840.50 Recovery/1–3148: Telegram

The Minister in Austria (Erhardt) to the Secretary of State

secret   us urgent

104. Reurtel 57.1 Delay in authorizing commencement ERP assistance until July 1 would cause most critical situation Austria. Two questions exist re ERP Austria. First—is extent and scope anticipated [Page 1379] ERP assistance Austria 1948–49 sufficient to lead to desired recovery by end 1952? Second, and most critical—will supplies furnished under ERP be procured and arrive in Austria in time to avoid a break in existing supply pipeline? Experience with UNRRA military’s civilian supplies, PL 84 and PL 389,2 has indicated an average interval of 13 weeks exists between the time funds are authorized and procurement begins until supplies are available for use in Austria. This refers particularly to food, agricultural supplies, and in lesser degree to coal, which are currently key commodities of US assistance to Austria.

Food as programmed in urtel 553 plus PL 84 food, not yet arrived in Austria, is only sufficient to last until May 23. After that, food pipeline will be completely dry. The only food remaining in Austria after that date will be approximately 822 calories per day per average consumer plus small US emergency reserve of twenty days flour, ten days meat, ten days fat, eight days pulses, four days sugar. Drop to approximately 800 calories a day would not mean that average consumers throughout all Austria would receive this amount. Soviets would probably curtail deliveries from Soviet Zone to Vienna and other zones. Result would be population of Soviet Zone would have daily ration greater than 800, population of US Zone would have daily ration of somewhere between 700 to 800 calories, population of French-British Zones would have daily ration of approximately 400 to 500 calories and population of Vienna might almost be without any food.

Since harvest is not available for consumption until approximately 15 September, period in question is most serious of entire agricultural year. Lack of food in itself would immediately result in sharp decline industrial production. The morale of population would be reduced to dangerous low which USFA fears might threaten status of US and western occupation forces, and physically endanger approximately 3000 dependents of American personnel Austria. Break on coal supply line would curtail encouraging growth in exports and reduce production to approximately status of that of 1945.

In order to avoid these disastrous results, it is necessary that procurement of food and coal be authorized early March for shipment from east coast US first week April. Without other assistance, authorization of ERP July 1 would not supply minimum food requirements to Austria until mid-September. Result would be that political and economic gains earned from previous assistance, including PL 389, would be jeopardized. It would endanger basic purpose of ERP and give Soviets and Communists an advantage they have never yet enjoyed in Austria, even during first days following liberation of Vienna and Eastern Austria. This situation would confirm Soviet and Communist [Page 1380] predictions that American assistance is doomed to failure. Soviets undoubtedly would exploit situation fullest.

Consequently assistance is needed to cover gap May 23 to September 15. Minimum assistance to avoid fall in ration and stoppage of production would require supply of food and coal for that period. Food would total $51,960,000 based on landed costs as reported WCL 41994, WCL 47158, and WCL 25476,4 and 3% loss factor on basis population of 37 ration period. We repeat again that shipments must begin first week April. Based on ration of 1800 calories per day, items and quantities required are listed in three columns: item, quantity in metric tons, and estimated cost: flour, 131029; $23,992,000; meat, 3998, $1,539,000; fat, 13709, $9,212,000; cereals, 38158, $6,563,000; pulses, 24338, $9,733,000; sugar, 4458, $921,000. On basis of 240,000 tons of coal per month planned under PL 389, it would be necessary to furnish 840,000 tons for period in question at estimated cost approximately $12,100,000. In the case of coal provision must be made to continue shipments from Ruhr, Poland and other European sources to maintain increasing industrial production. Austrian resources are negligible.

Inquiry of Finance Ministry and Austrian National Bank results in following information: Austrian gold holdings now include $4.7 million listed National Bank as reserve plus approximately $27.9 million worth of gold allotted to Austria November from Brussels gold pot now held $21.5 million Frankfurt, scheduled for shipment US February 10 and remainder New York. Against this gold following obligations are noted: first, the amount now held as “reserve” in Austrian National Bank which cannot be encumbered or eliminated from statement without grave effect on public confidence. Second, Austrian Govt has agreed, if required, to return gold sufficient to cover amount delivered from Salzburg $4,700, if allied claims to Brussels gold pot based on nature origin of this gold, make this necessary. Third, agreement to contribute approximately $7 million (International Monetary Fund) and (Bank for Reconstruction and Development).

The residual $16.2 million worth of gold can be considered available for any purpose authorized under Austrian law. Current opinion Austrian Govt authorities is that a new law would be required to hypothecate gold. Policy of availability of gold for emergency use will be discussed Cabinet next week. Appreciate your opinion to advisability of Austrian Govt hypothecating gold if necessary and possible.

Austria had, on 1 January, $4.4 million, of which $2.5 million was obligated; 13 million Swiss francs, of which 7.6 million obligated; 430,000 pounds sterling, of which 211,000 obligated. Taking total available [Page 1381] resources, including returns from exports and dollar occupation cost all of Which are now obligated, it is our opinion that by making readjustments in these obligations including payments to OMGUS, Austria might, in the next four months, have at its disposal for emergency food purchases approximately $5 million and less than $1 million equivalent in other foreign exchange. No additional resources are available in foreign dollar assets. No prospective credits are in sight. Potential amount of less than $6 million would not finance one-third of food import requirement for one month. If available gold residual is hypothecated in addition, food import requirement could be financed for only one and one-half months. Such sacrifice would simply postpone period of emergency at great cost to economic and political stability Austria and damage to present favorable foundation for commencement ERP.

Pass to JCS and Department of Army.

  1. Not printed.
  2. For the text of Public Laws 84 and 389, see 61 Stat. 125 and 934.
  3. Not printed.
  4. Not found in Department files.