PROSPECTS FOR EASTERN EUROPE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R00603A002600070001-9
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 28
• Document Creation Date: December 16, 2016
• Document Release Date: October 22, 2004
• Sequence Number: 1
• Publication Date: June 10, 1977
• Content Type: MEMO

,/0 7 Cr~cr?K ,vG f c E
Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
Confidential
Intelligence
Prospects for Eastern Europe
DIA and DOS review(s)
completed.
Confidential
NI IIM 77-015
10 June 1977
Copy ti 4's
Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
 STAT Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
CONFIDENTIAL
PROSPECTS FOR EASTERN EUROPE*
MAIN POINT'S
--Unrest is likely to grow in Eastern Europe over the next
three years. The destabilizing effects of detente, slower
economic growth, and dissident activity will all add to the
tension between the East European regimes and their peoples.
--The impact will not be uniform. Poland will be the most vola-
tile, and a blow-up there, which might bring down Gierek and even
conceivably compel the Soviets to restore order, cannot be
ruled out. The situation will be less volatile in East Ger-
many, but the Honecker regime is going to have a harder time
balancing its economic need for closer ties to the West with
the unsettling effect those ties have on the East German people.
--In the rest of Eastern Europe, the tension is not likely to
get out of hand. Nowhere will dissident activists by them-
selves seriously challenge the regime.
--Under economic pressures, all of the East European countries
will show more interest in expanding their trade with the West.
Despite misgivings, the Soviets will acquiesce or even en-
courage such expansion because they are increasingly reluctant
to subsidize the East European economies. But balance-of-
payments problems will help limit East European economic
ties to the West.
This Memorandum was prepared by an interagency group repre-
senting CIA, State/INR, and DIA under the auspices of the
National InteZZigence Officer/USSR and Eastern Europe.
Approved For RelegPMQ22`:`G'1A-4&'79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
--East European leaders will continue to give ground, sporadi-
cally and reluctantly, on human rights issues of interest to
the West. But they will resist anything that looks like
a Western effort to bring about significant political change.*
--If there is no major threat to internal order in any of the
countries, the prospects are fair for a slow evolution toward
less authoritarian methods of rule in East Europe.*
--The East Europeans are not likely to seek or get any signifi-
cantly greater independence in foreign affairs.
--The US is not likely to have a major impact on how the inter-
nal picture develops in any of the East European countries.
But the East Europeans will attach more importance to develop-
ing relations with the US, not only for the possible economic
benefits but also for the increased prestige such ties bestow
on the current leaders.
* DIA does not agree that East European Leaders will accommo-
date to Western views on human rights or that prospects are
fair for a decline in authoritarian methods of rule in the
absence of a threat to internal order. DIA believes that the
necessity for tight centralized party control, the Likelihood
of growing unrest, constraints imposed by the USSR, and the
example of Soviet treatment of dissent all argue against such
developments.
Approved For Relecss~D~g`UU -`.'17~-#~BP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
CONFIDENTIAL
SCOPE NOTE ............................................ 4
DISCUSSION ............................................ 5
Economic Trouble .............................. 5
The Dissident Problem ......................... 7
If Leaders Change ............................. 8
The Soviets ................................... 8
The Western Connection ........................ 10
Poland ........................................ 11
Hungary ....................................... 14
East Germany .................................. 16
Czechoslovakia ................................ 18
Romania ....................................... 19
Albania ....................................... 21
Bulgaria ...................................... 21
Approved For Release'20D51 2''& -t BP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
CONFIDENTIAL
SCOPE NOTE
This paper covers the next three years. It assumes
Soviet ability to deal, militarily if necessary, with any
serious threat to the USSR's security interests in Eastern
Europe. The paper is guided by these questions:
--What are the prospects for instability in the re-
gion, and in particular countries?
--What are the various countries' economic prospects?
--What is the outlook for an amelioration of tradi-
tional Communist practices?
--Do any of these countries have leeway for a foreign
policy selectively independent of Moscow's in areas
of significant interest to the US?
--What impact is the US likely to have?
Because of its unique status vis-a-vis the US and the USSR,
Yugoslavia is not considered in this paper.
Approved For RelecM4149Z . #IXE P79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
1. The riots by workers in Poland last year and the
emergence of dissident activity in Czechoslovakia, East
Germany, and Romania are signs that East European countries
will live in a more fragile than usual situation over the next
two or three years. The underlying causes are unchanged: the
chronic disaffection of the East European people with the Com-
munist systems they are stuck with, nationalism, and the attrac-
tion of the West.
2. But there are some new factors. Moscow's detente
policy has reduced the isolation of the East European people and
raised demands for more personal freedoms and a better standard
of living. At the same time, the requirements of detente have
made it harder for the regimes to deal with their peoples in
authoritarian ways abhorrent to Western sensibilities.
