The Landau initiative was part of a British-backed bid to pressurise Austria and Italy into a peaceful agreement over Venetia. Other possibilities floated at the same time included the exchange of Venetia for Rumania, where a revolt had overthrown the elected Prince Nicholas Cuza, and the exchange of Holstein for Glatz (again).
In the first instance, these efforts failed because, once again, the Austrians would not hear of selling out. Even before he relayed the Landau proposal to Esterházy, Anselm urged that Landau should not accept the Italian mission, in the belief that the proposed sale of Venetia would be rejected out of hand. If Landau came to Vienna bearing such dishonourable proposals, he would bring the Rothschilds further into disrepute as “partisans of Italy”:The Cabinet here is afraid of nothing. If the need arises, it will take the bull by the horns[?]; without the assistance of France, and I hope it will lack this support, the Italian army will exhaust itself in vain effort against the forts of the quadrilateral. The question of the duchies [of Schleswig and Holstein] is generally considered a question of honour, that of Venetia a question of material existence. [The government] turns a deaf ear to an offer of money on the part of Prussia; it would be more deaf than ever to such an offer from Italy, whose pockets in any case are empty.
Esterházy’s rejection of the Landau offer and Prussian allegations of Austrian troop movements only served to confirm this gloomy assessment. By the time the British government formally proposed the sale of Venetia for £40 million, it was too late. The Italian announcement of a domestic bond issue worth 250 million lire could now only be construed as a measure to finance military preparations. On April 8 the Italians secretly signed an agreement with Prussia, binding for just three months, to go to war against Austria if Prussia did, in return for which they would get Venetia. This gave the Italians the confidence to withstand a barrage of Rothschild criticism—criticism which was only intensified by the Italian government’s decision to impose a levy on all bondholders. Accusing the Italians of having “dealt a death blow to the credit” by their foreign and financial policy, James issued an unveiled threat: if the Italian government attempted to raise another foreign loan, “I declare to you in the most formal manner that I, who have been the patron of Italian funds in Paris, would repudiate completely all new dealings with Italy and that I would refuse henceforth to charge myself with the payment of the interest on the Italian debt . . .” He was equally furious with Bismarck: the Italian alliance convinced James that he was “a fellow who just wants war. I do declare the fellow is too bad and I will stand by Austria with the greatest pleasure in order to topple that wretched Bismarck.”
Yet it was neither Prussian aggression, Austrian intransigence nor Italian insou ciance which finally defeated the efforts to avert war. In fact, for all their talk of honour, once the politicians in Vienna grasped the imminence of war they bent over backwards to find a compromise. On April 9 the Austrian ambassador in Paris, Metternich, intimated to James that Austria would “give in” if France sided with Prussia. It was a message he repeated the next day, as James recorded:It looks as if Austria is, like all the powers, in need of money, which makes me continue to believe in peace ... Metternich says that Austria will offer anything to keep the peace, and in the end will probably give in ... Austria needs 8-10 million gulden. Will do everything we want and accept all conditions. It will sicken me if they are forced to give in to Prussia.
As that final comment suggests, James was increasingly sympathetic to the Austrian position. But the crucial point is that he expected an Austrian capitulation. And indeed that seemed to be on the cards, even after Bismarck had made his obviously unacceptable Gablenz proposals to give Schleswig and Holstein to a Prussian prince. It was not until May 28 that Austria finally rejected this “compromise”; and only on June 1 that she asked the Confederation Diet in Frankfurt to settle the question—the breach of the earlier Austro-Prussian accord on the duchies which gave Bismarck his casus belli. Even then, Austrian troops withdrew from Holstein without a fight.
