Date: May 9th, 1905 – Belgrade, Kingdom of Serbia
April unfolded with a deceptive rhythm of routine statecraft, but beneath the surface, Petar's mind was a crucible of burgeoning plans and anxious anticipation. He diligently attended to the daily dispatches and presided over council meetings with a newfound attentiveness that kept his ministers on their toes. He even found a grim satisfaction in the initial, grudgingly positive reports trickling in from the War Ministry about the improved boot inspection protocols. General Stefanović, it seemed, had finally understood that the King's demands were not fleeting whims.
Yet, the larger shadow of the machine gun program, and Minister Paču's impending report on its funding, loomed large. Petar knew this was a far more critical test of his will and the kingdom's capacity for change. During this intervening month, he often found himself in his study late at night, surrounded by maps and the industrial reports, trying to visualize a stronger, more self-reliant Serbia. Alex Volkov's pragmatic engineering mind warred with the imperial dreamer, concluding that all ambitions were smoke without a modern military and a robust industrial base.
This preoccupation led him to revisit his conversation with Colonel Mišić about Milan Stojadinović, the young, unheard economist in the Ministry of Commerce. If Paču, with his ingrained fiscal conservatism, declared the machine gun program impossible, Petar needed alternative perspectives, fresh ideas. "Mišić," he'd said one afternoon, "those memoranda by Gospodin Stojadinović you mentioned. Is there a way I might peruse them? Discreetly, of course. I am… interested in new economic thinking, wherever it may be found."
Mišić, ever resourceful, had managed to procure copies within two days. They arrived in a plain wrapper, and Petar devoured them. Stojadinović's analyses were insightful and surprisingly mature for a man reportedly in his mid-twenties. He wrote about leveraging Serbia's agricultural base more effectively through raw exports and developing processing industries – canneries, textile mills using domestic wool and flax, and modernized slaughterhouses. He argued for targeted state investment in infrastructure directly supporting economic growth, particularly railways to undeveloped but resource-rich areas. He most strikingly proposed a more aggressive strategy for renegotiating foreign debt and attracting new investment from non-traditional sources, emphasizing Serbia's strategic position and untapped potential as assets, not just liabilities.
Some of his ideas were perhaps politically naive, underestimating the entrenched interests or the complexities of international finance, but they were undeniably bold and solution-oriented. Alex Volkov, the student who had wrestled with economic theory, recognized the intellectual spark. Here was a mind that thought about growth and development, not just balanced budgets maintained through austerity. Petar made extensive notes, absorbing Stojadinović's arguments, considering how they might be adapted or used. He didn't plan to meet the young man yet; it was too soon. But Stojadinović's ideas became another set of tools in Petar's rapidly expanding mental arsenal.
Finally, the day of reckoning arrived—May 9th. Minister of Finance Lazar Paču was ushered into Petar's study. He came alone this time, his usual leather briefcase in hand, his expression unreadable but conveying an aura of immense gravity. The air in the room felt thick with unspoken pressure.
"Minister Paču," Petar began, his voice calm but firm. The month has passed. I trust you have a viable financial plan for the initial phase of the army's machine gun acquisition program."
Paču placed his briefcase on the table and slowly opened it. He extracted not a single, triumphant plan, but a series of documents. "Your Majesty," he said, his voice low and tired, "I have spent every waking hour on the charge you laid upon me. I have consulted with every department, reviewed every line of the national budget, explored every conceivable avenue within the bounds of fiscal responsibility and our kingdom's current economic reality."
He paused, and Petar's stomach tightened. This preamble did not sound promising. "The unvarnished truth, Your Majesty," Paču continued, looking Petar directly in the eye, "is that funding even a reduced program of twenty-five machine guns, with the necessary ammunition, training, and logistical support this year, as General Putnik outlined, is… extraordinarily difficult. To do so without causing severe disruption to other essential services or incurring dangerous levels of new debt requires sacrifices that will be deeply unpopular and potentially destabilizing."
This was not the outright "impossible" Petar had half-feared, but it was perilously close. He motioned for Paču to continue, his expression carefully neutral.
Paču then laid out a "Path of Extreme Austerity." It involved a series of painful measures: A ten percent cut across the board to the operating budgets of all government ministries, excluding the War Ministry's core combat readiness funds but including its ceremonial and non-essential administrative expenses. This would mean reduced civil servant salaries, deferred public works projects, and slashed subsidies to specific sectors. The imposition of new "National Defense Levies" – essentially new taxes – on luxury imports, tobacco and alcohol sales beyond the existing monopoly profits, and entertainment venues. These would be unpopular among the urban populace and the small but influential merchant class. A proposal to divert a significant portion of the funds allocated for railway expansion for the next two years towards the machine gun program. Paču noted this would delay crucial infrastructure projects intended to boost long-term economic growth. Finally, he presented a highly cautious proposal for issuing short-term domestic bonds, aimed at patriotic citizens and institutions. However, given the kingdom's financial standing, he warned that the uptake might be limited and the interest rates required relatively high.