3. New economic problems are also emerging. The East
European economies and the material well-being of the East Euro-
pean people have grown significantly over the past 15 years.
But the growth rates are slowing down, and the prospects are
good for growing consumer dissatisfaction over the next few
years. This is dangerous because rising material expectations
were consciously generated by the regimes to help neutralize
unfulfillable political and national aspirations.
Economic Trouble
4. The region as a whole is resource-poor. Even in good
harvest years, the northern countries are not self-sufficient in
grain. Eastern Europe is especially dependent upon energy im-
ports. Heavily reliant on foreign trade anyway, these coun-
tries have in recent years also suffered the consequences of
Western recession and inflation, higher prices for Soviet oil and
raw materials, and larger grain import needs due to poor har-
vests. At the same time, East European manufacturing plants
are obsolescent in important sectors. The labor force is rela-
tively skilled, but productivity suffers from lack of incentives.
Management is beset by the irrationalities and inefficiencies
endemic to centralized planned economies.
Approved For Releasoe;bU57U4K2' TCI7 -HDP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
CONFIDENTIAL
5. Unable to generate sufficient exports, the countries
of the region--especially Poland--are accumulating a large hard
currency debt. In order to keep new borrowing down, the East
Europeans will have to restrict imports from the West while at-
tempting to maximize exports. But economic growth itself depends
on quality Western equipment and industrial materials. The East
Europeans have already scaled down their growth projections for
the current (1976-80) five-year plan. There is reason to doubt
that even these more modest projections will be met. Tensions
will rise as consumers feel squeezed. The regimes will want to
raise consumer prices to stem demand, but they will be wary in
view of the Polish experience.
6. In the background loom more severe strains in the
early 1%80s, when anticipated declining Soviet oil production
will reduce oil imports from the USSR (see Figure 1) and will
greatly increase East European hard currency purchases of oil.*
As a result the East Europeans will have to take steps to
increase conservation and to substitute coal for oil in power
plants.
7. All these problems will renew the case for reforms--
increased material incentives, realistic price structures, and
more decentralization. Most of the East European leaders will
be reluctant to embark on this road. In addition to their in-
herent ideological misgivingp, they are likely to want more, not
less, centralized control at a time when hard economic choices
must be made. Under pressure, they are likely to be more con-
cerned about Soviet misgivings regarding the orthodoxy of reforms.
While reluctant to make basic structural changes, the East Euro-
peans will want to increase the output from the private sector
of the economy, and perhaps increase its share of the economy.
8. Increased economic constraints do not augur well for
political stability, but how bad things will get politically is
much less clear. The East European people know they are better
off materially than ever before. They also are accustomed to
some economic discomfiture and even deprivation. They know that
the West is experiencing high levels of unemployment and in-
flation. Experience will tell them they cannot expect much
help from the West. With adroit economic tinkering and reason-
able luck, many or all of the East European regimes may dodge
* DIA believes that the decline in Soviet oil production will
not be as rapid as indicated in this paper and that the So-
viets should maintain production at current or higher ZeveZs
into the 1980s.
Approved For Rele sM05t041'22' CI#fibP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
CONFIDENTIAL
Figure 1. Eastern Europe: Oil Consumption, 1975
Total by Source
Total by Country
Bulgaria Czecho- East Hungary Poland Romania
slovakia Germany
Total 246.0 326.0 300.0 216.0 308.0 270.0
Thousand B/D
Approved For Rele Q20(5M4/2't' CIX`F b'P79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
the various hazards of the next few years with the grudging
support of peoples reluctant to risk their hard-won margins of
improvement. The greatest hazards lie in Poland, whose people
are the most volatile in the region, and East Germany, where
the attraction of West Germany cuts very deep.
The Dissident Problem
9. Dissidence is not a new phenomenon in Eastern Europe.
But its re-emergence over the past year is of more than usual
concern to the East European leaders. Their performance as
rulers is being judged against Western standards of freedom
and human rights, at a time when their economic performance vis-
a-vis the West is being found wanting. These concerns are in-
creased by the evidence that dissident activity in one country
spills over into other countries. Helsinki has been a major
stimulus, "Eurocommunism" has added its fuel, and the East
European leaders are concerned that the Carter administration's
emphasis on human rights will further encourage the dissidents.
They also know that Helsinki has impacted, particularly in
East Germany, on wide segments of the population in addition
to the dissidents.
10. Nowhere do the dissidents seriously threaten Com-
munist rule, nor will they do so in the foreseeable future.
The danger for some of the East European leaders is that the
dissidents will incite a population restive over economic and
other grievances. The dissidents also make it more difficult
to maintain the kind of political relations with the West
and the US that can be helpful on the economic front. Further,
their activities create another source of tactical disagree-
ment with Moscow and among the East European party leaders
themselves.
