863.51 Relief Credits/152
The Austrian Minister (Prochnik) to the Secretary of State
Excellency: As Your Excellency is aware, a proposal for the final settlement of the indebtedness in respect of Relief Bonds of the series “Relief Bonds Series B of 1920 (Renewal Bonds)” maturing on January 1st, 1943, issued by Austria, was on June 15th, 1928, offered by the Federal Government of Austria, through the Austrian Minister in London, to the International Relief Bond Committee and accepted by said body in the name of the Governments of Denmark, France, Great Britain, Netherlands, Norway, Sweden and Switzerland. I am submitting herewith as enclosure marked A (A1, A2, A3, A4)62 the [Page 918] pertaining correspondence exchanged between the International Relief Bond Committee and the Austrian Legation in London. Negotiations are pending with Italy for her adherence to said agreement, and in this connection I am authorized to state on behalf of my Government that Italy shall not receive a more favorable settlement than that offered to the United States of America and the other aforementioned creditor Governments and that the Federal Government of Austria is ready to reserve to the United States of America full equality in regard to terms ultimately to be agreed upon with the Italian Kingdom.
As Your Excellency is also aware, the aforesaid negotiations dealt with “Renewal Bonds” bearing five per cent interest issued by Austria in place of the original six per cent Relief Bonds of Series B of 1920 which by their terms matured January 1st, 1925, but the payment of which was postponed to June 1, 1943, in connection with the international cooperation in aid of the flotation of the “Austrian Government Guaranteed Loan of 1923–1943”. The new settlement of the relief debt with the European creditor Power takes the form of an endorsement which has to be signed by Austria and the respective creditor State on the back of the Renewal Bonds. This endorsement simply contains the new plan of payment, while, as for the rest, it provides that the other former provisions of the bond shall remain in force. As the United States Treasury has not taken a Renewal Bond as of January 1st, 1925, and has not taken bonds in representation of annual interest accrued since January 1st, 1925, as the European creditor Powers have done, but still retains the original relief bond of 1920 in the amount of $24,055,708.92, I presume that the terms of settlement set forth in the enclosed correspondence of 15th June 1928 are not textually applicable in a proposal for the settlement of the Austrian relief indebtedness to the United States.
With this explanation of the lack of verbal identity with the terms of settlement with the European creditor Powers, I have the honor, on behalf of the Federal Government of the Republic of Austria, to submit to Your Excellency the following proposal for the final settlement of the indebtedness in respect of the relief bond of the series “Relief Bond Series B of 1920” held by the United States Treasury in the principal amount of $24,055,708.92.
Calculated in conformity with the provisions of the settlement with the abovenamed European Governments, with interest at the rate of 6 per cent, the debt owed to the United States increased up to December 31, 1924, to $31,069,155. With interest at the rate of 5 per cent from January 1, 1925, to December 31, 1927, it would have risen to $35,966,461. This would decrease to a final amount of $33,428,500 when the same reduction as agreed upon with other creditor States [Page 919] such as Denmark, France, Great Britain, Norway, Sweden and Switzerland is proportionately applied to the said indebtedness.
The Federal Government of Austria now offers to pay the sum of $33,428,500 (Thirty three million Four Hundred Twenty-eight Thousand Five Hundred Dollars) in full and final settlement of this debt, in 25 annuities of $1,337,140 (One Million Three Hundred Thirty-seven Thousand One Hundred-Forty Dollars) each on the 1st January 1943 and on the 1st January of each subsequent year to 1967 inclusive. Austria shall, however, have the option of paying, instead of the aforesaid annuities, the following instalments:
| On January 1st 1929 and on the same date of the following four years five annuities of $287,556 each, total | $1,437,780 |
| On January 1st 1934 and on the same date of the following nine years ten annuities of $460,093 each, total | $4,600,930 |
| On January 1st 1943 and on the same date of the following 24 years twenty-five annuities of $743,047 each, total | $18,576,175 |
| Grand Total | $24,614,885 |
Provided, however, that if Austria shall exercise this option the obligation of Austria to pay annuities during the years 1929 to 1943 will in the case of each annuity not arise if the trustees of the Austrian Government Guaranteed Loan 1923–1943 have, prior to the preceding 1st December, raised objection to the payment of the annuity in question on the date due. To the extent, if any, that any such annuity is not paid by reason of such objection on the part of the trustees, the amount thereof, together with interest at 5% compounded annually to 31st December 1943 shall be repaid together with further interest at 5% by 25 equal annuities on 1st January of each of the years 1944 to 1968, inclusive.
