Volume 3, Part 1, Slice 1 Part 4 (1/2)

demanded that those Italian-speaking districts, South Tirol, Istria and Trieste, which were under Austrian rule, should be joined to Italy; there were public meetings and riots in Italy; the Austrian flag was torn down from the consulate in Venice and the emba.s.sy at Rome insulted. The excitement spread across the frontier; there were riots in Trieste, and in Tirol it was necessary to make some slight movement of troops as a sign that the Austrian government was determined not to surrender any territory.

For a short time there was apprehension that the Italian government might not be strong enough to resist the movement, and might even attempt to realize these wishes by means of an alliance with Russia; but the danger quickly pa.s.sed away.

[Sidenote: Alliance with Germany.]

In the year 1879 the European position of the monarchy was [v.03 p.0020]

placed on a more secure footing by the conclusion of a formal alliance with Germany. In the autumn of that year Bismarck visited Vienna and arranged with Andra.s.sy a treaty by which Germany bound herself to support Austria against an attack from Russia, Austria-Hungary pledging herself to help Germany against a combined attack of France and Russia; the result of this treaty, of which the tsar was informed, was to remove, at least for the time, the danger of war between Austria-Hungary and Russia. It was the last achievement of Andra.s.sy, who had already resigned, but it was maintained by his successor, Baron Haymerle, and after his death in 1881 by Count Kalnoky. It was strengthened in 1882 by the adhesion of Italy, for after 1881 the Italians required support, owing to the French occupation of Tunis, and after five years it was renewed. Since that time it has been the foundation on which the policy of Austria-Hungary has depended, and it has survived all dangers arising either from commercial differences (as between 1880 and 1890) or national discord. The alliance was naturally very popular among the German Austrians; some of them went so far as to attempt to use it to influence internal policy, and suggested that fidelity to this alliance required that there should be a ministry at Vienna which supported the Germans in their internal struggle with the Slavs; they represented it as a national alliance of the Teutonic races, and there were some Germans in the empire who supported them in this view. The governments on both sides could of course give no countenance to this theory; Bismarck especially was very careful never to let it be supposed that he desired to exercise influence over the internal affairs of his ally. Had he done so, the strong anti-German pa.s.sions of the Czechs and Poles, always inclined to an alliance with France, would have been aroused, and no government could have maintained the alliance. After 1880, the exertions of Count Kalnoky again established a fairly good understanding with Russia, as was shown by the meetings of Francis Joseph with the tsar in 1884 and 1885, but the outbreak of the Bulgarian question in 1885 again brought into prominence the opposed interests of Russia and Austria-Hungary. In the December of this year Austria-Hungary indeed decisively interfered in the war between Bulgaria and Servia, for at this time Austrian influence predominated in Servia, and after the battle of Slivnitza the Austro-Hungarian minister warned Prince Alexander of Bulgaria that if he advanced farther he would be met by Austro-Hungarian as well as Servian troops. But after the abdication of Alexander, Count Kalnoky stated in the Delegations that Austria-Hungary would not permit Russia to interfere with the independence of Bulgaria.

This decided step was required by Hungarian feeling, but it was a policy in which Austria-Hungary could not depend on the support of Germany, for--as Bismarck stated--Bulgaria was not worth the bones of a single Pomeranian grenadier. Austria-Hungary also differed from Russia as to the position of Prince Ferdinand of Bulgaria, and during 1886-1887 much alarm was caused by the ma.s.sing of Russian troops on the Galician frontier. Councils of war were summoned to consider how this exposed and distant province was to be defended, and for some months war was considered inevitable; but the danger was averted by the renewal of the Triple Alliance and the other decisive steps taken at this time by the German government (see GERMANY).[9]

Since this time the foreign policy of Austria-Hungary has been peaceful and unambitious; the close connexion with Germany has so far been maintained, though during the last few years it has been increasingly difficult to prevent the violent pa.s.sions engendered by national enmity at home from reacting on the foreign policy of the monarchy; it would scarcely be possible to do so, were it not that discussions on foreign policy take place not in the parliaments but in the Delegations where the numbers are fewer and the pa.s.sions cooler. In May 1895 Count Kalnoky had to retire, owing to a difference with Banffy, the Hungarian premier, arising out of the struggle with Rome. He was succeeded by Count Goluchowski, the son of a well-known Polish statesman. In 1898 the expulsion of Austrian subjects from Prussia, in connexion with the Anti-Polish policy of the Prussian government, caused a pa.s.sing irritation, to which Count Thun, the Austrian premier, gave expression. The chief objects of the government in recent years have been to maintain Austro-Hungarian trade and influence in the Balkan states by the building of railways, by the opening of the Danube for navigation, and by commercial treaties with Rumania, Servia and Bulgaria; since the abdication of King Milan especially, the affairs of Servia and the growth of Russian influence in that country have caused serious anxiety.

