763.0221/9–2051
The United States High Commissioner for Austria ( Donnelly) to the Deputy Director of the Office of Western European Affairs ( Williamson)
personal
Dear Francis: I have before me your interesting and welcome letter of September 10th1 which I hasten to reply to in view of the importance of the subjects treated in your letter, as well as the desirability of giving you the benefit of my knowledge of their current status.
I shall also refer to a number of other matters of mutual interest.
1. The Senate Hearings.2 It was gratifying to learn that the Senate Hearings went off very well and that you do not anticipate a further cut in our budget. Red Dowling has written to me about the hearings which he considered most satisfactory. As regards the use of ECA funds for use in the Soviet Zone I have suggested to Mr. Meyer and Mr. Thibodeaux that they prepare a memorandum stating ECA’s position regarding such loans and clarifying any doubts which may exist in the minds of members of Congress and others that the Soviets have benefitted from them, either directly or indirectly. I consider that ECA here has been very circumspect in its loan operations in the Soviet Zone of Austria which have been made for the benefit of the Austrians residing in the Zone and certainly not for the Soviets. One of the most important problems confronting us in our work in this country is to continue to demonstrate to the Austrians residing in what is known as the Soviet Zone that we are interested in their welfare and that they can count upon our cooperation once it is established that no advantage will accrue to the Soviets. The loyalty of the Austrians residing in the Soviet Zone to their Government and their pro-Western leanings is as strong, if not stronger, than the Austrians residing in any other part of the country, and it is extremely important that we avoid any indication that we have written them off simply because they live in the Soviet Zone. I am sure that the great majority of them would be only too pleased to leave the Soviet Zone if they could do so without too great a burden. This is not possible because whatever tangible equity they possess, consisting of homes, [Page 1066] farms, etc., is in the Soviet Zone and they and their ancestors have lived in that area long before there was any thought or possibility of Soviet occupation. I am sure that you and Red told the Senators, as we told the Congressmen, that the over-all majority of Austrian residents in the Soviet Zone is anti-Soviet and in national elections the Communists have polled fewer votes proportionally in the Soviet Zone than in any other part of Austria. The memorandum which I have asked Mr. Meyer and Mr. Thibodeaux to prepare will furnish additional facts to reply to this question whenever it is put to you.
I have not yet received the transcript of the hearings which I am looking forward to reading.
2. Dollar Diversion Investigation. The MacCormac article in The Times3 stirred up little interest here and to the best of my knowledge the Volkstimme and the Soviet newspaper were the only ones that gave it any play. The American newspaper correspondents here asked me about it. I replied that I would give them all the facts but not for publication since I consider that publicity at this time would interfere with the investigation and prejudice our interests. I told them, however, that the Austrian Government would probably release the story upon completion of the investigation within two to three months. They appreciated our point of view and said that they would await the completion of the investigation.
The investigation is progressing satisfactorily and the accountants are encountering no difficulty. We have carefully avoided contact with them because we feel it would be much better to await the results of the complete investigation than to receive it piecemeal. Furthermore, if we were to keep in constant touch with them we might be accused of interfering with their work and prejudicing their views. The investigation is being conducted in strict accordance with the agreement and with the full cooperation of the Austrian Government.
Mr. Seckel, whom you referred to in your letter, also spoke to me sometime ago about Joham of the Creditanstalt. I took the position at that time, and I shall take the same position if he calls upon me during his next visit to Vienna, that it is an Austrian affair and that if Mr. Joham or any other individual has any objection to the investigation he should not complain to us but to the Austrian Government.
3. ECA Aid for Austria. The ECA level of aid for Austria for 1952 is still undetermined. Telegrams received by the ECA here from [Page 1067] OSR in Paris indicate that the aid may not exceed $105,000,000, and it appears that this figure was discussed at a recent meeting of Deputy Chiefs of ECA meetings held in Paris. The most recent telegram from OSR in Paris (No. 462 September 15, repeated to the Department as No. 46184) reads as follows:
“If their estimated program cost of dollars 172–195 million can in fact be procured for dollars 100–120 million, then political consequences of lower aid figure might be exaggerated. Still appears that aid for Austria, within context congressional cuts in overall aid, will fall within that range. Appreciate considerations raised in paragraphs 7 and 8 reftel A and will give full weight in final determination of aid to Austria. In meanwhile prudence dictates that we prepare ourselves for worst. Bedrock screening absolutely necessary.
