STARVATION prices for agricultural products, strangulation of trade, government bankruptcy, the threat of social collapse, these for over a year must have been echoing with relentless monotony through the dispatches of every diplomat, newspaperman and banking correspondent in Eastern Europe. The paralysis has gripped almost the whole region lying between the Baltic and the Aegean. For the purposes of this article, however, we shall in particular consider five states -- Czechoslovakia, Austria, Hungary, Rumania and Jugoslavia -- lumping them together and christening them "Danubia." We shall concentrate attention on these five states both because they now control most of the territory that once formed the single economic unit called the Austro-Hungarian Empire, and because they recently have been the subject of a definite proposal for economic reform put forward by the French Government.

For some time it has been a question whether the economic chaos in Eastern Europe can be kept from culminating in a major disaster, and whether the Great Powers can themselves avoid being engulfed in it. Critics of the post-war treaties have emphasized that the free-trade area which was Austria-Hungary is no longer free, and have said that this proves the stupidity of the statesmen who met in Paris. The statement goes too far. Certainly many of the troubles of Europe are due to the establishment of new frontiers; but it was not formal action by the Peace Conference but a long history of exploitation of one race by another, of resulting hates and rivalries and hopes, that broke the old Dual Empire into its component racial parts and launched each part on a career of political and economic nationalism. On the other hand, we must not minimize the fact that the establishment of new frontiers did not make the peoples who live along the Danube subject to different laws of life. Today they have much the same needs that they had before the war, and by and large they are equipped to produce much the same commodities as in the past. The problem each has still to solve is how to save its independence and individuality and at the same time give recognition to the fact that it cannot live an isolated existence, supplying domestic needs from domestic resources, and, when it trades abroad, selling much and buying little. Even a great country occupying most of a whole continent is just discovering the ruinous cost of following that phantom aim.

During the last week of February the French Government prepared a memorandum suggesting that the western Powers take joint notice of the threatening situation in the five Danubian states, and that the governments of those states be urged to consult together at once how to lower tariffs and remove trade and exchange restrictions; this action, it was suggested, would have to be preliminary to granting the fresh financial assistance from outside which experts agreed was imperatively needed. As the French and British financial stake in the Danube states is already very heavy, and as any fresh money must obviously come from Paris and London, it was natural for the initiative to be taken by Premier Tardieu of France in close consultation with the British representatives in Geneva and Paris. The Tardieu proposal was promptly communicated to Italy, and soon afterwards to Germany, and was also brought orally to the attention of the Danube governments.

The paternity of the Tardieu plan was from the first considered a question of capital importance in circles where any French proposal is automatically suspect -- among German nationalists, naturally, and among English liberals, one of whom spoke of the plan to the writer as being "just another French trick." Mr. J. L. Garvin hardly hid that such was his idea of it; and in staccato articles in the Observer he rejected anything practicable in favor of anything impracticable. As a matter of fact, this particular effort to bring about an economic rapprochement of the Danubian states originated almost as much with Sir John Simon as with Premier Tardieu,[i] and was not given an exclusively French label until after the British Foreign Minister had returned to London. He there found, as predecessors had found before him -- among them Mr. Henderson, Sir Austen Chamberlain and even Lord Balfour -- that the views a Foreign Minister holds in Geneva must often be watered down when he gets home.

Nor was the initiative of M. Tardieu particularly novel. Many statesmen have sought to minimize the economic results of parcelling out among different racial groups the region once exploited jointly by Vienna and Budapest. Many of their schemes exhibited more inventiveness than thought, and all proved politically impracticable. In scope they varied greatly -- from proposals for a thorough-going customs and even monetary federation of the so-called Succession States, all the way down the scale to proposals for much more restricted arrangements, such as an Austro-Hungarian customs union, a special tariff régime between Austria and Czechoslovakia, the union of Austria with Germany, a "Green Internationale" of the agrarian states, or the development of the Little Entente into an economic as well as a political alliance.

