Office of the Historian

Paris Peace Conf. 184.01102/24

Professor A. C. Coolidge to the Commission to Negotiate Peace

No. 28
Vienna, January 20, 1919.
[Received January 29.]

Sirs: I have the honor to inclose herewith memorandum from Lieutenant Goodwin on the financial situation in Hungary. His summary seems to me to overlook certain facts. The Government, and especially the Socialist members of it, are anxious to tax as heavily as possible war profits, which have undobutedly been considerable. It [Page 384] must be remembered that the Government is desperately hard up for money, and anxious to get it from any available source. Personally, I do not believe that any of the serious leaders “are purposely attempting to ruin the capitalistic industry in order that it may fail and be taken over by the Government”. It should be remembered too that, though the payment of 10 or 15 crowns a day to the unemployed seems unwise enough in itself, owing to the scarcity and very high prices that prevail it does not mean luxurious living. It also may be regarded as a desperate temporary measure in order to tide over a crisis.

I have [etc.]

Archibald Cary Coolidge
[Enclosure]

Memorandum for Mr. A. C. Coolidge

January 19, 1919.

Subject: Summary of the financial situation in Hungary, middle of January 1919.

The State budget of Hungary amounted to about 2 billion Crowns a year in peace times. From Nov. 1st, 1918, the beginning of the new Government, till the present time, the revolutionary government has spent over 2 billion Crowns in less than two months. During the war Hungary spent 35 billions in 50 months; the present rate of expense is somewhat higher than in wartime and is steadily increasing.

Hungary’s yearly savings amount to about 500 million Crowns, now worth about 150 million Crowns at the present rate of exchange. Taxes have practically ceased to be paid and from the occupied regions they do not reach the Hungarian Government at all. At the present moment the Government is making all payments through the Austro-Hungarian Bank, practically its only cash supply. Funds are received from the bank in the following manner: A War-Loan was placed with the State Austro-Hungarian Bank; of this Austria received 70%, Hungary 30%. Hungary’s share amounted to about 5 billion Crowns, of which about 3 billion were unused before the revolution. This is now being spent.

At the present rate of expenditure of nearly 1½billion a month, this sum will not last much more than two months, and on account of the daily increasing government salaries throughout the country and payments to the unemployed, it is likely to be exhausted before the end of two months.

Besides Hungary’s national debt she owes Allied countries a sum of nearly 3 billion Crowns, of which France is the largest holder, amounting to over ½ billion; the country also owes Germany a war debt of 1½ billion Crowns, to be paid in monthly installments. This debt is due at the conclusion of peace.

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The threat of the Jugo-Slavs and Czech Governments to stamp the Imperial money in those countries is another menace to the financial situation.

. . . . . . .

Summary

From the appearance of the socialistic policy in Hungary it would seem that they are purposely attempting to ruin capitalistic industry in order that it may fail and be taken over by the Government. At the same time by the payment of 10 Crowns per day to women and 15 Crowns to men who have no employment, they are winning a large number of persons to their side. Unless the country is provided with some raw material and coal at once so that it may produce as well as spend, a serious crisis will occur within a month or two. The conservative elements recommend besides the sending of coal and allowing raw material to enter the country, that an Allied force of 15,000 men should be sent to maintain order and allow the constructive elements of the Government to put through measures for saving the national credit.

Respectfully yours,

Philip L. Goodwin