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

Sailed from New York May 20 on Manhattan; U.S. has need for larger merchant marine; U.S. losing passengers to foreign ships; legislation necessary to provide aid and remove impossible restrictions on ship construction; [James Barclay] Young and [Alan Stewart] Rogers carried on well work of legation; Young has good judgment and is highly esteemed in Vienna; Rogers did most of reporting with accuracy and perception; spent three days in London on way back; [Robert Worth] Bingham not there but talked with [Ray] Atherton, whose views were found justified; had talks with Lord [Waldorf] Astor, Jeffry Dawson, [Clement R.] Atlee, Sir Stafford Cripps and others; found England's policy still uncertain, but full agreement on rearmament; great difference of opinion on sanctions and Italy; so called pro-German attitude in England may reflect influence of King Edward and men like Astor, [Philip Henry Kerr, Marquess of] Lothian, [Charles Stewart, Marquess of] Londonderry, and [Henry George Charles Lascelles, Earl of] Harewood; failure of Germany to reply to British memorandum may open their eyes; went from London to Antwerp and Brussels and found Belgians pessimistic; they cannot understand British position and are turning more to France; Belgium has no illusions concerning Germany, but does not feel herself in immediate danger; [Paul] van Zeeland government has done good job; economic position better; [L??on] Degrelle received large vote in last election, mostly from Walloon district, and is known to be receiving support from Berlin; [Frans] van Cauwelaert standing up against him in spite of threats; in Paris, had long conversations with [Jesse Isador] Straus and [Edwin C.] Wilson; also talked with [Pierre] Vienot, Under Secretary for Foreign Affairs; Vienot spoke with frankness; he was interested in reaction of [L??on] Blum's speech on debts before American Club; he felt French debt policy had been unfortunate; he doubted France would move no matter what happened to Austria, but thought she would go to aid of Czechoslovakia; Vienot admitted strong movement in France for some form of cooperation with Germany; returned by train to Antwerp and from there to Berlin by auto; much evidence of German rearmament; in Berlin talked with [Ferdinand Lathrop] Mayer, [Joseph] Flack, and [Raymond H.] Geist and others who are in position to know what goes on; von Neurath strengthened, but found he is without power or influence, although not permitted to resign; Foreign Office reorganized, with political division headed by [Hans Heinrich] Dieckoff, economic by [Karl] Ritter, and legal by [Friedrich] Gauss; restraining influence of Army becoming less; [Hermann] Goering remains as Air Minister, [Werner] von Fritsch as Minister for Army, and [Erich] von Raeder Minister for Navy; Army had been opposed to occupation of Rhineland and gave orders that if French moved in German troops were to withdraw without resistance; great mistake of France and England not to take joint action at the time; reason for occupation and refortification of Rhineland to immobilize France on her frontier and give Germany free hand in other directions; no further aggressive action by Germany likely until after Olympics, though persecution of Church and Jews goes on unabated; [Hjalmar] Schacht busy in Southeast Europe; most Southeast European countries have favorable trade balance with Germany, but since payment is not forthcoming they are forced to buy from Germany, often goods they don't want; U.S. trade agreement program elestic enough to permit principle of certain preferences among Danubian states as long as privilege is shared with all major states, but Italy and Germany will not permit; [Raymond H.] Geist the best informed man in U.S. establishments in Germany; his tact, character, and courage make him tower of strength; spend one day in Prague after leaving Berlin; talked with Butler Wright and Orme Wilson, but Czech friends were away; Czechs realize seriousness of their position, but still think they can depend on French support and are working toward closer cooperation with other Southeast European countries; they do not under-estimate seriousness of [Konrad] Henlein movement; discussion in Austria as to whether recent conversations between Rome and Berlin began on German or Italian initiative; thinks initiated by Rome with object of bringing pressure on London and Paris; [Kurt] Schuschnigg believes there has been and will be no agreement between Rome and Berlin; Mussolini repeated to him assurances that Italy would stand by Austria, but indicated he would like to see better relations between Austria and Germany; Schuschnigg did talk to [Franz] von Papen but said no progress was made; Schuschnigg and [Ernst] von Starhemberg have reached truce, though von Starhemberg's position greatly reduced; von Starhemberg too much a patriot to cause civil strife to regain his position; Schuschnigg, aware of Anglo-French position and sensitive to weakness of promised Italian aid, realizes Austria is on her own, and may still have restoration of monarchy up his sleeve; present European situation not encouraging; nothing U.S. can do to improve situation except to refrain from giving aid of any kind to the dictatorships causing the disturbance