Messersmith, G.S., Vienna. To William Phillips, Washington., 1935 November 22

Has been unable to get further information on German-Japanese agreement; new Austrian Cabinet settled down to work but is definitely on trial; Austrian budget up for debate; deficit not likely to be increased; Austrian negotiators who went to London to discuss live claims against Credit Anstalt made mistake of asking for much and offering nothing; met cold reception; Alexis, [Ernst] von Starhemberg adviser, accompanied negotiators and had conferences with important people in British Foreign office and with newspaper editors; was invariably asked same question - attitude of new Cabinet toward elections in Austria; Alexis answered frankly saying elections in Austria impossible under present conditions; he pointed out that in election in Czechoslovakia, Germany spent 6 million marks and the consequences could be seen in strengthening of Henlein Party; rumored that Foreign Minister [Egon] Berger-Waldenegg to be replaced and will become Governor of Styria; many feel that he handled Austrian position badly at Geneva; Chancellor and Vice-Chancellor favor keeping him, but he may force himself out if he continues making injudicious remarks; question of monarchy and restoration complicated; most of the men in the government are monarchists at heart and the monarchist tradition strong in perhaps majority of Austrian people but responsible leaders realize it would have to be a constitutional monarchy and doubt Otto would be amenable; their adherence is to the tradition in general rather than to the Hapsburgs in particular; thinks von Starhemberg has ambition to be regent, but believes he will not force any situation to realize ambition; all realize present form of Austrian government is merely stage through which Austria is passing, but essential under existing conditions; no change in Austrian relations with Germany; no progress in von Papen's negotiations; von Starhemberg not having easy sailing; it was publicly announced he had carte blanche to consolidate the various private armies - the Heimwehr, Sturmscharen, and Freiheitsbund into a militia which would be closely coordinated with Army, but they are showing resistance and von Starhemberg has made little progress; new Minister of Social Welfare, Dr. [Josef] Dobretsberger, young, energetic, and full of wholesome ideas, which will be pleasing to England; had talk with Chancellor regarding treatment accorded American correspondents in Austria; as result of conversation Foreign Minister instituted series of luncheons for press and arranged for more direct contact between correspondents and ranking members of government; increasing tendency in France to talk to present government in Berlin, although officially denied in Paris; reports from reliable sources that France turning toward new policy of giving up commitments in Eastern and Southeastern Europe to assure herself of her own security; it would be very shortsighted policy and cannot believe France would be so foolish.