11. So far, the East Europeans have been given consider-
able latitude in handling the dissidents by the Soviets. But if
Moscow decides to impose a tougher dissident policy on the East
Europeans, then the prospects for miscalculation and serious
troubles increase. Specific consequences are far less certain
or predictable, although they may well become severe and might
even result in a situation reminiscent of Hungary in 1956 or
bring down a leader, like Gomulka in 1970.
f-N
Approved For Relea?9i~A10?E' ll tbP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
If Leaders Change
12. A change in the leaders in any of the East European
countries would have an unsettling effect. New leaders might
have trouble establishing their personal authority and would have
to gain Soviet confidence.
13. Serious instability in Yugoslavia or a clearly dis-
cernible movement toward the West after Tito would cause
the East European leaders to tighten up their internal control
and to take special care in their external policies not to give
the Soviets cause for concern. Dissidents and disgruntled elements
in countries like Poland, East Germany, and Czechoslovakia might
be encouraged by such developments in Yugoslavia to press harder
for changes at home.
14. A leadership change in the USSR would have a more
pronounced effect. The East European leaders are comfortable
with Brezhnev because he has given them considerable latitude
in managing their internal affairs. His demands usually have
not been unreasonable and they have with time gained some sense
of his limits of tolerance. New understandings with Brezhnev's
successors might be reached with relative ease if they consoli-
date power smoothly and conduct similar policies toward Eastern
Europe and toward the West. But a period of political infight-
ing in the Kremlin, or the emergence of a new Soviet leadership
with a tougher stance toward Eastern Europe, would be very un-
settling. Contradictory Kremlin signals on policies and per-
sonalities might well be mirrored in the politburos of Eastern
Europe.
The Soviets
15. Moscow is obviously concerned about the unrest in
Eastern Europe. A blow-up in any country not only has important
implications for the region as a whole and for its ties to the
USSR, but also for the tranquility of the Soviet Union itself
and for its dealings with the West.
16. While Czechoslovakia in 1968 proved that Moscow can
be pushed too far--and will intervene with force if it feels its
security interests are seriously threatened, by and large the
Soviet leadership under Brezhnev has opted for stability in
Approved For Rec'ede' 20'0 '/04t22`: k H4DP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
CONFIDENTIAL
Eastern Europe at the expense of ideological purity. The So-
viets feel uncomfortable with the more permissive approaches of
the Poles and the Hungarians, but they have reluctantly per-
mitted both Gierek and Kadar to fashion their tactics to fit
their own circumstances. Gierek and Kadar are, in Soviet eyes,
good Communists who will neither be transformed into social
democrats nor forget the special relationship with Moscow.
17. The Soviets helped create the tougher economic
environment in which the East Europeans must now operate.
In 1975, Moscow sharply increased the price it charged East
Europeans for oil and other raw materials, and prices also
went up in 1976 and 1977. Moscow's policies derive from
its own economic problems, plus a lingering feeling that
the Soviet Union has had to sacrifice to ensure that people in
Eastern Europe continue to live better than Soviet citizens.
18. The Soviets will have to continue to subsidize
Eastern Europe, for the alternative is political unrest which
is the last thing Moscow wants. Realizing this, Moscow has
restricted its price increases, accepted payment in overpriced
machinery, permitted the East Europeans to run sizable trade
deficits, and granted credits and supplementary oil, deliveries.
Establishing the proper balance between economic and political
equities will become harder as the Soviets begin to face up to
an oil shortage in the 1980s and a more constricted Soviet
economic outlook generally.
19. One consequence of these economic pressures is
that the USSR will have to continue to look relatively favorably
on Eastern Europe's economic ties with the West. They hope
that the West will share the burden by continuing to finance
Eastern Europe's purchases of industrial and raw materials and
agricultural products and by helping to modernize East European
industry so that it can pay with quality goods for Soviet imports.
The Soviets probably will be willing to countenance such ideo-
logically questionable arrangements as joint ventures with
Western companies. They will be willing to allow a more favorable
political relationship between Eastern Europe and the West to
the degree that seems necessary for closer economic ties. They
will probably allow some internal reform if it seems to promise
economic results. But they will be concerned about the cumulative
effect of these trends. How far they will be willing to let
the East Europeans go will depend on their confidence in the
particular Communist leader's ability to retain essential control
and their perception of Western political intentions. This is a
complicated equation that Moscow will recalculate as specific
situations arise.
