Quote Originally Posted by English assassin
You just go into the red. Nothing gets disbanded. Its quite hard to get back out though because you cant build anything to get your income up.
One way to solve it is to send your mercenaries and overgrown army on pillaging missions. They die thus the strain on your coffers gets smaller and they pillage that can bring in income. This way you can maybe turn the tide especially if the deficit is not too big. If you can restore your trade links by sinking enemy ships - that works too. But only if you are not at war with everyone already.