WESTERN EUROPE BRANCH OFFICE OF REPORTS AND ESTIMATES WORKING PAPER BRANCH WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000400020002-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 2
• Publication Date: October 11, 1949
• Content Type: PAPER

014'DP79-010A000400020002-4
WESTERN EUROPE BRANCH
OFFICE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGENCE AGENCY
WORKING PAPER
BRANCH WEEKLY
NOTICE: This document is a working paper.,
an official CIA issuance It has-been
co-ordinated within ORE,, but not with the
IAC Agencies. It represents current think-
ing by specialists in CIA, and is designed
for use by others engaged in similar or
overlapping studies. The opinions expressed
herein may be revised before final and offi-
cial publication. It is intended solely for
the information of the addresses and not for
further dissemination.
DATE: 11 October 1949
AATH: H, L__(
C~A7 J-ALT=-["1(_ REVIEWER: 372044
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For week ending
11 October 1949
The new Austrian Government will be sli htl
less stable tonan Its predecessor, despite a pro a e con-
ua on of the present major party coalition. The
Austrian elections of 9 October showed an appreciable gain
by the new rightist Union of Independents at the expense
of the center, represented by the People's Party and the
Sodialistse The,Union, which captured almost 500,000 votes,
is an untried political group largely supported by ex-Nazis
who were voting for the first time, The Communist bloc,
although small, succeeded in maintaining its past relative
ositins As a consequence, the moderate parties will be
under increased pressure from both extremes. This will be
WESTERN EUROPE BRANCH
WEEKLY SMWFrf
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particularly true In the case of the People's Party
because of its loose internal organizations
The influential and highly conservative wing
of the People's Party will be inclined to work with the
rightist Union of Independents rather than with the
Socialists. The Socialists, who suffered a relative loss
of strength, were probably handicapped by some labor dis-
satisfaction a The gain, though only ace 38,000 votes!.,
registered by the bloc of Communists and left-wing
Socialists, will contribute to Socialist hesitation in
submerging Socialist economic theory to coalition harmony.
As the 1949 Austrian electorate included almost
900,000 new voters, the new political scene is characterised
largely by the definite groupie; of the ex-1Qazis under a
separate political banner rather than their submergence
within existing parties. Since the Allied Council has not
extended recognition to the Union as a political party, the
possibility remains that the Council may have to take action
before Union members of parliariont are fully accredited.
FRANCE
The humaining s tion of French labor has been
strengthens an a result o the collapse o ueuille
Government on the issue of laborts demands. Another Third
Force Government can be expected to make a prompt concession
to labor,, probably in the form of a cost-of-living bonus to
all workers. Serious labor unrest,, however, is likely to
be prolonged throughout this fall until basic wage levels
are substantially raised and a return to collective bargaining
is begun. The workerst extreme distrust of the late Cueuille
Goverment will be carried over as an initial handicap of the
next Third Force Government. The movement toward "unity of
action" initiated by the CGT will be only temporarily slowed
by the granting of a bonus and the promise of a gradual re-
turn to collective bargaining; whereas the Government's prob-
able refusal of an immediate material increase in basic wages
will soon give the unity movement new strength. Although in
the past the General Confederation of Labor (CGT) has found
it necessary to retard its strike program in view of the firm
opposition of leaders of the Force Ouvriere (FO) to "unity of
action", the CGT is now on the alert to take full advantage
of the increased rank and file pressure for higher wages
The FO, still opposed to "unity of action" with the CGT, has
recommended the reconstitution of the labor union "cartel"
composed of F0, the Christian Labor Confederation (CFTC) and
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the Technicians Union (CGC) for joint action on the
labor problem, The outlook for restoration of political
stability is therefore clouded not only by the Third
Force's present economic differences and by the imminence
of widespread strikes, but also by the better organized
demands of non.-Communist labor, which is an important
segment of the Third Force's support.
