they still dominated the European carrying trade, and Dutch merchants made large profits shipping French-supplied munitions to the Patriots. This ended when Britain declared war in December 1780, a conflict that proved disastrous to the Dutch economy. The Dutch were also excluded from the First League of Armed Neutrality, formed by Russia, Sweden and Denmark in March 1780 to protect neutral shipping from being stopped and searched for contraband by Britain and France. The British government failed to take into account the strength of the American merchant marine and support from European countries, which allowed the colonies to import munitions and continue trading with relative impunity. While well aware of this, the North administration delayed placing the Royal Navy on a war footing for cost reasons; this prevented the institution of an effective blockade and restricted them to ineffectual diplomatic protests. Traditional British policy was to employ European land-based allies to divert the opposition, a role filled by Prussia in the Seven Years' War; in 1778, they were diplomatically isolated and faced war on multiple fronts. Meanwhile, George III had given up on subduing America while Britain had a European war to fight. He did not welcome war with France, but he believed the British victories over France in the Seven Years' War as a reason to believe in ultimate victory over France. Britain could not find a powerful ally among the Great Powers to engage France on the European continent. Britain subsequently changed its focus into the Caribbean theater, and diverted major military resources away from America. Vergennes's colleague stated, "For her honour, France had to seize this opportunity to rise from her degradation ... If she neglected it, if fear overcame duty, she would add debasement to humiliation, and become an object of contempt to her own century and to all future peoples". Stalemate in the North At the end of 1777, Howe resigned and was replaced by Sir Henry Clinton on May 24, 1778; with French entry into the war, he was ordered to consolidate his forces in New York. On June 18, the British departed Philadelphia with the reinvigorated Americans in pursuit; the Battle of Monmouth on June 28 was inconclusive but boosted Patriot morale. Washington had rallied Charles Lee's broken regiments, the Continentals repulsed British bayonet charges, the British rear guard lost perhaps 50 per-cent more casualties, and the Americans held the field at the