people welcomed this extension of the war, nearly all the papers acclaiming the action of the Government. The only exceptions were the organs of the Official Socialist Party and a few of the Conservative journals, whose comments were heavily censored, and were therefore no doubt unfavourable to the new move.

The remainder of the year was singularly uneventful. The chief anxiety of thoughtful Italians was their country's very serious financial situation.

At the time of the German peace-move in December the Italian Government acted in close accord with the other Entente countries, and in rejecting the German offer the Cabinet appeared to possess the solid support of that large majority of the Italian nation who had throughout favoured all the war

measures.

CHAPTER II.

GERMANY AND AUSTRIA-HUNGARY.

I. GERMANY.

GREAT though the strength of the German nation was, that strength was severely strained after seventeen months of the European War. The German Army, whose total strength cannot have exceeded eight millions of men in 1914, had suffered nearly three million casualties, and of these the soldiers killed numbered almost eight hundred thousand. Loss of life on this terrible scale was a serious matter, even for such a powerful and populous country as Germany. And the financial losses were also very great. By the end of 1915 the Reichstag had sanctioned the expenditure of two milliard sterling upon war purposes, nearly the whole of which had to be met by loans; and this added to the pre-war debt of the empire, 240,000,000l., brought the German federal debt up to the huge sum of 2,240,000,000l. Nor can this be said to have been the total indebtedness of the German nation, for the debts of the individual states, so recently federated, must be added. The state debt of the Prussian kingdom alone amounted to nearly 500,000,000l., and the liabilities of the minor states were estimated at approximately 300,000,000l., so that the financial burden of the German people was, even after only seventeen months of the war had passed, over three milliard sterling. Furthermore, the war had greatly reduced the standard of living. The blockade of the German coasts by the British fleet had failed to cause starvation, and had produced no serious scarcity of the materials essential for the manufacture of munitions, but it had caused a very disagreeable insufficiency of certain kinds of food. In particular, the supply of meat had become very inadequate, and butter was extremely scarce. These trials, the horrible

loss of life, the waste of wealth, the arduous, unpleasant, and unfruitful labour, had produced in the German people a deep yearning for peace. But the sufferings were not insupportable, and were not such as to cause either the Government, or the Parliament, or the German nation to consider for an instant the possibility of unconditional surrender to the country's enemies.

Early in the year a change was made in the federal constitution which, though of very little practical importance, involved an important principle and was of interest to students of constitutional law. During the forty-five years of the existence of the new German Empire, the question of the closer unification of the federated states had often been discussed. The existence of subordinate parliaments was not to be regarded, of course, as in itself a sign of political backwardness; indeed, rather the contrary. The centralised form of government happened to be the universal development among the nations of Western and Northern Europe, but the federal organisation was not only established over nearly the whole of Central Europe, in Austria, Croatia, and Switzerland, as well as Germany, but was also, of course, the principle adopted in the advanced overseas democracies, in the United States, Canada, and Australia. In Germany, however, local autonomy had mediæval aspects. The twenty-one vassal kinglings of Germany constituted a curious relic of feudalism that was absolutely unique in the civilised world. Moreover, the individual states preserved exceptionally great powers. The functions of the Bavarian Parliament were wider in scope than those of the Bohemian Diet. Again, each of the Austrian provinces was a single area of considerable extent, whereas many of the German states were almost ludicrously minute, and most of them consisted not of a single territory respectively, but of fragments geographically disunited, whose political union had come about only through the accidents of the family history and inheritance of the nobles who had acquired the dignity of petty sovereigns. This geographical separation caused some awkwardness in administration, and the aggregate area of the seven German "principalities" was only 2,300 square miles-less than that of Devonshire. Yet, since the great changes of 1866 and 1871 no further steps towards the union of the states had been taken. In 1909, however, Prince Karl Günther of SchwarzburgSondershausen died, and the crown was then inherited by his cousin, Prince Günther of Schwarzburg-Rudolstadt, the head of the younger branch of the same royal family. For seven years the principalities were linked together only by the personal bond, but in February, 1916, a joint convention of the diets of the two states was held at Erfurt, and it was agreed that the principalities should be amalgamated into one state, the speakers pointing out that this action would be a sign of the union of hearts prevailing between all Germans at this time. The two

states thus agreed between themselves, but the arrangements between the two local diets and the imperial authorities were postponed, apparently until the time of the post-war settlement. The united states, which are situated in central Germany, close to the northern border of Bavaria, consisted even after their amalgamation of three disconnected territories.

The proceedings and debates in the Reichstag in the early part of the year were of the greatest importance, and owing to the fact that the problems raised by the war were discussed in the German Parliament in more definite terms, if not with greater freedom, than in any other legislature in Europe, these debates are of much historical interest. The proceedings in the House during March were mainly concerned with finance. A new war loan, the fourth asked for by the German Government, was open for subscriptions from March 4 to March 24. The loan was issued in the form of a five per cent. State loan redeemable in 8 years and in the shape of four-and-a-half per cent. Treasury Bonds which it was proposed to pay off gradually between 1923 and 1932. The price of the State loan was 98 and that of the Treasury Bonds 95. The latter were to be redeemable at par. The financial projects followed closely the lines of those announced twelve months earlier (see A.R., 1915, p. 213), but the Government now proposed some serious. measures of extra war-taxation. On March 16, Dr. Helfferich, the Minister of Finance, made a long speech on the Federal Budget of 1916-17. New taxes were to be imposed, and it was calculated that these would produce 24,000,000l. in the next financial year, and more in a whole year. (The taxes in question did not come into force until some time after April 1.) These war-taxes took the form of increased taxes on tobacco and increased duties on telegraphs, telephones, and letters, and stamp duties on railway and shipping freights. War profits were also to be taxed. The ordinary Budget for 1916-17 was expected to balance at 182,963,000l., considerably the highest figure ever reached, and in addition to this there was an estimated Extraordinary Expenditure of 5,000,000l., apart from the direct expenditure on the war. No provision was made for the payment of interest on the war credit out of revenue. Helfferich stated that the war credit voted by the House in December would still be sufficient for several months, and he then went on to compare the financial condition of the several belligerent countries. The Minister said that the financial position of Germany was much superior to that of any other belligerent, except perhaps Great Britain, and in some respects compared favourably even with Great Britain. Germany had covered her war expenditure by long-term loans, whereas Great Britain had relied to a great extent on short-term loans, which, he said, now amounted to 750,000,000l. Great Britain's monthly war expenditure was 150,000,000l., whereas that of Germany was about 100,000,000l. France and Russia were

