740.00119 Control (Austria)/3–1249: Telegram

The United States High Commissioner for Austria (Keyes) to the Department of the Army

secret

P 3127. Action to Department of the Army for JCS to State PACG From USFA Signed Keyes. Discussions among the Deputy High Commissioners for the United States (Balmer), British (Winterton), French (Carolet) and Soviet (Zheltov) elements regarding occupation costs to be assessed against the Austrian Govt for 1949 began on February 11. Three subsequent sessions have been held to date on February 18, February 25 and March 4. Discussions were begun upon British initiative.

At the first meeting, it was agreed to calculate occupation costs as a percentage of the combined ordinary and extraordinary budget, which amounts to 5,531.7 million schillings, as was done in 1948, and that each element would receive an equal share. The US representative proposed that the expenses of each element should be considered and justified in order to determine the minimum occupation cost. This was [Page 1268]aimed primarily at the Soviet element which follows the practice of charging the Austrian Govt separately for its civilian occupation costs (housing, transportation, labor, et cetera) in addition to the sum received as the result of Allied Council agreement. The British, French and Soviet deputies state that they could not accept this proposal without receiving further instructions.

The US deputy called attention to the previous consideration by the Allied Council on September 13, 1946, of a definition of occupation cost. At that time the public finance sub-committee reached agreement on what items of expenditure constituted occupation cost. However, the question was dropped in disagreement at the Allied Council level. No further agreement could be obtained at the meeting on February 25, 1949.

It was agreed that the sum of occupation costs, expressed in a percentage of the Austrian budget, would only be determined for the entire year. The Austrian Govt would only be notified of the amount for the first half, with the amounts of the third and fourth quarters to be formally confirmed by the Allied Council at subsequent meetings prior to the quarters concerned. During discussion of the actual percentage of the Austrian budget to be assessed for the year, the Soviet and British deputies proposed 10.5 percent, the same as for 1948, the French deputy 9½ percent, and the US deputy 6½ percent, was pointed out that annual US expenses were nearly 80 million schillings less than the British. The Soviet deputy claimed that a 20 percent increase in the cost of living over last year would require a great [greater?] amount of schillings for his element. The British and Soviet deputies acknowledged that they were prepared to make some minor reduction in the figure of 10½ percent.

At the beginning of the fourth meeting, the US deputy commissioner proposed that the deputies instruct the finance directorate to study the financing capacity of the Austrian Government insofar as the payment of occupation costs is concerned, and to determine the effects that further payments might have upon the Austrian economy.

The British, French and Soviet deputies stated their inability to consider the US proposal pending a further study of it. The Soviet and British members expressed the view that the financial experts could not reach a basis for decision on the US proposal. The Soviet member remarked that the US element had previously rejected the Soviet proposed modification of the Austrian budget. The US deputy replied that he considered it his duty to present the information of the financial difficulties facing the Austrian Government, and that if serious consequences arose as a result of excessive occupation costs, the four elements must accept the responsibility. Upon the initiative [Page 1269]of the British member, in which the Soviet joined, an effort was made to induce the US member to adopt 8.5 percent as his first proposal. The US deputy stated that he was not prepared to further discuss the percentages until the other deputies had replied to the US proposals.1

[
Keyes
]
  1. With Keyes’ concurrence, Legation Vienna in telegram 244, March 11, not printed, suggested that, since the British and French elements in Austria had fixed instructions, an approach should be made to the British and French Governments for a review of occupation costs in the light of Austrian economic conditions (740.00119 Control (Austria)/3–1149).