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-RDP79-01090A000400030011-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 11
• Publication Date: March 21, 1950
• Content Type: PAPER

Approved For Relea a 1999/09/02 : CIA-RDP79-0109000400030011-3
R E T
WES'3'ER EUROPE DIVISIO1T
OFFICE OF REPORTS AND ESTIMATES
CENTRAL ~ 111MLLIGENOE AGENCY
WORKING PAPER
DIV.... IISIOR WE Y
NOTICE: This document is a working paper.
i "an official CIA issuance, It has been
co-rordinated within ORE, but not with the
IAC Agencies. It represents current think.
trig by specialists in CIA, and is designed
for use by others engaged in similar or
overlapping studies a The-opinions expressed
herein may be revised before final and.offi
cial publications. It Is intended solely for
the informatiop of the addressee and not for
further disseminations
DATE: 21 Marsh 1950
DECLASS1FIED
LASS. CHANGED TO: TS S C
NEXT REVIEW DATE,:
AUTHt HR
DAT j~! fREVIEWER: 3720-0_ ;
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S E C R E T
WESTERN EUROPE DIVISION
WEEKLY SUMMARY
VOL. VI - No. 11
25X6A
For week ending
21 March 1950
1 -.
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25X6A
B 'The strained wage- rice relationshin Austria
would be fuYMeraggravated- If a probaal le new currency
devaluation takes place. A further reduction in the official
value of the Schilling 3s presaged by the failure of the
Austrian devaluation program of November 1949. The US is
pressing for a unitary rate at this time, which, to be
realistic, would have to be from 26 to 29 schillings to the
dollar, as compared with the present rate of 21=66 applicable
to ECA imports and 14.40 for cost of living" Imports. A
further devaluation is necessary to allow Austria to meet
competition in foreign markets. Internally, however, the
affect of devaluation would not be favorable. Wages have
failed to keep pace with rising living costs after the last
devaluation. A new lowering of the Schilling would have an
inflationary effect by raising the cost of imports. Although
a reduction in subsidies for imports of consumer goods has
been a long-term objective, of the Austrian. Government,
further devaluation of the Schilling, would bring pressures for
a continuance of such subsidies, both to restra?= i rises in the
cost of living and in the cost of production of export goods.
It appears Inevitable that a further devaluation of
the schilling would bring wage-price and budgetary adjustments.
The 1950 budget has already been revised once, a a result of
adjustments necessitated by the November 1949 devaluation. A
new devaluation would require raising the aiioun-;; of schillings
deposited to the ECA counterpart fund, as well as changing
other budgetary estimates.
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PRANCE
B Despite the evident failure of French labor's
current strike efforts,, new strike waves wIll pro a 3,17
emrgewithin the n~few months. In reaction to the
restoration of collective bargaining, management is taking
a firmer stand against labor than was at first anticipated,
and the organization of employers (CNPF) is now determined
that its members shall limit wage increases to 5S' in the
Paris region and 8,1,f> in the provinces. These increases
represent on the average less than half of what even the
most moderate unions are asking, after retreating substan-.
tially from their original demands.
Throughout the country, strikers now include
some employees of public utilities; a large number of
metalworkers, mostly in the provinces; all Communist-led
dockers and some others; textile, building, chemical and
insurance workers; and social security zvrorkors. In many
of these strike sectors, back-to-work movements are grow-
ing, but chiefly as a result of inability to maintain the
strike, and not because the workers are appeased. Many
workers were unprepared, both financially and mentally,
for prolonged or violent strike. action,, and are temporarily
accepting what they consider to be meager offerings on the
part of Industry and the Government.
Nevertheless, union leaders are determined to
force a reduction in the wage-price disparity, as evidenced
by their repeated calls for strike outbreaks all over France,
despite the fact that almost everyone except the anion
leaders admits that labor has little chance of getting more
than management offers in original bargaining.
The stern opposition to labor's legitimate economic
demands, when the restoration of collective bargaining
offered the long-awaited promise of remedial action, will make
the workers increasingly receptive to Communist propaganda.,
which will reach new heights with the arrival of US arms aid
next moth.
