As a result of the German coup in Austria and the general tension which it has created, imperative in my view, Prime Minister of the United Kingdom  should at the earliest possible date make a declaration of the British attitude. As this will be of vital interest  to Australia essential that you should be thinking round the issues involved. I had long talk with the Secretary of State for Foreign Affairs  last night and while he agreed the Prime Minister must make a declaration, it was apparent as yet the British Government has no clear idea what form such declaration should take.
While it is impossible to forecast what the decision of the United Kingdom Government will be, I set out below matters that will have to be dealt with, with some thoughts on lines it may be found desirable to take so that you can be giving consideration to the position.
AUSTRIA The close link between the people of Austria and Germany has long been recognised and the world generally has contemplated at some time and by peaceful means that the link would be cemented into a closer union, though probably not to the point of complete absorption of Austria into the German Reich. Such an absorption has now however, taken place. It is not the fact of what has occurred that has created the present apprehension of alarm and tension , but the way in which it was brought about-the application of force and coercion to an independent people. The atmosphere which has been created may lead to anything not excluding war, the limits to which it would be impossible to define. In these circumstances necessary to state where the United Kingdom stands. Then a reference to grievances many of which were legitimate and the injustices which have existed since the war and the failure of international statesmanship to remedy them. Then a statement that Britain's policy since the Prime Minister assumed office has been to face and endeavour to remedy those grievances, e.g. Halifax's visit to Berlin in November. That this is still Britain's policy with a proviso that it is conditioned by no further attempts to bring about a solution by force. That the United Kingdom is prepared to go further to rectify the grievances  and prepared to consider the co-operation of any means for the maintenance of the world's peace and for bringing about political and economic appeasement. On the economic side this may be amplified by references to the financial strength  and greater resources of raw materials of some nations with an expression of such nations' willingness to assist less fortunate peoples. After reiterating Britain's hope that the situation will be dealt with down these lines, a statement that the world has suffered a rude shock from the recent example of force, and a warning that a repetition cannot be tolerated, then a specific reference to individual dangers. 
MIDDLE AND EASTERN EUROPE PARTICULARLY CZECHOSLOVAKIA In this area many of the small nations would individually be unable to effectively resist aggression. Others not in this area e.g. United Kingdom, France, vitally concerned in the situation which would be created by further examples of force.
Imperative that these nations great and small should act together, should any further act of force be attempted. The United Kingdom could not view with indifference such a situation and would feel compelled to take action should such circumstances arise. Must be no misunderstanding but that the United Kingdom determined not to allow the situation further to deteriorate. The United Kingdom sincerely hope that wise counsels will prevail and that at long last Europe will face the situation and arrive by peaceful means at political and economic appeasement.
In view of the gravity of the situation cannot avoid taking every practical step to meet the position should efforts towards appeasement unhappily fail. To this end the United Kingdom Government propose to take such steps as may become necessary to organise the defence of the country. It will therefore introduce legislation to enable compulsion to be utilised where necessary so that the nation's wealth and man power can be directed to this end. This would not include conscription for military service.
Note-It may be necessary to take as definite a line with regard to Spanish situation as is taken with regard to Central Europe.
Owing to uncertainties of the position it is impossible to forecast developments. United Kingdom Government is very determined at the moment to maintain for the present policy of non-intervention and will only be moved from this attitude if it is established that Germans and Italians have been recently and are continuing to pour further troops into Spain in contravention of their undertakings in the Non-Intervention Committee and their recent acceptance of British formula for withdrawal of volunteers.