The Secretary of State to the Legation in Austria
355. Fol letter sent May 28 by State to War re subject urtel 440, May 26:19
“On May 20 the Secretary of State addressed a letter20 to the Secretary of War expressing the hope that the War Department’s procedures concerning financial operations in Austria and Korea would be brought in harmony with this Government’s policy to treat these countries as liberated areas. I understand there has now been an exchange of views on this subject with Headquarters, U.S. Forces, Austria, as the result of which the following proposal is under consideration:
- The U.S. High Commissioner in Austria would be authorized to negotiate a settlement whereby (a) the Austrian Government would accept the schillings for which U.S. Army disbursing officers are accountable in dollars and which are now held in a “special deposit account” in payment of all goods, services and facilities obtained from the Austrian economy in the period April 9, 1945 to June 30, 1947, and (b) the U.S. Army would agree to turn back to the Austrian Government, beginning July 1, 1947, all free schillings allocated to it [Page 1181]out of the Austrian budget and to buy with dollars all schillings required to meet its occupation expenses in Austria;
- In order to avoid delaying such a settlement no detailed reconstruction of the U.S. Army’s past procurement in Austria would be undertaken, particularly in view of the fact that the estimated total value of such procurement in the period April 9, 1945 to June 30, 1947 substantially exceeds the amount of schillings in the “special deposit account”;
- In order to meet the balance of its schilling commitments for the remainder of the fiscal year 1947, USFA would be authorized to request the Austrian Government to make an advance out of the blocked Austrian Government accounts in which have been deposited the proceeds of the sale by the Austrian Government of War Department supplies and captured enemy equipment turned over to the Austrian Government. This advance would be liquidated in the settlement mentioned above.
The Department of State considers that this proposal is fully in accord with the Secretary of State’s letter of May 20 and would be prepared to lend its support in obtaining approval of the General Accounting Office and of any other authorities whose consent may be required.
I hope that it will be possible to conclude such a settlement with the Austrian Government at a very early date in view of the reported imminence of a currency conversion in Austria. It would have very serious political repercussions if, in the absence of such a settlement, this Government would be required to seek specific protection for the “special deposit account” in a manner which would make it impossible for the Austrian Government to achieve the desired reduction in the volume of schillings in circulation. In this connection, I should point out that the Department of State would not wish to seek any special protection for the schilling holdings of the United States Government, the U.S. Army, quasi-government organizations such as the Army Exchange Service or of U.S. Government and Army personnel in Austria except, perhaps, to the extent to which any person holding such schillings is accountable to the United States Government or to the extent it may be proved that such schillings were purchased with dollars made available to the Austrian Government. Nor would the Department undertake to protect American nationals in general against losses resulting from devaluation of their foreign currency holdings. This position would have to be reviewed, of course, if the other occupying powers succeeded in obtaining special protection of their schilling holdings and those of their nationals.”