Holy Roman Empire

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Watching the Russians dominate on the battlefield, the prepared Berlin Government could still keep its composure, but the financial backers behind them began to grow restless.

"The borrower is king." This saying might be a bit exaggerated here, but the essence remains the same. Once the Prussian Federation was defeated, it would be very hard for creditors to reclaim their money.

The "collateral" previously promised by the Berlin Government would also depend on whether the Russians were willing to recognize it.

According to the Tsarist Government’s consistent behavior, there was an eighty percent chance they would pretend not to see it, and the remaining twenty percent they did see it, they would refuse to acknowledge.

To win this battle, the Berlin Government made every effort to borrow money, and the number of secret agreements signed was countless.

If the Prusso Federation were to collapse, it’s unknown how many financial institutions that lent money would go down with it. The consortium would want to transfer the losses, making a financial crisis inevitable.

Not only would financial institutions be out of luck, but real industries wouldn’t fare much better. Many companies might seem to have profited greatly from the war, but in reality, a lot of the profits were only on paper, with a huge backlog of final payments. Stay updated through empire

There was no helping it. Defaulting on final payments is a major chronic issue in commercial circulation, almost pervading every link in the capitalist market economy. It is a problem all manufacturing companies have to face.

No one knows how long this war will last, and no one knows how much money it will cost. To sustain the effort for a longer time, the Berlin Government naturally had to spend as little money as possible.

Owing a lot of debt isn’t a problem, nor are high interest rates; those are troubles of happiness. Only by winning this war would they need to consider these issues.

After the outbreak of Prusso-Russian war, the export prices of all strategic materials in Europe soared significantly.

Nominally, enterprises enjoyed massive profits from this surge in commodity prices; in reality, the Berlin Government only paid part of the costs, many just the initial deposits, while capitalists had to upfront the remaining production costs.

The Berlin Government did have money. There was a substantial amount lying in bank accounts, which was an open secret among those who were well-informed.

However, the deposits for purchasing materials meant that typically, only when ordering the next batch of goods would the payment for the previous batch be settled.

Given the high profits, the capitalists naturally wouldn’t refuse. Many economically weaker enterprises had to borrow from banks to provide these upfront payments.

To a certain extent, the Prussian Federation had already ensnared the economies of Britain and France with its debts – both were bound to lose together.

Everyone knew the "risks," but couldn’t resist the lucrative benefits. Moreover, the Prussian Federation had once won a Prusso-Russian war, and newspapers constantly belittled the Russians, boosting people’s confidence invisibly.

All this changed after the battle of Smolensk when everyone suddenly realized: "The Russian Empire is still the gendarme of Europe, and the Prusso Federation seems to be in trouble."

This just won’t do. Everyone had already invested so much; under no circumstances could they let the Prusso Federation be destroyed! If the Berlin Government fell, everyone would face misfortune.

The capitalists didn’t want the Prussian Federation to fall, and neither did the London Government. After finally supporting a chess piece, no one wanted to see it vanish.

Prime Minister Benjamin’s pressure soared overnight as domestic interest groups demanded the government take action to avoid the worst-case scenario.

Putting aside the documents in his hands, Benjamin asked in disbelief, "Has the situation really become this serious, that Britannia would be held hostage by Teutonic savages?"

The thick disdain in his expression was enough to show how distressed he felt. The relationship between England and Prussia was usually quite good; under normal circumstances, he would not use an insulting term like "savages."

Chancellor Garfield replied, "The situation is even worse than that. I suspect that even if the Prusso Federation wins the war, they might not have the capacity to repay these debts.

We can leave aside the overdue payments for materials for now, they have at least paid some money, and as long as companies aren’t too greedy, it mainly covers production costs, so the losses wouldn’t be substantial.

The real problem is the loans and bonds. Once the Prussian Federation is defeated, almost all collateral will have no security.

The gold they have put up isn’t even enough to pay off a tenth of the debt. Even if we included all of the Prussian Federation’s overseas assets, it wouldn’t be enough to fill this gap.

In an incomplete tally, we have even uncovered multiple cases of collateralized loans, especially the lending agreements signed in secret by the Berlin Government with financial institutions where the cases of repeated collateral are very severe.

The debts owed to us by the Prussian Federation far exceed the visible £180 million. The true figure might be £200 million or even £300 million, known only by the Berlin Government."

In an era of lax financial regulation in Britain, financial institutions give out loans in private, and the London Government has no real control over it.

The sale of bonds is even more chaotic. What is declared as a million might actually be an issue of three to five million, a common occurrence.

In an age relying on manual supervision, accurately accounting for these figures is too difficult. As long as problems don’t arise, the British Government would not intervene.

If a problem did emerge, the British Government wouldn’t be able to do much about it either. In finance, small problems don’t surface, and by the time big problems do, the institution is already on the brink of bankruptcy.

"Bankruptcy" is the best way to evade responsibility, with the government at most arresting a few scapegoats, and more often than not, not even able to find those.

Prime Minister Benjamin had lost interest in digging deeper into the exact figures of Berlin’s debt; there was no point.

Investment wise, this venture had become a toxic asset, and cutting losses was the best option.

Unfortunately, that was out of the question. Nobody wanted to see their money go to waste; the London Government had to take responsibility for the aftermath.

In the original timeline, Britain and France successfully dragged the Americans into the fray with that tactic. Although it hadn’t come to that, it still gave Prime Minister Benjamin a headache.

