Recaps

Franz used Austria’s leverage over Prussia to secure a treaty transferring Silesian Region and Prussian Saxony to Austria for 38 million Divine Shield, plus relocation expenses. The treaty seemed like a diplomatic victory, but Prussia later moved away nearly all the factories, workers, nobles, and peasants, while Austria softened its opposition to Prussia’s demands at the London Peace Conference.

• Franz learned that the Tsarist Government was nearing a compromise and ordered Felix to pressure Berlin into honoring its terms.
• Robson and McKet negotiated over the price and political conditions for transferring Silesian Region and Prussian Saxony.
• On August 11, 1867, Robson and McKet signed an agreement selling both regions to Austria for 38 million Divine Shield, with an additional 10 million for relocation expenses.
• Franz accepted Prussia’s two-year handover period, and Vienna celebrated the treaty as a diplomatic victory.
• Half a year later, Austria discovered that Prussia had relocated nearly all the factories, workers, nobles, and peasants from the transferred regions.
• The Vienna Government tacitly approved many of Prussia’s demands at the London Peace Conference after accepting the benefits of the deal.

Prussia secured an armistice with Denmark and then forced Russia to surrender vast territories, while Poland gained independence and emerged as a potential great power. The chapter ended with Prussia maneuvering to place William I on Poland’s vacant throne despite opposition from France, Austria, and Poland’s cautious parliament.

• Prussia and Denmark signed an armistice on September 1, 1867, with Denmark receiving a symbolic payment and Prussia relinquishing claims to Jutland and the Skagerrak Strait.
• Prussia, Poland, and Russia signed an armistice on September 26, with Russia recognizing Poland’s independence and ceding extensive territories without paying reparations.
• Prussia acquired Lithuania, Latvia, and most of Belarus, while Poland received the remaining territories, including Warsaw and much of Western Ukraine.
• Poland became an independent kingdom with more than 15 million people, but its provisional government faced a shortage of skilled talent and argued over who should become king.
• William I of Prussia emerged as the leading candidate for Poland’s throne, but France, Austria, and Poland’s parliament opposed or feared the prospect of a shared monarch.
• The Berlin Government used Prussian-trained Polish troops and a strong pro-Prussian faction to keep the succession debate unsettled, while Prussia prepared to pursue the throne or leave it vacant.

After the London Peace Conference, William I reshaped Prussia’s government while Alexander II purged officials responsible for Russia’s defeat. Franz used the struggle over Poland’s future to teach his eldest son Friedrich about politics, leaving Friedrich puzzled by the possibility of a Prussian-Polish merger.

• William I appointed Marshal Moltke as prime minister after Prime Minister Frank resigned, aiming to weaken the military’s grip on government.
• Alexander II ordered corrupt officials to repay stolen funds and be exiled to Siberia instead of executed.
• Franz stopped his brothers from pursuing the Polish throne and judged that Poland’s position between Russia, Austria, and Prussia left it with few safe choices.
• Franz asked Friedrich what he would do as King of Poland, and Friedrich said he would abdicate because he did not know how to rule.
• Friedrich proposed that Prussia recover and integrate its gains before Russia regained strength, and Franz urged him to study William I’s plans and the possibility of a merger with Poland.

The great powers maneuvered over Poland’s crown as protests turned into a deadly attack on Parliament, weakening the Polish government and deepening suspicion between Poland and Prussia. Alexander II revealed that Russia had engineered the crisis to drive a wedge between them and improve Russia’s diplomatic position.

• Napoleon III and the Gotha Family withdrew from Poland’s royal contest as the great powers backed competing candidates.
• Polish protestors surrounded Parliament, and Speaker Alex angrily demanded to know what they wanted as the legislature remained deadlocked.
• On November 11, 1867, a march turned into an assault on Parliament that killed seventeen legislators and injured Speaker Alex and dozens of others.
• The Polish government launched a crackdown, while Franz suspected Prussia had orchestrated the violence to increase its influence in Poland.
• William I questioned Moltke, who blamed Austria as the likeliest culprit, though William suspected the explanation was uncertain.
• Alexander II disclosed that Russia had engineered the crisis to fuel mistrust between Poland and Prussia and strengthen Russia’s prospects for future allies.

