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Altogether nine war loans were issued. The first (Sept. 1914, issue price 97-5%) produced 4,491,861,000 marks; the second (March 1915, issue price 98-5%) 9,106,394,700; the third (Sept.

1915, issue price 99%) 12,161,630,100 marks; the fourth (March

1916, issue price 95%) 10,767,598,000 marks; the fifth (Oct.

1916, issue price 95%) 10,651,726,200 marks; the sixth (April

1917, issue price 95%) 13,122,000,000 marks; the seventh (Sept.

1917, issue price 95%) 12,626,000,000 marks; the eighth (April

1918, issue price 95%) 15,001,000,000 marks; the ninth (Nov. 1918, issue price 95 %) 10,443,000,000 marks. Beginning with the sixth war loan a system of periodical drawings was introduced in order to attract subscriptions. This method of meeting financial necessities was maintained until almost the end of the war, when it became manifest that the increased burden of interest was becoming gigantic. It is true that in 1916 and 1917 new measures of taxation were passed by the Reichstag, but the yield of this taxation was inconsiderable. By 1918 the estimates had grown to over 7j milliard marks, or almost 3 milliards more than in the previous year. The necessity of imposing fresh taxa- tion was manifest, and the Reichstag adopted measures for this purpose in April 1916. The new taxes were estimated to pro- duce a revenue of 3,179,000,000 marks. They were as follows: a monopoly in spirits, to be administered by a Central Spirit Office, to which all the spirit manufactured by the distillers was to be delivered; an increase in the duty on beer; an increase in the duty on wine, amounting to an additional 20% of its value; an increase in the duty on sparkling .wine of three marks per bottle; a duty on mineral waters and manufactured non- alcoholic drinks; a duty on coffee of 130 marks per lookgm.; a duty on tea of 230 marks, and on cacao and chocolate of 140 marks per too kgm.; an increase in the postal and telegraph tariffs; a war duty ranging from 10% to 50% on increased prof- its of companies; a stamp duty of four-tenths per thousand for ordinary stock, two-tenths on war loan and seven-tenths on foreign stock; further an increase of the duty on bills of exchange and money transactions (Geldumsatzen) ; a duty of 5 per mille on sales; a luxury tax on precious metals, jewels, works of art, antiquities, carpets, furs, pianos, fire-arms and motor vehicles. Simultaneously a law dealing with the evasion of these as well as previous forms of taxation, and imposing severe penalties, was passed. Further, a tax upon excess of income beyond the amount of the last pre-war assessment was enacted, with the object of confiscating a considerable part of war profits. These new measures of taxation did not succeed in putting the finances of the Empire upon a sound basis, as they could no longer be properly administered. After the close of the war, in consequence of the Revolution and the reparation payments imposed upon Germany, the national finances fell more and more into a state of complete disorder.

From the beginning of the year 1916 war- weariness was be- coming more and more prevalent among the people, and the attempts of the Government and the press of the Right to fight it were unsuccessful.

A conflict arose between the navy administration and the Government of the Empire regarding the adoption of an intensi- fied form of the U-boat warfare, and this conflict cast its shadow upon the whole of political life and formed the subject of violent debate in the press. In March 1916 the two conservative parties in the Reichstag tabled a resolution to the effect that complete freedom in the use of the U-boat weapon should be reserved in any negotiations with other Powers. Ultimately a compromise was effected in favour of another resolution, which declared: " Seeing that the U-boat has proved an effective weapon against the British method of waging war with the object of reducing Germany to starvation, the Reichstag expresses its conviction that it is imperative to make such use of the U-boats as will assure the achievement of a peace giving security for the future of Germany." The Social Democrats voted in favour of this reso- lution with the exception of the Minority group of 18 deputies, to whom it gave the signal for separating themselves from the Social Democratic party in Parliament and forming a separate party under the name of Sozialdemokratische Arbeitsgemein-

schaft. It was out of this group that at a later date the party of the Independent Socialists sprang.

On April 5 1916 the Imperial Chancellor delivered a speech in the Reichstag describing peace negotiations as out of the ques- tion so long as on the British side the object of the war continued to be the destruction of Germany. In describing the objects of Germany the Chancellor said that peace could only be concluded on the basis of the results of the war. Poland therefore could not be handed over again to Russia; the Polish question must be solved conjointly by Germany and Austria. On the German eastern frontier securities must be demanded against any repeti- tion of the Russian attack. Belgium must not become a British vassal state, and must be economically joined up with Germany. In the Reichstag the speech was received with strong demon- strations of approval. It did not, however, succeed in uniting the nation afresh in a vigorous determination to prosecute the war to a successful conclusion. A similar fate attended later speeches which the Chancellor delivered in the Reichstag in Sept. and Nov., and in which, among other things, he said: " A statesman who hesitated to employ against the enemy any effective instrument of warfare which is really calculated to shorten the war would deserve to be hanged." The dissensions between the Right and Bethmann-Hollweg became more and more acute. He was reproached with watering down the war aims and of having too little backbone when confronted with the pressure of the Left for a democratization of the Govern- ment. The Social Democrats on the other hand, and gradually also the bourgeois Democrats and the Catholic Centre, demanded from the Chancellor unequivocal assurances that the Imperial Government was prepared to conclude peace on an acceptable basis, and in particular to renounce all annexations and war indemnities. The Chancellor himself was inclined to yield to this pressure, but he encountered vigorous opposition from the Chief Command of the army, where General Ludendorff in particular advocated the principle that Germany could not con- clude a peace which did not compensate her in the fullest degree by annexations and indemnities for the sacrifices she had made in the war. The Chief Command even went so far as to try to influence the policy of the Government, and Bethmann-Hollweg was not the kind of man resolutely to repel these endeavours. There gradually arose a situation in which the Chief Command actually acquired a real influence on the policy of the Empire. The result was that the Chancellor found himself in an ambig- uous position in dealing with the demand of the Majority of the Reichstag for an unequivocal demonstration of the German desire to make peace. At this stage the Catholic Centre deputy Erzberger became more and more prominent as the champion of the views of the Majority, so that ultimately two strongly contrasted groups were formed, the Minority on the Right which represented the views of the Chief Command, and the Majority, composed of the Catholic Centre, the bourgeois Demo- crats and the Social Democrats, who pressed for an acceptable peace. In addition to these there arose on the extreme Left a small but very active group which put itself in the most uncompromising opposition to the Imperial Government and from 1916 onwards voted against all war credit. The leaders were the deputies Haase (the former president of the Social Democratic party), Dittmann, Geyer and Ledebour. As already mentioned, 18 deputies of this colour seceded on Jan. 12 1916 from the Social Democratic party. The deputies Liebknecht and Ruhle, who were still further to the Left, did not join this new extremist group, because it did not go far enough for them. In Sept. 1916 the Congress of the Social Democratic party of the whole Empire adopted a resolution which, while laying stress on the duty of defence, rejected the idea of a war of conquest and advocated reestablishment of international relations.

The position of the Chancellor was rendered still more difficult by fresh and much more violent attacks upon him from the Right. He found it necessary to repel these attacks in very strong language in a speech which he delivered in the Reichs- tag. The worst of these attacks was a pamphlet directed against the Chancellor, which was published under the nom de guerre of