Aux
Cc etion of the Benelux Economic Union in 1950
seems more likely a any time a8 raw
months in view of the signing of the preliminary Benelux
Economic Union agreement on 5 October. Initiation of the
preliminary Economic Union, originally scheduled for 1 July
19499 has been delayed by conditions resulting in a chronic
Dutch trade deficit with Belgo'.Luxembourg. Devaluation of
the Dutch guilder in terms of Belgian francs is expected
gradually to bring the intra-Benelux trade balance into
closer equilibriums, and may even increase the total volume
of trade between Beige-Luxembourg and the Netherlands
Belgian exporters of textiles and metal products, for
example, are expected to benefit somewhat from the increased
Dutch import quotas and the removal of Dutch license re-
strictions on 30% of Bel.go-Luxembourg exports to the
Netherlands. On the other handy Dutch agricultural products
will be exported to Belgium without any restrictions, although
minimum price provisions will be maintained by the Belgian
Goverment a
ITALY
e US because of a series of developments emphasized
in enlisting popular support or close collaboration
he Italian Government ma have increase dif'f
by the news of Soviet atomic power. To date there is no
apparent change in the attitude of Italians toward the US
and USSR, although there has been a greater demand for
atomic energy control agreements and somewhat more poasi-
mism regarding the prospect for peace. The relative calm
with which Italians took President Truman's announcement of
the Soviet explosion may,, however,, prove deceptive, for
other events coincide inopportunely to influence the Italian
attitudes Italians have been disappointed by the out in ERP
aid. They are worried over the possibility that western
military planners have "written off" Italy in the event of
wars for they have noted that Marshall Montgomery's field
E T
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~T
inspection of western defenses stopped at the Franco-~
Italian border. This concern may be magnified by
Italy's failure to get representation on a par with the
UK and France in the Atlantic Pact organisations
Italians arc still resentful of the exclusiveness of US-
tK deliberations leading to sterling devaluation.
Certain possibilities for the future also loom
as irritants, There may be adverse Italian reaction to
disposition by the UNGA of the former Italian colonies.
Furthermore, western devaluations may result in a
deterioration of the Italian export position, precipitat-
Ing strong pressure for Increased trade with eastorn
Europe.
The net result of these developments may be a
weakening of the strongly pro-US attitude which has pre-
vailed In Italy, In the long-range view, unless the
Italians are impressed by some compensatory western action,
they may soften their attitude toward the USSR, especially
If their hope of peace appreciably fades.
SPAIN
h Mqngrc,
i s to and the non-G' car mun t Le ft
previous time in the past three years, during which they
have slowly moved toward a workable coalition of anti-
Franco forces.. Offsetting factors, however, still throw
the scales in favor of the Caudillo. Don Juan's suppor..
tern are attempting to close ranks and to lay plans for
action in expectation that Franco will soon be compelled
,to retire from power in favor of the Pretender. Don Juan
and his advisors apparently estimate that the econcnjc
situation in Spain may reach such an acute stage this fall
that the Array will withdraw its support from Franco and
restoration of the monarchy can be effected. The new
agreement between the Monarchists and non-Communist elements
of the leftist opposition to Franco guarantees to Don Juan
the support for a four-year period of large sectors of the
Socialist Party* the Socialist labor organization (UGT) and
the Anarchist labor union (CNT) , and removes the last
obstacle to full collaboration among the groups favoring the
restoration as the only feasible means of ousting Franco by
peaceful means.
Meanwhile Monarchist agitation among Army officers
and the clergy has been intensified, and it is reported that
attempts have been made to sound out the views of the French
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ate; British Governments. Monarchist propaganda stresses
the tact that Fxmnao, despite all his pramisea, has been
unable to secure foreign financial assistance. it is
impossible at this time to gauge conclusively the
et1'ectivenesa of this agitations but it is significant
that the Spanish secret police have issued new orders
listing Don Jan Monarchists as dangerous subversive ale.
gents,, and that the officers of at least one elite rag-,_
Mont have been placed under surveillance.
The Mdonarchist-Leftist efforts may be aided by
the current sharpening of criticism of the regime, already
*ideapread throughout Spain, and by a now "decidedly
liberal reaction" reported among university students,
Such a climate of opinion historically has been among the
important factors in previous changes of regime in Spain,
On the other hand, other developments tend to
bolster the Franco Government. Recent international
developments (i0e. the visits to Spain of US congressmen
and units of the US Navy, pronouncements of US political
leaders favoring aid to 5 ain, and the announcement of
the USSR atomic explosion) will undoubtedly revive hopes,
especially among the military, that Francois regime will
receive financial aid and will be included in the Atlantic
Pact. This belief may reinforce Army loyalty and enable
the Caudillo to overcame any measure of disaffection Don
Juan is able to produce in the near futures
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