After nine years of construction, the deeper and wider Suez Canal opened to navigation, despite costs that had more than doubled the original estimate. The opening brought commercial excitement and strategic relief to Austria, while Franz judged that its ship capacity would keep it useful into the dreadnought era.

• Franz bought up falling Suez Canal shares, while the canal company borrowed from banks with French and Austrian government guarantees.
• After engineers declared the project ready, Lesseps ordered the dam blown apart and seawater joined the Red Sea and Mediterranean Sea.
• People in Venice debated the canal’s tolls, commercial value, and strategic purpose, with one young man arguing it would boost shipping and trade.
• Franz reviewed the canal’s dimensions and concluded that its depth and width would allow dreadnoughts to pass, making the costly investment strategically worthwhile.

The British Government debated how to answer the Suez Canal’s strategic and commercial impact, rejecting a direct seizure as too risky and considering buying shares instead. In Paris, Napoleon III weighed occupying Egypt, with ministers warning that delay could let Britain or Austria take control and undermine France’s Mediterranean strategy.

• Edward warned John Russell’s cabinet that France and Austria could use the canal to threaten British interests in India and the Pacific, while Agawar described the growing commercial disadvantage to British goods.
• Steve proposed taking the Mandeb Strait or seizing Egypt or Sinai, but warned that Austria’s garrison and the risk of war made those options difficult.
• Reslin urged Britain to buy shares in the canal company, while Edward argued France and Austria could refuse to sell and pushed for naval pressure.
• Napoleon III considered sending troops to occupy Egypt, and Edmond-Leboeuf argued that French forces could secure the country or canal quickly.
• Abraham warned Napoleon III that Britain or Austria might seize Egypt if France waited, threatening its Mediterranean strategy.

The opening of the Suez Canal helped trigger Britain’s Canal Crisis, as a stock market crash and severe overcapacity drove banks and industries into collapse. In Vienna, Franz learned Austria also faced major overproduction, and the cabinet prepared to clear state-owned inventories while leaving weaker private businesses to fail.

• The Suez Canal’s opening sent London markets plunging, sparked bank runs, and helped expose Britain’s existing overcapacity.
• Britain’s railway, shipbuilding, and textile industries contracted sharply, bringing bankruptcies, unemployment, protests, and a political crisis for John Russell’s cabinet.
• Franz asked Prime Minister Felix what Austria would do as the crisis spread from Britain.
• Felix said the cabinet would order state-owned enterprises to dump surplus goods abroad and explained that Austria’s capacity exceeded domestic demand by about thirty percent.
• Franz accepted that weaker firms would fail and chose not to interfere, expecting the crisis to push capital toward emerging industries.

Tom recognized that widespread discounting signaled an impending economic crisis, while Citibank and other banks moved to protect profits by tightening credit and preparing to short the market. The crisis spread worldwide, damaging industries and trade and escalating tensions between Prussia and Poland over grain tariffs.

• Tom noticed steep discounts across New York and warned Elena that hard times were coming, though Elena reassured him about his job prospects.
• Citibank President James told executives that Austrian and British goods were flooding America and proposed halting lending, collecting risky debts early, selling securities, and shorting stocks.
• As banks tightened credit, American businesses cut production and laid off workers, while the postwar boom abruptly ended.
• British dumping spread the crisis across Europe, prompting countries to raise tariffs as businesses collapsed and international markets shrank.
• The crisis hit Belgium, Poland, and Prussia, while falling grain prices intensified competition between Polish and Prussian exporters.
• After Polish capitalists secretly sold grain in Prussia, the Berlin Government imposed tariffs to protect Junker interests, worsening tensions with Poland.

