WESTERN EUROPE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00865A002400010001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 15, 2016
• Document Release Date: August 12, 2004
• Sequence Number: 1
• Publication Date: December 18, 1975
• Content Type: NOTES

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Inner-German Relations Again A Disputed Topic
in West Germany . . . . . . . . . . . . . . . 4
Britain Bails Out Chrysler Subsidiary . . . . . 6
British Import Controls Barely Worth The
Bother . . . . . . . . . . . . . . . . . . . . 8
Portugal Seeks Help in Solving Economic
Problems . . . . . . . . . . . . . . . . . . . 11
ANNEX
France Edges Toward Allied Arms
Standardization . . . . . . . . . . . . . . . 13
December 18, 1975
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Inner-German Relations Again A Disputed Topic
in West Germany
The status of inner-German relations has
again become the subject of heated debate in
West Germany.
Opposition party leaders have called on
the government to break off negotiations with
East Germany just as the Schmidt government
was ready to conclude an agreement to improve
the transit routes to West Berlin. The opposition
is certain to make the agreement a major issue
in the national electoral campaign if the government
follows through on its plan to sign the agreement.
The opposition was given unexpected political
ammunition when the weekly newsmagazine Der
Spiegel charged on December 15 that East German
authorities have put up for forcible adoption
children whose parents have been caught trying
to flee East Germany. East Berlin labelled
the story an "outright fabrication" and expelled
the magazine's correspondent.
The West German government, however, claims
to know of five cases in which the East Germans
took custody of the children of parents who
attempted to flee to West Germany; in two cases,
the parents were deported and the children put
up for adoption. A government spokesman said
that Bonn has attempted to persuade East Berlin
to return the children to their parents. Bonn
has also protested the expulsion of the correspondent.
December 18, 1975
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The timing of the Spiegel story came at
a most unpropitious time for the Schmidt government.
Bonn had hoped--and apparently still intends--
to conclude this week the package deal with
East Germany to improve the road and transit
routes to West Berlin.
The opposition in any event probably would
have criticized this agreement as being too
favorable to the East Germans. Now it is almost
certain to broaden its attack to include the
charge that the Schmidt government--like the
Brandt government--has mishandled the entire
scope of East-West German relations.
I I
December 18, 1975
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Britain Bails Out Chrysler Subsidiary
Parliament grudgingly approved yesterday a
$325 million plan to aid Chrysler's ailing UK subsidiary.
The move ends nearly two months of speculation regarding
the future of Chrysler's operations in Britain.
Chrysler's bail-out is the second within Britain's
auto industry this year, a symptom of the serious
problems facing it. Poor quality, bad industrial relations,
an unsatisfactory delivery record, and low productivity
affect all of Britain's auto firms. Reflecting these
problems, the Labor government assumed majority control
of British Leyland in August of this year. That measure
called for the infusion of nearly $3 billion in the
company by 1982.
There had been considerable public and private de-
bate concerning the bail-out of Chrysler. The left
wing of the Labor Party objected to the plan because it
does not give the government an equity holding in the
corporation. The right wing opposed it because it under-
mines the government's new industrial strategy of backing
winners. opposition also came from the Liberal and
Conservative parties.
Some members of the Cabinet, including Industry
Secretary Varley, were strongly opposed to any form of aid
to Chrysler. The influencing factors, however, were
the potential impact of Chrysler's closing on employment
and on automotive export sales, particularly to Iran.
Chrysler employs some 25,000 workers in the UK.
The Chrysler operation helps to support 1,800 workers
employed by dealerships and 70,000 workers employed by
component manufactures. Despite the government's efforts,
at least 8,000 jobs at Chrysler will be lost, adding to
the rising tide of unemployment in Britain.
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Another factor underlying the government's move
to aid Chrysler was the government's fear that the clos-
ing of the Linwood plant, located near Glasgow, would
aid the Scottish nationalists' cause. The Wilson govern-
ment indicated that Chrysler's operations would be
streamlined by moving the assembly of the Avenger model
from Coventry, England to the Linwood plant.
December 18, 1975
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British Import Controls Barely Worth The Bother
Britain announced today a series of highly
selective, very mild import controls. The announce-
ment ends months of speculation regarding the possible
imposition of such controls. The thinness of the
package reflects London's hopes to placate trade
unionists without sparking a major international
protest.
The import controls include:
--Quotas on cotton yarns from Spain; the 1976
quota will be set slightly above the 1975
volume of imports
--Quotas on cotton yarn and synthetic fibres
from Portughl, which will remain in existence
until a new EC trade agreement is negotiated
with Portugal.
--The Government will open discussions with
Eastern European countries aimed at agreeing
levels of restraint on their exports of men's
woolen suits to the United Kingdom.
