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740.0011 EW (Peace)/12–1948: Telegram

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


1303. Deptel 919 [922], December 8.1 Following considerations seem most important in deciding position US element on occupation costs.

Quadripartite approach most desirable if agreement substantially to reduce burden on Austrian economy can be reached.
Austrian Government would have extreme difficulty meeting occupation costs 1949 and could probably do so only (a) by levying new “occupation tax” which would have harmful political repercussions or, (b) by cutting out certain essential expenditures now provided in “ordinary budget”. (Expenditures contemplated “extraordinary budget” can presumably be made only by release ECA counterpart schillings.)
Soviets, unlike British and French, have not repaid currently from military occupation funds advances made by Austria for civilian occupation costs (rents, etc.) and are now in arrears 194 million (of which 85 incurred this year) for these advances. Agreed principle equal treatment for occupation powers therefore violated in practice.
As of last June three powers had schilling bank deposit totalling 738 million plus allotment of 45 million for 1948 occupation costs. These amounts presumably somewhat reduced now but obviously very large schilling advances still available to three powers.
Established practice of AC is to reduce occupation levy progressively each year. For this principle to be effective 1949 may be necessary to abandon practice basing levy on percentage Austrian budget and also to determine costs quarter by quarter rather than for entire year.
In view large US contribution to revival Austrian economy and high interest in Austrian financial stability, US has substantial concern in reducing occupation costs to minimum.

In light these considerations US authorities Vienna intend pursue following course: (a) discuss informally with British and French (who have already raised question with USFA), stressing six suggested lines above; (b) avoid taking initiative, but express willingness discuss question quadripartitely whenever invited; (c) endeavor reach quadripartite decision reducing substantially burdens occupation costs along lines indicated paragraphs 3, 4 and 5 above; (d) reconsider position if eventually confronted with alternatives either blocking [Page 1446]quadripartite agreement or lending US sanction to AC decision inconsistent with US economic and political objectives.

In considering latter question, if it should arise, important to note high Austrian officials state government would prefer have free hand to bargain with each of three powers individually rather than be confronted with binding AC decision. As stated above we consider quadripartite approach preferable up to certain point but will wish to drive good bargain for Austria and to reconsider our position if good bargain appears unobtainable.

This is an agreed USFA and Legation cable.

Pass to Department of Army.

  1. Supra.