THE OUTLOOK FOR FRANCE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP98-00979R000400450001-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 28
• Document Creation Date: December 23, 2016
• Document Release Date: May 28, 2013
• Sequence Number: 1
• Publication Date: August 13, 1957
• Content Type: NIE

0,)
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4N I E 2 2 ? 5 7
13 August 1957
N? 300
NATIONAL INTELLIGENCE ESTIMATE
NUMBER 22-57
(Supersedes NIE 22-56 and NIE 71.2-56)
THE OUTLOOK FOR FRANCE
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of
State, the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in by the
INTELLIGENCE ADVISORY COMMITTEE
on 13 August 1957. Concurring were the Special Assistant, In-
telligence, Department of State; the Assistant Chief of Staff,
Intelligence, Department of the Army; the Director of Naval
Intelligence; the Assistant Chief of Staff, Intelligence, USAF;
and the Deputy Director for Intelligence, The Joint Staff. The
Atomic Energy Commission Representative to the IAC and the
Assistant Director, Federal Bureau of Investigation, abstained,
the subject being outside of their jurisdiction.
r+0
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CENTRAL INTELLIGENCE AGENCY
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4. The title of this estimate, when used separately from the text, should be classified:
FOR OFFICIAL USE ONLY
WARNING
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within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
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TABLE OF CONTENTS
Page
THE PROBLEM
1
SUMMARY AND CONCLUSIONS
1
DISCUSSION
2
INTRODUCTION
2
THE ALGERIAN PROBLEM
3
Algeria's Importance to France
3
The Situation in Algeria
4
Rebel Strength and Capabilities
4
The Communist Role ?
5
The French Position
5
The Colon Attitude
5
French Policies
6
Current Policy
6
Pressures for a Changed Policy
6
THE ECONOMIC PROBLEM
8
The Current Situation
8
Government Fiscal Policy
9
Economic Impact of the Algerian Conflict
9
The Level of Prices
10
The Adverse Trade Balance
10
The Balance of Payments
10
The Economic Outlook
10
The Short Term
10
The Longer Term
12
EUROPEAN COOPERATION
12
The Common Market
13
EURATOM
13
Future Integration Attempts
14
The Eurafrica Policy
14
FOREIGN AND DEFENSE POLICIES
15
Effects of the Algerian Problem
15
Policies Toward the Western Alliance
15
The French Defense Posture
16
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TABLE OF CONTENTS (Cont.)
Page
THE OUTLOOK
17
Prospects for an Algerian Settlement
17
The Alternatives
18
Prospects for the Fourth Republic
18
The Threat from the Extremes
19
The Future French Position
20
APPENDIX: French Military Strength
21
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THE OUTLOOK FOR FRANCE
THE PROBLEM
To assess the situation in France, with particular emphasis on the Algerian con-
flict and the economic situation; and to estimate the effect of probable developments
on the French domestic and international position through 1960.
SUMMARY AND CONCLUSIONS
1. France, besides its usual troubles of a
political system which few citizens re-
spect and an economic system which is
still outmoded in many ways, is cur-
rently burdened with two acute prob-
lems: the Algerian war and a financial
crisis marked by rising prices and by
large deficits in the budget and balance
of payments. Until these problems are
solved, France is unlikely to make much
progress in internal reforms and will fall
short of meeting its commitments to
NATO and to the European community.
2. The attempt to hold Algeria by force
shows little promise of success and
French leaders are slowly being driven
to the conclusion that they must nego-
tiate with the rebels. Public opinion is
not yet prepared to accept the loss of
Algeria, and it may be some time before
any government feels that it can aban-
don a repressive policy or risk open nego-
tiations with rebel leaders. Neverthe-
less, we believe that there is about an
even chance that within the next 18'
months a French government will offer a
wide measure of autonomy, coupled with
the promise of eventual independence to
Algeria. While such an offer would
arouse strong colon opposition in Algeria
and right-wing protests in France, we
believe that the army would not sup-
port the colons and that the government
could implement the agreement. The
Algerians would probably accept the offer
because they realize that they cannot win
a complete victory and because they
would expect that autonomy could be
quickly transformed into independence.
3. The government is at present trying
to solve the financial problem by tax in-
creases, budget cuts, and above all by im-
posing drastic restrictions on imports.
The protectionist aspects of this policy
will probably slow down the recent rapid
rate of industrial growth and may delay
fulfillment by France of its obligations
to the European Common Market. Any
drastic change in French economic poli-
cies is unlikely before the Algerian con-
This estimate supersedes both NIE 22-56, "The
Outlook for France," published 10 July 1956, and
NIE 71.2-56, "Outlook for Algeria," published 5
September 1956.
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flict is settled. The chances are slightly
better than even that in the climate cre-
ated by such a settlement a French gov-
ernment would utilize the opportunity to
take measures which would in time en-
able France to cooperate unreservedly in
European institutions without fears for
its economic future.
4. France will almost certainly remain
a member of the Western alliance, be-
cause the French realize that this alli-
ance is fundamental to their security.
At the same time, France will follow an
independent political line in some mat-
ters, such as dealings with the Arab world
and attempts to relax East-West tensions.
France will continue to fail its NATO
partners by not making the defense con-
tribution which would be most useful to
the alliance. French armed forces will
be employed to protect the French posi-
tion in Africa to the detriment of the
NATO defense of the European continent.
It is also probable that funds and efforts
will be diverted to an independent nu-
clear weapons program which will have
little military value for NATO during the
next few years.
5. The French will remain loyal to the
principle of European integration, but
will give their partners in the European
community some bad moments. The
French will be cautious in taking any
further steps toward closer integration
and they may find it difficult to imple-
ment the commitments already taken.
6. The French believe that they deserve
to hold a leading position in the world.
Yet they have witnessed repeated finan-
cial crises and a steady erosion of their
power position. Many citizens are frus-
trated and depressed, but we do not think
that there is any immediate prospect
that the Republic will be overthrown.
The Communists do not now have the
capability, and the extreme right lacks
leaders, followers, and a program. Gov-
ernment-as-usual will probably continue,
and there will be a stalemate on many
issues. Some problems will be settled,
but France will probably not undertake a
basic reappraisal of its internal needs and
of its international position.
DISCUSSION
INTRODUCTION
7. France at present is. at grips with two par-
ticularly serious problems: the Algerian con-
flict and a financial crisis. These issues are
interrelated; the economic costs of the Al-
gerian war aggravate economic difficulties.
These problems limit the freedom of maneuver
of French cabinets in determining both in-
ternal and foreign policy. They make it diffi-
cult for the government to fulfill its interna-
tional obligations or to implement internal
reforms. Domestic controversy over Algeria
has driven another wedge into a society al-
ready disposed to disagree over fundamentals.
8. The French people are in a state of uncer-
tainty and frustration. A large part of the
population feels that it is not obtaining the
social and economic benefits to which it is
entitled, in spite of striking increases in pro-
duction. Others are deeply concerned over
the steady decline of their country's power
status in spite of all diplomatic and military
efforts during the postwar years. The nature
of the present French political set-up intensi-
fies the frustration of these and other groups.
9. In 1956 the French elected a National As-
sembly, which is scheduled to last until 1960,
in which almost one-third of the deputies
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(Communists and Poujadists) are opposed to
constitutional government. The remaining
two-thirds of the deputies are divided among
the Socialists, the center parties,2 and the
conservative Independents and Peasants
(Moderes). These groups ? especially the
two strongest, the Socialists and the Mo-
der& ? are too deeply divided by ideological
and other differences to permit the pursuit by
any government of the firm policies which the
situation demands. Instead, the two cabinets
which have been installed by the present As-
sembly have not had reliable majorities, and
have been based on the uneasy and precarious
cooperation of the Socialists and the parties
of the center. The only other current possi-
bility is a government of the center with sup-
port from the Moder& Neither type of gov-
ernment is likely to bring about basic improve-
ments in the national economy and in
France's world position.
10. The experience of the Mollet government
illustrates these difficulties. The formation
of a predominantly Socialist government in
1956 stimulated popular expectations, espe-
cially among the working class, of social and
economic reforms. Many intellectual leaders,
particularly among the followers of Mendes-
France, hoped that through the cooperation
of Socialists and Radicals, France could be set
on a new road which would restore vigor to the
Republic and reduce the appeal of Commu-
nism. These hopes were largely disappointed.
Mollet did initiate a number of social meas-
ures, but their scope was limited by his pre-
occupation with the Algerian problem and his
growing dependence on the center-right.
Furthermore, by adopting a policy of repres-
sion in Algeria, he alienated many of his allies
on the left, including Mendes-France and his
group, and provoked dissensions within his
own party.
11. The present cabinet, led by Bourges-
Maunoury, has won even less confidence, and
its life-expectancy is short. But the fall of
the Bourges government is unlikely to solve
2 The most important party groups roughly in the
center are: the Radical Socialists (including dis-
sident Radicals), the UDSR, the Social Republi-
cans (ex-Gaullists), and the MRP.
