Holy Roman Empire

Chapter 1006: Chapter 20: The Forced European Economic Summit
 

To quell the revolutionary wave, stabilize the situation on the European Continent, and revitalize the European economy, the Continental Alliance decided to convene the European Economic Summit in Vienna.

Strictly speaking, this could only be considered a summit of the Continental Alliance. Only members of the Continental Alliance were invited to the meeting, with England and France being conspicuously excluded from the invitee list. There was no need for a reason; they simply did not want to include them in the proceedings.

At this time, holding the European Economic Summit was an act of desperation for all involved countries. After the outbreak of the economic crisis, everyone’s economy was severely damaged, the more developed the country, the greater the impact suffered.

Due to a lack of experience in handling such a crisis, governments of various countries failed to act in time, causing the crisis to escalate and social contradictions to surge dramatically.

Following the rise of the revolutionary wave, in order to stabilize domestic situations, various governments issued “Relief Acts.”

The “Relief Acts” were very effective; they managed to abate the momentum of the Revolutionary Party rather quickly after barely managing to feed the populace, the only downside being their high cost.

The Continental Alliance was already full of financially struggling members, and with the economic crisis reducing government revenues significantly, needing to provide “relief” for the unemployed populace proved to be a test for the financial situation of these countries.

Aside from Shinra, the Netherlands, Montenegro, Armenia, and the Nordic Federation, the rest, without exception, were either already bankrupt or teetering on the edge of bankruptcy.

Shinra, needless to say, had strong financial reserves and was the first to implement countermeasures that stabilized the domestic real economy, and now it had passed the most dangerous period.

Montenegro and Armenia, being agricultural countries, could hardly claim to have an industrial sector, which, if handicrafts were included, would account for merely five to six percent of their national economy. Such an economic structure naturally exempted them from enjoying any economic crisis.

The Netherlands and the Nordic Federation, although they did not participate in the continental wars, were definitely beneficiaries of war. Having just earned a wealth from the wars, combined with decent financial reserves, the governments could save a bit elsewhere and merely needed to tighten their belts.

The rest were miserable. The Tsarist Government had never been wealthy; the spoils obtained from the continental wars were not enough to cover the deficits from the wars between England and Russia, and with the suppression of several domestic revolutions, their treasury was once again empty.

Although Portugal was also a member of the Colonial Empire, due to internal government corruption, the colonies, which should have generated wealth, became financial burdens.

Everyone knew that once the bureaucracy was unchecked, no amount of fiscal revenue would suffice their extravagance, hence the bankruptcy of the Portuguese Government was not surprising.

As for Spain, Belgium, the Seven Italian States, they were victims of wars, whereas Switzerland simply suffered from indigestion.

As for Greece, it was a country capable of driving its creditors insane. Since gaining independence in 1832, it had experienced more than a dozen financial crises, roughly flaring up every three to five years, making bankruptcy inevitable.

Of course, part of this was due to England and France, the two major creditors, being too oppressive. Had everyone been as conscientious as Franz, the likelihood of fiscal bankruptcy would have been much lower.

As of now, the European Continent had already seen ten countries, including Greece, Belgium, Switzerland, Portugal, Sardinia, declaring bankruptcy. Close to bankruptcy were also the Papal State, Spain, and Russia.

Without a doubt, such widespread collective bankruptcy was certainly abnormal. It is worth noting that not long ago the Vienna Government had issued loans to everyone, even if the finances of various countries were troublesome, they shouldn’t have collapsed so swiftly.

There was no need to delve deeper into the truth since those well-versed in history understood it.

Since geopolitical considerations determined the pro-Austria stance of the European countries, Britannia, being excluded, naturally would not continue to seek favor where it was not welcome, leading to a cooling of diplomatic relations.

After the economic crisis erupted, financial crises broke out across Europe, and British bankers naturally didn’t miss the opportunity to take advantage of the fire.

Greed leads people astray. Taking advantage when the iron is hot is no matter, but the key issue is that in the face of their interests, the bankers failed to adjust their mindset in time and still reveled in Britain’s splendor.

With the birth of the Continental Alliance, Britain’s influence on the European continent had been weakened to an all-time low. Of course, Britain was still impressive, and no one dared provoke its majesty.

However, as the economic situation continued to worsen and revolutionary tides rose, the harsh reality of empty pockets overcame everyone’s fear of the British.

They naturally didn’t dare default, but they still dared to make excuses to delay repaying their debts. The British government didn’t give them low-interest loans anyway, as the loans they borrowed from commercial banks were high-interest, and now they couldn’t pay even if they wanted to.

