Holy Roman Empire Chapter 724 - Two Treaties

        



        Time is a butcher’s knife. No matter how resolutely Prussia and Russia stand, in the face of time they must eventually yield.         After more than two months of negotiations, on July 18, 1881, Prussia and Russia finally reached an agreement, albeit a very reluctant one, under the mediation of various parties.         It was truly a forced compromise. Neither the Russian government nor the Prussian government was satisfied with the treaty.         They only had dwindling reserves at home, and to avoid starving, they had no choice but to compromise.         The end of the war does not mean that spending will cease. Pensions for fallen and disabled soldiers, the resettlement of discharged officers, and post-war economic reconstruction all require vast amounts of funds.         Neither Prussia nor Russia dared to deplete their treasuries. Their governments lacked emergency funds, and the situation was far more complicated than mere financial bankruptcy.         If the soldiers are not properly taken care of, a major disaster could ensue. While mutinies are one thing, the greatest fear is that someone might raise their arm and call for “revolution.”         Britain, France, and Austria made it clear that only once a ceasefire treaty was signed would the international community consider offering assistance.         These days, Britain, France, and Austria effectively form the international community. With the three countries standing united, all the other nations combined are insignificant.         Post-war reconstruction can be postponed, but disarmament and the resettlement of troops are imperative. Without financial support from the international community, even a victorious Russian Empire would not be able to sustain itself.         Both Prussia and Russia have made concessions, or rather, the three nations have forced them to make concessions. The treaty stipulates the following terms:         One: The Kingdom of Prussia acknowledges its defeat and accepts responsibility for the war;         Two: It cedes the regions of East Prussia, West Prussia, and PoznaƄ to the Russian Empire;         Three: The Kingdom of Prussia shall pay 360 million guilders to the Russian Empire as war reparations, to be paid over 30 years at an annual interest rate of 6%;         (Note: An initial payment of 60 million guilders will be made. Thereafter, monthly payments of principal and interest totaling 1,798,652 guilders will be made, amounting to a total of 707.51 million guilders.)         Four: Once the Prussian government makes the first reparation payment, Russian troops must withdraw from Prussian territory within one month;         Five: Both sides must complete a prisoner exchange within one month, with no ransom being charged;                 The apologies and such were not the point. The true essence lay in just a few key provisions, especially the territorial cessions and reparations.         The land had already been occupied by the Russians, so there was no need for an actual handover so only the money remained. At that point, it was Hanover’s turn to step in.         Amid widespread astonishment, on July 19, 1881, the Hanoverian government and the Prussian government jointly announced the “Land Transaction Agreement between the Kingdom of Prussia and the Kingdom of Hanover,” which stipulated that the Kingdom of Prussia would sell the two duchies of Schleswig and Holstein and all territories west of the Elbe River to the Kingdom of Hanover for a staggering 210 million pounds.         Before anyone could recover from this shocking news, on July 20, 1881, the Hanoverian government signed a loan agreement with the British financial sector for 150 million pounds (approximately equivalent to 300 million guilders).         Armed with the borrowed 150 million pounds plus an additional 60 million pounds they had raised on their own, by the end of July of the year 1881, the Hanoverian and Prussian governments had completed what would become the most expensive land deal in history.         Securing the money should have been a cause for celebration. Regrettably, however, that money was merely funneled through the Prussian government. The 150 million pounds provided by the British were designated primarily to repay debts that the Prussian government owed them and clearly that amount was insufficient, so it simply vanished.         These blatant, oppressive terms left no room for complaint, and the Prussian government had no choice but to accept them.         Even the remaining 60 million pounds, once secured and used to pay the first installment of war reparations to the Russians, was immediately halved. In the end, the Prussian government couldn’t hold onto the final 30 million pounds either, as nearly all of it was spent on disarmament settlements and casualty compensations, with the funds for post-war reconstruction remaining uncertain.         Through a strategy combining one financing arrangement and two loans, not only were financial risks reduced, but double interest was also earned. The British truly demonstrated what a masterstroke in finance looks like.                 At the Vienna Palace, watching the British masterstroke, Franz couldn’t help but want to emulate it. However, he eventually realized, with a resigned sigh, that there was no suitable target for such a maneuver.         Setting down the documents in his hand, Franz lamented, “The Hanoverian government managed to raise 60 million pounds on its own. It seems we’ve always underestimated their financial strength. These small states in the German region might be far wealthier than we imagined.”         Chancellor Felix replied, “The Hanoverian government’s performance is indeed somewhat surprising, but it’s entirely understandable.         Since entering the modern era, the economy of northern Germany has developed rapidly. Especially after acquiring the Rhineland, the overall economy of the German Federal Empire has leaped to a new level.         Hanover holds the reins of the central government. Although it hasn’t managed to politically control the smaller states domestically, its economic influence is undeniable.         In effect, the Hanoverian government’s ability to raise 60 million pounds is equivalent to the German federal government itself collecting that amount.         This outcome stems from the central government’s insufficient control over the local states. Otherwise, given the economic conditions of the German Federal Empire, doubling that figure would have been no problem at all.         However, the price set for this territorial transaction is far too high. It greatly exceeds the actual value. Relying on these newly acquired territories to recoup the costs might take a hundred years.         