All these schemes, and many similar ones, came to nothing. Once again it was proved that peoples are guided less by enlightened self-interest than by sentiment; while the indifference or hostility of outside Powers proved that they were too engrossed in committing suicide in the grand manner to bother about exterminating what seemed lesser microbes in the world's blood stream. The more ambitious sort of scheme was put forward several times by Dr. Beneš, Czechoslovakia's indefatigable Foreign Minister; but it always met with strenuous resistance outside as well as within the area directly affected. The fate of the most recent effort to promote a customs union between Austria and Germany is well known; the world is still staggering from the train of political and financial events tipped off by the coup de théâtre in which Dr. Curtius and Dr. Schober participated in March a year ago. Italy thwarted the Austrian proposal to unite economic forces with Czechoslovakia, by insisting on being included. The "Green Internationale," to which Premier Stambuliski of Bulgaria devoted much effort in 1921, died when he was killed by the enemies of Jugoslav-Bulgar collaboration. As for the "economic Little Entente," it was discussed as early as May 1927 and the first of several conferences about it was held in Bucharest in February 1929; but though the commercial relations of the three participating countries were somewhat improved no general consolidation resulted and nothing of broad value to Europe was achieved.

M. Tardieu was undeterred by this disappointing record. Events last spring and summer had plainly showed that disaster and panic in Austria and Hungary can spread like wildfire to the centers of the world's wealth and power. A desperate cry for help from Chancellor Buresch of Austria reached Paris just as M. Tardieu was preparing to assume direction of French policy. Soon afterwards French representatives at Geneva were instructed to begin discussions with Sir John Simon about what might be done. The Shanghai affair intervened, however, and it was not until the last week of February that the French Memorandum[ii] outlining a possible course of procedure was drafted. Despite open skepticism and covert opposition in Berlin and Rome, and undiscouraged by applications for consideration which began pouring in from other states (Poland, Bulgaria, Turkey, even Switzerland), Premier Tardieu proceeded to force the pace. He had been invited, like his predecessor, to visit London, and he now indicated his intention of acting on the invitation. Premier MacDonald -- resentful, some think, of Sir John Simon's initiative, and worried by the appearance of too close coöperation with France -- countered by sending invitations to Berlin and Rome for a Four Power Conference to convene in London for a general canvassing of the whole Danubian situation. Premier Tardieu then announced that he would visit London before that Conference met, and actually arrived April 3.

In answer to the criticism that M. Tardieu was improvising instead of thinking out a detailed procedure, his friends point out that some bold initiative was long overdue, and that the way to begin is to begin. To encourage him to act with hope of more success than others had achieved was the fact that the world was obviously dismayed and sobered by the remorseless deepening of the universal economic crisis. To this general consideration was added the special one that England, in so far as her sentiments were revealed by Sir John Simon and Lord Tyrrell, British Ambassador in Paris, seemed to feel more sure of her own ability to ride out the storm and hence more willing and able to participate in some major constructive effort. No one needed to emphasize the gravity of the crisis in most parts of Central and Eastern Europe. The excitement and distrust which had sprung up there following the failure of the Kredit Anstalt had spread like a plague after England's abandonment of the gold standard. Stock exchanges closed, currencies tottered, capital migrated hither and yon seeking safe refuge, emergency exchange restrictions were rushed through in many countries in the effort to keep capital at home; simultaneously trade was slaughtered by embargoes, factories slowed down or came to a standstill, unemployment increased, commodity prices kept slumping lower and lower, uncertainty and distress pervaded every section of the community. The trade embargoes that were set up were varied in some cases by "contingent" arrangements, but these were hardly less stifling to commerce. The situation in which businessmen and bankers found themselves became progressively worse. Money due for goods already shipped could not be collected and unsold goods tied up capital, the while customs receipts fell off and taxes began to be difficult or impossible to collect. Government moratoria appeared in the offing and before long existed either officially or de facto in several states. Most dreadful of all to people who once already had been ground in the relentless mill of inflation, the whisper began to go about that another revaluation of currencies was becoming inevitable. The winter of 1931-32 turned out to be the worst since the cessation of actual hostilities in 1918.

