more industrially developed countries, yet prices for the country’s traditional exports were reduced by nearly half. 2 Protests over the fall in living standards and social unrest awoke fears across much of Europe of more revolutions following the one in Russia. This had contributed to the assumption of dictatorial or authoritarian regimes in a number of countries. 3 In such a climate the fall of the monarchy in Spain and the proclamation of a republic was unwelcome to the international banking community. Morgan’s Bank immediately cancelled a loan of 60 million dollars agreed with the previous administration.
The new government also inherited the consequences of the economic mistakes made under Primo de Rivera’s dictatorship, the massive debts from public spending projects and the collapse in the value of the peseta. Large amounts of capital had also been transferred abroad in anticipation of increased taxation and a further deterioration of the country’s economy. 4 Landowners and industrialists, afraid of the financial effects of the government’s likely social programme, immediately cut investment. These fears were influenced by the appointment of one socialist, Indalecio Prieto, as minister of finance, and another, Largo Caballero, as minister of labour. 5
The government, a coalition from six different parties, proceeded nevertheless to summon the Cortes and draft a constitution for the Second Republic. Throughout April, May and June of 1931 they continued to issue decrees dealing with the question of land reform. These forbade landowners to expel tenants or to hire day labourers from outside their municipality. And they extended employment rights agreed in industry, including the eight-hour day, to agricultural workers. On 21 May the government created the Comisión Técnica Agraria to draft a law, setting up an Institute of Agrarian Reform. It established a programme to resettle between 60,000 and 75,000 families each year, but its budget was only 50 million pesetas, a totally inadequate amount for the task.
The following week the new minister of war, Manuel Azaña, set out to tackle the overmanned military establishment. He offered generals and officers the possibility of passing to the reserve list on full pay. He reduced the sixteen captaincy-generals to eight ‘organic divisions’, suppressed the rank of lieutenant-general, reduced the length of obligatory military service to one year and ordered the closure of the General Military Academy of Saragossa, which happened to be commanded by General Francisco Franco. 6
These reforms did not bring about any substantive improvements in the modernization or efficiency of the army. If anything, it provided disgruntled officers with the time and opportunity to plot against the Republic. The government also made the error of keeping General Sanjurjo in the post of commander of the Civil Guard, a corps which had a notorious reputation for its deadly acts of repression. 7 It set up a new paramilitary force, with the unpromising title of Assault Guard. They were known as the asaltos , and tended to be deployed in towns and cities while the Civil Guard policed the countryside.
Catalan autonomy was also high on the list of matters to be addressed. It was a question which greatly concerned old-fashioned Castilian centralists, who saw any concessions to the regions as a threat to the unity of Spain. The April elections had proved a victory for the party of the Catalan left, the Esquerra Republicana de Catalunya, an essentially middle-class organization led by Francesc Macià and Lluís Companys. The two of them had proclaimed on 14 April that a Catalan republic would be established within a federal state. This was not exactly what had been negotiated in the pact of San Sebastián, so three days later three ministers left Madrid for Barcelona to discuss with Macià and Companys the best way forward to enable the Cortes to approve a statute of autonomy. On 21 April Macià