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

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000400020009-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 9
• Publication Date: November 29, 1949
• Content Type: PAPER

roved For ReleaA1999
01090040002
WESTERN EUROPE DIVISION
OFFICE OF REPORTS ARID ESTIMATES
CENTRAL INTELLIGENCE AGENCY
W? RKING PAPER
DIVISION WEK Y
NUrICE < This document is a waking paper, NOT an
to Mal CIA issuance c, It has been co-ordinated
within ORE, but not with the TAC Agencies 0 It
represents current thinking by specialists in CTA.,y
and is designed for use by others engaged in
similar or overlapping studies, The opinions
expressed herein may be ruvissd before final and
official publication It 'is intended sole], for
the information of the addressee and not for
further dissemination,
DATE : 29 November 1949
DOCUMENT NO.
NP,,~iANGE IN CLASS ^
DECLASSIFIED
AUT14 7 7
DATE: , ' REVIEWER: 372044
09-7
SASS CHANCED TO: TS S C
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FESTERN EUROPE DIVISION
WEEKLY SU ARY
VOL. V. - No. 20
25X6A
For week ending
29 November 1949
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25X6A SECRET
A The partial! supported general strike in France on 25
November Coes not res. a serious unlimited st kes - cembere
Nevertheless., prices w= continue to rise and the Governmen fs `
current wage and collective bargainin proposals will fail to allay
labor unrest. The Force Ouvriere (Fe , which called the one-day
"warning" demon;trataon n or er to save its following, thereby
reversed its long-established policy of advocating price reductions
rather than increases in money wages. It will continue, however, to
be handicapped in its attempt to lead labor in its current demands,
both by resistance from the Christian Confederation of Labor (CFTC)
and its own wariness of affording opportunities for the Communist-led
General Labor Confederation (CGT) to develop and control rank and
file strike committees, first at the plant and then at the national
level. In general, national labor organizations will not reach unity
of action in the near future, fundauirtci because the workers
themselves remain deeply Jisil.lusioned with union leadership, are
reluctant to lose pay, and lack equal determination to fight for
higher wages.
The Government is prevented by its internal disagreements
from taking decisive action to overcome the basis of the workers'
dissatisfaction. It is not likely to authorize a wage increase for
all workers, pending the return to collective bargaining. Its
current efforts, moreover, toward that objective will not win labor's
approval because: (1) all steps in the process will not be completed
in December; (2) the Government's draft bill does not gear the
mandatory minimum wage to a cost-of-living index, and it contains
stringent ^'ovisions for compulsory arbitration; and (3) the Govern-
ment has not clarified whether employees of the nationalized indus ries
will gain the full advantages of collective bargaining.
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SECRET
any # nd3 ratans t t or c s may consider rearming
western ermany. Although t Assembly acted avorab v to
W401 on decisions for economic and political concessions to
western Germany reached at the recent Foreign Ministers' meeting
in Paris, Gaullist and Rightist opposition during the Assembly
debate revealed widespread fear that security safeguards against
a revival of Germany's war potential had not been adequately
insured. Despite Schuman's insistence that the subject of German
rearmament had not been "envisaged, discussed, or even mentioned"
at the Foreign Ministers' meeting, French apprehension is likely
to grow that gradual incorporation of Germany into western Europe
may eventually involve military concessions.
Approval by the Netherlands Parliament of the Dutch
Indonesian agreement proriably o ne time for the
transfer of sovereignty to the Indonesians by the end of December.