As the economic crisis drove conflicts and wars across several continents, Spain’s worsening conditions helped spark a military-backed uprising against Queen Isabella II. Isabella fled to France, leaving Franz and his advisers to assess the uncertain succession and rule out an Austrian Habsburg claim.

• Economic turmoil intensified trade conflicts and wars across Europe, Africa, and Asia, while the British faced widespread blame for dumping goods.
• In September 1868, Burjos and General Prim agreed that a Hohenzollern prince would take Spain’s throne, forming the September Alliance against Isabella II.
• On September 17, Francisco Serrano led an uprising in Cádiz; after government forces were defeated, Isabella II fled to France on September 28.
• Franz convened a high-level meeting, where Foreign Minister Wessenberg reviewed the possible successors to Isabella II and Prince Leopold’s support among the Spanish military.
• Franz ruled out Austrian Habsburg princes as candidates because other nations would oppose their accession.

Franz’s government prepared cautiously for possible European conflict while Spain’s provisional government struggled to choose a king and maintain order. Spain’s troubles worsened when an uprising broke out in Cuba, with the United States openly supporting the rebels as its own economy faltered.

• Prime Minister Felix warned Franz that the unresolved Spanish and Polish successions could heighten tensions, and Franz ordered limited war preparations without expanding the army excessively.
• Napoleon III’s opposition removed Amadeo and other popular candidates from Spain’s succession contest, while Franz chose not to intervene.
• After the revolution, Spain’s provisional government disbanded Isabella II’s police, and Madrid descended into widespread crime and disorder.
• A large Cuban uprising erupted in October 1868, threatening Spain’s finances and the wealth of its nobles and capitalists.
• The United States backed Cuban independence organizations on a large scale as federal capitalists sought an escape from the economic crisis.

The chapter explained why the European powers supported Spain against the American Federation’s influence in Cuba, then followed Franz spending time with his sons at Schönbrunn Palace. It ended with Peter excitedly planning to continue building ships after Franz promised him a shipyard if he graduated with honors.

• The United Kingdom, France, and Austria backed Spain’s claim over Cuba because they feared the American Federation’s growing potential and wanted to contain it.
• At Schönbrunn Palace, Franz told Friedrich to keep his brothers from falling into the artificial lake.
• Peter celebrated aboard a makeshift boat he had built, and Franz ordered a photographer to capture the spectacle.
• Peter called his iron-wok-like boat the Franz, and Franz teased him before encouraging him to study shipbuilding properly.
• Franz promised Peter a shipyard if he graduated with honors, and Peter made him swear not to take the offer back.

After Maximilian I asked Franz for help following a disastrous defeat in Mexico, Franz refused to lend money and instead arranged to manipulate French public opinion. Exaggerated reports of the French army’s defeat sparked nationwide demonstrations, leaving Napoleon III under pressure to retaliate and restore France’s prestige.

• Maximilian I wrote to Franz complaining about France’s demands for compensation and asking for assistance after Mexican forces and the French army were defeated by rebels.
• Franz refused to lend Mexico money and advised Maximilian I to hire the French commander to suppress the rebellion, paying with Mexican mines.
• Franz ordered Tyrone to leak news of the French defeat so the French public would demand action.
• Paklun and Cross read exaggerated reports claiming tens of thousands of French troops had been beaten by Mexican rebels.
• The French Government failed to contain public anger, and demonstrations spread from Paris across France as the news circulated through Europe.
• Napoleon III faced pressure to retaliate because France’s reputation and political influence depended on proving its military strength.

On Christmas Eve 1868, electric streetlights made Vienna the first city celebrated as a “City That Never Sleeps,” a spectacle that spread across Europe through newspaper reports. The story ended with British and French observers comparing themselves unfavorably with Vienna.

