THE OUTLOOK FOR WESTERN EUROPE OVER THE NEXT DECADE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A004100010005-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 27, 2016
• Document Release Date: January 17, 2013
• Sequence Number: 5
• Publication Date: April 26, 1954
• Content Type: NIE

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NATIONAL INTELLIGENCE ESTIMATE ~~.:
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THE OUTLOOK FOR WESTERN EUROPE OVER
THE NEXT DECADE
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ject being outside of its jurisdiction.
The following member organizations of the Intelligence
Advisory Committee participated with the Central Intel-
ligence Agency in the preparation of this estimate: The
intelligence organizations of the Departments of State,
the Army, the Navy, the Air Force, and The Joint Stag.
H
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DATE---""""~ The Intelligence Advisory Committee concurred in this ;~~~'~.~,L
estimate on 20 April 1954. The FBI abstained, the sub- '
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CENTRAL INTELLIGENCE AGENCY
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WARNIN(}
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Title 18, USC, Secs. 793 and 794, the trans-
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 E"~1 A ~ r,.?. R..
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THE OUTLOOK FOR WESTERN EUROPE 1
OVER THE NEXT DECADE
THE PROBLEM
To estimate the outlook for Western Europe over the next decade.
ASSUMPTION
Germany will remain divided and Austria will continue under occupation during
this period.
CONCLUSIONS
1. Western Europe has staged a remark-
able recovery from World War II, but its
economic and political- foundations re-
main fragile and Western Europe will be
troubled by domestic divisions and by
conflicts of national interest, especially
between France and Germany. The
course of events within Western Europe
over the next decade will be largely de-
termined by developments within the UK,
France, Italy, and West Germany, by re-
lationships among these four states, and
by the reactions of these states to develop-
ments elsewhere in the world.
2. If world economic conditions remain
reasonably favorable, Western Europe
?will probably experience moderate eco-
nomic growth. A moderate recession in
the US or a trend in US policy toward
further protectionism would intensify
Western European tendencies toward
economic nationalism, and would prob-
ably reverse the postwar trend toward
economic cooperation. A sharp or pro-
longed depression in the US would lead
to a cessation of economic growth and
seriously endanger Western European
political stability and cooperation.
3. We believe that moderate governments
will continue to rule in the UK and in the
smaller democracies of Western Europe
and, providing there is no serious Euro-
pean depression, will very likely continue
in West Germany. The threat to politi-
cal stability in Western Europe will re-
main greatest in .France and Italy.
France and probably Italy are likely to
be ruled by weak or indecisive govern-
ments for at least the next several years.
However, the inability or unwillingness
of these governments to meet popular de-
mands for economic and social reforms
might produce explosive situations with-
in the period of this estimate.
1 For the purposes of this estimate, "Western Eu-
rope" includes the UK, France, West Germany,
Italy, Belgium, the Netherlands, Luxembourg,
Austria, Sweden, Denmark, Norway, Switzerland,
Spain, Portugal, and Ireland.
o~ AL
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4. The Communist threat is greatest in
Italy. Nevertheless, we do not believe
that the Italian Communists and their
left-wing Socialist allies are likely to at-
tain power within this period, either by
parliamentary means or by force. The
strength of the French Communist Party
is not likely to increase sufficiently to en-
able it to gain membership in the Cabinet
or to take over the French Government
during this period.
5. If West Germany can maintain a de-
pression-free economy, we estimate that
constitutional and responsible govern-
ment has an excellent chance of continu-
ing in that country. Should serious eco-
nomic difficulties develop, there would al-
most certainly be a growing trend in
West Germany toward a more authori-
tarian and nationalist type of govern-
ment. This trend would be intensified
if a moderate democratic government
appeared unable to pursue effectively
German national aspirations. While
West Germany will almost certainly pre-
serve apro-Western orientation during
the next few years, it will become an in-
creasingly restive and independent asso-
ciate, and will seek great power status.
