WI Ancien Regime France just declares bankruptcy?

What if the French monarchy, faced with a huge deficit, doesn't bother to call up the Estates General and just declares bankruptcy, cancelling its enormous stockpile of debt?

Yes, I know it would imcrease interest rate on future loans, but Spain declared bankruptcy several times in the 1600s and it didn't seem to have major ramificiations long term. Given debt interest was one of the main spending areas, cutting that to zero would likely mean no further borrowing was needed for the medium term.
 
No, they can't do that. Defaulting on a loan was grounds to be declared war on. While large bankers did incur most of the debt from France, the 4th largest stakeholder was Spain. The Dutch and Sweden also had French debt. Spain owed money to various bankers and some nations, but anyone who tried to collect on Spain would deal with Austria. many ex-poles also had money there and they were cooperative with their new Prussian overlords, so they might put pressure on. By defaulting, France invites Spain, Netherlands, and Sweden to attack, possibly Italian states with bankers too. In short, they'd end up at war with everyone they did in real life, except Britain and Austria.
 
No, they can't do that. Defaulting on a loan was grounds to be declared war on. While large bankers did incur most of the debt from France, the 4th largest stakeholder was Spain. The Dutch and Sweden also had French debt. Spain owed money to various bankers and some nations, but anyone who tried to collect on Spain would deal with Austria. many ex-poles also had money there and they were cooperative with their new Prussian overlords, so they might put pressure on. By defaulting, France invites Spain, Netherlands, and Sweden to attack, possibly Italian states with bankers too. In short, they'd end up at war with everyone they did in real life, except Britain and Austria.
Let's say that for whatever reason they default on the debt anyway, and war ensues. What happens next?
 
No, they can't do that. Defaulting on a loan was grounds to be declared war on. While large bankers did incur most of the debt from France, the 4th largest stakeholder was Spain. The Dutch and Sweden also had French debt. Spain owed money to various bankers and some nations, but anyone who tried to collect on Spain would deal with Austria. many ex-poles also had money there and they were cooperative with their new Prussian overlords, so they might put pressure on. By defaulting, France invites Spain, Netherlands, and Sweden to attack, possibly Italian states with bankers too. In short, they'd end up at war with everyone they did in real life, except Britain and Austria.

Exactly. Sounds almost like a bad Victoria 2 game but a dogpile would indeed happen - Though I wonder if Louis XVI might be able to save his skin
 
Let's say that for whatever reason they default on the debt anyway, and war ensues. What happens next?

There's still a grain famine to contend with, but what the revolutionary wars proved is that France had the capacity to militarily hold off all of Europe. Some countries might not even declare war because of the French military strength.

It's unlikely that they would default on all of their debt. Probably they'd try to service any debt they owe to their allies in Spain and Naples

Long term no one will lend money to France again for quite some time unless France offers up viable collateral like . The French taxation system would continue to be bonkers but without the forceful imposition of reform on the parlements and estates the French financial system will continue to struggle.
 
There's still a grain famine to contend with, but what the revolutionary wars proved is that France had the capacity to militarily hold off all of Europe. Some countries might not even declare war because of the French military strength.

It's unlikely that they would default on all of their debt. Probably they'd try to service any debt they owe to their allies in Spain and Naples

Long term no one will lend money to France again for quite some time unless France offers up viable collateral like . The French taxation system would continue to be bonkers but without the forceful imposition of reform on the parlements and estates the French financial system will continue to struggle.
I wonder if the King might suddenly get popular enough that he is able to actually get taxation of nobility and other stuff to check the nobles through (personally I doubt it).
 
No, they can't do that. Defaulting on a loan was grounds to be declared war on. While large bankers did incur most of the debt from France, the 4th largest stakeholder was Spain. The Dutch and Sweden also had French debt. Spain owed money to various bankers and some nations, but anyone who tried to collect on Spain would deal with Austria. many ex-poles also had money there and they were cooperative with their new Prussian overlords, so they might put pressure on. By defaulting, France invites Spain, Netherlands, and Sweden to attack, possibly Italian states with bankers too. In short, they'd end up at war with everyone they did in real life, except Britain and Austria.
So they'd end up at war with everyone but the actual powers on the continent that had the capability to wage war on them? The Netherlands, Sweden, Italian states...they have no ability to threaten France militarily in this era.
 
Some points:

1. I'm pretty sure they did default, effectively. I read somewhere that they were running into trouble selling short term debt, and this is what prompted the calling of the Estates General.

2. Modern governments simply can't finance themselves or run modern economies without debt.

3. They couldn't raise taxes either.

4. You still have the famine, as was pointed out about.

I don't think the problem would have been war so much as the government not being able to maintain support within France, for example being able to pay its soldiers. In fact, I think the government being broke caused the otherwise curious limp response to the revolution, eg all those rumors that they were concentrating troops around Paris to crush the sections but somehow this never happened.
 
No, they can't do that. Defaulting on a loan was grounds to be declared war on. While large bankers did incur most of the debt from France, the 4th largest stakeholder was Spain. The Dutch and Sweden also had French debt. Spain owed money to various bankers and some nations, but anyone who tried to collect on Spain would deal with Austria. many ex-poles also had money there and they were cooperative with their new Prussian overlords, so they might put pressure on. By defaulting, France invites Spain, Netherlands, and Sweden to attack, possibly Italian states with bankers too. In short, they'd end up at war with everyone they did in real life, except Britain and Austria.
What if they exempt the Spanish(and maybe Dutch) portions of the debt from the general default? Seems like the obvious tactic for them.
 