Approved For ReleQQ4RhiNEIBP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
CONFIDENTIAL
The Western Connection
20. Without making any special effort, the West has
a substantial unsettling impact on Eastern Europe. Many in the
region identify with Western cultural and social traditions and
consider an "Eastern way" in alliance with Russia as alien to
those traditions. Other East Europeans are drawn to the dynamic
and material features of Western life that contrast sharply with
the drabness of their own lot.
21. At the same time, the West has been in some re-
spects a force for stability. Detente has helped the East
Europeans to gain more latitude in their dealings with the USSR.
Western goods bolster economic growth and enrich consumer sup-
plies; Western credits permit large trade deficits; Western
contacts cater to, as well as arouse, popular aspirations.
Eastern Europe's economic needs have been a strong underlying
motive for detente in Europe and for the region's opening
to the West. These needs will grow over the next few years,
and while increased trade and credits from the West will not
be a panacea for Eastern Europe's economic ills, they can be
of considerable help. The East European leaders will discover
that the USSR will be increasingly reluctant to bail out their
economies and that they must do more business with the West.
Those countries which do not have MFN status will have increased
interest in getting it. All will show increased interest in
barter arrangements with Western companies and in joint eco-
nomic ventures.
22. Partly because of these interests, East European
leaders will continue to give ground, sporadically and reluctant-
ly, on some human rights issues of interest to the West. But
they will be hypersensitive to indications that the West is
seeking to bring about significant political change in Eastern
Europe. The Soviets in particular will be disposed to see
evidence that the West is seeking to make trouble for them
in their backyard. They will continue to see in the US em-
phasis on human rights a hostile political, rather than
humanitarian, motivation. If problems of internal order grow
serious enough--if for example there is a blow-up in Poland or
East Germany--the imperative of order will prevail, with the So-
viets seeing little choice but to accept the damage to wider
equities with the West.
Approved For Releasse~b'b5'/D"4T22 TUrAx-RLDP79RO0603AO02600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
23. There are definite limits to present and feasible
Western economic input to East European economic needs. Ex-
cept for Romania, trade with CEMA countries will continue to
predominate. Balance of payments constraints will also be a
limiting factor. Trade with Western Europe is, and is likely
to remain, much greater than that with the US (see Figure 2).
Poland
24. Internal unrest is more serious in Poland than
anywhere else in Eastern Europe. It will continue to be so
during the next two or three years. Disaffection with the
regime, and with Communist rule, is widespread. The mood of
the Polish workers fluctuates between resignation and surliness.
As last year's riots and sabotage over proposed price increases
proved, the workers are ready to express their grievances in
action. They know that what they do sometimes counts; in
1970 they brought down Gomulka. The workers are angry over
the failure of the Gierek government to make good on its
promises of a better material life. The quality of life has
improved but has not kept pace with expectations. People still
face a shortage of apartments, long lines to buy food and other
necessities, and long waiting lists for automobiles, refrigera-
tors, and the like.
25. But the workers' resentment is not entirely fixed
on pocketbook issues. The riots last year were also a response
to the sudden and arbitrary nature of the regime's decision
to raise prices steeply. For years, Gierek has been touting
his commitment to consultations with the workers; his action
gave the lie to his words.
26. Polish dissidents have tried, through the establish-
ment of such organizations as the Workers Defense League, to
make common cause with the workers. This has not yet paid
off in any tangible way, but they are still working to create
the impression that they speak for more than themselves. They
are pushing for more freedom in the arts and mass media and for
the right to travel. Beyond such personal freedoms, some
dissidents are urging a more pluralistic system for Poland
in which the Communist Party would share some of its power,
for example, with independent trade unions or even with other
political parties.
Approved For Release'2Db5%X4722 TCT'A- P79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
Figure 2. Eastern Europe: Foreign Trade Turnover by Geographical Area, 1975
76% Communist
70%
23.5
Other
52.5`
USSR
West
24%
30%
18.5 22.7
[.O
.5 Other
5.0> , M.
32.6
32.3
33%
[34.4
43.3
A5oo
1.4
Bulgaria Czecho- East Hungary Poland Romania
slovakia Germany
Approved For ReleasJ:380'571F4t l TFk PhR00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
CONFIDENTIAL
27. The irony is that personal freedoms are greater in
Poland than anywhere else in Eastern Europe. Moreover, it is the
only country in the region where agriculture is still largely
in private hands and where the number of people engaged in
retail trade and in services is increasing.
28. The position of the already powerful Catholic Church
has been strengthened by the recent unrest. It has helped
Gierek by urging restraint on the workers and, more recently,
on restive students. The Church calculates that a breakdown
in order will work against its interests and the prospects
of a less authoritarian state by bringing to power leaders
more orthodox than Gierek, possibly through the direct inter-
vention of the Soviets. At the same time, the Church will
be exerting increasing pressure on the regime on behalf of
its own direct interests and in the area of human rights.
