After Christmas, Franz beca busy again. There were always many tasks at the end of the year, including the governnt’s year-end summary, plans for the coming year, and the budget...
While specific tasks were handled by subordinates, Franz still needed to oversee the overall direction. As a competent emperor, he had to ensure his control over the governnt.
Finance Minister Karl presented the report, “Your Majesty, here is this year’s financial report.
The total revenue of the New Holy Roman Empire for 1875 was 865.2 million guilders, with total expenditures amounting to 876.4 million guilders, resulting in a budget deficit of 11.2 million guilders.
Austria’s total revenue for 1875 was 157.41 million guilders, with total expenditures of 155.04 million guilders, yielding a surplus of 2.37 million guilders.
Bavaria’s total revenue in 1875 was 11.32 million guilders, with revenues and expenditures roughly balanced.
The Kingdom of Jerusalem had a revenue of 220,000 guilders and expenditures of 3.14 million guilders, resulting in a deficit of 2.92 million guilders.”
Although the Austrian governnt was essentially the central governnt of the New Holy Roman Empire, it was important to maintain a distinction in financial matters.
If finances were not separated, and if the central governnt faced a deficit, there would be no way to request funds from the various state governnts.
It wasn’t just a matter of financial separation. In reality, their functions were also different.
The Austrian governnt is primarily responsible for governing Austria itself, handling matters such as taxation, maintaining public order, economic developnt, education, and infrastructure construction… These are all limited to Austrian territory.
The central governnt, on the other hand, has a different role. These specific administrative tasks fall under the responsibilities of the individual state governnts and do not require their intervention.
However, the central governnt is responsible for the entire New Holy Roman Empire, with its main functions including diating relations between the various states, enacting laws, overseeing the judicial system, conducting foreign affairs, training and managing the military, issuing currency, collecting tariffs, and managing colonies...
It is normal for the central governnt’s financial revenue to be lower than that of the individual states. Aside from inco from colonies, the central governnt relies mainly on seigniorage and customs duties.
While a large colonial territory does not necessarily translate to high financial revenue, it is currently fortunate that the central governnt can basically achieve a balance between inco and expenditure, with a slight surplus.
However, this surplus exists only on paper. Once it passes through the central governnt, it is quickly consud by local construction projects.
In earlier years, when the central governnt faced significant deficits, it had to rely on contributions from state governnts to cover these financial shortfalls. Extracting funds from others was always challenging.
During those tis, the end of each year was particularly painful for the Austrian governnt. They had to patiently persuade state governnts to willingly contribute funds.
With the developnt of colonial economies, this situation changed. There was no longer a need for the central governnt to subsidize expenses.
This change was not welcod by state governnts. Not having to pay ant a decline in their status within the empire.
Politics is quite realistic. Wth the central governnt’s financial balance achieved, rging the Austrian governnt and the central governnt is now on the agenda.
Regardless of whether people are willing or not, this is an inevitable outco. After all, how can one govern once the colonies are integrated?
While the central governnt can directly administer the colonies, if it were to take direct control of the integrated provinces, these provinces would then hold political status equal to that of the state governnts.
Undoubtedly, with the vast expanse of the African continent, its future developnt potential will certainly surpass that of the mainland.
If integration is not pursued now and the system is not established, once these provinces begin to develop, they will undoubtedly seek political rights.
If they eventually transition into an era of democracy and freedom where decisions are made by popular vote, then it would not be far-fetched for the Emperor to lose his throne.
The primary reason for placing the colonies under the empire rather than under Austria was to ensure that all states contributed financially and to have a legitimate claim for enticing immigrants in German-speaking regions.
Now that this had been achieved, it was ti to eliminate redundant structures. Politics is indeed this practical. Franz has already decided to rge the administrative powers of Austria, Bavaria, and Jerusalem.
The year 1875 will mark the last year of separate financial accounting. Thereafter, everything will be fully rged. The governnt will no longer need to deal with the complexities of maintaining two budgets.
Franz took the docunts and began to read carefully. The soon-to-end year of 1875 had been a good one. It was the first ti since his ascension that the Austrian governnt had recorded a budget surplus.
Despite being a re two million guilders, this was still a significant victory.
In the years leading up to his ascension, Franz had often struggled with financial issues, only managing to escape his difficulties after the eruption of the First Near East War which allowed him to profit from the conflict.
Following that, he accelerated the pace of colonial expansion, but the governnt continued to run annual deficits with the best situation being a balance between inco and expenditure.
Now was the era of the gold standard, not a ti for fiat currency. For the governnt to print money, it had to first consider its gold reserves.
