WARNING AND FORECAST REPORT FOR EUROPE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87R00529R000100030069-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: June 14, 2011
• Sequence Number: 69
• Publication Date: July 22, 1985
• Content Type: MEMO

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The Director of Central Intelligence
Washington, D.C. 20505
NIC No. 03645-85/1
22 July 1985
FROM: George Kolt
National Intelligence Officer for Europe
SUBJECT: Warning and Forecast Report for Europe
1. Attached is my report to the DCI based on our meeting held 17
July 1985. If there are any significant amendments or additions you would
wish to make, please let me know.
2. Next month's warning meeting will be held on 21 August 1985 at
1015 in r::m-7---E-62. CIA ers. Please have your clearances passed
and call with names of the attendees by noon, 20
August 1
3. I also encourage you to phone in suggestions for the agenda and
proposals to make opening presentations. It would be helpful to have your
comments for the next meeting by Monday, 12 August 1985.
George Kolt
Attachment
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The Director of Central Intelligence
Washington, D.C. 20505
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
FROM: George Kolt
National Intelligence Officer for Europe
SUBJECT: July Warning and Forecast Report
NIC No. 03645-85
22 July 1985
I. Main Discussion Items
A. Spain: The Internal Political Scene
1. Discussion
Although Prime Minister Gonzalez remains the dominant force
in Spanish politics, his mastery of the machinery has slipped a
bit and mounting economic problems could erode his popularity.
The lack of a credible political opposition gives the
Premier considerable latitude. But managing an economy burdened
with 22 percent unemployment and the austerity of a restructuring
process requires maximum political finesse. Trade unions --
including the Socialist UGT -- are becoming more truculent and
more demonstrations over issues like pension reform are likely.
The continuing ability of the weakened ETA and GRAPO to use
terrorism to gain headlines and scandals over government spying
on the political opposition could also detract from Gonzalez's
image. Gonzales recently allowed a minor cabinet reshuffle to
get out of hand and this has marred his reputation for political
deftness.
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2. Warning Note: If Gonzalez continues to stumble, it could
undercut his ability to handle the referendum on NATO membership.
Madrid's tactics on the bases issue already appear influenced by
pessimism over the NATO referendum -- polls indicate a hardening of
majority opposition to membership. Should other problems become
distracting, some Socialists may be tempted to play a tougher hand on
the bases -- particularly ex-Foreign Minister Moran who is now free
B. Ceausescu's Health and the Romanian Situation
Persistent) in Bucharest
indicate that Ceausecu may soon undergo surgery for cancer of the
prostate. The timing is dicey as the country is experiencing
more serious economic and financial problems in the wake of the
harsh winter of 1985.
If it is necessary, the operation might be hard on Ceausescu
who has several other complicating health conditions. And,
unless Ceausescu snaps back quickly, a succession scramble would
probably pit his wife Elena and playboy son Nicu against the rest
of the leadership. No dominant successor is evident in that
group as Ceausescu has brooked no heir-apparent but his aides
would probably unite to push aside Elena and Nicu.
The economy, weakened by four years of severe austerity, is
still suffering the effects of the severe winter. Extra energy
imports have depleted bank reserves and Romania soon may have to
seek new loans, rescheduling and an IMF program -- despite
Ceausescu's previous vows to the contrary. In addition, the
harvest forecast is not good, industrial production is lagging
and it will be tougher to meet his export goals and feed the
already deprived population.
2. Warning Note: The Soviets might use the new economic
difficulties to increase their influence over the Bucharest regime.
If Ceausescu is seriously ill and a sucession struggle begins, the
Romanian situation could confront the new Soviet leadership with its
first East European crisis and an opportunity to roll-back Romania's
often troublesome foreign policy. In addition, if Romania bungles
its financial squeeze because of weak leadership, lender confidence
in other East European regimes might sag.
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II. Monitoring Items
A. The Situation on Cyprus
1. Discussion: Neither the Greek or Turkish Cypriots are
likely to make concessions that would do more than allow the SYG
proposed proximity talks to begin in September. But Denktash seems
to have lost his PR advantage over Kyprianou. As for Greece and
Turkey, they are hinting at greater flexibility but, for now at
least, are sticking by the essentials of their mutually unacceptable
demands.
2. Warning Note: The Greek Cypriots and Papandreou might press
Washington hand to intervene with the Turks and make other US
interests hostage to our responsiveness. One outcome of such a
development could be that the Greek Cypriots insist that we transfer
USG activities from Larnaca airfield to UK bases on Cyprus -- a move
the UK would oppose because it would give those bases undesired
publicity.
B. The Next Steps in the European Community
1. Discussion: The paralysis at the Milan summit tended to
polarize views between French-led countries which are pushing
community integration and those, like the UK, which are more
concerned about sovereign rights. With Luxembourg and then the Dutch
in line for the Presidency, there will not be much dynamic leadership
within the institution to narrow these differences.
2. Warning Note: There is a potential that the EC may avoid
its difficult internal problems for a time by turning to other
issues -- like the Geneva talks and SDI, the Middle East and Central
America -- in ways that would harm US interests. In any event, the
divisions among the Europeans present opportunities to Moscow and add
another form of pressure on Helmut Kohl who needs good relations with
France, the UK and the US.
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C. Belgium: Political infighting within the governing coalition,
has caused t elections to be moved up to October from December and
reduced the prospects of recreating the same coalition after those
elections. The US could thus be dealing with a less pro-US coalition in
Belgium in the future. A marked change in the Belgium government should
it come about could also have a negative impact on the 1 November Dutch
GLCM basing decision.
D. Iceland: The US-Iceland dispute over the shipment of military
goods to the US bases in Iceland is reaching a critical phase. The
problem began in May 1984 when the US company Rainbow Navigation used the
1904 Cargo Preference Act to obtain a monoply on those shipments, taking
the business away from Icelandic companies and depriving Iceland of about
one percent of its GNP. The current very pro-US government of Iceland has
handled the issue in a low key way and at the same time reassured
Icelanders that the dispute would eventually be settled satisfactorily.
But the US offer early this month to pay Iceland compensation for lost
revenues has evoked a storm of protests from Icelanders who reject a
"dole". Unless a satisfactory solution is found soon, US-Icelandic
relations could deteriorate rapidly to the detriment of very important US
basing arrangements.
George Kolt
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