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-RDP79-01090A000400020011-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 11
• Publication Date: December 13, 1949
• Content Type: PAPER

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WESTERN EUROPE DIVISION
OFFICE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGEYCE AGFECY
WORKING PAPER
DIVISION WEEKLY
NOTICE: This document ia a working paper
Mr-al official CIA issuance It has been
oo-Ordinated within ORE but not with the
IAC Agencies. It represents current thinking 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-
eial pilblication. It 13 intended solely for
the information of the addressee an not for
further dissemination
NOTICE; This W00k17 ill not be ublished
Wir-rfi; th wee=s o re7,eiTer-litt
Janumv
DATE: 15 December 1949
DOCUMENT NO.
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WESTERN EUROPE DIVISION
WEEKLY SUISTAMY
VOL. V - No. 21 For week ending
13 December 1949
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AUSTRIA
When UaAaaAgemalgoageletantAustrian treetyals
coneluded, an efficient-and7iTaibii-govggEME-for
Austria 111rest in large part upon two factore:
(a) the degree to which the political influence of
vested interests is controlled; and (b) the ability of
responsible Austrians of all political parties, but
especially the People's Party, to realize that the
nation's beat interests impose certain limitations
upon their activities. The People's Party, which is
Austria"s largest, and is at best a heterogeneous
combination of business, farmer, and white collar
interests, is currently suffering from illnesses arising
fr.= its composition and from the showing of sone of itn
candidates in the October elections. These maladies
eftphasise the necessity for some shifts of policy and
point up the fact that long-range improvmnent in the
Party's outlook will come only from a deeper understanding
of Austria's national interests.
The October elections showed that party rank
and-filo was not entirely satisfied with the economic
policies pursued by the party leadership, dominated by
the industrialist element, which has entrenched itself
In strategic government poets-, and in the nationalized
-industries. The iadustrialista, and business interestas
who have profited personally from the political regime,
have continued to press for economic programs to free
Austria's still unhealthy economy from controls limiting
corporation profits, and have frequently failed to
utilizeaEffectively Austria's limited resourcea. Although
the PeoPlets Partyvs major competitor, the Socteliat
Party, lost mere in the elections, it (and also zne Union
of Independents) ran an effeotive campaign against
governmental corruption, price rises, uneconomical fiscal
programs, and monopolintic practioes.
People's Party agreement to Socisaist adminis-
tration of the nationalized industriee was the first
indication that the industrialist throttle-hold-on the
Party was being weakened. In more recent weeks,
legislatien on raw material controls, price rollbacks:,
and promises of cartel controls -- all opposed by the
-business group -- have been annnuncedc, Variouu cammercial.
scandals involving People's Party members havef'mcreased
the Party's realization that a clean-up and a return to
better politics is in order*
Despite the fact that the industrialists remain
the strongest elmment in the.PeopleOs Party, Austria today
has its bast opportunity since the War to mature
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politically. ECA presently exerts a continuing pressure
on Austrian officials to pursu4 sound economic
practices. The Socialists., who have a better record of
comprOmieing in the Interests of the national economy,
are now in a better position to watch their coalition
partner, Tho improvement in the Austrian ECA organiza-
tion, and the appointment of a non-political and forceful
person as its head, are promising. This is not to say
that business groups will not attempt to operate as
Usual; and People's Party leaders within the Government
still will probably tend to cover up for business and
to take ineffectual corrective measures.
FRANCE
The French military campaigntagalut Vietnamese
tisslattiamatiguttat wIIro aby not be hampered 'Sy the
current political difficulties of the Gov.rnment In its
defense of proposed increases in both expenditures and
taxes for 1950. Although budgeted exnenditures
for the campaign in Vietnam are being only slightly in-
creased in 1950 over 1949--from 107 to 115 billion franco--,
the French are likely to spend a considerably larger sum
for this purpose in the coming year. As in 1949! the
difference will probably be handled by a bookkeepIng opera-
tion of which that public is seemingly not aware. The
Assembly's Finance Commission has already approved the
proposed military budget of 420 billion francs (18.3% of
the total budgetj or 2.3% less than in 1949)D Including
the som4what larger credits directly requested for the
Vietnameee campaign.
The difference between budgeted and actual
expenditures for the Vietnamese campaign was handled in
1949 in the French Treasury's special account with the
Bank of Indochina. The latter issued eurrency (plastrec)
as needed to meet deficits In current military expenses
In Vietnam. Since free tram:for of onpital from Vietnam
to France is pemitted$ the rank of Indochina loans have
resulted in capital transfers to France necessitating re
payment to the Bank from the French Teeasury in francs.
