Messersmith, G.S., Vienna. Despatch No. 902 to Secretary of State [Cordell Hull], Washington.

Comments on effects on European situation of Austro-German accord of July 11, 1936; Chancellor has so far held to "Dollfuss Line"; negotiations to improve trade relations between Germany and Austria have come to nothing, but will continue; Germany lifted the 1000 mark visa fee; has not had expected results; no more German tourists in Austria than previously; some had feared an influx of Nazis and increased Nazi propaganda, but fears unrealized; comments in German press following accord showed it did not consider recognition of Austrian independence a permanent thing; belief in some quarters Nazis would be brought into Austrian Cabinet, but so far no indication of such reorganization; Austria intends to continue her independent foreign policy; will not sever connections with League of Nations; will also maintain friendly relations with other Central and Southeastern European countries and with Italy, among which countries there has been a recent exchange of official visits; Chancellor[Schuschnigg] in recent speech before Pan-European Agricultural Congress, made clear Austria's intention to pursue a "middle course" and to cooperate as far as possible economically and politically with other European countries; in talking with a group of intimates confidentially, Chancellor said that in event of war, Austria would hope to maintain a neutral position; Little Entente not in the Moribund condition reported in earlier dispatch; increased German armament program and Franco-Polish accord have strengthened it; in past, Italy has shown no interest in independence of Czechoslovakia but recent German pressure against Czechs brought Italy to realization that disintegration of Czechoslovakia would weaken her own position