Document Type: 
Document Number (FOIA) /ESDN (CREST): 
Release Decision: 
Original Classification: 
Document Page Count: 
Document Creation Date: 
December 21, 2016
Document Release Date: 
November 15, 2007
Sequence Number: 
Case Number: 
Publication Date: 
July 13, 1973
Content Type: 
PDF icon CIA-RDP79-00927A010400020001-6.pdf2.35 MB
Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 5 Secret Weekly Summary Secret 13 July 1973 No. 0378/73 State Dept. review completed Copy N2 50 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 CONTENTS (13 July 1973) rip= ;her,? ever 1 Still Not in Focus 2 International Money 3 Bahamas: Nationhood 4 Grain Prospects: Good In USSR; Eastern Europe 6 The Soviets and the Arabs 7 Europe: Security Conference Opens 8 Bulgaria-US: New Era 9 Germany: Flies in the Ointment 10 UK: Heath's Three Years 11 Italy: Center-Left Under Way 12 Indochina 16 Japan: Confidence Rising MIDDLE EAST AFRICA 16 China: Important Meetings on Tap 17 UN Middle East Debate 18 Pakistan: Economic; Bhutto's Situation 20 Lebanon: New Cabinet, Old Problems 20 Iraq: The Dust Begins to Clear 21 Rwanda: Changing the Guard WESTERN HEMISPHERE 21 Nepal: Up in Flames 22 Chile: A Quieter Patch 23 Guyana: Burnham Marching On 24 Uruguay: Settling Down Comments and queries on the contents of this publication are welcome. They may be directed to the editor of the Weekly Summary, Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 STILL NOT IN FOCUS ' J The The "year of Europe" has had rough going so far. Recent monetary, trade, and political de- velopments have, on balance, tended to erode confidence across the Atlantic, and the Europeans have made little progress in pulling themselves together for a fruitful dialogue with the US. In the absence of real economic factors: to explain the troubles the dollar has been having these past weeks, many Europeans attribute the continued unloading of dollars to the general lack of confidence in the way the US manages its economy. The European reaction has not been uniform. While the French, especially, profes!, to fear the competitive edge given US exports by the depreciation of the dollar, Bonn sees the dollar devaluation as one way to slow Germany's exces- sive export growth, and others see it as a probably temporary, if unwelcome, effect of the floating- rate system. In any case, the prolonged uncertainty has made negotiated reform of the international monetary system extremely difficult. The EC joint currency float has become a symbol of European unity, and Bonn's decision to revalue rather than float the mark unilaterally was due largely to this political consideration. Although many authorities consider the currency band a wrongheaded approach to economic unity, its demise under market pressures would be a severe psychological blovv to the community and to its ability to negotiate with the US. Page 1 While the community has been more cohe- sive in elaborating a common position for the coming multilateral trade negotiations than on monetary questions, the trans-Atlantic atmos- phere leaves much to be desired in the trade area as well. The French, for example, have used the monetary situation to buttress their insistence that the trade talks take account of the commer- cial advantages the US may gain from a devalued dollar. Moreover, the other EC members are having great trouble in trying to persuade Paris to permit the community to offer any of the com- pensation claimed by the US for losses it will suffer as a result of the EC enlargement. On top of this, the sudden and unexpected controls on certain US farm exports have aggravated the situa- tion. In the view of at least some European importers and farmers, these controls call US reliability as a supplier into question-even as the US presses for freer access to the community's agricultural market. On the political side, the anxieties the Euro- peans have felt as a result of US-Soviet agree- ments at the recent summit meeting were alle- viated by President Nixon's briefing of NATO perrianent representatives in California last week. Disc!uiet nevertheless persists. Europeans fret about the adequacy of US-NATO consultations and about the long-term consequences for Euro- pean defense of the US-Soviet understandings on the Ase of nuclear weapons. These misgivings may account for recent hints from France that it may SECRET Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 ..)L ,NC I be reconsidering its reservations about European 25X1 defense cooperation. This otherwise helpful sign is mitigated by the uncertainty of Paris motiva- security is a suspicion that West Germany may drift into neutralism in the new area of super- power detente. =a large element in France's thinkinq about tions. While the Europeans are aware of the rela- tion between these economic, political, and mii- tary issues, they nevertheless hale yet to find a way to bring the issues into focus for d scussion either among themselves or with the US. A meet- ing in Helsinki ast week of the EC Political Corn- mittee made clear that