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-RDP79-01090A000400030010-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 10
• Publication Date: March 14, 1950
• Content Type: PAPER

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WESTERN EUROPE DIVISION
OFFICE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGENCE AGENCY
DIVISION WEEKLY
NOTICE: This document is a working paper,
O. 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 addressee and not for
further dissemination
Included in this issue is a special article on:
Progress of French Tax Reform Program
DATE/V Yy' /f REVIEWER: 372 2044
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WESTERN EUROPE DIVISION
For week ending
VOL. VI a No, 10 14 March 1950
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S E C R E T
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Austria's unemployment problem will demand more
attention ur g 0c. Although Austria has a c ose'o
Full emp' Toyment since the end of the War, this phase
appears to have ended. The 1949-50 midwinter unemployment
levels have reached almost 10,rj of the total working popula-.
tion, a postwar record. Maintenance of full employment
during 1950 will be difficult because: (1) short-run
unemployment is expected from the developing rationalization
of industry, (2) any contraction of administrative activities
by the Western occupation forces, and Austrian Government
plans to eliminate surplus administrative employees, will
release substantial numbers of employees. (3) the perennial
surplus of white collar workers (presently about 159000) will
probably continue, and (4) tho progressive completion of re-
construction and reconversion activities will eliminate large
numbers of workers. The absorption of workers from the con-
struction industry will prove especially difficult, because
there have been about four times as many persons employed in
this industry as there were before the war.
The Government, under rising labor pressures to
take energetic steps, will be only partially successful in
alleviating unemployment in the construction industry, if
ECA, as expected, releases funds for housing and capital
construction. Consequently, higher levels of unemployment
in 1950 will probably force the Socialist Party to follow
more aggressive labor policies to combat Communist
exploitation of labor grievances.
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The Bidault Government's chances of remaining
in power du-ring the nee few wee s are mprove , The
recent wave of strikes for higher wages could have
seriously weakened the Government's stability, but the
Communist threat to spread social disorder and sabotage
the MDAP has momentarily made the Government more
cohesive. Both the anti-sabotage bill recently passed in
the Assembly and the gradual subsiding of the strike wave
have temporarily reduced the threat of Government collapse
and the Communists' ability to spread disorder throughout
the nation. Government unity appears, however, to be only
temporary, and dissension among political parties is likely
to be again intensified when controversial domestic issues
are debated in Parliament in the near future,
At this time, both the Socialists and Radical
Socialists are reluctant to be responsible for the fall of
the Government, especially in the face of the Communist
threat to the security,; of the nation. The recent defection
of the Socialists from the Cabinet has left Bidault with a
shaky minority Government. The Socialists are giving
Bidault only conditional support, and could cause a political
crisis, although they are reluctant tolfollow this course
since they hope, over a period of time, to regain some of
labor's support by defending the workers' interests from out-
side the Government. Also, the Radical Socialists could re-
fuse to support the Government on a wage-price issue.
However, the party will probably be more hesitant to take
this step prior to the reform of the present electoral law.,
Bidault, who has consistently demanded votes of
confidence in the Assembly in order to remain in power, will
probably continue to rely on this technique until forced out
by an adverse vote or a motion of censure. Thus far, the
opposition has been unable to muster the total of 311 votes
constitutionally required to overturn the Government.
The current wave of strikes in France ma recede
despite the attempts R "Mg Communists to impede MDAF
shipments by exploiting labor's genuine grievances, The
Communists are making strenuous efforts to incite a peak
number of walk-outs when the first shipments of materiel
arrive. The ostensible aims of the Communists are large
wage increases and a cost-of-living bonus. Their real
political purpose, however, is understood by the workers,
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who are apathetic and unlikely to assist the Communist
effort. Not only are strikers (weekly aided by the unions)
financially unable to hold out over a long period, but they
are increasingly resentful of being used as tools for the
furtherance of Communist objectives. Those factors, and
the growing tendency of the non-Communist unions to act
independently, are working to the advantage of the employers.
In the transport strike, where only the General Confederation
of Workers (CGT) remains out, the non-Communist unions have
accepted the Government's terms.
The strike movement, which mushroomed on a nation-
wide basis two weeks ago, still claims a large number of
workers in new strike areas, but many of the original strikers
(including 50.,000--or about one-third--of the striking Paris
metalworkers) have accepted the terms of their employers, and
have returned to work. Union demands, which, according to
reports, range as high as a 25% wage increase in some
nationalized industries, are being pared down by private
industry, and, to an even greater extent, by the Government,
in final agreements. The Government is financially more
hard-pressed than high-profit private employers, and is also
more interested in preventing inflation and in stabilizing
the national economy. It is, therefore, likely that in the
immediate future labor as a whole will gain wage increases
averaging between 5 and 8'%, but no more than a minority of
the workers are likely to receive a temporary 3,000 franc
bonus each month.
