8 - Public Finance and the Rise of the Liberal State in Spain, 1808–1914

Summary

Introduction

The wars and political changes that took place prior to 1840 created serious problems for the Spanish Treasury. Spain was affected by the Napoleonic Wars (War of Independence 1808–14) and by the subsequent restoration of the absolutist monarchy under Fernando VII. After General Riego's revolutionary uprising in 1820, Fernando VII was forced to swear fidelity to the Constitution of 1812 and thus became a constitutional monarch for three years during the so-called constitutional triennium (1820–3). A new absolutist coup in 1823, with the help of another French invasion, also called ‘the hundred thousand sons of St. Louis’, led to a second restoration of the ancien régime under Fernando VII and a period of absolutist stability known as the ominous decade. The death of Fernando VII was followed by widespread war, in the form of the First Carlist War (1833–40). The long transition from an absolutist regime to a liberal state was decided during these conflicts, which seriously affected fiscal issues. In this period, Spain lost a large empire and became a second-rate European power. Once Spain lost its colonies, it no longer received bullion remittances from the Americas and came to rely on its own revenues. Nevertheless, public expenditure increased more than receipts did, thereby raising the deficit and the public debt to alarming levels.

The end of the First Carlist War in 1840 consolidated the liberal state and allowed for greater political stability.