The debate on the agreement is expected to begin about 6 December
in the Second (lower) Chamber, and passage is not expected to be
difficult in view of the announced support of the agreement by
the conservative and influential leader of the Catholic group in
the Chamber. Conservative opposition in the First (upper) Chamber
probably will be stronger, and the two-thirds majority required will
not be easy to secure; approval of the agreement will hinge upon
two or three votes. Most of the Dutch seem to realize, however,
that the agreement is the best obtainable and that open warfare in
Indonesia would probably result from Dutch rejection of the Round
Table Conference decision,
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Nationalist sentiment similar to Titoism has spread to
the ranks m TEMan Socialist Party P I), furnishing
orthodox Socialists in the PSI with an opportunity to press for
a break with the Communists. Such a break would substantially
undermine Coxm nist strength in Italy and would create a group of
potential adherents to any new independent Socialist party, Tto
nationalist sentiment will probably make itself felt among all
but the pro-Communist left wing of the PSI, which at present in-
eludes the directorate. Although Italian Socialism has tradition-
ally been international-winded, it never tolerated foreign domination
of its policies ux til i t became su.bsererient to Italian Cc nunism at
the end of World War Iia The nationalist tendency is evident -in
several developments. Recently ten members of the P,SI made an
unauthorized visit to Belgrade at the invitation of Yugoslav labor
union officials, and for this action were denounced by the PSI
directorate. The PSI center faction is showing dissatisfaction
with the Party's compliant, attitude toward the Italian Communist
Party and Soviet forei&y pol.icy. Furthermore, a centrist leaders
Riccardo Lombardi, is reported to be on Tito's payroll.. Finally,
some PSI members have urgently recomc nded that their party exercise
vigilance to prevent infiltration by Yugoslav agents.
robable that any solution of basic Italian
-
-
financial rablems n Fiat-ion to sterlin~ iFe
a
Ell Fe achieved
a e meeting of g o-M an MR Economic Council IN Dine
on 12 December. Two major factors will govern Italian policies at
this meetings (1) the Italian Government's credit balance of 80
million inconvertible pounds; and (2) Italy's deliberate holding of lira
depreciation relative to the dollar.to about 8% thus far, in order
to prevent higher import prices and inflation. As a consequence of
the sterling devaluation of 3005% relative to the dollar, and the
Anglo-Italian cross-rate agreement of 1948, the lira has appreciated
ii terms of l eterl.ing. This has handicapped Italian exports to the
sterling area and to those areas in which Italian and sterling area
exports compete. Exports of fruits, vegetables, wines, and cotton
textiles, politically and economically important to Italy, have been
particularly affected by this situation.
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The Italiatt, mission, therefor, may first make sor =:
effort to break the cross rate agreement in order to satisfy
Italian exporters who demand that, the Government maintain a
higher pound-lira rate to protect Italian exports to the sterling
area while still hold the dollar-]dire rate down. Tje Italian
mission will not, however, press this proposal against expected
strong British opposition.. A large portion of the Italian
80 million pound balance was accumulated. Through pro-devaluation
speculation by Italian exporters, who took advantage of the wade
gap between the Government-supported cross-rate of ~'14.03 to the
pounds and the much lour black market rate. If the Italian
Government now maintained a cross rate higher then $2.80 to
protect exports, the sau speculation would be encouraged(tbe
more so as the dollar pound cross rate is reported to be as low
as 42.140 on th Italian black mar kot) 0 Ac- a result, ! to 0 s
sterling balances would continue to rise.
To find an outlet for these accumulated balances., Italy
will r naw prossa.ro upon Britain to p armit Italy to invest these
sterling b lances in Italian emigration and investment, in British
controlled axes of Africa. The UK has given littlo encouragement
to past proposals along these lines, and which it would probably still
find unacceptable for both political and economic reasons v
Italy will resist any British suggestions that it pursue
dual official dollar rates (a doe one for imports, and a high one for
exports)., regarding them as unacceptable to the US and contrary to the
Hoffman proposals? Italy will use the failure of various initial
proposals to gain a fora of preferential co noclity a:.gxeemsnt or a
concession from the UK which, wail provide some protection to Italian
fruit and vegetable exports, and to a loser degree, for cotton
textile and wine exports, Although an agreement may be achieved, the
larger problem of the sterling balances will remain unsolved,
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