No, they can't do that. Defaulting on a loan was grounds to be declared war on. While large bankers did incur most of the debt from France, the 4th largest stakeholder was Spain. The Dutch and Sweden also had French debt. Spain owed money to various bankers and some nations, but anyone who tried to collect on Spain would deal with Austria. many ex-poles also had money there and they were cooperative with their new Prussian overlords, so they might put pressure on. By defaulting, France invites Spain, Netherlands, and Sweden to attack, possibly Italian states with bankers too. In short, they'd end up at war with everyone they did in real life, except Britain and Austria.

You are making a countersense. Bankrupcy is not the cause for war. It most usually is the unavoidably consequence of a costly war and bankrupting after a ruinous war does not cause the war to start again.

And anyway, France was then the most powerful country in Europe.

Besides, the french debt was mostly held by french creditors : nobles and non nobles.

And they did the revolution because they refused bankrupcy. So they organized mass privatization of public assets for their benefit. Which caused terrible economic turmoil in France because most of the public assets sold had been the source for financing the healthcare system and the teaching/school system.

And in the end, France was anyway forced to déclare bankrupcy and forced a haircut of two thirds on its public debt in 1796.

So if Louis XVI had had the guts to declare bankrupcy, part of the nobility and the bourgeoisie would have been very angry but Louis XVI might have enjoyed public support of the low classes that did not hold public debt.
 
No, they can't do that. Defaulting on a loan was grounds to be declared war on. While large bankers did incur most of the debt from France, the 4th largest stakeholder was Spain. The Dutch and Sweden also had French debt. Spain owed money to various bankers and some nations, but anyone who tried to collect on Spain would deal with Austria. many ex-poles also had money there and they were cooperative with their new Prussian overlords, so they might put pressure on. By defaulting, France invites Spain, Netherlands, and Sweden to attack, possibly Italian states with bankers too. In short, they'd end up at war with everyone they did in real life, except Britain and Austria.

Interesting. How come no one declared war on Spain in the 1600s. I read they defaulted on their debt four times.
 
Interesting. How come no one declared war on Spain in the 1600s. I read they defaulted on their debt four times.

For most of it Spain was too powerful to be easily shaken down. Which is a good indicator that France declaring bankruptcy would not lead to war with its neighbors unless Britain and Austria decided now was a good time to give France a kicking. More likely it just means that nobody lends to France for decades and the French state is unable to finance its wars properly, making its long term strategic problems worse.

teg
 

RousseauX

Donor
No, they can't do that. Defaulting on a loan was grounds to be declared war on. While large bankers did incur most of the debt from France, the 4th largest stakeholder was Spain. The Dutch and Sweden also had French debt. Spain owed money to various bankers and some nations, but anyone who tried to collect on Spain would deal with Austria. many ex-poles also had money there and they were cooperative with their new Prussian overlords, so they might put pressure on. By defaulting, France invites Spain, Netherlands, and Sweden to attack, possibly Italian states with bankers too. In short, they'd end up at war with everyone they did in real life, except Britain and Austria.
errrr why?

Spain defaulted like what 7 times in the 1700s and no one went to war with them over it

I mean even with gunboat diplomacy it rarely came down to actual invasions just show of force vs countries with weak/no militaries
 
For most of it Spain was too powerful to be easily shaken down. Which is a good indicator that France declaring bankruptcy would not lead to war with its neighbors unless Britain and Austria decided now was a good time to give France a kicking. More likely it just means that nobody lends to France for decades and the French state is unable to finance its wars properly, making its long term strategic problems worse.

teg

Ok so now we have a really interesting ATL: no French Revolution and a crippled France going into the 19th Century. What do we think the alliance structure would be in this case? What would be the next major war?
 
The idea of France defaulting on /all/ of its debt is ludicrous. Ancient regime monarchies did defaults relatively often, but they never defaulted on everything. They would choose their creditors with the highest interest rates or who were the most unpopular/weakest, and default on them with some accusations of them being usurers or some other charge; a more general option was partial default on the value of debts, but again, this was partial. Alternatively, repayments would temporarily suspended in a time of crisis; the French did this in the Seven Years War and resumed payments post-war. Another favored tactic was that they would force a re-financing of their loans from short-term to long term debt, and similar to this in the French case debts above 5% interest rate would be "reformed" below this. In no case did an Ancien Regime market unilaterally default on the entirety of their creditors.

France could default in 1789, but a default would not be absolute, but rather a partial default on the lines above. Various loans above 5% interest rate would be reduced below 5%, a continuation of the suspension of payments would occur (this had started in 1787), lenders objectionable to the crown would be punished, and partial defaults on the value of debt would occur. It would cause a spike in French interest rates, and further disillusionment with public finances, but it would not be enough to seriously undermine or cripple France in of itself, no more than defaults in 1759 or 1770 did so; barely a decade after 1770, the French defeated the British after all.

Also on a note about defaults rarely being absolute, even the French Republicans never defaulted on all of the debt, I think the Directory which did a very extensive trimming of French debts still had around 1/3 of their previous debt obligations after their reforms.

Now, the political fallout of this would be extremely serious, as Louis XVI had staked a substantial amount of political capital on the idea of not defaulting, and the French government had lied about various proposals to fix the debt problem. Is it enough to cause the French revolution, in conjunction with other factors? Maybe. But it won't result in a coalition forming against France, France will manage its default to prevent too many important international fathers from being ruffled. I'm not aware of any war against a powerful nation starting because of a default, generally there is only the luxury of doing that when dealing with countries that can't fight back.

So too, the French will still be able to borrow, just as they were after the previous two defaults.
 
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