663.001/5–1452: Telegram

No. 800
The Secretary of State to the Embassy in Austria1

secret

2859. Figl had one hour conference with SecState May 132 on state treaty, economic reforms and Creditanstalt investigation.

In introductory statement Figl expressed gratitude for this visit emphasizing that morale of Aust people wld be strengthened by this trip since its official nature was public recognition of Aust sovereignty and indication of US support for Aust treaty, now again under consideration. Figl said free Austria was prerequisite for free Europe and enlarged on effects developments in Austria had on East satellites.

SecState remarked there was brief hope in summer 1949 that treaty might be concluded but Soviets soon reverted to sabotage tactics, which they kept up ever since. US, Brit and Fr wld continue however press for early conclusion of treaty.

Discussing economic problems, SecState told Chancellor Congress recently chopped off one billion dollars from Mutual Security bill and was now considering new cut of one billion. While second cut might be averted, congressional action was nevertheless indicative of current mood in legis of which the Chancellor wld have occasion to convince himself. Conclusion to be drawn was that Eur countries wld have to exploit their own capabilities to the limit. SecState continued it was understood AustGovt was powerless act in certain spheres notably re diversion of Aust assets in East Zone by Soviets and continuing demands for occupation costs. Nevertheless Aust-Govt [Page 1750]cld take action in other spheres particularly along lines suggested by MSA Vienna Jan 7 1tr3 to which no reply had been recd to date. Aust Govt shld also arrange for completion of dol diversion investigation which appeared to be blocked by refusal of Creditanstalt to allow inspection of files of its subsidiary in Switz. SecState recalled original agmt between US and AustGovt to undertake investigation. Since Congress was informed about allegations of dol diversion, incompletion of investigation wld result in unfavorable publicity which might have far-reaching consequences.4

The [In?] reply to SecState’s statement Figl first took up treaty, requesting Ger settlement shld not precede Aust settlement. Different course wld have unfavorable political effects in Austria by strengthening Pan-Germanism and extremism in gen.

Re econ reforms Figl remarked polit stability depended on maintenance of coalition of two major parties opposing each other on important econ issues. Maintenance of coalition therefore entailed compromises re econ legis, and compromises now more difficult to reach than during earlier period of reconstruction. AustGovt nevertheless had reached agmt on most points recommended by MSA. Final reply to MSA 1tr delayed by problem of export controls and by inability provide funds for agri subsidies for second half 1952. Chancellor said main problem re export controls was to cut red tape. Re agri subsidies AustGovt prior to his departure had already agreed raise 360 million through increased taxation. Area of disagreement thus confined to 140 million schillings. Figl expressed hope he wld be able make final reply to MSA 1tr during his stay in Wash.

Re dol diversion Figl assured SecState AustGovt determined to complete investigation. Figl informed SecState about transfer Creditanstalt shares to Berger and said he was disappointed hear during London visit that accountants still unable obtain access to Limor records. Figl said he had given instructions immed to institute bankruptcy proceedings against Limor. Without going into technical legal aspects in Switz, Figl rptd assurance AustGovt wld press for completion of investigation but wanted prevent this investigation from becoming polit football which wld only aid extremist groups.

[Page 1751]

SecState replied he was gratified hear AustGovt proposed to take vigorous action re investigation and econ reforms and hoped this cld be accomplished soonest.

In subsequent statement to press, Figl said Aust situation had been discussed in gen with specific emphasis on treaty problem. No mention made of econ problems.

After call on SecState Figl was recd by the President.5 During half hour discussion SecState reiterated Figl’s request that Ger settlement shld not precede Aust settlement, and President agreed. President commenting on courageous resistance Aust people recalled earlier invasions of Austria from East which were repelled and assured Austria of continued US support. Figl expressed gratitude for US moral and polit assistance emphasizing that US aid has made Aust resistance possible.

Acheson
  1. Drafted by Imhof and cleared with Williamson, Perkins, Collins, and E.P. Allen. Repeated to Paris and London.
  2. This meeting took place in the Department of State at 11 a.m.
  3. Not found in Department of State files.
  4. As a result of a report by the Joint Congressional Committee on the Economic Cooperation Administration (ECA) issued in May of 1950, which severely criticized the EGA and Austria for the dissipation of EGA aid and Austria’s own dollar resources, the United States recommended that the Austrian Government investigate these allegations with the assistance of an American certified public accounting firm.
  5. This meeting took place in the White House at noon on May 13.