BELGI171
The fall of the Bel ian Catholic-Liberal Cabinet
indicates no on y e bitter poll:151cal _e_ ii1 iii I- Vi of the country on the issue of King Leopold$s status, but
also the complete preoccupation of Belgian officials with
the question, to the detriment of other dcmeztie and inter-
national problems., The Catholic Party leaders may soon be
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able to form a Cabinet (possibly including Flemish Liberals)
designed solely to obtain parliamentary approval of King
Leopold's return, and they may be successful in accomplish-'
ing this sole objective. If, however, as seems likely,
Leopold does return, it will be some time before the con-
troversy subsides sufficiently for a relatively stable Belgian
Goverment to devote a proper amount of time to other issues.
The short-range effects of the royal controversy
are certainly a period of Government instability, walk-out
strikes, and mounting charges and countercharges among the
political parties. 'ie moderates from the three non-Communist
political parties express increasing anxiety that the
permanent divisive effects of the controversy will be serious,
and they are showing greater interest in having the King ' .
return merely to clear his name, and then abdicate in favor
of his eldest son, Prince Boudouin, The-political leaders
closest to Leopold are unlikely, however, to advize such a
course,
In the event of Leopold's restoration, the Catholics
probably would have difficulty forming a stable Government,
and there is the possibility of new elections preceded by
approximately six rooks under a "caretaker's government
Instability would then continue if the Catholics did not
receive an absolute parliamentary majoritye
The longer-range results, especially if Leopold
attempts to exert the personal influence in Goverment affairs
he did before the 'Na; probably would include considerably less
unanimity on foreign affairs among the three major parties than
heretofore. The postwar Walloon campaign to obtain decentral-
ization of Government control, until now carried on by small
and ineffective groups, probably would receive more serious
support, and the resulting Flemish-Walloon conflict, enervating
to the central Government undoubtedly would be carried into
all phases of Belgian national life.
B The dangerous Zessimism in some Italian business
circles would--'be" deepened If the removal on I March of all
restrictions on the industrial use of electricity fails to
bring a rise in industrial production indices. This
pessimism has been observed, despite assurances br the
Government that all is well. Businocsmen point to the decline
in exports, the drop in wholesale prices, and the increased
Inventories as indications of a trend toward recession.
Industrial production indices have also been lower,
compared to the May--July 1949 averages, but they have been
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Inconclusive because of electric power restrictions, which
have been In force since the end of Tu17 1949, and perhaps
because of seasonal factors. The pessimistic maintain,
however, that the indices dropped because of a ,eneral
decline In consumer demand. This interpretation would gain
credence if the indices do not rise in March; the resultant
unhealthy economic atmosphere would work against the ERP
I T 3-
a y
...+ .+. uaiy MI- W L.sLUU UrU Lea oy Tine
recent v o'p'en s'tr kes n the Venice area. A delay in the
payments of workers at the Breda plant at Porto 1larghera,
causing the workers to fear a closedown of the plant, enabled
Communist union leaders to launch a strike provoking violence
and bloodshed. This, in turn, was the excuse far a Communist.
led general. strike in the Venetian area, affectln" more than
10% of Italy's Population' The failure of the Communists to
win the support of the non-Communist labor federations for
this demonstration weakened it only slightly because it is
precisely in the uneoonomlo, overstaffed heavy industries
that the Communists have best maintained their hold against
the inroads of the non-Communist federations.
During the period of Fascist ".self sufficiency"
and military adventures, many plants for the manufacture of
arms and heavy equipment were doveicped, with strong monetary
support of the national Government, despite I ta1i's dearth
of natural resources. The -gradual elimination of thesc
uneconomic units is essential to the achievement of
Italian economic viability. This would mean at least a
short-run increase in unemployment. Until more capital is
available to develop industry better suited to Italian
resources and world markets than the war materiel Industry,
the reduction in the labor force of these uneconomic enter-
prises will continue to provide a live issue to the
Communist-led General Confederation of Labor.
Aware that these industries can not pay their way
with the present trickle of orders, and yet loath, to increase
unemployment, the Government will urge that the plants be
used for the manufacture in Italy of war materiel under
MAP. Although the ECA goal of reorganizing Italian Industry
along more rational lines will not be advanced thereby, the
Govorrm ont will insist upon the advantage o:" using the plants
to gain a breathing spell, during which it would hope to
develop alternative fields of emplo ,merit t,
r
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