During March the Financial Committee of the League of Nations had been meeting in Paris to consider what steps might be recommended for assisting the countries in most acute distress, above all Austria and Hungary.[iii] Obviously their investigations could only lead to the paradoxical conclusion that several of the states had already hopelessly over-borrowed and could not pay interest on their present debts, yet that they must be given fresh advances. Conscious that France still had money in her pockets, pressed hard for help (in several cases by states politically allied to France), anxious to salvage the loans already made, and encouraged by the fact that the whole world seemed impressed by the gravity of the crisis, Premier Tardieu went to London and urged immediate action. He proposed that the Danube states be asked to agree to cut the tariffs existing between them by ten percent, abolish all import and export prohibitions, abolish exchange limitations, and possibly even establish a common currency. He admitted that the ten percent cut would not in itself be of great value; but he thought it would mark an important reversal of direction, and he urged it as merely a first step. He further suggested that outside states permit the reform to be realized by waiving most-favored-nation treatment, and indicated that if they did France would be willing to give her share of a reconstruction loan, tentatively fixed at about $40,000,000. He did not suggest that outside states accord preferential tariff treatment to the surplus production of Danubia, but enemies of the project suspected that some such idea was also in his mind.

With all this the German and Italian Governments said plainly at London that they would have nothing to do. The Conference was indeed held at a most inopportune moment for Germany, with Chancellor Brüning engrossed in last-minute campaign speeches and unable to risk any appearance of irresolution in defense of German interests, commercial, agricultural or political -- and all were involved. Germany and Italy have important trade interests in the states of the Danube basin, much larger ones than France and Britain. They were not going to waive most-favored-nation treatment without compensation. They would have liked to be included in the proposed bloc; but they realized that to demand this was tantamount to rejecting the scheme entirely. As a compromise they made ready to ask for secondary tariff privileges midway between the rates fixed between the states of Danubia and the rates fixed between Danubia and the rest of the world. As things turned out, however, Herr von Bülow and Signor Grandi did not need to go even so far as to discuss this compromise; they succeeded in arranging for the Conference to fail over mere questions of procedure without incurring opprobrium for blocking the plan as a matter of policy. They simply vetoed the plan unless they were allowed to sit as members of the proposed conference of Danubian states; this demand the French and British declined to accept, and the Conference disbanded. The failure (to which, let it be repeated, French over-optimism and British hesitation also contributed), was to prove a serious blow to M. Tardieu's prestige and a contributing cause of his party's defeat at the French elections a month later.

The underlying reasons that set Germany and Italy against the French plan were obvious enough. To Germany it sounded the death-knell of the Anschluss and of any future revival of the Drang nach Osten. Italy feared the restoration of the power that had been Austria-Hungary and was determined to forestall a new constellation which would end the influence she had built up at Budapest and nullify her efforts to become arbiter of Balkan affairs. Both dreaded the creation of a bloc under the influence of French diplomacy and finance.

The method proposed by M. Tardieu was direct negotiation between the governments of Czechoslovakia, Austria, Hungary, Rumania and Jugoslavia; the Great Powers were to give advice and encouragement, but were not to participate directly in the negotiations or seek favors for themselves. The five governments were to prepare a series of preferential tariff treaties and take them en masse to Geneva. In effect, they would announce that they had done the best they could to reconcile their different interests; it would then be up to the Great Powers to decide whether the scheme seemed for the good of Europe and if so whether they would accept whatever disadvantages it might entail for them individually, or, alternatively, demand special consideration. The method had some aspects which Sir Arthur Salter declares[iv] should be present in any far-sighted tariff reform in Europe at the present time: 1, it offered a first step in a process which might be extended subsequently to include a wider area; 2, the suggested grouping was of contiguous countries, but not of countries forming one political group; 3, while proposing first of all to reduce tariffs between the participating states, it did not rule out as a simultaneous aim the reduction of tariffs between the group as a whole and outside states, in fact it tended in that direction by making a gap in the most-favored-nation system. If Germany and Italy opposed the plan because these points were not sufficiently clear it was open to them to say so plainly. The negotiations could then have gone forward, with the points either reserved for later consideration or implicitly accepted in advance. They preferred to block action with talk about procedure and left outside observers with the feeling that their principal aim had been to defeat France by defeating M. Tardieu.