Except in so far as the terms of payment contained in this proposal involve modification of the terms of the Relief Bonds Series B of 1920, these shall remain in force as regards all the terms and conditions set forth therein, including in particular those relating to the method, place, and currency of payment, the exemption from Austrian taxation, the similar treatment for all creditor Governments, the charge on Austrian assets and revenues and the priority over reparation, and in particular if the Government of Austria should at any time without the assent of the creditor Governments pay or attempt to pay any sum whether in respect of reparations or by way of compensation for any non-fulfillment of the obligations of Austria under Article 184 of the Treaty of St. Germain, the amount owing under the original terms of the aforesaid bond as expressed [Page 920] on the face thereof for principal monies and for any arrears of interest at 6% to January 1st, 1925, and at 5% thereafter shall forthwith be paid in cash by Austria in priority to any such payments under the said treaty.
On the acceptance of the proposal Austria agrees that the Government of the United States shall communicate the proposal and its acceptance to the Reparation Commission in order that the Commission may take note thereof.
I am furthermore authorized to state that the Austrian Government have decided to exercise the option under the terms of the above proposal regarding the funding of the relief bond of Austria held by the Government of the United States, subject to the reservation set forth above in case objection be raised by the trustees of the Austrian Government Guaranteed Loan 1923–1943 to the payment of annuity during the years 1929 to 1943. In this connection, Your Excellency will recall that, because an obligation on the part of Austria to make amortization payments prior to 1943 would have been contrary to the arrangements made when the “Austrian Government Guaranteed Loan 1923–1943” was concluded, the right was reserved to Austria in the arrangements of June 15, 1928, to make use of an option to the effect that in place of the method of paying in twenty-five annuities beginning in 1943, Austria may pay off her relief debts in forty yearly instalments beginning in 1929. In a letter of June 11, 1928, to the International Relief Debt Commission, the Austrian Minister at London stated that he had indeed no reason to believe that, in fact, the trustees of the Austrian Government Guaranteed Loan 1923–1943, will wish to veto any of the anticipatory payments on account of the relief debt unless such payment is in their opinion against the interest of the bondholders of that loan.
The Federal Government of Austria believes that with the above stipulated proposal for the settlement of relief debts, they have reached a fair and reasonable limit of the country’s paying capacity. The total principal amount of the Austrian relief debts of Series B of 1920, in representation of which bonds in the respective foreign currencies carrying interest at the rate of 6 per cent per annum and redeemable on January 1, 1925, were issued, is equivalent to approximately 848,500,000 Austrian schillings. With interest at 6 per cent up to December 31, 1924, and at 5 per cent from January 1, 1925, to December 31, 1927, the amount up to January 1, 1928, was the equivalent of 1,250,759,390 Austrian schillings. If the basis of settlement accepted in the arrangements of June 15, 1928, is accepted by the United States and Italy, Austria would have to repay this debt in twenty-five equal annuities of 46,500,000 schillings from 1943 to 1967. That is, there would be a total payment of 1, 162,500,000 schillings, representing a reduction of approximately 7 per cent from [Page 921] the indebtedness stated above as of January 1, 1928. In exercising the option to pay from 1929, Austria would have to pay total yearly instalments of 10,000,000 schillings from 1929 to 1933; 16,000,000 schillings from 1934 to 1943 and 25,840,000 schillings from 1944 to 1968, these payments representing the same present value as the payments of twenty-five annuities of 46,500,000 schillings each from 1943 to 1968.
A statement of Austria’s economic and financial situation is submitted to Your Excellency with this note, as an enclosure, marked B.63
Accept [etc.]