Bulgaria takes out a loan from German banks

The British chronology of the war records under 6 August 1915 that the government of Bulgaria had negotiated a new loan of 400 million francs with German and Austro-Hungarian banks. Contemporary sources describe it differently. According to a communiqué issued by the Bulgarian finance minister on that very day, 6 August, and circulated by Reuters, this was not a new credit but the implementation of a large loan concluded in Germany before the war, and an advance on account of it. We have not been able to confirm the sum of 400 million francs.

The 1914 option

In July 1914 the government of Vasil Radoslavov concluded with a consortium of German and Austro-Hungarian banks, headed by the Berlin Disconto-Gesellschaft, an agreement for a loan of 500 million francs, or £20 million. The outbreak of war, however, froze the matter. The Bulgarians complained that the banks were not honouring the agreement. As late as May 1915 one of the Bulgarian ministers said publicly that a mere six million francs had been received from Germany on account of the loan.

According to the minister’s communiqué, the consortium was to declare by 1 August 1915 whether it would take up the option on the first half of the loan, that is 250 million francs (£10 million). In the last few days the banks had announced that they would honour their obligations and take up the option. Since the war did not permit a public bond issue, it was postponed until at least a year after the conclusion of peace. Until then the banks were to take on deposit Bulgarian treasury bills to the sum of £4.8 million, or about 120 million francs. Bulgaria paid interest on them one percentage point above the official rate of the Reichsbank, which with commission came to between 6.5 and 7 per cent a year.

Debts to France and Russia

The communiqué also settled Bulgaria’s old debts. The £3 million owed to the Banque de Paris et des Pays-Bas in Paris was to be repaid from the future issue, while the £1.2 million for the Russo-Asiatic Bank was to be held by the Disconto-Gesellschaft at that bank’s disposal and handed over to it only after the conclusion of peace. The Athens correspondent of the London Daily Telegraph, whose report was reprinted by the New York Times on 7 August, presented the matter somewhat differently. He wrote of the signing of a convention on the second part of the loan, of 250 million francs, of which 60 million was to go to redeeming bills issued earlier to the Disconto-Gesellschaft, another 60 million to taking over Bulgaria’s debt to France, and the remaining 130 million was to be placed at the disposal of the government in Sofia. The sources thus differ in detail, but agree on the essential point: the German banks had once again begun to feed the Bulgarian treasury.

Money during the bidding

The news came at a moment when the Entente and the Central Powers were bidding against each other for Bulgaria. Only three days earlier the envoys of the four Entente powers had made a new offer in Sofia, promising Bulgaria part of Serbian Macedonia after the war if it joined the war against Turkey. Berlin could offer something more tangible than promises of lands that Serbia and Greece did not want to give up: money for an empty treasury. British and French diplomats were aware of the weight of this argument, but for several more weeks they believed that Bulgaria could be won over.

Radoslavov did not reveal his intentions. Yet only a month later, on 6 September 1915, Bulgaria signed a secret alliance with Germany and a military convention on a joint attack on Serbia. Germany and Austria-Hungary then promised it a war loan of 200 million francs, and from November 1915 paid Sofia regular monthly advances for the conduct of the war.