WEEKLY SUMMARY SPECIAL REPORT POLICIES OF THE NEW SPANISH CABINET

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500020027-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 22, 2016
• Document Release Date: May 14, 2010
• Sequence Number: 27
• Publication Date: May 22, 1970
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Policies of the New Spanish Cabinet
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22 May 1970
No. 0371/70A
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When General Franco announced sweeping changes in his cabinet last
October tr i move aroused much interest because it is likely that this
government will take Spain into the post-Franco era. Cabinet reshuffling in
Madrid has been infrequent-the last major change took place in July 1965.
In making his choices this time, Franco abandoned his usual policy of
keeping a balanced representation of all the major groups that support him
and gave the largest number of portfolios to businessmen and technical
experts who are either members of or associated with members of the
influential Catholic lay organization Opus Dei. These men, called "tech-
nocrats" because of their economic orientation, believe that the political
evolution of Spain requires stronger socioeconomic foundations. In keeping
with this belief, they propose to give priority to the economic modernization
of the country. Political liberalization, in their view, can wait.
Shortly after formation of the cabinet, a leading member announced
that the government had no intention of giving impetus to the very cautious
political evolution that has been taking place in Spain in recent years and
that it would instead place emphasis on changes in foreign policy, especially
in improving ties with Europe. Ironically, this important goal is unlikely to
be achieved until political liberalization takes place.
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New Cabinet Appointed October 1969
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The outstanding man in the new cabinet is
one of only six survivors of the oid one, Luureano
Lopez Rodo, Economic Planning Minister. He has
emerged as chief policy maker and has the sup
port of Vice Premier Carrerc; Blanco, the principal
Minister of Economic
Planning
Lopez Rodo
government figure after
Franco. Lopez Rodo's
training, his wide govern-
ment and academic ex-
perience, his economic
and political expertise,
and his membership in
Opus Dei all serve to en-
hance his position and to
make him the leader of a
team that includes sev-
eral of his former sub-
ordinates in economic
planning as well as sev-
eral colleagues in Opus
Dei,
INITIAL POLICY STATEMENT
After its first meeting on 31 October, Vice
Premier Carrero Blanco issued a policy statement
on behalf of the new government. In the domestic
field the statement emphasized general goals such
as better social welfare programs, education re-
forms, equitable distribution of wealth and the
strengthening of local government. There was also
a pious statement of the cabinet's intention to
give full information on its actions in order to
receive the benefit of public reaction.
In international affairs, the statement noted
that Spain belonged to the Western world and
would formulate its foreign policy accordingly. It
further stated that negotiations with the Common
Market would be stressed and friendship with
Portugal reaffirmed. It added that the government
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would strengthen relations with Latin America
and with the United States. This was followed in
mid-November by an interview given by Lopez
Rodo in which lie stated that the new government
would emphasize changes in foreign policy rather
than internal politics. This remark confirmed the
general intention of the new government with
regard to closer ties wi"h the Common Market
and relations with the United States.
ROLE OF FOREIGN MINISTER
LOPEZ BRAVO
The chief spokesman of the new cabinet on
foreign affairs is the new foreign minister,
Gregorio Lopez Bravo, who also is one of the six
holdovers from the previous cabinet, in which he
was minister of industry. A go-getter with an
attractive personality, he immediately started a
flurry of diplomatic activity. In a newspaper in-
terview in December, after little more than a
month in office, he explained his approach to his
job. After noting that, because of social, histori-
cal, and political factors, there were many "con-
stants" in Spanish foreign policy, he declared that
the main changes that a foreign minister could
make were in priorities and methods of operation.
As part of his activist approach, Lopez Bravo
is using personal visits to foreign countries to
make Spain's views better known. Since his ap-
pointment last October he has made eight trips
abroad (see map;. He also received German For-
eign Minister Scheel in Madrid on 22-23 April.
Lopez Bravo is also interested in having
Spain play the role of a power with global inter-
ests. He has stated, "Spain must not only have a
foreign policy, it must participate in international
politics." By interjecting himself into interna-
tional matters, he hopes to promote both himself
and Spain.
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In addition to making more use of travel
than did his predecessor, Lopez Bravo has em-
ployed a more tactful approach to foreign policy
problems. For example, in the dispute with the
United Kingdom over
Gibraltar-a perennial
point of friction-Lopez
Bravo has played down
differences and concen-
trated on aspects on
which some progress
might be made. In at-
tempting to reduce ten-
sion with the UK over
Gibraltar, Madrid agreed
last November to sus-
pend further discussion
of the problem in the
United Nations. The
Spanish press moderated
its coverage of the subject and adopted a friend-
lier tone toward the UK. There was no implica-
tion that Spain would give up its claim to Gibral-
tar, but Lopez Bravo stated in an interview that
the Rock would no longer he the magnetic pole
of Spanish foreign policy. Lopez Bravo and the
British ambassador in Madrid have had informal
exchanges this month concerning the sort of co-
operation that might eventually take place be-
tween Spain and Gibraltar once present border
restrictions are removed. The problem remains,
but it has been reduced somewhat as an obstacle
to other Spanish goals.
