Austria-Hungary Past May Signal Future

Some Eastern European countries may have to go a century back in time to find a geopolitical model to help pull them out of the economic shambles left by the collapsing communist system.

So says Thibaut de Saint Phalle, financial lawyer, author and World War II veteran who has spent much of his life making his way through the maze of international finance.

De Saint Phalle is circulating the idea that what Eastern Europeans need, now that Soviet President Mikhail S. Gorbachev is allowing them to move toward free-market economies, is a system similar to the Austro-Hungarian Empire, which resulted in almost 50 years of peace until World War I.

This will become particularly necessary, he said, if and when West and East Germany reunite and again become a powerful economic force in Europe.

“It seems highly likely that sooner or later the Germanys will get together again,” he said. “If I were secretary of state, I would be terribly excited about recreating in southeastern Europe a strong economic and political bloc to keep the Germans from expanding eastward.”

The dual Austro-Hungarian monarchy, with the emperor of Austria doubling as king of Hungary, was established in 1867 and was a stable power in southeastern Europe until it was dismembered at the end of World War I.

In the process Hungary lost regions to neighboring states--Transylvania to Romania, Croatia and Bacska to Yugoslavia, Slovakia and Carpatho-Ruthenia to Czechoslovakia.

De Saint Phalle envisions an economic federation between Austria, Hungary, Czechoslovakia and Yugoslavia, with links to Romania and Poland, able to trade both with Western Europe and the Soviet Union.

They would again use Trieste, a Yugoslav city at the northern end of the Adriatic Sea, as the principal port.

“It’s interesting because lately there have been political discussions and certainly all sorts of tentative economic agreements between Austria and Hungary on the one hand and more recently between parts of Czechoslovakia, Hungary, Austria, parts of Yugoslavia, and Italy,” he said.

“The idea is ‘Let’s reinstitute that port, which would serve as the exporting center for this whole region of Eastern Europe.’ ”

De Saint Phalle, who is writing a book forecasting the state of Europe in 1992, also said bureaucrats in the U.S. government are spending too much time worrying about what effect Western Europe will have on the United States in 1992 when the European Economic Community becomes an integrated trading bloc.

“I think they ought to spend a lot more time worrying about what is going to happen in Eastern Europe. How do we try to help avoid what happened in the days from 1870 to 1945 when the Germans were creating all these problems? Let’s make sure they’re not in a position to create problems again.”

Assuming Gorbachev’s reform program does not collapse, the Soviet Union should not interfere with such a federation as long as it proceeds slowly and bases its decisions on economic reasons, not political or military ones, De Saint Phalle believes.

“It will go as fast as it’s meant to go, but we can give it a push from time to time. We can say to the American businessman, ‘Go and invest, become part of the groups, work with these people, encourage them,’ ” he said.

Already American businesses are attempting to invest nearly $2 billion in Poland and Hungary through the Overseas Private Investment Corp. (OPIC), and officials expect Congress soon to authorize investment in other nations in Eastern Europe.

Such investments are one way to tap into the Western European market after 1992.

“If they can invest in Eastern Europe, they can manufacture things there and export them to Western Europe,” said Jim Hall of OPIC. “Not only is Eastern Europe a huge, untapped market, but they can also sell competitively in Western Europe.”