• August watched Vienna’s bright streetlamps with his son, who asked how electric lamps worked and said he wanted to become a soldier rather than a scientist.
• Vienna’s electric companies expanded across Austria, but high wiring costs kept electricity expensive and beyond most workers’ means.
• Franz’s government supported the electric industry, which helped Austria’s copper and rubber businesses grow during the economic crisis.
• Vienna illuminated its streets on Christmas Eve, 1868, and telegraph reports made the “City That Never Sleeps” the subject of European newspaper headlines the next day.
• European newspapers implied that electric lighting was widespread throughout Vienna, prompting British and French observers to resent the city’s achievement.

Vienna’s citywide electric lighting put pressure on London and Paris to follow, but both cities faced enormous costs and political resistance. London left the project to its municipality, while Paris announced a municipal electric company to light the city.

• Benjamin Disraeli learned that electrifying London would cost at least £75 million and rejected central government funding, leaving the project to the London municipal government.
• Molito explained that Vienna’s power grid used high-output generators and was built by the Austrian New Energy Electric Company with royal investment.
• Paris Mayor Barco struggled with debt and rejected electric companies’ costly proposals to build the city’s power network.
• The Austrian New Energy Electric Company focused on Vienna rather than expanding into cities where low customer density made electricity prohibitively expensive.
• The Paris Government announced the establishment of the Paris Electric Company and declared that Paris would be lit up.

Eriksen reported that Paris Electric Company had agreed in principle to license Austrian New Energy Electric Company's patents but demanded exclusivity. Mark Oliver offered an exclusive license for an additional one million Divine Shield as the company hurried to profit from technologies that competitors could soon copy.

• Eriksen told Mark Oliver that negotiations with Paris Electric Company had reached a preliminary agreement, but the French demanded an exclusive license.
• Mark Oliver instructed Eriksen to offer exclusivity in exchange for an additional one million Divine Shield in patent fees.
• The company relied on city licensing fees and technology transfers because fees based on households and factories were difficult to verify.
• Austrian New Energy Electric Company promoted the Age of Electricity in Paris and London to encourage cities to adopt its system.
• The company sold its patents while it could because foreign competitors could reproduce the technologies quickly once they became public.

Franz used the Austrian New Energy Electric Company’s licensing deals and city partnerships to expand its influence across Europe and ordered Mark Oliver to secure more cities. Meanwhile, a Japanese delegation led by Iwakura Tomomi visited Vienna after its treaty negotiations with European powers stalled, and Hirobumi Ito and Okubo Toshimichi marveled at the city’s electric lights.

• The Austrian New Energy Electric Company made a profit from technology sales and signed strategic cooperation agreements with more than a hundred cities.
• Franz instructed Mark Oliver to expand the company’s reach, improve its public image, and complete its European layout before extending worldwide.
• Okubo Toshimichi and Hirobumi Ito discussed Vienna’s prosperity and wondered why its streets showed no factory smoke despite Europe’s economic crisis.
• The Japanese delegation’s efforts to revise treaties had failed, and the Austrian Foreign Ministry had demanded concessions or payment in exchange for treaty rights.
• Hirobumi Ito estimated that Vienna’s streetlights cost hundreds of thousands of silver taels monthly, shocking the delegation, while Iwakura Tomomi dismissed the question as irrelevant to Japan.

Franz dealt with the consequences of Prussia’s territorial handover and considered how Austria should manage the former French Balkan Peninsula. He left the region largely undeveloped for now, preferring to preserve stability and keep it as a possible bargaining chip with Russia.

