863.00/4–848: Telegram

The Chargé in Austria (Yost) to the Secretary of State


445. Secret conversations between two leading Austrian parties conducted for purpose of achieving greater unity and stability of coalition, have so far yielded agreement on following points: (1) Foreign Policy. No important differences needed to be composed re this issue. (2) Elections which are not to be held until fall of 1949, as required by constitution. (3) Future Austrian army, which is to be based on conscription, with a small nucleus of non-political professional officers and NCO’s.

Although progress so far is gratifying and cooperative spirit of conversations continues, certain important issues are not yet decided: (1) Agricultural prices which People’s Party would raise. Compromise appears to be in sight allowing limited increases on basis subsidies and reduced middle man profits, without raising cost to consumers.

(2) Capital levy on which Socialists insist. Law providing for levy was recently approved by Cabinet but is presently bottled up in parliamentary [Page 1390] committee. Gruber has explained that progress to [of] talks slowed down lately hut that both parties are hopeful of reaching complete agreement.

Foreign press reports of above conversations have resulted in Volksstimme exposé April 7 alleging that “new FiglSchaerf secret pact” exists which demonstrates “complete subjection of Socialists who have become prisoners of reaction”. Volksstimme also claimed conversations took place “under patronage and with active participation of Americans who insisted agreement be concluded before Marshall Plan was signed”. Vice Chancellor Sehaerf, who is also chairman of Socialist Party, issued statement April 7 denying that “pact” exists. “It is natural” Schaerf said, “that two coalition parties conduct current conversations about political problems, but any reports about agreements going beyond such current discussions are without foundation”.

Sent Department 445; repeated London USDel 100.