863.515/11–2147: Telegram

The Acting Secretary of State to the Legation in Austria


959. From State, War and Treas. Pass to Keyes. After brief consideration of new Aus currency conversion law, details of which were received only within last two days, we make following observations: (Relegtel 1175 to Dept, War TT 8758 Nov 19, Deptel 955, Nov. 2051)

In view of long desired currency conversion, political situation in Aus and overwhelming support in Parliament, we assume you will support law in ACA:
On basis of rapid study, appears that law may be inequitable to extent it provides for differential treatment of currency as against deposits. Therefore, in stating US position in ACA, it is thought desirable that High Commissioner make clear that US notes that capital levy is considered by Aus Govt as integral part of financial reform. We view this statement as providing basis for rebuttal of charges which may be made against possible inequities present currency conversion law. US position on currency reform law could thus be clarified if necessary by explaining that US anticipates that such inequities as may develop under law will be corrected by capital levy.
Should our understanding be correct that there are inequities in currency conversion law, we assume you will wish to state informally your opinion to Aus Govt that coming capital levy will adjust such inequities.
Re para 3, Legtel 955, Nov. 20, should there be a turn-about which might lead to more favorable treatment for USIVA funds than for funds of other Aus business enterprises, please keep London and Wash informed because of implications for CFM of issue of extraterritoriality.52
  1. None of the messages under reference here is printed. On November 20, 1947, the Austrian Government submitted to the Allied Council for Austria a currency conversion law approved by the Austrian Cabinet and the Austrian Parliament. In the Parliament only the four Communist representatives had dissented. The Communist Minister for Fuel and Power, Karl Altmann, resigned from the Cabinet in opposition to the measure. The currency conversion law, which had been under discussion since June 1947, was designed to eliminate excess purchasing power and thereby a major cause of serious inflationary pressure within the Austrian economy.
  2. Telegram 1192, November 22, from Vienna, not printed, replied that the views outlined in this Departmental telegram would be expressed to the Austrian Government. The telegram stated: “US position has been and will be for present support of democratically accepted Austrian law.” The telegram concluded:

    “Legation opinion is that, granting risks of second conversion during occupation, timing of current law was peculiarly inept. Certainly choice of period so close to opening of CFM meeting and to Christmas for enactment of measure which offered such opportunities for Communist propaganda and Soviet obstruction was decidedly unwise. First result has been to give Soviets additional important means of pressure on Austrian Government. It should be noted that, while US element here had general info concerning forthcoming currency reform and so reported to Washington, Austrian Government took final action independently and added new features at last moment.” (863.515/11–2247)