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"Damn barbarians, how did they become so cunning all of a sudden!" Prime Minister Benjamin complained.

"Is this situation aimed only at us, or is it the same for all countries?"

This question was critical. If every nation was ensnared in the Prusso-Polish Federation’s debts, then the issue was less problematic.

Chancellor Garfield shook his head, "I’m afraid, Prime Minister, while similar issues have emerged in other countries, the numbers involved are not significant.

Perhaps the collective debt the Prusso-Polish Federation owes to all other nations doesn’t even amount to a third of what they owe us.

Besides us, the second largest creditor nation to the Prusso-Polish Federation is likely to be France, followed by the German Federation Empire. The debts to the rest of the countries can be considered negligible.

The Berlin Government doesn’t yet have the capability to borrow from the entire world."

On hearing this news, Benjamin nearly fainted from anger, swearing it was the worst news he had heard all year.

The main reasons for this predicament were, firstly, that the British had too much money, with a considerable amount of idle funds in the private sector; secondly, the diplomatic policies of the London Government. Without the government’s encouragement, the private financial institutions wouldn’t be so eager.

Everyone took it for granted that the government wouldn’t let the Prusso-Polish Federation lose the war. With that assumption, what was there to worry about? Could the Berlin Government dare default on its debts?

Other countries, however, were different; not everyone was optimistic about the Prusso-Polish Federation, nor did everyone have the confidence to guarantee the safety of their debts.

For instance: the financial sector within Austria doesn’t lend to the Prusso-Polish Federation, for a very realistic reason—the Vienna Government is supporting the Russians.

Politically influenced, no one was optimistic about the Prusso-Polish Federation’s prospects, and naturally, no one was willing to lend to them.

There’s even less to say about the small European countries. Not to mention the lack of guarantee for the repayment of the money, they didn’t have much to begin with!

Against this backdrop, it was not surprising that France became the second largest creditor, and the German Federation, the third. Who could blame them? They had the funds and maintained a good relationship with the Berlin Government.

Benjamin asked unequivocally, "What about the Russian Empire? Don’t tell me that the Tsarist Government has also borrowed a large sum of money from us!"

Garfield nodded reluctantly, "I regret to inform you, Your Excellency, that the Tsarist Government indeed owes us a considerable sum, albeit not as much as the Prusso-Polish Federation—somewhere around fifty to sixty million British Pounds.

A significant portion of this was borrowed before the war as prepayments for Russian agricultural products, the rest being outstanding payments for war materials purchased after the outbreak of the conflict.

We’ve roughly tallied the Russians’ foreign debts, and unsurprisingly, their largest creditor is Austria, with a total debt likely no less than what we’ve lent to the Prusso-Polish Federation.

Most of it was in loans, with a minor part in bonds, and very few outstanding payments for goods. Due to the Tsarist Government’s history of defaulting, most Austrian businesses demand immediate payment."

Perhaps the news was too staggering, for it took Prime Minister Benjamin a few moments to recover.

"This is the worst scenario imaginable. We cannot watch the Prusso-Polish Federation lose, just like the Vienna Government cannot afford to see the Russians defeated. This war is no longer just about Prussia and Russia!"

It was either an Anglo-Austrian confrontation or the Anglo-Austrian two countries engaging in a proxy war through Prussia and Russia. Whichever it was, the outcome did not bode well.

Especially now with the Prusso-Polish Federation at a disadvantage on the battlefield, the position for Britain was even more passive. The price for turning the tide in favor of the Prusso-Polish Federation would be too great.

Foreign Minister Edward said, "The situation is not as bad as it seems. In reality, it is mainly us who is entangled in debts; Austria still retains the initiative.

The Russians only involved a few major banks in their loans from Austria, and with territory as collateral, although slightly overvalued, as long as they can deliver, these businesses will not lose everything.

From what we see now, I don’t believe the Tsarist Government has the capacity to default. On the other hand, our problem is bigger, with tens of thousands, even millions of people involved in the same debts."

It was headache-inducing, lending money to two parties that seemed to be thriving but were actually in a difficult predicament. Regardless of who won or lost, there would be a debt default, it was just a question of how much.

The London Government could not control the financial sector. The bankers invested based on their interests, national interests were not within their considerations.

Being able to recuperate the loans would be fine, but if there is a debt default, these consortiums would escape unscathed, relying on the all-powerful "bankruptcy" escape clause.

Of course, there were also those not so bright or too slow to shift the risk, who ended up ruining themselves in the process.

Luckily, the Russians had a poor reputation, and there were few capitalists willing to lend to them, otherwise the London Government would have to experience what it truly means to be caught between a rock and a hard place.

Chancellor Garfield shook his head, "I don’t think there’s any difference, even with more options at the Vienna Government’s disposal, they wouldn’t allow the Prusso-Polish Federation to win the war.

They might even be happy to use us to weaken the Russians, clearing a significant obstacle to their unification of the German Region.

Think about it, the Prusso-Polish Federation disintegrates after defeat, the Russian Empire suffers severe damage, and our economy is hit hard by defaults; could there be a more ideal situation?

From the viewpoint of a beneficiary, I have reason to believe that this situation is truly the Austrian Government’s doing.

Of course, it might also be France, but I don’t think Napoleon IV has the capacity for such a scheme," Garfield said.

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