FINANCIAL TROUBLES
Perhaps the chief amongst the many obstacles which beset the path
of Prince Charles in his task of raising Roumania from the depth
to which it had sunk was the very serious state of the national
finances. The effect of the previous drains upon the country's
resources, and the expense of keeping an army prepared to meet any
emergency, caused by the hostile attitude of Turkey, were thus
summed up by the Prince in July 1866.
"The worst wound of the country is at present its finances. We have
not a penny, in the literal sense of the word, and the Ministry,
in order to restore the equilibrium of the Budget, has to adopt
measures which will scarcely gain friends for us: the taxes have
to be raised; 30 per cent. of salaries and pensions, which have
not been paid for four months, have to be kept back. For my part,
I have surrendered another 12,000 ducats of my Civil List. Only a
loan can save us now; we are in communication with financiers, but
their conditions are more than hard. With patience we shall yet
escape from this calamity, but for the moment the situation is very
difficult. Retrenchment must be made, wherever possible."
It is interesting to note that, whilst the receipts amounted to
only 56,000,000 francs in the first year of the Prince's rule, they
reached the total of 180,000,000 in 1891, being thus more than
trebled in twenty-five years.
Though the financial situation was only slightly improved during
1867,[14] Prince Charles entered in the autumn of that year into
negotiations with the Austrian financier, Herr von Ofenheim, for the
construction of a railway from Suceava to Bucharest, passing through
Jassy and Galatz. These negotiations, commenced as far back as 1862,
had been allowed to drop; and Roumania had thus lost the favourable
moment for appealing to the British money market, which, moreover,
was never at any time favourable to the enterprise. However,
Ofenheim's Syndicate, which included three Englishmen (amongst them
Mr. T. Brassey), arranged for the construction of the line, which
was to be built by sections, commencing with 110 miles from Suceava
to Roman. How necessary railways were to the country is shown by the
fact that only a quarter of the corn and wood intended for export
that year could be moved by ship to its destination. Eventually the
Chamber confirmed the Ofenheim concession, voting 230,000 francs for
the first section, and a subsidy of 40,000 francs per kilometer.
[14] The necessary expenditure was met in October 1867 by the issue
of 10 and 12 per cent. Treasury bonds.
Ofenheim only undertook to carry out the northern half of the
concession, and ceded the southern portion to a Prussian syndicate,
of which the well-known financier, Strousberg, was Chairman. This
syndicate was granted a concession by the Roumanian Chamber on
October 2, 1868.
Unfortunately for the progress of the railways, the question soon
gave rise to heated debates in the Chamber. For example, on June 11,
1869, a great commotion was caused there by a charge brought against
the Syndicate that it had extended the line unduly by a ten-mile
curve at Barboschi (payment, it will be remembered, was to be made
according to the mileage). Nevertheless, in spite of all this petty
opposition, the Prince had the satisfaction of seeing the first
section of the Roumanian railways, connecting Bukowina and Moldavia,
completed on December 15, 1869, whilst no less than 130 miles of
much needed high roads were opened for traffic, chiefly on the
western frontier of Roumania.
As the payment for the railways was to be governed by the completed
mileage, the Finance Minister instructed the Roumanian Commissary
in Berlin, Privy Councillor Ambronn, to control his payments by
the certificates of the engineer, countersigned by the chief of the
newly created Technical Bureau. This evoked an immediate protest
from one of the concessionaries, Dr. Strousberg, who threatened to
appeal to the law courts against so unjustifiable a check on the
honesty of the contractors. Councillor Ambronn reported that he felt
unable to refuse payment, although the engineers' certificates were
not countersigned, and further, that the proceeds of the bonds were
deposited, partly in cash, partly in stocks bearing interest, at the
Berlin Kassenverein. This led to a Parliamentary inquiry into the
state of the funds entrusted to Councillor Ambronn, and later on to
a unanimous resolution by the Ministry relieving him of his duties.
Prince Charles, however, was of the opinion that this measure would
only damage the credit of the railways, and declared his willingness
to accept the responsibility for the railway construction which was
thus thrust upon him by the country.
However, a report from the special commissioner, Herr Steege, sent
to Berlin in the autumn of 1870, placed the affair in a different
light, as it was then discovered that the money realised by the sale
of the railway bonds (35,000,000 francs) had been placed in the
Joseph Jacques Bank without the consent of the Roumanian Government.
This incorrect procedure on the part of the Commissary placed the
Prince in a most unpleasant position; for, though he considered it
in no way desirable that the money should be left lying idle, he
had never intended that it should be invested in a private company,
and so exposed to every fluctuation of the market. M. Steege was
therefore appointed to relieve Councillor Ambronn of his duties in
connection with the railway funds.
It seemed that the climax of the railway dispute must have been
reached with December 18, when Strousberg informed the Government
that he was neither able nor willing to pay the coupon due on
January 1, and further maintained that this payment should be made
by the State, though, as a matter of fact, he had paid the July
coupon himself. The interest, it is true, was guaranteed by the
State, but the terms of the concession provided that the interest
should be paid by Strousberg _whilst the line was in course of
construction_.
