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in the Balkans, better relations with Hungary Yugoslavia and Bulgaria,
and the anti-French developments in Rumania brought about by the
Franco-Soviet Pact, are steps in that direction. The fostering of these
friendships is, aside from the broadening of Germany's supply bases, a
distinct gain along the line of political policy, especially as it
weakens the position of the Little Entente and the general French idea
of collective security and European hegemony. 
 
 
The agreement with Austria,* concluded on July 11,1936, constituted a
gain in prestige and afforded an opportunity for broader National
Socialist activity which may bear fruit in the future. The fact that
this was brought about with at least the tacit approval of Italy has
the appearance of a gain, in that it was one of a chain of developments
which led to rapprochement with Italy.
 
 
1 (e). Germany's power was originally broken by the Treaty of
Versailles, but the struggle to regain her strength was continually
hampered by the League of Nations. This body, regardless of the
intentions of its founders, proved in effect to be an instrument for
the perpetuation of the Treaty. Skillfully wielded by France with the
aid of her satellites whose very existence was based thereon.  Under
 
 
 
       *  Embassy despatch No. 2941 of July 15, 1936.