662.6331/337
The Minister in Austria (Messersmith) to the Secretary of State
[Received July 7.]
Sir: I have the honor to acknowledge the receipt of the Department’s circular telegram of June 17, 4 p.m., requesting the submission of a brief telegraphic report on the significance of the visit which Dr. Schacht, President of the Reichsbank in Berlin, is making to various European capitals, which report is to be followed by a more complete written report. In accord with this instruction, I telegraphed the Department in my No. 32 of June 20, 10 a.m.10 that while Dr. Schacht had spent the night of June 10 in Vienna, he had not had any conversations with officials of the Austrian Government here. I now have to transmit the following more full report, giving the information which is available here concerning the significance of the visit of Dr. Schacht.
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Aside from the convenience in breaking his trip by airplane here, there is, however, I think, reason to believe that Dr. Schacht also broke his journey here in order to have the opportunity to discuss various matters with the German Minister, Mr. von Papen. Although Dr. Schacht and Mr. von Papen may not thoroughly agree with all aspects of Germany’s present foreign policy, particularly with respect to Southeastern Europe, they are in agreement with the party policy, which is really German policy, to the effect that all of Southeastern Europe is the natural economic hinterland of Germany. This is a point in German policy which is not only National Socialist and therefore not new, and is a point on which practically all Germans who do any thinking agree. There are many Germans still who do not believe that the policy of endeavoring to force German political supremacy over Southeastern Europe is either a safe or a wise one. It is definitely National Socialist policy that political supremacy must either follow or even precede economic dependence and penetration in this area. Dr. Schacht and Mr. von Papen belong to that school in Germany which believes that German economic penetration must be achieved by any means at the disposal of Germany, but in such a way as not to precipitate a conflict with anyone. They believe that this economic penetration will be followed by political dependence and in certain cases by such impairment of sovereignty that it may lead in the end to German territorial aggrandisement. Mr. von Papen has made no secret since his stay in Vienna of his belief that all Southeastern [Page 494] Europe is economically a hinterland of Germany and that Germany has special interests in this area to the exclusion of the other great powers. He and his predecessor here, Dr. Rieth, have in moments of frankness spoken of the interest of the other powers in Southeastern Europe as an intrusion and as a presumption. Mr. von Papen has never considered that his field of activity as Minister to Austria is confined to that country, and has therefore very definitely concerned himself in an active way with political and economic developments in the other countries in this area.
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After having completed his visit to Belgrade, Athens and Sofia, Dr. Schacht stopped at Budapest before returning to Berlin. Mr. Tyler, who, as the Department knows, is an American citizen and who is the adviser of the Hungarian National Bank, spent this last Sunday in Vienna, and I had the privilege of a three-hour talk with him. Mr. Tyler is, as the Department knows, a serious and trusted adviser of the Hungarian Government. He informed me that the visit of Dr. Schacht to Budapest did not have the same significance that it had to Belgrade, Athens and Sofia. While in Budapest Dr. Schacht had had long conversations with the President of the Hungarian National Bank and with other officials. The entire trade position between the two countries had been closely gone into. The Hungarian officials pointed out that the position of the trade relations between Hungary and Germany had changed completely in the last few years, and that the German debit balance to the Hungarian National Bank was now much too great for comfort. The bank, therefore, was taking measures to reduce this balance, which would involve reduction of German exports to Hungary, and Hungary was prepared to accomplish this by reducing Hungarian exports to Germany. This involved a sacrifice for Hungary, but it was necessary to do this, as Germany owed the Hungarian National Bank much too much for comfort. Mr. Tyler said that Dr. Schacht did not offer any particular objection to this procedure of the bank, which perhaps somewhat surprised the officials of the bank, who expected more resistance. Mr. Tyler was inclined to attribute this attitude of Dr. Schacht in Budapest to a desire not to disturb the German position in Hungary, which has so steadily become better. The economic position in Hungary for Germany is not so important as it is in some of the other Southeastern European countries. Practically the entire Hungarian Government and the higher command of the Hungarian Army are definitely pro-German. The major exceptions to this are Mr. de Kanya, the Foreign Minister, and the Secretary General in the Foreign Office, Baron Apor, who are of the opinion that this pro-German orientation is much too premature and therefore dangerous for Hungary. The Regent, without [Page 495] taking definite sides, is inclined towards the attitude of the Foreign Minister, Mr. de Kanya. Mr. Tyler was of the opinion that Dr. Schacht, knowing how favorable the German position in Hungary is, did not wish to do anything in any way to disturb the Hungarian Government. He is of the opinion that the visit of Dr. Schacht to Budapest was, therefore, more in the way of a courtesy than with the desire to achieve anything definite at this time. I am merely transmitting these observations of Mr. Tyler’s as they may be of interest in connection with the reports which the Department will receive from Budapest.
