The Historical Journal, ,  (), pp. – Printed in the United Kingdom
#  Cambridge University Press
THE CREDITANSTALT CRISIS OF 1931
AND THE FAILURE OF THE AUSTROGERMAN
CUSTOMS UNION PROJECT*
IAGO GIL AGUADO"
" St John’s College, Cambridge
. This article reveals that the diplomatic and ﬁnancial history of was even more
turbulent than believed to date. New documents found at the Bank of England show that an intricate
system of cross-deposits was set up by the Austrian Central Bank covertly to direct funds to the
Creditanstalt via American and British banks – to compensate it for taking over the bankrupt
Bodencreditanstalt – suggesting that the received accounts of the collapse of the Creditanstalt need to
be revised. Further, documents have come to light which show that France exacerbated the run
on the Austrian schilling in order to force Austria to abandon the Austro-German customs union project
of that year. This article considers the relationship between the collapse of the Creditanstalt and the
abandonment of the Austro-German customs union, incorporating the new evidence to provide a novel
interpretation of the ﬁnancial diplomacy of that year.
I
The collapse of the Creditanstalt in May  is generally held to represent the
start of the European banking crisis of that year." The link between the collapse
of the Creditanstalt and the German banking crisis is, however, still unclear.
* I would like to acknowledge the funding provided for my research by the Economic and Social
Research Council.
" Despite the central role played by the Creditanstalt’s collapse in the European banking crisis
of , literature on the subject is not abundant. This, together with the refusal of the
Creditanstalt to open its archives, means a deﬁnitive account of the collapse of the bank remains
to be written. None the less, several useful recent studies by Austrian historians exist. The works of
D. Stiefel, Die Grosse Krise in einem kleinen Land: OW sterreichische Finanz- und Wirtschaftspolitik –
(Vienna, ), and Finanzdiplomatie und Weltwirtschaftskrise – Die Krise der Credit-Anstalt fuW r Handel
und Gewerbe (Frankfurt am Main, ) have provided valuable insights into the crisis. Stiefel’s
work has shown that the hypothesis that the French provoked the collapse of the bank by
withdrawing short-term funds must be discarded, and highlights the questionable practices of
the bank’s management. F. Weber, ‘Vor dem großen Krach. Die Krise des o$ sterreichischen
Bankwesens in den zwanziger Jahren’ (unpublished habilitation dissertation, University of
Salzburg, ), unfortunately as yet unavailable to the general public, provides perhaps the most
detailed study of the internal causes of the bank’s problems, providing valuable information on the
judicial investigations conducted into the bank’s collapse. Similarly H. Kernbauer, WaW hrungspolitik
in der Zwischenkriegszeit – Geschichte der Oesterreichischen Nationalbank von bis (Vienna, ),
provides a careful insight into the Austrian central bank’s role during the crisis. A. Schubert, The
Credit-Anstalt crisis of (Cambridge, ), provides an interesting application of modern
economic theory to the crisis. As far as the Austro-German customs union is concerned, modern
literature is exceedingly rare, specially that referring to the situation in Austria. The seminal work

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   
Harold James argues that ‘it was the common nature of the causes of the crisis
that provided the link, the only substantial link, between German and Austrian
crises after  May ’,# whereas P. Temin feels that there was a more direct
link: ‘The Austrian government guaranteed its [the Creditanstalt’s] liabilities
and the bank’s foreign creditors agreed to stop withdrawals. This meant,
however, that the assets of the creditors lost liquidity. German banks were
aﬀected particularly, and their creditors started to withdraw deposits in
anticipation of further trouble.’$ Figures found in the archive of the Austrian
Nationalbank disprove P. Temin’s claim that the German banks were
particularly heavily aﬀected by the agreement to stop withdrawals from the
Creditanstalt. The documents available reveal that the German creditors of the
Creditanstalt held less than  per cent of the bank’s overseas debt.% None the
less, it is clear that the collapse of the Creditanstalt heralded the German crisis,
and probably did help undermine conﬁdence in the German banking system.
The conventional view holds that the problems of the Creditanstalt were
mainly the result of its merger in  with the bankrupt Bodencreditanstalt,
Austria’s second largest bank (with a larger industrial portfolio than the
Creditanstalt).& It is claimed that the management of the Creditanstalt was
initially unaware of the real extent of the losses of the Bodencreditanstalt,
which only emerged in . The position of the Creditanstalt was further
weakened by the eﬀects of the great depression, which hit its vast industrial
portfolio hard – the Creditanstalt was a German-style investment bank – and
by E. W. Bennett, Germany and the diplomacy of the ﬁnancial crisis, (Harvard Historical
Monographs, Number , Cambridge, ), does not rely on Austrian archival material,
material only partially studied in W. Goldinger, Das Projekt einer deutsch-oW sterreichischen Zollunion von
(Graz, ), and a gap which this article aims to ﬁll. To date nobody has adequately
incorporated the valuable ﬁnancial and diplomatic information available in the archives of the
Bank of England, the Austrian Nationalbank and the Archiv der Republik in Vienna to
understand the extent to which these two crises were linked. This is the fundamental objective of
this article.
# H. James, ‘The causes of the German banking crisis of ’, Economic History Review, 
(), p. .
$ P. Temin, Did monetary forces cause the great depression? (New York, ), p. .
% Creditanstalt to Nationalbank,  June , Vienna, Archive of Oesterreichische Nationalbank
(hereafter ANB), Bankakte \. The Creditanstalt’s foreign debts at the beginning of
June amounted to ,, dollars, of which ,, were held by British creditors,
,, by American ones, ,, by French ones, ,, by Dutch ones and ,,
by Swiss ones, the remaining ,, were held by creditors from other countries (including
Germany). The exact ﬁgure for German-held debt is not available, but it was clearly negligible.
The agreement to stop withdrawals reached with the Creditanstalt’s foreign creditors was signed
on  June, so Temin’s claim lacks any empirical basis. Similar ﬁgures are provided by A. Lackner,
‘Der Zusammenbruch der Credit-Anstalt  – eine Literaturu$ bersicht’ (unpublished dissertation,
Wirtschaftsuniversita$ t Wien, Vienna, ), pp. –, and by Stiefel, Finanzdiplomatie
und Weltwirtschaftskrise, p. .
& K. H. Geng, ‘Der Zusammenbruch der Creditanstalt und die Sanierungsmassnahmen der
Bundesregierung’ (unpublished dissertation, Institut fu$ r Wirtschafts- und Sozialgeschichte,
Vienna, ), p. .
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   
meant many of its loans were unrecoverable. By the spring of , it is argued,
these losses had seeped through the intractable management structure of the
Creditanstalt, which was also partly to blame for its failure, and, when
preparing the balance for , the managers realized that the bank’s capital
had been wiped out. Consequently, they decided to approach the government
on  May and declared the bank to be bankrupt. This is a view supported by
the likes of Kindleberger, who argues that ‘when the Creditanstalt took over
the Bodencreditanstalt, it acquired  million schillings of capital but 
million of accumulated losses, as it learned later when a British chartered
accountant revealed the truth’.'
This traditional account is supported by much contemporary evidence.
Peter Bark, an employee of the Bank of England then in Vienna, reported back
to London soon after the Creditanstalt’s problems were made public that:
Preparing a Balance Sheet for the forthcoming General Meeting of the Shareholders,
the management of the Oesterreichische Credit-Anstalt fu$ r Handel and Gewerbe
decided that in view of the continued industrial depression it was necessary to make a
conservative valuation of their debtors in order to establish a genuine Balance
Sheet … According to their estimation  Million Schillings ought to be written oﬀ of
the debtors and  million Schillings oﬀ their shareholdings in diﬀerent industries.
Besides that  million Schillings represent losses sustained from taking over the business
of the Boden-Credit-Anstalt two years ago.
Having reached these appalling conclusions, the Management informed immediately
the Austrian National Bank and the Government about the situation.(
Alexander Spitzmu$ ller, appointed director-general of the Creditanstalt by the
Austrian government following the bank’s collapse, also claimed that the losses
came as a surprise to the management. He told the Austrian cabinet that:
‘Neither the head accountant, Lazar Weisz, nor any other directors knew
about the real position of the Creditanstalt. Eventually there developed an
unfavourable opinion about the situation of the Bank, and the decision was
taken to investigate in order to determine how much ought to be paid out in
dividends.’)According to Spitzmu$ ller, it was only as a result of this investigation,
i.e. in , that the management realized the extent of the losses: ‘This
investigation was carried out and showed that no dividend could be distributed
and that three quarters of the capital had been lost.’*
The new set of documents found in the Bank of England makes this account
seem highly unlikely."! An intricate system of cross-deposits between the
' C. Kindleberger, The world in depression, – (London, ), p. .
