Chapter 377: Two Countries on the Verge of Bankruptcy
Chapter 367 – Two Countries on the Verge of Bankruptcy
Vienna Palace
Foreign Minister Weissenberg smiled and said, “Your Majesty, in order to seek our support, both Prussia and Russia have offered almost the same conditions.
The Russians promise to get Silesia after the war if we support them; Prussia promises to cede the Silesian region after the war as long as we remain neutral.”
The Russian promise was at the expense of the others, and the Czarist government would not have minded buying Austria at Prussia’s expense.
The Berlin government’s promise, that was forced upon them, and they were not willing to give up Silesia. In order to have won the war, they had to stabilize Austria.
Win the war, and all they had paid could be doubled back; lose the war, and Silesia could not be saved at all.
In spite of the past years, the Austrians still had a grudge against the Silesia region. Especially in recent years, with the increase in strength, the Vienna government to recover the Silesian region of the call is more and more high.
Once the Kingdom of Prussia appeared to be weak, Austria would surely fall on its sword, and now the Berlin government had to stabilize Austria first.
Looking at Felix who wanted to speak, Franz asked, “What does the Prime Minister think?”
Prime Minister Felix replied, “Your Majesty, neither of these two is the best option, what we need is for both Prussia and Russia to lose.
Right now our alliance with the Russians is an eyesore, and the countries of Europe are working to break it up. If the Czarist government continues to be victorious, we will only run into more trouble in the future.
The Russian Empire is strong enough for us now. If we let the Czarist government complete its internal reforms, it’s hard to say whether the Russian-Austrian alliance will still have any value.
Likewise, a stronger Kingdom of Prussia would not be in our interest. Europe is too small to accommodate so many powerful nations.”
Prussia and Russia were both defeated this was the ideal state of affairs. Not only can we use the Prussians to interrupt Alexander II’s reforms, so that the Tsarist government’s reforms this time will be even less thorough than in history; at the same time, we can also interrupt the Prussians’ ambitions, so that they will never have the chance to rise again after this defeat.
But it was very difficult to do this, and at least Franz did not think that Austria was capable of playing the balance.
The Kingdom of Prussia lost once and it was over, on the surface it looked like the Russians could lose many times, but in reality it was very false, there were too many internal problems in the Tsarist government, and Franz wasn’t sure about their ability to withstand losses.
It wasn’t like the Near East War, when the Russians were at the gates of Constantinople, and all classes in the country were in favor of the war, and the Tsarist government had to hold out for even the biggest losses.
Franz thought for a moment and said, “Don’t have this kind of idealistic plan, it’s easy to play the crash and end up pleasing neither side.
According to the actual needs, we just need to do two things are enough:
One, use the Prussians to disrupt the reforms of the Tsarist government; as long as the Russians are unable to gain a victory in a short period, Alexander II will give in to the conservatives, and this reform will not be complete;
Two, the Kingdom of Prussia could not grow larger; one power in the German region was enough, and there was no need to add another rival.
The matter of strengthening Prussia can be left to England and France, and all we have to do is to give blood to the Czar’s government when necessary, and strengthen their determination to fight on.”
It is impossible to please both sides, and if one really did that, the end result would more than likely be that both sides would dislike each other, and become disenchanted inside and out.
The role of the Russo-Austrian alliance was diminishing, but as long as the alliance was not dissolved, Austria could not openly stab the Russians in the back.
Austria’s credibility in international politics and diplomacy was at stake, and a country without credibility would never be able to gain the respect of everyone.
Luckily the Prussian government was smart enough not to play around with undeclared wars or actively invade Russia, or else Austria would have been dragged into the war under the alliance.
The situation now is that the Kingdom of Prussia invaded Denmark and the Russians declared war on the Kingdom of Prussia to protect the little brother.
This situation was not within the scope of the Russian-Austrian alliance of having to enter the war.
The fact that the Kingdom of Denmark was an ally of the Russians was not the same as if they were also an ally of Austria, and the government of Vienna was not required to side with the Russians.
Karl, the Minister of Finance, reminded, “Your Majesty, the finances of the Tsar’s government are very bad, and the Russians are slow to act, and are to a large extent limited by their financial resources.
Not long ago, the bonds issued by the Tsarist government were cold in the capital market, and investors were worried that the Russians would renege on their debts.
According to the analysis of the information we have, if the finances of the Russians do not improve, there is a possibility that the Tsarist government will declare bankruptcy again.”
There were provisions in the Russo-Austrian alliance that obligated them to provide material assistance to their allies without jeopardizing their own interests.
Theoretically, it was a matter of selectivity how the Vienna government would have to help in this situation. However, how to support it depends on the actual situation.
Loans are assistance, as are donations of material goods, and the specifics of the situation depend on the interests at stake.
If there is not enough interest, just take some weapons and ammunition from the warehouse to make up the number, can also cope with the past.
The attitude of the Minister of Finance was very clear, that is, the Tsarist government’s financial situation is very bad, after the war is likely to be bankrupt, Austria does not need to jump into this pit.
Financial bankruptcy is never a new thing in Europe. Especially in the case of the Tsarist government, once the government debt exceeded its capacity, they would declare bankruptcy.
Government bankruptcy means that the previous debt they suspend payment indefinitely, which can also be understood as not paying it back. This kind of thing the tsarist government has done a lot, many debtors were pitched without tears.
Of course not every country was entitled to renege on its debts, and there was another way to collect money in this era – by force.
Small countries, even if they declared bankruptcy, usually just reneged on their personal debts, and the debts of the Great Powers still had to be paid, for example: the Great Powers regulated the finances.