3
France's more serious problems, since a suc-
cessor government will have to be built on the
same shaky foundations. Realizing this, the
average Frenchman has become even more
cynical about his civic responsibilities and
even more disillusioned about parliamentary
processes than normally. Taking all these
factors into account, it is highly unlikely that
France can make much progress until the two
overriding problems of Algeria and the finan-
cial crisis are confronted and resolved.
THE ALGERIAN PROBLEM
Algeria's Importance to France
12. Especially since the Suez affair, the Al-
gerian conflict has come to overshadow all
other problems confronting France. In many
ways it resembles a major war: over 400,000
members of the French armed forces are in-
volved, costs are heavy, and decision and
action on other problems and policies have all
been affected. France is committed to an
effort to retain control of an area which has
legally been part of metropolitan France for
about a century and which contains roughly
a million citizens of European extraction
(colons) in a population of about nine mil-
lion; perhaps one out of seven Frenchmen has
a family connection in Algeria.3 Many
Frenchmen are convinced that their posses-
sion of Algeria is vital to French status as a
world power, and as a counterbalance to the
growing weight of West Germany in Europe
and in the Western alliance. They also fear
that loss of Algeria would be a prelude to
the disintegration of their influence in other
African areas.
13. Economic and military interests bolster
these considerations. Private investments in
Algeria held in continental France may
amount to $500 million; French public invest-
ment since 1945 has totalled roughly $800
million; colon, holdings may represent several
3 We use the term colon to describe all such Euro-
peans ? the majority of whom are urban work-
ers ? rather than merely the great landowners
of French descent. It is possible that only about
half these Europeans, who are concentrated in
the coastal region, originally derived from con-
tinental France.
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billion dollars. Trade with Algeria is very
important to certain influential French in-
terests (and vital to Algeria) . Moreover, the
French have in Algeria extensive air installa-
tions, excellent army training facilities, and
their primary guided missile range. The
French will regard the Sahara as a natural
testing area for nuclear weapons. Also, their
naval base at Mers-el-Kebir is one of the most
important and most modern of such installa-
tions in the Mediterranean area.
14. These interests are reinforced by the re-
cent significant oil discoveries in the Southern
Territories of Algeria. The French hope that
early development of these discoveries (still of
unproved capacity) , will eventually lessen
their dependence on Middle East oil. Other
mineral resources also have been found
throughout the French Sahara. An economic
organization to exploit these Saharan oil and
mineral resources was set up by the French
some months ago, and the French government
includes a new Ministry for the Sahara.
15. The above factors in large measure ac-
count for the determination of the French to
retain control of Algeria. They explain the
intensity of French feeling, and also the ruth-
lessness with which at times they have con-
ducted their military operations. Almost all
the Moder& and the majority of the MRP,
Radicals, and Socialists are publicly com-
mitted to retaining the French hold on Al-
geria, even though many of the leaders of
these parties will privately admit that there
is little promise of obtaining a settlement on
their terms.
The Situation in Algeria
16. Rebel Strength and Capabilities. The Na-
tional Liberation Front (FLN) has more than
held its own against the French over the past
year. The numbers of its "Liberation Army"
(ALN) have remained roughly constant at
about 20-25,000; expansion has probably been
limited by shortage of arms rather than lack
of manpower. Its increasingly heavy casual-
ties appear to be replaced without much dif-
ficulty; it can also count on occasional assist-
ance from armed sympathizers. Despite the
French capture of five rebel leaders last Octo-
ber and the French claim to have decimated
the ranks of the FLN directing bodies, the
nationalist movement appears to possess effec-
tive organization and leadership. There are
continuing reports of confusion and jealousy
among the FLN?ALN members, rivalry be-
tween them and the much less numerous and
effective MNA (Algerian National Movement,
whose main strength is among North Africans
in France) , and tribal feuding in remote areas.
The nationalist movement as a whole never-
theless seems to maintain its high morale,
with the at least tacit support of the majority
of Algerians.
17. The rebels are receiving material aid and
strong diplomatic and moral support from
other Arab areas. The two main channels for
military supplies appear to be: (a) through
Libya and Tunisia from Egypt, which seems
to be providing stocks of older weapons as new
ones are obtained from the Communist Bloc;
and (b) from Southern European countries
such as Spain and Italy. Many arms pur-
chases are made with funds provided by
Arab countries. Arab solidarity regarding
Algeria, largely defying distinctions based
on individual national attitudes toward
the Communist Bloc?Free World controversy,
is fully displayed in repeated initiatives
within the UN. The strength of popular
sentiment in North Africa favoring the Al-
gerian rebels is evidenced by the refusal of
Tunisia and Morocco to withhold support
from the rebellion even for the purpose of re-
taining vitally needed French aid. Morocco is
currently more successful than Tunisia in
avoiding clashes with France on the Algerian
issue, but this could change overnight.
18. In this situation, the FLN appears confi-
dent of outlasting the French in the present
test of endurance. It continues to insist upon
French recognition of the principle of Algerian
independence as a precondition for entering
negotiations, and it has in effect rejected both
the French cease-fire offer and Tunisian Pre-
mier Bourguiba's suggestions for a test of
French intentions. The nature and policy of
the present French government are not likely
to induce the FLN to change its attitude in
the near future. It probably will maintain a
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high level of sabotage and terrorist activity
over the next few months, not only to keep up
pressure on the French but also to attract
international attention prior to the UN Gen-
eral Assembly session this autumn.
19. The Communist Role. The influence of
the small, outlawed Algerian Communist
Party and of the Soviet Bloc upon the FLN
rebels -continues to appear slight. Consider-
able attention has been given over the past
year or more to the much-advertised creation
of local Communist maquis units to fight
alongside the FLN. Despite the Algerian
Communists' efforts to represent their role as
an important and increasing one, there is no
evidence that more than a handful of people
are involved. Moreover, there is no evidence
that the FLN has encouraged or more than
tolerated whatever minor assistance may be
coming from the Communists. On the other
hand, some individuals with primary Commu-
nist allegiance have infiltrated the FLN. The
FLN attitude probably is determined by prag-
matic considerations rather than by a pro- or
anti-Communist position. Thus far, the reb-
els probably believe that the disadvantages of
a closer connection with the Communists out-
weigh the possible advantages. However,
they would be likely to seek direct Communist
help ? both locally and abroad ? in case it
appeared expedient.
20. The French Position. The gulf between
the Moslem and European communities in Al-
geria has considerably widened over the past
year as the French pursued the Mollet-Lacoste
pacification program. Neither the military
nor the reform aspect of that dual program
has brought the results anticipated by the
French. French troops have taken a heavy
toll of rebel forces, but without any meas-
urable effect on nationalist strength. Certain
areas have been pacified, but guerrilla activity
has been resumed as soon as troops were with-
drawn. French defense forces have generally
been unable to prevent military supplies from
reaching the rebels by land, although the navy
has been generally effective in preventing the
landing of arms from ships. The Lacoste re-
forms, which a few years ago would have
seemed revolutionary, have not received much
5
support from the Moslem populace, partly be-
cause of fears of FLN retaliation and partly
because the long-term program does not en-
vision independence or the wide degree of
autonomy which would be necessary to satisfy
nationalist demands.
21. One significant result of the Lacoste policy
has been the expanded role of the French
Army in Algeria. Lacoste's inability to per-
suade local Moslem officials to accept positions
created by his administrative reorganization,
as well as the paucity of suitable French civil
servants, has caused him to appoint military
personnel to both central administrative and
local governmental posts.
22. These factors appear to have placed fresh
emphasis upon the military side of pacifica-
tion. Additional French troops are being
brought into Algeria, primarily through reduc-
tion of French forces in Tunisia and Morocco.
Operations against the rebels have reached a
new level of intensity. Moreover, the French
command apparently has decided that since
protection cannot be given all areas at once,
the army will concentrate on pacifying cer-
tain regions with greater thoroughness than
in the past. The French appear to be think-
ing in terms of creating order and inaugurat-
ing reforms in certain localities, which will
serve as models of what the pacification policy
can achieve. They may hope that this will
also impress certain UN members next fall
when France's policy toward Algeria will al-
most certainly come under heavy fire. In any
case, this increased emphasis on repression
will probably lead to heightened violence in
Algeria over at least the next few months.
23. The Colon Attitude. The majority of the
colons are strongly in favor of all-out war
against the Algerian nationalists; their atti-
tude has enabled the French government to
claim that France stands as an indispensible
arbiter between the Moslem and European
communities. The colon riots in early June,
mostly involving student and veteran groups,
illustrated the intensity of anti-Moslem feel-
ing among the European settlers in Algiers.
On the other hand, as metropolitan French-
men have become more aware of the human
and financial costs of a repressive policy in
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Algeria, they have been less willing to accept
colon demands. This decline in colon influ-
ence is evidenced by the unsuccessful attempt
to prevent some of the Lacoste reforms, and
the acceptance by Marshal Juin (whom the
settlers regard as one of themselves) of the
principle of limited autonomy for Algeria.