[Sidenote: The army.]

The disturbed state of European politics and the great increase in the military establishments of other countries made it desirable for Austria also to strengthen her military resources. The bad condition of the finances rendered it, however, impossible to carry out any very great measures. In 1868 there had been introduced compulsory military service in both Austria and Hungary; the total of the army available in war had been fixed at 800,000 men. Besides this joint army placed under the joint ministry of war, there was in each part of the monarchy a separate militia and a separate minister for national defence. In Hungary this national force or _honved_ was kept quite distinct from the ordinary army; in Austria, however (except in Dalmatia and Tirol, where there was a separate local militia), the _Landwehr_, as it was called, was practically organized as part of the standing army. At the renewal of the periodical financial and economic settlement (_Ausgleich_) in 1877 no important change was made, but in 1882 the system of compulsory service was extended to Bosnia and Herzegovina, and a reorganization was carried out, including the introduction of army corps and local organization on the Prussian plan.

This was useful for the purposes of speedy mobilization, though there was some danger that the local and national spirit might penetrate into the army. In 1886 a law was carried in either parliament creating a _Landsturm_, and providing for the arming and organization of the whole male population up to the age of forty-two in case of emergency, and in 1889 a small increase was made in the annual number of recruits. A further increase was made in 1892-1893. In contrast, however, with the military history of other continental powers, that of Austria-Hungary shows a small increase in the army establishment. Of recent years there have been signs of an attempt to tamper with the use of German as the common language for the whole army. This, which is now the princ.i.p.al remnant of the old ascendancy of German, and the one point of unity for the whole monarchy, is a matter on which the government and the monarch allow no concession, but in the Hungarian parliament protests against it have been raised, and in 1899 and 1900 it was necessary to punish recruits from Bohemia, who answered the roll call in the Czechish _zde_ instead of the German _hier_.

[Sidenote: The Customs Union.]

In those matters which belong to the periodical and terminable agreement, the most important is the Customs Union, which was established in 1867, and it is convenient to treat separately the commercial policy of the dual state.[10] At first the customs tariff in Austria-Hungary, as in most other countries, was based on a number of commercial treaties with Germany, France, Italy, Great Britain, &c., each of which specified the maximum duties that could be levied on certain articles, and all of which contained a ”most favoured nation” clause. The practical result was a system very nearly approaching to the absence of any customs duties, and for the period for which these treaties lasted a revision of the tariff could not be carried out by means of legislation. After the year 1873, a strong movement in favour of protective duties made itself felt among the Austrian manufacturers who were affected by the compet.i.tion of German, English and Belgian goods, and Austria was influenced by the general movement in economic thought which about this time caused the reaction [v.03 p.0021]

against the doctrines of free trade. Hungary, on the other hand, was still in favour of free trade, for there were no important manufacturing industries in that country, and it required a secure market for agricultural produce. After 1875 the commercial treaties expired; Hungary thereupon also gave notice to terminate the commercial union with Austria, and negotiations began as to the principle on which it was to be renewed.

This was done during the year 1877, and in the new treaty, while raw material was still imported free of duty, a low duty was placed on textile goods as well as on corn, and the excise on sugar and brandy was raised.

