prove matters within four years. After these explanations the Estimates were passed without any serious opposition.

Count Goluchowski made his usual statement on foreign affairs to the delegations on May 16. The most important part of this statement was that referring to Turkey. All outstanding points, he said, of the Mürzsteg programme (see ANNUAL REGISTER, 1903, p. 316) would be insisted upon with the same doggedness and energy which had been shown in regard to the gendarmerie, and it was to be hoped that Turkey would abandon the obstructive tactics hitherto adopted and would recognise them to be detrimental to her own best interests. AustriaHungary and Russia regarded it as a point of honour to discharge to the full the mission entrusted them by the Great Powers, and the authorities in Constantinople would do well to understand once for all that evasion and shuffling would not lead to any diminution of the Austro-Russian demands. AustriaHungary and Russia would not rest until their programme had been realised and made to work in all its details. If the Porte wished to free itself from foreign pressure it must co-operate with the reforming Powers. Otherwise it would be responsible for the continuation of the direct intervention of Austria-Hungary and Russia and for the serious danger that might ensue if Turkey, following suicidal tactics, should prove those to be in the right who regarded her as incurable and wished to subject her to a much more drastic operation than that represented by the measures, so preservative of her integrity, which constituted the kernel of the Mürzsteg programme. Turkey must in truth be struck with blindness if she refused to see these facts, and if she lent her ear to a pack of agitators and tale-bearers who made a business of circulating senseless rumours, inventions, and suspicions, and who cared nothing for the vital interests of the Ottoman Empire nor for the fatal consequences of their own conduct. Obduracy on the part of Turkey would be the more inexcusable in view of the agreement with Bulgaria, the correct attitude of the Servian Government towards the insurgents, and the tranquillisation of the Macedonian population by the reforms. But there was no more time to lose," and, therefore," added Count Goluchowski, "I entertain the expectation that Turkey will at last come to see how earnestly and unselfishly we are acting in the interests of her own preservation and consolidation when we insist firmly upon our demands."

As regards Italy, Count Goluchowski said that the Irredentist manifestations of the previous year (see ANNUAL REGISTER, 1903, p. 303) were "due to the wild antics of certain political jobbers and fanatical agitators," and that they might now be regarded as belonging to the past in view of the prudent and energetic attitude of the present Italian Government, whose bearing was strictly in accordance with that becoming a friendly and allied State. "My recent meetings at Abbazia with the Italian Foreign Minister," he continued, "could but strengthen

me in the knowledge that the most authoritative political circles in Rome attach no less value than we do to the cultivation of intimate and trustful relations with the neighbouring State. My intercourse with his Excellency Sgr. Tittoni took place on the basis of those conservative principles which underlie our policy and which Italy also has made her own, especially in regard to Balkan questions."

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Finally, referring to the war in the Far East, Count Goluchowski said that the growing sense of insecurity engendered by such conflicts was aggravated by the clogging of trade, especially through the unusual extension of the term contraband of war." At the proper moment it might be advisable to settle by international agreement certain restrictive principles calculated to improve matters in the future. In the same connection an interesting, if not absolutely lucid, statement was made to the delegations by the Foreign Minister, in reply to a question put by Dr. Falk, as to Austria-Hungary's neutrality in the war. 'In pursuance of our neutrality," he said, "we shall treat both belligerents with equality. Neutrality demands that neither weapons, food, nor other war material be delivered to either party, and that neither party be in any wise favoured; but it does not preclude the acceptance of orders from the one or the other party. I cannot yet say how this question will be regulated in the present instance, as it must first of all be discussed with the two Governments, but I must point out that neutrality cannot consist in denying everything to the belligerents. Economic points of view must be taken into consideration. During the Greco-Turkish war the exportation of horses, supplies, or weapons was not forbidden, and the Greeks, like the Turks, were free to order what they needed. It would not be right to deprive our producers of the profits that may accrue from such a contingency as the present."

A Hungarian delegate having asked whether the Government would occupy Macedonia, Count Tisza, the Hungarian Premier, answered that Austria-Hungary and Russia desired the free development of Balkan peoples and States, that they did not wish to exercise any predominant influence in the Balkans, but that they would not tolerate the exercise of predominant influence from any other quarter. He warned all whom it might concern not to assume the power of Russia in the Near East to be seriously compromised by the war in the Far East, nor to base upon such an assumption any extravagant political hopes.

Notwithstanding the frequent conflicts between the German and Italian students at Innsbrück the relations between AustriaHungary and Italy continued to be most friendly throughout the year. As was pointed out by the eminent scholar and historian, Senator Villari, the Irredentist movement is mainly kept alive by Austrian Italians; Irredentism does not flourish in Italy, in the Italian canton of Switzerland, or at Nice, the birthplace of Garibaldi, but in Trieste, Istria, and the Trentino. He

held that if proper provision were made for the protection and furtherance of the Italian language and of Italian culture in Austria this would give the death-blow to Irredentism; and the Austrian Government showed every disposition to make such provision, though it was constantly hampered in its efforts by pan-German fanaticism.

In September a commercial treaty was concluded between Austria-Hungary and Italy, under which from the beginning of the year 1906 Italian and all foreign wine would pay duty at the rate of 60 kronen (27. 11s.) the hectolitre, which would exclude all but the very best foreign wine. Italy, on the other hand, imposed a corresponding prohibitive tariff on foreign horses.

CHAPTER III.

RUSSIA, TURKEY AND THE MINOR STATES OF EASTERN EUROPE.

I. RUSSIA.

[A Record of the Leading Events of the Russo-Japanese War will be found in Chap. vi., on the Far East.]

IN Russia, though the energies of the Government and the nation were to a great extent absorbed by the war, internal affairs continued to occupy a very large share of public attention, and the reform movement increased in strength as military and naval disasters made the evils of the existing system of government more manifest.