24. Nevertheless, the French government will
have to take into account the possibility of a
violent colon reaction against any change in
its Algerian policy. A sudden decision to
grant Algeria independence ? which is un-
likely over the short run ? would produce the
maximum amount of colon violence, but even
if the concessions were less abrupt and sweep-
ing, colon demonstrations would probably still
take place. Such demonstrations might cause
a weak government to hesitate in implement-
ing its new policy. On the other hand, colon
violence would probably not develop into a
full-scale rebellion against the French author-
ities in Algeria unless the colons received
greater encouragement than we anticipate
from metropolitan rightists and from the
army. The army has a strong tradition of
loyalty to constituted authority and while
there is dissatisfaction among regular army
officers in Algeria there is virtually no evi-
dence that they are thinking of a coup. We
do not believe that the army as a whole would
support a colon rebellion, though a few offi-
cers might join the movement.
French Policies
25. Current Policy. The Bourges-Maunoury
government is now making what may prove
to be the final French effort to solve the Al-
gerian problem by the use of force. While
this attempt falls short of an all-out war
against North African nationalism, the French
cannot do much more in view of international
pressures, the lack of domestic support for
extreme measures, and the costs of the war.
26. At the same time, the government is re-
taining and amplifying many of the "reform"
features of the Mollet-Lacoste policy. Bourges
has announced his intention to decentralize
further the Algerian administration, and to
propose a statute which presumably will offer
some autonomy at local and departmental
levels, with gradual advances toward a distant
goal of full Algerian autonomy. Moreover,
like its predecessor, the Bourges government
maintains some unofficial contact with the
rebels. On the other hand, despite Lacoste's
opposition, there also is a move under way to
separate the Sahara politically from the
coastal departments. However, any official
changes in the French approach to the Al-
gerian problem now, and over the past year,
appear more as shifts in tactics than as modi-
fications in policy.
27. This policy of repression combined with
limited political reforms almost certainly will
be continued as long as the present govern-
ment holds office and Lacoste remains Min-
ister for Algerian Affairs. It is possible that
this renewed emphasis on force will have con-
siderable success in certain localities, and that
greater efficiency in operations ? as well as
greater power and responsibility for the
French Army ? will result from the decen-
tralization of control in Algeria. However, it
is almost certain that the present government
by these means will be unable to break the
back of the rebellion or to force the nation-
alists to accept current French terms for a
settlement. An effort along these lines over
a long period might result in at least a tem-
porary stabilization of the Algerian situation
through the use of force, but we do not be-
lieve that the French nation would be willing
to bear the necessary costs in terms of money,
morale, and manpower.
28. Pressures for a Changed Policy. While
intense emotionalism still surrounds the Al-
gerian issue, and charges of "abandonment"
of Algeria and "betrayal" of the French Army
are hurled freely, pressures for a new French
policy in Algeria are mounting and objective
discussion is becoming more prevalent in the
press and elsewhere. An apparent majority
of French "intellectuals" of the non-Commu-
nist left, as well as many of the center, are
opposed to the present policy. Moreover, a
number of politicians and political commen-
tators are privately conceding the eventual
French loss of Algeria. Similar but largely
unexpressed fears are affecting a substantial
and growing minority of the public. Most
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significant, about a third of the Socialists at
their recent party congress rejected the cur-
rent general French policy, and many of this
group approved the principle of Algerian in-
dependence.
29. There are also indications of a changing
attitude toward the rebellion not only among
business interests both in France and Algeria,
but within Modere political circles in Paris.
While there are demands for a tough policy to
protect the much-publicized Saharan oil dis-
coveries, there is also a growing realization
that the present strife is incompatible with
plans to extract the oil, and to build and main-
tain pipelines.
30. The over-all French position in Africa is
also involved in consideration of the Algerian
problem. The French government and the
former protectorates of Tunisia and Morocco
are all aware that relations between them
cannot be normalized until the Algerian re-
bellion is settled. The Tunisians and Moroc-
cans sympathize with the rebels but both
countries also wish to avoid the spread of
hostilities and to obtain French financial and
technical aid. Both Bourguiba and the Sul-
tan of Morocco have attempted to mediate be-
tween the Algerian rebels and the French,
and they are likely to increase their efforts
toward an Algerian settlement. In addition,
the French realize that the continuation of
the Algerian conflict places in jeopardy the
implementation of the Overseas Reform Act
(loi-cadre) in French West and Equatorial
Africa and the economic development of these
areas as parts of the European Common
Market. French hopes for maintaining a real
French Union ? that is, close ties between
the metropole and the overseas territories ?
depend on the success of these projects.
Finally, rising French hopes for the economic
development of the Sahara obviously depend
on the re-establishment of peace in Algeria
and, probably, the development of cordial rela-
tions with Tunisia and Morocco.
31. Nevertheless, these pressures for a
changed Algerian policy have not yet gained
sufficient strength to have an incisive effect in
the immediate future. The French govern-
ment, political parties, and public :to a con-
siderable extent remain prisoners of the in-
tense nationalist sentiment and propaganda
which were evoked by the Suez affair. The
present French government is unlikely to
attempt official talks with the Algerians ex-
cept on terms which would probably be unac-
ceptable to the rebels. Thus it is unlikely
that there will be any fundamental change in
French policy leading toward an Algerian set-
tlement at least before late autumn.
32. Over the next few months, however, we
believe that additional pressures for a change
will be brought to bear on the French govern-
ment. France will be confronted with diffi-
cult problems in coping with the UN General
Assembly discussion of Algeria this fall. It
will then soon be entering the fourth year of
its campaign in Algeria ? except in the highly
unlikely event that pacification will have suc-
ceeded by that time. The French will also be
under growing external pressure from all di-
rections, especially from the UN and their
partners in the Common Market, with respect
to Algeria. There will also be increasing in-
ternal criticism from the Socialists, whose offi-
cial policy has already shifted to a slightly
less rigid position than when Mollet was
premier.
33. The political and administrative institu-
tions of the French, as well as their pride and
sensitivity, will continue to operate against
any rapid change in policy. If the French
felt that there had been unwarranted inter-
ference by supposedly friendly countries, this
would delay any significant change. Other-
wise, there is at least an even chance that by
the end of this year the French will begin to
give serious consideration to an Algerian set-
tlement negotiated with the rebels.
34. French leaders could take advantage of
unofficial contacts with the rebels .to discover
a possible basis for a settlement. We believe
that the most the French would offer would
be the grant of a measure of nationwide au-
tonomy as a start, coupled with recognition
of the principle of eventual independence for
Algeria. Almost any French terms will be
accompanied by efforts to keep Algeria within
a revised or transformed French Union. The
French might also propose the separation of
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the Sahara from Algeria in order to retain
control of its resources, but such a scheme
would encounter strong Moslem opposition.
35. The FLN appears to have become more
rather than less intransigent about the terms
of a settlement as a result of the French
failure to repress the rebellion and the French
loss of prestige in the Middle East. On the
other hand, continuing French military pres-
sure on the rebels has probably convinced
them that they cannot hope for a speedy or
complete victory. Therefore, if the French
are not obviously forced to lead from weak-
ness, we believe that the FLN leaders will in
time agree to negotiate on terms of limited
nationwide autonomy and recognition of the
principle of Algerian independence. The
rebels would probably believe that autonomy
could be readily transformed into independ-
ence at an early date, and that needed French
aid meanwhile could be retained.
THE ECONOMIC PROBLEM
36. While the attention of most Frenchmen
during 1956 and early 1957 was increasingly
centered on the Algerian issue ? dramatized
and complicated by the Suez intervention ?
France slid into a critical financial position
with little or no public notice. The lack of
widespread concern prior to the fall of the
Mollet government was largely due to a seem-
ingly paradoxical situation which still ob-
tains: France is experiencing a relatively
high degree of prosperity at the same time
that the government is casting about for pal-
liatives to its critical financial straits. The
situation has now been brought home to the
average Frenchman by recent tax increases,
if not by Bank of France advances and rever-
sal of the trade liberalization program. On
the other hand, the French still are not in-
clined to accept draconian government meas-
ures and individual sacrifices as necessary to
the future economic health of France.
The Current Situation
37. The deterioration of the French financial
position began in 1956 after four years of eco-
nomic growth with relative monetary stability.
Industrial production continued to rise rap-
idly but strong inflationary pressures were
created by an excess of demand for consump-
tion and investment, both public and private,
on France's almost fully employed resources.
This shortfall of resources against rising de-
mand was met primarily by an adverse bal-
ance of trade. Imports rose at an accelerat-
ing rate and exports dropped for the first
time since 1952. The deterioration in the bal-
ance of payments was aggravated by the ef-
fects of bad weather on agricultural output, by
the Suez crisis, and by the decline of Ameri-
can assistance and expenditures in France.
Gold and foreign exchange holdings fell from
$2 billion in early 1956 to less than $900 mil-
lion during June 1957; they are in danger
of being completely exhausted by the end of
1957. Underlying this situation was the large
budget deficit. Mollet made an attempt to
reduce the deficit, but his modest efforts were
halted by the fall of his government on the
issue of increased taxes.