( Bark to Harvey (deputy governor of Bank of England),  May , London, Bank of
England Archive (hereafter BoE), OV\ Doc. .
) Spitzmu$ ller,  June , Vienna, Archiv der Republik (hereafter AdR), Ministerratsprotokoll
Nr. . * Ibid.
"! BoE, OV\. Folder title: ‘Credit Anstalt: cross deposits. Deposits by Austrian National Bank with
three London houses and then re-lent to Credit Anstalt.’ The folder contains a large number of documents
relating to the matter, including large numbers of telegrams from  onwards documenting the
operations which took place. The majority of the documents are not numbered.
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   
Austrian Nationalbank, the Creditanstalt, and a number of American and
British banks had been set up in , following the merger of the Creditanstalt
with the Bodencreditanstalt. This was meant to channel funds – presumably
illegally – to the Creditanstalt to compensate it for taking over the Bodencreditanstalt.
The only reference in the existing literature to these crossdeposits
is by Kernbauer."" He does not, however, seem to have come across the
documents in the Bank of England, and consequently expresses doubts about
the extent to which these deposits were expressly tied together. He leaves
unmentioned that they were set up to provide the Creditanstalt with foreign
exchange without having to reduce the reserves in the Austrian Nationalbank’s
published statements. This was done to keep these cross-deposits secret,
because, if the published reserves of the Nationalbank had suddenly fallen by
a substantial amount, it would have been impossible to keep the matter
secret."# The banks still involved in  appear to have been the New York
Trust Co., Rothschilds (London), Japhets, and the Anglo-International Bank.
The operation is best described with the help of extracts from documents at the
Bank of England archive, such as a telegram from the New York Trust Co. to
the Bank of England sent on  June :
Arrangement concluded early December  following conferences which Gluckstadt
[American banker] had in Vienna with Ehrenfest [Friedrich Ehrenfest was a director of
the Creditanstalt] STOP
Gluckstadt was then orally advised that Nationalbank would assist Creditanstalt in
working out Bodencreditanstalt situation by making deposits in foreign banks on
understanding that foreign banks would forthwith loan equal amount to Creditanstalt
similar period at one per cent. over ﬁxed deposit rate STOP
Ehrenfest wrote to us on November th  in part quote in virtue of an agreement
made with the Austrian Nationalbank the latter has undertaken to place large amounts
with foreign banks on ﬁxed terms for one to three months on the understanding that
these amounts with a certain interest margin are in turn allocated to our bank.
There would be for your institution an amount of one million dollars to two million
dollars taken into consideration and the margin between the rate you would have to
allow to the Austrian Nationalbank and the rate allowed to us would be one per cent.
maximum end quote
We understood purpose of arrangement was to enable Nationalbank place funds at
the disposal of the Creditanstalt and retain same amount in its own foreign exchange
holdings STOP
Gluckstadt cabled us on December rd  that Credit-Anstalt would arrange we
get two million dollars those deposits at four-threequarter per cent. three months
"" Kernbauer, WaW hrungspolitik in der Zwischenkriegszeit, pp. –, –. This episode is also
mentioned brieﬂy in Weber, Vor dem großen Krach, p. , although he does not seem to have come
across the documents at the Bank of England either.
"# Additionally, the Austrian Nationalbank was loath to lower the published ﬁgures for foreign
exchange reserves because it felt that this would undermine conﬁdence in the schilling. There is
plenty of evidence to suggest that during the run on the schilling of  these published
ﬁgures – which given the cross-deposits were already a poor reﬂection of actual reserves – were
manipulated by the Nationalbank to try and avoid a panic.
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   
against our giving Credit-Anstalt same amount same date ﬁve-threequarter per cent.
STOP
On December th  we cabled Brauneis [Victor Brauneis was director-general of
the Nationalbank] quote conﬁrming Gluckstadt’s conversation with you we propose
rate four-three-quarter per cent. ﬁxed deposit two million dollars December th March
th please cable end quote
Nationalbank cabled its acceptance on December th reading quote your wire of th
lend you two million dollars th December three months ﬁxed four-threequarter per
cent. STOP
You will receive for our account two million dollars from Citibank New York
Monday end quote
We took business on clear understanding deposit must be used exclusively to make
loan in equal amount to Credit-Anstalt STOP
Arrangement has been since renewed at each maturity and in each instance following
concurrent action taken by Nationalbank and Creditanstalt STOP
Ehrenfest cabled us on June th  quote at our request Nationalbank oﬀer you
three months extension three million dollars three per cent. hope you are satisﬁed STOP
Thereagainst Credit-Anstalt accepts two million dollars three months end quote
Such two million dollars loan to Credit-Anstalt matured May th last when by
virtue above-mentioned understanding we continued to hold such two million dollar
deposit from Nationalbank STOP
We have no written agreement from Nationalbank explicitly making it party to
Credit-Anstalt loan STOP
In view origin business representations then made to us and subsequent concurrent
renewals by Nationalbank and Credit-Anstalt on such correlated basis we believe such
agreement is implied that Nationalbank is party to whole transaction and that we are
entitled to hold deposit as collateral STOP
Will appreciate any additional information you may have that Nationalbank was
party to arrangements under which these restricted loans including your own were
made regards
HUNTER."$
An internal Bank of England memorandum shows that, despite the fact that
‘all parties to the transaction were aware that the deposits were made by the
Austrian National Bank with the London Bankers concerned on the understanding
that the latter should pass them onto the Credit Anstalt’,"% the
Nationalbank denied the existence of these cross-deposits. It notes that ‘The
National Bank, while it tried to avoid admitting this fact, even in answer to
direct questions, did in eﬀect admit it by several letters which it wrote to
Japhets in the following terms –‘‘We conﬁrm the arrangement made with you
through Direktor Ehrenfest of the Credit Anstalt.’’’"& It continues ‘In spite of
this the Austrian National Bank in its letter of the th May to Japhets denies
that there is any connection whatever between the two sets of deposits, i.e.,
"$ New York Trust Co. to Bank of England,  June , BoE, OV\ no number.
"% Bank of England memorandum signed C.A.G.,  June , BoE, OV\ Doc. .
"& Ibid.
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   
those made by the National Bank with the London Banks and those made by
the London Banks with the Credit Anstalt.’"' It is thus evident that these
deposits did not reﬂect accepted banking practices.
The documents clearly show that these cross-deposits were set up to
compensate the Creditanstalt for the takeover of the Bodencreditanstalt.
Francis Rodd,"( the representative of the Bank for International Settlements
(hereafter BIS) sent to Vienna following the Creditanstalt’s collapse, was well
aware of this: ‘The particular question of these cross deposits is further
complicated by the political and legal diﬃculties, since the National Bank
seems to have given the devisen in question to the Creditanstalt as a sop to the
latter to induce it to take over the Boden Credit at the time of the latter’s
collapse.’")
The sheer complexity of the system of cross-deposits suggests that the
Nationalbank was illicitly helping the Creditanstalt. It seems that they were set
up to circumvent any legal barriers to direct help for the Creditanstalt. This
view is reﬂected in another internal Bank of England memorandum: ‘Japhets
stated that their deposit was, in eﬀect, money belonging to the Austrian
National Bank and had only been placed on deposit with the Credit Anstalt
through them because the National Bank were not able to make a deposit
direct.’"* This, together with the denial of their existence on the part of the
Nationalbank, and the fact that they were an exceedingly costly way to
channel funds to the Creditanstalt, raise serious doubts about the legality of
such deposits. This in turn explains why Montagu Norman, the Governor of
the Bank of England, referred to them as ‘tainted money’.#!
The documentation at the Bank of England does not appear to give a
complete account of the cross-deposits, and the ﬁgures involved are unclear.
The documents refer primarily to , when the issue became acute due to the
attempts by the Nationalbank to withdraw its deposits from the aforementioned
British and American banks. A telegram from the New York Trust Co. to the
Bank of England mentions a total of  million dollars (approximately 
million schillings),#" whereas a telegram from Rothschilds (London) to the
New York Trust Co. notes that three London banks alone held  million dollars
(approximately "
#
million schillings ) in cross-deposits.## Kernbauer claims
"' Ibid.