• The Japanese delegation left Austria after establishing an embassy in Vienna, while Hirobumi Ito and the others continued their inspection tour in Prussia.
• Franz learned that Prussia had recovered Saxony and Silesia with most of their populations removed, and he considered how property owners and the remaining residents would respond under Austrian rule.
• The Kingdom of Saxony demanded that the New Holy Roman Empire sanction Prussia after discovering that its recovered territory had been emptied, but Franz declined to interfere with Saxony’s independent retaliation.
• Franz used his inspection of the former French Balkan Peninsula to investigate legal violations, prosecute offenders, and replace much of the local ruling class.
• Franz weighed the costs of developing the Balkan Peninsula, whose population and labor force had been depleted, and chose to maintain stability rather than invest heavily in it.
• Franz considered keeping the Balkan Peninsula as a future bargaining chip for Ukrainian lands if Russia sought access to the Mediterranean.

Franz approved Bosnia and Herzegovina’s plan to develop mineral extraction and heavy industry, hoping to improve the poor province’s economy. Meanwhile, Prussia pursued Japanese trade, and the newly formed Nordic Federation added pressure on Russia.

• The Nordic Federation was established, increasing Russia’s concern about its northern frontier as Alexander II struggled to contain the rebels in the Moscow Region.
• Franz publicized the Moscow rebels’ damage to the economy, while European media largely blamed Russia’s bureaucrats for the Prusso-Russian defeat and withheld great-power standing from Prussia.
• The Berlin Government welcomed the Japanese delegation and sold it military goods, signing a 1.58-million-Divine-Shield trade order in 1869.
• The Bosnia and Herzegovina government proposed exploiting local minerals and building heavy industry in steel, copper, and salt production.
• Franz approved Bosnia and Herzegovina’s development plan and left its execution to the provincial officials.

Thor and Wells debated whether to invest in Bosnia and Herzegovina Province's heavy industry, weighing its mature prospects against the Austrian Steel Group and the risks of new technology. They left the argument unresolved as Lawrence Lovsky suggested they go to lunch.

• Thor told Wells and the other Austrian Savings Bank shareholders that he planned to invest in heavy industry in Bosnia and Herzegovina Province.
• Wells warned Thor that the Austrian Steel Group's dominance made the steel business difficult and argued that salt mining offered a faster return.
• Thor argued that heavy industry could grow alongside the Austrian Steel Group, while the Austrian New Energy Electric Company's technology and standards made its market far harder to challenge.
• Wells clarified that his electric company was developing industrial machinery, not competing in power supply, and explained that he wanted to share the risks of funding new technology.
• Lawrence Lovsky changed the subject and suggested that the group have lunch, and Thor said he preferred the restaurant's roast goose.

Franz focused on Austria’s growing colonial rivalry with Britain and France and worried that France’s slow Greater France strategy would leave it too strong in the long run. He asked his advisers how to push Napoleon III toward expansion, but insisted Austria must avoid triggering a war before it was ready.

• Austria occupied territory in Yemen and disputed its African gains with the Ottoman Empire while France and Austria competed with Britain in Tunisia and Egypt.
• Franz learned that Britain was supplying weapons and instructors to African tribes resisting Austria’s expansion, as Austrian Africa’s population surpassed seven million.
• Franz asked his advisers how to accelerate France’s Greater France strategy, hoping France would overextend itself and decline.
• Wessenberg said France lacked the strength to expand further while its troops were tied down in Egypt, Tunisia, and Mexico and Sardinia remained unstable.
• Felix proposed provoking French expansionists to push Napoleon III into enlarging the army, and Franz approved the idea only if it could be kept from causing a war.

Franz ended Austria’s pirate campaign and weighed a major canal project while confronting the brutal costs of convict labor. In Mexico, Maximilian I alienated powerful groups with sweeping reforms and an heir declaration, prompting Franz to cut off Habsburg support and sever ties.

• Austria’s navy continued its anti-piracy campaign through 1869, killing more than ten thousand pirates and devastating pirate organizations.
• Franz postponed the proposed Vienna-to-Trieste canal pending further surveys and sent captured pirates to join the convict labor force.
• Maximilian I introduced sweeping reforms in Mexico, but landowners and capitalists opposed them and supported the rebels while ordinary people largely stayed passive.
• Maximilian I adopted Agustín Jr. and Salvador and named Agustín Jr. heir to the Mexican throne without consulting the Habsburg family.
• After Habsburg archdukes demanded that support for Maximilian I end, Franz agreed and sent him a letter declaring that their sides would separate.