The entire weight of the blow fell on Prince Charles; the railways
were his pet idea, nay, even his consolation, as a passage in one of
his letters to his father shows. "I have at least done _something_
for my country--I have given it a railway!" But now even that
comfort had been taken away.
Prince Charles, however anxious he was at that time to escape from
his almost intolerable position in Roumania, felt that he could
not quit his adopted country until he had procured justice for
his people, and removed the slur which appeared to rest upon their
honesty.
Early in March 1871 M. Sturdza thus described the financial
situation of the Principalities. The expenditure, but not the
receipts, of the State had increased threefold during the last
thirteen years; the public debt, which in Prussia amounted to 2
francs a head, reached a total of 7 francs in Roumania, whilst
34,000,000 out of the 84,000,000 francs received had to be devoted
to the payment of interest, thus leaving only 50,000,000 available
for expenditure. It was, therefore, scarcely a matter for surprise
that the Chamber should openly testify to the general indignation
felt by the nation, when the fresh burden of the interest on the
railway bonds was thrust upon the resources of the country. In their
wrath, however, the deputies forgot to be just, and threw the whole
blame on Prince Charles. Not a single voice was raised to point out
that the Prince himself suffered most from the painful situation
to which dishonesty and carelessness had brought the railways. He
could not be expected to know in detail all the requirements of such
concessions. The only just reproach which could be made against
him was the unconditional confidence which he, in his youthful
enthusiasm, had placed in Strousberg and Ambronn, from a desire
to procure the benefits of the railway for his country as soon as
possible.
The attacks turned chiefly on the circumstance that Ambronn had been
for a long time in the service of the Prince of Hohenzollern, though
this was rather a reason for excusing the Prince, who was surely
justified in employing a man whose honest administration had already
gained the confidence of his father.
As a way out of the difficulty Prince Charles thought that the State
should pay the January coupon and sue Strousberg for the amount,
in accordance with paragraph 7 of the concession. Unfortunately
the Treasury was empty, the Chamber would never consent to such a
measure, and to raise a loan was out of the question.
To crown the disaster an official intimation was received from
the Prussian Government that the coupon due must be paid by the
Roumanian State, as the bonds were only placed on the market owing
to the confidence inspired in the Roumanian State guarantee.
Pressure was brought to bear on Roumania by a Note maintaining the
rights of the German bondholders, addressed by Prince Bismarck to
the Sublime Porte as Suzerain of the Principalities. The Strousberg
affair thus threatened to become more a _question de force_ than a
_question de droit_. It appeared, moreover, that a lawsuit against
Strousberg was out of the question, as the bondholders, and not the
Roumanian Government, were the injured parties. Needless to say,
this opinion of the Prussian law-officers evoked great indignation
in Roumania.
Eventually, on January 2, 1872, the Chamber decided to offer the
bondholders two alternatives:
(_a_) To take over the rights and obligations of the first
concession, to complete the railways in three years with an annual
grant of nine millions towards the coupons; the payment of the last
year's interest, and the restitution of the deposit to be obtained
from Strousberg.
(_b_) To transfer all their rights to the Roumanian State, which
pledged itself to pay off the bonds (to be exchanged for State
papers) in forty-nine years' time by an annual payment of eleven
millions.
Three weeks later the Prince had the satisfaction of informing his
father that the vexed question appeared to be solved at last.
"You can hardly imagine what I have lived through during the
last weeks of the old year! Excitements, anxieties, and hopes
changed with every day. Day after day passed without any result,
or any hope of solving the unfortunate railway question: such a
strain on the nerves might have caused the strongest man to give
way. At first weeks passed before the matter reached the order
of the day, then the preliminary debates lasted fully four days;
the result was by no means certain the first two days, as the
Opposition brought all its batteries into action. I breathed
again on the evening of the fourth day, and the city also calmed
down at once from its former feverish excitement. The agitators
are afraid that the settlement of the railway question, which
they had made a dynastic one, has robbed them of their last
dangerous weapon....
"The Opposition used Von Radowitz's declaration in
Constantinople--that the Emperor was directly interested in an
arrangement--with much skill and perfidy, drawing the deduction
that the House of Hohenzollern was mixed up in this dirty
business. It is much too hackneyed and ridiculous to be even
annoyed about!"
The expense of the many reforms initiated by the Prince also
contributed to the chronic want of money. For instance, a report by
M. Jepureanu on June 9, 1874, showed the existence of a floating
debt of fifty-seven million francs, which was out of all proportion
to the resources of an agricultural country, where a failure of the
crops occurred about once in six years. It was further stated that
of late years, in spite of all the new taxation, the expenditure had
always exceeded the receipts.
_To_ PRINCE CHARLES ANTHONY, _January 26th, 1875_.
