Messersmith, G.S., Vienna. To William Phillips, Washington.

Saw President [Wilhelm] Miklas and Chancellor [Engelbert] Dollfuss within few days after arrival in Vienna; Chancellor small in stature, but intelligent, with pleasing personality and frank, engaging manner; well-informed about situation in Germany; fears Germany may take some overt action against Austria; thinks German repudiation of debts may have repercussions in Austria; Dollfuss had insisted that Austria meet her obligations, but some Austrians grumbling that if larger and stronger countries do not pay debts, Austria should not either; President Miklas much older and less attractive, but intelligent; does not play important part in government; met all the Ministers; impressed by their loyalty to Chancellor; Prince Ernst von Starhemberg, Vice Chancellor may be danger as he is very ambitious; he is, however, attached to Chancellor, and Vice-Chancellorship may satisfy him; have met colleagues and find them a fair lot; British Minister Sir Walford Selby, has wide acquaintance with European statesmen and is well acquainted with situation in Austria; Italian Minister, [Gabriele Preziosi] plays important role here at present and seems intelligent and active; French Minister [Gabriel] Puaux friendly and capable; for intelligence, capacity, and knowledge of situation, Czech Minister, [Zdenek] Fierlinger the strongest of the ministers; Soviet Minister, [A. M.] Petrovsky, quiet and reserved, but a strong man; German Minister, [Karl] Rieth wealthy and intelligent, but lacking in tact; Rieth ambitious, wants to be Ambassador, apparently at any price, and has become willing instrument of Nazi Party; Rieth explained that German-Austrian question was an internal one and if other countries would stay out of it the matter would be settled quickly; he made very tactless speech at luncheon given by American and English correspondents, with statements which all present knew were contrary to fact; Rieth said his biggest task was to build up trade relations with Danubian states, but he was hampered by strained relations between Austria and Germany; economic and financial situation in Austria somewhat improved, though still precarious; recent reorganization of National Bank has helped; unemployment down about 40,000 from last year; interest on guaranteed loans to Austria too high; burden should be eased by reducing interest or lengthening period of amortization; budget now somewhat out of balance, because of expenditures made necessary by Nazi bombing outrages; new taxes out of the question; internal political situation firmly settled and not directly menaced; since conversations in Venice between Hitler and Mussolini, atmosphere partially cleared; [Hubert Renfro] Knickerbocker, who seems to have gotten his information from one of Hitler's secretaries, said Hitler agreed (1) to guarantee Austria's independence (2) to call off the Nazi terrorist behind it - and (3) to lift the 1000 mark visa fee, if Dollfuss would agree to take several Nazis into his Cabinet; much of the bombing was to frighten tourists away from Austria; if Dollfuss is compelled to take Nazis into his Cabinet his government will be weakened; according to people recently in Berlin, economic situation worse in Germany; German crop suffered from drouth; [Ernst] Roehm and Reichswehr still at odds over admission of S.A. into army; Goering now inclined to associate himself with Right element; church controversy has not abated; anti-Semitic program continues; friend of [Heinrich] Br??ning attended dinner given by Americans for Messersmith before he left Berlin; told Br??ning's friend that Br??ning should leave Germany; has since learned that Br??ning went to England; [First Secretary Alfred] Kliefoth a great help; delighted that [George Howard] Gray assigned to Vienna; found suitable house, but it needs renovating; can move in about a month; in meantime staying at Bristol Hotel