Creation of a unified Reich, along with indemnity payments imposed on France and the acquisition

of important coal and iron deposits in the annexed provinces of Alsace-Lorraine, fuelled an economic
boom and huge increase in German industrial strength. With the backing of Wilhelm II, after 1890
Admiral Alfred von Tirpitz sought to exploit this growth to create a Kaiserliche Marine, or Imperial
German Navy, able to compete with the British Royal Navy for world naval supremacy.[22] He was
greatly influenced by US naval strategist Alfred Thayer Mahan, who argued possession of a blue-
water navy was vital for global power projection; Tirpitz had his books translated into German, while
Wilhelm made them required reading for his advisors and senior military personnel. [23]

However, it was also an emotional decision, driven by Wilhelm's simultaneous admiration for the
Royal Navy and his desire to outdo it. Bismarck stressed the need to avoid antagonising Britain, a
policy made easier by his opposition to acquiring colonies, but this challenge could not be ignored
and resulted in the Anglo-German naval arms race.[24] The launch of HMS Dreadnought in 1906 gave
the British a technological advantage over their German rival which they never lost. [22] Ultimately, the
race diverted huge resources to creating a German navy large enough to antagonise Britain, but not
defeat it; in 1911, Chancellor Theobald von Bethmann-Hollweg acknowledged defeat, leading to
the Rüstungswende or ‘armaments turning point', when he switched expenditure from the navy to
the army.[25]

This was driven by concern over Russia's recovery from defeat in the 1905 Russo-Japanese
War and the subsequent revolution. Economic reforms backed by French funding led to a significant
post-1908 expansion of railways and infrastructure, particularly in its western border regions.
[26]
 Germany and Austria-Hungary relied on faster mobilisation to compensate for fewer numbers and
it was the potential threat posed by the closing of this gap that led to the end of the naval race, rather
than a reduction in tensions. When Germany expanded its standing army by 170,000 men in 1913,
France extended compulsory military service from two to three years; similar measures taken by
the Balkan powers and Italy, which led to increased expenditure by the Ottomans and Austria-
Hungary. Absolute figures are hard to calculate due to differences in categorising expenditure, since
they often omit civilian infrastructure projects with a military use, such as railways. However, from
1908 to 1913, defence spending by the six major European powers increased by over 50% in real
terms.[27]

Conflicts in the Balkans

Sarajevo citizens reading a poster with the proclamation of the Austrian annexation in 1908

The years before 1914 were marked by a series of crises in the Balkans as other powers sought to
benefit from Ottoman decline. While Pan-Slavic and Orthodox Russia considered itself the protector
of Serbia and other Slav states, the strategic importance of the Bosporus straits meant they
preferred these be controlled by a weak Ottoman government, rather than an ambitious power
like Bulgaria. Balancing these competing objectives required simultaneously backing their clients
while limiting their territorial gains, dividing Russian policy makers and adding to the instability of this
region.[28]

At the same time, many Austrian statesmen considered the Balkans essential for the continued
existence of their Empire and Serbian expansion as a direct threat to it. The 1908-1909 Bosnian
crisis began when Austria annexed the former Ottoman territory of Bosnia and Herzegovina, which
it had occupied since 1878. Timed to coincide with the Bulgarian Declaration of Independence from
the Ottoman Empire, this unilateral action was denounced by all the Great Powers; unable to
reverse it, they amended the 1878 Treaty of Berlin and accepted Austrian annexation. Some
historians see this as a significant escalation, ending any chance of Russia and Austria co-operating
in the Balkans, while damaging Austrian relations with Serbia and Italy, who had their own
expansionist ambitions in the area.[29]

Tensions were further heightened by the 1911 to 1912 Italo-Turkish War, which demonstrated the
apparent inability of the Ottomans to retain their empire and led to the formation of the Balkan
League.[30] An alliance of Serbia, Bulgaria, Montenegro, and Greece, the League over-ran most of
European Turkey in the 1912 to 1913 First Balkan War. Despite its decline, the Great Powers had
assumed the Ottoman army was powerful enough to defeat the League and its collapse took them
by surprise.[31] The Serbian capture of ports on the Adriatic resulted in partial Austrian mobilisation on
21 November 1912, including units along the Russian border in Galicia. When the Council of
Ministers of the Russian Empire met to consider their response next day, they decided not to
mobilise, fearing Germany would do the same and start a European war for which they were not yet
prepared.[32]

The Great Powers sought to re-assert control through the 1913 Treaty of London, which created an
independent Albania, while enlarging the territories of Bulgaria, Serbia, Montenegro and Greece.
However, disputes between the victors sparked the 33-day Second Balkan War, when Bulgaria
attacked Serbia and Greece on 16 June 1913; it was defeated, losing most of Macedonia to Serbia
and Greece, and Southern Dobruja to Romania.[33] The end result was that even countries which
benefited from the Balkan Wars, such as Serbia and Greece, felt cheated of their "rightful gains",
while for Austria it demonstrated the apparent indifference with which other powers viewed their
concerns, including Germany.[34] This complex mix of resentment, nationalism and insecurity help
explain why the pre-1914 Balkans became known as the "powder keg of Europe".[35]