6. Franco-German relations will contin-
ue to be the central problem of any com-
mon Western European political or mili-
tary effort. We believe that the French
will ultimately be forced to accept some
arrangement for, West German rearma-
ment, but that they will do so reluctantly
and hesitantly, and probably in such a
manner as to detract from the effective-
ness of the arrangement.
7. NATO will almost certainly remain the
center of the Western security system.
The Western .European NATO states will
remain convinced that the continued
presence of US forces in Western Europe
is vital to their security and to the pre-
vention of war.
8. Unless a new series of Soviet actions
stimulates increased efforts toward re-
armament, ,the military forces of West-
ern Europe at best will probably remain at
approximately their present size, at least
until the rearmament of West Germany
has become effective. There will almost
certainly be a significant increase in the
quality of these forces.
9. We believe that Western Europe is un-
likely to go much beyond the present de-
gree of integration during the period of
this estimate. Even if EDC and EPC are
accepted in some form, open reservations
and concealed opposition `will almost cer-
tainly prevent full attainment of the EDC
and EPC objectives. On the other hand,
even- failure to ratify EDC would not in
itself destroy the military cooperation.
among Western European states now ex-
isting in NATO, nor exclude the possibili-
ty that NATO might be enlarged to in-
clude West Germany.
10. A great and recognized growth in nu-
clear capabilities may increase the diffi-
culties presently felt in maintaining an
effective Western coalition under US
leadership.2
=For more detailed views, see NIE 100-54, "Proba-
ble Effects of Increasing Nuclear Capabilities
upon the Policies of US Allies," (26 April 1954).
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DISCUSSION
I. INTRODUCTION: WESTERN EUROPE
TODAY
11. The 275,000,000 people of Western Europe
include a large proportion of the world's intel-
lectuals, administrators, and skilled workers
and farmers. They form one of the great
producing groups in the world; in 1953 their
industrial production was about two-thirds
that of the US and exceeded that of the entire
Soviet Bloc. Western Europe, taken as a
whole, possesses a substantial military estab-
lishment, in terms of numbers, quality, and
equipment. Thus, Western Europe is an im-
portant factor in the world balance of power.
12. The decline of Europe from its dominant
military and economic position in the world
began several decades ago, `and has become
more pronounced and more obvious as a re-
sult of World War II. The threat of Soviet
expansion has forced most of the countries of
the region to ally with the US. While they
realize that the alliance is necessary to pre-
vent Communist aggression, they resent their
loss of full control over their own destinies.
13. The fifteen states of Western Europe pos-
sess alarge degree of cultural unity and share
many common traditions, beliefs, and institu-
tions. While there are obvious differences in
political organization and economic develop-
ment among the various states, the area as a
whole is sufficiently homogeneous so .that im-
portant developments in one state will almost
certainly influence the others. Most of the
smaller countries are stable and prosperous
and are .not likely to take drastic actions
which would disturb the political and eco-
nomic patterns of Western Europe as a whole.
The course of events within Western Europe
over the next decade will be largely deter-
mined by developments within the UK,
France, Italy, and West Germany, by relation-
ships among these four states, and by the
reactions of these states to developments else-
where in the world.
14. Western Europe has made a remarkable
recovery since the end of World War II, due
both to its own efforts and to US aid. The
aggregate gross national product of the region
in 1952 was higher than ever before (30 per-
cent greater than in 1947 and about 25 percent
greater than in 1938) . A region which was
militarily weak in 1947 now has substantial
defense forces.
15. All of the states of Western Europe except
Spain and Portugal are ruled by moderate
democratic governments, and no Communist
has held a ministerial post in any country
since 1947. Some progress has been made
toward establishing political and economic
organizations for a? Western European com-
munity.
16. Western Europe's recovery has not re-
moved the difficulties caused by domestic divi-
sions and clashes of national interests.