29. Gierek's primary goal will be to keep the lid on.
He can do little else, for there are no short-term solutions
to the underlying economic problems. Supplies of consumer
goods will continue to fall short of demand. The regime will
continue to juggle reserves of foodstuffs and to import extra
supplies of consumer goods to take the edge off frustration
and get through the sensitive periods of Christmas and Easter.
30. Much of Poland's economic progress since 1970 has
.been due to extensive imports of Western technology. This
pace cannot continue during the next few years because of Poland's
serious balance-of-payments problem. Central planners must find
ways to use the resources already on hand more efficiently.
The leadership has hesitantly taken measures to encourage pri-
vate farmers and craftsmen to expand their activities. More
investment funds will be diverted to the production of con-
sumer goods. Poland may well seek refinancing of its Western
debt.
31. On the basis of the evidence of the past year,
Gierek seems inclined to move toward a less authoritarian
Approved For Release220k5TO9)V CIS RBP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
CONFIDENTIAL
Poland. He has given new encouragement to the private sector
of the economy, has loosened censorship, and is quietly
encouraging members of the rubber-stamp parliament to
act more like real representatives of the people. He has
to proceed carefully because such policies are not universally
supported within the party, and the Soviets undoubtedly are
suspicious about their implications.
32. So far, the Soviets are acquiescing, for what they
want most out of Poland at this juncture is quiet. They
have even helped out with an approximately billion-ruble
commodity credit and additional supplies of oil and grain.
If order should break down, both Warsaw and Moscow will want
to see it restored by Polish forces. Only if these fail will
the Soviets intervene.
33. The policies of the US and the West are not likely
to be critical to what happens in Poland over the next few years.
But they will have some effect on Gierek's prospects. On the
economic side, he hopes that the US will encourage private lenders
to be responsive to Poland's needs both with respect to refin-
ancing and to granting new credits, particularly to cover the
importation of consumer goods.
34. There are few trade barriers to an increase in
Polish sales to the US (the US accounts for only 4 percent
of Polish foreign trade) and little the US can do over the
short term to help Poland do a better job marketing in the
US. But the Poles are concerned that recent protectionist
actions against some of their exports may set a precedent
that will restrict their sales in the US. Warsaw wants recog-
nition by the US that it is doing better in the human rights
area and muted coverage of internal and dissident affairs by
Radio Free Europe. Above all, it wants to avoid a too
vigorous US policy that would arouse Moscow's fears of
American intentions in Eastern Europe and generate higher
Soviet pressure against Gierek's reforms.
Approved For Rel Q / N-T DP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
Hungary
35. The principal question in Hungary over the next
few years is whether the Kadar regime will continue to pursue
economic and cultural policies that are among the most liberal
in Eastern Europe. The prospects seem good.
36. Hungary's economic reforms--introduced in 1968
as the New Economic Mechanism--feature some decentralization
of decision making, a greater role for material incentive,
and more reliance on price fluctuations to control supply and
demand. The reforms encouraged innovation, productivity, and
efficiency. They improved the performance of the Hungarian
economy. But they also created political problems for Kadar.
Workers complained about growing inequities in wage scales,
conservatives about the creation of a bourgeois atmosphere,
and the Soviets about the implications for socialism. The con-
sequence has been some retrenchment and the fall from power of
the leading reformists. But Hungary has not returned to the
centralized, rigid model of the other CEMA countries.
37. Indeed, in its economic dealings with the West,
Hungary has continued to be the most innovative East European
country. It has led the way in establishing joint ventures
with Western companies and recently has allowed Western com-
panies to hold majority ownership in banking and service enter-
prises. Hungarian leaders are arguing that increased economic
ties with the West are necessary to cope with the changing
world economic environment. They have acknowledged that ques-
tions have been raised within the "socialist system" about
the compatability of increased economic ties to the West and
further economic integration in CEMA. Kadar is under some
pressure from the Soviets, other East European leaders, and
within his own party ranks not to go too far in orienting Hun-
gary's economy toward the West.
38. Kadar's social and cultural policies have been, by
East European or Soviet standards, enlightened. The security
apparatus is less in evidence, its abuses curbed. Writers and
artists can pursue nonideological work, and there is little
formal censorship. A wide range of Western literature, movies,
and plays is available in Budapest. There are limits, and
the government does not hesitate to enforce them. Intellectuals
must take care in commenting on the regime, must not criticize
Approved For ReleQQN 'EI P79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
the Soviets, and cannot question Hungary's commitment to communism.
The party is sensitive to unauthorized ideological interpreta-
tions of its practices. It clearly wants to avoid giving Moscow
reason to believe that questionable practices are hardening into
ideological positions.
