The House of Rothschild

by Ferguson, Niall

  There is no question that Bismarck set out to back the Hohenzollern candidacy with the intention of provoking France. As early as July 8, he spoke of “mobilising the whole army and attacking the French.” This was at least partly because he saw a foreign policy crisis as a way out of the internal deadlock over the financial question and the South German opposition to unification on Prussian terms. On July 10, for example, he confessed that “politically a French attack would be very beneficial to our situation.” Bismarck’s difficulty was in overcoming the reluctance of Leopold’s father Karl Anton and, more important, the unwillingness of William I to quarrel with France over the issue. In fact, Leopold had declined the candidacy on April 22, and it was only after much persuasion that Bismarck overturned this. A further difficulty arose when a cipher clerk in Madrid incorrectly decoded the Spanish envoy’s message conveying Leopold’s acceptance; this meant that instead of remaining in session to elect Leopold, the Cortes was dissolved, creating an unforeseen delay.

  It was a war of crossed wires: when they met at Bad Ems on July 9, William intimated to Benedetti that he would not be opposed if Leopold once again withdrew, but the more conciliatory part of the latter’s telegram to Paris was rendered indecipherable by climatic interference during transmission. Still, when Benedetti returned to pester William the next day, he was granted an audience. Although William refused to ask Leopold to withdraw, on the ground that it was purely a matter for the Hohenzollern-Sigmaringens, he instructed Werther, his ambassador in London, to assure Gramont of Prussia’s peaceful intentions. On July 12 Karl Anton declared that his son would not, after all, be a candidate. At their meeting outside the Kurgarten the next morning, William famously declared to Benedetti: “Eh bien, voilà donc une bonne nouvelle qui nous sauve de toutes difficultés.” That afternoon he went further, telling the ambassador that he approved Leopold’s withdrawal “in the same sense and in the same degree in which he had given his approval to the acceptance,” that is, “entirely and without reservation.”

  While all this went on at Ems, Bismarck was to some extent “out of the loop,” though he was already preparing the German press for some sort of démarche. He regained control of events only on July 13, when he received the famous telegram from Ems relating the gist of William’s encounters with Benedetti. Bismarck’s rewriting of this telegram for publication in the press correctly stated the King’s view that he could not undertake “in perpetuity never again to give his consent” to a renewed Hohenzollern candidature, but made it seem that William had subsequently refused to see Benedetti because the French demand had been offensive to him. This was not at all the sense of the original, and was calculated to affront Gramont. Bismarck proceeded to use the doctored telegram as the basis for an anti-French propaganda campaign directed at both domestic and foreign opinion.

  Thus Bismarck made Prussia’s policy more aggressive than his supposed master would have wished. Nevertheless, the blame for the war cannot be laid exclusively at Prussia’s door. The French had been signalling their opposition to a Hohenzollern candidacy from March 1869 onwards. When the news of it broke in Paris on 2—3 July, the immediate reaction was bellicose. Gustave summed up the French mood. The markets were “cool,” but:you cannot imagine the effect which this news this morning has had on the public as much as on the government, not to allow at any price that the prince should be named King of Spain and that in order to prevent this one will not recoil from war with Prussia. Never, it is said here, and it is the opinion of the Emperor, will there be a better occasion to make war on a more popular issue than this.

  Accordingly, on July 6, the French government approved a highly inflammatory declaration drafted by Gramont to be read in the Legislative Body. As Gustave discerned, Gramont’s “violent” language was a true reflection of the government’s position: nothing less than an “absolute veto by the king” of the Hohenzollern candidacy would satisfy them, and if Leopold were to accept the crown it would be regarded as “a declaration of war.” “Here,” he repeated, “one is all ready to make war, and one considers that one will never have a better and more popular occasion to do so.”1 When Gustave saw the French Prime Minister Ollivier, he was warned that France would use “every means” to stop the candidacy, “even war, and under such circumstances it will be a war of enthusiasm as in 89.” “The Emperor is going to get what he wants,” Gustave predicted, “war imposed by a parliamentary vote.”

  The crucial French step in this direction was Gramont’s insistence on July 12—after Leopold had withdrawn—that Benedetti demand from William a gratuitous and uncalled-for “assurance that he shall not again authorise this candidacy.” It was never likely that William would give such an assurance and Gramont’s repeated insistence that Benedetti ask for it was obviously designed to provoke Berlin, as was the request for a letter of apology to Napoleon. In the same reckless way, instead of resting content with William’s last conciliatory words to Benedetti, Gramont seized on the Ems telegram as a casus belli and secured French mobilisation on the afternoon of July 14—though not before Napoleon had once again dusted off his dog eared solution to all diplomatic difficulties: a congress. It was too late. On July 15 Ollivier and Gramont presented the Chamber with a version of the events at Ems just as distorted as Bismarck‘s, and war was declared. It was not until after the news of this reached Berlin that William agreed to Prussian mobilisation. “France is determined to pick up [sic] a quarrel,” concluded Mayer Carl. It is hard not to agree, even if it was a quarrel which was welcome to Bismarck and fatal for France. According to Gustave, the French view was “that if we have to have war, if it is inevitable, it is better to have it now rather than in six months.”