France still resists corn- munity discussion of the economic am political dimensions of US-European relations. The Britik:h have proposed that the political committee pre- pare a 'working document" for the N ne on a European identity vis-a-vis the US, on i others among France's partners appear to be ieve that Paris can be brought gradually ino a cr,r prehen- sive review of these issues. Even f th s proves o be the case, it will still be difficult for tnF Nine o reach a concerted position on an Atlaritic declara- lion by the time the President visits -,roue this 25X1 fail. The foreign ministers of the Nine .vill, how- ever, take a first stab at sorting oat their views it 25X1 a meeting on 23 July. ,4 -5 Ifter fallinq to new lows on international money markets last Friday, the dollar strengtn- ened this week against the major European cur- rencies and against the Japanese yen. I he major impetus to the rally was speculation that the United States was about to intervene saustantiai v in the exchange markets. An ann :)uncement th it US "swap lines" with foreign central banks had been substantially enlarged was interpreted by many traders as a signal that the United Stat?s was preparing to act in suppor-i of the doilcr_ Bundesbank President Kiasen added to tnis sen i- ment when he announced that the Americans a`e prepared to intervene and want to see: the dollir 25X1 supported. The West Germans, entered the market this week for the first time since March to support the dollar. The dollar purchases reportedly were very small, and the rally stalled Thursday when inter- vention failed to meet expectations. Intervention alone is unlikely to lead to a sustained recovery of the dollar in 1973, although the longer-term outlook is somewhat more favora- ble. The near-term burdens on the dollar-infla- tion, the psychological impact of domestic politi- cal uncertainties, and the potential damage to the US balance of payments by agr cultural export onto uls -clearly far outweigh in traders' minds the longer-term prospect for improvement in US -glance of payments resulting from the already substantial devaluation of the dollar. International money managers, representing the large multinational firms, commercial banks, some less developed countries, and the big oil producers, believe that in the short run other currencies, particularly the German mark, are more likely to appreciate than the dollar. To the extent the money managers act on this belief, it becomes a self-fulfilling prophecy. The German marl is the currency favored by traders because of its remarkable performance in the last year, the coat nuinq strength of the German economy, and Bonn's aggressive anti-inflationary pro- gram- Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 "SECRET Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 BAHAMAS: NATIONHOOD (p rThe colorful independence ceremonies in the occupied with their own unity problems. A small Bahamas on 10 July introduced political changes group of white Bahamians on Abaco Island feared that are more a matter of form than of substance. life under an independent government controlled The Bahamas have been almost completely self- by blacks, and they lobbied before independence governing for 20 years, and Lynden 0. Pindling, for the right to remain under the British crown.7 the islands' first black prime minister, has led the I (Their threats to resort to violence have since died country since 1967. Independence will, however, down. Most "secessionists" seem reconciled to permit the Bahamians to make themselves heard independence, and there remain only a few hot- on international issues for the first time. The heads who might foment (minor violence on this islands' basic alignment with the West should issue7 remain unaltered, but the government will side with other small countries against the large ones on a number of issues. Because of its small size, the new nation is at first unlikely to send diplo- mats to posts other than Washington, London, New York, and perhaps a Caribbean capital or two,)rbut limited relations of some sort with Havana are likely soon-primarily because CLUba, like the US, is a next-door neighbor? (y [The moderately nationalistic Pindling gov- ernment enters independence in good political shape at home. There are no significant extreme leftist or black radical organizations in the islands to pose an internal security threat. Legal opposi- tion parties exist, but are quite weak and pre- yr TEconomically the Bahamas are on shakier ground. Foreign investors remain uncertain about the Pindling government's economic intentions even though it has said it will follow a pragmatic policy designed to encourage foreign capital in- flows. The economy is vulnerable to sudden fluc- tuations in tourism, a notoriously unpredictable industry, but the islands' near-perfect climate, their proximity to the US, and their suitability as sites for oil refining and transshipment facilities are advantages the government is eager to capital- ize on7 IPindling and his government intend