763.0221/1–452: Telegram

No. 781
The United States High Commissioner in Austria (Donnelly) to the Department of State1

secret

2217. In long HICOM meeting Jan 32 on occupation costs chaired by US, with Caccia, Payart and Kraskevitch participating, [Page 1719]Sovs proposed 4.45 percent of present Aust budget (19,700,000,000 schillings) or 219 million, explaining this no change from last year’s percentage and therefore arguing it was no increase.

French proposed 220 million; Brit 200 million with escalator clause for upward revision in case of increased living costs during year. Following my expression of sincere dissappointment other 3 elements had not seen fit to reduce figure from sum received for 1951, Sov and French reduced their demands to coincide with Brit figure of 200 million. After reviewing acute economic situation in Austria, I pointed out keen interest of US Govt in facilitating, by all possible means, stabilization of Aust economy, recalled that US had, since beginning of occupation, brought into country $1,300,000,000 in various forms of aid and improvements and had renounced occupation costs for self. Also pointed out that US Govt was strict in assessing what costs could be classified as govt expenses in connection with occupation, adding that such items as servants, house rent, etc, are regarded as personal expenses of individual officers. Sov HICOM quickly pointed that there are no servants for Sov occupation forces. French and Brit made no comment.

I further indicated that obvious solution to problem of occ costs in signing of state treaty, which we hope for this year. With meeting deadlocked, I proposed further meeting of dep HICOMs to discuss details; this met with negative response. I then invited discussion of our respective detailed breakdowns of occupation costs, stating US willing compare figures with other elements. French and Sovs shied away from this proposal. Sovs then suggested another meeting of HICOMs following on Jan 11,3 to which other elements agreed, although French most reluctantly. Meeting ended with reiteration of US insistence that 1952 costs not be increased over 1951.

Although Deptel 1649 Jan 24 was received too late for discussion with Brit and Fr yesterday morning, Caccia, Payart and I discussed problem for hour following conclusion of quadripartite meeting. Fr rep reactions marked by frequent angry outbursts against Margaretha’s [Page 1720]speech Dec 14.5 He stated his govt would not consider any reduction, repeating well-worn arguments why Austrians should accept increase in costs, and implying drastic reduction French troop strength unless full sum received.

Caccia pointed out acceptance of US terms would mean a necessary retrenchment in Brit occ forces; he suggested this would most likely take form of sending wives and children home, a solution which would prove most unpalatable to Brit Govt in view long enforced separations last war, plus dependent evacuations already in force Malaya and Egypt at present time.

I pointed out that unless we all did something to keep Aust economy stabilized, country would face possible economic collapse, and felt that they as well as we, certainly did not want such an event to occur. I briefly reviewed unhappy Aust budget situation, pointing out that Aust budget represents 50 percent of country’s productive income, an alarming situation probably unparalleled in world today, and called attention to inflationary factors which had resulted in increase of over 50 percent in prices during past 18 months.

When Brit turned conversation to possible alternatives in case QP agreement not reached, Payart again became incensed at mere thought having to deal bilaterally with Margaretha, but finally asked if US could accept 180 million schillings per element, saying that while he could not conscientiously recommend such a compromise to his govt, he might decide to do so. Caccia frankly stated that his hands were bound by present instructions to press for 200 million, but that he would present entire situation to his govt, requesting instructions prior to meeting Jan 11. Reiterated our opposition to any increase above final figure for 1951 and told Brit and Fr I would maintain this position at next meeting.

I continue to believe Brit and French can get along with 1951 figure, provided they institute economies, and I am inclined to believe that they will in end accept quadripartite allocation of 151 million schillings per element, plus escalator clause reported in Embtel 2050 Dec. 14.6 Fr and Sov attitude re comparison items [Page 1721]chargeable to occupation with US figures indicated clearly they wish no such comparisons to be made, and similarly indicates where economies in their costs can be made.

Donnelly
  1. Repeated to Paris and London.
  2. The minutes of the Allied Council meeting of Jan. 3 are in ALCO records, lot 62 F 6, “Allied Commission Minutes—1952”.
  3. In telegram 2289 from Vienna, Jan. 11, Donnelly summarized the results of the meeting on occupation costs that took place that day and noted that all parties concerned were disinclined to break up quadripartite unanimity at the present time. Donnelly also observed that “our firm position in this matter is succeeding in wearing down the resistance of my colleagues.” (763.0221/1–1152)
  4. Telegram 1649 noted that the Department of State believed that the allocation of 151 million schillings with the escalator clause was a reasonable basis for agreement. It recommended, however, that before an open rupture occurs, Donnelly propose relating occupation costs to the performance of the occupation function whereby an accounting system would be established to justify the need for funds. (763.0221/12–2851)
  5. Reference to a speech by Finance Minister Margaretha before the Dec. 14, 1951, session of the Austrian Parliament in which he deplored the effect the raising of occupation costs would have on the Austrian budget and economy and singled out the French and Soviet elements as having claimed supplementary funds. Margaretha noted, however, that the U.S. element had not claimed occupation costs since 1947. A summary of this speech was transmitted to the Department of State in despatch 958 from Vienna, Dec. 28, 1951. (763.0221/12–2851)
  6. Telegram 2050 described the escalator clause proposed by the British High Commissioner which allowed for a supplementary allocation if the treaty negotiations did not result in the withdrawal from Austria of the occupation forces in 1952 or if increased prices or other causes resulted in the figure of 151 million schillings per element being insufficient. (763.0221/12–1451)