38. Nevertheless, there are continuing ele-
ments of strength in the French position,
particularly the growth of industrial capacity
resulting from high levels of investment and
modernization. Since 1954, industrial output
has been increasing at a rate of about 10 per-
cent annually, and productivity has been in-
creasing almost as rapidly. Favorable weather
conditions in early 1957 indicate a future
improvement in agricultural production. GNP
increased to $52 billion in 1956, a rise of four
percent in constant prices, following the
seven percent rise in 1955. Gross investment
expanded by over nine percent in 1956 to a
level somewhat under 20 percent of GNP;
these high levels continued in early 1957.
After many years of economic stagnation and
war French leaders have been loath to impede
the growth and re-equipment of industry by
over-all deflationary measures. They believe
that further growth would provide the best
prospects for dealing with hitherto persistent
social problems, and for assuring the long-
term equilibrium of the economy.
39. The political inability of the French gov-
ernment to limit the growth of competing de-
mands has been largely responsible for the
inflationary pressures and the external im-
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balance. As noted above, real output rose by
four percent in 1956, while total claims on
resources increased by six and a half per-
cent; private and public consumption rose by
over five and 10 percent respectively. Mil-
itary costs, especially for operations in Algeria,
are an important factor contributing to infla-
tionary pressures. However, rising expendi-
tures for other government activities, for in-
vestment, and for private consumption are of
at least equal importance.
40. Government Fiscal Policy. The large def-
icit in the central government accounts,
totalling about $3 billion in 1956, contributes
heavily to the current inflation. Premier
Bourges-Maunoury's fiscal program, approved
by the National Assembly in June 1957, is sub-
stantially the same as the revised Mollet pro-
gram which was rejected by the Assembly a
month earlier. Further increases in total ex-
penditures apparently have been checked, but
they are likely to remain at the 1956 figure of
slightly over 25 percent of GNP. However,
projected receipts from increased taxes should
reduce the deficit in the combined budget and
treasury accounts to perhaps $2.5 billion, or
from 23 percent of total government expendi-
tures to about 18 percent in 1957.
41. The government budget does not provide
a flexible means for the required deflationary
action, since it is politically difficult to reduce
expenditures or to raise taxes. Despite the
much-publicized attempts for some months to
achieve budgetary economies, over-all expendi-
tures have remained about the same. Those
decreases which have taken place have tended
to be offset by increases for military operations
in Algeria and for social services, particularly
for old age pensions, which the Socialist Party
regards as politically imperative.
42. Moreover, the traditional and pervasive in-
tervention of the government in the economy
of France hinders rather than assists the at-
tempt to control inflation. A considerable
proportion of major economic enterprises are
owned by the state. In addition, the govern-
ment intervenes through a complex network
of social security payments, subsidies, special
compensations, tax discriminations, and other
indirect measures. Farmers, craftsmen, and
small firms have been particularly favored, but
a myriad of other special interest groups ob-
tain different degrees of economic support and
protection. While the apparatus of interven-
tion grew piecemeal and embodies contradic-
tory economic objectives, its net effect is to
inhibit competition and change in large sec-
tors and to reduce the over-all flexibility of
the economy. Government policy, far from
obtaining greater leverage over inflationary
pressures by the extent of its intervention,
tends to be hamstrung by special interest
groups. This is particularly true under the
present tenuous parliamentary coalition.
43. Economic Impact of the Algerian Conflict.
The cost to France, both in resources and
manpower, of the insurrection in Algeria is
one of the major inflationary pressures on the
economy. French total defense expenditures
in 1957 are likely to be approximately $4 bil-
lion, or about 7.6 percent of estimated GNP.
These expenditures are about $1 billion higher
than the annual rate prior to the outbreak of
hostilities, which provides a rough indication
of the real cost of military operations in Al-
geria. Other costs to France include a drain
of resources in the form of unrequited service
and commodity exports. The flow of private
capital being repatriated from Algeria ? esti-
mated at $450 million in 1956 ? is not accom-
panied by a corresponding flow of commodities
and thus tends to swell the monetary claims
on resources within France. The full infla-
tionary impact of the Algerian crisis cannot
be estimated, but it is probable that the total
economic drain on France amounts to about
$1.5 billion annually.
44. The pressure on manpower resources of a
high level of economic activity and of the call-
up for military service in Algeria has been
severe. The labor force has been relatively
static in recent years, with immigration only
slightly exceeding the decline in the popula-
tion of working age. In a period of large pro-
ductivity increases, the withdrawal from the
economy of men for service in Algeria has not
had a very serious effect on output. It has
contributed, however, to the pressure on
wages.
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45. The Level of Prices. The French govern-
ment has attempted to maintain a stable price
level by direct measures. Particular attention
has been given to holding down the official
cost-of-living index for Paris, to which the
minimum wage rate is tied. In an attempt to
prevent an inflationary spiral, prices for major
items comprising the index have been manip-
ulated by tax reductions, suspensions of im-
port duties, and price blocking; more recently
the index itself has been revised. In addition,
a general price stoppage was introduced in
mid-1956 on domestically produced goods,
trading margins, and services. These govern-
mental measures have had a considerable ef-
fect. Nevertheless, the average prices for all
commodities rose by four percent in 1956, and
by two percent by July 1957. Moreover, in
July the official retail price index exceeded
149.1 (1949=100) and the government was in
consequence obliged to put into effect on 2
August the automatic five percent increase in
the guaranteed minimum wage called for by
law. While this action is expected to benefit
immediately less than a million workers, it
will undoubtedly, as in the past, lead to a gen-
eral wage increase.
46. The Adverse Trade Balance. Faced by a
gap between demand and supply the Mollet
government permitted a rapid increase in the
import surplus, apparently hoping that an
early settlement in Algeria would permit a
more fundamental readjustment of the eton-
omy. Under the impact of an almost full
utilization of industrial capacity, imports of
raw materials and semifinished products were
16 percent higher in 1956 than in 1955. Im-
ports of finished manufactured products in-
creased by 18 percent; food imports, by 56 per-
cent. The total volume of imports rose by 19
percent, as compared with a rise of 11 percent
in the preceding year. At the same time,
French exports have been hampered by high
prices resulting from inflated domestic de-
mands; the volume of exports declined by
eight percent in 1956, in contrast with a 12
percent increase in the previous year. As a
result, the foreign trade deficit rose from $235
million in 1955 to $1.2 billion in 1956, and to
an annual rate of about $2 billion in the first
five months of 1957.
10
47. Only about one-third of this increase in
the foreign trade deficit can be attributed to
extraordinary factors ? the winter freeze and
the Suez crisis. France, usually a net ex-
porter of wheat (over two million tons in
1955) , showed net imports of 500,000 tons in
1956. The 10 million ton increase in coal
consumption caused coal imports to rise by
$100 million and coal exports to fall by $60
million.
48. The Balance of Payments. As the balance
of payments has worsened, speculation against
the franc has accelerated. This deterioration
has occurred at a time when special receipts
from the US, in both direct assistance and US
military expenditures in France, have declined
sharply from a level of $1 billion in 1954-1955
to $370 million in 1956-1957 (these special
receipts are estimated at $290 million for
1957-1958) . An International Monetary
Fund (IMF) credit of $262 million, obtained
in October 1956, is now exhausted and Bank
of France gold and other foreign exchange
holdings are under $900 million. In these cir-
cumstances, the French government has ap-
plied restrictions on credit and on imports,
reversing the trade liberalization policy being
pursued with other Western European coun-
tries. Furthermore, on 10 August the French
took comprehensive measures just short of
actual devaluation to improve their exchange
position. The rate for tourist exchange trans-
actions was changed from 350 francs to 420
francs to the dollar. Simultaneously, the gov-
ernment announced that the higher rate
would be applied, by means of a 20 percent
export subsidy and a 20 percent import tax,
to all trade except imports of essential raw
materials and fuels. Nevertheless, France
faces the probable necessity of borrowing from
abroad.
The Economic Outlook
49. The Short Term. France is likely to be
faced with increased economic difficulties over
at least the next year or so. In order to sta-
bilize the economy, the French government
must reduce public and private demand to
levels commensurate with French resources,
which will increasingly have to be diverted to
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exports. The measures thus far adopted by
the French to restrain inflationary forces are
likely to prove inadequate. The tightening of
credit and gradual reduction in the level of
investment probably will reduce effective de-
mand at only a slow pace. At the same time,
the reduction of imports ? while moving in
the direction of a better external balance ? is
likely to lead to early and more intense pres-
sures on the general level of prices.
50. The present government, or any likely
successor, probably will be unable to take more
drastic measures to enforce a policy of fiscal
austerity in the near future. Dependence on
Socialist support precludes sharp cuts in the
field of social welfare, education, and public
works, or substantial increases in taxes on
mass consumption. Difficulties in attempting
economies in this direction will be augmented
by the likely growth of labor unrest. Depend-
ence on conservative support for a parliamen-
tary majority probably precludes sharp reduc-
tion in farm subsidies, or drastic increases in
taxes on business incomes. Military expendi-
tures for NATO-committed forces may be re-
duced, but substantial economies in defense
will not be realized as long as the policy of
forceful pacification continues in Algeria. In
fact, depending on the intensity of operations
in Algeria, military expenditures in 1957
could exceed present authorizations. Recent
economies and tax measures will not reduce
the absolute amount of the budget deficits for
1957 and 1958 significantly below that of 1956,
although there will be some improvement in
relation to the rising levels of both total ex-
penditures and GNP.