FRENCH AND SPANISH NORTH AND WEST AFRICA
smooth the road to a solution o e French-nationalist
conflict in North Africa. Increasing French sensitivity to
any hint of US influence on Arab activities is evident,
coincidentally with more outspoken nationalist bids for US
support.
A fairly strong undercurrent of French uneasiness
over US policy, and even some suspicion of US motives, is
revealed in recent speeches, newspaper articles, and
private conversations. A French official, expressing what
is probably the prevailing opinion among representative
Frenchmen in Algeria, recently emphasized France's grave
problem in North Africa. He charged the US with taking an
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unrealistic attitude toward colonial countries, asserted
that the Atlantic Charter had done "harm", and suggested
that the US must realize that the French are going
through a very difficult period, and that their nerves
are "Jumpy".
Meanwhile, a spokesman for the Tunisian
nationalist labor union (UGTT) has told the US Consul
General at Tunis that in trying to avoid offending the
French, the US underestimates the importance of the Arab
attitude in case of war with the East. He indicated that
the Arabs were not yet committed to either camp and were
open. to persuasion by concrete examples of US friendship.
US pressure on France, he also contended, would force the
French to carry out reforms, while ECA aid would be of
more benefit to Tunisia if allocated directly, rather than
through the French.
It may be inferred from the spokesman's remarks
that the UGTT is not likely to transfer its affiliation from
the pro-Communist World Federation of Trade Unions (WFTU) to
the International Confederation of Free Trade Unions, despite
the pending invitation and the greater ideological attractive-
ness of the latter, as long as immediate gains appear to be
more likely through association with the WFTUo
Kin Leo olds failure to receive a substantial
majority in e 12 March pop ar consu a on has caused.
a bad split in the .Cabinet, will precipitate a stormy debate
in Parliament, and will make an ultimate settlement of the
issue difficult. Although Leopold, obtained 57% of the total
vote and was supported in seven of the nine Belgian provinces,
he was decisively defeated in the two thickly populated,
industrial, Walloon provinces of Liege and Hainaut, as well
as in Brussels. The Socialists and Communists are, of course;
strongly opposed to Leopold. Within the Government coalition,
some of the Liberal Ministers and some of the Catholic
Ministers are against the King's return. Premier Eyskens
himself is reported to be threatening to resign if the King
does not abdicate. If Eyskens resigns, the pro-Leopold forces
would have extreme difficulty in forming a Cabinet. The
easiest solution seems to be for Leopold to abdicate volun-
tartly. He did, however., receive more than the vote (55;x) he
personally set as necessary to his return, and he has refused
to abdicate during the past five years of bitter controversy.
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THE TIMIRLANDS
Dutch contributions to the Western Union or
Atlantic Pact _ ptems v 1ll' e ~vicer r lire or some? ime,
even r " t e retuc on of Dutch military commitments in
Indonesia. Althot g the MDAP would permit the eventual
equipment of four divisions, the inadequacy of training
personnel and facilities will prevent the formation of an
affective and readily mobilized Array. Adequate Instruction
with modern equipment cannot be given to the men drafted In
1949, who are presently being trained as the first contri-
bution of the Netherlands to a western European defense
force a
The defensive capabilities of the Air Force are,
at present, extremely limited, and the combination of
restricted training facilities and a pre-World War II
concept of Air power among some of the high command is the
most difficult obstacle to overcome. The Navy, however,
might be rapidly integrated as a capable force into a
Western Union Navy. Though it will not be expanded
appreciably, the quality of its personnel Is high,, and Its
ships are relatively modern. 11orale in the Armed Forces
is considerably improved as a result of the Indonesian
agreement, and the growth of any "neutrality complex" in
the Netherlands in the near future 3s not expected to be
sufficiently widespread to deter programing for Western
Union defense.
