THE annexation of Austria has expanded Germany's domestic market by ten percent. More important, it has increased her supply of raw materials, especially iron ore and timber. In southern Austria lie an estimated 300 million metric tons of ore; this mineral possesses an iron content of 30 to 35 percent, has good smelting qualities, is easy of access and can in large part be extracted by strip-mining. The acquisition of these mines almost doubles Germany's pre-Anschluss reserves, believed to be about 375 million tons of 25 to 30 percent ore, though Nazi estimates are considerably higher.

The German Government naturally intends to exploit these resources on a large scale. Hitler has announced that by 1940 the new Reich will produce between 41 and 45 million tons of ore -- enough to make it completely self-sufficient. The German output of iron ore has been 10 million tons per year, only a third or a quarter of the country's requirements. Field Marshal Goering, who is in charge of the Nazi Four Year Plan to attain autarchy, recently stated that the annual production of Austria will immediately be doubled -- from 2 to 4 million tons. This amount will, of course, go only a short way towards relieving Germany of the necessity to import iron ore from abroad. Those in charge of the Four Year Plan doubtless expect to increase Austria's ore output severalfold. They also hope that the new mines being opened in Germany itself will soon be producing on a considerable scale. Nevertheless, it is very unlikely that the Reich can reach self-sufficiency in iron ore by 1940. In any case, even if Goering were able to speed up production enough to meet Hitler's required figure of 41 to 45 million tons, all the German and Austrian ore deposits would be used up within fifteen years. The creation of so shortlived and highly expensive an industry is obviously dictated by military rather than by economic considerations.

Austria also possesses extensive forests, covering more than 7 million acres, that is to say, approximately equivalent to a third of Germany's former forest area. Last year Germany imported timber to a value of 260 million marks. It is estimated that in the future Austria can supply about 25 percent of this amount. Though this will not give Germany self-sufficiency it will help her to conserve her limited foreign exchange.

As regards her shortage in foodstuffs, however, Germany cannot expect any material relief from Austria. Austrian agriculture can furnish meat and dairy products, but only in quantities small in comparison to German needs. In the past, Austria has been a foodstuff-importing country. In fact, she was even more dependent on imports than was the Reich: Austria produced only 76 percent of her food, whereas Germany produced 81 percent.

Prior to the Anschluss, Germany was able to purchase from Austria only limited quantities of such things as timber and ore, because she could secure very little Austrian currency. Now, of course, this exchange difficulty has been eliminated, and Germany can buy, in marks, whatever she wants in what formerly was Austria. On the other hand, she will receive only marks for what she sells to Austria. Consequently, the amount of money available to her in foreign currency will remain virtually the same as before. Some goods hitherto bought from other countries can now be purchased in Austria with marks; to this extent Germany will be able to acquire additional foreign currency with which to procure foodstuffs and raw materials abroad. But these sums will hardly exceed 70 or 80 million marks a year -- less than two percent of the value of Germany's total imports.

In the Austrian National Bank the Germans found gold worth 240 million schillings. This they at once removed to Berlin. They furthermore came into possession of Austrian deposits abroad, valued at around 160 million schillings, as well as some 300 millions of foreign securities held by Austrian investors -- all of it subject to forced sale to the Reichsbank. Germany thus gained the equivalent of approximately half a billion reichsmarks in gold and foreign exchange. This sum is considerable in comparison with what the Reichsbank previously had at its disposal. But it will alleviate Germany's foreign exchange troubles only partially and temporarily. If German imports of foodstuffs and raw materials for non-military uses were to be restored to their normal level, this new treasure would last hardly six months. Therefore, either the newfound wealth will shrink rapidly, or difficulties in obtaining food and primary products will continue.

Incidentally, it also should be noted that Germany's foreign debt will be increased by some 1,300 million marks -- that is, if in the end she assumes Austria's obligations in full.

To Austria the union with Germany means a complete change in economic system. The Austrian Republic, even in its corporate incarnation, may be said to have retained a relatively liberal type of economic régime. True, there were exchange controls and clearing arrangements with a few countries; but generally speaking, Austrian economics were othodox: business depended primarily on private enterprise; the orders of the government, apart from its limited rearmament program, played no great rôle in the country's economy; the use of foodstuffs and raw materials was free from governmental regulation; trade with other countries was encouraged; every effort was made to attract foreign tourists; the nation's currency was well covered; and the budget was balanced.

These manifestations of liberal economics have now been obliterated, to be replaced by government planning, war economy and autarchy. Austria will henceforth be ruled by the Nazi economic philosophy: reliance on imports will be considered a national shame; business will depend primarily on government contracts; state regulations will minutely govern production and consumption; and billions upon billions of debt will be piled up year after year. Indeed, Goering has already decreed a vast program which will reshape the Austrian economy along Nazi lines. Activities will be mainly directed towards military preparations and other unproductive purposes. Military roads will be built to connect with the network of similar roads in the Reich, fortifications will be erected along Germany's new frontiers, work on the Rhine-Danube Canal will be speeded up, and new railways and public buildings will be constructed. This policy will provide employment without adding in commensurate degree to the people's permanent welfare.