51. In this situation, a number of proposed or
already approved government programs may
be further postponed or their implementation
extended over longer periods. These include
about $800 million for long-term development
of Saharan resources, an expensive reform and
expansion of the French education system,
extension of the medical insurance system,
and a projected reorganization of the French
Army. Even with a decrease in military
operations in Algeria and a leveling off of pub-
lic investment expenditures, sizable budget
deficits are likely for at least several years.
11
52. The probable rise of price levels over the
next few months will lead to greatly increased
pressures on the level of wages. In current
prices, wages in 1956 were 11 percent above
the level for the previous year, but followed
rather than led the combined rise in over-all
productivity and the general level of prices.
In 1957, the rise in wages is expected to out-
pace productivity and prices, thereby provid-
ing an independent stimulus to the inflation-
ary spiral. There is likely to be growing dis-
illusionment and unrest among the rank and
file of the labor unions, hitherto largely re-
strained by the Socialist character of the gov-
ernment. The Communist-dominated CGT
will increase its wage demands and will prob-
ably be able to exert greater pressure on the
leadership of the other unions to support
them. A fairly serious strike movement is
likely to develop during the fall. The govern-
ment will find it difficult to continue manipu-
lating the official cost-of-living index and to
resist wage demands. Since rates of growth
of industrial production and productivity are
likely to decline, there will be greatly reduced
scope for granting wage increases which will
not contribute to a wage-price spiral.
53. The over-all balance of payments deficit
for 1957 is likely to be even larger than that
of last year, which was over $1 billion. A
trade deficit approaching $800 million was in-
curred during the first five months of this
year; no foreseeable government action is like-
ly to reduce the deficit even to the level of
1956. France still has drawing rights with
the IMF for an additional $262 million, and
a West German loan of $100 million through
the European Payments Union has been dis-
cussed. However, the French government will
probably be forced to draw further Bank of
France gold reserves even if such foreign
assistance should be forthcoming.
54. In these circumstances, increased atten-
tion is being devoted to the issue of outright
devaluation. It is possible that the present
government will officially devalue the franc,
although many French leaders are convinced
that such a step would be premature. They
would prefer to wait until measures already
taken could be supplemented by a compre-
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hensive program of financial stabilization.
They fear that the psychological reaction
of many Frenchmen to devaluation under
present conditions would only intensify the
already strong pressures on the level of prices,
and that the resulting rise in prices would
cancel most of the benefits of such a policy.
In the short term, the government would pre-
fer to rely on increasingly comprehensive
trade and foreign exchange controls, and on
increased investment incentives in export in-
dustries. This isolation of France behind a
wall of extensive trade and exchange controls
would damage prospects for European eco-
nomic integration, but we do not believe that
this consideration in itself would deter the
government from adopting restrictive policies.
55. The Longer Term. By raising a wall of
trade restrictions, France could probably for a
considerable period check the loss of reserves
and maintain economic growth, although at
a somewhat lower rate. By concentrating
scarce foreign exchange on the most essential
imports and by special measures to expand
exports, France might be able to achieve
about a two to three percent annual increase
of GNP and perhaps a five percent annual
rate of industrial growth over the next few
years. On the other hand, these estimates of
France's ability to maintain moderate levels of
economic growth within an increasingly pro-
tectionist framework depend on the willing-
ness of other countries to keep their markets
open to French exports.
56. Even should the French obtain some
short-term external assistance from the IMF,
West Germany, or elsewhere, foreign assist-
ance is unlikely to be continued over a longer
period unless the French give way to external
pressures for fundamental reforms in their
economy. Despite their huge exchange sur-
plus, the West Germans in particular would
be cautious about extending aid for fear that
France would thereby merely be encouraged
to resist basic changes.
57. A successful stabilization of the French
financial position is unlikely until after a set-
tlement of the Algerian conflict. The chances
are slightly better than even that in the cli-
mate created by such a settlement a French
government would utilize the opportunity pro-
vided by an easing of demand on resources
to place the fiscal system on a sounder basis,
and free the economy from the straitjacket
of foreign trade control and subsidies. Such
reforms, given the substantial growth and
modernization of the French economy since
1945, probably would in time enable France to
participate in cooperative European institu-
tions without reservations and fears for its
economic future.
EUROPEAN COOPERATION
58. France's financial difficulties have stimu-
lated moves toward economic isolation at a
time when the French have taken a consid-
erable step toward entering European cooper-
ative institutions, which many believe provide
the best hope for overcoming the problems be-
setting the French economy. This coincidence
of favorable and adverse trends symbolizes the
French approach to European cooperation.
Successive French governments have either
initiated or officially supported virtually all
the major postwar efforts that have been made
toward the integration of Western Europe.
They have had the backing of various groups
for a variety of not always consistent reasons,
but they have also encountered opposition;
the strength of which has varied with the
proposal. Opposition was greatest to the EDC
project, which dealt with the very sensitive
question of integrating the French and Ger-
man armies above the division level. There
has been less opposition to projects for eco-
nomic cooperation. While the French ap-
plaud the general theme of United Europe,
they have found some difficulty in accepting
concrete proposals for the attainment of this
ideal.
59. French ratification of the Common Market
(European Economic Community) and EU-
RATOM (European Atomic Energy Commu-
nity) treaties is encouraging but far from de-
cisive. Ratification makes possible but does
not necessarily assure a long-term commit-
ment to a firm policy of Europeanization. A
divided Assembly or an unenthusiastic govern-
ment could at any time delay implementation
of the plans during their initial phases. Such
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perils are more likely to beset the Common
Market than the less complex EURATOM,
especially since Europe's urgent energy prob-
lems were clearly illustrated by the Suez affair.
60. The Common Market. France to some
degree repeated its EDC performance by mak-
ing numerous demands on its five prospective
partners during the negotiations on the Com-
mon Market. These demands were aimed pri-
marily at reducing the degree of supranation-
alism in the treaty and at cushioning the
French economy ? especially the agricultural
sector ? against any strongly adverse impact
from the lowering of trade barriers. The ma-
jor French requests were largely satisfied, at
the expense of some diminution of enthusiasm
on the part of the other participants ? espe-
cially the Dutch. While the force of the
treaty has been somewhat diminished thereby,
it nevertheless represents a potent instrument
for economic change.
61. If the Common Market operates as in-
tended, the French economy will gradually be
forced out of its straitjacket of government
protection and control, and powerful private
economic pressure groups will lose some of
their influence. Despite French fears of a
drastic impact on manufacturing industries
and of possible domination by West Germany,
it appears that dislocations in the economy
will be neither sharp nor disruptive. How-
ever, the potential benefits of the Common
Market at best will only be realized over a long
time, as envisaged in the 12 to 15 year tran-
sition period provided by the treaty. The
Common Market project might make an even
slower start than planned, since it is possible
that the French government will not have
revoked its drastic trade restriction measures
by early 1959. In this case, the Common
Market would not have a significant effect on
the French economy during the period of this
estimate. If, on the other hand, the French
removed their trade restrictions and partici-
pated unreservedly in the project, it would
have a substantial impact.
62. Efforts to create the Common Market are
being matched in the broader field of Euro-
pean cooperation by an attempt to set up an
associated European Free Trade Area (FTA) ,
13
to which the members of the "Six" would also
adhere. The two projected organizations are
largely differentiated by the degree to which
customs barriers would be affected; the FTA
members would abolish such barriers among
themselves, but tariffs toward nonmembers
would be maintained on an individual country
basis. Much of the stimulus for the
FTA ? one which would exclude agricultural
products ? has come from British govern-
ment circles who fear an improved West
German competitive position within an im-
plemented Common Market scheme to which
the UK does not adhere. Few concrete steps
have been taken toward creating the FTA,
partly because of inherent difficulties and
fears that negotiations simultaneous with
those for the Common Market would diminish
French support for the latter project. After
ratification of that project is completed, nego-
tiations on the FTA will probably go forward.
In those circumstances, the French attitude is
likely to be shaped principally by the wish to
associate the UK with the cooperative trade
movement as a counter to possible German
economic hegemony, and by opposition to the
British plan to exclude the agricultural sector
from the FTA. If France is satisfied on the
agriculture issue ? the UK has already shown
some disposition to compromise ? it probably
will support formation of the FTA.
63. EURATOM. Whereas the French ap-
proach to carrying out the provisions of the
dramatic and far-reaching Common Market
project may be hesitant at best, there is un-
likely to be much foot-dragging on implemen-
tation of EURATOM. Because of French de-
mands, the treaty permits its signatories to
develop nuclear weapons programs on a na-
tional basis. This provision has satisfied
most French nationalistic objectors; the rea-
son why the opposition to the treaty was more
vociferous than to the Common Market proba-
bly is that EURATOM requires immediate
French action, while the former's provisions
allow for considerable delay.
