840.50 Recovery/4–2948: Telegram

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


549. Depts 262, March 22.1 Tentative ECA allocation $65 million.

Austrian proposal for use of $65 million is as follows in million dollars: Food 41 including 4.7 for freight; coal 12; medical supplies 1.2; railroad ties 1.0; agriculture 4.1; industry 5.1; hydroelectric installations 0.6.

In making division given above Austrian Government has indicated its intention to request additional first-quarter allocation of ten million dollars. Their proposed division of ten million dollars increase is as follows in million dollars: food 2 including 0.26 freight; tobacco 0.6; agriculture 2; industry 5.4.

Legation and USFA strongly endorse Austrian request for additional ten million as essential to necessary impetus for successful beginning ECA Austria.

Allocation of additional amounts to agriculture and industry would double allocations for both of these items necessary to increase exports in the case of industry and eventually reduce imports in the case of agriculture. Allocation of $65 million represents almost exactly January–March relief level which did not anticipate any industrial rehabilitation. Believe this increase would contribute considerably to recovery impetus and prestige of program in Austria.

Following comments are in reference to [application] of $65 million:

On basis of $65 million, Austria food figure of $36.3 excluding freight nearly corresponds with our yearly recommendation of 150 million.
Quarterly coal figure is slightly below original Austrian estimate. Reduction is so small does not materially affect coal supply plans.
Proposed figure of 1.2 for medical supplies has our concurrence since this allocation is necessary to assure uninterrupted flow.
Provision of one million for railroad ties represents urgent need for track maintenance material which takes precedence over all other transportation needs.
Agriculture figure is considered as minimum. Recommend one-half allocation be used for fertilizer, one-fourth fodder (most oil cake) about one-tenth for seeds, with remainder divided among pesticides, veterinary supplies and agricultural machinery. Endorse Austrian position that procurement of larger agriculture machinery should be postponed until next quarter plan.
Consider allocation of 5.1 for industry as below minimum requirement for attainment of recovery aspect and necessary export level. Present suspension of Export-Import Bank credits makes increase in [Page 1396] allocation for industry most essential. Consider Austrian breakdown of approximately equal division between capital equipment and raw materials sound for first quarter.
Austrian figure for electrical equipment justifiable in view of orders already placed with bizone and current negotiations for such equipment now being carried on with bizone.

Following is our recommendation for allocation of additional dollars ten million:

Recommend allocation of 1.4 for food (including 0.2 for freight). Austrian recommended that two million be used for establishment of iron food reserve made up mostly of canned goods. We do not concur with iron food reserve but recommend the expenditure of 1.4 toward establishment of regular reserve in order to avoid continuing food crises that have developed in Austria because of lack of reserve.
Recommend allocation of 0.6 for tobacco. This is justifiable because this increase over existing low level will be an important morale factor and because of important revenue collect[ed] by Austrian Government from tobacco sales.
Increase of allocation to industry by 5.4 considered essential. We ask for priority for this item following food reserve and small amount for tobacco.
Allocation of additional two for Agriculture supplies be used equally for fertilizer and fodder.
Recommend that reduction of 0.6 from Austrian food figure be used for procurement of agricultural machinery and implements.

Strongly recommend first-quarter allocation be increased from $65 to $75 million. Without this increase amount of funds which can be used for recovery projects will be small and will delay the effective beginning of Austria’s recovery efforts. Any effort of decrease allocation of funds for food in order to increase industrial allocation would result in lowering of ration scale which in turn could result in political unrest, reduction in the rate of labor productivity and would support the present Soviet directed Communistic line that ECA assistance is inadequate and has as its purpose economic enslavement of participating countries. On the other hand, the recommended increase in first-quarter allocation would assure effective commencement of ECA in Austria.

  1. Not printed.