39. Kadar himself seems to have won the support, grudging
or otherwise, of most Hungarians. A small number of Hungarian
intellectuals have come out in support of the Charter 77 group
in Czechoslovakia but have avoided criticism of conditions in
Hungary. Kadar has successfully ignored them.
40. He has had some trouble with workers and others
over the cumulative effects of price increases; last year, after
the Polish riots, there was a work stoppage in a large Budapest
factory. None of this got out of control and Kadar raised
prices on some goods this past winter without incident. He
has also promised no additional significant price increases in
consumer goods this year and he has raised some wages. None-
theless, Kadar knows that the consumer will inevitably be facing
more stringencies, and he is therefore moving to expand his
support. He is seeking better relations with the Catholic Church
and will soon visit the Pope. His projected trips to Western
Europe are, in part, designed to show the Hungarian people that
he has developed an active foreign policy within the framework
of Hungary's Soviet alliance. He has also mounted a new cam-
paign to recover the national treasures held by the US.
41. Kadar's light touch has not endeared him to all of
his colleagues in Eastern Europe. The Soviets are more of a
worry. Kadar's most powerful argument for his policies is that
they work, that Hungary does not have a significant dissident
or stability problem and is still a Marxist state faithful in
its own way to the USSR. But if unrest grows elsewhere in East-
ern Europe, the external pressures will increase on Kadar to
impose
a tougher regimen in Hungary. His reluctance to
line up
against
some of the ideas espoused by some West European
Com-
munist
parties will also create more trouble for him in
Moscow
if the
Soviets get more concerned about Eurocommunism.
These
pressures will be manageable as long as Kadar stays on the scene.
42. Like other East Europeans, Kadar looks to the
US to help his country primarily by maintaining the process of
detente. He sees the detente atmosphere on balance as favoring
the internal autonomy that he has carved out. Specifics are
less important, but there are two largely symbolic concessions
N~T~-F1155T- T
Approved For Releg~~'2Un51~4'/22~:`CNA-4&P79RO0603AO02600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
that he seeks: the return of the crown of St. Stephen and the
granting of MFN status. Both, in his view, would signal US
acceptance of Communist rule in Hungary and recognition of his
relatively enlightened policies. Thus they would strengthen
his domestic position and his ability to withstand pressures
from his own hard-liners and from Moscow. But they would not
much affect Hungary's foreign policy, which by necessity if
not conviction will continue to follow the Soviet lead.
East Germany
43. The Honecker regime is not nearly as rigid or doc-
trinaire as its predecessor, but it remains one of the more or-
thodox in Eastern Europe. It has sought not only to instill in
the average East German a genuine commitment to Marxist goals
and strict adherence to regime policies, but also commitment to
East Germany as a lasting nation state. It has not been notably
successful.
44. West Germany is the rub. It keeps alive the idea
of a German, rather than East German, identity. Its achieve-
ments give the lie to East German assertions regarding the su-
periority of Communism. And its impact in East Germany has been
growing since the two-Germany agreements of the early 1970s.
There have been over 35 million visits by West Germans in East
Germany since 1971. West German television is watched through-
out East Germany; children hum West German commercials; young
people get into arguments with party hacks who think they should
be watching the right kind of programs on the right stations.
45. The Helsinki agreement increased the pressure
because it seemed to imply that the regime would recognize the
right of East Germans to travel and even emigrate to the
West. It also gave restive East Germans a basis on which to
apply to leave. By late last year, more than 100,000 had made
application to emigrate to West Germany. To make matters worse,
they were the kind of people--young, well-educated professionals
and technicians--already in short supply in East Germany. The
regime denied the applications and also passed the word through
the party apparatus that applicants would lose their jobs.
Some did.
46. But Honecker has also used his large and relatively
efficient party and security organizations to find out why
the East German people are not happy. When not constrained by
overriding ideological or security considerations, he has tried
to be responsive. For example, one message he has received is
N T-~ 16 - ~ L
Approved For Rele.QQ20A) ;2't T CI1`- &79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
CONFIDENTIAL
that there is growing resistance to the government's effort to
organize and politicize even the leisure time of its citizens.
As a result, urban dwellers are now being allowed to plant their
own private gardens, and more "free" leisure time is being al-
lowed.
47. The cultural scene in East Germany is not as
open as in Poland or Hungary. But Western observers who have
returned to East Germany after a long absence are struck by
the progress that has been made. A flourishing literature
exists, in which the regime takes some pride. This does not
prevent it from exiling those, like the folk singer Wolf Biermann,
who go too far in their criticisms. But it has had some success
in reaching a truce with East Germany's artists and writers.
There is no organized dissident movement, and the activities
of individual dissidents, like Biermann and the writer Reiner
Kunze, do not seem to resonate strongly among the population.
