863.51 Relief Credits/7
The Minister in Austria (Washburn) to the Secretary of State
[Received December 16.]
Sir: I have the honor to report that I have recently had conference with the Chancellor and Dr. Schüller, and I am enabled to state that the Austrian Government is on the verge of abandoning that part of its request contained in the Chancellor’s letter to me transmitted with my despatch No. 1573 of October 17th, 1927, which has to do with the extension up to the 31st of December, 1957, of the time of payment of the principal and interest of the debt incurred by Austria for the purchase of flour from the United States Grain Corporation, leaving only to be dealt with by congressional resolution its request for the release of Austrian assets pledged for the payment of said debt, so as to subordinate them to the new contemplated federal loan. In stating this amended desire of the Austrian Government I have followed rather the phraseology found in the Joint Resolution of Congress approved April 6th, 1922, a copy of which was transmitted with my despatch No. 1037 of May 10th, 1926.23
Schüller is leaving today for London to attend the sessions of the Relief Credit Committee which meets on the 2nd proximo, and he will there make his amended announcement in harmony with the foregoing. The Austrian Government now has to all intents and purposes a postponement of its various relief credits until 1942 and upon further reflection it apparently deems it more prudent not to complicate matters by asking for a further postponement until 1957, as contemplated by the Chancellor’s letter above mentioned. It does [Page 457] desire that Austrian assets pledged to the relief credits be released and subordinated in the manner indicated.
Secondly, Schüller has been authorized formally to state to the Relief Credit Committee in London that as soon as the new federal loan has been floated the Austrian Government desires to take up the question of entering into a general funding arrangement for the entire relief credits which amount to about £25,000,000. All the outstanding relief credit bonds provide that the terms of payment shall be the same in all cases and Austria must therefore make the same arrangement with the United States as is made with the other relief credit states. Schüller says that it is to the advantage of Austria to take up the question of a debt settlement at an early date and not wait until 1942. He has stated this to me before, as I have elsewhere reported. It is obvious that he hopes to eliminate or greatly curtail the payment of interest which is now technically running. Austria anticipates, as I gather, that her situation lays the foundation for the hope that she will receive at least as favorable treatment from the United States as Italy did. It is plain to me that the Austrian Government is especially anxious that the relief credit debt settlement shall not be harnessed up in any way with the new loan. If, as the Chancellor explained to me, the two matters were considered together, the Austrian public would deem the conditions too onerous. They would lump the interest and amortization charges of the new loan and the relief credit settlement together. Schüller goes so far as to say that the new loan would have to be abandoned. There have been apparently some disquieting rumors, traceable to banking circles in London and Vienna, to the effect that our Treasury Department or Congress might stipulate a relief credit settlement before taking favorable action upon the desired release of Austrian assets. Schüller does not want to appear to be forced into making an arrangement which he asserts his government desires to make voluntarily.
It is my understanding that Minister Prochnik has not been advised by cable of these developments, though he has recently had some telegraphic instructions about the disposition of alien property. I am therefore taking the precaution of briefly informing the Department of the existing situation by wire.
The government here seems to regard it as assured that J. P. Morgan & Company will undertake to float the new issue and that it will be the only firm with which the Austrian Government will directly deal, though a syndicate will doubtless be formed. I get the impression that the advice of Morgan and Montagu Norman will be followed throughout.
I have [etc.]
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