the years 1862 and 1863, the accounts of which have been made up to the 1st of January next and sent to the Mexican Government, amount to 210 millions. To this must be added the expenses caused during the same years by the occupation of Cochin China and the presence of troops and ships of war in other parts of the extreme East. Those expenses may be estimated at 60 millions. Our war expenses have been, therefore, 270 millions.

"The deficit of these two years being only 75 millions, there is a difference of 195 millions, more than half of which has been provided for by the surplus of the ordinary revenue.

"This result allows us to look with more gratification (securité) upon the general condition of our finances, as it has been obtained without any relaxation in our public works, granted in 1862, with 121 millions, and in 1863 with 125 millions.

"This is a proof of the facility with which we can support all the ordinary charges of our Budgets, and even largely support great enterprises which have so powerfully contributed to develope the prosperity of the country, and which will develope it still

more.

"As regards the Budget of 1864, the resources realized will exceed the provisions agreed upon between the Government and the Legislative body. This surplus will diminish the estimates which the maintenance of our troops in Mexico might render necessary in case the negotiations entered into with the Mexican Government should not respond to the expectations of your Majesty.

"Whatever confidence I may entertain in this respect, it is, nevertheless, my duty to call the Emperor's attention to the importance of our deficits. The deficits of 1862 and of 1863 are not great, if we consider the extraordinary calls that were made; but, added to our former deficits, they amount to 972 millions. This amount exceeds the figure which prudence ought to allow, and it is necessary to reduce it by the consolidation of a portion of the floating debt to normal proportions.

"This operation will not throw new burdens upon the Treasury, as the interests of the floating debt will be relieved of the amount, which will be carried over to the Budget for the interests of the consolidated debt.

"I had fancied that it might have been possible to avoid this necessity, and that a prompt solution of the affairs of Mexico might, on the one hand, have limited our expenses to a sum less than what we have expended, and, on the other hand, effected by a loan contracted with Mexico the reimbursement of our advances. But, despite the confidence which we entertain of seeing a regular form of government established in Mexico, we cannot place the safety of our finances upon its settlement of the debt

to us.

This includes the credits carried over from 1861 to 1862, and from 1862 to 1863.

"It must also be admitted that the floating debt, when it is out of proportion with the ordinary resources which supply it, costs more than the consolidated debt, and that it is not without disturbing the general transactions of the country that capital is sought for by the State at a high rate of interest. Every branch of commerce suffers from it, and, instead of reducing the rate of interest, which ought to be the case, the Treasury helps to raise it.

"Every one will understand how important it is to shield the State against inopportune claims which would compel it to have recourse to onerous operations which might compromise public credit.

"Such a state of affairs is a cause of anxiety and hindrance to

commerce.

"As regards myself, Sire, I had entertained the hope that I need not have opened the ledger (grand livre), and it is not without mature reflection that I submit to your Majesty the proposal of reducing the floating debt by an appeal to credit.

"This loan differs from ordinary loans in this favourable sense, that as the produce is to be employed for the repayment of Trea- · sury Bonds issued, it will return an equal sum for circulation. It is a transformation, not an increase of debt.

"The amount of the loan remains to be considered. I propose to your Majesty to fix it at 300 millions. Our deficit would thus be reduced to 672 millions.

"The floating debt will remain beneath that sum, because the settlement of debts is always slower than the collection of taxes. The sums due to the Treasury exceed 600 millions.

"This debt will be all the more easily settled when we have succeeded in the steps which we have taken to obtain repayment for what we have advanced to Mexico."

CHAPTER II.

PRUSSIA.

Reply of the King to Address of the Municipality of Berlin-Royal Speech at Opening of the Chambers-Unsatisfactory Speech of the President of the CouncilAddress of the Chamber of Deputies-The King refuses to receive the Deputation from the Chamber-His Reply-His Answer to the Upper House-Convention between Prussia and Russia as to Polish Refugees-Unseemly collision between the President of the Council and the President of the Chamber-Message from the King on the subject-His Answer to the Address in reply-The Chambers closed by the King-His Speech read to the House-Ordinance against the Press-Remonstrances of the Crown Prince-Dissolution of the Chambers-Question of the Schleswig-Holstein Succession-Address of the Chamber of Deputies-Speech of M. Von Bismark-Refusal by the Chamber to grant a Loan.

In his reply to the New Year's Address of the municipality of Berlin the King said:

"The present position of affairs in Prussia, which has been styled a conflict, has arisen from the confusion prevailing in the public mind.

"I intend to maintain and protect the Constitution. I am compelled to carry out by every means within the limits of the Constitution that which I consider essential to the welfare of the country, without regarding the fact of my being at present misunderstood."

The Session of the Chambers was opened on the 14th of January, but the King was not present. The royal Speech was read by the President of the Council, M. Von Bismark Schönhausen, and the following were the most important passages:

"The Government of His Majesty greets you with the lively wish that in this Session a durable understanding may be attained with respect to those questions which last year remained unsolved. This object will be arrived at if our Constitution be firmly adhered to as the basis for the correct apprehension of the position of the representatives of the country, and if the legislative powers, with mutual consideration of each other's constitutional rights, take their common task to be the promotion of the power and welfare of the Fatherland.