But let us leave aside for a moment the political reasons responsible for the opposition of Berlin and Rome, and examine the particular economic and commercial factors which in themselves are enough to make any agreement between the Danubian states extremely difficult. Even a perfunctory study of their economic structure and trade relations shows many obstacles to concerted action. To begin with, two of the states, Czechoslovakia and Austria, have strong industries, whereas the other three -- Hungary, Rumania and Jugoslavia -- are mainly agricultural. The three agricultural states have been struggling ever since the war to build up infant industries, and of these they are inordinately proud. Taken as a whole, however, the area is predominantly agricultural, for Czechoslovakia and Austria (each with important and growing agricultural resources) are quite unable to consume the surplus agricultural produce of the other three, particularly as regards wheat, cattle, pigs and dairy products. Further, the trade of the individual states with one other is far from being in equilibrium; and some of them are much more dependent than others on Danubian trade. Plainly, then, the breaking down of local barriers would entail hardships in many special cases, and further disputes would be likely to arise over the basis of the common front which the united region should present to the rest of the world.

Some of the difficulties are revealed in the following tables which give the percentages, in terms of value, for imports and exports for the comparatively normal years 1927-28.[v]



Into Into Into Into Into
Austria Czechoslovakia Hungary Rumania Jugoslavia
from from from from from
Germany 18% Germany 23% Czech. 23% Germany 19% Czech. 19%
Czech. 18  Austria 7  Germany 19  Austria 15  Austria 18 
Hungary 9  Poland 6  Austria 17  Czech. 14  Germany 13 
Poland 9  U. S. A. 6  Rumania 8  Italy 10  Italy 12 
U. S. A. 6  Hungary 5  Jugoslavia 5  France 8  Hungary 6 
Switzerl'd 5  Gr. Britain 4  Poland 4  Gr. Britain 8  Gr. Britain 6 
Rumania 5  France 4  Switzerl'd 4  Poland 7  France 4 
Jugoslavia 5  Rumania 3  Italy 4  Hungary 6  U. S. A. 4 
Italy 4  Jugoslavia 3  U. S. A. 3  U. S. A. 3  Rumania 3 
Gr. Britain 3  Switzerl'd 2  France 3  Switzerl'd 2  Poland 2 
France 3  Italy 2  Gr. Britain 3      Switzerl'd 1 



From From From From From
Austria Czechoslovakia Hungary Rumania Jugoslavia
into into into into into
Germany 18% Germany 23% Austria 34% Germany 14% Italy 25%
Czech. 12  Austria 15  Czech. 19  Austria 13  Austria 20 
Hungary 9  Gr. Britain 7  Germany 13  Hungary 10  Germany 11 
Italy 8  Hungary 7  Jugoslavia 6  Poland 9  Czech. 10 
Jugoslavia 8  U. S. A. 5  Rumania 5  Czech. 7  Greece 9 
Rumania 6  Jugoslavia 5  Switzerl'd 4  Gr. Britain 6  Hungary 8 
Switzerl'd 6  Rumania 4  Italy 4  Italy 5  France 3 
Poland 5  Poland 4  Gr. Britain 3  France 5  Switzerl'd 3 
Gr. Britain 4  Switzerl'd 3  Poland 3  Jugoslavia 2  Rumania 1 
U. S. A. 3  France 1  U. S. A. 1      Poland 1 
France 2      France 1      Gr. Britain 1 
                U. S. A. 1 

