ABSTRACT
This harsh editorial was published in The Times of 18 October 1875, less than two weeks after the ominous and unilateral decision by the Ottoman government to partly repudiate its outstanding foreign debt. The insurrections of Herzegovina and Bosnia, in the summer of 1875, had put enormous pressure on the already faltering budget of the Empire. Faced with the imminent risk of a financial collapse, the grand vizier, Mahmud Nedim Pasha, had tried to avoid a catastrophe by taking
one of the most widely criticized decisions in the history of Ottoman finance. On 6 October 1875, a decision of the council of ministers announced that, for a period of five years, the coupons of Ottoman bonds would be paid half in cash and half in 5 per cent interest-bearing securities. This declaration, which amounted to a moratorium, had destroyed what little remained of the creditworthiness of the state.2 The editorial was extremely pessimistic on the possible solution of the crisis that had thus emerged, as it was severely critical of the role played by both sides involved in the operation. British – and for that matter French, German, and Italian – bondholders had been foolish enough to believe that such a default was avoidable; the Ottoman government, on the other hand, had displayed great dishonesty by (mis)leading them into believing that their engagement was solid enough to withstand the impending financial crisis, and by literally dilapidating the revenues they had obtained from these loans in highly unproductive spending. Given the point reached in the insolvency of the Ottoman Empire and the spiralling debt that burdened its Treasury, there was little hope of seeing this situation change overnight. The events that followed confirmed the darkest scenarios. By March 1876, payments had ceased altogether on most bonds, turning the ‘half-default’ of October into a formal bankruptcy.3 Some 20 years after its first foreign loan was contracted, the Ottoman Empire’s creditworthiness had been wiped out almost overnight. The financial disaster was coupled with an equally catastrophic political situation. Insurrections in the Balkans had been followed by the deposition of Sultan Abdülaziz in May 1876, and by a declaration of war by Serbia. A wind of panic swept over the European markets as bondholders realized that the Empire they had invested in was most likely about to collapse.