In the end, it was French policy which prevented a peaceful outcome. From an early stage, the Rothschilds had realised that the role of France would be decisive: if she acted as honest broker between Austria and Italy, James reasoned, then an agreement might be reached; but if she encouraged the Italians to throw in their lot with Bismarck, war seemed almost inevitable. It was perhaps the most important decision of Napoleon III’s career; and, characteristically, he tried to have it both ways. In Vienna Anselm was given to understand that France would side against Prussia in the event of war; James and Alphonse too began to think in these terms, though they suspected Napoleon of merely wanting “to fish in troubled waters” rather than to deter Prussia. They were right: far from urging restraint, Napoleon was in fact secretly advising the Italians to accept Bismarck’s offer. Indeed, it was the realisation that Napoleon was fomenting war rather than discouraging it which prompted James to make his final, vain bid to preserve peace. The irony is that his success in reversing French policy may well have had precisely the opposite effect.
James did not need to invent a financial crisis to bolster his arguments against war: the European stock exchanges were already sliding into full-scale panic. This was only partly because of the fear of war: as it happened, the diplomatic crisis also coincided with a banking crisis in both England and France, which had its roots in the return of the international cotton market to normality following the end of the American Civil War. The Rothschilds were themselves affected by this crisis, but much less severely than the joint-stock and investment banks: indeed, the principal victims of the crisis were to be the London bank of Overend, Gurney and the Credit Mobilier. For Lionel and his sons, the crisis was bad enough to keep them at New Court during the Sabbath and the “immense city failures” dominated conversation from the House of Commons to Lady Downshire’s ball. To James, however, the fall in share and bond prices was almost welcome; unlike his rivals, he was “praise God in debt to no one”—indeed, he sent the London house £150,000 to ease its difficulties—and the crisis provided him with an ideal diplomatic lever. His aim was to persuade Napoleon III that the negative economic consequences of war would outweigh any international (and hence domestic political) gains it might bring.
He began his campaign on April 8, the very day of the secret Prussian-Italian alliance. As Natty reported, “he had a long conversation with the Emperor at the Tuileries last night and tried to impress on His Majesty the necessity of remaining at Peace.” It was an argument James repeated when he saw the Emperor again three days later, in an effort “to persuade him that war would be the greatest misfortune for the economy”—a view seconded by Pereire. As Alphonse reported, Napoleon sought to reassure him:Prussia thinks she can count on the support of France. But there is nothing in that, and even as she secretly encourages Bismarck in his adventures, France will preserve her freedom of action, and reserves the right to act according to the circumstances. The Emperor would like to see the question of Venetia resolved. If Austria agrees, he would march firmly with her, and Prussia would pay the price of her follies.
Two weeks later, having been assured by Walewski that war was unavoidable, James went to see Napoleon yet again “to preach peace.” He now found the Emperor “very preoccupied,” as Alphonse recorded:He said that he considered the question closed and that he did not think that Bismarck could remain in office, and that as for himself, he had not wanted to get mixed up in the quarrel because all he would have done would have been to exacerbate it by his intervention ... But he received that instant ... the news that Austria was putting its army on a war footing in Italy ... My father asked him why he did not intervene to bring about an understanding between Austria and Italy. The Emperor replied that this could take place only through war, as Austria did not wish to listen to any proposals, and that he had proposed the [Danubian] principalities, but they had wanted Silesia.
As this indicated, Napoleon was still inclined to side with the Italians,
insisting that they had yet to begin military preparations. It was his old game of backing the revolution wherever it might break out, and when he said as much, denouncing the treaties of 1815 in a speech at Auxerre on May 6, the Rothschilds were appalled. The effect of the speech on the Paris bourse was devastating. It marked, wrote Alphonse the next day, “a new era and one can no longer even conjecture what will happen now in the world, and what revolutions Europe will have to endure before returning to equilibrium.” At a ball given by the Empress at the Tuileries that night, Mérimée noticed that “the faces of the ambassadors were so long, that one would have taken them for people condemned to death. But the longest of all was that of Rothschild. They say that he lost ten millions the evening before.” It was in fact after the Auxerre speech—which caused renewed panic on the Paris bourse—that James coined his famous epigram: “L‘Empire, c’est la baisse.”
