Allied-occupied Austria - Mounting Losses

Mounting Losses

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Further information: USIA, History of South Tyrol

In late 1945 and early 1946 Allied occupation force in Austria peaked at around 150,000 Soviet, 55,000 British, 40,000 American and 15,000 French troops. The costs of keeping these troops were levied on the Austrian government. At first, Austria had to pay the whole occupation bill; in 1946 occupation costs were capped at 35% of Austrian state expenditures, equally split between the Soviets and the Western allies.

Coincidentally with the Second Control Agreement, the Soviets changed their economic policy from outright plunder to running expropriated Austrian businesses for a profit. Austrian communists advised Stalin to nationalize the whole economy, but he deemed the proposal to be too radical. Between February and June 1946, the Soviets expropriated hundreds of businesses left in their zone. On June 27, 1946, they amalgamated these assets into the USIA, a conglomerate of over 400 enterprises. It controlled not more than 5% of Austrian economic output but possessed substantial, or even monopolistic, share in glass, steel, oil and transportation industries. The USIA was weakly integrated with the rest of Austrian economy: its products were primarily shipped to the East, its profits de facto confiscated and its taxes left unpaid by the Soviets. The Austrian government refused to recognize USIA legal title over its possessions; in retaliation, the USIA refused to pay Austrian taxes and tariffs. This competitive advantage helped to keep USIA enterprises afloat despite their mounting obsolescence. The Soviets had no intention to reinvest their profits, and USIA assets gradually decayed and lost their competitive edge. The Austrian government feared paramilitary communist gangs sheltered by the USIA and scorned it for being "an economy of exploitation in colonial style." The economy of the Soviet zone eventually reunited with the rest of the country.

South Tyrol, a disputed territory in the Alps, was returned to Italy. The "thirty-second decision" of the Council of Foreign Ministers to grant South Tyrol to Italy (September 4, 1945) disregarded popular opinion in Austria and the possible effects of a forced repatriation of 200,000 German-speaking Tyroleans. The decision was motivated largely by the British desire to reward Italy, a country far more important for the containment of world communism. Renner's objections came in too late and carried too little weight to have effect. Popular and official protests continued through 1946. The signatures of 150,000 South Tyroleans did not alter the decision. South Tyrol is today an Italian autonomous province (Bolzano/Bozen) with a German-speaking majority.