to real- ize financial and possibly material com- pensation for the Bahamas from the presencelcthere of three important defense-related US bases. Temporary arrangements are being made that will extend the old US-UK agreements under which the bases were established, but the negotiation of new agreements could b time-consuming and com- plicated1fhus far the Bahamians have not ti d th i h ppe e r and on their formal asking price or their negotiating strat- egy, but indications are that they will be well prepared for talks with US of- ficials. Pindling does seem convinced, however, that his country's security rests upon a continued close associa- 25X1 tion with the US, so protracted Baham- ian unreasonableness in the base nego- Independence Congratulations Prince Charles and the Pindlings Page 3 SECRET WEEKLY SUMMARY 13 Jul 73 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 tt' he Soviet grain crop this year could reach a record 194 million gross tons (157 million net usable tons) if favorable weather prevails for the rest of the growing and harvesting season. 1 he previous record of 150 million net tons was set in 1970; last year only 134 million net tons were harvested. Even if a record harvest materializes, the Soviets will need to import about It) million tons of grain during fiscal year 1974 to cover domestic and export requirements. adequate rainfall and cool temperatures. During most of June it was extremely hot and drier than Eastern Europe: Major Grain Producing Areas The largest acreage ever was sown to spring grains, more than offsetting the shortfall in the sowing of winter grains. The total area sown to grain is at the highest level since 1965. As in 1972, the Soviet strategy was to sow relatively more area to feed grains than to the lower yied- ing spring wheat in order to give the greatest possible support to Brezhnev's livestock progra-n. So far, both winter and spring grains have been developing well. At the end of June, mois- ture conditions for the winter grains were betL.er than normal and far better than last year. these grains are now being harvested. As for the spring grains, timely rainfall as well as improved organi- zation seem to have gotten the crop oft to a good start. They are now at a critica stage, requiring SECRET Pag? 4 WEEKLY SUMMARY 13 Jul 73 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Harvesting usual in much of the important New Lands area. More of this weather in July could easily erode Soviet hopes for a harvest substantially better than the record year of 1970. Through mid-June, the Soviets had con- tracted for about 9 million tons of grain for delivery by the end of fiscal year 1974. Almost 7 million of this was purchased from the US. Some of the Soviet purchases are slated for delivery this summer and fall and, therefore, should be viewed as covering shortfalls in the crop last year. In any case, more than 6 million tons must still be ,:our- chased to cover the estimated 15 million ions required for fiscal year 1974. During the last fiscal year, the Soviets imported about 27 million tons of grain, over half from the USI AND ALSO 1 E~~STERN EUROPE Tune raa?4ave improved the prospects or Eastern Europe's grain harvest this year, and it could total about 83 million tons if average gr: w- ing and harvesting conditions prevail this summer. This would be a drop of only 3.5 percent from the record 1972 crop and an increase of 17 per- cent over the annual average in the 1966-70 period. This year, the use of fertilizer increased, and larger areas were seeded to wheat and corn at the expense of lower-yielding rye and oats. Ac, a result, the output of corn may exceed last year s, and the quality of all grains should be better than last year. The winter grains-wheat, rye, and barley- were sown later than usual last fall, but a mild winter prevented excessive damage. One of the driest winters on record in East Germany, Poland and Czechoslovakia reduced soil moisture to dangerously low levels by 1 April so that officials were pessimistic about crop prospects. Rainfall in April and June, however, has improved the out- look, and it is now expected that yields for wheat and barley will be above average. Both grains were sown on larger areas than a year ago. Prospects for the spring-planted grains- barley, oats, and corn-are uncertain because of weather. Cold, wet weather in April delayed corn plan-:ing in Hungary, Romania, and Bulgaria, and slowsd development of barley and oats in most countries. May was hot and dry, adversely af- fectiig germination and growth of spring crops in Hungary and Czechoslovakia. On 30 June, soil moisture levels were 15 percent or more below normal in Bulgaria, East Germany, and Hungary. Even with a good grain harvest, Eastern Europe will still need to import between 8 and 9 million tons of grain in fiscal year 1974. A large share of these imports will consist of feed grain to support record numbers of livestock. Imports could go even higher depending on the output of important non-grain feed crops in the northern 