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Thirteenth Report [Communicated to the Members _ of the Council.] C« 7 2 . *924- H . LEAGUE OF NATIONS G en ev a, January 31st, 1924. FINANCIAL RECONSTRUCTION OF AUSTRIA (Second Year) THIRTEENTH REPORT BY THE Commissioner-General of the League of Nations for Austria. (Period December 15th, 1923, to J a n u a r y 15th, 1924. •— First month of the third Stage.) I have the honour to submit to the Council of the League of Nations my first monthly report for the year 1924. It forms a continuation of my Twelfth Report (Document C. 13.1924. II) and the preceding reports, and relates to the period December 15th, 1923, to January 15th, 1924. A month ago I drew the attention of the Council to certain symptoms of over-consumption which I thought I detected in Austria and which, I believe, are due to an inevitable reaction against the privations of former years and to the increase of private incomes produced by the process of adapting and readjusting the values of private capital which took place in 1923. This tendency, which at present creates a false impression of great prosperity throughout the country, appeared to me likely rather to delay than to advance the date on which satisfactory economic conditions and financial equilibrium could be permanently re-established. At the end of 1923, it produced a feverish desire to spend, which lent an impetus to trade and increased the State revenues, but I felt that, in view of the actual situation of the country, this state of affairs was not a normal one and might lead to a crisis, all the more serious because it had not been foreseen. At any rate, it seemed to me that the atmosphere of heedless extravagance in which private individuals lived was not conducive to the success of the essential task of reducing public expen­ diture. Its effect on prices renders it more difficult for the State to realise economies in admini­ strative expenditure, while it is proof of an attitude of mind which ignores the need of a spirit of sacrifice. The main danger was, I thought, that, on the basis of revenue which was perhaps only ephemeral, expenditure might be permanently fixed at too high a level. Since then, the situation has not undergone any noticeable change. Christmas and New-Year festivities have still further increased consumption, and the Vienna winter season, which is accom­ panied by much luxury expenditure, is at its height. Revenue from indirect taxation (in particular, from the tax on business turnover) continues to show an upward tendency, but it is still impossible to judge how far this improvement is permanent and how far merely temporary. None the less, in view of these exceptional receipts, the State’s dependents, such as officials and autonomous provinces, are seeking to benefit by the surplus, which they regard as permanent. The increased salaries granted to Government employees have not yet been covered by the suggested reduction in the amount of taxation refunded to the Provinces. The latter are even requesting the Central Government to guarantee them in every event an income greater than that — perhaps itself exceptional — which they received in 1923, although the very object of the reform was to induce them to effect economies and to cover the increase of expenditure resulting from the adjustment of salaries. In order to reconcile these points of view, therefore, the State is showing an ever greater tendency to work for an increase of revenue (which has hitherto always been obtained) rather than for a decrease of expenditure. W hat is required is a change in the public mentality. Mgr. Seipel, the Federal Chancellor, has clearly grasped this fact and has recently, in a state­ ment which has aroused much discussion, condemned the exaggerated consumption and indulgence in luxuries now everywhere apparent. If permanent and final recovery is to be attained — and that is our common aim — there must be some recovery from the present state of mind of Austria. The prevailing ideas will have to be entirely recast, and there must be a return to the conception of th r if t. The increase in the purchasing power of the public, due to the partial readjustment of capital values, has, moreover, already produced some effect on home prices. This effect has been ascribed to the monetary policy which has been followed, but it is in all probability due to the adaptation itself and to the excessive consumption to which it has given rise. At all events, the problem exists; I shall therefore in this report have occasion to draw the attention of the Council to the monetary question and to the question of prices ; both are most im portant at the present juncture. S. d. N. 160 (F) + 220 (A), (prov. S. A.) + 1500 (F) 1400 (A) 3/24. Imp. Kundig. I T h e I nternational R econstruction L o a n . The operations connected with the Guaranteed 1923-43 Loan were concluded before the end of August 1923. The only question left outstanding was the transfer to the Czechoslovak Govern­ ment of the securities due to it as repayment for the advance made by Czechoslovakia to Austria in 1922. It appears, however, that this m atter will soon be settled, and the net value of these securities was fixed some time ago at 60 million gold crowns. In these circumstances, the issue of the Guaranteed 1923-43 Loan, which was intended to provide a net sum of 585 million gold crowns, may be regarded as complete. In my n th Report to the Council (Doc. C. 735. 1923. II), I had the honour to summarise the terms and indicate the yield of each block. The Committee of Control of the Guarantor States, at its meeting in Paris on December 17th, 1923, took note of the results obtained and of the fact that the various blocks were floated subject to the conditions which it had laid down (less than 7% % average real interest), and it approved in detail the operations which had been carried out. The efforts made to furnish Austria with credit as provided in the Geneva Protocols are not confined to this 1923-43 International Loan, which was issued under the guarantee of Great Britain, France, Czechoslovakia, Italy, Belgium, Sweden, the Netherlands and Denmark. Two further loans were to be negotiated under the respective guarantees of the Swiss and Spanish Governments, which had not participated in guaranteeing the 585 million loan. T h e Swiss Government stated that it had been authorised by a decree of the Swiss Federal Assembly dated February 6th, 1923, to contribute 20 million gold crowns to the financial recon­ struction of Austria, either by way of a direct advance from the Government or otherwise. It is therefore empowered to place this money at Austria’s disposal when so requested without any further formalities. In order that the Austrian Government may not be required to pay interest now on a sum it is not at present utilising — since part of the International Loan is still available — the Government, with my permission, has not yet requested the payment of these 20 millions, knowing that it can obtain them as soon as they are required. T h e Spanish Government’s guarantee for a loan producing a net yield of 26 million gold crowns has been obtained and is now being utilised. The credit operations on the Spanish market h a v e been carried out between representatives of the Austrian Government and a group of Spanish banks, and the signatures were exchanged on December 15th, 1923; the money will be paid over by the banks without at present opening the loan to public subscription. The loan is of 52,300,000 Ptas. nominal capital value in obligations of 500 Ptas. issued at 405, bearing 6 % interest, dated December 1st, 1923, and repayable in twenty years. The Committee of Control has requested the deposit of the Spanish Government’s guarantee bonds, which, together with the Austrian Customs and tobacco security, are to cover the service of this loan, issued independently of the great Interna­ tional Loan, but on the same lines. All financial operations on the various European markets having thus been brought to a satisfactory conclusion — this being a condition laid down by the American Investment Syndicate for releasing the funds obtained by the United States Loan — I was able to request Messrs. Morgan & Co. to dissolve their syndicate on December 31st, 1923, and the net yield of the New York issue (viz. 21% million dollars) was, at the beginning of 1924, paid in to Account B, which is under my control. II . E x e c u t io n o f t h e R e f o r m P r o g r a m m e . A . The Provisional 3 / I2 th s fo r 1924. In my n th Report (Document C. 735, Chapter III, A), I reported in detail the manner in which the 1924 draft budget was being drawn up. I indicated the limits fixed in the scheme of reform by stages established by the Provisional Delegation of the League of Nations, as regards the expenditure and the deficit for the first and second halves of this year. The net figure for expenditure in the draft, after regrouping the figures, remained within the limit of 6,600 milliards fixed in the scheme of the Provisional Delegation (yearly average). I should point out, however, that in these estimates no account has been taken of the additional expenditure resulting from the increase in the salaries of Austrian officials which has since taken place.
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