Insolvent Austria

...Where is then the outlet for Austria's surplus goods...

...But here the Little Entente enters into the picture...

...and 4. restoration of the budgetary equilibrium...

...There are two ways of effecting the union: one by unanimous consent of the League of Nations, which is highly improbable as long as France holds a seat in the Council...

...It might be added that both demand and counter-demand are based on largely imaginary values inasmuch as neither one nor the other have been definitely fixed...

...Of course Austria wants Vienna as the key-point of the federation...

...on the other hand, there is no domestic market to speak of...

...If we turn to Roumania, we find that this country is against wiping out the Austrian debt because she is afraid of setting thereby a precedent in her dealings with Hungary...

...The question of reparations was brought up when the Treaty of Saint Germain of September 9, 1919 established Austria's war guilt, but in view of the utterly helpless economic as well as political condition of this country it was impossible to estimate Austria's earning power, let alone her ability to pay reparations...

...Nevertheless such events offer a good vantage point from which to consider the actual economic condition of Austria...

...At any rate, this threatening annexation gives a very efficient and convincing argument to either Germany or Austria...

...Bulgaria in the meantime has accepted a tentative plan (reached at Paris) for annual payments to the former Allies amounting to about $2,300,000...

...It would seem clear that a country whose natural resources have been cut off almost entirely, which has a large capital yet at the same time practically no hinterland, cannot for long endure an artificial life...

...and these claims were by no means the only ones to threaten the successful conclusion of the negotiations at the Hague conference...

...The actual proceeds of the reconstruction loan amounted to $130,000,000...

...Italy would not be willing to join such a customs union, one of her reasons being the fact that her claims on Austria are not settled yet...

...The rate of the exportable output of industries is in some branches as low as 25 percent, but in quite a few others as high as 80 and even 90 percent...

...In fact Germany is about the only friend of a nation surrounded by everything else but well-wishers...

...Germany, right in the middle of the European continent, is and probably will always be a power which has to be taken into consideration by any nation no matter how large and powerful...

...The issue of the war entailed a political transformation of central Europe...

...In the meantime a second national loan has been decided upon for purely productive purposes amounting to $100,000,000 for the extension and improvements of railroads, postal and telegraph service...

...Great Britain is once in a while pulling on the German end of the string...

...Czecho-Slovakia wants Prague as the commercial and financial centre of the federation...

...Roumania would probably accept the Allied proposal if her claims against Bulgaria and Hungary would be settled satisfactorily...

...The increase in exports to Germany is proportionately more rapid than that in imports from Germany, although the latter still surpass by more than 50 percent the Austrian business...

...The former Allied powers will have themselves to blame for the formation of a strong central-European bloc...

...Instead of the Danube valley which should offer the greatest possibilities, this outlet is the German market, thus creating another joint between the big and the small brother...

...On the other hand, Hungary has steadfastly refused to discuss property terms if her own demands on Roumania, in connection with the confiscation of the former Hungarian property, are not satisfied first...

...It is not so with Austria...

...In turn it was asked that Austria should cancel all her claims for indemnification regarding property which belonged to the former Austro-Hungarian government and which fell to Czecho-Slovakia and Jugoslavia...

...European history has so far been made by balancing and counterbalancing powerful combinations, and we can observe already that the economic constellations of the period shortly after the war do not hold true any more...

...The Austrian republic, which through the Treaty of Saint Germain has been transformed from the Austrian-Hungarian monarchy with a population of more than 52,000,000 into a republic counting only 6,500,-000 people with its capital representing a little less than one-third of the total Austrian population, is guided in its development mainly by two factors...

...Her production of food stuffs was not sufficient to feed her population, while her industries had lost a good deal of the former inland markets...

...and what good is a Danubian federation without access to the sea...

...A total debt of about $121,000,000 resulted from imports of food and raw material during the first years following the armistice...

...the other by the power of military or economic formations...

...This reconstruction scheme was characterized by four points of primary importance: 1. Creation of an independent central bank...

...The former economic system as represented by the Austrian-Hungarian monarchy was disintegrated in 1918 and the various portions now form parts of seven states...

...May it be hoped that this development, rather than left to explosive expression, will be carefully guided by intelligent diplomatic planning.diplomatic planning...

...That its existence is based on artificial ground seems to be proven by the fact that loan after loan is taken up abroad not so much for the development of domestic resources but rather for the most urgent needs of life...

...neither do they lower their tariff walls, nor do they offer anything in the way of debt cancellation...

...If it really comes to a German annexation of Austria it will just be the logical consequence of self-adjustment growing out of impossible economic conditions formed and created by the peace treaty...

...The solution of the indemnification problem was rendered more difficult and complicated because war claims and counter-claims were widely diffused among the nations in eastern Europe...

...The distribution of the industry, however, is such that about three-fourths of the companies under consideration, if measured by both number and capital, are established in Vienna...

