Among the most determined opponents of the Socialists was the ex-Socialist Benito Mussolini, formerly editor of the Avanti, and now of the Milan paper, Il Popolo d'Italia. He had managed to become the head of the Fascist organisation, which in the course of the year had formed itself into a political party, and had actively opposed the Government. The Fascists, it will be remembered, had been instrumental in 1921 in recovering factories which had been seized by the Communists, and driving members of that Party out of municipal administrations. In the May of this year they again came into violent conflict with the Socialists during a general strike proclaimed in Rome on the date of Italy's entry into the Great War.

Signor Mussolini determined to make use of this organisation to force the Government's hand, or alternatively to displace it. He called a general congress of Fascisti at Naples, and there on October 24 some 40,000 of them, or one-tenth of the total number, paraded before him in military formation. In his speech to the gathering Signor Mussolini openly threw down a challenge to the Government, calling upon it either definitely to settle the most urgent problems of internal and external policy, or else immediately to resign and hand over the administration to the Fascist Party.

Whether Mussolini's next step was premeditated or was the result of a sudden inspiration cannot be said with certainty. What is known is that on the 26th a Fascista Manifesto announced to the country "the impending march of the Fascisti on Rome in order to cut the Gordian knot and hand over to the King and Army a renewed Italy." The manifesto proclaimed the devotion of the Fascisti to the monarchy and their admiration for the Army, which was invited to abstain from the struggle, and contained a declaration to the working classes that they would not have to suffer any disturbance or violation of their rights.

On October 27 the Cabinet resigned. The King, who had rushed back to the capital from his holidays, commenced the usual consultations for the formation of a new Cabinet. The old Government, however, which according to the Constitution remained in power until a new Cabinet was formed, forced matters to an issue. Frightened by the Fascisti mobilisation and the seizure of public offices and railway lines, it suddenly proclaimed martial law, hoping thus to cow its opponents and restore order. But the King refused to sign the proclamation, and thus compelled the Government to withdraw the measure almost immediately. The country felt instinctively that the King, by this step, had saved Italy from a struggle that could easily have led to civil war. In the meantime members of the Conservative Party suggested to the King to entrust Signor Mussolini with the formation of a new Cabinet. The Fascist leader hastened to Rome on the 30th to discuss the situation with the King. On the same night the list of new Ministers

was submitted to His Majesty and received his approval, and on the following day (October 31), the new Cabinet was sworn in.

Contrary to general expectation, the Mussolini Cabinet was not composed of Fascisti only, but contained representatives of the Nationalist, Democratic, and Popular or Catholic Parties. Its most significant feature, however, was the inclusion of General A. Diaz and Admiral Thaon di Revel for the Departments of War and Navy, while the Premier retained in his own hands the portfolios both of the Home and Foreign Offices. The Fascisti were granted the honour of a triumphal march through the Capital; and the Government immediately thereupon, in order to show its respect for the Constitution, ordered the demobilisation of all Fascisti forces to be carried out within a few days.

On November 16 the Cabinet laid its programme before both Houses of Parliament and asked for full powers until the end of 1923. It has been remarked that since the time of Oliver Cromwell no Prime Minister has ever spoken more haughtily to a House of Parliament than did Signor Mussolini to the Chamber of Deputies on this occasion; whereas he treated the Senate with marked respect. He said that the new Government was willing to assume full responsibility, and therefore was asking the Chamber to grant it full powers. If, however, the Chamber would not do this, the Government would take the powers of its own accord. On the way the Chamber voted would depend its own existence, and it was for the Deputies to choose whether dissolution should take place in two days or two years.

In order to reduce the deficit the Government proposed among other things to revise war pensions; to introduce radical alterations in the constitution of the public services-railways, posts, telegraph and telephone-with a view to handing them over eventually, if and when possible, to private enterprise; to reduce shipping lines administered by the State and subsidies to shipping concerns; to curtail the programme of Public Works to a minimum; to reform the Civil Service; to exercise strict control over the Estimates; and to place taxation on a new basis in order to foster the revival of trade. In foreign relations the Government undertook to adopt a firmer attitude than its predecessors where Italy's interests were concerned. On November 25 the full powers demanded by the Cabinet till December 31, 1923, were granted by the Chamber by 275 votes to 90.

The revolution thus effected by the Fascisti completely overshadows all the other events that took place in the history of Italy during the year. It is, however, worth mentioning that from the economic point of view the year was not altogether an unsatisfactory one for the country. There were fewer strikes than in the previous year; the adverse trade balance experienced a further considerable reduction; and there was a

certain revival of the tourist traffic. The deflation of the currency was continued to a certain extent, and over 7,000,000,000 lire were deposited in the savings banks.

Mention should also be made of the election, on February 6, of Cardinal Ratti, Archbishop of Milan, to the Papacy under the title of Pius XI. From the day of his election the new Pope indicated that he would carry on the tradition of friendliness to the Italian people which had been the policy of his predecessor.

CHAPTER III.

GERMANY AND AUSTRIA.

GERMANY.

DURING the year 1922 the problem of reparations dominated the whole public life of Germany even to a greater extent than in the preceding year, whereas the two other questions which previously had been a similar source of anxiety and unrest— disarmament and the trial of war culprits-receded more and more into the background, though they are still, so to speak, in the air, and from time to time remind the world of their existence. The question how Germany was to carry out the reparation obligations laid on her by the Treaty of Versailles and reduced to definite figures in the London Ultimatum of May 5, 1921, had already at the beginning of the year reached a critical stage owing to the perils of the economic situation in Germany. As a practical precaution, Germany sent in a request for a postponement of the reparation payments. This gave rise in a short time, i.e. after the change of the Ministry in France on January 12, to a regular battle for the moratorium; and owing to the failure to obtain this, and the complete collapse of the exchange, the year closed amid a general feeling of hopelessness.