Land seizures In Ital , which weaken the prestige
of the Govern n. b?ne Communists, are likely to
become widespread unless concessions are promptly made to
the peasants. The main credit for the seeming success of the
seizure movement will go to the Communists, who will gain In
Party and labor followers
In one Important respect, the recent large-scale
land seizures by south Italian peasants differ from those of
last fall. The peasants' action is now for the first time
receiving the support of the non-Communist trade union
organizations, as well as of the Common st-do , i natod General
Labor Confederation (CGIL). This change in policy of the
free federations evidences awareness oa the.' r part that the
issue of land reform is too important for them to stand aloof
and term.- the Corrcnunis is to gain prestige by themselves. It
also indicates their determination to work, even in ways re-
garded as illegal, for Implementation by the Government of its
pledges to the peasants
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S E C R E T
It is doubtful, however, whether this turn of
events will appreciably hasten the implementation of an over-
all agrarian reform programs Despite the retention of Agri-
culture Minister Segni in the Cabinet? and the withdrawal
from the Cabinet of the conservative Liberals, progressive
hopes may be dashed. The draft law for national land
reform has still to be submitted to the Cabinet, and Parlia-
ment has yet to approve the bill before it for restricted
land redistribution in Calabria
The local elections, scheduled for this-spring,
may furnish definite indications that the Government has
suffered by its procrastination in grappling with land
reforms
Traditional Vatican sport for corporativism as a
political an economic system r eing re nforce
emergence of Giuseppe Dossetti.'s loft-wing Christian
Democratic following as a political force to be reckoned with
in Italy. The Dossetti group, which controls about one-third
of the Christian Democratic Party but holds only a few minor
undersecretaryships in the Cabinet,, Insists that Italy should
become something akin to a corporate state. It also wants
Italy to be run by an all-Christian Democratic Government,
rather than a coalition, and Is anxious to acquire major
Cabinet posts, particularly economic posts in order to de-
velop its plan.
The complete dedication of Dossetti's group to
Roman Catholicism makes it influential even among Christian
Democrats who disagree with its social principles. Premier
Do Gasperl is sharply aware of the difficulty of reconciling
the Dossetti policies with those of the rest of his
heterogeneous party, and is deeply alarmed by the possibility
that the Dossetti group might eventually dominate the party.
Donsetti's group could expect support from those
financial Sntorests :hich are interested in the formation of
large trusts made up of related industries (such as textiles
and chemicals), which could be developed to control the
economy of Italy along the vertical lines of the old Fascist
system.
Two aspects of Dossetti's aspirations are in
conflict with '_JS goals for western Europe. The reestablishment
of a corporative system in Italy would probably conflict with
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the US concept of an Italian economy integrated into that
of western Europa, a concept which excludes cartels and
includes liberalization of trade. Furthermore, Dossetti's
formula of "total power for the Christian Democrats"
suggests an undemocratic approach to Italian domestic
politics, while his slogan, "the self-sufficiency of
Catholicism" indicates that an Italian Government domi-
nated by this group might tend to seek a union of Catholic
nations rather than attempt to cooperate in the. Council
of Europe as it is now constitutedo
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SECRET
SPECIAL ARTICLE
PROGRESS OF FRENCH TAX REFORM PROGRAM
The French Governmont's fiscal reform efforts,
though severely handicapped by tradition and political
considerations, are yielding direct results which will
tend gradually to promote French economic and political
stability in keeping with major US aims. These reforms
in the tax system will progressively: (1) tend to bolster
public faith in the Government's financial position and
hence reinforce the present hard-won stability of the franc;
(2) permit a more equitable distribution of the tax burden,,
and thereby lesson social discontent and stimulate business
activity; and (3) render possible some non-inflationary
increases in expenditures for defense and for higher wages
in the nationalized industries.
In view of the chronic political instability and
the steady increase of tax rates since the War, any expansion
of total tax receipts now depends on thoroughgoing reforms
in methods of levying and collecting taxes. Tax evasion,
which is chronic in France and became a patriotic duty during
the occupation, has been recently estimated to run as high
as 400 billion francs a year, or over 20% of normal tax
receipts,
A comprehensive reform project was initiated in
December 1948, affecting the tax structure, voluntary tax
declarations, and collection methods. As a result, enforce-
ment efforts in 1949 produced a revenue 60 billion francs
greater than in the previous year. Furthermore, better
public cooperation in the Government's effort was apparent,
as declarations for income tax purposes led to a total
assessment in 1949 of 280 billion francs compared to the
Goverment's original estimate of 200 billion for that year.
This year..further substantial benefits are likely
to be derived from the Government's fiscal reforms. For one
thing, the ratio of income tax collections to total Govern-
ment revenues is expected to rise from 16% in 1949 to 24%
in 1950, even though income tax rates have been held fairly
constant. Better enforcement alone is expected to result
in 80 billion francs of additional revenue, of which 10
billion is anticipated from a "single control" system being
introduced for the auditing of business tax records0
The relative success of fiscal reform will be
attained in the face of serious handicaps. The farmers'
relatively large income is not tapped equitably by the
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Government., especially because of the obstacles raised by
the politically powerful agricultural interests. In 1949,
these interests even obtained in Parliament a ceiling on
the total revenue to be collected from farmers., and their
final tax bill amounted to only 1% of their gross income.
In view of the prevalence of small., individually-a-owned
enterprises,, the backwardness of bookkeeping methods and
the traditional use of cash instead of checks,, fully
effective fiscal controls must await a modernization and
rationalization of the nations entire economic structure.
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