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

Enjoyed Phillips' visit; leaving Apr. 3; will spend two days in Berlin and sail from Hamburg Apr. 7; looking forward to change of scene; received telephone call from Butler Wright; he reported many changes discussed in Department; [Jefferson] Caffery to go to Rio and [Hugh Simons] Gibson to Brussels; Wright to go to Havana; he thinks there will be no change in Vienna or Budapest; can't think of better post than Vienna, and [John Flournoy] Montgomery doing good job in Budapest; Montgomery spent several days in Vienna after Phillips left; evidence of increased political and economic cooperation between Austria and Hungary and among all Southeast European countries; thinks U.S. can do something constructive in trade relations if agreement is made not to share in inter-Southeastern European preferences except as they are shared by other nations outside the area; believes England and France, and eventually Italy will be willing to accept idea; much concern over recent Yugoslav-Italian treaty; thinks concern exaggerated; treaty can do no harm except that bilateral pacts in general can be dangerous; Little Entente in no danger, but Yugoslavia, like Poland, is sitting on the fence; if possible to return from U.S. by southern route will do so; will keep Phillips informed; has just heard two Italian generals captured and one killed in Spain; informant said German troops in Spain not in active fighting but used behind lines for training, guarding communications, etc