When we study these tables we see in what different directions the various states are tugged. Particularly striking is the preponderant rôle played by Germany in the trade relations of Austria, Czechoslovakia, Rumania and Hungary. She sends the first three of these more goods than does any other nation, and in the case of Hungary she ranks second. As a consumer of their products she is of nearly equal importance. Only in the case of Jugoslavia does trade with Germany rank below that with another non-Danubian state: Italy is more important for Jugoslavia than is Germany. The tables reveal a variety of other interesting facts, but one or two will serve to show the difficulty of safeguarding individual interests in any common plan. Certain states, for example, are much more important to others as purveyors than as outlets for goods. Thus Czechoslovakia and Austria are vital as markets for Hungarian goods, but their exports to Hungary are not of first importance to them. Jugoslavia, on the other hand, has little to do with Hungary either in imports or exports; her regional trade is chiefly with the two industrialized states, Austria and Czechoslovakia; and a quarter of all her exports go to Italy.

Not only are the interests of the individual states in part different; in each there exist special interests which oppose whatever concessions might be necessary to reach agreement. As already mentioned, the governments of the three predominantly agricultural states have been subsidizing industries with the aim of producing a "balanced economy." These infant industries will fight tooth-and-nail against opening the doors to foreign industrial products (even to the extent of 10 percent tariff reductions) in exchange for concessions regarding agricultural exports. Important, too, is the peasant opposition in Czechoslovakia and Austria to any letting down of the barriers against agricultural products, for in many cases these can be produced in Rumania and Jugoslavia more cheaply than in Czechoslovakia and Austria and the agriculturists in the latter countries fear disastrous competition. The situation is particularly difficult for Dr. Beneš, as the government of which he is foreign minister depends on agrarian support to remain in power.

Now let us put into the record a table revealing to what degree the same five states of Danubia are individually dependent on trade inter se, in contrast with their trade abroad. (Like the foregoing tables, this shows percentages of value for the years 1927-28.)



Imports Exports
Hungary 53 Hungary 64
Jugoslavia 46 Jugoslavia 39
Austria 37 Austria 35
Rumania 33 Rumania 33
Czechoslovakia 18 Czechoslovakia 31

To Hungary and Jugoslavia, evidently, the regional trade of Danubia is enormously important; and to Austria and Rumania only slightly less so. But this is much less true in the case of Czechoslovakia; in fact, she imports more from Germany (23 percent) than she does from the other four Succession States put together (18 percent). Here is a cleavage of interest between four of the Danubian states, who are their own best customers, and Czechoslovakia (the soundest of the lot economically and financially), who has built up a flourishing trade far afield and who thus has strong commercial reasons for demanding, first, that no Great Power secure special favors in Danubia, and second, that no agreement be reached without the consent of all the Great Powers.[vi]

Let us now complete the picture by adding a table showing what percentage of the trade of certain other countries is supplied by the Danubian states:



Imports Exports
Bulgaria 27 Poland 28
Greece 18 Bulgaria 24
Poland 16 Germany 12
Italy 9 Italy 9
Germany 8 France 7
Great Britain 1 Greece 5
France 1 Great Britain 1

Here the most surprising revelation is that the trade of France and Great Britain with these five states, in which Paris and London have taken such deep financial and political interest, is so small. France sends the Danube states only 7 percent of her total exports, and they supply her with only one percent of her total imports; Great Britain sends them only a little more than one percent of her total exports, and they supply her with only one percent of her total imports. Contrast these figures with Germany's exports to Danubia, amounting to 12 percent of her total export trade, and her imports from Danubia, amounting to 8 percent of her total import trade. Further, contrast the small commercial interest of France and Great Britain in Danubia with their very considerable financial interest, as revealed by the following table of post-war loans and credits made in Paris and London to governments of Eastern Europe, and still outstanding.



