Lending to the borrower from Hell

The latest number of The Economic Journal has pretty interesting research:
This is the abstract of the first article, Lending to the Borrower from Hell: Debt and Default in the Age of Philip II by Drelichman and Voth:

What sustained borrowing without third-party enforcement in the early days of sovereign lending? Philip II of Spain accumulated towering debts while stopping all payments to his lenders four times. How could the sovereign borrow much and default often? We argue that bankers’ ability to cut off Philip II’s access to smoothing services was key. A form of syndicated lending created cohesion among his Genoese bankers. As a result, lending moratoria were sustained through a ‘cheat-the-cheater’ mechanism. Our article thus lends empirical support to a recent literature that emphasises the role of bankers’ incentives for continued sovereign borrowing.

 See the draft of the paper.