The new cabinet's real push to identify
Spain with Europe is concentrated on efforts to
reach an agreement with the European Com-
munities (EC). Although Spain wants full mem-
bership or association with the EC, political
opposition to the Franco regime within some of
the six countries has made that impossible. The
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new cabinet has continued earlier negotiations for
a two-stage preferential trade agreement, and
terms were concluded in March. Final approval by
the EC is expected in June. During the first stage,
to last six years, Spain will reduce tariffs by an
average of 25 percent on most of the manu-
factured goods that it imports from the EC (by
60-70 percent on some items), and the EC will
reduce tariffs by about 60 percent on most im-
ports of Spanish manufactured goods. Both Spain
and the EC will also reduce trade barriers on
selected agricultural products. The character of
the second stage was left undefined, but Spain
hopes that it will lead to eventual association.
In pursuit of these closer ties, Lopez Bravo
has met with the foreign ministers of all six EC
countries. For instance, his trip to Paris in Feb-
ruary promoted closer relations with France,
which in turn could help Spain in its plans to play
a larger role in international affairs. The two
foreign ministers in their talks stressed their
similarity of views on international questions.
France agreed to sponsor Spain's return to full
participation in European affairs, including sup-
port of Madrid's effort to establish a relationship
with the EC. Lopez Bravo emphasized to the
French that, in developing closer ties with Paris,
Spain did not wish to detract from cordial
relations with its other allies.
The most notable accomplishment of the
Paris visit was the signing of an agreement under
which Spain contracted to purchase 30 Mirage
aircraft. Under a special provision, almost half of
the aircraft construction will be performed in
Spain. Madrid is also considering the purchase of
French tanks.
During the past several months Spain and
France have also discussed the possibility of
forming a Mediterranean "pact" to ensure the
security of the western Mediterranean. It is not
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clear which side revived this idea, as both De
Gaulle and Franco have espoused it in the past.
The pact, which may be no more than an agree-
ment to consult, would include France, Spain,
Italy, Greece, and certain Maghreb countries, or
some combination of these. According to some
sources, it would supplement NATO efforts in the
Mediterranean. Spain is interested because of its
concern over expansion of Soviet influence in the
area. Madrid may feel that pact consultations
would improve its relations with the Maghreb
countries, but its main reason would be the op-
portunity to enhance its international standing
and improve its chances of eventually getting into
NATO. Lopez Bravo told Secretary Rogers last
month that he had discussed with the French how
such a pact arrangement might be achieved, but
that Spain would act with the full understanding
and support of the United States. The idea is
likely to remain a French-Spanish project, for an
Italian official has already said hus country would
not be interested, and participation of the
Maghreb countries at this time is doubtful.
IMPROVED RELATIONS WITH THE USSR
AND EASTERN EUROPE
The cabinet is interested in stepping up rela-
tions with the Soviet Union and the Eastern
European countries. An indication of this goal
was the brief stopover that Lopez Bravo made in
Moscow en route to Manila last December, when
he met with a Soviet Foreign Ministry official at
the airport. Lopez Bravo is influenced by his
long-time support for increasing Soviet-Spanish
trade as well as by the possibility that better
relations would put Madrid in line with the ef-
forts of the EC countries to expand ties with
Eastern Europe.
The main development since Lopez Bravo's
visit was the arrival in Madrid in late March of a
Soviet shipping delegation to set up an office
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under terms of the port facilities agreement
signed in February 1969. This may lead to even-
tual subdiplomatic relations. The Soviets are also
pressing for a TASS office in Spain and the estab-
lishment of Madrid-Moscow flights by Soviet and
Spanish airlines. Madrid is likely to move slowly,
however, on giving the Soviets any significant
presence in Spain. It believes it must balance its
desire for improved trade and relations with its
concern over Soviet expansion in the Mediter-
ranean area.
The present cabinet has continued the policy
of its predecessor in establishing formal consular
relations with Eastern European countries. This
policy began with Romania in 1967 and was
followed with Poland in July 1969 and Hungary
in December. Negotiations far consular relations
have been undertaken with Bulgaria, and a similar
move with Czechoslovakia is expected.
