the proviso that the people of North Sleswig might, if they desired it, join Denmark. Saxony, however, retained a certain amount of independence, whereas the smaller States were to be organised into a new German Confederation under Prussian leadership. Germany north of the Maine was annexed to Prussia. The triumph of Prussia was immediately followed by the reorganisation of the French army, and the initiation of reforms in Austria. [Illustration: PRAGUE.] The aim of Lord Derby’s Government had been to withdraw England entirely from foreign politics, but that did not prevent Englishmen from rejoicing at the creation of a strong progressive German Power in Central Europe capable of curbing the restless ambition of France, and at the defeat of Austria--one of the strongholds of decaying feudalism. During 1867 the work of consolidating North Germany went on rapidly, and Baron Beust, the Saxon Minister, was called to carry out the new policy of reconstruction in Austria. At last the independence of Hungary was recognised, and the Austrian Emperor having sworn to maintain the Hungarian Constitution, he was crowned in Pesth as King of this ancient Monarchy. When Hungary had been conciliated, Baron Beust next proceeded to frame a constitution for the other provinces of the Empire. One little cloud, however, arose on the untroubled horizon of the English Foreign Office. A pending dispute as to the occupation of Luxembourg tempted Lord Stanley to interfere in Continental affairs during the spring. The King of Holland was Grand Duke of Luxembourg, and he had entered into a secret agreement to sell it to France. But the capital of the province was held by a Prussian garrison, and the new North German Parliament objected strongly to permit a German province to pass under French dominion. France, on the other hand, demanded the evacuation of Luxembourg, and on the 23rd of April, 1867, Lord Stanley wrote to inform Lord Malmesbury that war was imminent. The Luxembourg Question arose simply because the French Emperor had been outwitted by Bismarck’s diplomacy. The claim of France for a cession of German frontier had been postponed till after the peace with Austria was signed. By giving the South German States easy and generous terms, Bismarck had induced them to sign secret Treaties with Prussia, putting their armies at her disposal should France make war on her. Hence, when M. Benedetti presented the French claim for compensation in 1866, Bismarck defied his threats, and as France had neither allies in Germany nor breechloaders in her arsenals, she had to submit. But in 1867 Napoleon imagined he had discovered in Luxembourg a door into Germany that could be forced by diplomacy, and hence the negotiations with the King of Holland, which had been rendered abortive by the resistance of Prussia. The French ambassador in London then appealed to Lord Stanley to use his good offices as mediator, his proposal being that France would cease to press