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The following points of the contents of the statement seem to me to require special mentioning:

The current administration of Austrian Federal Finance resulted in a deficit only in the first year of reconstruction, i. e. in 1923, while in the subsequent years fairly considerable surpluses were obtained. Therefore, the total deficit shown in the years from 1924 onwards, represents such part of capital expenditure only as was not covered by ordinary revenue, and, consequently, had to be defrayed out of the yield of loans. Thus Austria succeeded, thanks to the magnanimous support it received from all the nations participating in the work of its reconstruction, to save its finances from utter ruin and to establish the permanent equilibrium of the budget. Moreover, a large portion of the purely productive capital expenditures was covered by current revenue, so that the proceeds of the reconstruction loan set apart for such capital expenditure, will be sufficient up to the first months of 1928. Now, as is also shown by the enclosed statement on the use of the said loan, the sums disposable under this heading are almost exhausted. Only a sum of approximately 26 million Schillings is left for capital expenditure in 1928. The great works of reconstruction Austria undertook with the help of funds drawn from the reconstruction loan, in the first place the installation of electric traction on the Federal Railways, and the laying of long distance telephone cables, both of them works of highest importance to making Austria’s balance of payments active, must be continued and completed, if the result aimed at, namely to secure for Austria's economy a permanent adequate position in the ensemble of the various European economies, is to be attained.

My Government therefore finds itself obliged to proceed to the issue of an investments loan for which the basis is given through the said decision taken by the Committee of Control in accordance with Article 7 of Protocol II dated Geneva October 4th, 1923 [1922].18

To be able, however, to contract the loan under suitable conditions, Austria requires her assets to be freed from the lien imposed upon them under the terms of Article 197 of the Treaty of St. Germain 14 for purposes of reparation, as well as under the terms of the relief bonds issued by Austria for the relief credits granted to it. Likewise a further postponement for this purpose is required of the payments to be made in accordance with the stipulations of these bonds.

My Government has at the same time addressed to the Reparation Commission the request to defer in favour of the intended loan and for a period of 30 years i. e. up to 31. december, 1957, the charges laid upon all the assets and revenues of Austria by virtue of Article

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For text of protocol, see League of Nations, The Financial Reconstruction of Austria (C.568.M.232.1926.II), p. 139.

* Malloy, Treaties, 1910–1923, vol. II, pp. 3149, 3216.


197 of the Treaty of St. Germain. It now ventures to ask also the Government of the United States of America to grant the suspension of the lien, and the postponement up to 31 december, 1957, of the payments due for the relief credit granted to Austria to the amount of about 24 million Dollars plus interest.

In view of the nature of the proposed investments my Government deems it indispensable that the loan to be contracted should be for 30 years at least, lest in the next few years that are devoted to further reconstruction work, Austrian economy be charged with too heavy obligations for the repayment of the loan.

In bringing the above request of my Government to your knowledge, I should be greatly obliged if Your Excellency would kindly forward it to the Government of the United States and advise me, at the earliest possible date, of the decision taken by them in the matter. I avail myself [etc.]



The Secretary of State to the Secretary of the Treasury (Mellon)

WASHINGTON, October 18, 1927. Sir: I have the honor to transmit for your information a memorandum report 15 of a conversation in which the Austrian Minister indicated that his Government wishes to know whether the Secretary of the Treasury has power without further authorization by Congress to extend for an additional period of five years the time of payment of the debt incurred by Austria for the purchase of flour from the United States Grain Corporation.

I am transmitting to you this informal inquiry in view of your possible interest in considering it jointly with the cognate inquiry of the Austrian Chancellor communicated to you by this Department's letter of September 24, 1927. I have [etc.]

For the Secretary of State:


Assistant Secretary

863.51 M 82/

Mr. R. C. Leffingwell of J.P. Morgan & Co. to the Secretary of State

NEW YORK, October 18, 1927.

[Received October 19.] DEAR MR. SECRETARY: Confirming my statement over the telephone, the Austrian Government has in contemplation the flotation of a

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loan or loans in the amount of 775,000,000 schillings or about $110,000,000. The purpose of the loan is to provide funds which, with some contribution from current revenues, are estimated to suffice for the completion of a five year program for the electrification of the Austrian railways (which was set under way from the proceeds of the Austrian reconstruction loan of 1923 and from budget surplus), for the erection of telephone cables and the improvement of highways, etc. It is intended that the loan be offered in this country and in England and in the important Continental markets to evidence international solidarity in behalf of Austrian reconstruction.

We have been asked by the Austrian Government to issue the loan in this country and we have indicated our willingness in principle to study the matter, but it is still in its preliminary stages and nothing has been settled.

The loan has already received the tentative approval of the Committee of Guarantor States which guaranteed the Austrian loan of 1923. The Trustees of that loan have been informed of the project and have expressed their wish to be kept advised. We understand the proposal will also be submitted to the Reparations Commission.