The Spanish Government has accepted in
principle the Warsaw Pact proposal for a confer-
ence on European Security. The Spaniards have
indicated publicly their strong support for this
proposal with the proviso that the United States
and Canada participate and that it have careful
preparation. They are urging that a date for the
conference be set before September, a stand that
goes beyond the more cautious NATO position.
POLICY TOWARD THE UNITED STATES
While devoting considerable attention to the
promotion of Spain's ties with Europe, the new
government has not neglected relations with the
United States. Tn fact, Lopez Bravo immediately
raised the mattes of beginning negotiations on a
new relationship to replace the bilateral defense
agreement that expires next September, Spanish
discontent with the amount of grant aid offered
by the United States during negotiations for re-
newal of the agreement in 1968 led Madrid to
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refuse to sign by the deadline and to invoke a
consultation period that finally resulted in a
shorter renewal period than the five years stipu-
lated in the original agreement. In negotiations
now under way, the Spaniards say they have
abandoned the idea of rent for the bases. Instead
they are stressing the need to replace the present
US control over the bases with a "truly shared"
US-Spanish control mechanism. They are also
interested in having the new agreement permit
Spain to participate along with NATO in deci-
sions involving -European defense. Also, Madrid
desires to increase and strengthen commitments
to defend the Spanish security area. But the new
government appears to want to continue its
special tie with the United States and to expand it
by including nonmilitary items such as aid to
education. Although Spain could still make un-
reasonable demands, it seems likely that it will
accept some sort of compromise that can be
presented to the Spanish people as an increase in
international prestige.
One immediate possible irritant in U','-
Spanish relations may arise from the preferential
trade agreement Spain has negotiated with the
European Communities. Because Madrid is de-
sirous that the agreement will lead to eventual
association with the EC, it hopes Washington,
which generally opposes preferential trading
agreements, will leniently interpret the GATT
provision requiring that such agreements have a
definite time schedule for full association.
Although the cabinet's initial policy state-
ment omitted any reference to Spain's relations
with the Arab countries, Lopez Bravo later ex-
plained that this did not mean any neglect or
change in Madrid's traditional ties with the Arab
states. To reaffirm this, he made an official visit
to Cairo last January and to Rabat in early May.
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He also invited Nasir to visit Madrid. In addition,
agreement has been reached to permit the Arab
League to open an office in Madrid. Concurrently
with the new flexib?ity, however, Lopez Bravo
also softened Madrid's usual hard line toward
Israel, which it does not recognize, when he
stated in an interview in March that Spain's
friendship with the Arabs does not mean that it is
an enemy of Israel.
Lopez Bravo is also interested in expanding
Spanish relations in Asia. He was able to do this
and also promote Spain's ties with the former
Hispanic nations by going to Manila last Decem-
ber for the inauguration of President Marcos, at
which time he offered a $10-million Spanish
credit to the Filipinos. He also used that occasion
to meet the Mexican foreign minister, and this led
to an understanding that their ambassado} s in
Washington would hold talks regarding thestab-
lishment of consular relations.
The new cabinet is following the economic
programs of its predecessor, at least for the im-
mediate future. This was to be expected because
Economic Planning Minister Lopez Rodo, who
held the same position in the outgoing cabinet,
played a leading role in devising those plans.
Inasmuch as a majority of technocrats in the
present cabinet were chosen on his recommenda-
tion, Lopez Rodo should be better able to imple-
ment his plans now.
Essentially economic policy is governed by
the Second Economic and Social Development
Plan, which was adopted in February 1969 to run
through 1971. This plan, as did its predecessor,
attempts to set target performances for each
sector of the economy so that each will know
where the related sectors and the economy as a
whole are headed. The Second Plan seeks a more
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Travels of Foreign Minister Lopez Bravo
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rational allocation of resources in order to achieve
the greatest long-run economic growth and to
increase ihe competitiveness of the economy with
a view to furth--r integration into the world
economy. The plan stresses improvement in agri-
culture, which has lagged behind other sectors of
the economy, as well as in basic industries, trans-
port, and communications. It emphasizes the
need for more and better education, scientific
research, housing, and urban services. It aims at a
5.5 percent average annual growth of GNP for the
period through 1971 and will attempt to bring
about an increase in investment-especially in
expos t-oriented industries-relative to total con-
sumption.
When the new cabinet took over, there was
need for prompt action to restrain the growth of
domestic demand and to cool the economy. Al-
though the government has pledged to take the
action necessary to maintain stable growth, it has
appeared to be reluctant to promulgate deflation-
ary measures because these would be politically
unpopular. The new cabinet's primary line has
been to continue the tight monetary policy
initiated by its predecessor for controlling infla-
tion. Thus it has continued for 1970 the 18
percent annual ceiling on new bank credit estab-
lished last September, and has raised the redis-
count rate of the Bank of Spain to 6.5 percent.