I believe that the Department is correct in assuming that the present policy of the German Government with respect to Southeastern Europe, of which the visit of Dr. Schacht is a definite indication, offers specific dangers for our trade agreement policy and also for economic and political peace and security in Europe. As I have pointed out in this despatch, there can be no doubt as to the definite economic objectives of Germany in Southeastern Europe. These, entirely apart from the political expansionist objectives of the present German Government, present real dangers, not only for the economic and political independence of these countries, but also for peace and security in Europe. The present German thesis is that economic penetration must be followed by political dependence, if this does not precede it. Germany does consider that she has special interests in all of Southeastern Europe and she considers the interest of the other major countries in that region as a presumption and as an interference. Germany’s policy, therefore, in recent years has been directed towards keeping up disunion among the Southeastern European states and increasing her own trade with them by all means possible.
Germany has, therefore, been definitely opposed to any collective agreements, economic as well as political, between the Danubian and Southeastern European states. She wants to keep the field clear for the making of bilateral agreements, in which Germany will have, because of the economic position she will have achieved vis-à-vis these states, specific advantages with respect to the other major European states. As a part of this policy, therefore, Germany has protested vigorously in Prague and Vienna against the putting into effect on July 1 of this year of the Czechoslovak-Austrian trade treaty which was signed early this year.11 This treaty was the first important concrete expression of the will of the South-Eastern European states to make among themselves economic agreements open to all the other states, and which would have the tendency not only to strengthen the economic position of the states separately, but also to fortify their external position politically. This Czechoslovak-Austrian treaty, [Page 496] which was not concluded without difficulty by the states concerned, was too definite an expression of the will of the Southeastern European states to follow a certain path for Germany to accept it. Her vigorous protest, therefore, against this treaty, which has resulted in the decision of these countries to delay the putting into effect of the treaty, will also encourage certain other countries, such as Switzerland, to make similar protests. Germany has, therefore, definitely blocked for the present this movement towards economic cooperation among the Southeastern European states, and this not because she is so definitely interested in sharing in the concessions which Austria and Czechoslovakia make to each other, but because she wants to interfere with these agreements and keep the way open, as I have already pointed out, for purely bilateral agreements.
For the making of these bilateral agreements on terms so advantageous to her and so disadvantageous to the other major European states, that is, to fasten her political and economic hegemony over Southeastern Europe, Germany has in the last few years proceeded on a definite plan. She has permitted herself to build up huge debits in practically all of these countries, and through her inability to pay, even if the desire were there, she has forced these states to increase their purchases from her. It is not for this Legation at Vienna to report on the degree to which this economic penetration has already taken place. So far as Austria is concerned, her trade with Germany, in spite of the unfavorable political relations, has steadily progressed. In the case of a country like Rumania over 50% of her exports now go to Germany. It would be interesting to have a report which will bring together in compact form tables showing the change in the trade between Germany and these respective Southeastern European states in the last few years. It would, I am sure, show to a startling degree how this economic penetration of Germany has already progressed. Some of these countries are alarmed over the position in which they find themselves already, and the visit of Dr. Schacht has undoubtedly for one of its ends the calming of these fears and preparing the way for decreasing these German debit balances through further taking of German goods, and therefore through further dependence on Germany. The Southeastern European states formerly hoped that through the clearing agreements they would be able to maintain their position of economic and political independence. They now realize that these clearing agreements have broken down and they are practically in the position where they have to take more goods.
One has to realize situations like this set forth in the preceding paragraphs to appreciate how sinister these fascist and dictatorial governments are, because of the methods which they do not hesitate to use. We have developed a trade agreements program at home through the [Page 497] President and the Secretary, which is not only in our interest but in the general interest of all countries. The program is, I understand, sufficiently elastic to take into account certain special situations which exist in different parts of the world, and such a special situation, I believe, does exist among the Danubian states. The position in this part of the world is such that I think we must admit the principle of certain preferences among these states as long as we share with the major states all the preferences which may be accorded to the major states. I believe that we could make agreements, for example, with Austria and Czechoslovakia and all these other states within the framework of our trade agreements program and admitting these preferences among the smaller states themselves, on the basis that we stand on the same footing with the major powers, such as France, England, Germany and Italy.