25X1 countries. The upward trend in purchases of pro- tein meals by all East European countries will probably continue in the coming year. Page 5 I:=CRET Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2~0t0-7/1{1~/15 : CIA-RDP79-00927A010400020001-6 I [Moscow is engaged in a flurry of d plomat c and political activity in the Middle East aimed at preserving its own position in the area; is a boners the Soviets hope to pick up infcrmatiorl on whit the Arab nations intend to do next in their dis- pute with Israel. Not the least of the Soviet dit- liculties in this quest is how to explain that better relations with the US do not mean a reduction n Soviet support for the Arab cause.7 dispatched senior politburo member Andrrcy Kirilenko to Syria to represent the USSR at the opening of a new phase of the coviet-stronsoruud Euphrates Dam project. During its v -, i he net with Syrian Government leaden and tin) fiqur s rorn the Baath and Communist parties His pub- lic remarks were carefully calcul,ited to reassure his hosts that the Soviets still support Israeli with- drawal from all occupied territory " lire ofterE,d nothing more in the way of practical aid, no v- rever, than the dire prediction that if i'ie Israe is do not move toward a ;ust ~,ett'Cmeer t, they will "inevitably clash with the growing po,%-.r of tie Arab people." This did riot irnpi ess :Pu Syrians, who responded by lauding Sovie'. ecc~niwnic help Tut made only passing reference to Soi:-. sup,,)( rt n the Arab-Israeli confrontation.? mediator or that it believes there is much mileage to be gained by inserting itself in the stormy Svrian-Lebanese-fedayeen relationship) 20 Some of the USSR's more serious problems in the Arab world will be aired during the current visit to Moscow by Egyptian President Sadat's national security adviser, Hafiz Ismail. Soviet- I- relations have gone from tepid to cool f)ne step was taken last wee.< where Moscow /) over the last few months, and both sides have ' [From Syria, Kirilenko went an to r._?irut this 25X1 meek. he sought the visit aril since his arrival has hart meetings with over nment leaders and Lebanese: Comrru- nrstsT Soviet Foreign Ministry official,. used tie it{ Moscow has no desire to complicate Lebanel.se- Syrian relations arid, indeed, is urging rrrstraint in both parties4Presumably Kirilenko has taken this line, at least with the Lebanese, but it is doubt'ul that Moscow expects it will be able io act as ;l some explaining to do. The Egyptians will want morc authoritative Soviet explanations of Soviet policy in the Middle East in light of the Washing- ton summit meeting. the Soviets are concerned that Cairo is about to take further action against their position in Egypt and will want to compare motes on the resumption of the UN Security Council debate on the Middle East. Soviet offi- cials have expressed annoyance at Egyptian fail- ure to consult on this subject and say they were taken by surprise by some of Egyptian Foreign Minister Layyat's comments on the Palestine issue at the security council debate in June. f he UN is expected to resume consideration of the Middle Last later this month, probably on 20 July.7 I he results of these consultations will prob- .;: lv be mixed. I he Soviets can cite the treatment of the Middle East in the US-Soviet communique as proof that they have riot sold out Arab inter- ests, and they can repeat their standard support for the Arab position on Arab-Israeli issues. The Aral, leaders, however, are looking beyond the wording of the communique to the evidence of a broader Soviet interest in improving relations with the West. I his they take to be the true barometer of what help to expect from Moscow, and they have made it clear that they do not like what they see. SECRET Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 'CRET SECURITY CONFERENCE OPENS wants an early conclusion to the conference. The ministers eventually decided that the next stage rAfter six months of preparatory talks, the will begin on 18 September, as the West desired; 41 Conference on Security and Cooperation in in order to mollify the Soviets, they agreed that 25' Europe opened in Helsinki last week with a five- preliminary organizational meetings will get under day meeting of foreign ministers. There were 1-ew way in late August. The West resisted Soviet pres- surprises, but the meeting highlighted the dif- sure to make plans for stage three, insisting that ferences among the artici t p pan s and suggested progress in stage two must first be assessed.r that the substantive phase of the conference has its work cut out for itl L1 rThe opening presentations in Helsinki 3, vealed no willingness on anyone's part to concede TThe ministers adopted with relative dispatch Z basic positions before the real bargaining gets ,~. the agenda "mandates" on security, economic under way. Soviet Foreign Minister Gromyko and scientific cooperation, humanitarian conta.:vts, ?' reiterated Moscow's position that unconditional ILA and follow-up machinery. These had been ham-,L4 recognition