"( Francis Rodd, the representative of the BIS in Vienna, was a former employee of the Bank
of England. Throughout the crisis he maintained a lively correspondence with both Sir Frederick
Leith-Ross at the Treasury and Montagu Norman at the Bank of England.
") Rodd to Siepmann (memorandum of telephone conversation),  June , BoE, OV\
Doc. .
"* Bank of England memorandum signed B.G.C.,  May , BoE, OV\ Doc. .
#! Bank of England memorandum signed C.A.G.,  June , BoE, OV\ Doc. .
#" New York Trust Co. to Bank of England,  June , BoE, OV\ no number.
## Rothschilds (London) to New York Trust Co.,  June , BoE, OV\ no number. The
telegram reads ‘Understand three London Banks totalling $,, will continue deposit to
Oest. Credit Anstalt Vienna without corresponding arrangement with Oest. Nationalbank
Vienna.’
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   
that in  the cross-deposits amounted to at most  million dollars (
million schillings),#$ the real ﬁgure probably lying somewhere in-between.
These are sizeable amounts considering the fact that the Creditanstalt’s paidup
capital in  (which had been increased in  following the takeover of
the Bodencreditanstalt) amounted to  million schillings.#% Interestingly
enough, these ﬁgures are quite similar to the Creditanstalt’s own claims of the
net losses caused by the takeover, which according to internal accounts
amounted to n million schillings, and to the oﬃcial accounts for  to 
million schillings.#&
This elaborate system of cross-deposits set up to compensate the Creditanstalt
for absorbing the Bodencreditanstalt raises serious doubts about claims that the
Creditanstalt was unaware of the troubles which the merger involved and that
they only emerged two years later.#' Given that, as Walther Federn, editor of
Austria’s then leading economic newspaper (the OW sterreichische Volkswirt),
reported, ‘other Viennese Banks had refused to take over the bank [Bodencreditanstalt]
without an exact inspection of its balance’,#( it seems that it was
well known in Viennese banking circles that taking over the Bodencreditanstalt
constituted a considerable risk. Additionally, there is plenty of evidence that
the Creditanstalt had been consistently rigging its accounts before :
valuations of stocks had been inﬂated, dud loans considered recoverable.#)
Federn, for example, recalled one Creditanstalt director who claimed that
‘ownership of unlisted shares is most pleasant, because their book value needn’t
be lowered with stockmarket prices’#* (which was a real problem given the
collapse of stockmarkets during the great depression). Dividend payments
appear to have been used to manage stockmarket valuations irrespective of
#$ Kernbauer, WaW hrungspolitik in der Zwischenkriegszeit, p. . Kernbauer’s ﬁgures refer to the
deposits by the Austrian Nationalbank in foreign partners of the Creditanstalt. We know, however,
from the example of the New York Trust Co. that not all these deposits were then forwarded to the
Creditanstalt. In this particular example, of the  million dollars deposited by the Nationalbank
in the New York Trust Co., only  million were placed at the disposal of the Creditanstalt. New
York Trust Co. to Bank of England,  June , BoE, OV\ no number.
#% Economist,  May . #& Weber, Vor dem großen Krach, p. .
#' Kindleberger, The world in depression, – , p. , and Kernbauer, WaW hrungspolitik in der
Zwischenkriegszeit, pp. –. Kindleberger argues that the losses of the Bodencreditanstalt only
became apparent following the Creditanstalt’s collapse and the subsequent investigations
undertaken by British chartered accountants. This view is reﬂected in Kernbauer’s uncritical
acceptance of the claims made by Viktor Brauneis, director-general of the Austrian Nationalbank,
to the Bank of England in September of , when he claimed that as far as he was aware, the
takeover of the Bodencreditanstalt would provide the Creditanstalt with important opportunities
for proﬁt. This view is, however, untenable. The telegram from the New York Trust Co.
reproduced above notes that Brauneis was directly involved in setting up these cross-deposits,
which means that he must have been aware of the losses of the Bodencreditanstalt when he made
these claims to the Bank of England.
#( W. Federn, Der Zusammenbruch der OW sterreichischen Kreditanstalt (Berlin, ), p. .
#) Schubert, The Credit-Anstalt crisis of , p. . Schubert notes that the bank’s published
statements had been manipulated as far back as .
#* Federn, Zusammenbruch der Kreditanstalt, p. .
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   
proﬁts.$! There is evidence that before their merger the Creditanstalt and the
Bodencreditanstalt lent each other uncovered cheques to improve their
respective balances before annual accounts were drawn up,$" a fact which in
itself makes it highly improbable that the management of the Creditanstalt was
unaware of the Bodencreditanstalt’s problems. Geng’s claim that as early as
 the accounts of the Creditanstalt did not reﬂect reality can thus be
accepted,$# and Stiefel notes that this was all done quite consciously: ‘Whereas
the unpublished internal accounts showed only small proﬁts and by  they
were closed with losses, the yearly accounts continued to show, through
appreciations [of the book value of its industrial portfolio], and despite a
further deterioration of the situation, proﬁts. This ‘‘window dressing’’ exceeded
by far usual banking practice.’$$
If there is plenty of evidence that the accounts of the Creditanstalt had been
systematically rigged, it is hard to accept the view that the directors of the
Creditanstalt were – due to the poor organization and the long time it took to
digest the Bodencreditanstalt – unaware of its troubles till that May of .
After all, it makes little sense systematically to falsify accounts if one is unaware
that the bank is in an untenable position. These facts, together with the new
evidence on cross-deposits, make the traditional view that the Creditanstalt’s
management only found out about the bank’s problems and about the costs of
the merger with the Bodencreditanstalt in May  implausible.$% It is hoped
that the opening of the Creditanstalt archives will allow us to discover the real
reasons for its collapse.
The implications of the new evidence on the cross-deposits are manifold.
First, and as noted above, it undermines the received view of the bank’s
collapse, because its problems must have been known earlier to its management,
and, one assumes, to certain individuals in the Nationalbank. Further, together
with the evidence on the rigging of accounts it implies that the Creditanstalt
consciously misled the Austrian public about its situation. Thus, although we
will have to wait till the Creditanstalt archives are open for a deﬁnitive account
of the collapse, it is clear that the existing accounts will have to be revised.
Finally, the cross-deposits indicate that the position of the Austrian Nationalbank
was much weaker than the oﬃcial ﬁgures suggest, because a large part of
its ‘reserves’ were actually tied up. This means that current estimates of foreign
exchange cover in Austria at the time of the great depression are inﬂated,
something which is very important to understand the ﬁnancial diplomacy of
$! Kernbauer, WaW hrungspolitik in der Zwischenkriegszeit, p. ; Federn, Zusammenbruch der
Kreditanstalt, p. . $" Kernbauer, WaW hrungspolitik in der Zwischenkriegszeit, p. .
$# Geng, Zusammenbruch der Creditanstalt, p. .
$$ Stiefel, Finanzdiplomatie und Weltwirtschaftskrise, p. .
$% Weber, Vor dem großen Krach, p. . Fritz Weber claims that the management of the
Creditanstalt must have been aware of the problems by the second half of  at the latest. The
cross-deposits, as well as the evidence on the rigging of accounts, suggest that they must have been
aware of the bank’s problems much earlier.
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   
. They help explain why Austria was so vulnerable to ﬁnancial pressure
during the run on the schilling. This will become clear below when we discuss
that other vital incident of European history in , the Austro-German
customs union project.
II
In March of  the Austrian and German governments announced to the
world that they intended to establish a customs union in what was a clear
violation of their treaty obligations.$& This project can be placed in the context
not only of the process of revision of the Versailles settlement, but, more
controversially, in the wider German policy of ‘Mitteleuropa’, of creating a
German-dominated central Europe large enough to rival the perceived
American and Russian ‘world empires’. As Fritz Fischer notes, as early as 
‘Walther Rathenau, the leading personality in the Allgemeine Elektrizita$ tsgesellschaft,
told Bethmann Hollweg that German policy should be directed
toward the creation of a central European customs union, and secured the
chancellor’s agreement.’$' There can be no doubt that this was considered a
ﬁrst step towards Anschluss – union between Austria and Germany. This was
admitted by less careful German diplomats, as Sir Eric Phipps, then British
minister in Vienna reported about his German counterpart, Count
Lerchenfeld: ‘Lerchenfeld spoke bitterly about his transfer just at a moment:
‘‘when he had done so much for his country’’: he added that the Germans
would eventually put their hands on everything in Austria.’$( It is this aspect
which made the issue so highly charged for contemporaries, who invariably
recalled the Zollverein and its role in the uniﬁcation of Germany in the previous
century.
