No. 795
Memorandum of Conversation, by George Freimarck of the Office of Western European Affairs



  • Vice Chancellor Schaerf Sums Up.


  • Dr. Adolph Schaerf, Vice Chancellor of Austria
  • George Freimarck

Several days before the end of his visit to the United States,1 Vice Chancellor Schaerf told the Departmental officer accompanying him that he would like to have a “private talk” with him on “the latest developments in Austrian politics” before he returned to Austria. This talk took place in the Hotel Plaza in New York on the morning of Thursday, March 20. Schaerf’s purpose in this was evidently to underline basic themes in his position with a view to having it repeated to the Department.

The Vice-Chancellor is a man of undeniable charm, whose forte of being disingenuous and taking his listener into apparently complete and disarming confidence was abetted on this morning by the comfort of a room looking out on the landscape of Central Park as it changed during an early Spring snowstorm.

[Page 1744]

During the conversation—which lasted some three quarters of an hour—Schaerf summarized his political position and offered his observations on the Austrian political repercussions of his trip.

Dr. Schaerf elaborated at some length on his thesis in the long-term vs. short-term investment policy controversy. In essence it was a repetition of the line of argument he pursued in his conversation with Mr. Harriman, although he now laid particular stress on the damage that United States prestige would suffer and the encouragement the Soviets would derive from a stoppage of the public works program. On the one hand there would be statements to the effect that “the Americans never finish what they start—look at these expensive ruins they left us with…”2 and on the other, resultant unemployment would provide fertile ground for an increase in the Communist vote by way of protest.

Dr. Schaerf then summarized the advantages that would accrue to both Austria and the United States by completing the public works program and observed that diverting the effort to consumer goods industries would have a far more inflationary effect inasmuch as these industries were even now “overexpanded”. At this point Dr. Schaerf made some rather sharp comments on the “selfish motives of the People’s Party leadership”.

This in turn led him to repeat what he had told the Departmental officer in two previous “private talks” during the journey. Dr. Schaerf said he was quite upset to have heard from Ambassador Donnelly (on Saturday March 8 at a luncheon given at the Austrian Embassy) that Ambassador Donnelly had supported Chancellor Figl in the matter of bread-grain prices “in order to save Figl’s position in the People’s Party.” Schaerf expatiated on what he felt were the unfortunate and inflationary results of this action (stoppage of bread-grain deliveries and driving up the price of meat).

In this connection Schaerf turned to what he called “the embezzlement of Dollar funds.” He professed to have thought the sum involved was a relatively small one and to have believed the issue involved no malfeasance until Ambassador Donnelly gave him the true figure.* He said he was undecided as to what immediate steps he would take in this situation but that it was evident that something had to be done. He mentioned the possibility of suspending “responsible bank officials”. He is obviously apprehensive of the explosive possibilities of a thorough-going investigation into this affair, even though—as he implies—members of his own party are not involved.

[Page 1745]

The Vice-Chancellor then reviewed his thoughts on the inflationary characteristics of the Austrian economy. Here again, he repeated the line he pursued with Mr. Harriman, viz. such characteristics were traceable to “inept” handling of the various wage-price agreements which incorporated “extraneous issues” that resulted in putting more money into circulation than was necessary or desirable.

Finally Schaerf said that he was very happy at the repercussions of his trip in the Austrian People’s Party press, for now “The lines are drawn”. In answer to a question he admitted that he had been apprehensive at first, but on balance he now felt quite pleased. He was quite prepared to have elections on the issue of “long-term vs. short-term investment policy”. Would anything be changed as a result of elections? Schaerf thought not. He pointed out once more that the “long-term investment policy” was written into the budget and was therefore the policy of the Austrian Government. He further pointed out that Foreign Minister Gruber was in complete agreement with him on this question.

The little session ended on the note that it would be interesting to see how the ground actually lay in Austria.

  1. Schaerf was in the United States for a 3-week visit beginning Feb. 29. For Schaerf’s account of his trip, see his book Oesterreichs Erneuerung 1945–1955, pp. 309–311. According to telegram 1750 to Vienna, Jan. 11, Schaerf’s trip, which was paid for with U.S. funds, included visits to New York, Washington, Tennessee Valley Authority, Chicago, Detroit, Niagara Falls, and back to New York. It was also noted that Schaerf wanted the trip to be ostensibly a private one. (033.6311/1–1152)
  2. Ellipsis in the source text.
  3. Also at the March 8 luncheon. [Footnote in the source text.]