Perhaps the chief amongst the many obstacles which beset the path of Prince Charles in his task of raising Roumania from the depth to which it had sunk was the very serious state of the national finances. The effect of the previous drains upon the country's resources, and the expense of keeping an army prepared to meet any emergency, caused by the hostile attitude of Turkey, were thus summed up by the Prince in July 1866.

"The worst wound of the country is at present its finances. We have not a penny, in the literal sense of the word, and the Ministry, in order to restore the equilibrium of the Budget, has to adopt measures which will scarcely gain friends for us: the taxes have to be raised; 30 per cent. of salaries and pensions, which have not been paid for four months, have to be kept back. For my part, I have surrendered another 12,000 ducats of my Civil List. Only a loan can save us now; we are in communication with financiers, but their conditions are more than hard. With patience we shall yet escape from this calamity, but for the moment the situation is very difficult. Retrenchment must be made, wherever possible."

It is interesting to note that, whilst the receipts amounted to only 56,000,000 francs in the first year of the Prince's rule, they reached the total of 180,000,000 in 1891, being thus more than trebled in twenty-five years.

Though the financial situation was only slightly improved during 1867,[14] Prince Charles entered in the autumn of that year into negotiations with the Austrian financier, Herr von Ofenheim, for the construction of a railway from Suceava to Bucharest, passing through Jassy and Galatz. These negotiations, commenced as far back as 1862, had been allowed to drop; and Roumania had thus lost the favourable moment for appealing to the British money market, which, moreover, was never at any time favourable to the enterprise. However, Ofenheim's Syndicate, which included three Englishmen (amongst them Mr. T. Brassey), arranged for the construction of the line, which was to be built by sections, commencing with 110 miles from Suceava to Roman. How necessary railways were to the country is shown by the fact that only a quarter of the corn and wood intended for export that year could be moved by ship to its destination. Eventually the Chamber confirmed the Ofenheim concession, voting 230,000 francs for the first section, and a subsidy of 40,000 francs per kilometer.

Ofenheim only undertook to carry out the northern half of the concession, and ceded the southern portion to a Prussian syndicate, of which the well-known financier, Strousberg, was Chairman. This syndicate was granted a concession by the Roumanian Chamber on October 2, 1868.

Unfortunately for the progress of the railways, the question soon gave rise to heated debates in the Chamber. For example, on June 11, 1869, a great commotion was caused there by a charge brought against the Syndicate that it had extended the line unduly by a ten-mile curve at Barboschi (payment, it will be remembered, was to be made according to the mileage). Nevertheless, in spite of all this petty opposition, the Prince had the satisfaction of seeing the first section of the Roumanian railways, connecting Bukowina and Moldavia, completed on December 15, 1869, whilst no less than 130 miles of much needed high roads were opened for traffic, chiefly on the western frontier of Roumania.

As the payment for the railways was to be governed by the completed mileage, the Finance Minister instructed the Roumanian Commissary in Berlin, Privy Councillor Ambronn, to control his payments by the certificates of the engineer, countersigned by the chief of the newly created Technical Bureau. This evoked an immediate protest from one of the concessionaries, Dr. Strousberg, who threatened to appeal to the law courts against so unjustifiable a check on the honesty of the contractors. Councillor Ambronn reported that he felt unable to refuse payment, although the engineers' certificates were not countersigned, and further, that the proceeds of the bonds were deposited, partly in cash, partly in stocks bearing interest, at the Berlin Kassenverein. This led to a Parliamentary inquiry into the state of the funds entrusted to Councillor Ambronn, and later on to a unanimous resolution by the Ministry relieving him of his duties. Prince Charles, however, was of the opinion that this measure would only damage the credit of the railways, and declared his willingness to accept the responsibility for the railway construction which was thus thrust upon him by the country.

However, a report from the special commissioner, Herr Steege, sent to Berlin in the autumn of 1870, placed the affair in a different light, as it was then discovered that the money realised by the sale of the railway bonds (35,000,000 francs) had been placed in the Joseph Jacques Bank without the consent of the Roumanian Government. This incorrect procedure on the part of the Commissary placed the Prince in a most unpleasant position; for, though he considered it in no way desirable that the money should be left lying idle, he had never intended that it should be invested in a private company, and so exposed to every fluctuation of the market. M. Steege was therefore appointed to relieve Councillor Ambronn of his duties in connection with the railway funds.

It seemed that the climax of the railway dispute must have been reached with December 18, when Strousberg informed the Government that he was neither able nor willing to pay the coupon due on January 1, and further maintained that this payment should be made by the State, though, as a matter of fact, he had paid the July coupon himself. The interest, it is true, was guaranteed by the State, but the terms of the concession provided that the interest should be paid by Strousberg whilst the line was in course of construction.

