Mr. Hay to Mr. Seward.

No. 5.]

Sir: The question of a financial compromise between Austria and Hungary, which has for several months engrossed the attention of the people of this empire, to-day appears in a fair way to definite settlement. The negotiations of the respective deputations of the Austrian and Hungarian legislative bodies have made no progress for some weeks, and there seemed to be no immediate prospect of any solution from them. The two ministries have therefore taken the matter in hand, and have in concert elaborated a scheme of compromise which has at once received the concurrence of both deputations. Their prompt acceptance of this arrangement gives rise to general wonder that they have not been able of themselves to orginate something analogous.

The more important points of the arrangement thus concluded are the following :

1. The portion of the realm represented in the Austrian Reichsrath is to pay 70 per cent, of the current expenses of the government, and the regions appertaining to the Hungarian crown 30 per cent., for a period of 10 years from the 1st January, 1868.

2. Out of the yearly interest on the public debt of the empire is to be subtracted the sum of 25,000,000 guilders annually, to be paid by Austria alone, as representing sums disbursed for the exclusive benefit of the cis-Leithan provinces; and the remainder is to be divided for payment between the two halves of the realm in the proportion of 70 per cent, to Austria and 30 per cent, to Hungary.

3. By subsequent arrangements between committees of the two legislatures, the entire national debt is to be reduced to a uniform standard of interest, and the present wide diversity in the value of national securities to be done away with.

4. The sinking fund is to be for the present abolished, for it is a singular fact that during all these years of financial distress the Austrians have kept up their sinking fund, paying off bonds at a low rate of interest by borrowing at a higher one.

These propositions must be accepted or rejected altogether. It will be seen that the curse of the provisorium, which seems inseparable from everything in this realm, still clings to this place. But as the provisional state of things it contemplates is to last for ten years, it is hoped that by the expiration of that period the constitutional system will have passed through its era of probation and experiment, and that definite arrangements can then be made for the future.

It still remains for the Austrian and Hungarian legislative bodies to accept this agreement.

I am, sir, with great respect, your obedient servant,


Hon. William H. Seward, Secretary of State, Washington, D. C.