Holy Roman Empire

Chapter 143: Laundered

Indeed, the timing of the Russian ultimatum was quite calculated. With the ultimatum set to expire on December 24th, the day before Christmas, the Prussian government faced a challenging choice.

They had to decide whether to hold firm or make concessions during a time when everyone would rather be celebrating Christmas. This added pressure and inconvenience may have been part of the Russian strategy to unsettle Frederick William IV and the Prussian leadership.

Berlin.

Upon receiving the final ultimatum from the Russians, the Kingdom of Prussia was in turmoil, with the war and peace factions arguing vehemently. Plans to instigate Polish independence were once again brought up.

Prime Minister Joseph von Radowitz exclaimed passionately, “No, this won’t work. Poland simply can’t stand on its own. Even if we were to relinquish our Polish territories and allow them to form an independent state, it wouldn’t stop the Russian military onslaught.

On the contrary, it would anger the Russians, and they might unite with Austria and France to attack us. Prussia would have no chance of winning such a war!”

The newly appointed Foreign Minister, Alfa, disdainfully remarked, “Prime Minister, there’s no need to be so alarmist. At worst, we’ll be dealing with the Russians.

The French are deeply divided in their internal struggles. The President supports one side of the parliamentarians, while the parliament passes bills that the President vetoes. How could they possibly get involved in this war?

Austria is supporting us this time, and even if the Austrian government has ulterior motives, the Austrian people are our steadfast allies.

If the Austrian government dares to join forces with the Russians to attack us, even before the action begins, there will be a revolution in their country. They won’t take such risks.

He paused for a moment and continued to rally, “The Russian Empire is already decaying; it’s a giant empire that can be easily broken apart. Since they’re standing against us this time, why not break them apart?

As long as we step up this time, all the people in the German territories will become our loyal supporters, and the great task of unifying Germany will be accomplished in our hands.”

Unfortunately, the senior members of the Prussian government were not teenagers with a penchant for fantasy anymore. While it was true that the Russian Empire was decaying, challenging such a decaying empire was not something Prussia could easily undertake.

The strength of their allies? Don’t be ridiculous. Using that to dupe teenagers is one thing, but where were Prussia’s allies?

Many German states are just bystanders who love to watch the show. They shout slogans that sound impressive, but if they were to face Russia, it would be a different story.

If it were to be analyzed carefully, it would be found out that the so-called defense of the territorial integrity of the German Confederation doesn’t include parts of Prussian Poland and East Prussia.

It’s a blatant trap, and once Prussia jumps in, it’ll have to face Russia head-on. Of course, there will be some support, as there are plenty of countries that don’t like Russia.

Finance Minister Holder replied coldly, “Mr. Alfa, unless all the German states simultaneously declare war on Russia, it’s impossible for us to win this war on our own.

Perhaps you haven’t noticed, but for the Prussian-Danish War, we’ve already emptied our treasury. Government officials haven’t received their full salaries for the past six months, and in the last three months, they haven’t received a single penny.

With the country under full mobilization, our strategic resources can support at most two weeks of fighting. Unless our army can win this war within two weeks, there’s no need to initiate this conflict.

The lack of funds is indeed one of the major problems. The Prussian-Danish War began in March of the previous year, and although there have been temporary ceasefires, both sides’ armies have remained in a standoff.

The Prussian treasury has been running a deficit for years, and they’ve been doing everything possible to raise funds to support this war.

At this point, they’ve exhausted most options. International loans are unavailable, government bonds are unsellable in the financial markets, and the domestic population has donated multiple times, emptying their wallets to support the war effort.

Indeed, raising funds has been a desperate effort, and while they managed to gather some money from the German territories, most of it quickly slipped through the Prussian government’s fingers.

Lack of funds is only one aspect; the other critical issue is the real possibility of losing the war. In the era of musket warfare, the strategy of using large numbers of troops, often referred to as “human wave” tactics, can be highly effective.

The Prussian-Russian border is not easily defensible, and if a war breaks out, once the main Prussian army is engaged elsewhere, Cossack cavalry could easily penetrate deep into Prussian territory, posing a significant threat.

“Russia’s interference makes it impossible to continue the Prussian-Danish War. At this point, the most important thing is to find a way to persuade our domestic population, explain the difficulties we face, and make them understand the government’s predicament.

This issue will be addressed by the Prime Minister, and the Foreign Ministry will send representatives to communicate with the Russians and reopen negotiations with the Kingdom of Denmark. We will also invite Austria to mediate in this war.

To demonstrate our sincerity, once negotiations commence, the Kingdom of Prussia will demobilize its forces.” Frederick William IV calmly laid out the plan.

……

On December 23, 1849, under the armed mediation of the Russians, the Prussian government announced its acceptance of the Russian proposal to reopen negotiations with Denmark on the Schleswig-Holstein issue, simultaneously lifting the nationwide mobilization.

As soon as this news spread, it caused an uproar in the German region. Anti-Russian sentiments among the populace began to surge, and disappointment with the Prussian government grew.

During the period when the Kingdom of Prussia was under nationwide mobilization, many people were deeply moved, and there were numerous donations of money and goods. However, now that the Prussian government appeared to back down suddenly, it seemed like a betrayal of the emotional support people had given.

While the Prussian government had backed down, the question of what to do with the Schleswig and Holstein duchies remained. In the eyes of the people, this was a matter of principle that could not be easily abandoned.

Everyone turned their attention to Vienna, as Austria, being the leader of the German Confederation, had to present a clear stance at this critical moment.

Metternich was an experienced diplomat; he wouldn’t easily jump in to help Prussia out of this predicament.

On Christmas Day, the Austrian Foreign Ministry announced: “The Austrian government will convene a meeting of the Confederation in the near future and send a delegation from the German Federal Council to participate in the upcoming negotiations.