"The establishment of the Budget is prominent among the objects that will occupy you.

The state of the finances is thoroughly satisfactory.

"Last year's receipts were so good that in most branches he the administration they considerably exceeded the estimates, cted, will afford means completely to cover the expenditure, inclall extraordinary demands. The deficit shown by the es public

est

for 1862 will, therefore, as was anticipated at the time of their discussion, in reality not exist.

"In the absence of a legally-fixed Budget for 1862, the Government has especially aimed at conducting the administration with. economy; it nevertheless has not neglected to make all such expenditure as was necessary for the regular carrying on of the administration of the country, for the maintenance and advancement of existing State institutions, and for the welfare of the land. As soon as accounts have been finally balanced, Government will present a proposition concerning the receipts and expenditure of the past year, and move for the retrospective approbation of both Houses of Parliament for the expenses incurred.

"The Budget for the year 1863 will again be laid before you. The dispositions of the same have been further corrected by the experiences since obtained, and in certain items rectifications have been made corresponding to circumstances. It has thus been found possible to diminish the deficit shown by the previous draft. Considering the results of the past year, and the circumspection with which the revenue is estimated, the hope appears well-grounded that this deficit, like those of previous years, will be fully covered by excess of income. . . .

"In pursuance of the identical notes addressed to the Royal Cabinet in the month of February, 1861, by a number of German Federal Governments, motions have been made by the same Governments in the Diet, the which, less by their substance than by the interpretation of the Federal compact they involve, have acquired an important significance for the position of Prussia relatively to the Federal Diet. The Government is also, for its part, fully persuaded that the Federal treaties no longer correspond, in the form in which they were concluded in 1815, with the altered circumstances of the times. Above all, however, it is aware of the duty of a conscientious observance of existing treaties, and resolved to exact complete reciprocity in the fulfilment of that duty as the first condition of the maintenance of such treaties."

In the course of the debate on the Address in the Chamber of Deputies, M. Bismark, the President of the Council, made a speech which caused intense dissatisfaction amongst the members. He said:

"Your decisions alone are to regulate the Budget as regards its total amount and its details; if you are to have the right to demand of the King the dismissal of Ministers who do not enjoy your confidence; if, by your decisions with regard to the expenditure, you are to have the right to do away with the army organization; if you had the right (as you constitutionally have it not, although claiming it in this Address) to control the relations between the executive power and its functionaries; if you had all these rights, you would be de facto in possession of the

complete power of Government in this country. On the basis of these demands this Address reposes. By it the Royal House of Hohenzollern is required to abdicate its constitutional rights of Government in favour of the majority of this House."

The Chamber met this assertion by a storm of contradiction, and the President rang his bell. M. Von Bismark persisted in his assertion. "It is the same thing," he said, "in another form. You declare the Constitution violated so soon as the Crown and the Upper House do not do your will. You address the reproach of such violation to the Ministry, and not to the Crown, whose fidelity to the Constitution you, on the contrary, place beyond all doubt. But you know, as well as any one in Prussia, that the Ministry acts in the name and according to the commands of His Majesty. The Prussian Ministry is in this respect quite different from the English. The latter, call it what you will, is only the Ministry of the Parliament; but we are the Ministers of the King. It is not in order to make a shield for ourselves that I reject the severance of Crown and Ministry. We need no such shield; we stand firm in the consciousness of our good right. I reject the distinction you would make, because by it the fact is concealed that it is now a question of an Address against the Crown, and not only against the Ministry."

M. Bismark proceeded to say that theoretically it was undeniable that the Chamber had the right to reject the whole Budget, and thereby to bring about the dismissal of all functionaries, the abandonment of the army reorganization, and many other things besides. But such a theory was incompatible with practice; practically, the like had not yet happened. After the last dissolution of the Chamber, Government had made great concessions. These were met by unreasonable demands. The Chamber came to a

resolution which was an abuse of its right:

"You asked of His Majesty the disbanding of about one-third of the cavalry, and about half the infantry; in its totality your resolution was inexecutable, because it had a retrospective action. By this, I may well say, radical resolution, you first got into the cul de sac out of which you now seek an exit you will have great difficulty in finding. The Government came to your assistance by offering to accept the Vincke amendment. Instead of availing yourselves of the bridge thus laid down for you, you replied by a resolution which destroyed all hope of an understanding. We closed the session in the hope that you would return hither in a more conciliatory mood than that in which you departed. It is now your turn to make concessions, and, unless you do so, we shall have difficulty in terminating the conflict."

In the Address of the Chamber of Deputies, which was carried by 255 out of 323 votes, they severely commented upon the unconstitutional mode in which the Government was conducted, saying:

"Since last Session the Ministers have carried on the public