There are always daring souls in this world, perhaps it was his time confined in London or perhaps his perilous escape that left a shadow on Victor Emmanuel III.

Driven mad by financial pressure, Victor Emmanuel III, under the motivation of hatred, did something drastic. He first borrowed heavily from British banks and then immediately declared the government bankrupt, demanding a debt restructuring.

To spread out the pressure, Victor Emmanuel III not only did this himself but also encouraged neighboring countries to do the same.

Franz didn’t know exactly how it was done, but the ultimate result was that they managed it, coaxing thirty million British Pounds from the British.

No wonder the six Italian states almost declared bankruptcy at the same time; it was clearly a prearranged scheme. Because they weren’t bold enough to directly embezzle the British money, they used bankruptcy as an excuse.

As for another participant, the Papal State, they didn’t declare bankruptcy because they had religious protection.

As long as one can abandon integrity, the Pope can do a lot. “Bankruptcy” was too disgraceful, for as a servant of God, everything belongs to God, so the servant’s debts could also be considered God’s debts.

This move was somewhat shameless, so they borrowed the most popular saying of the Middle Ages: “In the eyes of God, usury is the ugliest and most abominable sin”.

If one is a devout follower of God, then they must lower the interest rates. Faced with this kind of irrational existence, most bankers probably had headaches.

…

These were all conjectures Franz made based on the information he had; he didn’t bother to see how it was actually done.

In fact, the Italians’ work on keeping secrets was done very well. If it weren’t for the British bankers making a fuss later on, Franz wouldn’t have known about such a divine operation.

It was fortunate that these folks knew their limits and demanded debt restructuring using bankruptcy as an excuse. If they had directly defaulted, that would have been suicidal.

Not everyone is Mao Xiong, and these days if one wants to default, they first need to see if they can withstand a beating. Otherwise, if armed collectors come knocking, they’d be in for a world of hurt!

In such blatantly unfair matters, don’t expect anyone to step forward. Politics requires circumvention; those who confront issues head-on don’t last.

Regardless, the Italian area remained unchaotic, and Victor Emmanuel III was very much instrumental in this. If he hadn’t led the way in pulling off a scheme from the British, the situation would have been even worse.

With someone leading the charge, there were no fears that no one would respond. Everyone was short on money, and saving any amount was crucial, even if it was only a temporary fix that had to be repaid in the future—it could solve the pressing problem.

To reduce fiscal expenditure, governments of various nations were eyeing the debts they repaid each month, and one after another declared bankruptcy like vendors flocking to a market.

Not only British bankers were tricked, but every banker who lent them money, each and every one of them was bamboozled.

The governments were bankrupt; if anyone wanted them to continue fulfilling their debts, then it was time to talk about debt restructuring! For these “bankrupt governments”, it didn’t matter whether negotiations succeeded.

If the negotiations succeeded, it meant they could save on debt expenses, or at worst, delay payments; if talks failed, they would just continue to pretend to be dead. Those who owed money weren’t in a rush, and even with collateral, there was no way to cash it in given the current circumstances.

The bankrupt ones were being dishonest, but those who hadn’t declared bankruptcy were not much better. It wasn’t that they didn’t want to declare bankruptcy, but that they couldn’t.

For instance, Spain was currently at war with Japan. What would it look like if the government went bankrupt? That would be a severe blow to our morale, right?

Another example: the Russian Empire. Over the past few years, the Tsarist Government had gone bankrupt multiple times and was already on the capital’s blacklist. Now, the largest creditor was Shinra. The loans were not even high-interest ones, and considering the bilateral relations, even if the Tsarist Government wanted to default, it would be embarrassing!

Everyone had learned to act shamelessly, without a shred of integrity. Franz could only lament the collapse of morals and the decline of societal standards. If this continued, the fun would be over.

There had just been news that the Vienna Government was creating three million job positions to help address the unemployment issue in allied states; everyone was gathering.

The Holy Roman Empire was the oldest boss of the European Continent. As the leader in the European world, focusing only on its allies was really too narrow-minded.

If Europe descended into chaos, how could it, the old boss, fare well? Thus, to solve the problem, the focus shouldn’t be limited to one area; help must be collective because everyone benefits only when all are doing well.

From the fact that the European economic summit was convened in Vienna, it was evident Franz had been persuaded by everyone, since he embodied the spirit of internationalism.

