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Rh and to adopt a policy of agreement with the anti-German races of Austria-Hungary should be encouraged and stimulated.

"(5) The ultimate aim of Allied policy should be, not to form a number of small, disjointed States, but to create a non-German Confederation of Central European and Danubian States.

"(6) The Germans of Austria should be free to join the Confederated States of Germany. They would, in any case, tend to secede from a transformed Austria, in which they would no longer be able to rule over non-German peoples.

"In view of the great amount of cabling that will be necessary to achieve unity, may I ask you to let me have either your own suggestions, or your approval of those above mentioned, as speedily as possible?"

In his reply, Mr. Balfour wrote on February 26, 1918:—

"Your very lucid memorandum raises in one shape or another the fundamental problem of the Hapsburg Empire. A final and authoritative answer to the question you put to me can only be given (if given at all) by the Cabinet, speaking in the name of the Government. But I offer the following observations on the subject, in the hope that