48. One of the most important forces for stability
is the character of the East German people. They are more
disciplined than the Poles and the Hungarians and far less
quick to give expression to their grievances. Material things
count for much. The East Germans are the best off people in
East Europe, and they know it. But despite their gains, the
gap between them and the West Germans remains an enduring
problem for Honecker. An absolute decline in the standard
of living would be more serious, particularly if there were
no corresponding decline in West Germany. Apathy might grow
into unrest and the prospect for disorder, demonstrations,
and efforts to get to the West would grow.
49. To forestall such developments, East Germany needs
to maintain or increase its trade with the West. It must con-
tinue to import Western machinery and technology to keep its
economy competitive in Western markets. Its projected economic
growth over the next three years (11 percent) will mean an in-
crease of its Western debt from $4.8 billion at the end of 1976
to about $8 billion. As Honecker openly admits, the country
faces a serious shortage of hard currency. He also knows that
the East German economy will be under increasing pressure be-
cause of its energy shortage. The upshot is that East Germany
has an increasing economic incentive in maintaining or im-
proving relations with West Germany and other Western countries.
50. At the same time, Honecker feels under increasing
political pressures from the West. He is concerned about West
German efforts to expand its ties to West Berlin and about
-TT~~17 T
Approved For Rele ~LLe~iiD9,464kN'EIBP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
what he regards as its efforts via the media to create trouble
for him with the East German people. He also is afraid of
increasing person-to-person contacts with West Germany because
it further loosens his grip over his own people. He cannot
sharply curtail the contacts that already exist because this
would jeopardize increased economic dealings with West Germany,
would prompt a strong negative reaction from the East German
people, and could upset Moscow because of its implications for
detente in central Europe. Honecker has tried to strengthen
the image of East Germany as a separate and fully "normal"
nation state by seeking to erode the special status of East
Berlin. But this does not help very much with his domestic
problems, and it creates problems in his relations with the
West. He also has little latitude from the USSR when it comes
to Berlin questions: Moscow decides when and how hard to push
on Berlin.
51. The East Germans are likely to continue to push
for increased economic ties with the West over the next two
or three years. If this proves to be a failure, if the domes-
tic economy declines seriously, then a tightening at home and
a move to drastically cut contacts with West Germany might well
result.
52. In the meantime, the East Germans will push for
increased economic ties and high-level contacts with the US.
This would help them improve the regime's image at home. It
would also provide some additional flexibility in economic
dealings with West Germany. If such ties were to develop, the
East Germans would have an additional incentive to ease up on
human rights questions at home. They would also have another
reason to keep the Berlin situation quiet. Their views on
this, while not ruling, have some weight in Moscow. The
East Germans are not likely to stray far from the Soviet line
on foreign policy questions, even if relations with the US
are significantly expanded.
Czechoslovakia
53. In Czechoslovakia, political and economic stag-
nation continue to masquerade as stability. The Husak regime
is one of the more orthodox and unimaginative in Eastern Europe.
4AK
Approved For Reles'9S/D' fA-5P79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
CONFIDENTIAL
Operating under the close supervision of Moscow, it has worked
to limit Western influences and to keep a tight lid in the
cultural area. Prospects for internal liberalization in the
human rights or economic areas are dim. Czechoslovakia's
foreign policy will not deviate from Moscow's.
54. The Prague leadership is divided and mediocre and
has little genuine support or respect in the country. The
economy is hard pressed by Soviet and Western price increases,
badly requires extensive modernization, sorely misses the ex-
pertise of the 1968 reformers, and needs greater productivity
from an apathetic populace. Its growth rate is one of the
slowest in Eastern Europe and is likely to remain so.
55. All these factors would add up to a seriously un-
stable situation if it were not for the apathy and despair that
have characterized the popular mood since the collapse of the
"Prague Spring." The emergence of the Charter 77 dissident
group has been a pointed reminder that the problems and senti-
ments that gave rise to the "Prague Spring" in 1968 are still
at work. But the dissidents have not struck a responsive chord
with the wider population.
56. The prospect is for more of the same over the
next few years. Economic problems are not likely.to result
in serious popular disorder and, without strong pressure from
below, the impasse between the moderates led by party leader
Husak and hard-liners led by Bilak is likely to continue.
Moscow seems comfortable with a divided leadership in Prague,
and it will continue to be reluctant to endorse any efforts
to introduce economic innovations or to bring back into the
mainstream of Czechoslovak political and economic life those
who were implicated in the 1968 revolution.
57. Given its disabilities and priorities, the
Czechoslovak leadership looks hardly at all to the US for
help and is unwilling to modify its internal or foreign poli-
cies to get it. Increased contacts could, over time, help
promote change, but the real impetus will have to come from
within Czechoslovakia.