French loans (in francs) British loans (in pounds sterling)
1923 Austria 124,437,000 1919-21 Jugoslavia 1,945,000
1924 Jugoslavia 263,300,000 1919-21 Poland 4,007,000
1924 Poland 216,300,000 1919-22 Rumania 2,101,000
1927 Poland 51,000,000 1919-23 Austria 8,825,000
1928 Bulgaria 129,125,000 1921 Poland 614,000
1929 Rumania 534,202,000 1922-24 Czechoslovakia 4,100,000
1931 Poland 300,000,000 1923 Austria 10,748,500
1931 Jugoslavia 676,000,000 1923-27 Rumania 1,613,700
1931 Rumania 575,000,000 1924 Hungary 6,422,600
1931 Hungary 354,000,000 1924 Greece 7,100,000
1931 Jugoslavia 250,000,000 1926 Bulgaria 1,700,000
1932 Czechoslovakia 600,000,000 1927 Poland 1,680,000
    -------- 1928 Bulgaria 1,500,000
    4,073,364,000 1928 Greece 3,360,000
      1928-31 Greece 5,931,700
      1929 Rumania 1,901,100
      1930 Austria 3,000,000
      1930 Hungary 1,000,000
      1931 Austria 3,000,000

In other words, we may calculate that at present exchange rates France is owed about $160,700,000 by the governments of Eastern Europe, while Great Britain is owed about $259,000,000. In addition, of course, great sums of French and British capital have been invested in private enterprises. There is also the pre-war investment, which is still large even though it has been much written down.

We have now sufficiently indicated the clash of economic policy between some of the Danubian states, and we have shown that the interests of groups within states are discordant; enough has also been said to show how different are the predominant material interests of France and England -- financial -- from those of Germany and Italy -- commercial. No wonder it has proved hard to arrange a trade when payment is to be made in such different coin. And certainly no trade will ever be arranged unless outside nations are far-sighted enough to sacrifice some immediate advantages in order to create a more prosperous area with greater buying power.

Overriding in importance all the material difficulties are the difficulties arising out of the fact that Europe is divided politically into two rival camps, with Great Britain hesitating on the outskirts. France tries to keep the Little Entente states within her orbit, Germany hopes to tempt or force them within hers, England would like to continue holding the balance.

A powerful section of German opinion favors postponing any decision; this school believes that a catastrophe is inevitable and necessary, and that amid the ruins of Central Europe the future German Reich, monarchist or republican, can build a new power on fairer terms of competition than prevail today. Those who hold these political views are reinforced by the domestic interests opposed to any lowering of tariff barriers. It is true that Germany is living today by means of her active trade balance, and it is also true that her exports are tending to diminish, so that she might be expected to welcome agreements which would restore prosperity in the Danubian basin and hence enable her to increase her sales there. But an entirely disproportionate amount of influence is exercised in all German tariff, tax and banking matters by the Farmer's Party, of which the landowners in East Prussia are the head and front. By tradition and conviction President Hindenburg is a staunch upholder of this group, and through him it has secured all sorts of favors. It is strongly protectionist, and for both practical and theoretical reasons it will resist any suggestion that the German export trade be shown any favors, especially if it scents in the offing a proposal that new outlets for German industries be bought at the prices of increased agricultural imports.

In France aims are mixed. Nobody would claim that French credits of recent years had been free from political considerations; every franc was meant to play the rôle of an "iron man." But France realizes that the situation is deteriorating rapidly, and that a general crash looms up as a possibility. She is reluctant to lend more money, whether for political or economic objects, and she is much concerned about the fate of what she has already lent. She will give no more homœopathic subsidies simply to postpone the evil day.

Germany is perhaps wrong in thinking that she can wait with impunity for the time when France in desperation makes a better offer. The lesson of the chain of events started by the Kredit Anstalt failure a year ago should have taught her that disaster in Vienna can touch Berlin very quickly. And this time social disaster is not excluded; for it must be recognized frankly that although communism is not an active force today in the Danubian states the impulse to seize land, repudiate debts, and in general start afresh is becoming dangerously strong. It is almost inconceivable that the present governments could survive another currency inflation. Second thought, then, may make the Germans more ready to compromise than they were in London in April.