Within some states, such conflicts as those
between capital and labor and between clerical
and anticlerical forces continue. The rapid
recovery of West Germany has revived French
fears of German domination. Resentment
over any US pressure and resistance to this
pressure have increased. Although the ability
of Western Europe to resist external Commu-
nist pressures has increased, the Communist
threat now appears less imminent to many
leaders of opinion and there is greater eager-
ness to negotiate differences with the Com-
munist states.
17. In spite of the progress made since 1947,
Western Europe's present level of prosperity
and stability affords but a precarious basis for
solving the problems which remain. The
great question concerning Western Europe
during the next decade is this: has Western
Europe reached an economic, political, and
military plateau above which it is unlikely to
rise and from which it may descend, or will it
continue its progress toward a sound economy,
political stability, and greater military
strength?
II. PROBABLE DEVELOPMENTS OVER THE
NEXT DECADE
Probable Economic Developments
18. Western Europe does not constitute an
economic entity, and few generalizations will
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apply equally well to all the economies of
Western Europe for the period of this estimate.
However, the states of Western Europe have
many economic problems in common, and
economic relationships among most of these
states are closer than ever before.
19. If world economic conditions remain rea-
sonably favorable, Western Europe's aggregate
gross national product is likely to increase by
about 30-35 percent during the next decade;
this is approximately the rate of growth antic-
ipated in the US, but less than that expected
in the Soviet Bloc. The rate of growth in
West Germany probably will be somewhat
greater than that in any of the other major
Western European countries. As dollar aid
declines, fears of deficits and of inflation and
sensitivity to political pressure for increased
social services may so restrict investment in
some countries as to keep economic growth
-below the rate projected above. Moreovex,
Western Europe's external trade must expand
if the member states are to achieve the pro-
jected rate of economic growth, since Western
Europe is far more dependent than the US or
the USSR upon imports of raw materials and
foodstuffs.
20. Under favorable economic conditions in
the non-Communist world, Western Europe's
present tendency toward liberalization of
trade is likely to continue. However, Western
European confidence that a prosperous Free
World economy can continue to operate with
decreasing restrictions and controls remains
shaky at best. Any appreciable adverse de-
velopment would quickly stimulate the growth
of various insulative, protectionist, and re-
strictive measures.
21. Any movement toward economic union, as
distinct from looser types of cooperation, is
likely to be confined to the six Schuman Plan
countries. It is likely that these countries
will take some steps toward the formation of
a free trade area. It is also possible that these
countries will set up certain supranational
agencies, including a monetary agency and a
planning agency responsible for advising the
six governments on monetary and fiscal poli-
cies. This might lead eventually to a common
currency, but steps of this sort are essentially
political and will depend on political trends.
Economic cooperation in Western Europe as a
whole, and British Commonwealth coopera-
tion with Western Europe, are not likely to
develop much beyond the present stage of
consultation and coordination.
22. We believe that the Western European
dollar problem will be smaller and mare man-
ageable during the period of this estimate
than it has been during the past decade.
However, the balance which Western Europe
as a whole has achieved in its commercial
accounts with?the dollar area still depends on
import controls; and some countries, notably
France and Italy, still depend on US aid. The
fear of a recurrence of the dollar shortage as
US aid declines will delay dismantling of trade
and exchange controls, particularly if the de-
mand for Western European exports should
also slacken.
23. Western Europe's trade with the Soviet
Bloc is likely to remain small in relation to its
total trade with the rest of the world as long
as political tensions persist and the Bloc con-
tinues to pursue its policy of self-sufficiency.
Even small trade offers by the Soviet Bloc,
however, if concentrated on certain countries,
would probably meet with some success in
undermining the Western system of strategic
export controls. Increased dependence on
trade with the Soviet Bloc may open some of
the weaker Western European countries to
Soviet political influence, making them more
cautious in their attitude toward the USSR
and less receptive to US leadership. Western
European vulnerability to Soviet trade offers
would increase considerably in the event of
an economic recession, or in the event of in-
creased restrictions on trade among Free
World countries.