--Poland, Czechoslovakia and Romania will be
invited to continue their existing restraint
on exports of men's leather footwear throughout
1976, and to extend a similar voluntary restraint
on women's and children's leather footwear.
--Establishment of an import "surveillance"
scheme to monitor--but not to restrict--the
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importation of color TV sets and tubes and
black and white portables from all sources,
including other EC members.
The items selected for control came as no surprise.
The Wilson government had long singled out these items
as potential candidates for controls. The restrictions
are, however, even more limited in scope than had been
expected, apparently due to pressure placed on the
British by the US and several EC members. As was
expected, no quotas were established for autos.
The measures are largely a response to trade
union demands that the government step up its attack
on unemployment. In August, total unemployment passed
the politically sensitive 1 million mark and is
expected to reach 1.2 million before the current
recession bottoms out next year. The textile, shoe,
and television tube industries have been particularly
hard hit. During the first half of this year, the
color television industry, for instance, was running
at 50 percent of capacity. At the same time, foreign
imports accounted for over 50 percent of sales in the
British market.
The measures are also a token attempt to improve
Britain's payments deficit. While the balance of
payments deficit is down from 1974, it is still
expected to reach $4 billion for the year. In contrast
to last year, Britain is having difficulty financing
its deficit due, in large part, to the reduction in
OPEC sterling holdings. As a consequence, Britain
announced in November its plan to borrow $2 billion
from the IMF.
While the protectionist measures may appease the
demands of Britain's Trades Union Congress and left
wing of the Labor party, London may come under attack
from its trading partners. In the EC, the Commission
is relieved that the UK action was not more comprehen-
sive but annoyed with the "ridiculous" British course
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and with the UK's failure to seek justification under
EC rules for any of its actions. The Commission must
now decide whether to let these measures remain in
effect, although they are illegal under EC treaty
commitments, or to try to persuade the British to
revoke.
Under the General Agreement on Tariffs and Trade,
Director General Long is considering calling a council
meeting, perhaps on December 22, at which time the UK
could discuss its controls. Long believes that a
probably council determination that the measures are
minor and do not contravene the UK's obligations under
the General Treaty on Tariffs and Trade would help
prevent the UK action from providing an excuse for
other countries to introduce import controls.
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Portugal Seeks Help in Solving Economic Problems
The West Germans are considering a loan to
Portugal to help resolve Lisbon's impending inter-
national liquidity crisis. The non-Communists who
now dominate Portuguese politics fear that, without
foreign assistance, the severe economic restrictions
the government would be forced to adopt would provoke
popular unrest and threaten political stability.
Chancellor Schmidt told newsmen on Wednesday
that the West Germans were contemplating extending
credit to the Portuguese central bank. Schmidt
indicated a proposal was being studied that was
similar to the arrangement with Italy in which the
Italians received a $2 billion credit by putting
up their gold reserves as collateral. Bonn has
already agreed to give Lisbon $27 million in bi-
lateral aid, but Schmidt gave no figure for this
latest proposal.
The announcement followed Schmidt's discussions
with Portuguese Socialist Party head Soares, who is
on a week-long tour of European capitals to explain
recent developments in Portugal. Soares' mission is
partisan rather than official, but any aid commitments
he can produce will enhance the Socialists' popularity
in legislative elections promised for next spring.
Soares has emphasized in his talks with foreign
leaders that the political situation in Portugal
is stabilizing, but that the country urgently needs
economic assistance. Portugal's foreign exchange
reserves are expected to run out early next year.
The nation's gold reserves, valued at about $4
billion at the present rate, were expected to fore-
stall the crisis, but government efforts to sell or
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borrow against the gold have been unsatisfactory,
due in large part to the gold market's current
instability and the reluctance of bankers to deal
in large quantities of gold.
The Azevedo government expects to approve the
first of a series of austerity measures--including
a wage freeze and price and tax increases--at
Friday's cabinet session. Government officials
believe they have gained sufficient strength since
the November 25 paratroop uprising to move ahead
with such measures. These officials nevertheless
fear that without foreign assistance the more
severe restrictions that would be necessary might
set off popular protests, which could provide the
Communists with an opportunity to stage a political
comeback.
While the cabinet is concentrating on the
economy, military leaders have turned their attention
to renegotiating an agreement with the major political
parties over the division of government responsibility
between military officers and civilian politicians.
The armed forces presented a draft revision to the
parties on Wednesday and the parties have until
December 30 to submit their responses and proposals
for a new pact. After the beginning of the year,
a five-man delegation from the all-military
Revolutionary Council will discuss the proposals
with each party and draw up a final document.