Dr.

each spending nearly as much as Germany, whereas AustriaHungary was spending only 65,000,000l. per month. Including the Italian expenditure (30,000,000l. per month), the total war expenditure of the Quadruple Entente was 12,000,000l. per day (360,000,000l. per month), whilst that of the Central Powers was only 5,500,000l. per day (165,000,000l. per month). This fact was, said the Minister, of good augury for Germany and her Allies. He calculated that the total expenditure of the enemy countries up to March 31, 1916, was 5,000,000,000l. to 5,250,000,000l. and that that of Germany and her Allies was 2,500,000,000l. to 2,625,000,000l., the respective expenditures thus being in the ratio of 2 to 1. Dr. Helfferich also claimed. that the deposits in German Savings Banks had increased since the beginning of the war by 25,000,000l.

It was announced a few days later that the subscriptions to the Fourth War Loan had reached a total of 533,000,000l. Thus the four loans together had produced the sum of 1,815,000,000l., as against credits up to 2,000,000,000l. voted by the Reichstag, and an expenditure actually incurred of about 1,700,000,000l.

At the end of 1915 and in January and February, 1916, the German people were much disturbed by the so-called Baralong incident, and great indignation was expressed all over the country. The German Government alleged, on the strength of certain American witnesses, that on August 19, 1915, the British auxiliary cruiser Baralong had fired on and murdered the helpless and drowning crew of a German submarine, which had been disabled by the cruiser and was sinking. The German Government demanded that those responsible for this alleged crime should be tried by a British naval court-martial. The British Government refused this demand, but offered to submit the case to an American naval tribunal, if the German Government would allow the same tribunal to investigate three cases of alleged atrocities by German submarines. The German Government replied on January 10, refusing to agree to this proposal, and stating that the cases in question had already been investigated by the German naval authorities, and that it was only asked that British naval officers should investigate the Baralong incident, as it was not doubted that a British naval tribunal would mete out suitable punishment to the offenders. The British Government sent another reply on February 25, but no agreement of any sort was reached. The Baralong incident was debated in the Reichstag in January, when all parties, including the anti-war Socialists, expressed their indignation with the British Government.

The spring session of the Prussian Parliament was of considerable interest. The diet was opened on January 13, and on that day a long speech from the Throne was read, not by the King himself, but by Dr. von Bethmann-Hollweg, who, it will be remembered, was not only Imperial Chancellor, but also held the position of Prussian Prime Minister. The royal message

began by eulogising the army and nation for the manner in which they had withstood a world of enemies, and proceeded to refer to the proposals for new taxation. Additional income-taxes would be necessary, and state-funds would be used for the restoration of the devastated province of East Prussia. Then followed a vague reference to the question of franchise reform. The mutual sympathy and understanding which had arisen during the war would, it was declared, continue in time of peace; and this spirit would permeate all the national activities, and would find expression"in shaping the principles for the representation of the people in legislative bodies." Prussia, the King declared, had grown great in storm, and in storm stood to-day unshakable.

The passage in the King's speech which excited most interest in Germany was that referring to franchise reform. The vagueness of the phrases used caused much disappointment and dissatisfaction among members of the Central (Catholic), Radical, and Socialist parties. The notorious three-classes system of franchise for the Lower House of the Prussian Parliament had for many years been one of the chief grievances of the democratic parties in that state, and it was hoped that the loyalty shown by Radicals and Socialists during the war would lead to the desired reforms. Although this question was primarily only a problem of Prussian internal politics, the fact that the Prussian Constitution was utterly undemocratic was indirectly a matter of some importance to all Germany, and indeed to all Europe. The Prussian Diet, as such, was of course entirely subordinate to the Imperial Parliament, but since the Prussian Government had the right to nominate seventeen members of the Bundesrat, the Upper House of the German Parliament, that Government had the power to wield considerable influence in Imperial and Foreign affairs. Thus the policy of the Bundesrat was largely affected not by the views of the Prussian people as a whole, but by the opinions of the upper classes in Prussia, who were nearly always Conservative, and often highly reactionary.

A Constitutional point of some interest was raised during March. At that time the submarine question was becoming of great importance, owing to the fact that the United States Government were insisting upon a modification of Germany's policy, and the German Chancellor was notoriously desirous of acceding to the American demands. The Prussian Diet, which unlike the Reichstag was dominated by the chauvinistic parties, therefore sent a memorandum to the Chancellor urging that the American requests should be refused, and an unmitigated submarine war waged against Great Britain. The Chancellor replied that the Prussian Parliament had no status in the discussion of foreign policy, and the Foreign Minister, Herr von Jagow, protested at what he regarded as an unconstitutional attempt at interference. The Prussian Diet refused, however, to admit this limitation, and on the technical point thus raised the Diet's