"Only a few days ago I was confidently looking to the immediate
future, and hoped that the Roumanian railway system, which I had
achieved for the country after such severe struggles, would soon
be opened for traffic. I believed that this intolerable affair,
which has cost me several years of my life, was finally settled,
and looked forward to enjoying the fruits of my labour. But no!
To-day the railways are again the disturbing element. After
great effort I had achieved the stability and peace so necessary
for the development of the country: domestic affairs had become
consolidated, and abroad we enjoyed respect and confidence. All this
may again be at stake.
"... The Berlin Company must raise a loan of seventy-five million
francs to pay the debts incurred in construction; in so doing they
want our support, and ask for a law giving this loan preferential
rights in the annuities. This is, of course, out of the question,
as the former creditors must always have the first claim.... We do
not conceal the seriousness of the situation, the more so since the
German Government urgently requests us to give way to the entreaties
of the company, and so prevent a catastrophe which would principally
be felt by the shareholders. In the event of our inability to
regulate this affair the German Government would in future be
compelled to withhold the exercise of its benevolent interest in
Roumania!
"This threat is very serious, and we foresee its evil consequences."
_To_ PRINCE BISMARCK.
"For several weeks we have been exclusively occupied with the
difficulties which the new loan for the completion of our railway
system causes both here and in Berlin. Animated with a lively wish
to bring this important affair to a satisfactory conclusion, my
Government has commissioned the Minister of Public Works, M. Th.
Rosetti, to proceed to Berlin, and to place himself in personal
communication with the railway company.
"I cannot conceal from your Serene Highness that the proposals
of the company, which must be settled by constitutional methods,
encounter no small difficulties, arising from the very nature of
the affair. Nevertheless, my Government has every wish to prepare a
solution which would be acceptable to both parties, and which could
be successfully promoted in the Chamber here. If we may hope for the
benevolent interest of your Highness in this delicate question, I do
not doubt that it will soon be solved. M. Rosetti is able to give
the necessary information should your Highness desire to enter more
fully into the question."
_From_ PRINCE BISMARCK, _March 1875_.
"I return my humblest thanks to your Highness for the gracious
letter which Minister Rosetti has handed to me. The knowledge and
personal amiability of the latter has made a favourable impression
on all circles here, and he has brought the negotiations to such a
point that their conclusion may be expected, provided the result
here gains the approbation of your Highness's Government. I myself
entertain the hope that such may be the case, the more willingly
since so large an amount of German capital is placed in no other
foreign enterprise, and the solidly assured future of the railways
must exert a decisive influence on the development of the rich
resources with which Roumania is blessed by nature. The protection
afforded to the enterprise by your Highness will contribute
materially to maintain and further public interest in Germany for
the welfare of Roumania."
* * * * *
Whilst these delicate negotiations were in progress, the question
of the right of Roumania to enter into commercial treaties was
brought to a close. The intimate relations of the Principalities to
Austria-Hungary rendered it desirable that the first treaty should
be concluded with that State, not without opposition in the Chamber,
and it was actually voted on July 10, 1875. "This international
act," the Prince wrote, "is of great importance, as it contains the
germ of Roumanian independence."
The Budget of 1876, which announced a deficit of 30,000,000 francs,
was received with a storm of indignation, and eventually led to the
fall of the Catargiu Ministry.
_To_ PRINCE CHARLES ANTHONY, _April 26th, 1876_.
"The excitement here is very great; there are rumours of
conspiracies and revolutions; but all this cannot terrify me, for I
go straight ahead and do my duty. The condition of our finances, and
the serious situation in the East, does, however, make me anxious.
The former is the consequence of the latter; for months no money
has come into the country, and trade is completely at a standstill.
All our securities have fallen, railway and customs returns have
decreased, farmers cannot pay, and taxes are hard to collect.
Nevertheless, the engine of State must not be allowed to stop, and
we must pay the interest on our debts in order to maintain our
credit! All this has materially affected our finances, which were in
a satisfactory state."
_To_ THE SAME, _December 14th, 1876_.
"Neither the approach of the war, nor the probable passage of
foreign troops makes me really anxious: I am troubled rather by
the comfortless state of our finances, which have reached a stage
impregnated with danger for the immediate future. The State can
only maintain its credit at the greatest sacrifice, by paying the
coupons of the foreign debt with the little money remaining in the
country, and in addition it must raise sufficient to pay the army.
"Under these circumstances only a well-assured peace, or a war, can
be of any assistance; a long extension of this uncertainty will be
our ruin!"
_To_ THE SAME, _January 20th, 1877_.
"The money famine increases daily, and I cannot see how we are to be
helped out of our difficulty. Only the most necessary payments are
made. Even the Civil List has not been paid for months."
* * * * *
The longed-for war, bringing with it the independence of Roumania,
arrived at last, and with it came perhaps the lowest point touched
by Roumanian finance. All payments were stopped both at home and
abroad, every tax was doubled, and 30,000,000 francs of paper money
were issued on the security of the Crown lands, to be redeemed at 10
per cent. above par. Such were the sacrifices which the Roumanian
nation offered at the shrine of patriotism and independence.