It is conceivable that, had Napoleon been consistent in backing Italy and (by implication) Prussia against Austria, the Austrians might still have backed down. Yet at the eleventh hour—perhaps partly because of James’s badgering—Napoleon seemed to come to Austria’s rescue. The diplomatic compromise was foreshadowed economically. First the Credit Foncier offered another cash advance, as requested by Metternich. Then the Lombard company’s annual general meeting in Paris on April 15 was a “brilliant success”—which also seemed to reaffirm the economic links between France and Austria. The crucial development came in the course of May, when Austria unexpectedly offered to cede Venetia to France (which might then hand it over to Italy) in return for support against Prussia. Although Napoleon dithered, reverting to his hobby-horse of a Congress, this remarkable and often misunderstood initiative bore fruit on June 12, when Austria and France signed a treaty guaranteeing French neutrality. Throughout the negotiations, James played an active role in promoting French “goodwill towards Austria,” regularly seeing Rouher, the British ambassador Cowley and Napoleon himself Typically, he had his own private anti-Italian agenda, enlisting the French government’s support in his private quarrel with Italy over the tax on rentes. He also held out as an incentive to the Austrians the prospect of renewing the existing Rothschild short-term credits in Vienna, though the Austrians retorted with quibbles about their contract with the Lombard line.
Bismarck had told Bleichröder on May 23: “The Emperor [Napoleon] can still make peace if he wants.” This was not quite true; for in bolstering the Austrian position Napoleon was in fact contributing decisively to the outbreak of war. The treaty of June 12 was predicated on the assumption that, with France neutral, Austria could not only defeat but dismantle Prussia and Italy: in return for relinquishing Venetia, Austria intended nothing less than the restoration of the Bourbons in the Two Sicilies, the Pope in central Italy and even the old duchies of Tuscany, Parma and Modena. Prussia would be reduced to the frontiers of 1807, losing Silesia to Austria, Lusatia to Saxony, and her Rhine provinces to Hanover, Hesse-Darmstadt, Bavaria and Württemberg. Although Bleichröder had been talking as if the war had already begun since May 4, it was only really after June 12 that Austria decided to fight rather than capitulate. Indeed, James himself regarded the war as not having begun until June 13. Thus it was French policy—at once encouraging Italy and Austria to fight—which turned what might have been a phoney war over Schleswig-Holstein into a full-scale war over the future of Germany and Italy. Without his intending it, James’s efforts to secure peace by shifting Napoleon from a pro-Italian to a pro-Austrian position had tempted the Habsburg regime to stand and fight on both fronts.
Silver Linings
The Rothschilds had tried to stop the war of 1866; they had failed. The costs of this failure for Austria were high: contrary to the expectations of most contemporaries—the Rothschilds included—she and her German allies were decisively defeated by Prussia in the field, a defeat which counted for infinitely more than the Austrian victories over Italy. This time, the Rothschilds had backed the losing side. Moreover, the ramifications of the battle of Königgrätz seemed and were immense. “Casca il mondo,” said the Papal nuncio, and with reason. Bismarck’s alliance of Prussian conservatism with democracy, kleindeutsch Liberalism, Italian nationalism and even the Hungarian revolution truly turned the world upside down.
The dismay of the Austrian Rothschilds was understandable: “In consequence of the terrible news from the battlefield,” Anselm’s son Nathaniel wrote after Königgrätz, “I feel so deeply upset and depressed that I am hardly able to write.” Nor was this just pained patriotism—though Anselm affirmed the existence of this with his donation of 100,000 gulden for the care of the wounded. (He also firmly resisted efforts to distinguish between Jews and non-Jews in the Austrian army).8 Until the preliminary peace had been signed at Nikolsburg on July 26, there seemed every chance that the Prussian army would continue southwards to Vienna itself. As it was, Rothschild properties in the vicinity of the battlefields came directly under Prussian control. Communications to the Rothschild-owned ironworks at Witkowitz were cut off, so that the workforce could not be paid. It was reported that Schillersdorf had been occupied—allegedly by members of the Prussian-backed Hungarian legion—and “a great part of the game” plundered. In fact, when Ferdinand arrived there in September, he found a handful of Prussian cavalry officers; on the day they left, he reported crossly, “they cantered their horses all over the gravel paths in the park. One of them had a hedge put up under my window, and kept jumping over it backwards and forwards. All the English servants were looking on and laughing at his want of skill.”