“How much money needs to be invested, have you calculated it?” Franz asked.

International spirit also needed monetary support. This was an era based solely on gold, “the beautiful times when lack of money simply meant printing more” was something no one even dared to think about.

Even though Shinra was the world’s largest gold-producing country and had the world’s largest economic output, Franz dared not recklessly print money.

Prime Minister Carl shook his head, “The information provided by the governments and the data collected by the intelligence department differ significantly. It’s still uncertain whether it’s due to the intelligence services having a biased collection or if the national bureaucrats are underreporting the crisis.

In addition, there are many other uncertainties, for instance: when the Japanese-Spanish War will end, whether there will be another surge in revolutionary waves, and so on—these unpredictable events could increase the cost of saving the market.

According to the most optimistic estimate, at least eight billion in funds need to be raised to get through this economic crisis. If things go worse, it might require twelve billion.

Just our ring-railway plan and related infrastructure alone would cost 2.7 billion Divine Shield, plus other minor projects, domestically about four billion Divine Shield is needed to stimulate the economy.

The three-million-job plan, although funded by the Aristocratic Lords, still required a government investment of twelve billion Divine Shield, primary for policy subsidies, personnel training and management, and transportation costs.

“Fiscal loans…”@@novelbin@@

Upon hearing the Prime Minister’s response, Franz furrowed his brows even deeper. A substantial appraisal was impossible, as Franz knew bureaucrats better than anyone. Deceptive tactics were elementary to them.

If the administration were clear and just, the concealment would remain within controllable limits; however, if corruption were rampant and the bureaucracy decayed, the situation would be doomed. Not only could they hide crises, but they might also manufacture even bigger crises, a phenomenon coined as “official oppression leads to rebellion.” Most uprisings were the handiwork of these individuals.

Regrettably, within the Continental Alliance, such Corrupted Empires existed. Liang Ya was a prime example, plundering vast wealth from its colonies every year, yet domestically the economy was a disaster. It was a clear sight of a dynasty’s twilight.

As for the Russian Empire, it hadn’t reached such a state yet. The Russian Empire was still getting by during the era of Alexander III, after the reforms initiated by Alexander II.

In Franz’s view, the most uncertain factors were not the distant Japanese and Spanish War, but the potentially explosive Liang Ya, alongside the destitute war-losers, France.

Explosive situations abounded; a slight mishap could change the colors of Western Europe. Therefore, although France did not participate in the economic summit, the Vienna Government still reserved one hundred million Divine Shield for their market stabilization.

Viewing the funding gaps of each country separately might seem trivial, but collectively, for members of the Continental Alliance, it summed up to an astronomical figure.

In these times, the purchasing power of Divine Shield was robust, “twelve billion Divine Shield” being equivalent to the sum of two years of revenue at the peak of Europe’s financial intake.

Such an enormous amount of money would be a pressure on anyone. What could one do when the European Continent had just burst into a significant war?

Even two years later, the major participating nations had not yet emerged from the war’s shadow. Even including the Vienna Government, a balanced budget was unattainable.

In a sense, this Continental economic summit was essentially forced by the necessity of “money.” Now with worsening capital markets, governments were facing financing difficulties and had no choice but to turn to the Vienna Government for assistance.

As in the original timeline, during a financial crisis, financing was challenging for everyone, but US Government bonds remained sellable. Even with the erratic “print, print, print” fiscal policy of Old Te, the US Dollar still performed robustly in the capital markets.

The current situation was similar; Shinra could almost play the role of the Americans, not being the sole superpower, yet “Divine Shield” had become a principal settlement currency for the European countries alongside “Gold.”

In this context, the financially robust Vienna Government, possessing plenty of collateral, naturally had an excellent reputation in the capital markets.

For instance: In the Russian capital market, government bonds issued by the Vienna Government sold better than those issued by the Tsarist Government. Even if the interest on Shinra’s government bonds was a third lower than the Tsarist’s, it couldn’t dampen the enthusiasm of the Russian public.

Were it not for the maritime superpower Britannia eyeing them greedily, Franz too could have lived that wonderful “print, print, print” life. Times were different; printing like Old Te was impossible, but surely printing an extra billion or two wasn’t too much to ask?

In fact, Divine Shield had already begun to be overissued. They didn’t yet dare to print several hundred million at once, but printing an extra ten or eighteen million annually was necessary.

Such a minor amount would dry up once the sun shone on it. Experts would find it very hard to detect, and its release into the capital market naturally would not cause ripples.