“Congressional cut in aid and future prospects places responsibility on Austrians to accelerate their own timetable for essential economic steps toward self support and solution their many economic problems.”
I met on Monday of this week with Mr. Meyer and Mr. Thibodeaux for the purpose of reviewing the proposed aid program. It was agreed that ECA here should make a still further study of minimum aid requirements for 1952 and that this information should be telegraphed to Washington and Paris. The figure of $120,000,000 is low and insufficient according to our present calculations. The figure of $105,000,000 would be insufficient and might necessitate readjustments which would have the effect of increasing unemployment, especially during the winter months, and retarding the economic recovery of the country. It is very difficult to arrive at a firm figure for the current fiscal year in view of price rises and the uncertainties as to the coal situation. If the supply problem is not corrected and if Austria must continue to pay $30 or more a ton for coal landed in Austria, it might be necessary to use a major part of the suggested $105,000,000 aid for this purpose. I understand that our Army has been compelled to import coal from the United States at a laid down cost of approximately $38 a ton. I believe that a figure of $145,000,000 would be sufficient for Austria this year. Even then it would be necessary for Austria to make certain readjustments in the economy. It is about time for the Austrian Government to liberalize trade in this country and gradually eliminate some of the archaic economic laws, such as the cartel system, which I opposed in one of the recent sessions of the Allied Council. While we have taken advantage of every opportunity to inform the Austrian Government of our objections to monopolies, cartels and other impediments to free enterprise, the Government [Page 1068] has been very slow in attacking the problem and I do not look for any improvement in the near future. It is proper for us to continue to remind them of these weaknesses in their structure but in the final analysis they must assume the responsibility for the reforms. The “get tough” policy for Austria as advocated in some quarters is not the way to solve the problem. Instead, we should remind the Government that they can hardly expect our Government to continue to aid this country unless it takes steps to help itself, such as the elimination of the current restrictions on trade. I agree with you that we must not be influenced by the view of certain Government officials here that we will always bail them out. At the same time we must be careful, for military and strategic reasons, to avoid upsetting the balance here. Also, we must be tactful in our approaches to the Austrian Government and fair in our exactions of them since the coalition government is not strong and could fall apart on a major issue. This was demonstrated during the recent controversy over the dollar diversion investigation. If it had not been for the support that Figl received from the Socialist Party he would have been defeated, forced to resign, the People’s Party would have suggested a new chancellor and shake-up in the Cabinet, some of whom might not have been acceptable to the Socialists, with the resultant break in the coalition. The position of the coalition is still precarious but barring some unforeseen major development I am inclined to believe that the coalition will endure, at least until 1952.
[Here follows Section 4, “Security Forces”.]
5. Printing Plants. Campbell is still awaiting news from his organization about the printing plants. Any news?
6. State Treaty. The brief information received by us from the Department following the Foreign Minister’s meetings indicates that the DFM’s of the three Western Powers will meet shortly to consider the proposed abbreviated treaty and that this will be followed by a meeting of the four DFM’s to review the treaty. Also, that if the Soviets refuse to accept the treaty, we will propose the abbreviated treaty. This is my understanding of the situation and if I am wrong I wish that you would put me straight. There is an intense interest here on the part of the Austrians in the treaty and I believe that it would be in our best interests, and in all fairness to the Austrian Government, to keep the top officials informed of our plans. I should like to suggest that Red Dowling participate in any future meeting of the DFM’s. Dowling lives with the problem every day and could serve as an able assistant to Reber. How do you feel about it?
How about the police officer?
[Page 1069]Nothing more at this time. I shall write to you again after the conference with General Irwin.
Sincerely yours,
- Not printed.↩
- The Senate was conducting hearings on the report of the Bureau of the Budget and financial assistance to certain European countries was under critical review.↩
- This is a reference to an article by New York Times correspondent John MacCormac entitled “Banking Scandal Alleged in Vienna,” which appeared in the New York Times, September 6, 1951, p. 16.↩
- Not printed.↩