The prospects of the Allies became daily more gloomy. Wurmser, the Austrian general, was driven back, the blockade of Landau raised, and this moment was selected by the Prussian king and his ministers to force a subsidy under the significant threat of an entire withdrawal of his army, which for the present remained in a state of suspicious inactivity. Russia at this juncture came forward to interfere. The Prince de Nassau, a spurious dignitary and favourite of Catharine, arrived at Berlin with a communication for Frederick William, urging him in the strongest manner to act in concert with his allies, and representing very forcibly that the partition of Poland, and the engagements he contracted for his share, obliged him to continue the war, and that his own declarations and manifestoes from the first, by his own confession, made him a principal in it. Notwithstanding this good advice, the Empress cautiously abstained on hinting at pecuniary succours, being probably aware that a Russian subsidy would answer his majesty's purpose as well as one from England. Early in the year 1794, the Duke of Brunswick resigned the command of the Prussian forces. He was succeeded by Marshal Möllendorff—a soldier of some reputation, but old, testy, and pragmatical.

After much time wasted in preliminaries, and continued threats on the part of Prussia to withdraw immediately from the alliance unless subsidies were forthcoming, Lord Malmesbury was empowered to make the following proposals: Two millions sterling were to be given to the King of Prussia to bring 100,000 men into the field. Of this sum England was to furnish two-fifths, or £800,000; Austria and Holland, each one-fifth; and the remainder was to be considered as an advance from Prussia, to be reimbursed by France at the restoration of peace. Munificent as this proposal may appear—and it really was so when the relative situation of the parties is considered—it did not at first sight appear large enough to satisfy the craving appetite of Frederick William, who, in a private interview with Lord Malmesbury, had the assurance to demand for the proposed succours no less a sum than twenty millions of dollars, without reckoning the "bread and forage!" The firm conduct and resolute tone of Lord Malmesbury, seem at last to have convinced the rapacious monarch that in grasping at too much he might lose all; and, after a great deal of shabby negotiation and bargaining, a settlement was nearly effected on the original terms. Austria, however, positively declined to become bound for any part of the subsidy—we doubt not for sufficient reasons. Holland, in more alarm, was willing to contribute her share; but so many impediments were thrown in the way of a settlement by the machinations of the French party at Berlin, that Lord Malmesbury found it indispensable to quit that court and conclude the negotiation at the Hague. He was accompanied thither by the Prussian minister, Haugwiz—a man whose character for honesty must be left to the verdict of posterity—and on the nineteenth April 1794, a treaty was concluded between Prussia, Holland, and England, by which the former power was bound to furnish an army of 62,000 men, under a Prussian commander-in-chief, to be subsidized by the other states, and to serve against their common enemies. The maritime powers agreed to pay his Prussian majesty £50,000 per month to the end of the year, £300,000 to put the army in motion, and £100,000 on its return home. All conquests made were to be at the disposal of the maritime powers.

Thus did Prussia, vaunting herself to be peculiarly the military power of Europe, sell the services of her army for hire, with as little reservation as ever did the mercenary troops of Switzerland or Brabant. The very idea of such an individual transaction carries with it something degrading; as a state-bargain, it is humiliation. One quality only can be brought forward to redeem the sellers of their national armies from contempt, and that is the most scrupulous fidelity to the cause of the parties from whom they have accepted their hire. There is no treachery so base as the desertion of a paid ally.

Immediately after the treaty was signed, Lord Malmesbury was recalled to London "for information." The advantage which was taken in the absence of this clear-sighted and able diplomatist, may be gathered from subsequent events. We doubt however, whether, had he remained on the spot, he could have counteracted the evils, which appear to us more the result of a preconceived intention to betray, than the sudden consequence of a plot, or the predominance of a new hostile party in the court or cabinet of Berlin. On the 27th of May, the first instalment of the subsidy, £300,000, was remitted from the British Treasury. About the same time, Lord Malmesbury returned to Holland, and renewed his entreaty, through Haugwiz, that the Prussian army might be put in motion. This was positively refused, until advice was received of the payment of the subsidy at Berlin. Frederick William had removed to Poland to look after his ill-gotten possessions. His minister, Haugwiz, very shortly retired to Berlin, and never returned. Möllendorff, in command of the army, peremptorily refused, in the face of the treaty, and of the apparent commands of his master, to leave the Rhine, and take up his position in the Low Countries—in short, he would obey no orders, and did all in his power to thwart and counteract the Austrian. Meanwhile, the French advanced in irresistible power. On the 26th of June they were victorious at Fleury—a battle which established the reputation of General Jourdain, and settled the fate of the Netherlands. In Flanders, Moreau defeated Clairfait, and took Ypres. General Walmoden evacuated Bruges. The Duke of York was obliged to abandon Tournay and Oudenarde to their fate, and retired upon Antwerp on the 3d of July.

