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III. Preliminary Budget for June 1924...14-15 [Communicated to the Members — of the Council.] C. 342. 1924- H. LEAGUE OF NATIONS Geneva, July 30th, 1924. FINANCIAL RECONSTRUCTION OF AUSTRIA (Second Year) EIGHTEENTH REPORT BY THE Commissioner-General of the League of Nations for Austria. (Period May 15th to June 15th, 1924. — Sixth Month of the 3rd stage.) I. — INTRODUCTION I have the honour to submit to the Council of the League of Nations my Eighteenth Monthly Report, for the period May 15th to June 15th, 1924. Much of my office’s time during this month was taken up with the preparatory work for the session of the Council. I went to Geneva with the representatives of the Austrian Government to attend the meetings of the Financial Committee, the Committee of Control, and the Council. By its decision dated June 16th, in which it adopted the conclusions of the report of the Financial Committee and myself and took note of the resolution of the Committee of Control, the Council agreed to a higher level of equilibrium being fixed than that indicated in November 1922 (350 million gold crowns). The investigations for the purpose of determining a new figure in agreement with the Austrian Government will be pursued pending the arrival in August of the delegation appointed to conduct the enquiry in conjunction with me. I feel certain that the Austrian Government will also employ this interval in actively preparing the concrete proposals for those measures of re-organisation which it still considers feasible and the actual figures at which it thinks the budget can be permanently balanced. The negotiations will, of course, be rendered easier by the knowledge that the policy of reform, which is at present being pursued in a very large number of countries, still is and will continue to be the main plank in the Austrian Government’s programme. As the joint report by the Financial Committee and myself states: “The collaboration of the Austrian people as a whole will be the most effective means of expediting the date at twhich the Council can terminate the control of the Austrian budget, which, in the terms of the Protocols, is to be brought to an end when the Council shall have ascertained that the financial stability of Austria is assured.” II. — EXECUTION OF THE REFORM PROGRAMME A. 1924 B u d g e t . As I mentioned in my Eleventh and Twelfth Reports to the Council (Documents C. 735.1923. II, pp. 4-8, and C. 13. 1924. II, pp. 5-7), the Government, on November 20th, 1923, laid before Parlia­ ment a draft budget estimating for a deficit of 836.7 milliards of paper crowns. The debate in Parliament being for several reasons continued until May, it became necessary for the Chamber to vote provisional twelfths. (See my Thirteenth and Sixteenth Reports, page 2.) A budget was finally passed on May 21st estimating for a deficit of 1,166 milliards. Although the costs incurred by the revision of salaries in December 1923 were not shown in the draft budget, allowance had to be made for them in the estimated expenditure in the budget as actually passed, the total of which was thus increased by 501 milliards. In order to compare the 1924 budget with the 1923 budget, we must re-group the figures in accordance with the method adopted in the Finance Law, in Article 1 of which the budget is divided into the four following categories: Central Administration, Monopolies, State Undertakings and Railways. (For the 1923 budget, see my Seventh Report, Document C. 521. 1923. II, page 2). S. d. N. 1550 (F.) -J- 140u (A.) Impr. Kundig. 4- Customs Tariffs Amendment Bill. At the end of May, the Government laid before Parliament a Bill for the Amendment of the Customs Tariffs. It decided that it was necessary to amend the present tariff, which is still, generally speaking, that of the former Austro-Hungarian Monarchy, with this difference, however, that the majority of the present duties are about 70 per cent of the pre-war duties. Various modifications of detail have been introduced since the war, e.g., a considerable increase in certain fiscal duties (alcohol, spirits, sugar, etc.) and in duties on luxury articles; the duties on certain half-finished articles (ironware, tanning materials, etc.) have been reduced or even exempted from import duties in order to promote national industries ; in order to reduce the cost of living and to ward off the famine threatening Austria after the Armistice, the import duties on certain categories of foodstuffs were also abolished. Further, certain duties were increased to protect national industries. All these measures affected the home markets and were intended by the Government to be supplemented by an appropriate foreign commercial policy. I should say that Austrian industry largely depends upon its ability to export to markets which, though before the war part of the Austro-Hungarian Monarchy, are now none the less foreign markets. Statistics, indeed, show the importance of Austria’s exports to the neighbouring or Succession States. During 1922, these exports represented 89 per cent of her total exports and were distributed as follows : Value in thousands of gold crowns Country 1922 1923 Kingdom of the Serbs, Croats and Slovenes . • • • 138,449 137,091 G erm any........................................................................ 161,865 131,259 Czechoslovakia............................................................ • • • i i 3,H 3 104,857 Italy ................................................................................. • • • 113,015 100,156 H u n g ary ........................................................................ 142,900 84,977 Poland............................................................................. • • • 101,514 83,695 R o u m a n ia .................................................................... 78,833 Switzerland.................................................................... • ■ • 52,423 70,644 Strangely enough, Austria would appear to have encountered the most serious difficulties from the point of view of foreign commerce in the neighbouring countries. Several of these coun­ tries have had to struggle through exchange crises which forced them to curtail imports by a system of import prohibitions and a rationing of the goods to be imported. The constant drop in the exchange again hampered the conclusion of commercial treaties and led to the establishment of high Customs tariffs. In these conditions, Austrian industry was of course forced to look more than ever towards the home market. Here, again, however, serious difficulties were encountered. The Government thinks that they are due to the reduced Customs tariff. Its view is that, following the stabilisation of the crown, these tariffs did not afford sufficient protection to Austrian industry against those foreign industries which were still reaping the benefits of a perpetually falling exchange. It was also believed that, owing to the reduction on the import duties, foreign countries had but little to gain from negotiations with Austria for the conclusion of treaties of commerce. Real commercial treaties only exist with Italy and France. Negotiations are in progress with Germany and Czechoslovakia, and are contemplated in the near future with Hungary, Poland and the Kingdom of the Serbs, Croats and Slovenes, where the stabilisation in the rate of exchange appears to have provided the indispensable basis for the conclusion of tariff treaties. Conventions on the basis of the most-favoured-nation clause exist with Switzerland, Poland, Roumania, Belgium, Great Britain and several other European countries. The Government consulted me on the new tariff and I replied that, from the point of view of the guarantee of the service of the loan, I saw no reason for an increase in the present rates. I expressed the fear that the new Customs duties on certain foodstuffs and fats would result in an increase in the cost of living, and would thereby render it more difficult to balance the budget. The Government, however, emphasised the fact that the new rates should be regarded as a compromise between interests which were frequently in conflict. The imposition of new tariffs on foodstuffs was necessary, in its opinion, to encourage the development of agriculture. The increase in the Customs duties on textiles was intended to protect this important branch of Austrian industry, while the boot-making industry would benefit from an increase of duties on manufactured goods. Certain representatives of the metal industry, on the other hand, seemed to fear that the new rates would exercise an unfavourable effect on the import of several raw materials necessary to their industry. A Parliamentary Committee will open an enquiry among all the persons concerned before the actual debate in Parliament. In view of the great importance of this question, it is to be hoped that the bill will not be passed without careful consideration. C. R e d u c t io n in t h e N u m b e r o f O f f ic ia l s . In the period from May 3rd to 31st, the number of dismissals was: Central Administration.................................................................................................. 292 State U n d e rta k in g s...................................................................................................... 1,401 Making a total o f ........................................................................................................... 1,693 (Details will be found in Annexes I Va and IVb.) The reduction in the number of officials since the beginning of the process of reconstruc­ tion accordingly amounts to 67,109 as compared with the minimum of 100,000 accepted by the Government in its agreements with the Provisional Delegation of the League of Nations. — 5 — III. — THE FINANCIAL SITUATION The position of Accounts A and B, which are under my control, is shown in Annexes Ha and 116. The service of the loan called for the withdrawal during May of 73 milliards of paper crowns from the Customs and tobacco receipts; the remainder (231 milliards) was refunded to the Austrian Treasury. This sum, together with uncontrolled revenue from taxation collected by the Government, was sufficient to meet expenditure, no release of funds from the loan being necessary to cover the deficit.
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