ECA message files, FRC 53A278/Vienna: Telegram
The Acting Economic Cooperation Administrator ( Porter) to the ECA Mission in Austria 1
Ecato 445. Subject—ECA Policy Toward Austria. Reference—Mission and OSR cables re (a) level of 1952 aid (b) increase in grain prices (c) 1951 counterpart program (d) U.S. coal import program. Part III of IV Parts.
Within framework of areas to be designated to Aust Govt as requiring governmental action believe ECA shld concentrate influence on immediate implementation few key measures needed keep economy on even keel and facilitate adjustment to diminishing aid.
- a.
- Adjustment Grain Prices. Ref Toeca 552 rptd Torep 637.2 ECA/W concurs proposed Mission negotiations re adjustment grain prices and approved in principle release counterpart required subject to condition outlined below.
- b.
- Foreign Exchange Administration. Obviously quickest way Austs to supplement dollar ECA aid is to improve collections foreign exchange earnings. It is our suspicion that in spite changes foreign exchange administration Austs still have long way to go in [Page 1059] order achieve responsible and coordinated administration. We also concerned at Aust failure collect more of tourist earnings.
- c.
- Retention Quotas. Believe reduction retention quota to reasonable percentage and its elimination on all but soft commodities shld be given highest priority.
- d.
- Control of Credit. Believe proper control of credit most urgent anti-inflationary measure required.
- e.
- Exchange Rate. As result 5th wage-price agreement further devaluation schilling may be necessary maintain export market. Present feeling ECA/W is that effect present rate on trade in international situation in July and August shld be tested before any new move. Even if possible devaluation less than 10%, any adjustment exchange rate shld be coordinated with IMF.
- f.
- Counterpart Policy. ECA/W believes 1951 counterpart program consistent with objectives outlined above, and subject OSR concurrence, hereby gives step two approval 1951 program with increases coal and agricultural sectors recommended by Mission and step three approval second and third quarter release. Increase second and third quarter release level to 1307 mil to include 3 mil schillings for productivity and TA activities also approved. Concur OSR recommendation Repto 3566 rptd Vienna Repto 3603 Mission be authorized make marginal adjustments as needs may dictate within annual program between sectors in above schedule for second and third quarter release in order expedite overall program.
ECA has no objection Utilization counterpart for indirect financing subsidies by releasing counterpart for budgetary investment and thereby permitting budget to finance subsidies. Some subsidies appear necessary in order maintain competitive character of Aust economy and there seems to be no method whereby Aust Govt cld increase grain prices this late date other than increasing previously agreed upon subsidies. However, to prevent Aust Govt from abusing this facility, Aust Govt must present supplementary counterpart program including these budgetary investments. Before final approval such releases given Aust must show measures have been taken supplement government revenues and what new steps have been taken counteract inflationary impact higher counterpart release level. Usual financial justification will be discussed NAC after receipt supplementary program.
- Repeated to Paris for OSR.↩
- Telegram Toeca 552 described a recommendation calling for the establishment of a 15 groschen per kilo bread grain subsidy as a bonus incentive for agricultural production, requiring the release of 60 million schillings from the ERP Bureau as counterpart funds. (ECA message files, FRC 53A278, Vienna)↩
- Telegram Repto 3566 informed ECA/W that OSR agreed with the 1951 Austrian counterpart program, including the release of 1,307 million schillings for the second and third quarters of the year. (ECA message files, FRC 53A278, Paris)↩