During 1921, after the first reparation payments had been made, the financial stability of the country and its currency had rapidly deteriorated. The Government consequently had not been surprised, on applying to the Bank of England for a loan of 25,000,000l., to receive from the Governor the reply that no credit could be given to Germany so long as she was saddled with her present load of reparations debt. Accordingly, her last step in that year had been to turn to the Reparations Commission with a declaration that she would be able to pay only in part the next two reparation instalments due on January 15 and February 15. She joined to this statement a request for a postponement of payment. This forced the Supreme Council of the Allies to seek a new solution of the reparations problem. The first subject discussed by the Conference of the Supreme Council convened at Cannes by the

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French Premier, M. Briand, was the question of reparations; and in the course of the deliberations German delegates were invited to attend in order to explain the situation of Germany. No decision, however, was reached on the subject of the moratorium. Herr Rathenau, the head of the German delegation, set forth the extent of Germany's capacity to pay in a statement which was highly commended at the time, but owing to the Cabinet crisis which supervened in France, and the declared aversion of the new head of affairs, M. Poincaré, to Conferences and oral discussions, the Conference was prematurely broken off. Still, on January 13, immediately before the dissolution of the Conference, the Reparations Commission granted Germany a temporary postponement of payment, on condition that it should pay 31,000,000 gold marks every ten days, and within fourteen days submit a complete plan for emending the German Budget and guaranteeing the paper currency, and also a scheme for cash payments during 1922.

In its reply of January 28 the German Government, taking its stand on the discussions in Cannes, proposed that Germany during 1922 should pay 720,000,000 gold marks in cash and 1,450,000,000 in kind, at the same time asking that the cash payments should be reduced to the lowest figure possible. In regard to the amending of the Budget, it pointed to the agreement just arrived at between the Government Parties and the People's Party for the better collection of existing taxes and the introduction of new ones, both direct and indirect, the proceeds of which were expected to increase the revenue from taxation from the 55,000,000,000 paper marks raised in 1921 to 100,000,000,000 in 1922, and the chief constituent of which was a forced loan anticipated to yield 1,000,000,000 gold marks. Notice was given of a Bill to secure to the Reichsbank-in accordance with the demand of the Reparations Commissioncomplete freedom from interference on the part of the Imperial Chancellor, and a promise was held out that everything which could be reasonably required should be done to lessen the floating debt and to check the activities of the note press.

The Government's attitude on the reparations question was explained by the Chancellor in a speech in the Reichstag on January 28, in which he repudiated as utterly groundless the charge brought against Germany by M. Poincaré, in a speech in the French Chamber, of maliciously avoiding the fulfilment of her obligations. The Reichstag showed its approval of the attitude of the Government by rejecting a vote of censure brought forward by the Communists.

The Reparations Commission answered on March 21 in a note in which it fixed the obligations of Germany at the figures proposed by the German Government, but attached to this concession certain stringent conditions which would have to be carried out by a fixed date, at latest by May 31. The taxation arrangement-which the Reparations Commission considered

quite unsatisfactory, and incommensurate alike with the obligations and the capacities of Germany-was to be put into effect by April 30. In addition, by May 31 new taxation to the extent of 60,000,000,000 marks would have to be imposed. A number of measures for securing strict control over German finances and the German Budget would have to be introduced at early dates, and the scheme for an internal loan submitted by April 30.

In a speech in the Reichstag the Chancellor pointed to the rapid depreciation of German currency which had been the immediate effect of the note, and rejected the suggested measures for controlling German finances as an intolerable infringement of German sovereignty. By 248 votes to 81, with 43 abstentions, the Reichstag on March 30 passed a resolution protesting against the intolerable demands made of the German people in the note of the Reparations Commission, and approving of the declarations made by the Government in answer to it.

The Government accordingly besought the Reparations Commission to reconsider its decision of March 21, and proposed that Germany's capacity to pay should be investigated by experts. The exchange of notes was for the time being closed by an answer of the Reparations Commission deploring the obstinacy of Germany and warning the Government of its possible consequences, but at the same time expressing readiness to examine every practical suggestion which might be put forward by Germany for removing her difficulties.

Meanwhile there had met in Genoa the great World Economic Congress, the convening of which was the one positive result of the Conference of Cannes. The Congress, it is true, lost much of its significance for Germany owing to the fact that France had consented to take part in it only on condition that the question of reparations was not officially raised. Nevertheless, the German Government, as the Chancellor had stated in the above-mentioned sitting of the Reichstag of January 26, regarded the convoking of the Congress as a moral victory for Germany, as it hoped that "investigation of the world economic problems and their inter-connexion will help to put the question of reparations more and more in its true light, and so favour the reasonable and practicable solution of the problem advocated by Germany." This hope was fulfilled only to a limited extent. It is true, the admission to the Congress on equal terms of the German delegation (consisting of Dr. Wirth, Herr Walter Rathenau, who had been Foreign Minister since the end of January, and Dr. Hermes, the Minister of Finance) as representatives of Germany was a moral triumph, and the question of reparations was discussed in private conversations; but very little actual progress was made. The German delegation, however, became the object of general and by no means welcome attention when, on Easter Sunday