The net burden on the French Treasury imposed
by these payments to the Bank of IndoehLea$ beyond
budgeted expenses, will probably run to about 60 billion
francs for 1949$ equa13Sne about one-third of the
Treasury's inflationary financinr for the year. Although
Minister of Defense "Tone Pleven and Modernization Director
Jean Monnet have endeavored recently to have the piastre-
franc transfers restricted Minister of Finance Maurice
Petsche has successfully contended that such action
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would create inflation in Vietnam critically detrhaental
to the Bao Dai regime; and would in effect read
Vietnam out of the French. Union
The hoatIiitv of some French economic ani
olitical s roaer-4ialbei,,sa.ra-74::traqp
W Ma .e) more rfiTaTE-W767r.cierneiirThrrie-Fts e;ego-
tiations for the advancanent.of western European economic
integration. The French aro proceeding cautiously in the
current "Fritalux" discussions with Benelux and Italy,
showing coolness toward the admiesion of Germany without
the UK, and opposing extensive removal of quantitative
-import restrictions in the near futuroo This caution is
largely a reflection of the delicate political pcsition
In the Bidault Government under pressure from econemtc
groups
Labor, industry, and agricultural groups hay
already shown hostility to the GovernmeAat's removal of
some import. quotas The farm bloc (CGA) and the
employers' bloc (CNPF), both professing firm support for
the principle of over-all liberalization of etrado, are
firmly opposed to any regional Integration resulting in
competitive lamports Labor is eapecially wary or in-
creased unemployment Fear of more German competition
especially in the stool Industry, Is prevalent among
both employers and laboro
Spokesmen for the Socialiste and the indopenden
have contended that the UK must be ineludod In any plane
for western European Lategration Beeause tha French see
the UK as an essential counterbalance for west Germany La
an integrated Wentern :6urope, France is likely to agree to
west Germany's admission Into ary economic unien. only after
reaching agreement with the UK. This delay; however, in
steps toward the economic Integration of western Europe -
disappoints EGA vs expectations that P7a1106.3 would take tha
lead in progress toward this goal,
e,
FRMICH AND SPANISH NORTH AND rEST AFRICA
The French Goverepontv, ifitualldaLjapimbe.
uestion of US cciiiitlilatoryitialte in Morocco to the
ar i the-nationalTourt of Justice may
result eventually In the loss of the unique US peoition
In Morocco and in turn encourego the Moroccan nationalists
toward a rapprochement with the COMM711iStS. Cencoivably,
this arbitral action might boomerang an the French, by
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precipitating an investigation of Franco lz application
of the 1912 Treaty of Fez; by virtue of which France
controls Morocco
Appeal to the International Court will occur
upon the expiration an 31 December of the temporary
US assent-to the epplication or French Moroccan import
regulations to US businessmen in, Morocco. The French
claim thatthis appeal is the best solution and the
only alternative to the current; unsatisfactory agree-
ment. The French insist that the appeal to arbitration
is not an unfriendly gesture, but the fact remains that
a deep resentment has developed in the French Government
and among the French people toward the privileged
position enjoyed by US interests In Morocco
A judgment favorable to France would abrogate
the 1836 treaty between the US and the Sultan of Morocco?
and would necessitate the negotiation by the US of a
treaty with France, relegating US trading interests to
the less. favorable level of those of other nations.
Annulment of this century-old treaty would deprive the
Sultan of the greater part of his restricted sovereignty,
and, consevently might alienate the nationalists fran
the US.
BELGIUM
1391 Ian u4Pral101.1m6Tb. iRea4Pecte4 t9erP,M417LEI.
the precen,, level,v-ilift3h-EiTy even becani higher
because of (1) the continuing depressed state of the
coal industry; (2) reduced activity in the steel and
metallurgical Industry; (3) the Inability of Belgian
seasonal workers to Mad employment; and (4) the inereae-
ing numbers of unemployed or striking Belgian frontalioes
(people who live in Belgium and work in France). The
November average number of unemployed of 260p700 compares
with the October figure of 246500,, and a continued decline
in Belgian industrial activity will doubtless throw more
out of work. The Government7s program to combat unemploy-
ment through public works, low cost housing construction,
and the establishnent of new industries will take some
time to carry out; meantime; continuation of the high level
of unempio-xent will result in increased labor protests
with unfavorable political consequences for the coalition
Government.
