State funds: expenses

rom the first years after the recovery of Constantinople, the financial reserves of the state of Nicaea had already been insufficient to supply the funds needed by Michael VIII for the reconstruction of the capital and for his foreign policy.

The lack of funds and the gravity of the economic situation, which was constantly detriorating, became particularly apparent during the periods when it was imperative to maintain a strong military force capable of defending the ever-shrinking Byzantine Empire. The army of mercenaries constituted an unbearable economic burden and its maintenance had already led the state to bankruptcy during the reign of Michael VIII.

The increase in expenses, however, was not only due to the cost of running the army and administration; the most important expenditures of the state budget were the payments made to neighbouring powers. As the state was short of military forces and had no navy, it was forced to buy peace, but also to pay subsidies to powerful neighbours, such as Genoa, for the maintenance of a fleet and a regular army.

Thus, as time went by, the economic and fiscal crisis became increasingly acute. The state coffers were almost empty. The currency had been devalued and all the sources of income had in their major part been exhausted. The financial collapse of the Byzantine state was therefore inevitable.