Stimulating the economy through fiscal deficits required careful consideration of how much money was available. It was impossible to cover losses simply by printing more money as prolonged deficits would only increase governnt debt.
The governnt’s capacity to bear debt was limited. Once it exceeded that threshold, financial collapse would ensue.
Greece serves as a cautionary tale in this regard. The previous governnt had recklessly distributed benefits without considering the consequences of fiscal deficits, ultimately leading to default.
Undoubtedly, the Austrian governnt also carried a heavy debt burden. The so-called budget surplus existed only on paper and was insignificant compared to its massive debts.
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After a mont, Franz closed the docunt and said, “Let’s use this budget surplus to reduce our debt! Our debt pressure is still quite significant. If we encounter an unexpected situation, we will be in a very passive position.”
At the beginning of the New Holy Roman Empire, small states were concerned that the central governnt would use imperial finances to subsidize Austria at their expense.
To reassure everyone, Franz established a rule: the central governnt could not incur external debt, and any fiscal deficits would be borne by the state governnts.
The effect was quite clear. The central governnt struggled to cover its own expenses and had to rely on the state governnts each year. Every expenditure was strictly audited, eliminating any possibility of misappropriation.
As a result, the central governnt’s fiscal deficit shifted onto the state governnts. Austria, being the largest, had to contribute the most, and with its own investnts in infrastructure, its debt continued to rise.
To date, Austria’s total debt had reached 500 million guilders, nearly 3.2 tis its fiscal revenue, surpassing even the Russian governnt’s foreign debt.
Of course, this calculation was not entirely reasonable. So revenues were not included in the fiscal inco but could still be used for debt repaynt.
However, this figure was still sowhat precarious. During periods of rapid economic growth, it might not pose a problem, but once entering a phase of economic stability or even recession, issues would arise.
Franz did not even ntion the fiscal deficit of the Kingdom of Jerusalem as it was an inevitable outco.
With all agricultural land lying fallow and cities undergoing redevelopnt, expenses were mounting. If Jerusalem were not a holy city, it likely wouldn’t even generate that 220,000 guilders in revenue and would simply be a pure investnt.
Finance Minister Karl replied, “Yes, Your Majesty.”
After a brief pause, Karl added, “Your Majesty, our plan for financial consolidation has t with opposition from the state governnts. There may be trouble in the imperial parliant.”
rging the central governnt with Austria was an inevitable trend that everyone was ntally prepared for. Franz had already discussed it with the kings of the various states, and generally speaking, there was no significant opposition.
There were no issues with administrative consolidation. From the beginning, the Austrian governnt had effectively served as the central governnt, and in reality, both sides had long been one entity.
Given the established facts that had already occurred, the state governnts understood that their opposition would be futile. As long as their own interests were not hard, they tacitly accepted this arrangent.
However, finances are different. The state governnts have continuously been funding the central governnt. After finally achieving a balance between inco and expenditure, it feels unfair to have Austria reap all the benefits. Anyone would feel uncomfortable in such a situation.
There is no room for compromise on this issue. If the finances cannot be rged, how can integration be accomplished?
After hesitating for a mont, Franz made a decision, “If we cannot persuade the state governnts to agree, then we will postpone rging the financials for now.
Let Jerusalem announce its reconstruction plan and prepare the necessary docunts to apply for mbership in the New Holy Roman Empire at the imperial conference early next year.”
The Kingdom of Jerusalem had never been part of the New Holy Roman Empire, but if Jerusalem wanted to join, no one could oppose it.
No Catholic nation could refuse the inclusion of the holy city. Otherwise, public outrage could easily lead to the governnt being overthrown.
Adding Jerusalem to the empire would not only increase the influence of one more state but also introduce a significant challenge.
The Kingdom of Jerusalem was impoverished and just beginning its reconstruction efforts, which would require substantial funding. Undoubtedly, Jerusalem had no money of its own.
Rebuilding the holy city was a religious imperative. Once it joined the New Holy Roman Empire, those expenses would fall on the central governnt. According to convention, this expenditure would ultimately be passed down to the state governnts.
Franz had already devised a plan to rely on the Vatican to raise funds for Jerusalem’s reconstruction from around the world. To this end, he promised governance of the city of Jerusalem to the Holy See.
However, this was still under confidential negotiation. For the Vatican to gain control over Jerusalem, it needed to cooperate with Austria to stabilize the entire Middle East.
This did not prevent Franz from using the enormous costs of rebuilding Jerusalem to exert pressure on the state governnts.
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