Holy Roman Empire - Chapter 500

Chapter 500: Chapter 73: A New Level of Pie in the Sky
 

After leaving the Palace of Versailles, Alexandrovich had lost interest in sightseeing, clearly indicating that his trip to Paris was not going well.

Napoleon III had extended goodwill towards Russia, but solely out of simple political necessity to demonstrate power to the European nations, which did not mean that France was truly willing to bring Russia into its fold.

Without the humiliation of the “Treaty of Frankfurt,” the proud French still looked down upon Russia as a destitute barbarian.

Especially after the alliance between England, France, and Austria, France no longer faced diplomatic pressure, and there was no longer an enemy in the world that they felt the need to take seriously, at least on the surface.

Before Alexandrovich’s visit to Paris, the St. Petersburg Government had held high hopes, attempting to exploit the opportunity of France’s overtures towards Russia to obtain financial assistance.

Reality was cruel; even the money from the Usury Empire was hard to come by. Bankers were shrewd, especially towards the Tsarist Government, which had lost its credibility.

Even the loan of five hundred million Francs, previously promised, now encountered problems, with the French demanding gold and silver as collateral.

It’s not surprising. Alexander II was also conducting currency reforms, albeit on a much smaller scale. Now, the French were eying their reserve funds.

Since Alexander II’s reforms, developing industry, constructing railways, and implementing agricultural reforms had become the government’s three strategic priorities.

The plans were sound, but they all needed financial support. Wars had caused a massive outflow of gold and silver from the Russian Empire, resulting in a severe shortage of domestic capital.

The Tsarist Government’s solution was to attract foreign capital. Regrettably, European banks refused to offer them loans, and even investments were made with extreme caution.

Alexander II’s reforms were somewhat better than those in history, with a ready example to learn from next door. All other issues could be managed, but they could not learn how to raise funds.

Austria had reached its current state of development through multiple foreign bond issuances, gathering several billion Divine Shields of capital. Even now, the Vienna Government had to repay tens of millions of Divine Shields in debt each year.

Due to matters of credibility, the Tsarist Government simply could not borrow money. Even pledging rights of way and tax revenues as collateral was futile—the Tsarist Government had a reputation for defaulting on debts.

Pressured by a debt crisis, Alexander II had no choice but to declare a default, and the consequences of that decision were now emerging.

It wasn’t that Alexander II’s decision was wrong; if he hadn’t defaulted, the finances would have been crushed by foreign debt, and the situation would have been even worse.

To put it simply, even without defaulting, they wouldn’t have been able to borrow much money. Bankers were too astute and would never lend to someone incapable of repaying.

In the original timeline, the French lending money to the Russians was out of desperation. The pressure on national defense was too great; they needed to rally allies to share the burden.

France’s composite national strength suddenly fell behind as it entered the late 19th century, partly because the government lent out a significant amount of money, leaving less for domestic development.

Now there was no need to consider; the French were definitely not going to exhaust themselves supporting them. Even with usurious loans, the French would only lend to those who had the ability to repay.

Take Austria, for instance, which now owed the French a huge debt. Both developing domestically and exploring colonies, the Vienna Government’s fiscal revenue was certainly not sufficient.

Austrian private capital accumulation was also insufficient, so naturally, Franz had to resort to external debts. Of course, these weren’t simply international loans; most of the debt existed in the form of bonds.

A large portion of these bonds were issued in the name of projects, and the debt was not all owned by the Vienna Government.

It was similar to how the Americans borrowed money to build railways, mortgaging the railways to British banks and then using the borrowed money for construction.

If an economic crisis occurred and the railway companies went bankrupt, the British banks would be trapped in their investment.

Many of Austria’s projects were the same, owing the banks a large sum and issuing a plethora of bonds to the public, with the government only putting in seed money.

Anyway, these projects were standard commercial operations. In case of an unexpected event, it would just be the bankruptcy of one company.

Economic convergence was also an important factor in the alliance between England, France, and Austria. From a global perspective, if England and France experienced an economic crisis, Austria would be affected, and vice versa.

To break free from this situation was actually quite simple; it all came down to one word—wait. Once the domestic private capital was sufficiently accumulated, there would be no need to borrow from abroad anymore.

It’s a mutually beneficial arrangement; one side has excess capital which urgently needs to be invested, while the other side lacks funds for development, making it a prime opportunity for collaboration.

The Americans in the original timeline developed in this manner. Without the World Wars, they wouldn’t have turned their fortunes around from a debtor to a creditor nation so quickly.

Of course, the terms debtor and creditor nations are not absolute. Domestic companies borrow foreign banks’ money, domestic banks also go abroad to develop, and likewise issue loans to others.

Even though the Russian Empire was short on capital, it still had banks exporting capital overseas. These were all normal economic activities, mainly for the sake of profit.

Having understood the French stance, Alexandrovich did not continue to entangle himself further. After visiting France’s industries, he directly took a ship to London.

This time, he relaxed, as the Tsarist Government had no illusions of obtaining loans from the British. Unless the bankers in London were out of their minds, such a scenario was simply not possible.

They couldn’t possibly expect the London Government to provide guarantees, could they? The two sides were enemies, and even if the Russian Empire had fallen behind in the ranking of British competitors, the animosity accumulated from earlier was not so easily resolved.

Moreover, Prussia and Poland were underlings of the British. Even just to avoid disheartening their subordinates, such actions could not be taken.

…

Russia’s diplomatic moves still attracted significant attention from the Kingdom of Prussia. Even without Bismarck, Wilhelm I still managed to control the Kingdom of Prussia.

After a series of political struggles, the Junker aristocracy, which had been united due to the war, now lay fractured.