of the inviolability of frontiers is of mered out in the preparatory talks. Committees prime importance. The Western delegates, per- will use the "mandates" as the basis for their -L$ceiving in this emphasis a desire to sanctify the work during the next stage of the conference. I he status quo in Eastern Europe, stressed self deter- ministers had more difficulty agreeing on other mination and the importance of human contacts. procedural questions, largely because Moscow West German Foreign Minister Scheel, in Conference Greetings Gromyko escorted I ~ v Foreign Minister Kar/alainen SECET Page 7 WEEK__Y SUMMARY 13 Jul 73 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 SECRET particular, challenged Soviet concept ons with lay the groundwork for a Balkan regional disarma- pointed proposals for the free movement of men,, conference. Bucharest has already ap- journalists, tourists, and public,itions between proached Turkey about taking part in such a Fast and West.1 gathering. Tito and Ceausescu will have a chance rThe West Europeans, hopett l that an agree- ment enhancing the security and welfare of Europe can be attained, consider the precise terms of proposals important and worth arguing about. hhey doubt that the US shares their sense of priorities and suspect that Washington might be willing to accept an innocuous outcome in exchange for gains elsewhere. H us us they will be reluctant to see the talks acquire a momentum -hat might sweep them along against tneii udgment. Stage two may tar_r(_cessiJo period, proposed ten principles over Wig iutrire relations between European states. 11-11,-V arnoent to an international "hands oft' apps oach. One principle would forbid "instigating or tolerating ? emigre subversive or terrorist activity; others ire aimed at limiting worrisome problems like ir- redentism, military pressures and disregard for the rights of small states. scheduled to begin on 15 July. BULGARIA-US: NEW ERA ?7 (Along with the other East Europeans, the i' Bulgarians are taking a friendlier attitude toward better 7the JS. The warming trend was first discernible t i rr el when Secretary Rogers met with Foreign Minister tvlladenov at the UN last November, but during the ast two months Sofia's desire for improved relations has become more evident) ua y a va ,.ountries can and must establish mu tageous relations. Peking has replaced Washington as the archfiend in the Bulgarian press. L G For three weeks in May, a four-man US customs team visited Bulgaria to train some 50 customs officials in narcotics control. This train- ing was part of an agreement reached earlier in the year that also provides for exchange of intelli- gen(-e on drug smuggling) f?omania obviously believes that meaningful 2. (Bulgarian foreign policy is an appendage of negotiations will begin only at the nfext rouna of kSoviet policy, and Sofia's more positive attitude talks. Foreign Minister Macovescu's address left toward the US reflects Moscow's interest in no doubt that to Bucharest, Europe in security .t detente. The Bulgarians, however, have reasons of and military problems are inseparable He called their own for wanting improved economic re- the i ti for the dismantling of military Lases r)r the terri- tories of others, a gradual redu_tion :ot military troops and budgets, a renunciation ce maneuvers on the borders of neighborinc states, and the creation of denuclearized zones in Europe. I he Romanians are wasting iittir' time in mounting a campaign to link the se~:!ar ity con- ference with the later force redu:tion talks ano to ven on g lations with Washington. The recep customs officials, as well as the improved treat- ment of the US in the Bulgarian press, is designed to create a good atmosphere for the Bulgarian trade delegation scheduled to arrive in Wash- ingirrn on Sunday. The Bulgarians hope that this delegation will open a new era of improved ECRET 25X1 25X1 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 %.P _VI 1L I `%dw GERMANY: FLIES IN THE OINTMENT .2. (Signs of improved relations between the regatta in the Baltic Sea. These incidents add to Germanies were overshadowed this week by more the skepticism with which many West Berliners 30 shooting and an angry demonstration at the Ber- view Brandt's Ostpolitik.~' ,Rlin Wal' 31 rTheir concern will increase if the East Ger- ~D rfhe East and West German foreign ministers, y mans continue to reject applications for visits to Otto Winzer and Walter Scheel, met in Helsinki 2East Berlin during the World Youth Festival from } on 4 July and agreed that permanent missions 3 28 July to 5 August. After first threatening to 33 should be established in East Berlin and in Bonn 'grant access only in "hardship cases," the East by late summer. Egon Bahr, who has been seeing ) Germans reportedly acquiesced in a suggestion his East German counterpart to iron out derails from the West Berlin Senat that they appeal to on the missions, publicly stated that he expects West Berliners not to visit during the Festival. the West German representative to be in