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ITALY
A Sulit in the Ia1iari Communist_T!Ttm(PCI)
ay occur o rema ns an rower 1.79.1715hiria
Iiya-ca-atia regional elections in the spring of 1950Q A
problem is nosed for the PCI, whlch has preferred to be
a mass party by the growing "nationalist" deviation
encouraged by Tito!s succeesful defiance of the
Cominform0
The PCI v pursuing a generally moderate pollcyF
has had as an asset the poor soolo-aeaaomic conditions
In Italy and its dynamic program for the alleviation of
such conditions has been its major attrection. On tlea
other hand) the Partyls ineernational stand (subservieime
to USSR foreign polic7a and oppoeitior to ERP despite
its obvious benefits to the nation) has been a definite
cause of Party stress and stretr,
Because many in the Party have been dubious about
its International standj the success of ?itocs nationalist
Communism Is more and more encouraging similar deviation
in the PCI ranks, Deviationist eleelents are active in
varying degrees of strength in many large cities of Italy
Efforts are being mado evaecially by Paety members who
fought in Spain to orient the Perty around rtalys
interests ther than arouqd the Coainfoem The looal
Party in the industrial city of Terni bac already formed
a nationalist group, A mall group of PCI members 'demi
recently purged for visiting BeicraJec Although no out-
standing Comrunist figures have yet been clearly connected
with a nationalist moveents several aro under suspielonc
Some of the PCI? leaders may wa1i favor a nationalist re-
orientation of the Party, aensint; the potentially 0.6n
appeal of such a shift.
In this situatioa PCI /seders faithful to the
Cominform are faced with a dilemma. If they attempt the
large-scale purgee that may prove progresaively neceasery
if Tito remains in power, they will aleo be severelee
weakening the Party as a mass orgerization; and wil
damage any ehanee it has of 3UCCOSE in the 1950 elections.
If they fail to purge extensively, the hereey will g:low
within the Party.
A moderate policy with limIted "pureing" will
probably pa-even until the communal and regional elections
In the spring. Failure of the Geninferm, heweeero te elim-
inate Tito by that time, and an unsatisfactory POI el-towing
in the Italian spriae elections, would probkbly reit In:
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(1) the "official" displacement of the moderate
Togliatti leadership by Longo-Socchia control, meai-.
.ng a direct action policy and more discipline; and
(2) the emergence of a schismatic national Communist
party.
The scheduled reshuffle of the Italian
Cabinet in eaiT:7URTr7n-Tilier corriErroffEW-Uhristian
Democratic contro of the Government, but wider dF;ree-
ment Among supporters of the Christian Democratic Party
will become manifest. Whether or not Saraoat and oeher
moderate Socialist ministers return in January to t):15
Cabinet from which they withdrew in November the already
dominant influence of the Che.ietien Democrats will
be increasedo Saraoatts group has lost a lerge part of
its following to the new Unitary Socialist Party (23U)p
Moreover, the Christian Demoorats are arrangino fon a
greater concentration of poor n their own hands through
extension of the activitieo of certain economie mid'cstries
held by them. At the same tUne, however, the greater
powers of the Christian Democratic leaders, togothee with
abatement of the Communist threat will bond to ehaopen
dif7erences among the heterogeneous supporters of the
Christian Democrats, particularly with regard to social,
ant economic policies,
Not only are the Left and Right sections of the
Party in conflict on these issues, but the Vatican itself,
and its lay organization, Catholie Action,, era similarly
divided, A fundamental difference of opinion between the
Christian Democratic National Council end the Christian
Democrat-sponsored Free Confederation of Italian Workers
was revealed when the former backed a plan by Christian
Democratic Deputy Fanfani proscribing rigorous anti-
strike legislation, while the latter strenuously opposed
it. Similarly, the have been indication thRt the:
Vatican Undereecretaries oftate, Tardini and Montini,
are at odds on various basic polioies of the Govemaen.,
and they take different sides among the elements in
Catholic Action. Moreover, the now Socialist group (PSU)
will be able in Parliament to exploit Issues on which
agreement has not been achieved wIthin the Christian
Democratic Party
The widtning division within the Christiaa
Democratic Party and among its supporters would complicate
the achievement of important legielaticn. It could even
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bring about realigaftents which would result in th
emergence of a new Catholic Party sparked by a
militant Catholic Action leader, such as Gedda,
who aspires to develop a Government vigorously
reforlmist in the field of social welfare and at the
same time closely id,,ntified with. the Vatican
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