Genius for Compromise

Perched on the edge of the Iron Curtain, opulent little Austria sits between two worlds--and makes the most of both of them. Its prosperous people proclaim their neutrality almost as ardently as they complain about their overcrowded parking lots and eagerly sell their steel, sausages and stretch pants to countries as diverse as the U.S. and Red China. Glittering Vienna, which has more high-priced jewelry stores and high-calorie pastry shops than any other continental city, is a compelling advertisement for capitalism to the thousands of Eastern Europeans who visit it every year. Last week the Austrian National Bank announced that the country's gross national product jumped 10% in 1964, to $8.8 billion, and the Austrians began negotiating in Brussels for some form of alliance with the Common Market.

The negotiations are piquant because Russia has warned Austria not to join the Common Market--under terms of the 1955 treaty that ended the Soviet occupation--and because Austria already belongs to a rival trade bloc, the European Free Trade Association. Austria depends on the Common Market for 50% of its trade (v. 18% with EFTA), and feels that its prosperity is endangered by the Market's common tariff barrier. Says Austrian National Bank President Reinhard Kamitz, a prime architect of Austria's economic revival: "As long as we do not try for full membership, we will not be violating our neutrality agreement."

Split Personality. The Common Market members are divided over what kind of alternative arrangement to make. West Germany, which is Austria's No. 1 trading partner, wants a tight tie between Austria and the Six. France would like to undermine the Britishdominated EFTA, but also worries that Germany might become too intimate with Austria through the Market; it thus favors a loose tie. The other Market members are wary of any deal that might open the way for the other neutral nations, Switzerland and Sweden, to join the Market. The Austrians are undecided themselves about how closely to cozy up to the Six.

That is not surprising; the land that produced Sigmund Freud has a split personality on most matters. Its economy and government are run by a coalition of the cartel-minded Peoples' Party and the nationalization-minded Socialist Party. Austria has suffered less than its Western neighbors from inflation and labor strife because both parties agreed to let a government board rule on wage and price hikes. Almost 25% of Austria's economy is nationalized, including most of its basic industries, much of its banking, and two-thirds of its joint-stock companies.

Helpful Tourists. Despite its many drawbacks and few resources, Austria has prospered from ingenuity. Its nationalized steel industry developed the revolutionary L-D oxygen steelmaking process, from which 15 million tons of steel will be made this year all over the world; now it is building a $30 million L-D plant in Russia and is considering a deal to put up a rolling mill in North Korea. Austria has also signed a series of barter treaties with Russia and the satellites, manages to run a payments surplus because foreign tourists spend $523 million a year to enjoy its Alps and its Gemiitlichkeit.

This ability to make the most of everything has nearly tripled the country's per-capita income in the past dozen years--to $1,175--and has given Austria a growth rate second only to West Germany's in Europe. It also gives the government a certain confidence that it can come to terms with the Common Market members at Brussels.

This file is automatically generated by a robot program, so reader's discretion is required.