58. Party leader Ceausescu is not likely to lose his
firm grip on Romania's rigidly authoritarian political and
economic system during the next several years. Party cadre
- 19 -
CONFIDENTIAL
Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
and popular resentment of Ceausescu's authoritarianism and
personality cult may grow, but we judge that Ceausescu can
contain or thwart any such reactions.
59. Romania faces an economic slowdown because energy
and balance-of-payments constraints will prevent it from
achieving its projected annual growth rate of 6 percent. This
will affect the Romanian consumer and could spur grumbling
within the leadership over Ceausescu's overly ambitious economic
goals. But it probably will not provoke serious popular dis-
turbances or threaten Ceausescu's predominance. Ceausescu
has long slighted consumers, always with a keen sense of what
they will bear, and in the past has successfully blamed under-
lings for economic shortfalls.
60. Ceausescu is unlikely to relax the strict domestic
controls which he considers necessary to maintain his personal
power and to allow him freedom of maneuver vis-a-vis the Soviets.
The appearance of Romanian dissidence--as feeble as it is--
has alarmed him, and he has also stepped up his efforts to in-
crease vigilance in the media and cultural affairs.
61. For the past year there has been a perceptible
thaw in Soviet-Romanian relations, symbolized by Brezhnev's
visit to Bucharest in November 1976. The thaw appears to be
limited, however, largely to bilateral issues and to represent
a decision of both sides to mute polemical exchanges over some
contentious issues. Romania's interest in assuring supplies
of Soviet raw materials may have played a role. Both sides,
however, continue to assert fundamentally conflicting con-
ceptions of how relations among Communist countries both within
and outside Warsaw Pact should be conducted. This breach of
the "unity and cohesion" of the pact, a fundamental Soviet
aim, remains the major source of tension between the two coun-
tries. Romania's other foreign policy initiatives are of
lesser concern to the Soviets.
62. A fundamental shift in Romanian policy is, how-
ever, unlikely. Nationalism is a fundamental part of Ceaucescu's
psychology and not merely a ploy to enhance his leadership po-
sition. Moreover, while Ceaucescu enjoys considerable tacti-
cal latitude, even he probably could not undertake any major
move to return Romania to subservience to the USSR without
provoking a major upheaval in party ranks.
Approved For Re1cQQ2003 M:'CtA'XDP79RO0603AO02600070001-9
 Approved For Releatq ffl Lj j FJQ.P79R00603A002600070001-9
ALI
63. Ceausescu will continue to pursue a "special re-
lationship" with the US and the West as well as the Third World.
It provides psychological sustenance for his maverick stance
vis-a-vis Moscow and has helped support Romania's economic
growth. The economic motivation will grow as the Romanian
economy slows down.
Albania
64. Serious ideological differences with China and
reduced Chinese assistance to the Albanian economy have evi-
dently prompted Tirana to move out of its isolation in Europe.
It has made some cautious overtures to Greece, Turkey, and
France in search of increased trade. It seems likely that
these efforts will continue. The Soviets want to get back
into Albania, but their prospects are poor.
65. How far Tirana will go in overcoming its xenophobia
depends in part on how its internal politics develop. These
have been in some turmoil, and a number of younger people have
emerged whose political orientation is not clear. No major
adjustments are likely as long as party boss Hoxha and Premier
Shehu are in power. But our information on Albanian internal
forces is fragmentary, and a political upheaval should not be
excluded. Should one occur--whatever its policy directions--
it could provide a destabilizing focus for other endemically
troubled nationalist currents in the Balkans.
Bulgaria
66. Bulgaria has been, and probably will continue to be,
the most stable country in East Europe. The recent purge of
party leader Zhivkov's long-time associate Boris Velchev could
precipitate other changes farther down the party hierarchy. But
these are unlikely to change Bulgaria's close economic and
political affiliation with the Soviet Union. Popular affec-
tion for Russia predates the birth of Bulgarian Communism, and
Bulgaria can be counted on to carry a spear for Soviet foreign
policy positions.
21 -
CONFIDENTIAL
Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603A002600070001-9
CONFIDENTIAL
67. Bulgarian domestic policies will continue to be
among the most conservative in Eastern Europe. There has been
evidence of some limited popular dissatisfaction with economic
and social conditions, but the chances of large-scale unrest
seem very remote. Intellectual dissent will remain only a
minor irritant, in large part because Bulgaria is both geo-
graphically and intellectually far removed from the West.
Approved For Releasoe"21m5P i/ k-F7DP79R00603A002600070001-9
 Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
Confidential
Confidential
Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
 STATINTL Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9
Next 5 Page(s) In Document Exempt
Approved For Release 2005/04/22 : CIA-RDP79R00603AO02600070001-9