All duties, moreover, were to be paid in gold--this at once involving a considerable increase. The tariff treaties with Great Britain and France were not renewed, and all attempts to come to some agreement with Germany broke down, owing to the change of policy which Bismarck was adopting at this period. The result was that the system of commercial treaties ceased, and Austria-Hungary was free to introduce a fresh tariff depending simply on legislation, an ”autonomous tariff” as it is called. With Great Britain, France and Germany, there was now only a ”most favoured nation” agreement; fresh commercial treaties were made with Italy (1879), Switzerland and Servia (1881). During 1881-1882 Hungary, desiring means of retaliation against the duties on corn and the impediments to the importation of cattle recently introduced into Germany, withdrew her opposition to protective duties; the tariff was completely revised, protective duties were introduced on all articles of home production, and high finance duties on other articles such as coffee and petroleum. At the same time special privileges were granted to articles imported by sea, so as to foster the trade of Trieste and Fiume; as in Germany a subvention was granted to the great s.h.i.+pping companies, the Austrian Lloyd and Adria; the area of the Customs Union was enlarged so as to include Trieste, Istria and Dalmatia, as well as Bosnia and Herzegovina. In 1887 a further increase of duties was laid on corn (this was at the desire of Hungary as against Rumania, for a vigorous customs war was being carried on at this time) and on woollen and textile goods. Austria, therefore, during these years completely gave up the principle of free trade, and adopted a nationalist policy similar to that which prevailed in Germany. A peculiar feature of these treaties was that the government was empowered to impose an additional duty (_Retorsionszoll_) on goods imported from countries in which Austria-Hungary received unfavourable treatment. In 1881 this was fixed at 10% (5% for some articles), but in 1887 it was raised to 30 and 15% respectively. In 1892 Austria-Hungary joined with Germany, Italy, Belgium, and Switzerland in commercial treaties to last for twelve years, the object being to secure to the states of central Europe a stable and extended market; for the introduction of high tariffs in Russia and America had crippled industry. Two years later Austria-Hungary also arranged with Russia a treaty similar to that already made between Russia and Germany; the reductions in the tariff secured in these treaties were applicable also to Great Britain, with which there still was a most favoured nation treaty.

The system thus introduced gave commercial security till the year 1903.

[Sidenote: Reform of the Currency.]

The result of these and other laws was an improvement in financial conditions, which enabled the government at last to take in hand the long-delayed task of reforming the currency. Hitherto the currency had been partly in silver (gulden), the ”Austrian currency” which had been introduced in 1857, partly in paper money, which took the form of notes issued by the Austro-Hungarian Bank. This inst.i.tution had, in 1867, belonged entirely to Austria; it had branches in Hungary, and its notes were current throughout the monarchy, but the direction was entirely Austrian. The Hungarians had not sufficient credit to establish a national bank of their own, and at the settlement of 1877 they procured, as a concession to themselves, that it should be converted into an Austro-Hungarian bank, with a head office at Pest as well as at Vienna, and with the management divided between the two countries. This arrangement was renewed in 1887. In 1848 the government had been obliged to authorize the bank to suspend cash payments, and the wars of 1859 and 1866 had rendered abortive all attempts to renew them. The notes, therefore, formed an inconvertible paper currency. The bank by its charter had the sole right of issuing notes, but during the war of 1866 the government, in order to raise money, had itself issued notes (_Staatsnoten_) to the value of 312 million gulden, thereby violating the charter of the bank. The operation begun in 1892 was therefore threefold: (1) the subst.i.tution of a gold for a silver standard; (2) the redemption of the _Staatsnoten_; (3) the resumption of cash payments by the bank.

In 1867 Austria-Hungary had taken part in the monetary conference which led to the formation of the Latin Union; it was intended to join the Union, but this was not done. A first step, however, had been taken in this direction by the issue of gold coins of the value of eight and four gulden. No attempt was made, however, to regulate the relations of these coins to the ”Austrian” silver coinage; the two issues were not brought into connexion, and every payment was made in silver, unless it was definitely agreed that it should be paid in gold. In 1879, owing to the continued depreciation of silver, the free coinage of silver was suspended. In 1892 laws introducing a completely new coinage were carried in both parliaments, in accordance with agreements made by the ministers. The unit in the new issue was to be the krone, divided into 100 h.e.l.ler; the krone being almost of the same value (24-25th) as the franc. (The twenty-krone piece in gold weighs 6.775 gr., the twenty-franc piece 6.453.) The gold krone was equal to .42 of the gold gulden, and it was declared equal to .5 of the silver gulden, so much allowance being made for the depreciation of silver. The first step towards putting this act into practice was the issue of one-krone pieces (silver), which circulated as half gulden, and of nickel coins; all the copper coins and other silver coins were recalled, the silver gulden alone being left in circulation. The coinage of the gold four- and eight-gulden was suspended.