Prior to that, the Austrian government hopes that the Kingdom of Prussia can assume the responsibility of a major power and defend the duchies of Schleswig and Holstein.”

At this point, people remembered that there was still the German Federal Council in the German Confederation.

However, for the Prussian government, the emergence of the German Federal Council at this time was simply adding more trouble.

It was clear that reaching a compromise within the German Federal Council was highly unlikely, as everyone there had their pride to maintain.

Even if the German Federal Council were to make a decision to declare war on Russia, it would primarily concern Austria and Prussia, and those smaller member states in the hinterland wouldn’t be directly affected. They had little reason to fear the consequences.

Getting the German Federal Council to agree to relinquish Schleswig and Holstein at this point was simply out of the question.

If Prussia were to give up Schleswig and Holstein, all responsibility would fall squarely on their shoulders.

At this point, rumors were already circulating that the Prussian government had used people’s patriotic fervor to provoke this war as a means to divert attention from domestic issues. Public opinion was turning heavily against the Prussian government.

On Christmas Day in 1849, the entire German region didn’t celebrate the holiday with much enthusiasm. Newspapers were filled with news of the Prussian-Danish War, and the festive atmosphere was rather subdued.

To express their dissatisfaction with the Prussian government’s retreat, Franz ordered the cancellation of Christmas celebrations. The royal banquets and government festivities were called off.

The Russian stance was extremely firm. If the two countries’ borders weren’t restored to their pre-war positions within a month, the Tsar’s troops would march into the Kingdom of Prussia. This directly jeopardized any potential gains that the Prussian government might have made.

The Prussian government was not foolish and understood that the longer the situation dragged on, the more problematic it would become. Even before the negotiations began, Prussian troops had already started withdrawing from the Jutland Peninsula.

One of the reasons for this withdrawal was the lack of funds. Maintaining an army of over a hundred thousand troops deep inside enemy territory posed significant logistical challenges. Since they had already decided to concede, it made sense to retreat early to save on expenses.

……

Sch?nbrunn Palace, Vienna.

Franz’s mood was not good at all. The Prussian government backed down too quickly, and there was no longer a chance to delay using negotiations.

He now finally understands why so many people get caught when embezzling public funds; there are simply too many unexpected situations, making it difficult to maintain effective control.

His investments in the food processing industry have only finished establishing factories. To make a profit, it required at least some time for the factories to start operating.

The investments in the mines are also not going well at all; the time is too short, and they’ve hardly been effectively developed.

The only mining operation that is underway is for sand and gravel. However, railway construction has just begun, and while the profits are promising, it’s still just a drop in the bucket.

The total savings in the Royal Bank have reached 2,768,900 guilders, but there are monthly administrative expenses of 18,000 guilders that must be deducted, and a portion of the funds must be reserved for the bank’s operations. The amount of money available to fill the gap is insufficient.

In theory, around three million guilders from the donations would become bank deposits, but in reality, this remains uncertain. Franz doesn’t want to take that risk.

When it comes to year-end settlements, the House of Habsburg’s assets are quite substantial. However, using those funds to cover his own shortfall could easily lead to internal conflicts.

These industries already have a mature management system in place. Aside from supervising their operations, Franz only takes his rightful share of the profits each year.

Since his uncle is still alive and holds the position of patriarch within the House of Habsburg, Franz receives a significant discount on his share, which amounts to only 300,000 guilders in profit dividends.

If it weren’t for the fact that the annual royal pension is about to be disbursed at the end of the year, Franz would indeed have a difficult time figuring out how to cover this financial gap.

He certainly can’t resort to borrowing money or withholding government donations—after all, it wouldn’t look good for the emperor to be seen doing such things, and it’s unlikely the Ministry of Finance would come knocking at his door demanding repayment.

Indeed, with the impending conclusion of the Prussian-Danish War, Emperor Franz understood that it was time to make adjustments to Vienna’s court expenditures. Cutting back on lavish court banquets was one way to reduce unnecessary expenses, and the Prussian situation provided him with a convenient excuse.

Franz had already instructed his advisors to calculate the annual costs of various court events, and the total expenses for these festivities often exceeded half a million guilders, and in more extravagant years, they could easily surpass one million guilders.

“Your Majesty, with the Prussian-Danish War nearing its end, we need to prepare to refund the donations to maintain the bank’s credibility,” reminded John Stuart.

For a bank, maintaining its reputation is of utmost importance. To safeguard the credibility of the Royal Bank, Franz decided to forgo any opportunities for personal gain by retaining the substantial donations.

Otherwise, if he had chosen to siphon off the donations held in the Royal Bank, those funds would have been depleted entirely. By firmly stating that all the donations should be handed over to the Prussian government, he ensured that it remained a mystery without a culprit.

Franz thought for a moment and said, “Let’s hold a press conference to explain the whole situation, inviting Prussian representatives and notaries to be present to verify the accounts.

We’ll announce publicly that if the negotiations proceed smoothly, we will start returning the portion of donations that hasn’t been used yet. We’ll ask people to bring their original bank receipts to the designated banking locations for a proportional refund.

This year’s royal pension will be deposited directly into the Royal Bank, and the dividends from the royal assets will also go into the bank. So, the financial gap won’t be an issue.

Furthermore, we should settle the previous matters as soon as possible, complete the commercial loan procedures, leaving no traces behind.”

“Yes, Your Majesty,” John Stuart replied.

With money at hand, many problems become more manageable. Once the financial gap was filled and the loan procedures completed, the matter could be considered resolved.

After these operations, Franz’s misappropriation of donations would appear as a legitimate commercial loan from the bank. The initial investment would be effectively laundered.