residence Pankow, however, began rejecting visit applica- in East Berlin on 15 September.I tions this week. The explanation to Western of- ficials that the East Germans wish to prevent D /Another sign of better relations has been the "another Munich" is self-serving; the East Ger- 31 entry into force of an agreement providing for mans are primarily motivated by a desire to one-day visits by West Germans to formerly re- ensure that the anti-imperialist flavor of the 33 stricted East German communities. This agree- Youth Festival is not diluted. The East Germans ment, part of the inter-German basic relations treaty package, was at first ignored by Vest Germans, but authorities in states bordering on the East are now receiving numerous applications for visit permits. Thus far, no real problems have arisen during the visits? 7A rn contrast to these signs that the Germans are edging toward a modus vivendi, the incident ? at the Berlin Wall suggested that the relationship 31 between East and West Germany will continue to be an uneasy one. Border guards foiled are at- tempted escape by opening fire on three people, one of whom was reportedly wounded. An angry group of West Berliners later ripped a hole in the wall. The East Germans subsequently protested, saying that only their "restraint" prevented a major incident? 219 rThe East Germans demonstrated in a less d, dramatic, even petty, fashion their claim that there are no political ties between West Berlin and 30 Bonn. To stress that West Berlin is a separate political entity, the East Germans continue to 33 insist that a separate agreement be signed between the East German sports organization and the West Berlin chapter of the West German sports federa- tion. To emphasize the point, the East Germans raised a West Berlin flag at an international have attempted to lessen the effect of their action by stating that they will not curtail access by West Berliners or West Germans to other parts of East: Germany. Any restriction on access, how- ever, is viewed negatively by West Berliners, who25X1 are already concerned that while Ostpolitik has brought some benefits, their basic situation has not improved significantly. SECRET Page 9 WEEKLY SUMMARY Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Jt(.,Nt I ,>%&[In office since 1970, Prime Minister Heath has accomplished much of what lie set out to do. He still faces problems, primarily those affecting labor and the economy. His success in controlling inflation and maintaining industrial peace w 11 largely determine the outcome of the next general election, which must be held before mid-] 9751 to be renegotiated. The Industrial Relations Act, hated by the unions, remains in effect; and while some of its provisions may be moderated, the Heath government will not agree to abolish the act and allow the country to drift back to the labor chaos that existed earlier) .;' 1EC membership is still the cause of some ft he Heath government has f jlfilled many of friction. The opposition Labor Party is on record his campaign promises; and some of his reforms, +' as intending to renegotiate the terms for member- particularly in taxation, are beginning to have an 3bship if it returns to power, and Enoch Powell, impact. Britain's economic growth rate has in- creased to close to six percent, partly through expansionary government budgets. Unemplo/- ment, which rose following Heath's election, is now at a politically tolerable level.? F' jHeath has been less successful in dealing with inflation. Fie has been unable to contrDl rising food costs. He imposed a freeze, and thf n controls on wages and prices. The government d:d manage in this way to slow down the rate of wage rises. Price inflation, however, continues at about nine percent annually, and food costs have gone up more than 15 percent in the past year. This has caused concern among the genera! public and will prompt labor to press for rel ef. The govern- ment is consulting sporadically with the Trades Union Congress in an effort to encourage the unions to hold the line voluntarily on wage in- creases. The unions are unlikely to cooperate; they are more likely to demand viage increases 3s long as prices, especially food prices, continue to go up./ :V_?rAfter 1972, the most strike-ridden year in Britain for nearly half a century, the labor scene was almost bound to improve. A controntation earlier this year between the unions and the gov- ernment over the wage-price controls was averted largely because of Heath's firm stand and the r)oor financial condition of some of the unions. This fall will bring another testing period because contracts involving the several militant onions are long a thorn in Heath's side, is strident in his opposition to EC membership. According to a recent public opinion poll, popular opposition to membership is increasing. The percentage of voters wanting to pull out of the EC has nearly doubled in the past six months, and 42 percent now favor a renegotiation of the terms. This dis- play of popular displeasure could strengthen