"The great countries of Europe are raising enormous revenues and something like half of them are being spent on naval and military preparations, [which are], after all, preparations to kill each other. Surely this expenditure becomes a satire on civilisation. If it goes on, sooner or later I believe it will submerge civilisation."

-- Sir Edward Grey (British Foreign Secretary), 29 March 1909
The Navy Scare
In March 1908, the Reichstag passes a Supplementary Naval Law, increasing the rate of Germany's battleship / battlecruiser construction programme from two new ships per year to four. The British government is under no illusion who the new German battle fleet is aimed at: as early as 1902, the First Lord of the Admiralty (Lord Selbourne) had informed the government that "the Admiralty had proof that the German Navy was being constructed with a view to being able to fight the British Navy: restricted cruising radius, cramped crew quarters, etc. meant that the German battleships were designed for the North Sea and practically nothing else."

The Supplementary Naval Law of 1908 causes particular alarm in Britain because the Liberal Government has been cutting military spending in favour of social programmes. Since the 1906 launch of the groundbreaking battleship, HMS Dreadnought, the tempo of British ship-building has gone in the opposite direction, from four to two new dreadnought-class ships per year. As Britain's entire defence policy depends on naval supremacy, it is inevitable that Britain will now reverse this trend and match any increase in the production of German naval armaments.
"There is no comparison between the importance of the German Navy to Germany, and the importance of our Navy to us. Our Navy is to us what their Army is to them. To have a strong Navy would increase their prestige, their diplomatic influence, their power of protecting their commerce, but it is not a matter of life and death to them, [as] it is to us. No superiority of the British Navy over the German Navy could ever put us in a position to affect the independence or integrity of Germany because our Army is not maintained on a scale which, unaided, could do anything on German territory. But if the German Navy were superior to ours, they, maintaining the Army which they do our independence, our very existence would be at stake".

Sir Edward Grey, 29 March 1909
The issue is complicated by the fact that the British Admiralty suspects that Germany is actually secretly accelerating her building plan, beyond that publicly authorised by the Navy Laws. The Admiralty has evidence that Germany is building up in advance stockpiles of naval guns, turrets and armour - the time-consuming elements in building a ship - before the hulls of the ships they are intended for are actually built. With these stockpiles at hand, battleships could be built in only the time that it took to build the hull to house the stockpiled parts: this would dramatically increase the number of ships built. At Germany's declared rate of building, she will have 13 dreadnought-class battleships by 1912, compared to Britain's 16: but if the suspected rate of construction is actually true, she will have 21 dreadnoughts by that time. The near-panic in Britain caused by the realisation that British Naval supremacy may be threatened, is known as the "Navy Scare".

In February 1909, Prime Minister Asquith reverses the cuts in the dreadnought building program - restoring the 1909 total to four new ships - and adds the possibility of an extra four on top of these (the order for the addition four will be confirmed August 1909). Asquith makes it clear that the increase is a direct result of the increase in German production, explaining that "Germany alone ha[s] the right to determine the rate of her shipbuilding but the British Government (in estimating their own programme) [can] not avoid taking account of the development of the German programme".

As the prospect of a costly Anglo-German naval arms race looms, Sir Edward Grey suggests talks between British Chancellor (ie Finance Minister) Lloyd George and German Ambassador Metternich. Grey knows that Naval supremacy is so important to Britain that she will match whatever build-up Germany undertakes, and so keep naval parity out of Germany's reach, regardless of the cost. The end result of an arms race will therefore be huge and costly building programmes which do not change the balance of naval power at all, but merely build animosity and resentment on both sides because of the huge costs incurred. Grey hopes that talks at this early stage might lead to an amicable agreement to restrain naval building programmes in both countries, before the arms race gets out of control. At their first meeting, Lloyd George assures Metternich that Britain would be "most ready to meet Germany half way in establishing a joint basis for curtailment of the fleet building on both sides". But the Kaiser regards the German Fleet as his own creation, and takes personally any suggestion that his new fleet be curtailed. He warns his Ambassador: "I do not wish a good understanding with England at the expense of the extension of the German fleet."

On 14 July 1909, Theobald Bethmann-Hollweg replaces von Bulow as Chancellor. He favours naval talks with Britain, and so on 21 August he opens negotiations in Berlin with the British Ambassador, Sir Edward Goschen. From the beginning, the aims of the two sides are different - Britain wants an understanding specifically to control the naval armaments race, whereas Germany wants a wider-ranging political understanding between the two countries.

Bethmann's suggestion is that Germany could cut her dreadnought programme from 4 to 3 ships per year, but Britain must give in return a guarantee of neutrality in any future wars. Grey is skeptical about this offer, as a guarantee of British neutrality gives Germany a free hand to dominate continental Europe. It also undermines the spirit of the Anglo-French entente, as the English friendship with France would be made meaningless if England were to say plainly that under no circumstances would she ever help France against Germany. Grey concludes that "I want a good understanding with Germany, but it must be one which will not imperil those we have with France and Russia."

Faced with a choice between a crushingly expensive naval race or a pledge of neutrality that will lead to German domination of continental Europe, the British government chooses the first course. The naval talks sputter on with increasing pessimism until 1911, but no agreement is reached on how to amicably limit naval building, and the armaments race continues with no apparent means of controlling it.
"I consider any control of armaments as absolutely impracticable. Who would be content to weaken his means of defence without the absolute certainty that his neighbour was not secretly exceeding the proportion allowed to him?...No, gentlemen, any one who seriously considers the question...must inevitably come to the conclusion that it is insoluble so long as men are men and states are states."