  It was the fact that France not only appeared to be more aggressive than Prussia but actually was the aggressor which determined British non-intervention. As in the Luxembourg crisis of 1867, the Rothschilds acted as a channel of communication between London and the potential belligerents. On July 5 Napoleon had asked Alphonse to relay a message to Gladstone asking for his support in securing the withdrawal of the Hohenzollern candidature. Natty delivered this to Gladstone at his home at 11 Carlton House Terrace early on the morning of July 6 and, finding him on the point of leaving to see the Queen at Windsor, drove with him to the railway station. According to Morley, “For a time Mr. Gladstone was silent. Then he said he did not approve of the candidature, but he was not disposed to interfere with the liberty of the Spanish people to choose their own sovereign.”2 This has sometimes been interpreted as a blow to the French Rothschilds’ hopes; but it seems just as likely that this is what they wanted to hear. A lukewarm response was what was needed if the increasingly reckless Gramont was to be restrained. Gustave wanted England “to preserve the peace”: that meant putting pressure on France as much as on Prussia.3 “We hear that your government has put a good deal of pressure on ours to accept [a compromise],” he wrote on July 11, “but in the meantime unfortunately the public mood and the Chamber are becoming aroused.” Thus, when the Hohenzollern candidature was withdrawn on July 12, the Paris house sent another telegram to London stating optimistically: “The French are satisfied.” Gladstone saw it late that night. This was the cue for Granville to telegram to Lyons, the ambassador in Paris, that France should indeed “accept as satisfactory and conclusive the withdrawal of the candidature of Prince Leopold.”

  British pressure had some effect in Paris: when Lyons delivered his message, General Leboeuf’s demand that reservists be called up was rejected by the council of ministers, and it was decided not to regard Gramont’s demand for a guarantee of non-renewal as an ultimatum. At this point the Rothschilds’ informal mediation appeared to have contributed once again to the maintenance of peace. “Half an hour later,” wrote Gustave on hearing of William’s unqualified endorsement of Leopold’s withdrawal on July 12, “and war would have been declared, although it may not be in accordance with the ideas of the Emperor, who wanted war, but he is obliged to be satisfied with that re
sponse. Thus peace is made, or rather the war is adjourned, for I do not believe that relations between the two countries will remain good.” Mayer Carl’s relief was less qualified: “[E]verything is settled in a satisfactory manner and the dreadful calamity of a European war is spared. Thank God for that ...” Disillusionment the following day was profound; and they had no doubt where the blame lay. On the very day war broke out, Gustave raised the possibility that France might revive her earlier designs on Belgium. Nothing did more to discredit the French case in London.

  The financial consequences of the crisis have been neglected by historians but deserve attention; for they too help to explain British non-intervention. In the first months of the war, German and French financial markets were more or less equally affected. Things were bad in Paris: the price of rentes had begun to slide as soon as the news broke of the Hohenzollern candidature, from 74.83 on June 4 to 71.25 on July 9; the outbreak of war saw a sharp fall to 67.05. But these figures were little different from those in Frankfurt and Berlin, where the recently issued Prussian 4.5 per cent bonds slumped from 93.5 to 77.3—if anything, the German crisis at the outbreak of the war was worse. Though the flight for liquidity was enough to plunge a number of banks on both sides into difficulties, the Rothschilds were more or less untroubled. Apart from a substantial sum (35 million francs) owing to Russia, the French house seems to have had relatively few problematic liabilities, and the Frankfurt house almost none. Even if he had missed a Bismarckian hint, Mayer Carl had “taken [his] precautions in time.” As accurate news of the first French reverses at Spicheren and Froeschwiller filtered back, of course, it was the French market which collapsed, while the German markets rallied. The British market, by contrast, was barely affected throughout: the biggest fall was 3.6 per cent between May and August 1870. The contrast with 1866, when the war between Austria and Prussia coincided with an acute financial crisis in London, is marked. (What seems to have happened in 1870 is that French capital began to flow to London from a fairly early stage in the conflict—one of the best indicators that, for all the government’s rhetoric, there was a vein of pessimism in Paris.) It is not without significance that Gladstone himself bought consols worth £2,500 at a price of 90 on 18 July: a private and well-founded vote of confidence in British non-intervention.4

  The English Rothschilds therefore viewed events on the continent with something more like neutrality than had been the case in 1866, when Prussia had seemed the villain of the piece. True, there was a flicker of Francophile sentiment on the news of the French defeat at Sedan, prompted by the presence in London of Alphonse’s wife Leonora; hence, perhaps, Lionel’s request for details of Prussian atrocities and his later role in transferring money raised abroad for French war-wounded and prisoners-of-war. And before Sedan the London house did more for the French war effort than for the Prussian: French purchases of biscuits and salt pork in England were financed by the London house, though the government’s bills were discounted on less than generous terms. In addition, New Court initially offered to subscribe to any French war loan and to send gold if it were required by the Banque de France, though these offers were not taken up as the French government financed the first phase of the war by selling treasury bills on the domestic market. By the time the government brought out a proper war loan in late August, however, the London house was less keen. When the Government of National Defence sought to raise a £10 million loan in London in the autumn of 1870, it was to the minor American firm of J. S. Morgan & Co. that it had to turn.