Britain's hand in internal EC negotiations. The domestic inflationary pressures, in particular, will reinforce London's desire to reform the expensive EC farm policy. )Heath has been unable to settle the Ulster problem, but some progress has been made to- ward reaching a political solution. The Labor Party thus far has supported the government's policies but recently stated that unless the Ulster moderates prevail and the situation improves, it may reconsider its position.) jr Although the conservatives suffered setbacks i; several recent local and by-elections, the party aseems inclined to read the political signposts optimistically. Its record thus far has been good, and if it can master the economic problems now before it, it is likely to win the next election. The opposition Labor Party is torn by dissension and is unlikely to recover within the next year. The Liberal Party, which has made a good showing in several by-elections, is not a serious con- SE CRET ALEKLY SUMMARY 25X1 25X1 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 SECRET ITALY: CENTER-LEFT UNDER WAY 3? (though the new center-left government r should enjoy smooth sailing for a while, its pros- pects over the longer run are threatened by 39 lingering dissension among and within the coali- tion parties. The new prime minister, Mar ano Rumor, was able to present a government to President Leone after only 17 days of negotia- tions. The key development was the decision by the Socialist Party to rejoin the government after a year in the opposition? -J-Ij fThe relative speed with which Rumor was ble to form a government attests to his bar- gaining skill but indicates that the more divisive issues were papered over or set aside. The pro- gram that emerged from last week's bargaining gave high priority to emergency economic 37 measures. The parties pledged to fight inflation, implement tax reforms, stimulate the building industry and consider a pension increase. They set ` g 3 I aside the contentious problem of radio-TV regula_ only two minister-without-portfolio slots and , ?Y tion-instrumental in the collapse of the previous major right-wing leaders appear to be keeping LPJ government-by assigning it to a study com- their distance from the renewed center-leftfIFor mittee. Consideration of explosive "law dand4o example, former prime minister Giulio Andreotti order" issues was also put on ice. The center-eft refused to accept a cabinet post, despite heavy program was equivocal on the perennially st cky pressure to do so) matter of parliamentary relations with the Com- munist Party f' [The Socialists' acceptance of the invitation to return to the government was marred by r internal party feuds. The majority and minority faction leaders are still at loggerheads over .he terms on which the party accepted coalition membership. Indeed, the minority leader has refused to p rmit his faction to participate in the government. 7 Government cohesion may be threatened ?y other disputes. The cabinet has no vice-prime minister because the Socialists and Social Tv' Democrats could not agree on a candidate for P-re post. In addition, the Republican Party's ad- vocacy of government austerity clashes wilh Page 11 Prime Minister Rumor being sworn in Socialist opposition to major cuts in social pro- grams., 31 Although all Christian Democratic factions are represented in the new cabinet, some in the party are dissatisfied with the new government. The party's left wing is disgruntled at receivin W'. tNevertheless, the government should have no trouble in parliament next week and probably will not encounter major problems right away. Rumor will benefit from the momentum gen- erated by his rapidly concluded negotiations, and prospects are good for agreement on emergency measures to check inflation and spur the econ- omy. The nearly sacrosanct August vacation period will postpone consideration of other touchy legislative issues until fall.? iJ . JrOver the longer term, the coalition will be subjected to powerful centrifugal pressures when 25X1 the parties have to face specific choices on such divisive issues as housing, legal reforms and the SECRET Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 Approved For Release 2007/11/15: CIA-RDP79-00927A010400020001-6 SECRET Fighting in Kontum [he fighting continueJfor control of two villages west of the provincial capital of Konturn. Both sides want to establish firm control over the disputed territory: the Communists would like a buffer zone between themselves and the South Vietnamese; the government would like to deny the Communists easy access to :he outskirts of Kontum City. During the past few days the two sides have sharpened both the rhetoric and the fighting. The Communists have conducted rocket attacks on South Vietnamese rear areas and the aovernment has responded with air attacks against the other side. Most recently, the government has greatly exaggerated the size of the Communist units involved in the attacks and has threatened to use additional units to cope with the Cornrr4unist