The five-man delegation is weighted in favor
of the faction of military officers who have agreed
to reduce the military role in national political
life, but do not want to withdraw from the government
altogether. One of the members of this group,
Lisbon region commander Lourenco, said recently
that the military should quit politics at the
"right moment"--but that this would not occur
immediately following the legislative elections
in the spring.
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France Edges Toward Allied Arms Standardization
The need for greater allied efforts in the area
of arms standardization was the major topic at the
meetings of foreign and defense ministers of the
NATO countries in Brussels last week.
Allied concern over steadily increasing Soviet
military might and growing economic pressures in
the NATO states have combined to give new urgency
to a concept that is as old as the alliance itself.
A compromise approach has been worked out that
satisfies both France, which wants to emphasize the
European component of a standardization effort, and
the other allies, who do not want to lose sight of
cooperation within the Alliance as a whole.
France will participate in a temporary NATO
committee, but its mandate has been restricted to
studying how to facilitate inter-changeability of
equipment--in effect, an early stage of standardiza-
tion. The committee will prepare an action program
for presentation to the NATO ministers when they
meet in Oslo next May The committee will try to
determine the areas where action is most urgently
needed--perhaps communications and ammunition, as
the French have suggested.
French Reluctance
Despite French reluctance, the allies agreed
in principle last week to continue discussions
within NATO on the broader questions of transatlantic
standardization, procurement, and research and de-
velopment. France insists that policy guidelines on
these issues must first be developed among the
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Europeans. This is critical, Paris argues, if
European industrial and technical capabilities are
to be protected in transatlantic competition.
Just recently, the French agreed to participate
in a purely European effort to promote the joint
production of equipment based on common requirements.
An informal group of European officials will meet
next month to begin studying how much cooperation
may be possible. A proposal to create a European
arms procurement agency, meanwhile, was rejected
by the French on the grounds that it would be too
closely linked to NATO or its Eurogroup.
The allies are willing to accept for now the
French-imposed limitations on NATO efforts as a
price for getting France involved at all in the
standardization effort. The Belgians and the West
Germans, in particular, recognize the delicacy of
the French situation with regard to participation
in "Atlantic" schemes.
Domestic political opposition in France to
participation in any standardization scheme is in-
tense both on the left and on the right. The decision
to involve France, even in such a modest fashion,
reportedly was made by President Giscard only after
much internal wrangling.
Giscard continues to maintain that an independent
defense policy remains a fundamental tenet of French
global strategy. He recognizes, however, that greater
European collaboration in arms efforts could lead to
more orders for French arms makers, bolstering em-
ployment and the economy in general.
Another factor is that France is committed to
involvement in NATO's contingency planning for con-
ventional attack. This improves the prospect that
Paris will further efforts toward standardization.
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France will presumably seek to establish
specific projects for inter-European cooperation
within the new informal European group. The aim
will be to assure an important role for French
industry and to achieve a measure of European unity
before engaging in NATO-wide negotiations. At the
same time, of course, Paris will continue to seek
bilateral deals with the US that would strengthen
French production capabilities in defense and ad-
vanced technology areas.
The Europeans are willing to play along with
the French so long as some momentum toward standardi-
zation is maintained. They realize that without
French participation there can be no meaningful
rationalization of European defense industries.
Without the French
If the French prove too troublesome in the
European group, however, the allies will again be
tempted to proceed without them. The UK and Italy,
in particular, have warned that there is a limit to
how far the Europeans should go in trying to secure
French involvement.
The UK is especially anxious to see progress
towards a "two-way street" in transatlantic arms
procurement as a means of easing its balance of
payments problems. London is suggesting that some
decision should be reached soon to allow discussions
concerning European collaboration and the two-way
street to proceed in parallel.
The problem of a site for next month's session
with senior West European defense, armaments and
foreign office officials, and subsequent meetings
if they materialize, is illustrative of the sensitivi-
ties aroused by the "NATO-vs-Europe" aspect of the
standardization debate. The French will probably
protest London as a choice, arguing that it is too
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closely identified with the Eurogroup.. Brussels,
the seat of NATO, is even more objectionable to
Paris, and the other Europeans will not contenance
holding meetings in Paris.
A "neutral" city is a more likely choice, and
Bonn may be suggested, but the Dutch for one are
likely to want eventually to stress links with NATO
by holding sessions in Brussels.
The participation of France, even if initially
limited, is seen by many Europeans as providing a
political impetus to European integration. The
French deny any such intention and in fact remain
skeptical of arms cooperation arrangements that
have been proposed by the EC Commission in the context
of a common industrial policy.
Nevertheless, the new European endeavors--
especially if France's partners can sustain the
threat that France might otherwise be relatively
isolated from arms cooperation--contain the seeds
for a more rational division of labor among the
Europeans and establish a forum for arms discussions
that are still regarded as too "political" a burden
for the EC to bear. F_ 1
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Secret
Secret
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