The statement of the Budget for 1904 was issued at the beginning of the year, but as usual it afforded no trustworthy indication of the real condition of the finances of the Empire, especially as it made no special provision for the war. All the customary items of the War Ministry showed a small increase, making altogether 30,800,000 roubles over and above the military Estimates of the previous year, while the only extraordinary expenditure provided for was a sum of 890,000 roubles. The total expenditure of the Minister of Marine was even estimated at 2,500,000 roubles less than the previous year. The entire Budget amounted to 2,178,637,055 roubles, with a surplus of ordinary revenue over ordinary expenditure of 13,636,242 roubles. The ordinary income of the ensuing twelve months was expected to be 83,000,000 roubles more than that of 1903. The estimated extraordinary expenditure, chiefly for railways, especially the line round Lake Baikal and other parts of the Siberian Railway, was 212,178,804 roubles, to be covered by permanent deposits of the Exchequer in the State Bank, the free resources of the Treasury, and the surplus of ordinary income. This result was due to the specially favourable character of the past fiscal year-a splendid harvest, increased trade and

the receipt of more than the estimated revenue, although by virtue of the Imperial manifesto of March, 1903, the peasants owing arrears of taxes in over 62,000 villages were released from the responsibility of payment. A new feature was the assignment of 12,000,000 roubles for the increase and improvement of roads, which the Emperor considered "a necessity of the first order." A beginning was also made with furnishing the peasantry with means of obtaining small credits by an advance of 2,000,000 roubles for this purpose. The harvest of 1903 had produced 400,000,000 poods, over 6,000,000 tons more than the average quantities of breadstuffs for the previous five years; the total turnover of Russia's foreign trade in 1903 had been greatly in excess of that of the previous year; and the amount of gold in the country had much increased, while the amount of paper money in circulation had remained the same.

Against this rose-coloured official picture of Russian finance, there appeared some statistics published by the organ of the South-Western Railway which showed that the official railway forecasts made at the beginning of 1903 had not been justified. The railways had not only failed signally to pay their way, but showed a deficit of 7,000,000 roubles. The actual receipts of the entire network of State railways in 1903 were 414,000,000 roubles, and the expenses of maintenance and exploitation for the same period were 421,000,000 roubles. The only paying lines were the Moscow-Kursk, South-Western, Ekaterinoslaff, Nikolaieff and Trans-Caucasus systems. As the earnings of the combined Russian systems had fallen considerably below the amount necessary for exploitation at a profit, to say nothing of development or extension, there seemed to be no alternative but to cover the deficit from other Imperial sources.

In September a statement was issued by the Minister of Finance with regard to the condition of the State finances as affected by the war. It represented the available gold reserve on the outbreak of hostilities, including the economies effected in various branches of the Administration, as amounting to 300,000,000 roubles. To this was added the French loan of 800,000,000f. issued at the beginning of the war (about 310,000,000 roubles). As the cost of the war up to the beginning of August only amounted to 257,500,000 roubles, there should be sufficient funds to continue it for a considerable period without having recourse to further loans or taxation. The expenses of the war were calculated at about 10,000,000 roubles a week, but this estimate did not cover the cost of the new mobilisation, nor that of the renewal of stores destroyed or abandoned at Liao-yang. Besides the French loan mentioned above, there was an internal loan of 150,000,000 roubles, divided into six series of 50-rouble bonds, bearing interest at the rate of 36 per cent. and repayable in five years. The Finance Minister explained the issue of this loan as being due not to any immediate necessity, as there was still plenty of money in

the State coffers, but as having been made with a view to contingencies in the more distant future-i.e., the probability that the war will continue for a long time; and another loan was contracted in Germany for 250,000,000 roubles in December. As regards the price of the rouble, the Russian Ministry of Finance made an arrangement with a syndicate of Berlin bankers (the firms of Bleichröder, Warschauer and Mendelssohn) to buy up all the roubles on the foreign market so as to keep up their price.

Earlier in January an Imperial decree was issued ordering a revision of the legislation relating to the Russian peasantry. The new laws were to be submitted to commissions in the various provinces for further discussion with regard to local requirements, each commission to be presided over by the governor and to comprise the chief officials, representatives of the nobility and the zemstvo to be chosen by the governor, and persons selected for their knowledge and experience of the matters to be considered. It was specially laid down in the decree that the communal system should be kept inviolate, thereby indicating that the policy advocated by the Liberals of assimilating the peasantry to other classes of the population was to be disregarded. At the same time special plenary powers were conferred upon the Minister of the Interior and governors of provinces, including the right of appointing persons to district offices without election, of prohibiting meetings, of forbidding obnoxious persons to reside in the province, and of dismissing officials if they were dangerous to public peace and order. In pursuance of this measure the Russian Medical Congress which met at St. Petersburg at the end of January was dissolved by the police because it passed a motion to the effect that "a regular and systematic campaign against tuberculosis could only be carried out on condition that personal freedom and the freedom of speech, of the Press, and of meeting were granted," and another calling attention to the danger resulting from the artificial concentration of the Jewish population in the authorised zone of residence established for the Jews in the towns of the south and west of Russia."

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Meanwhile the zemstvos continued their agitation for an extension of their powers in the direction of a national representation. Several of them addressed petitions to the Government making the following demands: (1) That in cases in which the Government desires to learn the opinion of persons on the spot in regard to questions of local administration it should not summon them at its own will and pleasure, but should leave it to the zemstvo assemblies to elect them; (2) that all projects of laws relating to local government should be first of all relegated for consideration to the zemstvos, whose opinion should be taken into account by the Council of State; (3) that persons summoned in any way to participate in the work of legislation should be secured against administrative interference.