"This… path," Paču concluded, his voice heavy, "will allow us to meet the approximate cost of acquiring twenty-five Maxim guns and their initial support within the next twelve to eighteen months. It will be a severe burden on the kingdom. It will cause hardship. And it offers no room for error or unforeseen expenditures." He did not try to hide his distaste for the measures he was proposing. He was, in effect, showing Petar the actual cost of his demand.
Petar listened in silence, his mind racing. The cuts were deep, and the new taxes were potentially inflammatory. Delaying railway expansion was a bitter pill, directly contradicting his long-term goals for industrial development, which relied on better transport. Yet, Paču had not said no. He had, under duress, presented a way, however arduous.
"This is indeed a stark proposal, Minister," Petar said slowly. "The sacrifices you outline are significant." He rose and walked to the window, mirroring his actions from their previous meeting. He needed a moment to think, to draw upon Alex Volkov's analytical detachment and Stojadinović's bolder, if untested, ideas.
He turned back. "The ten percent cut to ministerial operating budgets," Petar began, "while painful, may enforce a necessary discipline and root out inefficiencies. I will approve this, understanding that essential public services like basic education and public health must be protected as much as possible. The National Defense Levies… these will be unpopular, but perhaps necessary. They must be communicated as a temporary measure for the kingdom's survival, not a permanent imposition."
He paused. "The diversion of railway funds, however… is the greatest concern. Railways are the arteries of a modern economy, Minister. To halt their expansion is to slow our future growth, the very growth that could eventually make such military expenditures more sustainable." Here, he decided to introduce a thought inspired by Stojadinović subtly. "Are we certain there are no other avenues for raising capital for such a strategic national asset? You mentioned domestic bonds. What if we were to structure them differently, perhaps offering returns linked to the future profitability of the new lines, or seeking partnerships with domestic businesses that would directly benefit from their construction? Or are there underutilized state assets – lands, properties – that could be leased or sold to generate immediate capital for this specific purpose, rather than diverting funds from ongoing projects?"
Paču looked surprised by the specificity and novelty of these suggestions. "Your Majesty, these are… unconventional ideas for our current system. Assessing the viability of such measures would require significant study."
"Then study them, Minister," Petar said firmly. "While we may need to divert some railway funds temporarily, I want a parallel effort to explore these alternative financing mechanisms for infrastructure. We cannot afford to sacrifice our long-term economic development entirely on the altar of immediate military necessity. We must find ways to do both, however difficult."
He then addressed the core issue. "Despite the hardships, Minister Paču, you have demonstrated that a path, however narrow, exists to begin the machine gun program. I therefore approve the 'Path of Extreme Austerity,' with the modifications I have outlined regarding the railway funds and the exploration of alternative financing. We will aim to fund the acquisition of twenty-five machine guns and their support within the next fiscal year. General Putnik's program will commence."
He saw the immense weariness on Paču's face, but also a grudging acknowledgement. The King had not backed down. "I will also expect," Petar continued, "that you, Minister, will personally oversee the implementation of these fiscal measures with the utmost diligence to minimize corruption or waste. And I want monthly reports on the progress of these National Defense Levies and the identified savings."
Paču inclined his head. "As Your Majesty commands. It will be a difficult year for Serbia."
"Difficult years forge strong nations, Minister," Petar said, a touch of Alex Volkov's historical romanticism seeping through. "And strong nations secure their futures."
After Paču departed, the weight of the decision settled upon Petar. He had committed Serbia to a path of significant hardship. There would be public discontent over the new taxes and the cuts. He would be blamed. But he also knew, with a certainty that chilled him, that the alternative – facing the coming storms with an army equipped for a previous century – was far worse.
He had won. He had secured the funding, however painfully, for a crucial first step in modernizing his army. He had also, perhaps, pushed Lazar Paču to the very limit of his loyalty and capacity. The man was a valuable, if unyielding, servant of the state. Petar hoped he hadn't broken him.
His thoughts turned again to Stojadinović's memoranda. The young economist's ideas about leveraging assets and seeking innovative investment strategies seemed even more relevant now. Perhaps it was time to find a way to bring that fresh thinking more formally into the government's orbit, even if initially only in an advisory capacity. Paču's traditionalism, while a brake on recklessness, could also be a brake on necessary innovation.
Petar walked over to the maps of his kingdom, now symbols not just of territory, but of immense challenges and burgeoning, fragile hope. The price of firepower was high. The cost of empire would be higher still. But today, he made a crucial down payment to fund Serbia's future, whatever that future might hold.