...In addition, many new industries had been established in the succession states and high protective tariffs prevented Austrian commodities from being marketed in central Europe...

...Poland, Jugoslavia and Roumania are showing more sympathy with and understanding of the Austrian dilemma...

...And it is not so impossible that sooner or later a new economic group will be closely formed around this central-European bloc...

...Austria is quite willing to accept the proposal although there is hope that she may be able to collect from the succession states which show a fine economic development and a favorable trade balance...

...The League of Nations's control over the Austrian finances was terminated June 30, 1926...

...The main task in earlier economic and financial history was to keep Austria alive...

...While some branches of industry did not exist at all or had been developed insufficiently before the birth of the present Austria, the output of other industries was overwhelmingly dependent on foreign markets...

...or Czecho-Slovakia at the mercy of the enlarged German republic, enclosed from north, west and south...

...If the former Allies cancel Austria's debt, Hungary might ask for the same privilege...

...The Allies are well aware of the futility of collecting anything at all from Austria in the next ten or fifteen years, thus they might just as well call off the whole party...

...Such a discussion may also illuminate to a certain extent the so-called "boiling-pot" of central Europe and to chart the undercurrents which are of such decisive influence upon the further peaceful development of its nations...

...only France stands aside and is irreconcilable...

...But while the other nations try to be as friendly as one could expect under the circumstances, they certainly do not take any practical steps to help Austria out of the hole...

...Austria cannot exist on her own resources, and sooner or later the alternative will have to be decided upon: Danube federation or a German-Austrian union...

...Czecho-Slovakia, for instance, proposes tariff reciprocity and even a Danubian customs union, the disadvantages of which have been shown above...

...Italy is more lenient with the German language in Tyrol (which does not eliminate, however, the memory of the earlier reckless policy of Italianizing the Tyrolese Germans...

...True, Germany has also had to rely on foreign loans but such recourse was had merely to surmount temporary difficulties...

...3. flotation of a foreign reconstruction loan...

...The annexation of Austria would probably have been effected long ago if Germany had been stronger economically, and if France had refused any such thing...

...The German districts of Czecho-Slovakia, Bohemia and Moravia would want to follow the example of Austria and form part of Germany...

...One is based on the commercial interests of the Danube valley, the other on the political feeling which may be described as strictly German...

...France and Italy show signs of growing competition, in political, military, naval and purely commercial affairs...

...But national antagonisms exist...

...Aside from purely economic considerations the ties between Germany and Austria are manifold...

...Inasmuch as the union is not possible officially, it is tried unofficially...

...2. stabilization of the existing national currency...

...Impartial opinion seems to favor a Danubian federation between (at least) Austria, Hungary and Czecho-Slovakia...

...Apparently it is true that Austria has been left as an economic torso...

...And even if the federation is formed, there is Italy holding the Adriatic outlets with Trieste and Fiume...

...Austrian industry is composed of about 750 industrial enterprises of which 515 are representing the bulk of the capital invested...

...Separate negotiations have been initiated with the United States Treasury with the result that the Austrian debt (some $24,000,000) has been settled on the same basis...

...The issued share capital of the latter is approximately $140,000,000, while the combined amount of share capital and reserve funds is $215,000,000...

...Imagine the consternation of Italy losing through an annexation the buffer state and getting into direct touch with the German frontier...

...The turning-point came in October, 1922, when the reconstruction scheme of the League of Nations was signed, thereby transforming into attractive investment business what formerly was more or less in the nature of international relief action...

...In view of this ever more intimate relationship it is not surprising that the neighbor nations are becoming alarmed...

...The tariff walls erected all around Austria forestall a free and undisturbed development of foreign trade...

...If two nations want a union, it will be realized sooner or later and cannot be prevented for all time...

...While the former is very doubtful in view of the almost complete disarmament of Germany and Austria, the latter way is almost bound to present itself...

...it is maintained, and not unjustly, that Prague was once such a centre and has been robbed of its predominance by the central-European bloc, formed by Germany and Austria...

...In fact, the Treaty of Versailles stipulates that Germany acknowledges and will strictly respect the independence of Austria, that this independence shall be inalienable except with the consent of the Council of the League of Nations...

...in the meantime Germany has developed her commerce, trade and industry to such a degree that one might well speak of an independent and self-sustaining Germany once more...

...these efforts consist of the concession of commercial privileges on the part of Germany, the simplification of frontier and passport regulations, the standardization of laws and judicial methods between Austria and Germany, the connecting of educational institutions, fairs and exhibitions, and many other activities of an official, semi-official or private nature...

...A funding agreement was signed in London in June, 1928, which provided for forty yearly instalments beginning in 1929...

...And France, through this tremendous accumulation of power by a large central-European bloc, would find herself hopelessly outclassed and estranged from Poland...