This was a period of great anxiety to Lord Malmesbury; for although there are many occasions wherein even the ablest diplomatist must fail, more especially when there is a total absence of good faith on the other side, yet the crisis was so alarming as to impress him with the sense of more than usual responsibility. The following extract from his diary will show his opinion of the Prussians:—"June 26. To Keyserlautern, Prussian headquarters—repetition of the same language—great, but shabby art and cunning—ill-will, jealousy, and every sort of dirty passion. The marshal proposes a memorial to us, which we decline receiving, and he dispatches his first aide-de-camp, Meyerinck, to the King of Prussia, with his account of what we had said. (N.B.—It appears that these were exaggerated, and calculated to do mischief, and embroil the negotiation.") Shortly afterwards, he writes thus to the Duke of Portland:—"I must thank you on a separate sheet for your few confidential lines. If we listened only to our feelings, it would be difficult to keep any measure with Prussia. But your opinion and that of Mr Pitt, is one of sound political wisdom, and I am well pleased it has prevailed. We must consider it as an alliance with the Algerines, whom it is no disgrace to pay, or any impeachment of good sense to be cheated by."

The ministry of Great Britain, however, found it necessary to come to an immediate and explicit understanding with the Prussians, who, though utterly useless and inactive, continued with the utmost punctuality to draw the monthly subsidy. A good opportunity was afforded by the conduct of the Prussian minister at London, who, with unparalleled effrontery, took upon himself to complain of the manner in which the late treaty had been executed with reference to the disposition of the forces. Lord Grenville's reply was decided. If the treaty had not hitherto been punctually executed, it was notorious to all Europe, that the failure had not been on the part of England. The British resident at Berlin was further desired to intimate, "that the continuance of the liberal subsidy granted by his majesty will depend solely on the faithful execution of the engagement taken by Marshal Möllendorff, and on the efficient service of the Prussian army under his command." This announcement led to a conference between Baron Hardenberg on the part of Prussia, and Lord Malmesbury and Baron Kinckel as representing Great Britain and Holland. Hardenberg began with the usual assurances of the continued good wishes and intentions of his king, who, he said, had been deceived by a cabal, but who would, so soon as the Polish war was over, return to Berlin, and then every thing would go well. He further proposed that Lord Malmesbury should return to Berlin, and resume his negotiations there.

"This was said to Kinckel and me with a clear and evident view to prevail on us to renew the subsidy treaty, as the term of its expiration draws near, and as the court of Berlin is uneasy at our negotiations at Vienna, and apprehensive of the event of an attack on Warsaw. It was too thinly veiled not to be seen through. I therefore answered, that I was fearful the evil was done; that if the king and his ministers had acted up to the sentiments M. Hardenberg now mentioned, or even if I saw a sincere disposition of doing it now, by Möllendorff's army really acting, it certainly would be good grounds to hope, but that this was not the case.

"Hardenberg employed every argument, and every trick, within the narrow compass of his means, to persuade me they were earnestly anxious to unite with us, and disposed to rectify their past behaviour; but I remained firm, and absolutely declined giving in to a belief of it.

"This led him to say that we could not do without the Prussians, and that we must continue the subsidy; that, therefore, it was wisest and best to do it in the manner the most useful and conciliatory. I replied, that without deciding on this strong question of necessity, I could not but observe that, by stating it as an argument, he brought his court on a level with the lowest German prince, and supposed it to be actuated by principles like those of the dey of Algiers; and that, if necessity was to decide the measure, it required no negotiation, it would do itself, and I felt myself by no means in a rank to conduct such a business."

On the 1st of October, instructions arrived from England to suspend the subsidy; and on the 25th of the same month, Baron Hardenberg, on the part of Prussia, declared the treaty at an end, which was followed by a direct order from the king to withdraw his army altogether. On the 2d of November, Lord Malmesbury received his recall.