Olabif tested an improving telephone connection for the Royal Academy of Sciences, while the chapter surveyed Austria’s research projects and the industrial support behind them. Telephone and internal combustion engine research remained works in progress, and Franz continued to fund experiments while keeping their dangerous waste contained.

• Olabif conducted a long-distance telephone test with Oscar and found that the call quality had improved.
• The Royal Academy of Sciences divided telephone research among teams working on voice quality, exchanges, lines, and equipment.
• The phonograph was expected to reach the market after Christmas, while Franz reflected that broad research investment could be more valuable than pursuing famous inventors.
• The internal combustion engine team continued developing a second-generation engine after an earlier laboratory model proved too weak for practical use.
• Franz’s laboratories pursued difficult research, and their scientists carefully disposed of experimental waste to reduce the danger of harmful releases.

Austria’s vast colonial reach and Franz’s balance-of-power strategy left it influential but constrained, while France and Russia relied on expansion to manage domestic tensions. Alexander II’s reforms gained support from nobles after he offered government-funded land reclamation to peasants, but the policy drained the treasury and left his government facing a severe fiscal crisis.

• Austria’s colonial holdings spanned six continents, but Franz avoided further conquests because Austria lacked the strength and population to hold them securely.
• Franz’s diplomacy kept Russia to the east, France to the west, and Prussia contained, though politicians had begun to consider the possibility of an Austrian threat.
• Napoleon III accelerated France’s expansion to secure his dynasty and ease tensions between the government and capitalists.
• Alexander II replaced senior officials after three ministers were assassinated and appointed Reform Party members willing to serve despite the risks.
• Alexander II allowed nobles to keep land they refused to sell and funded peasants’ efforts to reclaim undeveloped land.
• The Tsarist Government paid for tools, seeds, and food for the poor settlers, and the resulting costs made fiscal problems Alexander II’s greatest challenge.

Facing a fiscal crisis driven by the land reclamation campaign, Alexander II suspended debt payments and the Tsarist Government declared bankruptcy, forcing Austria to pursue collateral and manage its guarantees. In Vienna, Russian bond defaults threatened securities firm owner Philippe, who tried to delay early redemptions and limit his losses.

• Finance Minister Yevgenkis warned Alexander II that the Tsarist Government would go bankrupt within three months unless it acted.
• Alexander II chose to suspend payments on international debts and prioritize the land reclamation campaign over railway development.
• On July 7, 1869, the Tsarist Government announced its bankruptcy to major creditors, sparking outrage and public attention across Europe.
• Prime Minister Felix told Franz that Austria could face 38 million Divine Shields in compensation and urged him to demand Russian collateral and repayment.
• Philippe learned that his firm’s Russian bonds had triggered demands for early redemption and instructed Berg to offer eighty percent of the principal after three days while seeking buyers.

Russia and Austria remained deadlocked over repayment of Russian debts as financial institutions struggled with the fallout from the default. Philippe learned that Wealth Securities was buying certain Russian bonds and ordered Alpha to test whether it would buy his holdings, leaving the truth behind the move uncertain.

• Wessenberg rejected Soreis’s request to postpone Russian debt payments for five years and waive interest and penalties, though he said repayment could be delayed.
• The Russo-Austrian negotiations stalled, and European financial institutions continued to suffer losses from Russia’s default.
• Philippe calculated how he could cover his company’s bond-redemption losses and considered raising money without selling his bank shares.
• Alpha told Philippe that Wealth Securities was buying Russian bonds at twenty percent of face value, but only bonds issued specifically to Austria.
• Philippe ordered Alpha to contact Wealth Securities and offer his bonds, hoping to learn whether the company’s move signaled real progress in the negotiations.