For a long time to come, the Hanoverian government will be burdened with enormous debt, which will significantly impact their economy.”         The German Federal Empire controls the prime regions of the German lands, with extremely favorable natural conditions with over 70% of the industry of the Second Reich in the original timeline was located here.         With such a foundation, as long as the ruling class doesn’t act foolishly, the economy won’t be too bad.         It is precisely because of this economic prosperity that so many in the Austrian government remain so attached to this region. If it were merely a backwater, then in keeping with European cultural traditions, everyone would have long forgotten about it.         The most typical example is the Swiss region. Although still the ancestral land of the Habsburgs, because the mountainous areas are so poor, people have chosen to overlook it.         Foreign Minister Wessenberg commented, “Although the bid is a bit high and comes with huge debt, the Kingdom of Hanover is not at a loss.         They have paid such a steep economic price that the Prussian government must have made concessions elsewhere.         If nothing goes wrong, Hanover and Prussia might have already reached a secret agreement. All that remains is to announce it at the right time.         In theory, after a Prussian-Hanover merger, they will finally have the opportunity to truly control the German Federal Empire and establish the envisioned North German Empire.         Once North Germany is integrated, these debts will be nothing.”         Everyone says it’s expensive, while Franz is too embarrassed to call it cheap. Reality has taught him that when your opinion diverges from the majority, it’s best to keep quiet unless absolutely necessary.         People have different experiences, view issues from different perspectives, and naturally reach different conclusions.         Franz waved his hand and said, “Alright, whether Hanover ultimately loses or gains doesn’t really matter. Their so-called grand plan will take a long time to implement. We have plenty of time to think it through. Now, let’s discuss the Russian government’s loan application for 50 million guilders.”         War is truly terrifying. Even the Russians, who have received war reparations, are still suffering from a shortage of funds.         It’s not that the Russian government is wasting money. In fact, although the amount Prussia has to pay in reparations isn’t small, the first installment is only 60 million guilders.         That figure might seem huge, but when you compare it to the millions of soldiers the Russian government has mobilized and the number of casualties and wounded in the war, it is rather insignificant.         Most Russian soldiers receive extremely low wages, almost negligible even, with only a small allowance provided during wartime.         Now that they’ve won the war and are having the troops disarm and return home, a dispersal payment is inevitable.         Assuming a reduction of 3 million troops and paying each person 20 guilders, that would immediately require 60 million guilders. Even if that was cut in half, it would still require paying 30 million guilders.         In reality, 30 million guilders is certainly not enough. Officers’ treatment cannot be compared to that of ordinary soldiers, so the severance pay standards naturally differ.         Reduced standards?         That would already be a gross underestimation. In Austria, that amount is merely equivalent to two months’ wages for an ordinary worker. After all, these are the very people who risked their lives on the battlefield and you could say that this rate is as low as it can possibly go.         While the survivors might be taken care of, the compensation for those killed or disabled cannot be handled so carelessly. Otherwise, no one would be willing to risk their life for the Tsar anymore.         With 1,433,000 soldiers killed in action and 671,000 injured, without hundreds of millions of guilders, it simply couldn’t be managed. Fortunately, installment payments are possible. Otherwise, even a bankrupt Russian government wouldn’t be able to cobble together enough funds.         Minister of Finance Karl proposed, “Your Majesty, the financial situation of the Russians is extremely poor. Even after receiving war reparations from Prussia, they have not escaped the crisis.         Providing them with loans now still carries enormous risks. Unless the Russian government can offer terms we cannot refuse, I do not recommend extending any loans to the Russians.”         Not only is the risk enormous, it’s an outright trap. The end of the war does not mean the crisis is over.         With the loss of war-driven orders to absorb the excess production capacity, companies’ inventories are steadily rising, and an economic crisis is already brewing.         Once the crisis erupts, the war-torn Kingdom of Prussia, with so much left to rebuild, certainly won’t be able to bear it. The Prussian government would declare bankruptcy, and the Russians wouldn’t be able to collect their war reparations.         Cut off from that revenue, no one can say whether the Russian government will be able to hold on.         Foreign Minister Weissenberg objected, “Purely from an economic standpoint, lending money to the Russians now is extremely unwise.         However, from another angle, this also presents an opportunity. We can demand even higher terms to secure greater benefits.         If the Tsar is willing to fully support our annexation of the Ottoman Empire, I believe this loan could still be approved.”         The notion of “looting while the fire burns” flashed through Franz’s mind, and he couldn’t shake it away.         The Ottoman Empire is Austria’s next strategic target. Defeating the Ottomans is easy, but annexing them is another matter entirely. The biggest obstacles are Britain, France, and Russia. Due to geopolitical reasons, the Russians have more influence on this issue than the British or French.

        Previously, Franz’s plan was to partition the Ottoman Empire with the Russians, but partitioning hardly compares to having it all to oneself.         If one could monopolize the Ottoman Empire, it would not only unite the homeland with the Middle East but also extend Austrian influence into Central Asia—a move of immense strategic significance.         It didn’t take long for Franz to come to his senses. With such enormous benefits at stake, it certainly wouldn’t be easy to fully realize them.         The Russians aren’t fools either. Dealing with Britain alone is enough for them, and adding Austria into the mix would make it even harder for them to reclaim Central Asia.         Franz shook his head and said, “We can test the Russians, but don’t get your hopes up too high. The Russian government isn’t yet at the point of utter desperation.”

[Previous | Table of Contents | Next]

Comments