Chapter 620: Institutional Reforms

  Chapter 607: Institutional Reform

After Christmas, Franz was busy again. The end of the year is always a lot of things, the government’s year-end summary, the plan for the coming year, the financial budget ……

The specific things were the responsibility of the people below, but the general direction Franz still had to control. As a qualified emperor, he must ensure the control of the government.

Finance Minister Karl: “Your Majesty, this is the report of this year’s financial income and expenditure.

The New Holy Roman Empire’s total financial revenue for 1875 was 86.52 million guilders, total expenditure was 87.64 million guilders, and there was a financial deficit of 1.12 million guilders.

Austria’s total fiscal revenue for 1875 was 157.41 million guilders, total fiscal expenditure was 155.04 million guilders, and there was a fiscal surplus of 2.37 million guilders.

Bavaria’s total fiscal revenue in 1875 was 11.32 million guilders, with expenditures and revenues basically equal, and a fiscal balance.

The Kingdom of Jerusalem had a fiscal revenue of 220,000,000 shillings in 1875, a fiscal expenditure of 3,140,000,000 shillings, and a deficit of 2,920,000 shillings.”

Even though the Austrian government was the central government of the New Holy Roman Empire, there was a financial distinction to be made.

If the finances weren’t separated and the central government ran a deficit, there was no way to reach out to the state governments for money.

Not only was there a financial separation, but in fact the functions of the two were also different.

The Austrian government is mainly responsible for the governance of Austria, such as: collecting taxes, maintaining social security, developing the economy, education, infrastructure development …… These are all confined to the Austrian region.

The central government is different, these specific administrative things, are the functions of the state governments, do not need their intervention.

However, the central government was responsible for the whole of the new Holy Roman Empire, and its main functions included: mediating between the states, making laws, the judiciary, conducting diplomacy, training and managing the army, issuing money, collecting customs duties, and administering the colonies. ……

It was not unusual for the central government to not have as much revenue as the states, and apart from colonial revenues, the central government had only mint taxes and tariffs.

Just because the colonies were large doesn’t mean the revenues were also high. The current situation is good enough that it is able to basically balance the books and still have a slight surplus.

However, this surplus only exists on paper, and after the central government passes through a hand, it will be consumed by local construction projects.

In the early years, the central government had a serious deficit and had to share the deficit with all the state governments. It was always difficult to get money out of other people’s pockets.

At that time, the end of the year was the most painful time for the government in Vienna. It was necessary to patiently do ideological work with the state governments to get them to pay willingly.

The situation changed only when the colonial economies developed and subsidies from the central government’s pocket were no longer needed.

This change was not something that the state governments wanted to see, not needing them to pay any more money out of their pockets also meant that their position in the empire was diminished.

Politics being what it was, the merger of the Austrian and central governments was on the agenda as the central government broke even.

Whether people wanted it or not, it was a foregone conclusion. How else would the colonies be ruled when they were localized?

It was fine for the central government to govern the colonies, but if it governed the localized provinces, then the political status of those provinces would have to be on par with the state governments.

There is no doubt that the African continent is so big that its future development potential is definitely more than that of the mainland.

If we don’t consolidate and finalize the system now, these provinces will definitely have to fight for their political rights and interests when they develop in the future.

If the era of democracy and freedom is overdone, and the people vote to make decisions, then the European emperor will become the African emperor, and it will be just a matter of time.

The main reason for putting the colonies under the Empire rather than under Austria in the first place was to get the states to pay for them together, and the second was to have the orthodox name to facilitate the luring of immigrants in the German region.

Now that all this was accomplished, the time had come to unload. Politics was so realistic that Franz had already decided to merge the administrations of Austria, Bavaria, and Jerusalem.

1875 would be the last time the finances would be settled separately, and later on they would be fully merged. The government would no longer have to go through the trouble of making two budgets.

Franz took the document and looked at it carefully. The upcoming 1875 was a good year, and it was the first time since he ascended the throne that the Austrian government had a fiscal surplus.

Even though it was only a paltry two million guilders, it was a great victory.

A few years before he succeeded the throne, Franz had no shortage of financial headaches until the outbreak of the First Near Eastern War, and only got out of it by making war money.

Later on, the pace of colonial expansion was accelerated, and the government’s finances were in the red for years, and at its best, it was just breaking even.

Now is the era of the gold standard, not the period of credit money, the government to print money, must first look at the gold reserves.

