3 SEPTEMBER 1921, Page 19


Wu described some time ago the Ter Meulen scheme for reconstituting the credit of the disorganized countries of Central Europe under the guidance of the League of Nations. It is gratifying to know that—if America, Serbia, and Rumania assent—the Financial Committee of the League may forthwith apply the scheme to Austria, with the consent of the Allies and of Austria herself. The project is explained in an instructive report now issued by the League, and it deserves attention. Austria last March appealed to the Supreme Council of the Allies for help in her economic distress. The Allies declared that they would suspend for a term of years all their claims upon Austria for reparation, or for the cost of the occupation, if Austria would accept the Ter Meulen scheme and entrust her assets to the control of the Financial Committee of the League. The Committee agreed to undertake the task

on certain conditions, and then sent expei is to Austria to study the situation and to find out whether the Austrian Government and the Austriln political parties were seriously resolved to co-operate with the League. The mission was satisfied that Austria could be saved from ruin and that she was ready to do her part. The Financial Committee then adopted a plan which received on August 13th the approval of the Supreme Council of the Allies. The Allies invited America, Serbia, and Rumania to signify their assent to the plan at the earliest

• League of Nations Financial Iteconstruction of Austria. Report of the Mancini Committee of the council. heehaw: Oonstable, tot the hessue,of Nations. 153.1

possible moment, so that the Financial Committee of the League may set to work for " the re-establishment of economic equilibrium in Europe and of very life itself for Austria."

The success of this plan, as its authors repeatedly point out, will depend on the simultaneous enforcement of all its pro-

visions. The Allies must first of all suspend their claims on Austria for at least twenty years. Next, they must do their best to remove obstacles to trade between Austria and the " Succession States," which have emerged from the wreck of the Hapsburg Empire. Further, Austria must adopt " the most stringent measures " to restore her finances, partly by reducing expenditure, partly by raising an internal loan to balance her Budget. At present the deficit is about two-thirds of the whole, and is met by printing fresh paper money, with the result that the krone sinks lower and lower in value, and

the expenditure soars atilt higher above the revenue. Austria VI therefore required to reform her currency by adopting an

" Austrian franc " equivalent to the fifth of a dollar, and to 50 or 100 paper kronen. This new paper coinage is to be issued by a private Bank of Issue, independent of the State.

At least half of the capital of 20 million dollars is to bo sub- scribed abroad, and half the directors will presumably be foreigners. The Bank is to be supervised by a Commission of Control, appointed by the League, who will have the right to veto any new Austrian loan until the State has discharged its liabilities to the Bank. As a guarantee for a dollar loan, which is to be raised abroad, Austria is to mortgage all land and buildings to the extent of 4 per cent. of their value—a guarantee equivalent to 160 million dollars. Austria is akio to mortgage the Customs, the tobacco monopoly, the salt monopoly, and the revenue from mineral oil, with a not revenue estimated at 8 million dollars. Further, she is to raise a forced loan to the extent of 2 per oent. on the value of real property, -she must abolish the food subsidies and the artificial restrictions on rent, and she must increase her direct taxes and her railway and postal rates. The Financial Committee of the League will authorize the issue, through their organizer, Sir Drummond Fraser, of Ter Meulen bonds on the security of Austria's assets

so as to make temporary advances to Austria until the proceeds of foreign loans are available. Such, in brief, is the plan which should lead Austria out of the morass in which she is struggling.

It must be added that the League delegation to Vienna formed a far more favourable opinion of Austria's economic outlook than some less competent observers have expressed.

The League experts found that the Austrian industries were recovering and that unemployment was in May " comparatively unimportant." Austrian manufacturers had benefited by the fall in the price of coal and raw materials, and were able to obtain foreign credits for the purchase of these necessaries through the Austrian banks. They were hampered by the lack of commercial treaties with Austria's neighbours and by the abnormal condition of the exchanges. Nevertheless, the delegation holds that " Austrian industry will have a good chance of maintaining itself when the present fluctuations in the exchange have disappeared." Austrian commerce has revived " in spite of all opposition and enmity ; the position of Vienna as commercial centre of the South-East of Europe will certainly be further strengthened when the obstacles to business, which still exist to a very great extent, are abolished." The re-establishment of a stable currency in Austria would, of course, attract capital to Vienna and enable it once more to play its part as a great financial centre. There is no reason, then, to despair of Austria, with her natural resources and her skilled people, if financial help is afforded her on the conditions that we have summarized. But it must be borne in mind that she cannot do without that help. Without foreign loans Austria will not be able even to buy bread for her people. " In any case Austria is to-day, in the opinion of the delegation, nearer to the abyss than ever." The Financial Committee of the League must act at once to avert a catastrophe -the effects of which would be felt far beyond the borders of Austria.