World’s first sovereign war bonds – issued by Mediterranean state of Venice

Venice’s important financial contribution is prestiti: bonds first issued in 1172 to fund wars, the first Eurobonds (and AAA government bonds, if ratings existed then). Venice was first to issue bonds to citizens just as governments issue bonds now. Before prestiti, even after, rulers borrowed for wars; when unable to repay, they defaulted. Venice however was Athens’ medieval equivalent, a democracy for elites; by late 13th century, it was Europe’s most prosperous city, having 36,000 sailors operating 3,300 ships, dominating Mediterranean commerce. Defence meant wars, and borrowing. Subscriptions were obligatory on citizens proportionate to their wealth; forced loans were preferable to tax. The outstanding capital paid 5% per annum. Prestiti were perpetuities, with no maturity date, and no physical bonds, but registered through Loan Officers, and sold and transferred with all rights of original purchasers. Government repaid principal when possible. Defaults were low, as Venetian elites in government owned prestiti.