Intense opposition to this project on the part of Czechoslovakia and above all
France immediately became manifest. This can be divided into two stages, the
one preceding the Creditanstalt’s collapse, and the one which followed it and
is characterized by the use – on the part of the French – of the Austrian
ﬁnancial crisis to extract concessions from the Austrian government. Czechoslovakia
was the power which reacted most violently to the project. As Sir
Robert (later Lord) Vansittart, then permanent secretary at the foreign oﬃce,
$& Internal foreign ministry legal report, undated and unnumbered, AdR, BKA-AA Karton
, p. . The Austrians and Germans strenuously denied that their actions contravened
Austria’s obligations under article  of the Treaty of St Germain, and the Protocol for Austrian
Reconstruction of , under which Austria agreed to abstain from any negotiations or from any
economic or ﬁnancial engagement calculated directly or indirectly to compromise her independence.
A legal report meant only for internal use, found in the foreign ministry archives in
Vienna, highlights that they well were aware of the fact that this was not the case. This document
states that: ‘Even if we assume that the Court’s [the Permanent Court of International Justice in
The Hague] report will be completely unbiased, it is not to be assumed that it will declare that the
proposed Customs Union is no threat to Austria’s independence.’
$' F. Fischer, Germany’s aims in the First World War (London, ), pp. –.
$( Phipps to Vansittart,  May , Cambridge, Churchill Archive Centre (hereafter CAC),
the Phipps collection \ p. .
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   
pointed out in a conﬁdential report to cabinet, this was understandable:
‘Czechoslovakia’s position – geographic and economic – is such that her lot
would be unpleasant and perhaps untenable, if Germany and Austria were
united commercially. A S.O.S. has been sent to Paris to save Czech
independence and France is fully alive to the importance of responding to the
call.’$) The Czechs proceeded to terminate trade negotiations with Austria.$*
They started circulating rumours – for no corroborating evidence can be
found – that the customs union agreement included secret military clauses,%!
and Eduard Benes) , then Czechoslovak foreign minister, even threatened the
long-serving Austrian minister in Prague, Ferdinand Marek, with a trade war
if Austria and Germany persisted with their plans. This can be seen from the
report on the conversation sent by Marek to the Ballhausplatz:
France, whose trade deﬁcit with Germany is nearly  billion, would suﬀer much less
than Germany in case of a trade war, which Germany and Austria, given the present
circumstances, would barely survive for two months. Instability and revolution would
be the result. Given that France is suﬀering under the present trade agreement with
Germany, she might even welcome a tariﬀ war with the Reich. Czechoslovakia is
certainly the strongest of the central European states, and although she would be
strongly aﬀected by a trade war, it would aﬀect her much less than Austria or Germany.
Do we need to go that far? Asked the Minister [Benes) ].%"
Similar threats were heard from Paris, where Aristide Briand, the French
foreign minister, threatened in a speech to the senate to terminate Austria’s
preferential trade agreement,%# and told Lord Tyrrell, the British ambassador
in Paris, that if Germany was to continue with her plans, she would start raising
tariﬀs.%$ The British role during these initial stages is more equivocal: although
Britain did not participate in the initial collective protest of the other three
guarantors of the Geneva protocol of , which forbade Austria’s alienation
of her ‘economic independence’,%% she then swung progressively into Paris’s
line, and it was Arthur Henderson, the Labour foreign secretary, who actually
took the issue to the council of the League of Nations.%&
$) Vansittart, foreign oﬃce conﬁdential report () ‘An aspect of international relations in
’, CAC, Archives of Lord Vansittart of Denham, \ p. .
$* Neue Freie Presse,  Mar. .
%! Phipps to Vansittart,  Apr. , CAC, the Phipps collection \ p. .
%" Marek to Vienna,  Apr. , AdR, BKA-AA –\.
%# L. Zimmerman, Deutsche Aussenpolitik in der AW ra der Weimarer Republik (Go$ ttingen, ),
p. .
%$ L. J. Go$ tzhaber, ‘Der Versuch einer Zollunion vom Jahre ’ (unpublished Ph.D. thesis,
Karl Franzens University, Graz, ), p. .
%% F. Siebert, Aristide Briand – , ein Staatsmann zwischen Frankreich und Europa (Stuttgart,
), p. .
%& The Austro-German customs union was discussed in Geneva, and an avis consultatif was
requested from the Permanent Court of International Justice in The Hague. The ruling, however,
which although not binding would have had immense political signiﬁcance, was made public in
September , when the customs union had already been abandoned, and was thus of little
relevance to the outcome of the aﬀair. We can thus reject Fritz Weber’s claim that ‘The greatest
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   
That intense diplomatic pressure was exerted on Germany, and above all
Austria, from the moment the customs union project became known, is well
documented. However, new documents have emerged – unmentioned by the
literature on the subject – relating to Austrian fears of a military intervention
on the part of Czechoslovakia and France in the spring of . This military
intervention would have been undertaken to stop the Austro-German customs
union project. A couple of internal foreign ministry reports relating to the issue
exist, and have been reproduced in the appendix to this article. They refer to
alleged military preparations on the part of Czechoslovakia and France for
intervention in Austria: ‘the intention is to stop the customs union by simply
occupying Austria, thus eliminating her from the negotiations. To this eﬀect
the Prague government will resign, the parliament will be dissolved, and a pure
Hradschin [Presidential] government will be formed, to lead the measures
against Austria.’%' These are not the only documents which inform us about
these fears. Correspondence between Marek, the Austrian minister in Prague,
and the Ballhausplatz also refer to these rumours, and indicate that other
countries were aware of them. The Austrian minister was approached on
 May by the Italian minister to ask him whether such fears were actually
circulating in Vienna.%( On  May Marek again wrote to the Ballhausplatz to
report that Count Cadorna, the Italian military attache! in Prague, had gone
to investigate the matter after he had heard rumours that gasmasks had been
deposited in all railway stations between Brno and Bratislava. Cadorna did
not, however, discover anything to this eﬀect. The Hungarian military attache!
also conﬁrmed that no unusual moves could be detected in Czech military
circles.%)
It appears highly unlikely that there was any substance to these fears
circulating in Vienna at the time. The reports printed in the appendix contain
errors, such as the reference to the intervention having been discussed by Benes)
and Briand two months earlier, i.e. at least a fortnight before the Czechs and
French could have been aware of the customs union project, or implausible
statements such as that by the informant in Paris who claimed that Briand had
told cabinet that no complications would arise from an occupation of Austria.
Further, a marginal note on the initial report, signed indistinctly, and dated 
May , notes that the information in it had not been veriﬁed. None the less,
the episode does illustrate one fact, namely the extreme pressure the Austrians
were exposed to, and, above all, the tension caused by the aﬀair. The mere fact
that these threats were initially held to be credible in Vienna reveals the
success of French diplomacy followed in September , when the Court at The Hague declared,
with a narrow majority, that the customs union was incompatible with the Geneva Protocol of
.’ Weber, Vor dem großen Krach, p. .
%' Internal foreign ministry report (I),  Apr. , AdR, BKA-AA –\.
%( Marek to Peter (general secretary at Austrian foreign ministry),  May , AdR, BKAAA
–\. %) Marek to Peter,  May , AdR, BKA-AA –\.
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   
animosity which had been created by the customs union project. The
information provided in the Austrian documents should be veriﬁable in both
the French and the now open Czech archives, specially those relating to an
alleged secret cabinet meeting held on  April in Paris and the mobilization
of the ‘reserve disponible’.
Despite the external pressure and the fears of a possible military intervention,
there exists no concrete evidence in the Austrian archives to suggest that this
initial pressure was successful in its attempts to force a retreat from the customs
union project. All evidence suggests, rather, that it was the ﬁnancial pressure
following the collapse of the Creditanstalt which forced the Austrian
government to abandon the project. Before discussing the new evidence
relating to French pressure following the Creditanstalt collapse, it is important
to note that there is absolutely no evidence to suggest – as has been done in the
past%* – that the French provoked the collapse of the Creditanstalt by
withdrawing funds from the bank. No corroborating documents have been
found, and all circumstantial evidence points against the hypothesis of French
intervention. The fact that the foreign exchange reserves of the Austrian
Nationalbank actually increased during April ,&! that the Creditanstalt
did not face a liquidity problem when it approached the Austrian government
for help,&" and that French loans to the Creditanstalt appear to have been
minimal before its collapse,&# all make it extremely unlikely that they provoked
the collapse.
