In 1936, Jaeger was transferred to Budapest, where Switzerland had set up an embassy that year. He was head of the Swiss mission, and was direct supervisor of Carl Lutz. Jaeger played a role in opposing the deportation of Jews by the Nazi and Arrow Cross Party. He tried to dissuade the Nazis from deporting Jews to Auschwitz and to respect the neutrality of the 76 Swiss protected houses. The activities of Jaeger were instrumental in providing Lutz with the necessary conditions for the rescue of Jews in Budapest. Lutz later said that Jaeger always allowed him a good deal of freedom of action, and had total confidence in him.
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