It is doubtful whether the autocratic governments of Germany and Italy will permit this. Italy has special privileges with Hungary and Austria under the Rome Protocols,12 but it is true that she gives compensations and has, in fact, so far given more than she received. These Rome Protocols were really an endeavor on the part of Italy to maintain the economic position in these countries, in order to support their independence. It is quite possible that Italy with respect to these preferences could be brought into an amenable position, as she is interested principally in the maintaining of the political position. The present German Government, however, seems to be insistent on playing a dog in the manger policy, as indicated by her action with respect to the Czechoslovak-Austrian treaty already recited. Germany has other plans for imposing her economic as well as political will on Southeastern Europe. I have mentioned this aspect of the situation, for the existence of these dictatorships in several countries is as distinct an obstacle to economic peace as it is to political peace. The Department is wise in assuming, therefore, that the activities of Dr. Schacht as a part of the present German program are a distinct threat to our trade agreements program, but this is only one of the ways in which dictatorships have and will continue to upset all reasonable and wise arrangements between peoples.
Any student of the European problem must realize that there is a certain basis to the contention of Germany that Southeastern Europe is its natural economic hinterland. The consuming power of the sixty-five million inhabitants of Germany is great, and greater than that of any other great power on the Continent. In spite of the present situation in Germany, in the long run the consuming power of these sixty-five millions must be envisaged as growing rather than decreasing. [Page 498] A Germany which is to a degree and will continue to be a country highly industrialized will have to have a more agricultural Southeastern Europe as a natural hinterland. Any arrangements which would tend to disturb such a natural situation and flow of trade would be dangerous to peace in continental Europe, but similarly just so dangerous to peace and economic stability are the pretensions of that group in Germany which believes that close economic relations of Germany with Southeastern Europe mean political dependence on Germany. The solution is to be found, I believe, in these Southeastern European states being permitted to make among themselves economic agreements which will do away with the barriers which are now causing so much distress and dislocation, and the major powers in Europe and elsewhere recognizing these preferences which the smaller states may accord to each other, without necessarily insisting on sharing therein, except to the degree they may be accorded to any non-Southeastern European country. Such a principle could be recognized by both Germany and Italy without interfering with certain natural advantages which they will inevitably enjoy in their trade relations with these states, if they are prepared to recognize the sovereignty and independence of these states.
We are, however, I believe, unable to make any trade agreements with these Southeastern European states under our trade agreement program for the present until the political situation in Europe will have at least lost some of its uncertainties or until the present Governments in Berlin and to a degree in Rome have given an indication that they will not place such insuperable obstacles in the way of such agreements. For the moment the pressure which the political situation in Europe and the military pressure from certain directions exert on the countries in Southeastern Europe seem an insuperable obstacle in the way of definite progress with our program in this part of the world, or any progress among these states themselves in settling their serious economic problems.
I have not failed, in accord with the admonition in the last paragraph of the Department’s telegram of June 17, 4 p.m., to already bring to the attention of the Austrian Government the broad objectives of our trade agreement program, and have not failed to point out the ultimate dangers of bilateral agreements. The Department may be assured that I shall continue to use every favorable opportunity to discuss this matter with the appropriate Austrian authorities. I may say in this connection that the Austrian Government is quite alive to the dangers of the German program and fears that it will soon begin to feel the results of the German economic pressure on other countries of Southeastern Europe. In fact, Austria is one of the countries which is definitely bound to feel the results of the German program.
[Page 499]Already under the clearing arrangements between Austria and Germany, Germany is taking more Austrian cattle and agricultural products and refusing to take fabricated goods, which in so many lines are in competition with German goods in Germany. The increasing taking of German goods in other countries of Southeastern Europe which are a natural market for Austrian fabricated goods is bound to affect the Austrian industrial situation, and the use of blocked marks and blocked balances in these countries gives Germany a price advantage which will in the end work disastrously for Austria. The position which has developed and which is making such rapid progress is perhaps no more relished in other Southeastern European countries than it is in Austria, but for the present they see no solution to their difficulties. At present it is only the breakdown of this iniquitous system practiced by Germany which can be envisaged as the preventive to these countries being reduced to economic slavery and political subjection.
I was informed in the greatest confidence in Berlin that Dr. Schacht quite appreciates this position and that he has expressed the opinion that if the revolving credits which Germany has in England and in the United States were to be curtailed, it would lead very rapidly to the impossibility of Germany carrying on its external trade policy, as well as inability to continue her internal industrial program and re-armament. I am not able to state to what degree these revolving credits are the means on which Germany is continuing her internal and external policy, but there is much reason to believe that the great powers which will in the end be most prejudiced by this German program have a powerful weapon in their hands in these credits, which they have so far not seen fit to use.
There is transmitted herewith, as of interest to the Department, an article from the London Times of June 2213 in the form of a despatch from its Vienna correspondent.
Respectfully yours,
- Not printed.↩
- Signed April 2, 1936, League of Nations Treaty Series, vol. clxxx, p. 51.↩
- Signed on March 17, 1934, by Austria, Hungary, and Italy for the promotion of closer economic and political relations among the signatory States, League of Nations Treaty Series, vol. cliv, pp. 281, 287, and 297.↩
- Not reprinted.↩