But what shall the compromise be? Hardly what one high German official foretold to the writer -- a Franco-German partnership in Central Europe, France supplying the capital and Germany the "experience" (he did not add the word "talent," but meant it). It is true that German business men have had long experience in dealing with Vienna -- and Vienna is still the "door to the East." But the offer to contribute experience is not enough. The decision facing Germany is twofold. Does she or does she not intend to try and recreate Mitteleuropa? Supposing the answer is in the negative, does she want to act now to help restore the Danubian market for her goods, or delay until after there has been another crash? As already noted, a section of German opinion favors the second course. But it is arguable that Germany, if the prosperity of Danubia were restored, would stand to sell more goods there even if in the agricultural states her manufactures had to compete at a disadvantage with the manufactures of the industrial states. Before the war (1913) Germany sold to the 55,000,000 inhabitants of the Austro-Hungarian Empire 10.9 percent of all her exports, and took from them 7.7 percent of her total imports; the balance in her favor amounted to 277,300,000 gold marks. She enjoyed no privileges in Austria-Hungary beyond the equal treatment accorded her goods under the most-favored-nation clause. As for Italy, she in 1913 sent 8.80 percent of her exports to Austria-Hungary and in return took goods amounting to 7.26 percent of her total imports -- not a bad business for a country always more of an importer than an exporter. The area of Danubia is not just the same as that of the Hapsburg Empire, and important industrial and agricultural developments have taken place since 1913. Nevertheless, is it unreasonable to suppose that today Germany and Italy, without any advantages except the most-favored-nation treatment implicit in the French plan, could trade with equal profit with the 62,000,000 inhabitants of Danubia? They did not need special privileges before. They still have the enormous advantages of geographical proximity and of experience.

At this point a word should perhaps be said about the attitude of Poland, whose exports to the five states of the Danubian bloc comprise over a quarter of her total exports, and whose imports from those states comprise about 15 percent of her imports. Poland has been satisfied with this favorable balance of trade, and on the whole thinks that an arrangement like that suggested by M. Tardieu would not harm her interests provided no outside Power secured special favors. The Polish press, indeed, has occasionally preened itself over the fact that the plan, by omitting Poland, implied a recognition of the soundness of Polish economy. On the other hand, the Pilsudski Government was not a little aggrieved by the recent French loan to Czechoslovakia, by recent measures to repatriate Polish workers who had immigrated into the industrial districts of Northern France, and by the failure of the Polish railways to secure further French funds for constructing the Gdynia railway.[vi] If opposition to the formation of a Danubian bloc should develop in Poland it will be due to a desire to secure French concessions in the above matters in return for Polish acquiescence, or to fear that in the end Germany is likely to be granted some special favors. Should there be an "intermediate" preferential zone for Germany and Italy, then Poland is prepared to demand that she be included in it.

To the Danubian governments it must be said frankly that though the lowering of tariffs will entail immediate loss and suffering to certain groups of their citizens they have no choice but to accept the fact stoically and get through the subsequent read-justments as best they can. Prompt action will revive confidence in their good sense and good will, and will authorize them to expect the maximum financial help that the distraught money markets of the world are in a position to give. It may console them, too, to realize that unless they agree to coöperate they face complete ruin, not for one class or set of interests only, but for the entire population, to the accompaniment perhaps of uprisings which would transform the whole established social order. To the extent that industries in these small states are artificial they in any case face eventual extinction; and those farmers whom specialization and the adoption of modern methods do not equip for more or less free competition with their foreign rivals will have to discover other ways to subsist. Governments will find it painful and unpopular to accept these facts, but a refusal to do so will not alter the result, it will merely aggravate its unpleasantness.

Conditions in Danubia will not stand still, either while the small states haggle or while the German Government pursues the individualistic policy by which it hopes to avoid coming to grips with agrarian opposition at home and to prevent the creation of a constellation of states which would block the road of future expansion towards the south and east. France is in a position to offer concessions to soften the distrust which Germany feels for any proposal emanating from Paris. The discussion over both armaments and reparations is at a most critical stage, when decisions cannot be long postponed. If to the advantages which a large section of German business life would find in coöperation with the Danubian countries could be added a political prize to offset the seeming abandonment of the Anschluss project, then Germany might be brought into line. She must know, too, that London is quietly debating the future of the most-favored-nation clause, and that after the Ottawa Conference Britain may be found siding with France in working towards its abolition. She is running a risk, then, of "outstaying her market."