It is proposed that the new loan be secured by a second lien, subject only to the loan of 1923, on Austrian customs and tobacco receipts and on such other revenues as may be necessary, and that reparations and relief claims be subordinated to it and postponed until after its repayment, as in the case of the loan of 1923.

There will doubtless be presented to you by the Austrian Government in due course, if indeed it has not already been done, a request that, as in the case of the loan of 1923, Congress subordinate the relief lien of the United States to the second charge now proposed to be granted and postpone its relief claim for a period extending beyond the maturity of the new loan, which would be say twenty-five

thirty years from the date of issue. There will also arise the usual question whether for any reason the Department of State interposes any objection to the proposed loan.

I do not mean by this letter to ask for a ruling from the Department of State on a question which will thus be presented to it through official channels. My purpose in telephoning you, and in writing you

in this detailed manner in accordance with your request, is only, as always, to keep the Department promptly advised of foreign loans in contemplation.

For convenience of reference I enclose a copy of the decisions taken last week by the Committee of Guarantor States and the Trustees of the loan of 1923; of the joint resolution of Congress approved April 6, 1922,15a and the announcement of the Secretary of the Treasury con

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cerning his action thereunder; 14 and of the prospectus of the loan of 1923.17 I am [etc.]


(Enclosure 1)

The President of the Committee of Guarantor States (Alberti) to the Austrian Minister of Finance (Kienböck)

OCTOBER 12, 1927. SIR: The Committee of Guarantor States have considered the request of the Austrian Government for their approval under the Geneva Protocol II, of a new Austrian Loan for productive capital works. They have had the advantage of receiving in addition to the written memoranda furnished to them, verbal explanations from the representatives of the Austrian Government. They have also had the advantage of consultation with the Trustees of the Austrian Guaranteed loan 1923.

The Committee have been informed that the Austrian Government do not propose to raise any other foreign loan during the period of five years covered by the present loan programme; and that it is the intention of the Austrian Government to apply to the proposed loan, some part of which will be raised in Austria itself, the principle recommended in 1924 by the Financial Committee of the League of Nations that revenue producing undertakings such as the post, telegraphs and telephones, and the railways, will recoup to the Austrian Treasury the charges for interest and amortization on such part of the proceeds of the loan as may be allocated to them.

They understand that the Austrian Government will further make available for productive investments during the five years 1928– 1932 inclusive certain sums out of the current Budget revenue.

The Austrian Government will further make such written application to the Trustees of the guaranteed loan 1923 as may be necessary under the terms of the general bond of that loan: and they propose in due course to apply to the Reparations Commission and the States holding Austrian relief bonds for the necessary assents of those authorities.

In these circumstances the Committee of Guarantors acting on behalf of the States whom they represent, raise no objection in principle to the issue by the Austrian Government of a loan for an effective sum not exceeding 725,000,000 shillings for the revenue producing purposes of the Post Office and Railways indicated in the statement submitted to the Committee, and have authorized their

Treasury Department press release, dated June 9, 1923, not printed. 17 Not printed.

President, when the actual terms of the issue are communicated to him by the Austrian Government, to give on behalf of the Committee their final approval under Article 7 of the Protocol. I am [etc.]


(Enclosure 2)

Declaration of Trustees of the Austrian Loan of 1923 The Trustees have heard the interesting exposé made by the Austrian delegation and taken note of the statements made by Doctor Schuller concerning the projected loan; as regards this loan the Trustees consider that they are not concerned to express an opinion unless they consider that the projected loan is likely to be prejudicial to the Austrian Government guaranteed loan 1923/43. Therefore, when the terms and conditions of the loan are further advanced the Trustees will be notified in time to enable them to consider whether these are prejudicial to the interests of the bondholders of the Austrian Government guaranteed loan 1923/43.


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The Secretary of the Treasury (Mellon) to the Secretary of State

WASHINGTON, October 21, 1927. MY DEAR MR. SECRETARY: Receipt is acknowledged of the letter of Assistant Secretary Castle (EA 863.51/839), dated October 18, 1927. It is stated therein that the Austrian Government wishes to know whether the Secretary of the Treasury has power, without further authorization by Congress, to extend for an additional period of five years the time of payment of the debt incurred by Austria for the purchase of flour from the United States Grain Corporation.

If such authority is vested in the Secretary of the Treasury it must be derived from the Joint Resolution of Congress of April 6, 1922, c. 124, 42 Stat. 491. By the terms of this Resolution the Secretary of the Treasury was authorized “to extend, for a period not to exceed twenty-five years, the time of payment of the principal and interest of the debt incurred by Austria for the purchase of flour from the United States Grain Corporation and to release Austrian assets pledged for the payment of such loan, in whole or in part, as may in the judgement of the Secretary of the Treasury be necessary for the accomplishment of this Resolution: ..."18 By virtue of this authority the time of payment of the debt was extended to June 1, 1943, and the lien given the United States by Austrian Relief Bond No. 1, Series “B” of 1920, which it holds, was subordinated to

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