To play with fiscal deficits to stimulate the economy, you must first look at how much money you have in your own pocket. There is no way to make up for the shortfall by issuing more money, and long-term deficits will increase government debt.

There is also a limit to the government’s debt carrying capacity, and once it exceeds that degree, the finances will be crushed.

Greece is a negative example in this regard. In the front, the government made a great effort to issue welfare benefits without any consideration of the consequences of fiscal deficits, and in the back, it could only renege on its debts.

Undoubtedly, the Austrian government also owes a lot of debt, and the so-called fiscal surplus only exists on paper, and there is not a single wave in front of the huge debt.

After a few moments of work, Franz closed the document: “fiscal surplus, it will be used to reduce the debt! The pressure on our debt is still great, and if we encounter an unexpected situation, it will be very passive.”

At the beginning of the establishment of the new Holy Roman Empire, the smaller states were worried that the central government would subsidize Austria with the Empire’s finances, and they themselves would suffer.

To put everyone’s mind at ease, Franz laid down the rules: the central government was not allowed to borrow from the outside world, and the deficits were to be shared among the state governments.

The effect was very obvious: the central government did not have enough money to spend on itself, and every year it had to reach out to the state governments, and every expense was scrutinized by everyone, so naturally there was no misappropriation.

In this way, the fiscal deficit of the central government fell on the state governments. Austria is the largest and has to shell out the most money, and with its own infrastructure investment, the debt has been growing steadily.

To this day, Austria’s total debt has amounted to 500 million guilders, nearly 3.2 times the revenue, more than the foreign debt of the Tsarist government.

Of course, this is not a reasonable calculation, and there are still revenues, which are not included in the fiscal revenues, but can be used to pay off the debt.

This figure, however, is still somewhat dangerous. In the period of rapid economic development, it is not considered a problem, must enter the period of economic stabilization, or even recession, the problem appears.

The fiscal deficit of the Kingdom of Jerusalem, which Franz did not even mention, was a foregone conclusion.

All the farmland is lying fallow, and the city is undergoing re-planning and construction, all of which cost money. If Jerusalem wasn’t the Holy Land, it’s estimated that it wouldn’t even have that 220,000 shillings in revenue, it would be a straight pure investment.

Finance Minister Karl: “Yes, Your Majesty.”

After a pause, Karl added, “Your Majesty, our financial consolidation plan has been opposed by the governments of the states, and there may be trouble in the Imperial Council.”

The merger of the central government and Austria was a general trend, everyone was prepared for it, Franz had long talked to the kings of the states, and by and large there was no opposition.

There was no problem with the administrative merger, that was from the beginning the Austrian government was part of the central government, in essence the two sides had been one for a long time.

The governments of the states knew that their objections were not valid to what had already been established. Without jeopardizing their own interests, they acquiesced.

But finances were different, and the state governments had always paid to subsidize the central government. It was not easy to achieve a balance of income and expenditure, and then they were plucked from the peach, no one would feel comfortable.

There is no way to compromise on this issue. If the finances cannot be merged, how can integration be accomplished?

After a few moments of hesitation, Franz made a decision: “If we can’t persuade the state governments to agree, then let’s shelve the fiscal merger for now.

Let the Jerusalem side publicize the reconstruction plan, and at the same time prepare the documentation to apply for membership in the New Holy Roman Empire at the Imperial Conference early next year.”

The Kingdom of Jerusalem had never been part of the Holy Roman Empire, but no one could object if Jerusalem wanted to join the Holy Roman Empire.

There was no Catholic country that could refuse the Holy Land to join. Otherwise the spittle of the populace could bring down the government.

The addition of Jerusalem to the empire didn’t just increase the voice of a state, it also added a big trouble.

The Kingdom of Jerusalem was penniless, and reconstruction had just begun, which required huge sums of money. There was no doubt that the Kingdom of Jerusalem itself was broke.

It was religiously correct to rebuild the Holy Land, and after joining the Shinra Empire, this expense fell to the central government. According to the usual practice, the money would end up on the heads of the state governments.

Franz had already made plans to rely on the Holy See to collect donations from all over the world to support the rebuilding of Jerusalem, and for this reason he had even promised the governance of the city of Jerusalem to the Holy See.

But this is still in secret negotiations, the Holy See wants to get the right to rule Jerusalem, must cooperate with Austria to stabilize the entire Middle East.

This did not prevent him from first using the huge expenses for the reconstruction of Jerusalem to put pressure on the governments of the states.

(End of chapter)