The Austrian Sanierungswerk, 1922-1926

In May, 1922, Austria seemed to be on the verge of disintegration. Spiraling inflation had not only wrecked the country's economy but had also destroyed the Austrian people's desire to maintain their national identity. In fact, a union between Germany and Austria had been forestalled only by the bellicose attitude of the Allied Powers. In mid-May the Pan-Germans decided to risk war rather than endure the unbearable economic conditions any longer. In order to bring about the Anschluss, they announced their willingness to form a coalition with the Social Democrats. Ignaz Seipel, however, persuaded the German nationalists to abandon their dangerous Anschluss policy by proposing the establishment of a bank of issue. When he was unable to get financial backing from private sources, he unsuccessfully sought financial assistance from the Allied governments. He then resorted to diplomatic blackmail by pursuing a "vigorous foreign policy" that brought Europe to the brink of war. In order to prevent an armed conflict, the Allies agreed to loan Austria $125,000,000, provided that the Austrian government allow the League to exercise financial control over the country for two years. Although Seipel readily accepted these conditions, the Social Democrats rejected them outright. Although economic necessity eventually forced the socialists to accept the League's terms, they constantly attacked Seipel's administration. Consequently, when the French invasion of the Ruhr threatened the existence of his government, Seipel showed no hesitancy in using the Sanierungswerk as a means of strengthening his political base of power. Following his reelection as chancellor in October, 1923, Seipel decided to bring the Sanierungswerk to an end. He discovered, however, that the French wished to prolong League control as a safeguard against the Anschluss. To justify their unilateral extension of League control, the Allies resorted to the subterfuge of pretending the Austrian budget was not balanced on a sound basis. Seipel responded to this trickery by introducing a bill that would have given the federal government a' larger share of the provincial revenues. When his own party refused to support his proposal, Seipel resigned. He was succeeded by chancellor by Rudolf Ramek. Ramek's refusal to enact Seipel's revenue bill provided the Allies with a convenient excuse for maintaining their control over Austria. The League refused to even consider withdrawing its control until after Hindenburg's election to the German presidency in 1925. Since the French considered Hindenburg's victory an effective guarantee against the Anschluss, they recommended that the Sanierungswerk be terminated at once. Although the British and Italian governments opposed such a move, they yielded to French pressure and voted to abolish League control. On June' 30, 1926, the League's less than honorable relationship with Austria finally came to an end