Chancellor Bethmann-Hollweg to the Reichstag, 30 March 1911.
Morocco II (Agadir)
While the naval talks in Berlin are still on-going, a second Franco-German dispute over the status of Morocco drives relations between Britain and Germany to a new low.

Despite the apparent settlement of the status of Morocco at the 1906 Conference of Algeciras, the country remains a source of friction between France and Germany. In January 1911, France sends troops to the Moroccan capital (Fez) to protect the European population there from local unrest following a series of palace coups. Germany is sensitive to any sign that France is trying to increase its political hold over Morocco, and responds in kind to the French military intervention, by dispatching a warship to the southern Morocco port of Agadir.

The official reason for Germany's military presence is "to protect German civilians and commercial interests in the area", though in fact Germany has neither citizens nor commercial interests in the region at this time. The actual purpose of Germany's "gunboat diplomacy" is to pressure France to compromise its position on Morocco: France will have to give up some other lucrative part of her empire (the German Foreign Minister suggests the whole of French Congo would be acceptable) to induce Germany to leave Agadir , or face German annexation of the southern half of Morocco.

Negotiations between France and Germany, aimed at resolving the crisis, begin on July 9th 1911. Although not a party to negotiations, the British government also has an interest in the outcome, not least because Britain actually has a larger commercial stake in Morocco than either France or Germany. When the British Chancellor, Lloyd George, makes clear Britain's diplomatic support for France, Germany has to either moderate its territorial demands on France, or go to war over Morocco.

The Franco-German talks drag on for two months without resolution but, when the Berlin Stock Market crashes on 4 September over fears that war is imminent, German Foreign Minister Kiderlen begins to moderate his demands on France. In a final agreement signed on 4 November 1911, Germany recognises that Morocco is in effect a French protectorate, and receives in return 100,000 square miles of territory which is transferred from French Congo to the German Cameroons.

In Germany, it is regarded as a great humiliation that the Foreign Minister has had to settle for less than half the territory than had once been his irreducible minimum. The nationalist press complains: "Without acquiring anything of moment, we are more unpopular than ever!". And in the Reichstag, Conservative leader Ernst von Heyderbrand is in no doubt that it is British interference in support of France which has forced Germany's humiliating climbdown over Morocco:
"Like a flash in the night, all this has shown the German people where the enemy is.
We know now, when we wish to expand in the world...who it is that lays claim to world-wide domination...
Gentleman, we Germans are not in the habit of permitting this sort of thing and the German people will know how to reply...
We shall secure peace, not by concessions, but with the German sword".

Ernst von Heyderbrand to the German Reichstag, November 1911

While the Agadir crisis is still underway, Admiral von Tirpitz takes advantage of the increased anti-British feeling in Germany, and suggests an expansion of the German High Seas Fleet. He proposes a Supplementary Naval Law, which will add an additional battle squadron of eight dreadnoughts to the Fleet, as well as 72 new submarines and 15,000 extra personnel. Before the proposed bill is made public, a British government mission (under Minister of War, Richard Haldane) arrives in Berlin on 8 February, to discuss ways that Britain and Germany might reduce mutual tension and slow their naval arms race. The talks are good-natured and substantive, but founder upon Germany's insistence that she will slow her building programme only if Britain pledges to remain neutral in any future European war. Britain offers an assurance that she will never attack Germany, nor join any alliance that has aggression against Germany as its aim, but this is not enough, and on 22 March 1911 the terms of the Supplementary Naval Law are published in Berlin.

To preserve British Fleet's superiority in the North Sea in the face of the proposed new German battle squadron, the First Lord of the Admiralty, Winston Churchill, starts bringing home the Royal Navy from overseas stations, especially the Mediterranean. His reasoning is that Britain needs to be overwhelmingly strong in the one theatre that is truly vital to her:
"We cannot possibly hold the Mediterranean or guarantee any of our interests there until we have obtained a decision in the North Sea...It would be very foolish to lose England in safguarding Egypt. If we win the big battle in the decisive theatre, we can put everything else straight afterwards. If we lose it, there will not be any afterwards."

Churchill to Haldane, 6 May 1912.

As Britain moves vessels out of the Mediterranean, France fills the vacuum there by moving her Atlantic Fleet into the Mediterranean, thus preventing the Triple Alliance powers of Italy and Austria-Hungary from taking control there. France's reasoning is the same as Churchill's - it is better to concentrate one's resources in the decisive theatre, which in France's case is the Mediterranean. The move is not part of a joint naval strategy, although France would like it to be, and she lobbies hard for a formal commitment that Britain will secure France's now-undefended Atlantic and Channel coast in the event of war. Germany assumes that a military agreement HAS been reached, and Churchill is well aware that the simultaneous Fleet redeployments give the appearance of some secret Anglo-French division of naval effort. He argues that the two countries are simply putting their fleets in the places where their own best interests demand it, and denies that the Entente has assumed the form of a defensive alliance. Nevertheless, France is now able to argue in any future conflict with Germany that, as she has denuded her Atlantic defences to fill the British vacuum in the Mediterranean, Britain has at least a moral obligation to protect France's Atlantic coast from attack by the German North Sea Fleet.
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