Origin and Growth of Papal Debt

Regular public debt in the Papal States lagged far behind the main Italian city states. Except the well-known venality of offices, it started officially in 1526 with the first issue at a 10 per cent yearly rate (Monte Fede) and expanded markedly only after the second half of the sixteenth century.

Papal debt increased at a rapid pace throughout the seventeenth century until the large 1684 and 1687 concentrations of a jumble of different issues into the St Peter Monti, reduced at 3 per cent. In little more than a century and a half the Camera Apostolica – the central treasury – had authorized 187 separate issues: 71 to provide funds to the treasury itself; 55 to bail out the Roman nobility; 23 to benefit the Capital city; and 38 to underwrite the debts the communities had accumulated with the Apostolic Chamber.

After the end of the seventeenth century nearly all new emissions were issued to replace older ones, at the nominal value of 100 silver scudi for each luogo, or bond. The total stock of debt stabilized around 50 million scudi. Interest rates remained stable at 3 per cent, but bonds were always highly appreciated in the secondary market, fetching prices well above par until the end of the eighteenth century, when the Napoleonic Wars shattered the whole system.

From the available documentation, Chart 8.1 shows the debt growth (interest paid on yearly balance sheet expenditures from 1599) for two hundred years.

The two logarithmic curves apparently show a continuous increase, with a clear parallelism between expenditures and interests paid. However, nominal values in the long run do not describe correctly the real dimension of public debt. From a demographic point of view, the Papal State population gained a good 25 per cent from the late sixteenth to late eighteenth century, mainly due to the annexation of the Ferrara territories (1598) and the conquest of the Farnese Castro duchy (1649).