Although we can ignore any claims that the French provoked the collapse of
the Creditanstalt to pressure the Austrian government, it is well known that the
French used the subsequent ﬁnancial crisis in Austria to exact political
concessions – notably the abandonment of the customs union project. As noted
above, the management of the Creditanstalt approached the Austrian
government on Friday  May, and that weekend was one of frantic negotiations
conducted between the government and the bank. A plan to save the
Creditanstalt was presented to the public late on  May, which entailed the
recapitalization of the Creditanstalt with an injection of capital of  million
schillings by the federal government,  million by the Austrian Nationalbank,
and  million by the Rothschilds (who were at the time the main shareholders
of the Creditanstalt) to compensate for the  million schillings reported
losses.&$ This plan did not, however, reassure the Austrian public – which need
%* See W. A. Lewis Economic survey, – (London, ), p. , H. Luther Vor dem Abgrund
– . ReichsbankpraW sident in Krisenzeiten (Berlin, ), p. , and Stiefel, Finanzdiplomatie und
Weltwirtschaftskrise, pp. –. Both Lewis and Hans Luther, the then President of the Reichsbank,
consider French withdrawals of short-term capital to be the immediate cause of the Creditanstalt’s
collapse. Stiefel provides an interesting analysis of why this view has persisted for so long.
&! K. E. Born, Die deutsche Bankenkrise – Finanzen und Politik (Munich, ), pp. –, and
Weber, Vor dem großen Krach, p. . According to Fritz Weber, the loans by French banks to the
Creditanstalt amounted only to  million schillings, or n per cent of the Creditanstalt’s total
overseas debts. &" Federn, Zusammenbruch der Kreditanstalt, p. .
&# Stiefel, Finanzdiplomatie und Weltwirtschaftskrise, p. .
&$ Brauneis,  May , ANB, Generalratssitzung Nr. .
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   
hardly surprise us given that the real extent of the losses is now calculated to be
at least  million schillings&% – and the announcement was followed by a run
on the Creditanstalt.
The key element, as far as the customs union was concerned, was when the
run on the Creditanstalt became a run on the schilling. The Austrians had
experienced hyperinﬂation only a few years earlier, and they were scared that
the decision might be taken to print money to solve the problem, a possibility
feared by the Bank of England, as one of its conﬁdential memorandums on
Austria illustrates: ‘In spite of the  experience, half the cabinet and several
private bankers have at some time or other been openly in favour of inﬂation,
presumably as an easy way out of the present diﬃculties.’&& Whatever the exact
reasons may have been, one can hardly blame the Austrians for having had
little faith in the probity of their ﬁnancial system, and the run on the
Creditanstalt was followed by a run on the schilling as they moved their savings
into ‘safer’ currencies. The combined eﬀect of the two runs on the position of
the Nationalbank was such that within two weeks of the announcement of the
Creditanstalt’s problems it felt obliged to ask the government to declare a
general banking moratorium, a demand which was, at this stage, refused.&'
The Austrians had received permission from the League of Nations ‘Control
Committee for the  loan for Austrian reconstruction’ to issue treasury
bonds for  million schillings, albeit with initial French opposition. This can
be seen from a telegram sent by the Treasury to the Bank of England, informing
that Sir Frederick Leith-Ross, the representative of the Treasury on the
committee, ‘tells us privately that the real facts are that the French, Belgian
and Czechoslovak Governments absolutely declined to agree to the Austrian
proposal on Saturday. Their pretext was short notice etc. … , but no doubt
their real reason was political. The other members supported the Draft
Resolution proposed by Leith-Ross, and under pressure the French accepted
the compromise arrived at.’&(
However, the Austrians faced the problem of where to place these bonds – it
had to be abroad due to the continued loss of foreign reserves on the part of the
Austrian Nationalbank. A delegation from the Austrian ﬁnance ministry was
told in Berlin that Germany was in no position to help on its own,&) and the
British refused to take the lead in the placement of these bonds, as Felix Frank,
&% Kernbauer, WaW hrungspolitik in der Zwischenkriegszeit, p. , and Schubert, The Credit-Anstalt
crisis of , p. . Kernbauer believes the overall losses to have been over  million schillings.
Schubert claims they amounted to about , million schillings. Although these ﬁgures include
the losses which accrued after  May, it is clear that the losses before the problems were made
public by far exceeded the Creditanstalt’s own claims.
&& Conﬁdential Bank of England memorandum on Austria,  July , BoE, OV\ Doc.
.
&' Nationalbank to chancellery,  May , ANB, Bankakte \; Kernbauer,
WaW hrungspolitik in der Zwischenkriegszeit, p. .
&( Walley to Cattern,  May , BoE, OV\ Doc. .
&) Stiefel, Finanzdiplomatie und Weltwirtschaftskrise, p. .
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   
Austrian minister in Berlin, told Bernhard Wilhelm von Bu$ low, the general
secretary at the Wilhelmstraße: ‘[The] English group had suggested the Banque
de Paris for the placement. We cannot avoid this, specially since the English
will not otherwise participate. We shall have to negotiate in Paris over the
placement of the bonds.’&* This placed the Austrians in a position they had
desperately hoped to avoid, namely to have to depend on French help, as
Phipps pointed out to his colleague Orme Sargent on  May: ‘the Austrians
now seem almost equally anxious for two things, () for foreign ﬁnancial
support and () for that support not to be exclusively French, as that would place
Austria completely in the French pocket’.'!
With a constantly deteriorating foreign exchange position, which – due to
the cross-deposits noted above, and the fact that the accounts of the
Nationalbank had been constantly ﬁddled since the start of the crisis'" – was
considerably worse than the oﬃcial ﬁgures published by the Nationalbank
suggest, the Austrians started negotiations with the Banque de Paris et Pays Bas
on  June. Johannes Schober,'# the Austrian foreign minister, instructed the
Austrian minister in Paris to accept any technical conditions for the
placement,'$ and, as Francis Rodd, the representative of the BIS in Vienna,
reported to his headquarters, the negotiations were soon over: ‘On Friday
night the th of June, we were informed by Paris that the negotiations with the
French bankers on the terms of the issue of the treasury bills had, for all intents
and purposes, been completed and only the ﬁnal approval of the French
government remained.’'% The speed of the negotiations and the Austrian
willingness to accept virtually any technical conditions were due to their need
for the money to arrive before the morning of Wednesday  June. That
afternoon, or at the very latest on Thursday morning, the Nationalbank would
have to publish its foreign reserve ﬁgures. As Rodd noted ‘these ﬁgures
included a loss of foreign exchange of  million schillings. The publication of
the statement in this form was in the opinion of everybody concerned
calculated to produce a panic.’'& The implications were clear, and as Rodd
points out, known to all parties involved: ‘the publication of the statement,
therefore, had to be made coincident with a declaration of an internal
moratorium. It was moreover clear to all that an internal moratorium would
lead to a general moratorium … Both London and Paris had had this situation
explained to them.’''
&* Frank to Vienna,  June , AdR, BKA-AA –\.
'! Phipps to Sargent,  May , CAC, the Phipps collection \ p. .
'" Bruins to BIS, ANB, Bankakte \. Bruins notes in his report to the BIS that accounts
had been ﬁddled even before the publication of the Nationalbank return on  May (the ﬁrst after
the start of the run on the schilling), so as to avoid showing the real extent of losses of foreign
exchange.
'# Johannes Schober, a Gross Deutscher who was vice-chancellor in a coalition government led by
the Christian Social Party, was the main Austrian instigator of the customs union accord.
'$ Rodd to Siepmann (memorandum of telephone conversation),  June , BoE, OV\
Doc. . '% Rodd to Siepmann,  June , BoE, OV\ Doc. . '& Ibid.
'' Ibid.
