis.” Spanish lawmakers are expected to pass the bill before the end of the first quarter.