Austria is already experiencing a decrease in unemployment as a result of being included in the German public works and rearmament programs. The average number of unemployed in 1937 was 320,000 -- with a high of 400,000 and a low of 260,000. During the first three months of German rule, the number of unemployed was reported to have been reduced by more than 150,000. The heavy industries are prospering: the iron works, rolling mills and machine factories have received large orders. The building trades will likewise maintain a high level of employment.

Less favorable is the outlook for industries that depend on consumption and on export, for they will be hampered by raw material shortages. They will also feel the force of the international boycott against German goods, which in the past has in many cases operated in favor of Austrian products. Certain of Austria's export items -- such as textiles and various kinds of fancy goods -- are particularly sensitive to boycotting. It remains to be seen whether the losses which her industries must face as a result of the Nazification of the country will be outweighed by gaining free access to the German market. In any such calculation it must be kept in mind that the highly efficient German industries will now be free to enter the Austrian market, and furthermore that German and Austrian products are much alike and therefore compete with each other both at home and abroad.

This similarity was responsible for the fact that in the past Germany absorbed only 15 percent of Austria's exports and supplied only 16 percent of her imports. The bulk of Austria's foreign trade gravitated to other countries, as can be seen from the following figures for 1937, expressed in millions of schillings:

Imported into Exported from
Country of Origin or Destination Austria Austria
Germany 233 180
Italy 80 172
Czechoslovakia 160 87
Hungary 131 111
Rumania 87 69
Poland 67 53
Jugoslavia 115 66
Great Britain 66 66
United States 87 30

To reorganize Austria's foreign trade to meet the new situation will be difficult and painful. She can fulfill German timber requirements, for example, only by cutting her sales to Hungary, Italy and Great Britain. In the case of many commodities, the gain of the German market will just about replace the loss of the old ones. For many years Austrian foreign trade has had an unfavorable balance. In 1937 the excess of imports over exports amounted to 237 million schillings. This was balanced by other income from abroad, mainly by the large amounts of foreign currency brought into the country by tourists. These visitors came primarily from Great Britain, Holland, Czechoslovakia and the United States. But this tourist influx has now ceased, for as a province in the Third Reich Austria is far less attractive to foreigners than it was as an independent republic. The Austrian tourist resorts may in part be compensated by the great number of German visitors who will now come. But these will bring only marks -- and they will spend them sparingly. There will no longer be that inflow of pounds, dollars, crowns and gulden upon which the country's economy in the past so much depended. In the future, then, Austria will have to go without the imported goods which previously were paid for with those pounds and dollars. Germany suffered a sharp reduction in tourist traffic after the advent of the Nazi régime, with the result that her supply of foreign exchange was curtailed. Austria will now have the same experience, only faster and with more disastrous results, since catering to tourists has been one of her most important industries.

For Austria the era of sound budgets is over: her indebtedness and taxation will increase rapidly. The German tax burden is 50 percent higher than was Austria's under the Republic. By official order, schillings have been converted into reichsmarks at the rate of 1½ schillings to the mark. Before the Anschluss the reichsmark was exchanged in private transactions in Vienna at a rate of 1.12 schillings to one mark. But the rate of exchange provided in the old clearing arrangement between Germany and Austria was two schillings to the mark, and trade between the two countries was carried on at this rate. Compared to this, the rate at which schillings have been converted into marks is favorable to Austria, though the effect of this advantage will undoubtedly be only short-lived.

Germany now has common frontiers with Italy, Jugoslavia and Hungary. Her economic position in Southeastern Europe, already very strong as a result of five years of energetic activity by Dr. Schacht and his collaborators, has now become, thanks to the inclusion of Austrian trade in that of the Reich, overwhelmingly predominant. This is indicated in the following table showing the share of Germany and Austria combined in the foreign trade of the five Danubian countries in 1937.

Exports to Germany Imports from Germany
and Austria and Austria
(percent of total)
Hungary 41 44
Jugoslavia 35 43
Rumania 27 38
Bulgaria 47 58
Czechoslovakia 21 19

With the exception of Czechoslovakia, which in recent years has reoriented her trade towards West European and overseas markets, these Danubian countries now find that their foreign commerce depends largely on Germany. The Reich is now by far the largest customer for their raw materials and foodstuffs, and at the same time is their principal source for manufactured goods. Nazi leaders and theorists have made no mystery of their desire to extend German economic, if not political, domination over Southeastern Europe. The lure of Rumanian oil, of Hungarian wheat and of Jugoslav minerals is undeniably strong. The more Germany's contradictory policies of rapid rearmament and of economic autarchy reveal her shortage of primary products, the greater will be the temptation for her to expand into Southeastern Europe. Whether she can impose her hegemony over that vast area without coming into armed conflict with Soviet Russia and the Western Powers, including Italy, remains to be seen.

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