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   
That the situation in Austria was getting desperate was evident. On  June the
Nationalbank asked the government to start preparing for a moratorium and
the introduction of exchange controls. Its letter to the government explained
the problems:
The run on the Creditanstalt has been followed by a ﬂight from the schilling, which in
the last eight days has taken on worrying proportions; this in itself has increased
nervousness and withdrawals from banks and has started runs at the weaker ones … It
is possible that if we are able to negotiate a moratorium on withdrawals with the
[foreign] debtors of the Creditanstalt, and the placement of the treasury bond issue of
 million schillings abroad, conﬁdence will be re-established, this being the
precondition for reducing the inﬂation and avoiding controls. However, given that a
successful completion of negotiations can no longer be expected with certainty, we ask
the federal ﬁnance ministry to start preparing today the measures necessary to declare
an internal moratorium.'(
The seriousness of the situation was such that in the cabinet meeting on the
th the Austrian chancellor, Otto Ender, noted that unless the Creditanstalt’s
problems were resolved, he feared that law and order in Austria would
collapse.') The situation came to a head on  June , when the French
minister in Vienna, Count Clauzel, presented the Austrian government with
an ultimatum demanding that Austria submit its ﬁnances to League of Nations
control and that it send a note – he provided the text – to the French
government surrendering the customs union. The French government refused
to provide the funds necessary to prevent the by now imminent banking
moratorium in Austria unless these conditions were accepted by eight that
same evening. This was the latest possible moment at which the money could
be sent to Austria in time to appear in the next Nationalbank statement and
thus prevent a moratorium. The Austrians rejected this ultimatum, and a
moratorium was only avoided thanks to a last minute intervention by the Bank
of England. Montagu Norman hoped thereby to avoid a Europe-wide ﬁnancial
crisis, as he noted in a conversation with the head of the Federal Reserve Bank
of New York: ‘On the advice of Sir Robert Kindersley'* and Bruins(! we have
decided, at a meeting held here this afternoon, that we cannot wait for the
treasury bonds to be placed and we are therefore paying over to the Austrian
government Schilling  million in anticipation of the placing of the treasury
bonds.’(" Contrary to later claims (see below), this was not done by the Bank
of England to save the Austrians from French pressure, but to avoid a banking
moratorium. As Montagu Norman noted in that same conversation: ‘We have
'( Nationalbank to ﬁnance ministry,  June , ANB, Bankakte \.
') Ender,  June , AdR, Ministerratsprotokoll Nr. .
'* Sir Robert Kindersley was a director at the Bank of England and was at the time in Vienna
representing the interests of the Creditanstalt’s foreign creditors.
(! Professor G. W. J. Bruins was a foreign adviser of the Austrian Nationalbank called in to help
during the crisis.
(" Norman to Harrison (memorandum of telephone conversation),  June , BoE,
OV\ Doc. .
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   
done this unwillingly but because we believe that otherwise there would be a
moratorium in Austria which would be quickly followed by a similar action in
the adjoining countries and probably in Germany as well.’(#
This French move, which even the American secretary of state termed
‘blackmail’ in the presence of the French ambassador in Washington,($ is
known to the literature.(% However, new documents at the Bank of England
show that French ‘blackmailing’ was much more intricate than believed to
date. The French were not only demanding political concessions in exchange
for the funds necessary to avoid a banking moratorium, but were actually
withdrawing funds from Austria in order to accentuate the ﬂight from schilling
which made the Austrian government dependent on foreign help in the ﬁrst
place. The French were causing the problem they were oﬀering to solve in
exchange for onerous political concessions! The operation is best described by
the documents themselves. Here is an extract from a memorandum prepared
by Rodd for the BIS and forwarded by him to the Bank of England:
The withdrawals of foreign exchange from the Central Bank by the ﬁve principal banks
in Vienna up to and including Monday, June th, are interesting reading. In total the
ﬁve banks since the beginning of the crisis had withdrawn  million schillings of
which, of course, the largest amount, namely  million schillings, was withdrawn by
the Credit-Anstalt between the beginning of the crisis and Saturday, June th, inclusive.
This was accounted for by withdrawals of foreign deposits before the Creditors’
Committee was formed and the cashing in of valuata Kassenscheine. From June th
onwards the Credit-Anstalt withdrawals of foreign exchange were comparatively
moderate considering the position of the Bank; they amounted in all to n million
schillings. The Wiener Bankverein, which was known to have lost and be losing foreign
deposits had, by June th, withdrawn  million schillings, of which n were between
the th and the th inclusive. The N.O. Escompte Gesellschaft had up to June th
inclusive withdrawn n million schillings, but since that date had actually received
foreign devisen on balance, the net plus being n million schillings, between June th
and th inclusive. The other two large banks concerned are both banks either directly
under French inﬂuence or having French sympathies; they are the La$ nder Bank and the
large and active branch in Vienna of the Zivnostenska Banka of Prague. The direct
foreign commitments of the La$ nder Bank at the beginning of the crisis were known to
be small. Nevertheless, by June th this bank had withdrawn n million schillings of
devisen, of which n were withdrawn between June th and th, being the largest
amount withdrawn in this period by any bank in Vienna with the exception of the
Credit Anstalt. It is of course well known that this bank has behind it the Banque des
Pays de l’Europe Centrale in Paris. Demands by the La$ nder Bank for foreign exchange
from the Austrian Nationalbank may therefore be considered wholly improper in the
present circumstances. The Zivnostenska Banka in the period under review withdrew
 million schillings, of which  million between June th and th. It is a matter of
interest that half way through May the Zivnostenska Banka had asked a prominent
American bank for the terms upon which the American bank would take a deposit of
no less than  million dollars [ million schillings]. It is therefore clear that the
(# Ibid. ($ Stiefel, Finanzdiplomatie und Weltwirtschaftskrise, p. .
(% For an up-to-date account of the issue, see Stiefel, Finanzdiplomatie und Weltwirtschaftskrise.
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   
Vienna Branch of the Zivnostenska Banka had no business to call upon the Austrian
National Bank for devisen.(&
These are considerable ﬁgures, for the Nationalbank was scared of publishing
a loss of  million schillings for the week ending on the th, and the bond
issue which the French were meant to help place only amounted to  million
schillings. This account is supported by documents found in the Austrian
Nationalbank’s archives. Figures contained in a report sent by the Nationalbank
to the secretary general of the League of Nations, Joseph Avenol, indicate
that between  May (the day on which the run on the Creditanstalt started)
and  August, the La$ nderbank used up  million schillings of foreign
exchange, and the Zivnostenska Banka  million, a sizeable sum considering
the Creditanstalt, which was in the middle of a crisis and having to repay
foreign loans and deposits, used up only  million schillings in the same
period.('
The paucity of references in other archives means it is hardly surprising that
this episode has remained unmentioned to this day. In the correspondence
between the British legation in Vienna and the foreign oﬃce for that year, there
is only one reference to this episode. Sir Eric Phipps, British minister in Vienna,
noted in a letter to the foreign oﬃce that: ‘I understand that the Vienna
branches of the Central Europa$ ische La$ nderbank and of the Zivnotstenska
Bank have both been selling Schillinge.’(( This reference is easily missed, and
might actually have been lost on the foreign oﬃce, which, on its own admission,
was insuﬃciently informed about the situation in Austria, as can be seen from
the following extract of a letter sent by the central department of the foreign
oﬃce to the British legation in Vienna, on  July : ‘This Department is
a little harassed by what is going on in Germany and Austria so you must
forgive me if you do not get what you would think appreciative and informative
answers to yours letters, but do not for this reason suppose that writing to the
Foreign Oﬃce is like putting your money into Germany, that it all goes down
the drain.’() The only direct reference in the Austrian archives is found in an
appendix to the minutes of the cabinet meeting held on  September . It
notes that Schober, vice-chancellor, and foreign minister, claimed in cabinet
that ‘It is also due to French inﬂuence that during the negotiations with the
(& Rodd to Siepmann,  June , BoE, OV\ Doc. . Francis Rodd forwarded to Harry
Siepmann at the Bank of England a copy of this memorandum he had written for the BIS
describing the situation in Austria between  and  June .
(' Nationalbank to Avenol,  Sept. , ANB, Bankakte \.
(( Phipps to Foreign Oﬃce,  June , PRO, FO C\\.
() O’Malley to Hadow,  July , PRO, FO C\\. In fact, British intelligence on the
crisis was quite good. The Bank of England was receiving privileged information from both Francis
Rodd, the BIS representative in Vienna (and a former employee of the Bank of England), and Sir
Robert Kindersley (a director of the Bank of England), who represented the interests of the foreign
creditors of the Creditanstalt in the ‘Austrian Credit Anstalt International Committee’. This
explains the valuable insights into the crisis provided by the British archives. None the less, it
appears that the Bank of England and the foreign oﬃce did not share all the information available,
which might help explain the above claim.