In Frankfurt too there was horror; and again this reflected the direct threat posed to the town itself by Prussian arms. From an early stage, Mayer Carl had recognised the vulnerability of Frankfurt “in the centre of it all” and his hopes of remaining on “good terms with both parties” were soon shattered. He himself could not help siding with the majority of German states and the Confederation itself against Prussia. “Now that hostilities have begun,” he wrote on June 11, “we must hope that Prussia will get a famous licking and be well punished for her unaccountable conduct which is considered by everyone as quite unheard of in the annals of ancient & modern history.” By June 20 preparations were under way “to keep the Prussians at a distance” from Frankfurt; but it was obvious when they prepared to attack the city on July 8 that resistance would be futile, and Mayer Carl hurriedly sent his daughters off to France. On July 17, after another decisive Prussian victory over troops of the Confederation, the town was occupied. “In a great state of perturbation and anxiety,” Mayer Carl’s wife Louise described to her sister-in-law Charlotte:the insolence of the Prussians, of their actual robberies, for it seems they go into all the shops, select the most beautiful and most costly articles and never think of paying for anything. In Willy’s house on the Zeil the soldiers occupied every room, with the exception of Matty’s [Hannah Mathilde‘s] dormitory, and would drink nothing but Champagne at their meals!
If it were true that by now the Rothschilds were beginning to be assimilated into their respective national milieus, such feelings would presumably have been much less pronounced in neutral London and Paris. But they were not: the entire family seems to have identified itself with the Austrian-German side. When the Italians received what James called “a real hiding” from the Austrian army at Custozza, he was delighted: “It will do them good,” was his verdict, “and will make it easier to arrive at peace.” As for Prussia, Mayer Carl’s fears that the French house might belatedly succumb to Bleichröder’s appeals for assistance were surely unfounded: James exclaimed that he “heartily wished Austria to give the damned Prussians a good licking, as they have messed everything up.” The news of Austrian losses on the eve of Königgrätz therefore made him “half crazy.” “I declare,” he told his nephews, “I am wholly [pro-]Austrian this time, as the war is just too unjust.” Even his eight-year-old granddaughter Bettina was “very angry with Mr Bismarck for having taken Venice [sic].” “Will it depend upon Mr Bi
smarck,” she asked her English grandparents, “whether you go to Gunnersbury or some other place?”
But what could be done? Whereas a number of those close to the Emperor continued to urge an anri-Austrian policy on him, Alphonse had discerned as early as April the dangerous implications of a German war for France. Napoleon’s indecision—his encouragement of both Italy and Austria to fight—had left him not the arbitrator he had hoped to be, but a mere spectator. On July 1 Alphonse astutely summed up the contradictory nature of French policy:If the Austrians win, our government will align itself with them, if they lose we will fall on them ... It is probable that two observation corps will be formed before long, one on the Rhine and the other on the Alps. As a precautionary measure rather than with a predetermined objective, because the Emperor is said to be very uncertain, and adopts a cold and reserved tone in his relations with Prussia. France is playing for big stakes, in effect. The preponderance of the Prussians in Germany would be an immense danger which would not even be compensated for by the acquisition of the Rhineland provinces ... So all public sympathies are for the Austrians, though because no one knows what the Emperor thinks, people dread their success as much as they wish for it, for L. Napoleon’s friends are agitating a great deal in favour of Prussia.
The House of Rothschild Page 27