The entire weight of the blow fell on Prince Charles; the railways were his pet idea, nay, even his consolation, as a passage in one of his letters to his father shows. "I have at least done something for my country—I have given it a railway!" But now even that comfort had been taken away.

Prince Charles, however anxious he was at that time to escape from his almost intolerable position in Roumania, felt that he could not quit his adopted country until he had procured justice for his people, and removed the slur which appeared to rest upon their honesty.

Early in March 1871 M. Sturdza thus described the financial situation of the Principalities. The expenditure, but not the receipts, of the State had increased threefold during the last thirteen years; the public debt, which in Prussia amounted to 2 francs a head, reached a total of 7 francs in Roumania, whilst 34,000,000 out of the 84,000,000 francs received had to be devoted to the payment of interest, thus leaving only 50,000,000 available for expenditure. It was, therefore, scarcely a matter for surprise that the Chamber should openly testify to the general indignation felt by the nation, when the fresh burden of the interest on the railway bonds was thrust upon the resources of the country. In their wrath, however, the deputies forgot to be just, and threw the whole blame on Prince Charles. Not a single voice was raised to point out that the Prince himself suffered most from the painful situation to which dishonesty and carelessness had brought the railways. He could not be expected to know in detail all the requirements of such concessions. The only just reproach which could be made against him was the unconditional confidence which he, in his youthful enthusiasm, had placed in Strousberg and Ambronn, from a desire to procure the benefits of the railway for his country as soon as possible.

The attacks turned chiefly on the circumstance that Ambronn had been for a long time in the service of the Prince of Hohenzollern, though this was rather a reason for excusing the Prince, who was surely justified in employing a man whose honest administration had already gained the confidence of his father.

As a way out of the difficulty Prince Charles thought that the State should pay the January coupon and sue Strousberg for the amount, in accordance with paragraph 7 of the concession. Unfortunately the Treasury was empty, the Chamber would never consent to such a measure, and to raise a loan was out of the question.

To crown the disaster an official intimation was received from the Prussian Government that the coupon due must be paid by the Roumanian State, as the bonds were only placed on the market owing to the confidence inspired in the Roumanian State guarantee.

Pressure was brought to bear on Roumania by a Note maintaining the rights of the German bondholders, addressed by Prince Bismarck to the Sublime Porte as Suzerain of the Principalities. The Strousberg affair thus threatened to become more a question de force than a question de droit. It appeared, moreover, that a lawsuit against Strousberg was out of the question, as the bondholders, and not the Roumanian Government, were the injured parties. Needless to say, this opinion of the Prussian law-officers evoked great indignation in Roumania.

Eventually, on January 2, 1872, the Chamber decided to offer the bondholders two alternatives:

(a) To take over the rights and obligations of the first concession, to complete the railways in three years with an annual grant of nine millions towards the coupons; the payment of the last year's interest, and the restitution of the deposit to be obtained from Strousberg.

(b) To transfer all their rights to the Roumanian State, which pledged itself to pay off the bonds (to be exchanged for State papers) in forty-nine years' time by an annual payment of eleven millions.

Three weeks later the Prince had the satisfaction of informing his father that the vexed question appeared to be solved at last.

"You can hardly imagine what I have lived through during the last weeks of the old year! Excitements, anxieties, and hopes changed with every day. Day after day passed without any result, or any hope of solving the unfortunate railway question: such a strain on the nerves might have caused the strongest man to give way. At first weeks passed before the matter reached the order of the day, then the preliminary debates lasted fully four days; the result was by no means certain the first two days, as the Opposition brought all its batteries into action. I breathed again on the evening of the fourth day, and the city also calmed down at once from its former feverish excitement. The agitators are afraid that the settlement of the railway question, which they had made a dynastic one, has robbed them of their last dangerous weapon....

"The Opposition used Von Radowitz's declaration in Constantinople—that the Emperor was directly interested in an arrangement—with much skill and perfidy, drawing the deduction that the House of Hohenzollern was mixed up in this dirty business. It is much too hackneyed and ridiculous to be even annoyed about!"

The expense of the many reforms initiated by the Prince also contributed to the chronic want of money. For instance, a report by M. Jepureanu on June 9, 1874, showed the existence of a floating debt of fifty-seven million francs, which was out of all proportion to the resources of an agricultural country, where a failure of the crops occurred about once in six years. It was further stated that of late years, in spite of all the new taxation, the expenditure had always exceeded the receipts.

To Prince Charles Anthony, January 26th, 1875.

