May elections were held for the Constituent Assembly, which met on October 5, and approved of the policy of the Cabinet of Signor Zanella. The Cabinet was still in power when the year closed.

One of the difficulties connected with the setting up of the new State was the fate of Porto Barros. It was not clear whether this port was or was not within the territory of Fiume. But the difficulties were overcome by an agreement, signed on June 5, between the Free City, Italy, and Jugo-Slavia, which grants equal rights in the unified port of Fiume to the three signatories of the agreement. The port is to be controlled by a consortium to which each State will appoint two members.

CHAPTER V.

LESSER STATES OF WESTERN AND NORTHERN EUROPE: BELGIUM LUXEMBURG NETHERLANDS SWITZERLAND SPAIN

PORTUGAL-DENMARK-SWEDEN-NORWAY.

BELGIUM.

DURING 1921 Belgium continued to pursue the policy on which she had embarked at the Armistice, and which, as is now obvious, threatens to involve her in the general ruin of Europe. But before the end of the year two events took place which show the widespread resentment against that policy, and perhaps have paved the way for its reversal. One is the rout of the Francophile Party, which had led the country into mischievous adventures, and made her the mere satellite of France, a power whose interests and aims were totally opposed to her own. The other is the dissolution of the "Union Sacrée," which, virtually since August 4, 1914, and actually since 1916, had combined all the political parties in support of a national Coalition Government.

Of these two events the latter is, of course, a matter of purely local concern, affecting only the balance of the three traditional parties in the Belgian State. But the relations of Belgium to France have a wider bearing, and require to be traced somewhat more in detail.

The Belgian people, as is known, is composed of two sections differing in race and language the Flemish and the Walloons. It is the latter section which, since the revolution of 1830, has always been in the ascendant in public affairs, while the other section has had to struggle hard for more than a century in order to obtain recognition of its rights and a semblance of equality. The circumstances of the war enabled the Flemish to gain some important successes which threw the Frenchspeaking "jingoes" into alarm. These latter saw in a French alliance the best means of securing their position against further encroachments, and by working on the public fear of a German war of revenge they managed to obtain the adhesion of the

Government to this project. The objections, it is true, were very strong. France obstinately refused to abandon any of her tariff restrictions, which hit Belgian industry in every branch. She had adopted a whole series of measures intended to divert the traffic of Alsace-Lorraine from Antwerp. She had placed a number of obstacles in the way of Belgian policy in Luxemburg. Nevertheless appeals to passion and a liberal use of funds secured for this cause the support of a number of publicists and of the Comité de Politique National, the body which after the Armistice had plastered the walls of Brussels with coloured maps setting forth claims so extravagant that the officers of the Allied armies stared in amazement.

M. Jaspar, Minister of Foreign Affairs, fell into the error of taking the skilfully manipulated demands of a small group for the genuine voice of public opinion; and though personally he was in favour of friendship and even alliance with England, he signed the separate agreement with France. This agreement took the dangerous form of a military treaty, negotiated and signed by the heads of the General Staffs, and completely withdrawn from the control of Parliament or of the League of Nations. The first consequence of this situation was that Belgium played the rôle of a mere client of France at the international conferences held at Washington and in Europe. At all of these the word of Paris was law. At Cannes, it is true, the Belgian delegates at last found the sacrifices both of interest and pride which were demanded by their French colleagues more than they could endure, and their resentment led to a fierce dispute. But till then the process commenced at Versailles had gone steadily on, and in the course of 1921 Belgium's prestige as a European Power suffered one blow after another till it sank to vanishing point.

M. Jaspar was more successful in his negotiations with Luxemburg. The annexationist aims of the Belgian Nationalists had in 1919 and 1920 thrown the Luxemburgians into the arms of France. M. Jaspar, by firmly resisting the demands of the "jingoes," succeeded in recovering gradually a part of the lost ground, and in concluding an economic treaty which, while safeguarding the interests of Luxemburg, gave to Belgium the place which had been occupied by Germany before the war.

Another country with which Belgian foreign policy was closely concerned during the year was Holland; and affairs in this quarter, though not so badly mismanaged as in the case of England and France, were not so successfully arranged as with Luxemburg. An agreement with Holland had actually been negotiated by M. Paul Hymans, and this might have brought Belgium considerable advantages if properly handled. But M. Jaspar did not have the courage to resume the negotiations and lead them to a successful termination, and he abandoned a position of vital interest to Belgium in order to please a mere handful of agitators.

The insignificance of this party was shown at the elections held in November. In the previous election of 1919 the Nationalists had already suffered a severe reverse, securing only one seat throughout the whole country-a result all the more humiliating in view of the fact that the system of proportional representation is in vogue. And last November they lost this seat as well, receiving only about 6,000 votes out of a total of 2,500,000. The results of this election were interesting in other ways. Some days before it occurred the Socialist Party had left the Government and broken up the Union Sacrée. This party was one of the most moderate of its kind in Europe; it had always shown itself ready to make concessions, and had frequently adopted in practice a policy opposed to its basic principles. Nevertheless, the two bourgeois parties, the Catholics and the Liberals, knit together by a common spirit of reaction and desire for class war, had organised a furious attack on it, and proclaimed that the elections would see the overthrow of socialism. They conducted a long campaign in which every method of corruption was employed, and the mistrust of Germany, still prevalent among the people, was effectively exploited. Nevertheless, the Socialist ranks in Parliament remained unshaken. They lost two seats in the Chamber (obtaining 68 instead of 70), but gained 20 in the Senate. The Liberals, who were expecting a great advance, lost one seat in the Chamber and a dozen in the Senate. The smaller parties were almost wiped out from the Chamber with the exception of the "Front Party" (the Flemish Party), which alone of these has any importance. The Catholics slightly strengthened their position in the Chamber, but lost their absolute majority in the Senate.

