State Bankruptcy

In 1557, on the very first year as Spanish king, Philip II was forced to declare the country bankrupt. Spain had for many years undercut its tax base and what was worse, had no control of the price-fluctuations from the inflow of American silver and gold. It was impossible for the Spanish minister of finance to forecast any repayments as all costs fluctuated volatile. The spending was based on the planned budget, but the inflow was irregular at best which made Spain spend more than it actually had, thus the Great Bankruptcies of 1557 and 1596.