  By contrast, offers from Mayer Carl of Prussian war bonds, which were ignored at the outset of the war, led to talk of a subscription of 1 million thalers by the London house in October. The following month, Hansemann was sent to London to arrange an issue of five-year treasury bonds worth 51 million thalers; the short duration of the bonds was a signal of the intention to impose reparations on France, though not necessarily the extent of any indemnity. Mayer Carl made a persuasive case for Rothschild participation in this operation:The position of the Fft House is not pleasant as the Government has the right to expect our support and is sure not to forget it if we do not assist them and leave the task to others. On the other hand we do not mean to do any thing that might be disagreeable to you or place you in a false position towards our Paris friends. I hope therefore that if Mr Hansemann pays you a visit you will receive him kindly and tell him exactly what you would like me to do ... [I]f we lose the opportunity of showing ourselves useful to [the government] others will jump at the opportunity of putting us aside and I in particular must suffer from the effect ... I should not have troubled you with all these details if the chief question was not to get the money from England: and to hear from you how this could be managed to conciliate the interest of our houses with the views & wants of the Government. I own that I should be very sorry if Schröder who I dare say represents Erlanger & all that clique were to take hold of the Prussian business as I have every reason to believe that all the other Prussian houses who are interested in the [North German] Confederate bonds would join him, delighted at the idea of having turned us out.

  The London house hesitated to be publicly identified with the new loan, but evidently put Hansemann in touch with the Bank of London; Mayer Carl likewise used the Seehandlung as a kind of front for his participation. New Court also helped to replenish the Seehandlung’s silver reserve—one of the main objectives of the loan.

  These financial factors partly explain why Britain declined to play the mediating role which the French Rothschilds hoped for. From the outset of the war, Alphonse and Gustave urged the British government to intervene to broker an early peace, hoping that they and their cousins once again could act as the channel for pacific communications. But the only thing which would have prompted such an intervention would have been a French victory, with its implicit threat to Belgium; and once that possibility evaporated Gladstone and his ministers were more or less content to let events take their course. The other potential danger—that Russia and Austria-Hungary would also become embroiled in a “general war”—was never real: Gorchakov and Beust stuck to their policy of non-intervention (agreed as early as September 1869), announcing their neutrality on July 13 and 20 respectively. Even Disraeli’s criticism of Gladstonian inaction was a mere reflex action: he saw no real reason to resist the “German revolution,” and as for saving Napoleon III, had he not just dedicated his novel Lothair to the Orléanist duc d‘Aumale? It was especially irksome for Alphonse that The Times—whose editor Delane’s friendship with Lionel was well known—came out strongly against France in its early coverage of the war. In particular, the paper’s publication of the draft treaty Benedetti had given Bismarck in 1866 seemed to confirm suspicions that France had designs on Belgium.5 In October 1870 Gladstone himself published an anonymous article in the Edinburgh Review in which he declared that the “new law of nations... censured the aggression of France.” There were those who believed that the Rothschilds were responsible when The Times changed its tune in the same month, arguing for intervention to prevent the annexation of Alsace and Lorraine. But in truth any Rothschild attempts to find a basis for English mediation were bound to come to nothing. The assumption that the war would be long and indecisive may also have encouraged a policy of wait-and-see in London.6

  For the Rothschilds on the continent, neutrality was never an option. Mayer Carl had no hesitation in subscribing 1 million thalers to the initial Prussian war loan; when this public subscription raised only half the 120 million thalers sought by the government—another sign of German nervousness in the early stages of the war—he readily joined the Hansemann-led syndicate to underwrite a further 20.7 million thalers (of which the Frankfurt house took 3 million). Once news of Prussian successes began to reach Frankfurt, he could not resist basking in Bismarckian reflected glory. “I should think that the people at Paris will be rather astonished,” he wrote gleefully after Froeschwiller, “particularly as they most likely did not fancy that the Germans cou
ld lick them so easily. Here and all over the country there is a great enthusiasm and I need not tell you that everybody is quite delighted.” “I have not the least doubt,” he wrote a week later, “that the German troops will be victorious and that a durable peace will be made. Meanwhile there is a good deal of business and every one speculates thinking that we are likely to have a great life.”

  As the military news got better, so his tone became more strident: “I think that the French have no chance of success,” he exclaimed on August 27, “and will learn to know what it is to compete with the German nation and with one Million of men.” Like so many Germans, he was exhilarated by the news of Sedan and eagerly increased his holdings of government bonds. ‘There is not the least doubt,“ he declared on November 23, ”that the [German] Government is called upon to be first fiddle in the future European concert“; ”Germany strong and united will be able to do more for the peace of the world than any other nation.“ To be sure, he and his family had no illusions about the human costs of the conflict: his English-born wife Louise and their children worked ”day and night“ in the hospital they established for wounded soldiers. But he had no doubt about the justice of the Prussian cause. Despite his grumblings about the discomfort of the journey, Mayer Carl was only too proud to be invited along with other parliamentarians to ”pay homage at Versailles to the German Emperor.“