"Only a few days ago I was confidently looking to the immediate future, and hoped that the Roumanian railway system, which I had achieved for the country after such severe struggles, would soon be opened for traffic. I believed that this intolerable affair, which has cost me several years of my life, was finally settled, and looked forward to enjoying the fruits of my labour. But no! To-day the railways are again the disturbing element. After great effort I had achieved the stability and peace so necessary for the development of the country: domestic affairs had become consolidated, and abroad we enjoyed respect and confidence. All this may again be at stake.

"... The Berlin Company must raise a loan of seventy-five million francs to pay the debts incurred in construction; in so doing they want our support, and ask for a law giving this loan preferential rights in the annuities. This is, of course, out of the question, as the former creditors must always have the first claim.... We do not conceal the seriousness of the situation, the more so since the German Government urgently requests us to give way to the entreaties of the company, and so prevent a catastrophe which would principally be felt by the shareholders. In the event of our inability to regulate this affair the German Government would in future be compelled to withhold the exercise of its benevolent interest in Roumania!

"This threat is very serious, and we foresee its evil consequences."

To Prince Bismarck.

"For several weeks we have been exclusively occupied with the difficulties which the new loan for the completion of our railway system causes both here and in Berlin. Animated with a lively wish to bring this important affair to a satisfactory conclusion, my Government has commissioned the Minister of Public Works, M. Th. Rosetti, to proceed to Berlin, and to place himself in personal communication with the railway company.

"I cannot conceal from your Serene Highness that the proposals of the company, which must be settled by constitutional methods, encounter no small difficulties, arising from the very nature of the affair. Nevertheless, my Government has every wish to prepare a solution which would be acceptable to both parties, and which could be successfully promoted in the Chamber here. If we may hope for the benevolent interest of your Highness in this delicate question, I do not doubt that it will soon be solved. M. Rosetti is able to give the necessary information should your Highness desire to enter more fully into the question."

From Prince Bismarck, March 1875.

"I return my humblest thanks to your Highness for the gracious letter which Minister Rosetti has handed to me. The knowledge and personal amiability of the latter has made a favourable impression on all circles here, and he has brought the negotiations to such a point that their conclusion may be expected, provided the result here gains the approbation of your Highness's Government. I myself entertain the hope that such may be the case, the more willingly since so large an amount of German capital is placed in no other foreign enterprise, and the solidly assured future of the railways must exert a decisive influence on the development of the rich resources with which Roumania is blessed by nature. The protection afforded to the enterprise by your Highness will contribute materially to maintain and further public interest in Germany for the welfare of Roumania."

Whilst these delicate negotiations were in progress, the question of the right of Roumania to enter into commercial treaties was brought to a close. The intimate relations of the Principalities to Austria-Hungary rendered it desirable that the first treaty should be concluded with that State, not without opposition in the Chamber, and it was actually voted on July 10, 1875. "This international act," the Prince wrote, "is of great importance, as it contains the germ of Roumanian independence."

The Budget of 1876, which announced a deficit of 30,000,000 francs, was received with a storm of indignation, and eventually led to the fall of the Catargiu Ministry.

To Prince Charles Anthony, April 26th, 1876.

"The excitement here is very great; there are rumours of conspiracies and revolutions; but all this cannot terrify me, for I go straight ahead and do my duty. The condition of our finances, and the serious situation in the East, does, however, make me anxious. The former is the consequence of the latter; for months no money has come into the country, and trade is completely at a standstill. All our securities have fallen, railway and customs returns have decreased, farmers cannot pay, and taxes are hard to collect. Nevertheless, the engine of State must not be allowed to stop, and we must pay the interest on our debts in order to maintain our credit! All this has materially affected our finances, which were in a satisfactory state."

To THE SAME, December 14th, 1876.

"Neither the approach of the war, nor the probable passage of foreign troops makes me really anxious: I am troubled rather by the comfortless state of our finances, which have reached a stage impregnated with danger for the immediate future. The State can only maintain its credit at the greatest sacrifice, by paying the coupons of the foreign debt with the little money remaining in the country, and in addition it must raise sufficient to pay the army.

"Under these circumstances only a well-assured peace, or a war, can be of any assistance; a long extension of this uncertainty will be our ruin!"

To THE SAME, January 20th, 1877.

"The money famine increases daily, and I cannot see how we are to be helped out of our difficulty. Only the most necessary payments are made. Even the Civil List has not been paid for months."

The longed-for war, bringing with it the independence of Roumania, arrived at last, and with it came perhaps the lowest point touched by Roumanian finance. All payments were stopped both at home and abroad, every tax was doubled, and 30,000,000 francs of paper money were issued on the security of the Crown lands, to be redeemed at 10 per cent. above par. Such were the sacrifices which the Roumanian nation offered at the shrine of patriotism and independence.