Messersmith, G.S., Vienna. To James Clement Dunn, Washington.

Austrian Government disturbed over unfavorable repercussions in Geneva to its attitude on sanctions and unfavorable turn in Credit Anstalt negotiations in London; position of Foreign Minister severely shaken and he is likely to be replaced; Foreign Minister made speech before Bundestag, attempting to clear up Austrian position; his statement acceptable to everyone except Italy and Germany; [Julius] Goemboes and [Koloman de] Kanya visited Vienna last week to talk with Austrian leaders about problems common to Austria and Hungary; position of Minister of Commerce [Fritz] Stockinger uncertain; Stockinger a capable man, but has used his position for private gain; new Minister of Finance [Ludwig] Draxler having difficulties; instead of supplying funds from treasury for Heimwehr, has found it necessary to make serious cuts in budget; his position not secure; likely changes in Cabinet no indication of instability in government; Austrian National Bank made stupid offer to settle live claims against Credit Anstalt at 25 percent of face value; offer refused; Bank ignored psychological and political factors involved; American and English correspondents happy over cooperation they are now getting from Austrian Government; President of Lawyers Association in Vienna has for many years been Jew as 70 percent of Vienna lawyers are Jewish; movement among non-Jewish lawyers to organize separate association; government prevented this by declaring that a non-Jew should be President for next year, with a Jew for Vice-President; not to be interpreted as discriminatory action; intended to relieve anti-Semitic pressure and will be in the interests of the Jewish population; friends from Germany emphasize importance German Government placing on Olympic Games and American participation; realizes little Department can do to influence American Olympic Committee; games should be non-political, but Germans have made political matter of them; U.S. attitude will be deciding factor; if U.S. participates, other countries will; if not, majority will follow lead; position of Jews in Germany getting steadily worse; German friends say "real" action against Jews will begin after Olympics; corruption growing in every part of German Government, everyone tries to get what he can while he can; [Heinrich] Sahm, Burgomaster of Berlin, dismissed and thrown out of Party because members of his family bought in Jewish shops; German people may endure hardships, persecution, and discrimination without revolt, but resources of country used up, and Government maintaining situation at cost of standard of living which people will not endure for long; situation cannot last without outside help; important that other countries refrain from giving help of any kind; French Ambassador to Germany,Fran??ois Poinset, urging talks with Germany; has high regard for Poinset and no one hates present German regime more than he, but he is so close to situation he has lost perspective and is overcome by what he believes to be immediate danger; thinks talks between Paris and Berlin will come to nothing; it was announced recently in Berlin that St??rmer, [Julius] Streicher's paper, has been sold and that Streicher will cease active association with it; it may have been sold and may become temporarily less offensive, but will likely reappear with its usual viciousness after the Olympics; postscript (dated Dec. 6) states clipping of article by [Norman] Ebbutt from London Times enclosed; Ebbutt particularly well-informed on economic and financial matters in Germany; public resources exhausted and resources of banks and industry almost wiped out; only private capital remains; some of this being expropriated, principally from Jews