863.51/838
The Minister in Austria ( Washburn ) to the Secretary of State
[Received September 19.]
Sir: In closing my despatch No. 1258 of December 30th, 1926,2 I observed, I have the honor to report, that I anticipated that during the second half of 1927 the Federal Government would seek to float another loan for strictly productive investment purposes. This prophecy is now in the process of fulfillment. I do not cite it as an evidence of perspicacity. The facts upon which it was based were more or less common property.
Before the Austrian Government can contract a new federal loan or pledge its revenues for such a loan, the consent of three organs is necessary, to wit:
- (1)
- The Austrian Control Committee, made up of representatives of the States guaranteeing the external reconstruction loan of 1922 and 1923;
- (2)
- The Reparation Commission;
- (3)
- The States having prior liens on Austria because of relief credits, among whom is the United States.
There have been persistent rumors that the Chancellor will go to Geneva to attend the September League meeting in connection with the new loan. He tells me today that the rumor is unfounded. He at no time has considered such a possibility. He is going to Germany very shortly to deliver some lectures, to be absent about a week, but Switzerland is not on his itinerary. Dr. Schüller, of the Foreign Office, who is now in Switzerland on leave, will be in Geneva and it is considered quite probable that he will undertake to discuss the matter of a new federal loan with the Financial Committee of the League and seek to enlist its cooperation or goodwill. The Austrian Control Committee [Page 443] will meet in the middle of October in London and there the serious work will really begin. Minister of Finance Kienböck will be on hand. The Chancellor tells me that he is not yet decided whether he will go or not.
Assuming that the Control Committee will be sympathetic, as it is hoped, the next appeal will be to the Reparation Commission and to the relief credit States. In my despatch No. 1037 of May 10th, 1926,3 I enclosed the Joint Resolution of Congress, approved April 6th, 1922,4 authorizing for a period not to exceed twenty-five years the extension of the time for the payment of the principal and interest of the debt incurred by Austria for the purchase of flour from the United States Grain Corporation. I also enclosed the notice of the action of the Secretary of the Treasury pursuant to the authority conferred under this Resolution and the relevant Decision of the Reparation Commission, No. 2400. In this connection the question may presently arise as to what affirmative action must be taken by the United States as one of the relief credit nations in order to facilitate a new Austrian federal loan. In the event it should be deemed advisable to take any action whatever, will a new enabling act of Congress be necessary or may the Secretary of the Treasury, under authority of the Joint Resolution herein-before referred to, subordinate the lien of the Austrian Relief Bond Series B of 1920, issued to and held by the United States of America on account of food purchased from the United States Grain Corporation for relief purposes, to a new Austrian federal loan providing said new loan matures within the twenty-five year period mentioned in the Joint Resolution, No. 460 of April 6th, 1922? I may say that it is proposed that the new loan shall mature within this period just mentioned.
As to the amount of the new loan, assuming that the necessary permission can be obtained, I find on reference to my despatch No. 1076 of June 16th, 1926,3 that an additional loan of 200,000,000 schillings was then contemplated. The new investment program is more ambitious. It is proposed not only to continue the electrification of the railroads, which is now underway, and the further extension of underground cables for telephones, but also to reconstruct federal public highways, which are in a bad state of repair, and to extend quasi-public utility agricultural enterprises, such as dairies. For this program, the Chancellor tells me that it is hoped to secure a new loan approximating ninety million dollars. The details will be worked out between now and the middle of October for presentation to the Austrian Control Committee and as soon as available I will forward them to the Department.
[Page 444]I get the impression that the actual loan flotation will hardly be attempted before the spring of 1928. Many hurdles must be taken. Meanwhile, as has been intimated to me on several occasions recently, the Austrian Government would greatly appreciate it if the competent law officers of the American Government would investigate in a preliminary way the question as to what action is necessary by the United States to subordinate its existing lien to a contemplated new Austrian federal loan for the purposes indicated. It is assumed, of course, that other creditor nations will take favorable action. The outstanding external reconstruction loan, to which the United States has already subordinated its lien, is in the amount of $130,000,000.
I have [etc.]