24. A moderate recession in the US or a trend
in US policy toward further protectionism
would intensify Western European tendencies
toward export subsidies, import restrictions,
and other manifestations of economic nation-
alism, and would probably reverse the postwar
trend toward economic cooperation. A sharp
or prolonged depression in the US would have
serious economic and political consequences in
Western Europe. It would reduce direct and
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indirect dollar earnings. More important, it
would depress business expectations and confi-
dence in general, lead to a cessation of eco-
nomic growth, and thus seriously endanger
Western European political stability and co-
operation. It would on the whole probably in-
crease the economic cohesiveness of the ster-
ling area and the Commonwealth.
Probable Political Developments
25. We believe that moderate governments
will continue to rule in the UK and in the
smaller democracies of Western Europe and,
providing there is no serious European depres-
sion, will very likely continue in West Ger-
many. The threat to political stability in.
Western Europe will remain greatest in
France and Italy. There is some possibility,
especially in Italy, that the strength and effec-
tiveness of the Communist parties will be re-
duced by government action. Even if such
action should be taken, both France and Italy
will continue to be hampered by Communist
and extreme right opposition to the form of
government itself, by their party systems, by
fundamental divisions over such issues as
economic reform and clericalism, and by deep-
seated social cleavages. Therefore, France
and probably Italy are likely to be ruled by
weak or indecisive governments for at least
the next several years. However, the inability
or unwillingness of these governments to meet
popular demands for economic and social re-
forms might produce explosive situations
within the period of this estimate.
France
26. Basic constitutional, economic, and social
reforms are essential to the revitalization of
France. However, French society is essen-
tially static, with its institutions deeply rooted
and highly resistant to change. Conflicts of
interest make it extremely difficult to obtain
agreement on social reforms and programs for
economic expansion. Anticlericalism persists
as another divisive factor, and internal dissen-
sion. will almost certainly be increased by the
revival of West Germany.
27. Unless new leadership emerges, it is prob-
able that government by weak coalition cab-
inets will continue. These governments will
be drawn for the most part from the right-
center, but on occasion from the left-center.
Such governments will probably be capable of
averting political anarchy and economic col-
lapse, but they are unlikely to achieve signifi-
cant progress toward revitalizing France.
Throughout the period of this estimate the
possibility will persist of a swing to the ex-
treme right. We believe that a rightist coup
is possible but unlikely, especially in view of
the weakness and division of the right.
28. The French Communist Party will remain
a large and important vehicle of political
protest, particularly for the working class, and
its large representation in parliament will con-
tribute to making the formation of stable gov-
ernments difficult. Its strength would almost
certainly be increased by a major depression,
by the emergence of a nationalistic and mili-
taristic West German state, and possibly by a
prolonged relaxation of Communist-Free
World tension. We do not believe its strength
is likely to increase sufficiently to enable it to
gain membership in the Cabinet or to take
over the French Government during this
period. On the other hand, developments
such as an economic depression or increased
fear of Germany might create a political situ-
ation which permitted the establishment of
a leftist government with Communist support.
Italy
29. The outlook for Italy over the next decade
is for political instability and weak govern-
ments, because of the continuing political
power of the Communists, the deep division
among the non-Communist forces, and the
difficulty of satisfying popular demands for
social and economic improvement. It is pos-
sible that a strong government might emerge
willing and able to meet these demands. How-
ever, this development is unlikely, and extrem-
ist sentiment among the electorate therefore
will probably increase. While the probable
long-term trend will be toward right-center
governments, on occasion efforts may be made
to form moderate left governments. Mount-
ing frustration and disillusionment may lead
to an increasing trend toward authoritarian
rule. However, we believe the emergence of
another fascist regime unlikely.
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30. Despite a probable increase in their pop-
ular strength, the Communists and their left-
wing Socialists allies are unlikely to attain
power within this period, either by parliamen-
tary means or by force. However, weakening
of the center political parties might go so far
as to endanger the existence of democratic
institutions, especially if it were accompanied
by deterioration of the Italian economic situa-
tion. The chances of such a development
would be increased if a relaxation of interna-
tional tension should remove an urgent sense
of the Communist danger, or if center and
right groups in Italy should fail to take posi-
tive measures to improve economic and social
conditions. If Italy were imminently threat-
ened by a Communist takeover, we believe that
anti-Communist elements, supported and as-
sisted by the public security and military
forces and relying on outside assistance,
would use force to prevent the Communists
from coming to power.