Thus the attack on the Socialists proved a failure, and the Ministry of M. Carton de Wiart, of which the best that could be said was that it was incompetent in a dignified manner, was overthrown. The King entrusted the formation of a Cabinet to M. Theunis, who had been Financial Minister in the preceding combination. M. Theunis, who is not in Parliament, immediately addressed himself to M. Vandervelde with an inquiry whether the Socialist Party would consent to resume its place in the Government. The labour leader refused, not so much from motives of principle as from tactical considerations. He considers-and with reason-that his party, by constituting the whole of the opposition, will be able to focus all elements of discontent, and so gain fresh support. Further-and this also on good grounds-he counts on a rupture sooner or later between the two bourgeois parties which are at present sharing power, since, judging from the record of their relations in the past, their present friendship must be very precarious.

Thus the history of Belgium during 1921 has been marked in external affairs by a Francophile policy extremely dangerous both to herself and the people of the world, and in internal affairs by a bourgeois coalition based on a purely negative

programme of anti-socialism, and by a hostility between the Flemish and Walloon sections which jeopardises her whole existence. If the political situation inclines one to pessimism, the economic outlook is not any more cheerful. Before the war Belgium's principal resources were, on the one hand, its manufactures which it exported to all its neighbours, particularly Germany, and on the other hand, its transhipment traffic at Antwerp. The "hinterland" of Antwerp has always been the Rhine district. Since the war the situation has greatly altered. The rate of exchange has completely closed the German market. Not only so, but it has given rise in the case of many articles to a competition which formerly did not exist. In certain branches of manufacture in which Belgium used to satisfy her own requirements, the Germans are now entering the market with prices so low that Belgian workmen cannot compete with any hope of success. On the other hand the purchase of raw materials in America, in England, and-for certain products of the Indies-in Holland, is hampered both by the prohibitive exchange value of the dollar, the pound, and the florin, and by the rapid fluctuations to which these foreign securities are subject on the Stock Exchange. The industrial crisis is far-reaching and calamitous. The recent measures taken by England to protect her trade, and the furious protectionist policy of the French Government have dealt fresh blows to Belgian industry, and it is safe to say that the Loucheur scheme of reparations in kind will be the finishing touch. Unemployment is spreading like a plague through the country, and owing to the high cost of living (the index number is about 420), it is becoming a formidable social menace. Causes and consequences are intertwined in a vicious circle, and the result, at once paradoxical and tragic, is that in a producing country like Belgium, coal, which in 1914 cost from 28 to 35 francs, now costs 190 and even 200 francs.

The position of Antwerp has been jeopardised by the war. All the German houses which had branches and offices there adopted the practice during the war of installing themselves at Rotterdam, and the policy of reprisals and the insecurity of the Government have contributed still further to divert from the great port of the Scheldt its most important clients. With the Rhineland in foreign occupation, and its trade paralysed, and with the rate of exchange preventing all purchases by Germany abroad, the transhipment traffic has not a quarter of its previous importance.

There is still Alsace-Lorraine. But the French Government, in order to benefit Dunkirk and its own ports, has imposed on goods shipped via Antwerp special levies called "surtaxes d'entrepôt," and fixed railway rates in such a way as to attract elsewhere the commerce of the new provinces. The malady of Antwerp, if it is not incurable, threatens at any rate to last for a considerable time.

LUXEMBURG.

During the year 1921 the Grand Duchy of Luxemburg, surrounded as it is by powerful neighbours-France, Belgium, and Germany-suffered from the trade depression which was general over Europe. Bad as was the position everywhere, it was made worse for Luxemburg by the erection on the part of its neighbours of Customs barriers. It is true that according to the Treaty of Versailles exports to Germany had become possible free of German Customs duty; nevertheless, the falling mark and cheap production in Germany made trade in this quarter practically impossible. It therefore became necessary to seek for new markets for the products of the metallurgical industry of the Grand Duchy, and Holland, Switzerland, Great Britain, and South America were possibilities which yielded good returns. But the labour situation was difficult throughout the year. Towards the end of 1920 the Government had introduced as a conciliatory measure a system of Workmen's Councils in the large factories. Yet a serious strike occurred in March, 1921, and the concessions which had been made were eventually withdrawn. Throughout the year there was considerable unemployment in this small country, and the Government was occupied in the establishment of means of relief.

The outstanding event of the year 1921 was the signature on July 25 of the economic agreement with Belgium. Negotiations for such an agreement had been in progress for some time, despite the fact that the referendum which was held in 1919 showed an overwhelming majority in favour of an economic union with France. The agreement with Belgium is for a period of fifty years, and has been ratified by both Governments. Its main features are as follows:

1. An economic union by which the Customs frontier between the two countries will be suppressed and by which the Customs and Excise regime in Belgium will be applicable to the two countries;

2. Provision for the payment of indemnities to agriculturists in the Grand Duchy in the event of the price of home-grown corn falling below a certain figure as a result of competition by Belgian farmers;

3. The grant of a loan of 175,000,000 francs to Luxemburg, of which the issue will be made in Belgium, and for which the Grand Ducal Government will not be called upon to pay more than 2 per cent. interest per annum; the difference between the rate of interest charged for the advance and the rate of issue to be met by the Belgian Government. Government. Belgian notes and coinage will replace the Luxemburg currency, of which all notes of 10 francs or over will be withdrawn. Luxemburg notes of less than 10 francs will continue to circulate temporarily