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   
B.I.S. the La$ nderbank withdrew – million schillings a day, thereby
continuously weakening the reserve position of the Nationalbank.’(* Both are
easily missed and make little sense on their own, although they serve to conﬁrm
Rodd’s claims. Other documents at the Bank of England refer to the steps
which were taken to stop this politically motivated run on the schilling.)!
Consequently, it appears as if Lewis’s claim that France ‘exerted pressure by
withdrawing short-term funds’)" to stop the customs union was correct.
However, the means chosen were not – as he and many others have argued – to
bring down the Creditanstalt by removing funds from it, but rather to force
Austria to rely on French help by artiﬁcially accentuating the run on the
schilling. The French attempt was initially foiled by the Bank of England’s
intervention, which ran counter to the foreign oﬃce’s own policy of supporting
the Quai d’Orsay, as can be seen from a letter sent by Orme Sargent to the British
legation in Vienna, written in late August when the customs union issue was
eﬀectively resolved: ‘We – the Foreign Oﬃce – do not want particularly to be
identiﬁed with the original action of the Bank in lending the money, especially
as the transaction has not in the end had the eﬀect (which presumably it was
intended to have) of freeing Austria from French dictation.’)# He explained in
that same letter that ‘the loan is entirely a private aﬀair of the Bank’s. The
Bank took the initiative originally without consulting us, and since then have
perhaps purposely not kept us informed. The Bank, as you probably know, are
always jealous of their independence.’)$ This also explains Sargent’s complaint
that ‘the principle of ﬁnancial autonomy, though sound in principle, has
sometimes in the present state of world aﬀairs considerable disadvantages’.)%
Despite Sargent’s claim that the Bank of England had aimed to save Austria
from French pressure (the real reason for the intervention, it is now clear, was
to avoid a banking moratorium which was felt would lead to a European-wide
banking crisis) it appears, from the evidence found in the Austrian archives,
that the Austrian government had already decided to surrender the customs
union at this stage. Schober, the Austrian foreign minister, had told Phipps on
the morning of the th, i.e. before the French ultimatum and the Bank of
England credit, that ‘although of course he could not say so oﬃcially, he must
admit, speaking as a private individual that it seemed to him that there could
no longer be any question of putting the customs union plan into execution,
even should the decision of the Hague Court be favourable, and he had so
(* Schober in ‘U$ bertragung der stenographischen Aufzeichnungen u$ ber die Verhandlungen
des Ministerrates in der Sitzung vom . September ’,  Sept. , AdR, Ministerratsprotokoll
Nr. . Appendix.
)! Rodd to Siepmann (memorandum of telephone conversation),  June , BoE, OV\
Doc. , and Bruins to Siepmann (memorandum of telephone conversation),  June , BoE,
OV\ Doc. . )" Lewis, Economic survey, – , p. .
)# Sargent to Hadow,  Aug. , PRO, FO C\\.
)$ Ibid. The Bank of England and the foreign oﬃce do not appear to have shared all the
information at their disposal, a fact which might help explain the above claim by the foreign oﬃce
that it was poorly informed. )% Ibid.
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   
informed the Austrian chancellor’.)& Bennett chooses not to take this comment
too seriously, arguing that Schober ‘was no doubt speaking under the stress of
the immediate Austrian crisis, which was eased later in the day by Norman’s
extension of credit’.)' This is the view taken by Julius Curtius, then German
foreign minister, who later claimed that ‘our partner was, after the English
help mentioned above, once again on top of things and determined to
persevere’.)(
However, this position cannot be sustained. We know that as early as  June
Vansittart had commented on Schober’s wish to discuss alternatives to the
customs union, and much more importantly – and here Bennett’s lack of
information on what was going on in Austria becomes clear – Ender, the
Austrian chancellor, had announced at the cabinet meeting on the th that
Austria would eventually get help from abroad ‘but not without a painful
price, Austria will have to bury the customs union with Germany. But if the
customs union was still worth enough to get Austria a guaranteed loan from the
League of Nations, then it is still valued highly, whereas its real value is
considerably lower.’))
Although no document appears to exist which shows exactly when the
Austrians decided to abandon the customs union, it is clear that the decision
was taken before  June, and stuck to despite the Bank of England’s advance.
This view is supported by evidence which shows that the Austrians were well
aware of the weakness of their position despite the British help, as can be seen
from a letter sent by the Nationalbank to the ﬁnance ministry on  June:
The fact that the advance on the placement of the treasury bonds has provided us with
 million schillings of foreign exchange is unlikely to suﬃce to re-establish the desired
trust of the public in the Nationalbank and the currency, unless the clear will of the
Nationalbank to end the inﬂationary increase in the money supply becomes manifest.
The  million schillings would, if the demand for foreign exchange continues at an
average rate of  million schillings, be used up within – days and the help provided
would disappear in smoke, if we continue to allow an increase in currency in circulation,
which is predominantly being used by the public to purchase foreign currencies.)*
The implications of all this are clear. The collapse of the Creditanstalt and
the consequent ﬁnancial crisis signiﬁed the end of the customs union project.
French pressure was not, as some believed, responsible for the collapse of the
Creditanstalt, but – to this day ignored – it was responsible for an exacerbation
of the ﬂight from the schilling, which forced the Austrians to surrender the
customs union project. French ﬁnancial pressure had knocked the will to ﬁght
for the customs union out of the Austrians.
)& Phipps to Henderson,  June , in R. Butler and E. L. Woodward, eds., Documents on
British foreign policy, – : second series volume II (London, ), Nr. .
)' Bennett, Germany and the diplomacy of the ﬁnancial crisis, p. .
)( J. Curtius, BemuW hung um Oesterreich – Das Scheitern des Zollunionplans von (Heidelberg,
), p. . )) Ender,  June , AdR, Ministerratsprotokoll Nr. .
)* Nationalbank to ﬁnance ministry,  June , ANB, Bankakte \.
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   
Although this article has concentrated on the international aspects of the
project, it is important to note here that there were many in Austria who had
opposed the customs union all along, and who were quite happy to see the
project abandoned. These appear to have, according to Phipps, included
former Chancellor Ignaz Seipel: ‘Monseigneur Seipel, as usual, has since his
return to Vienna maintained an attitude of discreet reserve in regard to this
question, but I have reason to believe that he is in reality opposed to the
plan’.*! The problem in gauging the extent of internal opposition in Austria to
the customs union is, as Phipps noted, that ‘although Austrian patriotism per
se is, as I have pointed out, practically non-existent, it is replaced by a sort of
amorphous patriotism for the ‘‘great German nation’’ and this renders diﬃcult
any open manifestation of opinion against the ‘‘Anschluss’’, whether it be
economic or political’.*"
None the less, it is now clear that it was because of the ﬁnancial pressure that
the French conditions were eventually accepted and the customs union project
was publicly dropped at the League of Nations early in September.
III
The above ﬁndings reveal that the diplomatic and ﬁnancial history of  was
even more turbulent than believed to date. The ﬁndings on the cross-deposits
between the Austrian Central Bank, the Creditanstalt, and several overseas
banks indicate that the accepted view on the role of the merger of the
Bodencreditanstalt with the Creditanstalt in the collapse of the later is in
urgent need of reappraisal. It also indicates that the real foreign exchange
reserves of the Austrian Nationalbank were considerably smaller than the
oﬃcial ﬁgures would suggest, which in turn helps explain why Austria was so
susceptible to foreign ﬁnancial pressure in . The ﬁndings on French
accentuation of the run on the schilling in , and on the fears of military
intervention by Czechoslovakia and France in Austria in the spring of ,
show that French pressure during the customs union dispute was much greater
than formerly believed. It is now clear that the customs union project was
abandoned as a result of the ﬂight from the schilling – exacerbated by the
French – and the consequent need for foreign help. The impact of the French
policy of withdrawing funds from Austria – to weaken its ﬁnancial position and
thus make it dependent on foreign help – on the wider European ﬁnancial crisis
of that year remains to be studied.
*! Phipps to Henderson,  Apr. , CAC, the Phipps collection \ p. . *" Ibid.
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   
Appendix: Report on military information regarding Czechoslovak
military intervention in Austria*#
Gegenstand: Milita$ r. Informationen u$ ber angebliche Vorbereitungen der
Tsch. Slowakei Gegen O$ sterreich.
Genehmigungs- Dringlichkeits- und Verschlußvermerk: Streng Geheim.\.
.