Mexico is a negative example, no power also dare to learn others to renege on the debt. 1862 President Juarez announced a moratorium on the payment of debt, and then the French debtors killed the door.
This approach does not work for the Russians, there is no debtor has the ability to kill to St. Petersburg to ask for money. After a few more pitfalls, no one lent money to the Tsar on the capital market.
Franz asked in surprise: “The Russians’ finances have deteriorated to such an extent?”
In his memory, the Tsarist government’s finances were bad, but not to the point of collapse. Even if it fought a Russo-Prussian war, it would not go bankrupt immediately.
Minister of Finance Karl explained, “Your Majesty, in recent times, ordinary European countries would try to pay off their debts as much as possible as long as they could hold on, and there were very few that reneged on their debts, however, the Russians were the exception.
According to past experience, when the Tsarist government’s debt reaches a certain level, they will declare bankruptcy. Recently we have gathered intelligence that the Czarist government has made preparations for bankruptcy.”
Franz was speechless, in fact, there were many cases of kings declaring bankruptcy and reneging on their debts during the medieval period, which came almost every few decades.
Many capitalists were made to cry, with the Jewish capitalists being the most victimized. It was the result of being too rich, most of the money gathered into their hands, so who to borrow from if not them?
Of course, there were many kings who got screwed. The Jewish capital was hated because they often buried nails in the loan contracts, and many kings who borrowed money fell for it and had to pay a lot of extra interest.
Facts have proved that rulers are not to be messed with, especially in the era of monarchy, dare to cheat them of their money, are to pay a price. That’s where most of the anti-Jewish movements in continental Europe came from.
Into the modern era, the power of capital is growing, governments renege on their debts through bankruptcy less and less, especially with the background of the great powers of the international loans more afraid to renege on their debts.
In the days when everyone reneged on their debts together, naturally it didn’t matter, anyway, the world was as black as a crow. But all of a sudden everyone else began to abide by the rules, leaving you alone to renege on the debt is very prominent.
As soon as the debtors publicized it, the credibility of the Tsar’s government went down the drain. Without credibility, a lot of things are not easy to do, before the embarrassing situation of Russians using gold and silver coins.
Franz thought for a moment and said, “Then we also tighten the silver root externally and remind the domestic financial community to be more vigilant.
Support for the Russians is based on assistance in kind. All large loans to Russia must be collateralized.”
That’s kind of falling on its face. These restrictions undoubtedly made it more difficult for the tsarist government to finance the Austrian capital market. But as long as the tsarist government doesn’t renege on its debts, there’s no harm in taking out even more collateral.
With collateral, even if the Russians declared bankruptcy, it would be impossible to renege on these debts. The value of the collateral, after all, usually exceeded the loan.
Franz also had to do what he had to do, knowing that not long before the Tsarist government had taken Alaska to offset a debt of 2,570,000,000 Shenyang guilders, with an accompanying favor owed. The Russians would never have done that if they hadn’t really been able to hold out.
……
While Austria was worried about the Russians going bankrupt, the government in London faced the same problem, as the European continent is the most militaristic country, the Kingdom of Prussia is not the Lord of money.
Lending money to the Berlin government now was no less risky than lending it to the Russians. The war bonds issued by the Berlin government were cold in the London financial market.
If the Kingdom of Prussia won the gamble, then there was still a possibility that it could afford to pay back the money; if the Kingdom of Prussia lost, or if both sides lost, all these investments went down the drain.
Not many people were bullish on Prussia, and people were not willing to risk their money. Even though the interest rate on the bonds had been raised to 15.8% per annum, sales were still not optimistic.
As the gold master of the Kingdom of Prussia, the London government naturally could not watch this happen. Without enough money, what would the Kingdom of Prussia fight this war with?
Minister of Finance Agarwal said, “The war bonds we have already issued to the Prussians have only sold 1,869,000 pounds so far, which is too far away from the issue amount of 15 million.
The people do not see that they can win this war, and there is no way that this bond can be sold unless someone can give them a guarantee.
The finances of the Kingdom of Prussia are very bad, and they have been in the red since 1848 until now.
Various financial institutions in the country believe that Prussian finances are on the verge of bankruptcy and have refused to give them loans.”
It wasn’t easy to be a gold master; it was a matter of investing real money. The cost of the Russo-Prussian War was destined to be a huge expense, and the likelihood of a bloodbath was still very high.
Prime Minister John Russell rubbed his forehead and said, “So, we haven’t raised one-fifth of the aid we promised to the Kingdom of Prussia in the past two months?”
As agreed, the British were to provide the Kingdom of Prussia with a 10 million pound loan plus the issuance of 15 million pound war bonds.
The reality was that, apart from a £5 million advance from the London government to the Prussian government, there was no one in the capital markets at all.
This was the aftermath of the Near East War, where Britain and France failed to defeat the Russians, let alone the Kingdom of Prussia.
Even the government in London didn’t think the Kingdom of Prussia could win the war. To support them, it was only to interrupt the Russian reforms, not to expect the Kingdom of Prussia to win.
“Yes, Mr. Prime Minister. People don’t have confidence in Prussia, so they are cautious when investing.” Finance Minister Agarwal replied
Supporting the Kingdom of Prussia against the Russians was still very much supported by the British public, but it was different when it came to shelling out money.
Some newspapers in London were betting on when the Kingdom of Prussia would fail.
The most optimistic estimates were that the Kingdom of Prussia would be able to hold out for a year and then lose the war; the most pessimistic thought that it would take less than a month for the Berlin government to surrender.
The general opinion was that it was only a matter of time before Prussia lost the war, unless Britain and France entered the war themselves.
(End of chapter)