Austria Finance

Very critical immediately after the end of the war the economic and financial situation of Austria was outlined, restricted in its new borders and upset by the social crisis and the progressive devaluation of the currency, so that numerous relief credits had to be granted to the new republic over the years which immediately followed the peace treaties (France, England, Italy for 48 million dollars, United States for 24 million dollars, some neutral countries for 25 million pounds). And it was precisely these credits and foreign speculation on the crown that allowed Austria to live in the years 1919, 1920 and 1921. Once these sources were exhausted, the solution to the problem became urgent; the four allied powers were persuaded of the need for an organic plan of financial restoration and in the meantime asked the countries that had previously granted loans to Austria to suspend their privileges on the mortgaged assets. However, during the long and difficult elaboration of the project by the financial committee of the League of Nations, Austria’s needs had become so great that new credit openings were imposed to avoid the catastrophe (England for 2,250,000 pounds, France for 55 million francs, Italy for 70 million lire, Czechoslovakia for 500 million Czechoslovakian crowns); Nevertheless, the crown lost 9/10 of its value in the space of six months and the Austrian government launched a desperate appeal to the victorious allies in August 1922.

According to topschoolsintheusa, the situation changed as soon as it was decided in Geneva to subject Austrian finances to international scrutiny and to guarantee a restoration loan.

In its basic lines, the financial plan approved and signed by Austria and the guaranteeing powers was intended to achieve a balanced budget by the end of 1924, through a large program of administrative reforms; to fill the deficit in the meantime, valued at a maximum of 650 million gold crowns, through the loan; to prevent any further issuance of paper money and to delegate the supervision of the application of the entire project to a commissioner of the League of Nations. On November 18, the treasury ceased to issue notes and since then the rate of the crown has remained constant at $ 0.00001412; in the following month the government offered on the market 50 million crowns of gold in treasury bills (30 million were subscribed by the banks and 20 by the public) and in the meantime asked for and obtained full powers from the parliament during the period of the restoration. On December 15, with the arrival of the general commissioner, dr. Zimmermann, yes the complicated negotiations for the long-term loan began and in the meantime it was decided to issue a short-term loan which was guaranteed by England, France, Czechoslovakia, Italy in the amount of 24.5% for each of the said powers and by Belgium in the amount of 2 %, and was successfully placed in February 1923 in the form of Austrian one-year treasury bills for £ 3,500,000. On April 16, the control committee approved the terms of the long-term loan which gave a net sum of 585 million gold crowns and was fully guaranteed as follows: France, England, Czechoslovakia 24.5%, Italy 20.5%. Belgium, Sweden, Romania, Holland, 55%. Spain undertook in turn to guarantee another fraction of 4% on the basis of which 26 million gold crowns were obtained which,

At the same time, the new completely autonomous issuing bank was created with a capital of 30 million gold crowns entirely subscribed by Austria and it was established that the confederation, the provinces, the municipalities could no longer issue paper money, nor resort to the bank without pay the counter value of the notes received in gold or foreign currencies, and that the metal reserve should rise from 20.5% to 33% of the circulation, excluding the advances granted by the old bank to the state (percentage which, due to the rapid increase in reserves, reached 60% of the circulation at the end of the restoration period).

Numerous administrative reforms were also applied in the first half of 1923; 50,000 officials were fired, various administrations were unified and simplified, postal rates and the price of salt increased. Overall, by the end of the first year of control, the reforms had already obtained a favorable impact on the budget, the economic life of the country was recovering. In the second year the deficit disappeared completely, but other sums of the loan had to be used for that purpose and, although the situation was overall good, there was concern about the danger of a rise in the cost of living following the enormous increase in taxes and fees, and for the poor results obtained in the field of expenditure reduction (4% only in the face of the 70% savings requested by the delegation). The boom came at the end of 1923 stock exchange caused by the confidence with which the project was accepted and by the sudden influx of foreign currencies from the loan and repatriation of capital; this was followed by the collapse of speculation on the French franc in early 1924 and a very serious financial and credit crisis manifested itself on the Viennese market. All this caused fear of the success of the financial restoration; the League of Nations decided on a new investigation into the economic situation of Austria and following this, in September 1924, the financial plan underwent various modifications: control was limited, the budget base was increased, and the use of a portion of the loan proceeds in productive expenses.

On March 1, 1925, the new monetary unit was introduced: the shilling (Schilling), equivalent to 10,000 crowns and with a value of 0.21172086 grams of fine gold. The situation as a result of this was always improving; the rapid growth of the gold reserves allowed an expansion of the circulation, which, when the plan of the League of Nations was applied, was not sufficient for the normal needs of the country; on the other hand, the strong revenue from revenues, mainly due to the new solid monetary bases, rather than the reduction in expenses, allowed the balance of the budget in a short time and the loan could be used, in part to liquidate the previous debts, in part for the expenses necessary to increase production; from 30 June 1926 the restoration could be said to have been completed and international control over Austrian finances was lifted. A new foreign loan is imminent,

The public debt of the Austrian Republic as at 31 December 1927 was made up as follows:

The amount of circulation at the end of 1927 was 1005 million shillings and the amount of the reserve 84 million shillings in gold and 653 million shillings in foreign exchange.

Austria Finance