As to Italy, might she not employ this occasion to secure a favorable solution of questions which Rome and Paris have been debating fruitlessly for months and years? Would not a settlement of the status of Italians in Tunisia and of the frontiers of Libya (not to touch the outstanding dispute over naval parity) offer Italy more than enough compensation for acquiescence in a plan which in any event might well prove more beneficial than harmful to Italian commerce? Further, would she not rather see Austria coöperate with her small neighbors than face the possibility that some day she will unite with Germany and bring the German frontiers to within fifty miles of the Adriatic?

The United States Government is not likely to favor the German and Italian desire for preferential treatment. Washington made no declaration regarding the Tardieu plan, but its opinion must be fairly plain. It will not protest the abrogation of most-favored-nation treatment as regards the mutual trade relations of the Danubian states. But it could not view with equanimity any outside state's demand for special favors; it would demand that equal treatment be accorded American commerce. At the same time, if the Danubian states were able to produce a promising scheme, and if Germany or Italy could demonstrate a need for some sort of special treatment as regards specified commodities (possibly a quota arrangement), and if other Powers like France and England acquiesced "for the general good," then it is conceivable that Washington's protest would not be strenuous or persistent.

Whether or not a plan is worked out will depend in no small measure on England's activity in encouraging (and helping) France to go as far as she can, in pressing Germany and Italy to come half way to meet her, and in establishing all-round confidence that in dealing with the serious task which lies to hand impartial pressure will be put on all concerned to show farsightedness and self-abnegation. There is no need to recall Britain's enormous interest in quickly releasing some of the brakes now clamped on the wheels of European business. Her influence, if she once made up her mind to use it, might well be decisive, particularly in the case of Italy. Thus although the circle in which the destinies of Danubia are revolving seems ironclad, some way of breaking it may yet be found. The prod of hungry and angry people is being felt strongly in their homelands, and the echoes of their threats are heard in the world capitals. Will the response come promptly enough to forestall blows which will send the whole continent reeling?

[i] The British Government, moreover, had already taken independent action in somewhat the same sense. In January 1932 it had asked the German and Italian Governments to express an opinion regarding a customs union of the five states mentioned above, plus Bulgaria, but had drawn back in face of what Dr. Gustav Stolper calls the "prompt and negative" reply of Berlin (Deutsche Volkswirt, March 11, 1932).

[ii] Officially dated March 2. For text see London Times, March 18, 1932.

[iii] See Report of 45th Session of Financial Committee (1932. II. A. 5); summarized in the London Economist, April 9, 1932, p. 785-6.

[iv] "Recovery," Chapter IV.

[v] The tables give average figures for the two years 1927-28. Fractions are omitted. The tables are based on the League of Nations "Memorandum on International Trade and Balances of Payments, 1927-29," Vol. III (Geneva, 1931), supplemented by the statistical annuals of the various individual countries. Further details may be found in "Statische Grundlagen Innereuropäischer Handelspolitik," by Dr. Richard Riedl (Vienna: Walter Rothschild Verlag, 1932).

[vi] See the speech by Dr. Beneš before the Foreign Affairs Commissions of the Czechoslovak Parliament, March 22, 1932 ("Sources et Documents Tchécoslovaques, No. 17." Prague: "Orbis," 1932); also Central European Observer (Prague), March 11, 1932.

[vii] This table, while not assuming to be absolutely complete, nevertheless indicates the general magnitude of the obligations of East European governments incurred in France and Britain since the war and now outstanding. The figures have been corrected by the latest information procurable from government representatives in the United States and from various banking houses. Round figures have been used in some cases; and in figuring present exchange values no account has been taken of any possible repayments in gold. All Eastern Europe is included in this table because financially the whole area is apt to stand or fall together.

[vi] See Frankfurter Zeitung, April 28, 1932.

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