For instance: the industrial Junkers, financial Junkers, military Junkers, court Junkers, parliamentary Junkers, and rural Junkers.

With his subordinates no longer unified, the King’s power naturally solidified. Politics in the Kingdom of Prussia began to return to normality, and while the military’s influence remained significant, it was no longer a monopoly.

New internal power balances had formed, and Wilhelm I turned his gaze towards the European Continent. He knew every move of the Russians like the back of his hand—as enemies.

The Russians wanted to escape their isolation through diplomatic activities, a situation Wilhelm I naturally would not agree to.

In the Berlin Palace, the military and political high command of the Kingdom of Prussia gathered together to discuss how to sabotage the Russians’ diplomatic endeavor.

“The European tour of the Russian Crown Prince is at the invitation of the French, and there must be some trade of interests between the two countries, but the likelihood of an alliance is slim.

The Tripartite Alliance of England, France, and Austria has already been formed, and at this point, the French have no basis to ally with the Russians. The French are probably courting the Russians to inflate their own worth, aiming to gain more leverage within the Tripartite Alliance.

What the Russians lack most now is money, and the French have plenty of capital. The main goal of Alexandrovich’s visit to France is probably to obtain loans.

Financially speaking, the Tsarist Government’s credibility has been completely lost; no banker would be foolish enough to lend them money.”

Lending an ear to Foreign Minister McKate’s pompous talk, Wilhelm I frowned, the Russians not the only ones short of money, Prussia was too.

The financial situation of the Berlin Government was even worse than that of the Tsarist Government. At least the Russians could default on their debts without repayment, while Prussia had to bear the heavy burden of its own debts.

In recent years, the number of Prussians who went to Austria to make a living had been on the rise, largely due to excessive tax burdens.

To pay off debts, the Berlin Government had no choice but to increase the burden on its citizens. Those who couldn’t bear it simply fled.

Wilhelm I did not dare to stop them, for those who fled were mostly destitute, having lost their livelihoods at home, they were trouble if they stayed.

If it weren’t for the possibility of nearby immigration, civil unrest would have already risen in Prussia. Victory over the Russian Empire brought only glory, and the newly expanded territory could not be turned into wealth in the short term, still in a phase of investment.

The populace gained no tangible benefits, and the mere status of a great power wasn’t enough to deceive their stomachs.

Of course, the spiritual gains were of some use, as even though times were tough, public support for the government remained high.

Even if unable to carry on, the people simply emigrated instead of revolting.

This was somewhat similar to Japan, except that Japan had no outlet for relief; when the hunger became too acute, trouble would arise, such as rice riots.

Wilhelm I interrupted, “Does the Foreign Department have a plan? Regardless of the Russians’ motives, all we need to do now is to sabotage.”

No reason was needed; if an enemy sought to accomplish something, simply preventing them from succeeding was the correct approach.

While Prussia could not interfere with internal reforms of the Tsarist Government, they could still meddle in their international diplomatic affairs.

In comparing diplomatic prowess with other nations, Wilhelm I was not confident, but against the Russians, he was assured of success.

After pausing for a few seconds, Foreign Minister McKate replied, “Your Majesty, it’s unlikely that the Russians will be able to secure funds from the outside, and their most significant political goal should be to improve diplomatic relations with other countries.

Now, as France grows closer to Russia, this has also alarmed the Vienna Government. At this point, the Russian-Austrian Alliance is no longer providing political benefits to Austria and has instead become a diplomatic burden.

There are only a few years left until the end of the Russian-Austrian Alliance, and the Foreign Department plans to widen the rift between them so that they do not renew their pact.”

The destruction of the Russian-Austrian Alliance was of great significance to the Kingdom of Prussia, directly affecting the outcome of the next Prusso-Russian war.

Prime Minister Maoqi shook his head, asserting, “That’s not enough. The Russian-Austrian Alliance is not just a matter of political interest; it also carries vast economic significance.

The current Russian Empire is practically a dumping ground for Austrian goods. Austria alone accounts for 63% of Russia’s total import and export trade volume; Vienna Government wouldn’t let go of such lucrative interests so readily.”

Interests are always the best tie; nothing is non-negotiable when it comes to profit. Even though there are significant conflicts between Russia and Austria, they still maintain an alliance for the sake of mutual benefit.

Foreign Minister McKate clarified, “Indeed, Your Excellency the Prime Minister. But we also have to consider some data: in the last few years, the total volume of Russian-Austrian trade has been steadily declining.

The Tsarist Government is striving to shake off economic dependence on Austria to develop its industry; the Russians have increased tariffs several times already.

If it weren’t for the fact that the Russian industry is too backward and their products lack market competitiveness, the Austrians wouldn’t be able to maintain their current market share.

The great development campaign launched by Alexander II is bearing fruit, and it’s inevitable that Russian agricultural products will face a surplus this year.

After the Russian Crown Prince’s European tour, it’s quite likely he will open up domestic markets to England and France, in exchange for Russian agricultural products entering the international market.

Once Austria loses its monopoly on the Russian market, it will also face the impact of Russian agricultural products in the international grain export market, and the relationship between the two countries is bound to be greatly affected.

The more agreements the Russians reach with England and France, the greater the losses for Austria. The change might not be apparent in the short term but will become very significant after three to five years.

As long as the Austrians see greater benefits, it wouldn’t be impossible for them to abandon the Russian-Austrian Alliance.

For example:

Their belief that as long as we win the next Prusso-Russian war, they could obtain the Ukraine Region and the Russian Balkan Peninsula, cutting off the Russians’ grain export channels.”

Everyone’s faces changed abruptly, clearly startled by McKate’s astonishing assertion.

Suddenly, the room fell silent, filled only with the sound of people’s breathing and the faint beating of hearts.