The cabinet has also moved to postpone
government spending by ordering an indefinite
delay of 10 percent of planned central govern-
ment expenditure projected in the 1970 budget,
which contained a 12 percent increase over the
1969 budget approved by the old cabinet. The
government also imposed a 20 percent predeposit
requirement on all imports in hopes of cutting
down Spain's enormous trade deficit, which was
responsible for the 1969 balance-of-payments
deficit.
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On the other hand, the cabinet yielded to
worker demands for better pay by approving a
17.6 percent increase in the general minimum
wage effective on 1 April. This was a raise from
102 pesetas ($1.45) to 120 ($1.70) a day. Not-
withstanding the government's contention that a
minimum-wage raise is not inflationary because it
affects only a small group of unskilled workers,
most impartial observers believe that this increase
will inevitably have a booster effect upon wages
in general. The government maintains limited con-
trols on wages and prices, which are more guide-
lines than limits to be enforced directly.
The new cabinet reportedly intends to see
how well the present regulations work before
proceeding further. It is also concerned with in-
creasing Spain's exports, and this goal is reflected
in the moves to build closer ties with both
Western and Eastern Europe, and with the USSR.
IMPACT ON DOMESTIC PROBLEMS
The new cabinet immediately impressed ob-
servers with its alertness and competence and gave
the impression of working as a team. US officials
who have had contacts with the ministers have
remarked on how well informed they are on
important issues, including those outside the com-
petence of their ministry. This spring, however,
reports are being heard of a lack of coordination
and a rise in frustrations within the cabinet. Al-
though a certain amount of this reporting may be
chalked up to the propensity of informed
Spaniards to gossip about political figures, there
are some problems at the root of it.
Among these is the MATES. scandal. This
involves the misuse of some 10 billion pesetas
(around $143 million) of government export
credits by a fast-expanding company, Maquinaria
Textil del Norte de Espana, SA (MATESA),
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Because government approval was required to get
these credits, and technocrats associated with
Opus Dei were involved in approval of these trans-
actions, opponents of the Catholic organization
have tried to blame Opus Dei ministers. The min-
isters of commerce and finance m: iy have been
dropped in the October cabinet changes in
response to pressure to find those ultimately re-
sponsible, but the official investigation to deter-
mine responsibility and decide who should be
punished has continued. The company president
and several associates this week were given stiff
fines and sentenced to prison terms of up to three
years. Recently the investigation has been moved
to the level of the Supreme Court so that minis-
ters or exx-ministers can be indicted if necessary.
This action implies that Franco himself has de-
cided to lot the case run its full course. Although
the most likely result would be the indictment of
the ex-ministers of finance and commerce, it
could involve ministers in the present cabinet.
The two most rumored possibilities are Foreign
Minister Lopez Bravo, formerly the minister of
industry, and Education Minister Villar Palasi,
formerly a legal adviser to MATESA. It would be
contrary to Franco's usual way of operating to let
a case go so far as to involve a member of so
recently chosen a cabinet, however. Con-
sequently, some solution not involving the
present cabinet is likely to be found. However,
the widespread criticism that the case has aroused
makes it difficult to rule out entirely Franco's
letting the chips fall where they may.
Other difficult problems confronting the
cabinet are financing the new education reform
program, replacing old guard officials in the Na-
tional Movement with more moderate officials,
and living with the current budgetary restrictions
on ministerial programs, These restrictions may
have been involved in the recent resignation of
Minister of Public Works Silva Munoz. He men-
tioned family reasons, but some observers see his
departure as a strategic withdrawal to avoid being
identified with a cabinet that may be embarrassed
by the MATESA scandal. As the member of a
rival Catholic Action group, Silva Munoz may
have considered himself outnumbere t in the new
cabinet and ready to build up political contacts
outside the government.
Last month after two leading Madrid news-
papers published separate articles about the need
for political liberalizatiop in Spain, the editors of
one of them, ABC, were ordered to print an
article by one Gines de Buitrago, which, it soon
became known, was a pseudonym for Franco and
Carrero Blanco. ;n an angry rebuttal to critics of
the present system, the authors likened calls for
political democracy after the ills that existed
prior to the present government as comparable to
advising a reformed alcoholic to return to drink.
The article made it evident that the regime does
not intend to permit changes in the present po-
litical setup. Such a warning against democracy
does nothing to help efforts of the technocrats to
lead Spain to reintegration into Western Europe.
But the technocrats are pragmatists and are will-
ing to work toward long-range goals to be
achieved after Franco goes
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