West Ge7?many
31. West Germany's remarkable recovery from
Nazi rule and its progress toward democracy
and cooperation with the West have been
aided by conditions which probably will not
persist throughout the period of this estimate.
Authoritarian and extreme nationalist ele-
ments still exist in Germany. Nevertheless,
German opinion will almost certainly remain
moderate so long as West Germany remains
prosperous and so long as the West, German
Government appears able to gain some satis-
faction for German national aspirations.
However, even under such circumstances,
West Germany will become an increasingly
restive and independent associate, and will
seek great power status among the Western
states. As its strength increases, West Ger-
many will probably attempt to commit the
Western alliance to bring heavier pressure to
bear on the USSR to restore German unity.
32. If West Germany can maintain a depres-
sion-free economy, we estimate that constitu-
tional and responsible government has an ex-
cellent chance of continuing. Should serious
economic difficulties develop, there would al-
most certainly be a growing trend in West
Germany toward a more authoritarian and
nationalist type of government. This trend
would be intensified if a moderate democratic
government appeared unable to pursue effec-
tively German national aspirations. An ex-
tremist, nationalist movement is unlikely to
achieve power without the help of a depres-
sion, but continued frustration of German
national aspirations would almost certainly
increase nationalist feeling at all levels of the
population.
33. The foreign policy of the Federal Republic
will continue to aim at removing the last
vestiges of the occupation regime and at re-
storing full German independence and sov-
ereignty. Assuming no decisive shifts in
Western or Soviet policy, it seems almost cer-
tain that West Germany will preserve apro-
Western orientation during the next few years
and will continue to seek equal association
in the Western alliance. Should this associ-
ation be denied, it might seek to play an inde-
pendent role between the two great power
blocs, but it will almost certainly not align
itself closely or consistently with the USSR.
The United Kingdom
34. The two major British parties are in essen-
tial agreement on maintaining Britain's place
as a ranking power, on the main lines of
British foreign policy, and on the need to
restore Britain's economic power. We be-
lieve, therefore, that British foreign, defense,
and trade policies would not be significantly
altered, even if Labor should forma govern-
ment within this period.
35. The present Conservative government can
almost certainly remain in power until 1956,
the end of its five-year constitutional term,
although for tactical reasons it may call an
earlier election. If world conditions remain
reasonably favorable, and if the Conservatives
maintain their present standard of perform-
ance, they will probably win the next election.
36. Conservative prospects are enhanced by
the protracted differences which have split
the Labor Party and which diminish its effec-
tiveness as the Opposition. Bevanism, the
political faith of a vocal and energetic left-
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wing minority, is responsible for the split.
Bevanism will remain an important factor in
Labor's policies, but it almost certainly will
not come to dominate the party in the fore-
seeable future. Attlee's successor will proba-
bly be a less controversial figure than Bevan
and one who is better suited to attract the
important floating vote in Britain.
Probable Military Developments
37. The armed forces of the states of West-
ern Europe 3 are impressive in size, taken all
together. They include 3,250,000 men under
arms (2,000,000 of these are in ground forces
organized into 55 divisions and numerous
separate brigades and regiments) , 22,000 air-
craft (of which about 6,500 are jets and 9,000
trainers), and strong naval forces. However,
the size of these forces is not an adequate
measure of their ability to defend Western
Europe. There is no over-all unity of com-
mand, .and there are great differences in
quality of personnel. The ground forces are
equipped with arms of many .varieties, are
deficient in antiaircraft weapons and in lo-
gistic support, and have only limited stock-
piles of equipment for reserve units. The air
forces are hampered by inadequate aircraft
control and warning systems, the lack of re-
placement aircraft and reserve personnel, and
an inadequate fuel distribution system.
