863.51/72
The British Appointed Ambassador on Special Mission (Grey) to the Secretary of State
Sir: As you are doubtless already aware, the Supreme Council in Paris decided by the Resolution of October 7th, 1919, that a Sub-Commission of the Organisation Committee of the Reparations Commission should be constituted at Vienna.
The Sub-Commission has submitted a unanimous report regarding Austria which has been carefully considered by the Organisation Committee and sent to the Supreme Council in Paris.
As the detailed part of the plan therein proposed was drawn up by the United States Representatives you are no doubt already cognisant of the proposal but I reproduce it here for convenience of reference:
The main recommendation of the Sub-Commission is, in effect, an advance to Austria of One Hundred Million Dollars to cover the supply of such foodstuffs and coal as will be required by Austria during the next six months. This advance, together with the sum of Forty-eight Million Dollars advanced by the Allies during the last twelve months, would be consolidated into a single loan, to be secured by the total assets and by the present and future Revenue of the Austrian Republic—the Administration of both assets and revenue being entrusted to the Reparations Commission. It would be the duty of the latter during the next six months to formulate and put into operation a programme for the economic and financial reconstruction of Austria. If attention be confined to the financial aspect of the problem with which the Organisation Committee is more particularly concerned, it is clear that the sum of One Hundred Million Dollars, which is estimated as required as the capital, cannot be provided by Austria itself; it follows that the funds must be directly advanced by one or more of the Allied and Associated Powers.
Recommendations of this scope raise questions which it is not within the competence of the Organisation Committee to determine. They can, therefore, only submit them for most immediate consideration and decision by the Governments concerned.
It is quite clear that the respective Powers themselves must decide whether to grant the loan and whether the terms of any advances that may be made will permit the Reparations Commission to be entrusted with the responsibility contemplated.
The Organisation Committee desire to express it as their opinion that there is no escape from the conclusion that it is only in the institution [Page 241] of a Central Controlling Authority, with wide powers over the financial and economic administration of Austria, that any hope can be found of the salvation of that country.
If the advances required can be supplied by any one or more of the Allied and Associated Powers and on terms that will permit doing so, then the Organisation Committee recommend that the following plan be adopted.
That the Austrian Government be authorised to issue Certificates of indebtedness in an amount to be determined by the Sub-Commission at Vienna, convertible into First Bonds to be issued pursuant to Article 181 of the Austrian Treaty of Peace. A portion of these Certificates to be given to the British, French, and Italian Governments as security for all loans or credits heretofore made [and to be given to the lending Government for all loans and credits hereafter to be made to the Austrian Government92] in place of and instead of Austrian assets now held or about to be taken as security for loans or credits. Such assets to be turned over to the Sub-Commission at Vienna, together with all objects of Art to whose monopoly and property the late Royal and Imperial House recently declared to be Government property, as well as any other liquid assets of the Austrian Government. All assets so turned over to be held by the Sub-Commission and so far as available to be administered by it for the purposes contemplated. The other portion of the Certificates to be applied from time to time by the Sub-Commission in such manner as it may deem proper and necessary in the interests of reparation, at the same time assuring to Austria her minimum requirements in food, coal and raw materials as provided by Article 181 of the Austrian Treaty of Peace.
The Organisation Committee further recommends that the foregoing plan be communicated at once to the Austrian Government, and if the Austrian Government shall request the Organisation Committee of the Reparations Commission in writing to exercise immediately like powers to those conferred upon the Reparations Commission, and the Austrian section thereof, by the Austrian Treaty of Peace, then the Sub-Commission in Vienna shall proceed as follows:
- First. that the Austrian Government forthwith prohibit by law the sale, transfer or disposal outside of Austria or to other Austrian Nationals, of any of the assets of the country, either publicly or privately owned, without the consent of the Sub-Commission at Vienna and to declare void any such sales or transfers heretofore made after the signing of the Armistice of November 3rd, 1918, without the consent of the Austrian Government.
- Second. To prepare forthwith and put into immediate operation a financial plan along the lines indicated in this report in order to preserve Austria’s assets for reparation and assure to Austria a minimum supply of the shipment of coal and raw materials.
- Third. To exercise forthwith such control over collection and expenditure of all taxes, customs and revenue of the Austrian Government as to the Commission shall appear necessary and desirable.
- Fourth. To commence a study forthwith of the economic and financial conditions of Austria and to prepare comprehensive plans for the rehabilitation of her to the end that reparation contemplated by the Austrian Treaty may be forthcoming.
You will observe that the Committee state that only by financial assistance provided by one or more of the Allied and Associated Powers, and by taking over the financial and economic administration of the country can the salvation of Austria be assumed [assured?]. The conclusion is reluctantly forced upon His Majesty’s Government that unless the Allied and Associated Powers are prepared to give their support to some such proposal there are only two financial alternatives left, namely:
- (a)
- To permit Austria to realize immediately any assets she is in a position to dispose of in order to enable her to purchase coal and food.
- (b)
- To insist on the conservation by Austria of her assets for reparation and possible reconstruction.
Should (a) be adopted it would mean that within a few months Austria would again be confronted with starvation, but with the whole of her assets entirely dissipated.
The adoption of (b) would condemn Vienna to certain starvation, suffering there being already very acute, and the result of this would be that the Allied and Associated Powers, being unable or unwilling to provide finance for Austria, would be at the same time refusing to allow her to help herself, even though such self help involves the ultimate sacrifice of her continued existence.
In the opinion of His Majesty’s Government the adoption of either of these alternatives would signify to the world that the Austrian Treaty had been, to all intents and purposes, “scrapped” even before its ratification. If such an impression were created it is unnecessary to dwell on the far-reaching consequences in Germany and elsewhere. The almost inevitable result would be that Austria would be forced into a political union with Germany and that to resist such a union consistently would be extraordinarily difficult for the Allied and Associated Powers.
His Majesty’s Government feel that in view of these grave considerations no effort should be spared to devise some financial plan [Page 243] comprehensive enough to enable Austria to alleviate her existing misery, which is appalling, and to assure her continued existence as an economic and political entity. At the same time, His Majesty’s Government cannot see how, without the full and generous cooperation of the United States, any plan of this character can be arranged, which would be of permanent benefit to the world and to Austria herself.
The United Kingdom, in common with the United States, is already bearing a vast portion of the burden of the European war debt but the present financial situation of the United Kingdom, and particularly the discount on Sterling in New York, make it utterly impossible for the British Treasury to contemplate the assumption of further liabilities on behalf of Austria which involve expenditure outside of the United Kingdom. It would be, in itself, a dangerous and difficult expediency to grant further credits, even within the United Kingdom, to such countries as Austria, but in view of the grave issues now confronting the Allied and Associated Powers, His Majesty’s Government are prepared to consider the question of putting this further strain upon their resources provided that the United States Government and the Governments of the other Allies contribute in proportion to their capacities. If any solution is to be reached it is essential that the Government of the United States should provide such part of the expenditure of Austria out of the suggested credits as would be incurred in dollars. The willingness of the United States to incur this obligation is necessary for the initiation of any plan. The part played by the United States in connection with the finance of the war is still fresh in the mind of His Majesty’s Government, but they feel it incumbent upon them to urge the United States Government, with all the strength in their power, to extend their financial activities in order to meet the terrible crisis now raised by the situation in Austria.
I am directed to express the earnest hope that the United States Government will give their most serious consideration to the above proposals, and that I may be furnished with a reply at your earliest possible convenience.
I have [etc.]
- The passage enclosed in brackets is inserted in accordance with a memorandum from the British Embassy dated Nov. 26, 1919 (file no. 863.51/76).↩