64. Implementation of EURATOM should
greatly hasten the development and construc-
tion of nuclear power facilities, and at the
same time reduce the chances of a costly
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French race with already impatient German
industrialists. An expansion of domestic
power resources is fundamental for a con-
tinued increase in France's productive capac-
ity, and for the retention of its competitive
position within the embryonic Common Mar-
ket. Although EURATOM will not produce
nuclear energy for industrial uses within the
period of this estimate, it gives France an
opportunity to reduce its dependence on Mid-
dle East oil over the next decade.
65. Future Integration Attempts. Many sup-
porters of the two plans in France are pri-
marily interested in their effect in stimulating
action toward the political integration of the
six Western European countries. France al-
most certainly will continue to participate in
the broad forms of European cooperation for
the foreseeable future. It appears ready to
move ahead cautiously with the two current
treaties. But French ratification of the trea-
ties does not presage any disposition to accept
the thesis of a political European union.
France needs the shared strength which pres-
ent and incipient cooperative organizations
can provide; it is far from convinced that more
than this is required. However, if the present
treaties are fully implemented and comple-
mentary institutions of the OEEC-type estab-
lished,' the long-term trend would probably be
toward a more confident and interdependent
Western Europe. Under such circumstances,
France slowly might change its attitude
toward a supranational political organization.
66. The Eurafrica Policy. Many. French lead-
ers wish to use European integration as a
device for associating their Common Market
partners with them in the attempt to main-
tain the French position in Africa. The
French hope that their African territories will
be restrained from demanding independence
by their pressing need for economic assist-
ance, but are having difficulty in continuing
to provide colonial development funds at
present levels. They therefore made their
participation in the Common Market project
dependent on contributions for colonial devel-
opment from their European partners. While
some Frenchmen believe that European inte-
gration and preservation of their special status
in Africa are mutually exclusive policies, this
is not a widespread view.
67. A common investment fund for dependent
overseas territories is provided for by the Eu-
ropean Economic Community Treaty. The
amount is set at over $580 million for the first
five years after ratification, and the French
Black African territories are to receive the
bulk of that sum. Algeria has been given a
special position in the Common Market, and
France would also like to associate Morocco
and Tunisia with the project. However, while
the Algerian conflict continues, these two
countries almost certainly will not participate,
and a permanent basis for Algerian associa-
tion with the Common Market cannot be
determined.
68. We do not believe that the results of link-
ing the Common Market with the Eurafrica
policy will come up to French expectations.
The application of the loi-cadre to the French
African territories will probably stimulate fur-
ther demands for more self-government, and
increase speculation about independence.4
Some high French officials already believe that
many of these territories will become inde-
pendent within two to five years. African
nationalists will regard the need for develop-
ment funds as only one element in the asso-
ciation with France; many of them are un-
likely to be inhibited from additional political
demands by economic considerations. In any
case, the projected expenditures through the
Common Market amount to only about $100
million a year, and the net effect of this spread
over more than a dozen French territories
may not be very substantial. This would be
particularly true if France, which is to con-
tribute roughly 40 percent of the fund, is
forced to lower the level of its past inde-
pendent development expenditures. Moreover,
the other European countries involved will not
be eager to assume even indirect political re-
sponsibility for developments in French Afri-
can areas, and the French will be anxious to
avoid any weakening of their influence.
Those countries will still be subject to certain
4For more information on these African terri-
tories, see NIE 72-56, "Conditions and Trends in
Tropical Africa," published 14 August 1956.
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restrictions in their economic access to the
African territories in spite of their somewhat
reluctant participation in the development
fund over the next five years.
FOREIGN AND DEFENSE POLICIES
69. France is currently torn between the de-
sire to recapture its status as a great power
and a growing fear that sooner, rather than
later, it must recognize that this is impossible.
The French action at Suez, strong support for
Israel, and general policies toward the Middle
East over the past year were all stimulated by
a national sense of outrage over Arab assaults
on Algeria, which the French believe is the key
to their position as a world power. The fail-
ure in Egypt illustrated for France the decline
in its power position, but French leaders have
not fully faced up to the implications of this
decline. The French commitment to Algeria
in large measure has inhibited a reappraisal
of their defense and foreign policies similar to
that made by the British.
70. The nature of the governmental organi-
zation is one of the factors contributing to
French slowness in adjusting to the decline in
France's power position. In view of govern-
mental instability, much of the power to de-
termine French policy action rests with the
bureaucracy. Many of the ranking members
of this group have roughly the same back-
ground, experience, and intensive education.
Their common outlook is based upon an appre-
ciation of the historical role of France in Eu-
rope and the world; it is not necessarily repub-
lican, and it is generally conservative. Some
members of this administrative class serving
France abroad have at times imposed their
own views in the absence of firm direction
from the government. For example, French
representatives in Indochina have been and
will probably continue to be addicted to
maneuvers which do not necessarily reflect
the attitude of the French government.
Bureaucrats of this type tend to influence
French policy toward a view of the world based
on the past greatness of France, and toward
conservatism.
71. Effects of the Algerian Problem. The
Algerian issue continues to shape France's
15
policies toward not only intimately affected
areas, but also its major allies and the UN.
In particular, the issue is affecting French
attitudes toward the US, whose intentions
with regard to both North Africa and the
Middle East are suspect in French eyes.
France will persist in measuring US friendship
by the yardstick of support ? or at least lack
of opposition ? on its Algerian policy. More-
over, the French are likely to weigh their ac-
tions in other areas against the US position.
For example, there is increased sentiment in
France favoring recognition of Communist
China, but the French government will prob-
ably forestall any concrete move in that direc-
tion so long as it is satisfied with the US atti-
tude toward Algeria. UN discussion of the
Algerian problem aroused considerable indig-
nation in France. That discontent was molli-
fied by the last General Assembly's proceed-
ings, but France is likely to walk out of the
forthcoming or a later session if it results in
a decision on Algeria adverse to the French.
Although there is no present disposition
toward withdrawal from the UN, it is possi-
ble ? though unlikely ? that a right-center
government would withdraw if the General
Assembly took a strong anti-French stand.
72. French policies toward Morocco and Tu-
nisia will probably continue to be based on
the theme of interdependence. However, the
development of new and enduring relation-
ships between France and those areas will be
greatly hampered so long as the Algerian
problem is not resolved. There has already
been a series of incidents involving these
areas. Although some progress has been
made in remedying the resulting setbacks in
relations, each incident diminishes mutual
trust and renders less likely the construction
of a new relationship satisfactory to both
sides. Further incidents will probably occur
while the Algerian fighting continues, and it
is possible, though unlikely, that Morocco and
Tunisia will become directly involved in the
armed conflict with France.
73. Policies Toward the Western Alliance.
France continues to adhere to the Western
alliance system as the basis of French foreign
policy, while insisting on its independence
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from the US and its right to a larger role in
determining the policies of the alliance. Al-
though there was considerable resentment
over the isolation of France and the UK from
their NATO partners during the Suez inter-
vention, the failure of the intervention had the
net result of increasing French realization
that the alliance was fundamental to their
security. There has been a reaffirmation of
French insistence on the retention of Ameri-
can and British troops on the continent in
order to: (a) guarantee US involvement in
any Soviet attack on Western Europe; (b) ful-
fill the need for conventional ground forces
while those of France are concentrated in
North Africa; and (c) operate as a restraint
on West Germany.
74. France will probably remain committed to
the Western alliance for the foreseeable fu-
ture. There are minority voices besides the
Communists' which will call for a more neu-
tral position, a European "third force," or an
understanding with the USSR permitting
France to become wholly neutral. But these
elements almost certainly will not be able to
determine French policy. Even in the im-
probable event of a popular front or of an
ultraconservative government, we believe it
unlikely that France would withdraw entirely
from its international commitments. There
is a more likely danger that a crisis over Al-
geria in some way might become linked in
French minds with betrayal by the Western
allies; a wave of intense nationalistic feeling
might then cause a temporary breakdown of
cooperation with France's allies.
75. While France will continue to support
NATO, it will follow an independent policy
on many issues. The French will try to main-
tain their freedom to take unilateral action
against Arab nationalist pressures, and to
play a role in Middle Eastern affairs. They
will almost certainly seek to gain support, or
at least acquiescence, from their Atlantic part-
ners for these policies. The French will prob-
ably resume their efforts to relax East-West
tensions whenever the opportunity arises.
They will be particularly interested in eco-
nomic assistance to underdeveloped countries
(which, according to the so-called Pineau
16
plan, should be extended through interna-
tional agencies) , in economic and cultural
contacts, and in promoting disarmament.
However, in view of their emphasis on the
inclusion of conventional forces and their de-
sire to safeguard their position as a possible
nuclear power, the French will probably con-
tinue to take a cautious attitude toward con-
crete disarmament proposals.
76. Within the NATO framework France is
likely to give particular attention to the seven-
member Western European Union (WEU),
which it considers as largely its own creation.
