863.51 Relief Credits/18
The Austrian Minister (Prochnik) to the Secretary of State
Washington, January 28,
1928.
No. 11/R
Excellency: Enclosed I have the honor to submit
to Your Excellency copy of the correspondence passed between the
Austrian Government and the Relief Committee in London in regard to the
proposed settlement of Relief credits extended to my country, viz:
- A.
- Original proposal of the Austrian Government,
- B.
- Counter proposal of the Relief Committee,
- C.
- Answer of my Government to B.
In addition I beg to submit to Your Excellency a schedule of payments
prepared for the American share in accordance with the last propositions
of the Austrian Federal Government (sub C).
These figures I have previously brought to the attention of Your Dr.
Young.
Accept [etc.]
[Page 865]
[Enclosure
1—Aide-mémoire]
Original Proposal Made by Autrian
Government11
The Austrian Government undertakes the obligation of paying through
25 years beginning from 1943 40 million schillings annually[,] i.
e.[,] a total of 1000 million schillings.
The Austrian Government reserves the right to pay from 1929 on during
5 years 10 million sch. annually, during the following 10 years 15
million sch. per annum, these sums with 8% compound interest until
1943 to be deducted from the total of 1000 [million] sch.
After having paid off in aforestated way 200 million sch. prior to
1943 the Government would then pay 26.24 million sch. for the
ensuing 25 years.
[Enclosure 2]
Counterproposal Made by the Relief Bonds
Committee
Aide-Mémoire
- 1.
- The International Relief Bonds Committee[,] representing the
Governments of Denmark, France, Great Britain, Holland, Italy,
Norway, Sweden and Switzerland, welcome the proposal of the
Austrian Government for the final settlement of their Relief
Debts outlined in the Aide-Memoire handed
to the Committee on the 12th December 1927,12 as
they are convinced that it will be in the interests both of
Austria and of the Creditor Governments that a definitive
settlement of this question should be reached.
- 2.
- The Committee accept in principle the proposal that the Relief
Debts should be funded by means of an arrangement under which
the Austrian Government would undertake the obligation of
paying, in settlement of the debts, 25 annuities from 1943
onwards, but would at the same time reserve the right to make
payments from 1929 onwards, the sums paid before 1943, together
with interest thereon, being in that case deducted from the
payments from 1943 onward which the Austrian Government would
undertake the obligation to make. The Committee accept this
basis of settlement on the understanding that this arrangement
will not give rise to any objection on the part of the Trustees
of the League Loan.
- 3.
- The total amount of the Relief Debts (including that due to
the United States Government) as at the 1st January 1928, is
approximately 1,250 million schillings and the Committee are not
disposed to recommend their respective Governments to accept any
settlement less
[Page 866]
favourable than the following, to wit that the Austrian
Government should undertake the obligation of paying from 1943
onwards during 25 years, 50 million schillings annually or a
total of 1,250 million schillings, reserving the right to pay
from 1929 during 5 years (1929–1933 inclusive) 10 million
schillings annually, during the subsequent 10 years (1934–43
inclusive) 20 million schillings annually, and during the
subsequent 25 years (1944–1968 inclusive) 35 million schillings
annually.
- 4.
- The annuities agreed upon would be denominated in gold
schillings and would be payable on the 1st January of each year.
The share of the annuities due to each Creditor Government would
be proportionate to the amount of the debt to that Government as
at 1st January 1928. The amount so calculated would be payable
at the option of such Government in Austrian schillings or
United States of America dollars or sterling or in the national
currency of such Creditor Government at the current rate of
exchange.
- 5.
- The Relief Debts will retain their full priority over
Reparations, until they have been finally settled and discharged
in accordance with the arrangements proposed. The agreement for
the settlement of the Relief Debts will be submitted to the
Reparation Commission for their approval and would become
definitive on such approval being obtained.
- 6.
- The Committee would be glad to receive a revised proposal from
the Austrian Government on the above lines.
[Enclosure 3]
Answer of the Austrian Federal Government to the
Relief Bonds Committee, dated Vienna, January 14,
1928
The Austrian Federal Government, on their part too led by the
conviction that it will be in the interests both of the creditor
Governments and of Austria that a definitive settlement of the
Relief Debts should be reached, have taken note, with thanks, of the
consent given in principle by the International Relief Bonds
Committee, to the proposal made by the Federal Government of an
alternative plan for the payment of the Relief Debts. The Federal
Government have already received a letter from Messrs. J. P. Morgan
& Co. according to which the said banking house have to make no
objections to the present plan of payments as seen from the point of
view of the League Loan prospectus. Moreover, the Federal Government
have addressed a letter to the Trustees of the League Loan asking
them whether any objections will be raised by them to the said
proposals. As soon as an answer will be received from the Trustees
it will be transmitted to the International Relief Bonds Committee.