Nothing more could be done till the supply of gold had been increased. The bank was required to buy gold (during 1892 it bought over forty M. gulden), and was obliged to coin into twenty- or ten-krone pieces all gold brought to it for that purpose. Then a loan of 150 M. gulden at 4% was made, and from the gold (chiefly bar gold and sovereigns) which Rothschild, who undertook the loan, paid in, coins of the new issue were struck to the value of over 34 million kronen. This was, however, not put into circulation; it was used first for paying off the _Staatsnoten_. By 1894 the state was able to redeem them to the amount of 200 million gulden, including all those for one gulden. It paid them, however, not in gold, but in silver (one-krone pieces and gulden) and in bank notes, the coins and notes being provided by the bank, and in exchange the newly-coined gold was paid to the bank to be kept as a reserve to cover the issue of notes. At the same time arrangements were made between Austria and Hungary to pay off about 80 million of exchequer bills which had been issued on the security of the government salt-works, and were therefore called ”_salinenscheine._”

In 1899 the remainder of the _Staatsnoten_ (112 million gulden) were redeemed in a similar manner. The bank had in this way acquired a large reserve of gold, and in the new charter which was (after long delay) pa.s.sed in 1899, a clause was introduced requiring the resumption of cash payments, though this was not to come into operation immediately. Then from 1st January 1900 the old reckoning by gulden was superseded, that by krone being introduced in all government accounts, the new silver being made a legal tender only for a limited amount. For the time until the 1st of July 1908, however, the old gulden were left in circulation, payments made in them, at the rate of two kronen to one gulden, being legal up to any amount.

This important reform has thereby been brought to a satisfactory conclusion, and at a time when the political difficulties had reached a most acute stage. It is indeed remarkable that notwithstanding the complicated machinery of the dual monarchy, and the numerous obstacles which have to be overcome before a reform affecting both countries can be carried out, the financial, the commercial, and the foreign policy has been conducted since 1870 with success. The credit of the state has risen, the chronic deficit has disappeared, the currency has been put on a sound basis, and part of the unfunded debt has been paid off. Universal military service has been introduced, and all this has been done in the presence of difficulties greater than existed in any other civilized country.

[Sidenote: The Ausgleich with Hungary.]

Each of the financial and economic reforms described above was, of course, the subject of a separate law, but, so far as they are determined at the general settlement which takes place between Austria and Hungary every ten years, they are comprised under the expression ”Ausgleich” (compact or compromise), which includes especially the determination of the Quota, and to this extent they are all dealt with together as part of a general settlement and bargain. In this settlement a concession on commercial policy would be set off against a gain on the financial agreement; _e.g._ in 1877 Austria gave Hungary a share in the management of the bank, while the arrangement for paying the bonus on exported sugar was favourable to Austria; on the other hand, since the increased duty on coffee and petroleum would fall more heavily on Austria, the Austrians wished to persuade the Hungarians to pay a larger quota of the common expenses, and there was also a dispute whether Hungary was partly responsible for a debt of 80 M. [v.03 p.0022] gulden to the bank. Each measure had, therefore, to be considered not only on its own merits, but in relation to the general balance of advantage, and an amendment in one might bring about the rejection of all. The whole series of acts had to be carried in two parliaments, each open to the influence of national jealousy and race hatred in its most extreme form, so that the negotiations have been conducted under serious difficulties, and the periodical settlement has always been a time of great anxiety. The first settlement occupied two full years, from 1876, when the negotiations began, to June 1878, when at last all the bills were carried successfully through the two parliaments; and it was necessary to prolong the previous arrangements (which expired at the end of 1877) till the middle of 1878. First the two ministries had to agree on the drafts of all the bills; then the bills had to be laid before the two parliaments. Each parliament elected a committee to consider them, and the two committees carried on long negotiations by notes supplemented by verbal discussions. Then followed the debates in the two parliaments; there was a ministerial crisis in Austria, because the House refused to accept the tax on coffee and petroleum which was recommended by the ministers; and finally a great council of all the ministers, with the emperor presiding, determined the compromise that was at last accepted. In 1887 things went better; there was some difficulty about the tariff, especially about the tax on petroleum, but Count Taaffe had a stronger position than the Austrian ministers of 1877. Ten years later, on the third renewal, the difficulties were still greater. They sprang from a double cause. First the Austrians were determined to get a more favourable division of the common expenses; that of 1867 still continued, although Hungary had grown relatively in wealth.[11] Moreover, a proposed alteration in the taxes on sugar would be of considerable advantage to Hungary; the Austrians, therefore, demanded that henceforth the proportion should be not 68.6:31.4 but 58:42. On this there was a deadlock; all through 1897 and 1898 the Quota-Deputations failed to come to an agreement. This, however, was not the worst. Parliamentary government in Austria had broken down; the opposition had recourse to obstruction, and no business could be done.