Among the stimuli for this approach are:
(a) the French wish to cultivate closer re-
lations with its neighbors, as a result of Suez
and a renewed interest in European integra-
tion; (b) the desire to keep a close watch on
West Germany; and (c) the hope of bringing
the UK further into continental affairs as a
counterweight to Germany. While France
would still fear the possibility of German pre-
dominance in Western Europe, suspicion of
the Germans has diminished considerably over
the past year of two. The French appear to
envisage closer relations with Bonn; for ex-
ample, there is genuine French interest in
standardizing non-nuclear weapons with Ger-
many and the other WEU members. They
have accepted the general US concept of Ger-
man reunification as linked with disarma-
ment and the European security issue. How-
ever, the French public has not been fully
persuaded by the more cordial approach of
its government. France might take a much
more cautious attitude if prospects for Ger-
man reunification were improved.
77. The French Defense Posture.5 France
has an army of almost 800,000 men, an air
force of about 3,900 aircraft ? of which over
1,600 are jet aircraft ? and a navy with a
substantial antisubmarine force, centered a-
round three aircraft carriers, as well as escort,
patrol, and minesweeper forces. The navy
has performed well in complex NATO exer-
cises. However, the French ground forces
contribution to NATO has been reduced al-
most to the vanishing point and the air con-
See Appendix for a summary of French military
strength.
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tribution has been seriously diminished over
the last two years. The French have the ca-
pacity for a modest nuclear weapons program
(an annual production rate of three nominal-
size bombs in 1958; increasing to an annual
rate of 110 by 1967) , which they are on the
verge of adopting.6 France could make a more
substantial contribution to Western defense
by implementing the French Army's plan for
reorganizing and re-equipping its armed forc-
es to increase the mobility and fire-power of
its divisions. Such units could meet the re-
quirements of either limited operations in
overseas territories or large-scale operations
on the European continent. It is not doing
so now because stringent financial limitations
and the involvement of large forces in Algeria
prevent the necessary reform measures.
78. French technical and scientific compe-
tence in military research and development re-
mains among the best in Europe, especially in
the fields of radar electronics, metallurgy, and
aeronautical engineering. However, there is
a serious lack of trained technical personnel
available for the development of full-scale pro-
duction in these areas, and little likelihood
that the numbers of scientists and engineers
will increase significantly in the near future.
This deficiency, coupled with a severe short-
age of funds, suggests that many weapons
improvements and developments, although
first-rate in design, will remain in the proto-
type stage during the period of this estimate.
79. Termination of the Algerian conflict will
improve France's military posture in Europe,
but certain weaknesses will remain. The
probable diversion of funds to a nuclear pro-
gram will be likely to delay the re-equipping
of the armed forces without a compensatory
increase in potential for resistance to Soviet
aggression, since the French cannot develop
a substantial independent nuclear capability
by 1960. In the field of guided missiles em-
phasis will be placed on defensive and short
to medium range weapons. US aid will plug
some, but not all, equipment gaps.
For further discussion of French nuclear policy,
see NIE 100-6-57, "Nuclear Weapons Production
in Fourth Countries ? Likelihood and Conse-
quences," published 18 June 1957.
THE OUTLOOK
17
Prospects for an Algerian Settlement
80. We have estimated above that there is
an even chance that by the end of this year
the French will give serious consideration to
negotiating a settlement with the FLN. We
believe that moves toward a settlement are
likely within the next 12 months, unless some
dramatic international incident has mean-
while caused a fresh outburst of nationalistic
reaction in France. In the initial negotia-
tions, the French would probably hesitate to
concede the principle of independence, while
the FLN probably would demand not only the
principle but a timetable for its implemen-
tation. Both parties might prove adamant
to the point of a temporary breakdown of
the talks, but there is a good chance that
they would resume after a relatively brief
period on the basis of a French concession
of eventual independence. We believe that
the chances are about even that a settlement
will be reached within the next 18 months,
and that it is probable that there will be a
settlement before the end of 1960.
81. However, it would first be necessary for
any French government to obtain parliamen-
tary majority approval ? probably excluding
Communist votes?for such a course of action.
It might be that Assembly sanction for a nego-
tiated settlement could only be achieved
through the formation of a "national union"
government (consisting of all political parties
except the right and left extremes). It is
unlikely that the Socialists and Radicals
would be willing to share responsibility solely
with the Communists for a closing out of the
Algerian conflict; they would almost certainly
attempt to associate the right-center with
such an effort.
82. Until a settlement is negotiated, the
French will continue their efforts both to-
ward imposing a political solution and repress-
ing rebel guerrilla activities. Open moves in
the direction of concessions to the FLN will
altnost certainly be accompanied by colon
violence. We believe that such outbreaks will
not attain the proportions of a general up-
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rising unless the French Army as a whole
supports such an effort, which we estimate
it will not.
83. The terms of a settlement would probably
be based on French recognition of the right
to eventual independence and a grant of a
substantial measure of national autonomy to
the Algerians, coupled with extensive safe-
guards for the colons. The FLN would prob-
ably be willing to promise protection for
French and colon interests in return for as-
surances of continued French assistance with
Algeria's economic, technical, and adminis-
trative problems. These terms, once approved,
would probably take some time to implement.
Thus, even if the French and the rebel leaders
achieve a negotiated settlement within the
next 18 months, there will still be unrest in
Algeria. A solution based on substantial au-
tonomy would probably restore order at least
temporarily, but the Algerians would soon be
pressing the French for more rapid progress
toward independence, and might resort to vio-
lent pressures. There would almost certainly
be some degree of friction and perhaps armed
conflict between the Algerians and the colons.
The French therefore would probably not be
able to disengage themselves completely from
the Algerian problem over the next several
years in terms of either troops or expenditures.
. 84. The Alternatives. While the course of
events indicated in paragraphs 80-83 is the
most likely, it is by no means certain, and
could be altered by many contingencies.
Hence, we have examined several possible
alternative developments.
85. It is possible that the pressures within
France to come to terms with the FLN will
fail to achieve sufficient momentum to ensure
a compromise solution. In the short run,
significant FLN successes in the diplomatic
or military sphere might strengthen French
intransigence. As a result, the process of ex-
ploratory talks might suffer long interrup-
tions, and the conflict might be prolonged
into the period of the French national elec-
tions, which could entail a further postpone-
ment of a settlement. Under these circum-
stances, the rebels might turn to the Bloc
for direct military and other assistance, par-
ticularly if the FLN estimated that the US
and other Western powers would continue
to be unsuccessful in their attempts to moder-
ate French intransigence. Any effort by the
French during this period to separate the
Sahara from the coastal areas and to create
a colon enclave within those areas would
intensify Moslem hostility to the French.
Furthermore, the growing bitterness accom-
panying a long drawn out conflict would make
the rebels increasingly less willing to accept
anything short of immediate independence.
Thus, eventually the only alternatives to con-
tinued French military occupation would be
the forced partition of Algeria, or a grant of
outright independence for all Algeria with
only initial protection for the colons and
French interests. The first alternative would
pose difficult and continuing problems for the
French.
86. Another possible alternative is a reversal
of French policy in the direction of concluding
an agreement for Algeria's independence with
the FLN over the next six months or so ?
perhaps with the five rebel leaders captured
last October and now imprisoned in France.
Although this alternative to prolongation
might crystallize with little or no warning,
we believe it unlikely that any French gov-
ernment during the remainder of this year
would have sufficient authority to make such
a change, or that the French would abandon
so quickly their hopes for an imposed solution.
Prospects for the Fourth Republic
87. We have already stated our belief that
future French governments are likely to be
formed for the most part from an Assembly
minority ? either the center-left (Socialists
and Radical Socialists) or the center-right
(MRP and Moderes) ?with precarious sup-
port from other democratic parties. The
deep division between the Socialists and the
Moder& on economic and social issues and
between the Socialists and the MRP on the
clerical issue seem to preclude the formation
of a broad center government unless the
threat from the extremes forces them to-
gether.
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88. Under current conditions, we thus would
expect French cabinets over the next few
years to be based on minority coalitions of
either a center-left or center-right complexion.
The present distribution of political strength
in the Assembly suggests that center-left gov-
ernments are more likely to be formed than
center-right governments. However, over a
longer period the Assembly may ? as it often
does between elections ? drift toward the
right. It is possible ? though highly unlikely
? that the Assembly might be dissolved before
the expiration of its term in 1960.
89. The Threat from the Extremes. A num-
ber of threats to this relatively static political
situation are currently developing, and may
become critical during the period of this esti-
mate. Substantial dangers might arise from
the Algerian situation: the government might
suddenly offer extensive concessions to the
Algerians which the French public would not
be ready to accept, or the government might
appear to be without a policy at a time when
incidents and French reverses had reached
a high level. Either contingency could touch
off intense demonstrations and riots in Paris,
which might be taken advantage of by either
the Communists or the extreme right. But
these would probably not be sufficiently well-
planned or sustained to create a real threat to
the Republic. Another danger is that strong
external pressures on France with regard to
the Algerian and economic problems might
stimulate highly emotional, chauvinistic de-
mands from the French public which the gov-
ernment would be unable to satisfy. Such
an eventuality might cause a cabinet crisis,
but would be unlikely to result in the over-
throw of the constitution. There also is the
threat that deteriorating economic conditions
could result in a dangerous degree of labor
unrest which could be exploited by extremists
of either side.
