863.00R/7–2151: Telegram
The United States High Commissioner for Austria ( Donnelly) to the Secretary of State 1
261. From Donnelly and Meyer, for Perkins State, Foster ECA, and Katz OSR. Supplementing Legtel 260 July 212 following background info may be of interest on atmosphere of negots:
Complete story of developments this week in Aust Govt with respect to accountants’ investigation learned from Schaerf last night.
After clarification our position, which I gave Figl and Schaerf on Mon July 16, Figl obviously surprised and shocked, and it seemed to us possible that govt might call off investigation if Peoples Party had their way, or attempt further temporizing if Gruber called the tune, or finally decide to cooperate in face of my warning and under Socialist pressure from within cabinet.
When Figl and Schaerf came to see me at legation Thurs, it was clear that they had something to talk about but were having difficulty in getting to the point. After discussion miscellaneous subjects, I asked them what about the accountants, and in due course informed them of contents Deptel 150 (rptd Paris 415).3 Figl hastened to reply that we might have everything that we wished and that he wld present matter to cabinet and confirm decision by letter on fol day. Yesterday afternoon I recd letter, main point of which was scope of investigation (war-assets, ERP, and all other [Page 1053] transactions in any way connected with them). I returned letter as unacceptable because of qualifying phrase “in any way connected with them”. Figl called out of parliament to attend to this and stated he wld gladly omit phrase in redictated letter, text of which I have now received and regard by and large as satisfactory.
Later in evening Schaerf informed me that whole question had not been fully aired in cabinet until that morning, Friday, July 21, in bitterest session yet witnessed. Entire Peoples Party attacked Figl who stood alone with Socialists. Figl reproached for conducting secret negots with Americans, not keeping his party colleagues informed, and willingness submit to conditions which his colleagues subscribe. Kolb, Hurdes, and Margaretha stated they wld never agree to proposed scope of investigation. Gruber still out of town. (Schaerf says although Gruber has ostensibly appeared to seek helpful compromises, he had privately continued to advise Margaretha not to give in.)
Decision to comply with our wishes finally reached when Socialists threatened to take whole matter to floor of parliament if Peoples Party did not give in. Schaerf says his party’s position based on two points: (1), That relations with US and foreign aid may not be jeopardized by mischief of private individuals; (2), Necessity for clean house in Aust administration. Schaerf said it had been bitter day for Margaretha, one of whose chief officials, Hintze, had been arrested that afternoon for abuse of office in administration of public assets. Schaerf added that although politically this cabinet session had been a nail in Figl’s coffin, from now on there wld be no argument about investigation, and his belief we cld have anything we wished. In Schaerf’s opinion, there is possibility of Figl’s emerging with strengthened position after lapse of few months, if in fact Joham and Grimm can be got rid of.
Immediate repercussions late in evening were frantic attempt of Creditanstalt emissary Obernbreit to get in touch with officer of Legation for purpose of conveying fol msg: (1), That as result this unjustified persecution Austria’s leading bank govt wld fall; (2), Commies already in possession and wld publish complete story American interference; (3), Sovs wld claim Creditanstalt as German asset and seize all of bank’s holdings in eastern zone; (4), Sovs wld demand immediate repayment of five years rent for Hotels Grand and Imperial and other properties leased from bank.
I regard it as entirely possible that Peoples Party leadership may go through period some embarrassment and severe internal dissension, but am inclined discount threats of Creditanstalt, although they may be expected to try every stratagem to save themselves. [Donnelly and Meyer.]