ON the eve of the war Hungary was spending six or seven million gold crowns a year to subsidize her merchant marine and had invested over three-quarters of a billion crowns on elaborate harbor works, warehouses and railroad yards at Fiume, her one port. Important results had been achieved. The sea-borne trade of Fiume in 1913 reached about 2,250,000 tons and had begun seriously to rival that of Austria's port, Trieste.

Deprived of Fiume by the war, and surrounded by states which nurse unpleasant memories of the haughty Budapest of former days, Hungary has had to bide her time in the matter of regaining some sort of access to blue water. Hamburg has been bidding for her export trade; but not only is Hamburg distant, but Czechoslovakia or Austria must be crossed before German soil is reached, and even the special rates granted transit trade on the German state railways are not sufficient to persuade Hungarian business men that their natural route lies to the north rather than to the southwest and southeast. Toward the southeast, Hungarian commerce may use the Danube; but in the Black Sea the wheat from the Hungarian plains will face Russian competition, and even at best this is a roundabout route for reaching the Mediterranean and western Europe. Naturally, then, Budapest looks back toward the Adriatic.

Only recently, however, has the Central European political situation developed in a way to make it possible for Budapest to open serious negotiations with either Italy or Jugoslavia, in whose control the Adriatic now lies. Discussions with Italy have turned about Fiume, those with Jugoslavia about the port of Spalato, connected only last year by a broad-gauge railway with the railway system of the Save and Danube valleys. Italy is naturally anxious to attract Hungarian trade to Fiume, which is far from content with the present subordination of its interests to those of its sister Italian ports, Trieste and Venice. Jugoslavia, on the other hand, hopes to break Italy's strangle-hold on the commerce of the Adriatic by building up a rival port, to serve as an outlet for the export trade of Jugoslavia and much of Central Europe as well. Spalato, the port she has chosen for development, is situated about midway on the Dalmatian coast.

Tradition, the superior facilities of Fiume, and the fact that it is about 250 kilometres nearer Budapest than Spalato, predispose Hungary in favor of the Italian rather than the Jugoslav port. But there are balancing factors. Hungarian merchandise must in any case cross Jugoslav territory to reach either Fiume or Spalato, and Belgrade is not disposed to grant special railroad rates for the benefit of Fiume; moreover, she has arranged rates from interior points to Spalato identical with rates from those same points to Fiume. She also is undertaking important improvements in the Spalato harbor. Rail rates being the same, Spalato has an advantage over Fiume in that it lies nearly a day's voyage nearer those Mediterranean and transatlantic ports to which the ocean freight of Hungary, Rumania and Jugoslavia is directed. Incidentally, this competition for Hungarian favors does not tend to sweeten Italo-Jugoslav relations, which are already quite sufficiently sour.

Political elements also enter into the three-cornered negotiations. Rome can see advantages in building up across Central Europe a non-Slavic bloc to counter-balance future Russian influence in the Balkans. Hungary, with Czechoslovakia and Poland as neighbors to the north and Jugoslavia to the south, also has reason to be Slavophobe. The extent to which she fears Slav encirclement may be judged from the fact that serious Hungarian statesmen are willing to talk and write of a union with Rumania under the Rumanian dynasty. A traditional sense of racial superiority and the feeling that Prince Carol would hardly be a dignified wearer of the crown of St. Stephen make this eventuality unlikely. But that it can be talked about at all indicates Budapest's anxiety to secure some non-Slavic friends.

In these circumstances Count Bethlen's recent trip to Rome attracted wide attention. He went ostensibly to sign a general treaty of arbitration with Italy and to negotiate for the use of Fiume. The provisions of the treaty (signed April 5, 1927) are the customary ones found in such general treaties of "perpetual friendship." Regarding Fiume, it was agreed that technical experts should meet promptly to study the question of Hungarian traffic there; indeed, a delegation under the presidency of Baron Szertenyi has already started from Budapest for Fiume for this purpose.

But for the reasons suggested above, European observers were quick to intimate that Count Bethlen's conversations with Premier Mussolini touched on other much more important matters. Count Bethlen, however, has not remained in office longer than any other Prime Minister in Europe without possessing unusual qualities of caution and wisdom. He is unlikely to jeopardize his country's recent remarkable progress in reconstruction for the sake of acting as an anti-Slav spear-head for Italy. Indeed he admitted as much in a statement upon his return to Budapest on April 17, when he remarked that Hungary could not expect to use Fiume without the cordial coöperation of Jugoslavia; and it is likewise to be noted that in order to soothe Jugoslav sensibilities the Hungarian Foreign Minister introduced into the Chamber of Deputies a new commercial treaty with Jugoslavia on the same day (May 3) that the Italo-Hungary treaty was introduced. On the whole, it seems likely that before committing himself irrevocably to either camp Count Bethlen will wait to see on which side of the fence the grass grows greenest, and that meanwhile he will continue playing Rome against Belgrade and try for useful concessions for Hungary in both Adriatic ports.

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