Bericht. I
Seit dem . April d.J. laufen fast ununterbrochen Mitteilungen von
verschiedenen Seiten, hauptsa$ chlich aus Bo$ hmen ein, dass milita$ rische
Massnahmen erwogen werden, die zur Besetzung Oesterreichs notwendig sind.
Bis zum .d.M. konnten keine konkreten Daten herbeigeschaﬀt werden. Am
. d.M. traf die Mitteilung ein, dass die franzo$ sischen Milita$ rattache! s im
Zeitraume vom .–. Besprechungen in der Wiener Gesandtschaft abhalten
werden. Tatsa$ chlich fand eine diesbezu$ gliche Konferenz in der franz.
Gesandtschaft hier statt und haben daran die Milita$ rattache! s von Prag, Berlin
und Budapest teilgenommen. In dieser Konferenz, soweit Informationen
zulassen, wurde in erster Linie die Ausgestaltung des N.[achrichten] Dienstes,
der sich hauptsa$ chlich gegen Deutschland und Italien von hier aus zu wenden
hat, in Beratung gezogen, zweitens wurde das Gutachten der einzelnen
Attache! s u$ ber die Stimmungen ihrer La$ nder und ihrer Leistungsfa$ higkeit im
Falle der Besetzung Oesterreichs vorgetragen.
Die Attache! s sollen u$ bereinstimmend die ungehinderte Aktion verbu$ rgt
haben, da weder Ungarn noch Italien und Deutschland gegenwa$ rtig in der
Lage sind gegen den Einmarsch wirksame Gegenmassnahmen zu ergreifen.
Am . d.M. traf Muka aus Prag hier ein, ohne hiezu aufgefordert, und teilte
mit, er sehe es als seine Pﬂicht an, auf die drohende Gefahr in Oesterreich
aufmerksam zu machen. Nach seiner Information beabsichtigt man die
Zollunion durch die Besetzung Oesterreichs ganz einfach nicht zuzulassen und
Oesterreich aus den Verhandlungen auszuschalten. Zu diesem Zwecke wird
die Prager Regierung demissionieren, dass Parlament aufgelo$ st, so dass eine
reine Hradschin Regierung entsteht, die die Massnahmen gegen Oesterreich
durchzufu$ hren haben wird.
Die diesbezu$ gliche Besprechungen fanden zwischen Briand und Benesch
bereits vor  Monaten statt, wobei Briand Benesch die Zusicherung gab, die
Aktion voll und ganz durch Frankreich zu dekken [sic !].
Die Aktion gegen Oesterreich soll unmittelbar nach den Pﬁngstfeiertagen
Platz greifen und zwar in der Form, dass eine franzo$ sische Milita$ rmission mit
besonderen Vollmachten nach Wien gelangt (an der Spitze wird General
Mittelhauser stehen) und als Exekutivtruppen sind C.S.R. Verba$ nde in der
Sta$ rke von n Mann vorgesehen.
*# Austrian foreign ministry report,  Apr. , AdR, BKA-AA –\.
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   
Der Abmarsch an die o$ sterr. Grenze soll in unauﬀa$ lligster Art und Weise
erfolgen u.zw. unter dem Vorwande einer Nachtu$ bung werden die Truppen
auf Lastautomobilen verladen (motorisierte Verba$ nde) und derart eingesetzt,
dass sie la$ ngstens um  h fru$ h die o$ sterr. Grenze u$ berrumpeln, um  Uhr fru$ h
bereits die Donaulinie erreicht haben werden.
Hava Bru$ nn meldet am . d.M., dass die Sokol zu einer streng vertraulichen
Besprechung eingeladen waren und ihnen nahegelegt wurde sich ab . d.M.
bereits zu halten, da ho$ chstwarscheinlich es zu einer Einberufung auf la$ ngere
Zeit kommt. Den Sokoln wurde zur Pﬂicht gemacht u$ ber diese Besprechung
gegen jedermann strengstes Stillschweigen zu wahren.
Die zu-erst [sic!] aufgetauchten Alarmnachrichten wurden allgemein als
von Prag lanciert angesehen und es hatte den Anschein, man verfolge damit die
Einschu$ chterung der o$ ﬀentlichen Meinung Oesterreichs. Seit dem . d.M.
verdichten sich die einzelnen Meldungen, hauptsa$ chlich aus den Grenzgebieten,
gegen Oesterreich, die fast u$ bereinstimmend eine emsige Vorbereitung
der einzelnen Truppenverba$ nde anher berichten. Ein Zuschub von
Kriegsmaterial sowie der notwendigen Tankformationen ist noch nirgends
einwandfrei festgestellt worden. Eine Meldung vom . d.M. aus Paris besagt,
dass dortselbst ein vertraulicher Ministerrat unter Vorsitz des Pra$ sidenten der
Republik stattgefunden hat, zu dem auch der Chef des Generalstabes, General
Weygand, zugezogen wurde. Der Gewa$ hrsmann konnte in Erfahrung bringen,
dass bei diesem Ministerrat die Besetzung Oesterreichs besprochen wurde und
die Durchfu$ hrung als solche in dem vom Generalstabschef vorgelegten
Prospeketn gutgeheissen worden ist. Briand versicherte, dass mit Komplikationen
nicht zu rechnen sei und dass die ergriﬀene Massnahme in dieser
Form gekleidet, die Zubilligung der anderen Grossma$ chte erhalten wird.
Soweit bis jetzt die Informationen zulassen, ﬁnden in Frankreich vorzeitige
Einberufungen aus der sogenannten Reserve disponible statt, die hauptsa$ chlich
zur Versta$ rkung gegen Deutschland Verwendung ﬁnden.
Bericht. II
Die bis zum heutigen Tage eingelangten Nachrichten aus den einzelnen
Bezirken lassen erkennen, dass Konzentrierungen von Transportmitteln bereits
Platz gegriﬀen haben. Die Staatsbahndirektion Pilsen sowie auch Prag und
Bru$ nn haben reservate Weisungen ergehen lassen, dass frei werdende Waggons
umgehend an die Ursprungsstation ohne Aufenthalt abzuschieben sind, ferner,
dass die Einwagonierungsstationen mittels eines Dienstzettels bis zum  d.M.
zu melden haben, dass die fu$ r die Einwaggonierung notwendigen Vorkehrungen
revidiert und sich in Ordnung beﬁnden.
Der Gewa$ hrsmann aus Pilsen hat festgestellt, dass auf der Transenalbahn
Pilsen-Tabor  Garnituren a  Waggons ferner  Garnituren fu$ r ArtillerieTransport
zu je  Waggons bereit gestellt liegen.
Weitere Konzentrationen von Eisenbahnwaggons ﬁnden in den Stationen
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   
Budweis - Iglau - Znaim - Bru$ nn - Biesens - Pisek - Lundenburg und Pressburg
statt.
Auf dem Flughafen von Bru$ nn werden mit rasender Geschwindigkeit  neue
Hangars gebaut, die fu$ r Unterbringung von je  Flugzeugen berechnet sind.
Die Nesselsdorfer Waggonfabrik (Tatra Werke) erhielten den Auftrage die
in Bestellung gegebenen  Stu$ ck  tonnigen Lastkraftwagen, die Ende August
d.J. zur Ablieferung gelangen sollten, durch Tag- und Nachtschicht die
Lieferung derart zu beschleunigen, dass die Wagen schon Ende des Monats zur
Ablieferung gelangen.
Eine erho$ hte Ta$ tigkeit wurde ferner bei Breitfeld Daniek (Kolben) in den
Werken von Kralup sowie in Nechanic festgestellt.
Die einzelnen Ueberpru$ fungen in den Garnisonen von Budweis, Neuhaus,
Telsch, Znaim, Bru$ nn. Go$ ding und Pressburg haben ergeben dass die Sta$ nde
der Infanteriekompagnien derart erho$ ht wurden, dass die MG. Zu$ ge
vollsta$ ndig komplett sind, die Infanteriekompagnie einen Eﬀektivstand von
 Mann besitzt.
Ein telephonischer Bericht aus Olmu$ tz besagt, dass die Flugkompagnie 
und  strenge Marschbereitschaft bereits erhielten und werden unter dem
Vorwange einer Uebung in den Raum von Bru$ nn gelangen.
Die Kavallerieregimenter ,  und  haben je – tonnige Lastkraftwagen
zugewiesen erhalten, die vom Zentraldepot der Automobiltruppe im Laufe des
. Mai eingelangt sind.
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