Foreign Relations of the United States, 1952–1954, Germany and Austria, Volume VII, Part 2

763.00/10–352: Telegram

No. 824
The Chief of the Mutual Security Agency Mission in Austria (Meyer) to the Mutual Security Agency

confidential
priority

Vienna, October 3, 1952—8 p.m.

Tomus 205. Ref: Musto 169 Sept 29.¹ Joint Emb/Mission message. New Communist approach in Austria. No radically new information or views available other than already reported by mission or Embassy to comment on Ginsberg views. Latest analysis politico-economic situation contained Embdesp 550 Sept 24² should provide excellent background material for your statement. Believed factual base Ginsberg statement correct, but our immediate conclusions not quite so alarmist. Situation, however, could deteriorate rapidly. Addressing specificially four points made:

(1) USIA retail operations undoubtedly increasing. No known instance of putting free merchants out of business nor is this clearly intention. More precise objectives are probably: (a) propaganda (b) source of schillings to Soviets (c) endeavor sow seeds distrust Aust economic organization (d) extension penetration Aust economy. This development alarming, but not yet critical.

(2) Soviet softness not yet complete and while Austs undoubtedly developing certain tolerance for Sov threat believe continuing occasional kidnappings and more frequent intervention in Sov zone maintain awareness problem. Aust Commie Party still probably weakest in Europe. Problem presented undoubtedly exists but not cause immediate concern.

(3) Threat inflation continues to be problem. However, has been substantially arrested during past year with prices constant since Jan 1 and schilling strengthened. More visible immediate threat is unemployment. Problem in preserving tensions stabilization attained in face political threat unemployment. Long run prospects discouraging, but by no means hopeless.

(4) We agree situation has weakened in past year. Reasons include continued discouragement re State treaty, increasing frictions maintenance coalition government, reduced dollar aid and others mentioned despatch 550. Depleted cash position treasury and mounting unpaid govt bills are cause concern; also high 1952 trade deficit and inability govt adjust foreign exchange rate. Because this factor impedes exports westward and slows internal trade, Sov East/West trade drive has gained acceptance some quarters. In summary, we are concerned, but continue hopeful.

Meyer

1. Not printed. (MSA telegram files, lot W 131, “Vienna Musto”)
2. Despatch 550, a 15-page report entitled “An Estimate of the Austrian Politico-Economic Situation, September 1952,” noted that Austria was approaching a crossroads with respect to its economic policy with the principal obstacle being its political inertia. (763.00/9–2452)