To the proposals, as laid down in the Aide-Memoire of the International Relief Bonds
[Page 867]
Committee, the Federal
Government have the honour to reply as follows:
1. In order to exclude any misunderstanding the Federal Government
beg to state beforehand that by making their offer of paying certain
amounts denominated in Austrian schillings, it was by no means their
intention to turn the debts hitherto denominated in various
currencies into debts denominated in schillings. The offer was made
in the schilling currency for the reason only to reduce for the
purpose of the present negotiations and for the sake of calculation,
the various currencies to a common denominator and to give hereby
the clearest and most lucid possible idea of the plan of payment,
which otherwise would have had to be made for each currency
separately or expressed in percentage. It is a matter of course that
after an agreement had been reached on the principles of the plan of
payment, payment, in accordance with the plan, in respect of the
debts to the various States was to be made in original currencies of
the respective debts.
Now, a completely new arrangement in respect of the character as
regards currency, of the present obligations is provided for in
point 4 of the Aide-Mémoire. In place of the
present obligations denominated in the various respective
currencies, the obligation towards all the creditor Governments is
to come to pay in gold. This would mean that Austria would have to
secure the creditor Governments against the risk of fluctuations, if
any, of exchange. It is difficult for the Federal Government to see
which is the basis the Relief Bonds Committee wish to take in making
this demand; they think that it would be impossible for them to
advocate in the face of public opinion of their country a concession
in this direction.
2. Concerning the plan of payment proposed by the International
Relief Bonds Committee the Federal Government have the honour to
make the following statement: The International Relief Bonds
Committee have informed the Austrian Federal Government that they
accept in principle their proposal. They start, however, from the
supposition that from 1943 onward up to 1968 1250 million schillings
must be paid in all, while the proposal of the Federal Government
provides a total payment from 1943 to 1968 of 1000 million
schillings. In the proposal of the International Relief Bonds
Committee the right would be reserved to the Austrian Government to
begin the payment of annuities as early as 1929 and to pay during
the first 5 years 10 million schillings annually, during the
subsequent 10 years 20 million schillings annually, and during the
last 25 years 35 million schillings annually. The Federal Government
must point out, that the 25 annuities (1943–1968) provided for in
the proposal of the International Relief Bonds Committee, very
considerably differ as regards their present-day value, from the
present-day value of the 40 annuities provided for in the proposal
of the International Relief Bonds Committee. Calculated at 5% the
present-day value is 339 million schillings in the former case (25
annuities) and 402 million schillings in the latter (40 annuities).
A most unwelcome situation would arise therefrom, for under such
circumstances it would be too difficult for the Federal Government
to advocate in parliament the making of payments in anticipation to
begin from 1929. Naturally the alternative proposal must be
constructed so as to avoid that
[Page 868]
the annuities from 1929 onward will represent
a higher present-day value than does the plan of payments beginning
from 1943. It is true that also the proposal made by the Federal
Government on 12. December last,13
represented a higher present-day value for the plan of payments
beginning in 1929; this was caused by the fact, that the Federal
Government is on the standpoint that with payments beginning from
1943 they intended to increase the principal only by the amount of
8% compound interest on the payments which would have been made in
anticipation. We realize that it was a mistake to make a proposal
which in the two alternatives would have represented different
present-day values of the annuities. In order to remove this defect
which was contained also in the first Austrian proposal, and to have
to a certain extent regard to the wish of the International Relief
Bonds Committee that the annuities of the second period (1934–1943)
as proposed by the Austrian Government should be increased, they
have the honour to submit the following new proposal:
3. Austria undertakes the obligation of paying from 1943 onward a
total sum of 1162,5 million schillings in 25 equal annuities of 46,5
million schillings and reserves the right to pay from 1929 as
follows: 1929–1933 5 annuities of 10; 1934–1943 10 annuities of 16;
1944–1968 25 annuities of 25,84 million schillings each. The
present-day value of these payments is in both alternatives 315
million schillings. If this present-day value is compared with the
present-day value (339 million schillings) of the payment from 1943
onward of 1250 million schillings as proposed by the International
Relief Bonds Committee, it can be seen that the Federal Government
are meeting the wishes of the International Relief Bonds Committee
in a high degree.
For reason of simplicity the annuities are expressed in schillings
also in the present proposal. But the Austrian Government are
interpreting the proposal as meaning that the payments to be made to
the several States in the sense expressed above in the paragraph of
point 1, shall be made in the currencies in which the debts were
contracted; this principle will have to be followed when the
definitive text will be drawn up.
[Enclosure 4]
Proposal for the Funding of
Austrian Relief Debts to the United
States of America
Austria undertakes to pay, within 25 years beginning from 1943 [,] a
total of $32,977,250, i. e.:
- 24 instalments of $1,319,000,
- one instalment of $1,321,250.
Austria reserves the right to make instead of the above stated
instalments the following payments, beginning from January 1st 1929:
- 5 years $284,000 each;
- 10 years $455,000 each;
- 24 years $735,000 each;
- 1 year $729,000.