90. The real but very limited strength of the
extreme right is centered in a heterogeneous
group drawn from the upper and middle
classes which for diverse reasons is hostile to
the Republic. This group can gain some mob
support from a few war veteran organizations
and other malcontents. However, although
19
a number of somewhat obscure military fig-
ures are connected with them, these rightist
elements have no obvious leader and they
lack any substantial popular support. The
Poujadists have been losing strength and co-
hesion ever since the last Assembly election.
They might form a significant element in any
rightist attempt at a coup, but they probably
would not be able to assume the leading role
in such an attempt. The mood of the French
public would have to be far more revolution-
ary than it is at present for the right to have
any prospect of success in an attempt to over-
throw constitutional government.
91. General DeGaulle continues to be a focal
point for speculation about a rightist bid for
power. However, his actions and statements
have not been those of a man who is interested
in taking control of France; and his views
on many questions, including North Africa,
appear to be closer to those of the moderate
left than those of the right. In any case, he
would almost certainly not lend himself to
such a bid unless it were cloaked in a legal
and popular garb and were certain of success.
He might be called to the premiership by the
President of France in the event of a severe
crisis; he would probably insist upon assur-
ances from parliamentary leaders that the
constitution would be amended to establish a
strong and independent executive authority
before he would accept such a call.
92. The Communist Party has suffered only
a slight decline in terms of membership and
organization strength; it still controls the
CGT, and it retains its electoral position as the
largest political group in France. On the
other hand, it has lost whatever political re-
spectability it acquired during the period im-
mediately prior to the Hungarian uprising.
Socialist refusal to cooperate in any way
with the Communists has been confirmed in
recent months. It continues to be highly
unlikely that the Communists will be able to
form and participate in a "popular front," or
that they would attempt a bid for power
through extra-legal means. A popular front
of the 1936?type in any case has little rel-
evance to the current French scene, since the
prototype was based on very different condi-
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tions, and since occasional Communist voting
support has been accepted by recent govern-
ments without any reciprocal commitment.
93. The essential condition for an increase of
Communist influence on the government of
France is a working agreement with the So-
cialists. We do not exclude the possibility
that circumstances will permit some future
limited advance toward that goal. A major-
- ity consisting of the moderate and extreme
left conceivably might be formed for the sole
purpose of closing out the Algerian problem
on terms of French withdrawal. But we re-
gard this as the least likely parliamentary
approach to that contingency. If an alliance
between the leftist parties should be formed to
deal with pressing economic problems, it
would have better prospects for at least a
brief survival. However, we consider such an
alliance extremely unlikely unless the econ-
omy should deteriorate much more seriously
than we foresee. In addition, we believe that
the more conservative groups in the French
Assembly would be inclined to compromise
with the moderate left on economic and social
legislation if the spectre of an agreement be-
tween the Socialists and Communists were
raised.
The Future French Position
94. We thus believe that the Fourth Republic
will survive during the period of this estimate.
However, the next few years almost certainly
will subject the fabric of French political, eco-
nomic, and social institutions and practices
to heavy strains. French governments will
continue to have only limited maneuverability
between the left and right extremes in the
Assembly. They will encounter severe diffi-
20
culties in attempting to find politically
acceptable solutions to the problems they will
face; they will be caught between the neces-
sity for taking some kind of action, and the
fear that any action will create new cleavages
and precipitate an adverse Assembly vote.
Hence there is likely to be a stalemate on
many issues.
95. Nevertheless, certain far-reaching changes
may take place within the period of this esti-
mate. The Algerian problem will probably be
settled on terms of increasingly weakened ties
with France which will eventually lead to in-
dependence. France will be subjected to
strong pressures from its allies within the
NATO and European organizations for closer
coordination of its policies with theirs. There
is likely to be a serious attempt to normalize
France's economic relations with the outside
world on the basis of a devaluation and stabili-
zation of the franc.
96. France may be able to turn some of these
events to its advantage. However, in many
cases there will not be clear-cut decisions and
France probably will still be deeply involved
in Africa and its pursuit of great-power status.
It will experience the frustration of having
insufficient resources to pursue the policies
seen as vital to that status, and it will prob-
ably be undergoing a highly emotional reac-
tion to the gradual continuing decline of its
past greatness. In this situation, there will
be mounting pressures for a change at the
time of the 1960 Assembly elections, but the
innate conservatism of the French and the
resistance of their institutions to repeated
assaults are likely to preclude a basic reap-
praisal of the nation's needs and the future
role of France in world affairs.
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APPENDIX
FRENCH MILITARY STRENGTH
1. Numbers and distribution of armed forces:
Location
West
Germany
Metropolitan
France
Algeria
Tunisia
Morocco
Elsewhere
Unlocated
ARMY
Strength Divisions
AIR FORCE
Squadrons
58,000 2 3
221,000 3
360,000 14
25,000 1
65,000 4
62,000
4,000
Total 795,000 24
NAVY
Ships
Aircraft Carriers
Battleships
Light Cruisers
AA Light Cruisers
Frigates
Destroyers
Submarines
Patrol Vessels
Minesweepers
38
12 (4-31 flights)
3 (4- 1 flight)
2 (-1- 4 flights)
1 (+10 flights)
59 (+46 flights)
In
Service Building
3 2
2
2
1 1
2
15 4
14 19*
89 20
124 7
* Including one nuclear-powered submarine.
NAVAL AVIATION
Location Squadrons
Metropolitan France
Algeria
Tunisia
Morocco
Elsewhere
14
8
1
6
1
30 (771 aircraft,
of which 87
jets)
2. The French Army divisions stationed in
West Germany and France, and 12 of those in
North Africa, are NATO-committed. Of these,
only the two in Germany, plus not more than
two currently in North Africa, could be com-
bat-effective in Europe within 30 days after
mobilization. Divisions in France have been
drastically depleted, and even those remain-
ing in Germany somewhat weakened, by secu-
rity requirements in North Africa. NATO
divisions in North Africa are separated from
most of their heavy equipment in depot stor-
age in Europe. The impact of the Algerian
conflict on NATO is apparent when the
present status of French forces is compared
to that of 1953-1954, when there were good
expectations of 14 reasonably effective divi-
sions available to NATO in Europe by M+30
days.
3.. On the other hand, although higher unit
training in preparation for war on the conti-
nent may have suffered, valuable and prac-
tical experience has been gained at the small
unit level. Army-Air Force cooperation and
teamwork have improved appreciably; the
tactical employment of helicopters has been
studied and developed; there has been ex-
tensive practice in the use of communications;
and staffs are now well-trained in the plan-
ning and execution of tactical operations, up
to division level.
4. French Air Force over-all capabilities re-
main below NATO standards. In particular,
only 12 of the 21 NATO-committed squadrons
are considered combat-ready, largely because
of diversion of personnel to non-NATO units
in Algeria, and an extensive re-equipment
program. However, if the projected increase
in all-weather fighter capability materializes,
and if modernization of the AC&W network
continues, there will be an improvement in air
defense of metropolitan France over the next
two or three years. Over-all capabilities may
also be improved during that period as a result
of rotation of combat-experienced personnel
from Algeria to NATO units in Europe. More-
over, plans are underway to activate one
Bomber Command squadron equipped with
the Vautour (a twin-jet light bomber) by the
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21
Declassified and Approved For Release 2013/05/28: CIA-RDP98-00979R000400450001-8
SECRET APPENDIX
end of 1957. By late 1960 this Command may
increase to six squadrons of 12 aircraft each.
5. The French Navy's effectiveness is some-
what limited by obsolescent ships and air-
craft, but is being steadily improved by re-
placement under the building program. No-
table improvement is expected in late 1959
with the scheduled completion of two aircraft
carriers from which jets may be operated. In
view of budgetary limitations, however, no
appreciable expansion in size is likely.
SECRET 22
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8 48 12
36
PO c 1 :
PAI g A N S E\ A OMNI
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One 'P"AlUll'
lk M f: T f'. R '.
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.,,
Gibraltar (UK) '
36
32
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Kasserine
Biskra
TUNISIA o
.
eur Gabes
z i
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I i J To D.I E R I D
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Marrakech

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28
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24
Boundories o,e not nocessoray those
?
?V???-?
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20
ALGERIA
1 Site of important oil strike
International or intercolonial
--- boundary
0 National or colonial capital
N. Edon
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Cinq FO rt Laperrine
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In zaoua
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.1 : .
20
Selected road or track
/
? ? ? Southern boundary of French
Departments
0 100 200 300 Miles
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Bordel
In 0L.lezZarn
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o 100 200 360 Kilometers
........ .....-->_.** ..' 1
E N C HI i W E A R 1 C A
26135 7-57 1
, ./Sy 1 1
4 0 4 8 12
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Declassified and Approved For Release 2013/05/28: CIA-RDP98-00979R000400450001-8
Declassified and Approved For Release 2013/05/28: CIA-RDP98-00979R000400450001-8
a