Their object was to drive out the Badeni government, and for that reason the obstruction was chiefly directed against the renewal of the Ausgleich; for, as this was the first necessity of state, no government could remain in office which failed to carry it through. The extreme parties of the Germans and the anti-Semites were also, for racial reasons, opposed to the whole system. When, therefore, the government at the end of 1897 introduced the necessary measures for prolonging the existing arrangements provisionally till the differences with Hungary had been settled, scenes of great disorder ensued, and at the end of the year the financial arrangements had not been prolonged, and neither the bank charter nor the Customs Union had been renewed. The government, therefore (Badeni having resigned), had to proclaim the necessary measures by imperial warrant. Next year it was even worse, for there was obstruction in Hungary as well as in Austria; the Quota-Deputations again came to no agreement, and the proposals for the renewal of the Bank charter, the reform of the currency, the renewal of the Customs Union, and the new taxes on beer and brandy, which were laid before parliament both at Vienna and Pest, were not carried in either country; this time, therefore, the existing arrangements had to be prolonged provisionally by imperial and royal warrant both in Austria and Hungary. During 1899 parliamentary peace was restored in Hungary by the resignation of Banffy; in Austria, however, though there was again a change of ministry the only result was that the Czechs imitated the example of the Germans and resorted to obstruction so that still no business could be done. The Austrian ministry, therefore, came to an agreement with the Hungarians that the terms of the new Ausgleich should be finally proclaimed in Austria by imperial warrant; the Hungarians only giving their a.s.sent to this in return for considerable financial concessions.

The main points of the agreement were: (1) the Bank charter was to be renewed till 1910, the Hungarians receiving a larger share in the direction than they had hitherto enjoyed; (2) the Customs Union so far as it was based on a reciprocal and binding treaty lapsed, both sides, however, continuing it in practice, and promising to do so until the 31st of December 1907. Not later than 1901 negotiations were to be begun for a renewal of the alliance, and if possible it was to be renewed from the year 1903, in which year the commercial treaties would expire. If this were done, then the tariff would be revised before any fresh commercial treaties were made. If it were not done, then no fresh treaties would be made extending beyond the year 1907, so that if the Commercial Union of Austria and Hungary were not renewed before 1907, each party would be able to determine its own policy unshackled by any previous treaties. These arrangements in Hungary received the sanction of the parliament; but this could not be procured in Austria, and they were, therefore, proclaimed by imperial warrant; first of all, on 20th July, the new duties on beer, brandy and sugar; then on 23rd September the Bank charter, &c. In November the Quota-Deputations at last agreed that Hungary should henceforward pay 33-3/49, a very small increase, and this was also in Austria proclaimed in the same way. The result was that a working agreement was made, by which the Union was preserved.

(J. W. HE.)

[Sidenote: Austro-Hungarian crisis, 1903-1907.]

Since the years 1866-1871 no period of Austro-Hungarian development has been so important as the years 1903-1907. The defeat of the old Austria by Prussia at Sadowa in 1866, the establishment of the Dual Monarchy in 1867 and the foundation of the new German empire in 1871, formed the starting-point of Austro-Hungarian history properly so called; but the Austro-Hungarian crisis of 1903-1906--a crisis temporarily settled but not definitively solved,--and the introduction of universal suffrage in Austria, discredited the original interpretation of the dual system and raised the question whether it represented the permanent form of the Austro-Hungarian polity.

At the close of the 19th century both states of the Dual Monarchy were visited by political crises of some severity. Parliamentary life in Austria was paralysed by the feud between Germans and Czechs that resulted directly from the Badeni language ordinances of 1897 and indirectly from the development of Slav influence, particularly that of Czechs and Poles during the Taaffe era (1879-1893). Government in Austria was carried on by cabinets of officials with the help of the emergency clause (paragraph 14) of the const.i.tution. Ministers, nominally responsible to parliament, were in practice responsible only to the emperor. Thus during the closing years of last and the opening years of the present century, political life in Austria was at a low ebb and the const.i.tution was observed in the letter rather than in spirit.