Originally the phrase 'Dutch courage' referred to the courage that results from indulgence in Dutch gin (jenever), but 'Dutch courage' can also apply to the gin itself.
In 1650 Frances Sylvius, a Dutch doctor, created Dutch gin in an attempt create a diuretic medicine. This was then used by soldiers in the Thrity Years' war by English troops and was an instant success for its warming properties on the body in cold weather and its calming effects before battle. Because of the effects of Dutch gin English soldiers fighting in the Dutch Republic in the 17th century apparently called the drink "Dutch Courage".
After the Thirty Years' War English troops returned home with 'Dutch Courage'. Gin became popular in England after King William III, better known as William of Orange (1650 - 1702), allowed unlicensed gin production and at the same time imposed a heavy duty on all imported spirits. Soon gin distillation took place in England. The gin produced in England was different from the original Dutch version because the distillers did not have the original recipe. King William III actively encouraged gin production and gin was sometimes given to workers as a part of their wages.
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