38. The most effective defense force in West-
ern Europe is supplied by the NATO states.
These forces are relatively well-equipped and
are fairly well integrated, although defi-
ciencies still exist. Greece and Turkey, as
members of NATO, and Yugoslavia, as an ally
of Greece and Turkey, contribute important
additional strength (nearly a million men
organized into about 60 divisions) to the de-
fenses of Western Europe. The capabilities
of NATO forces stationed in Western Europe
have so increased during the last four years
For the purposes of this estimate, "Western Eu-
rope" includes the UK, France, West Germany,
Italy, Belgium, the Netherlands, Luxembourg,
Austria, Sweden, Denmark, Norway, Switzerland,
Spain, Portugal, and Ireland.
that these forces could offer strong initial
resistance against an attack by Soviet forces.
39. Western Europe's aggregate scientific and
technical capability is great. Progress in
weapons research and development is ham-
pered by insufficient funds and by a shortage
of specialized research equipment and labora-
tory facilities. We believe that some progress
will be made toward overcoming these weak-
nesses, partially by increasing international
cooperation, and that Western European sci-
ence and technology will continue to make
significant contributions in the development
of new and improved weapons. When con-
trols are released in West Germany, Western
European research and development resources
will be considerably increased.
41. Unless a new series of Soviet actions stim-
ulates increased efforts toward rearmament,
the military forces of Western Europe at best
will probably .remain at approximately their
present size, at least until the rearmament
of West Germany has become effective. There
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will almost certainly be a significant increase
in the quality of these forces, especially in
terms of air power, as fighter units are con-
verted to modern jets, as bomber forces in-
crease in size and quality, and as air defense
systems improve.
42. Under favorable economic conditions, the
Western European NATO states, except per-
haps Italy, will probably have the economic
capacity to maintain their military forces at
.present levels without US aid. However, op-
position to increased taxation, reluctance to
incur budget deficits, and popular pressures
for higher living standards and for increased
social services make it unlikely that the gov-
ernments will be willing to spend the neces-
sary funds. Consequently, some countries,
notably France and Italy, will continue to
press for US aid.
43. The Western European states will remain
convinced that the continued presence of US
ground, naval, and air forces in Western
Europe is vital to their security and to the
prevention of war.
44. NATO will almost certainly remain the
center of the Western security system. Its
success in increasing confidence in Western
Europe and in strengthening the ties among
the Atlantic states makes it an important
element in Western defense. While much re-
mains to be done toward standardization of
equipment and toward integration, NATO
forces are now interdependent to an unprec-
edented degree. On the other hand, NATO
has no integrated foreign policy and no ap-
paratus for achieving one, and it has only the
beginnings of a common economic defense
policy. Efforts to overcome these deficiencies
will be hampered and thwarted by conflicts
of national interest.
Probable Developments Concerning the
Western European Community
45. Western Europe has made progress during
the last five years toward economic coopera-
tion and the establishment of common insti-
tutions. Plans now being discussed by minis-
ters and debated by parliaments (EDC, EPC)
call for an even higher degree of integration
among the six nations of the Coal-Steel Com-
munity. Full and whole-hearted approval of
these plans would contribute to the solution
of some of the problems facing Western
Europe. Steps toward a single European
market would be facilitated. National rival-
ries might be dulled, especially the dangerous
antagonism between France and Germany,
and the possibility of a revival of German
militarism would be reduced.
46. However, many forces are working against
the development of Western European inte-
gration. The UK almost certainly will not
become a member of a highly integrated
Western European community, though it will
probably continue and perhaps increase its
present degree of collaboration with Western
European political, economic, and military
organizations. Without UK membership, an
integrated Western European community al-
most certainly would be dominated by West
Germany. France fears such an eventuality
almost as much as it fears Soviet domination..
Throughout the Continent there are many
interests threatened by further steps toward
infegration.
47. For these reasons, we believe that Western
Europe is unlikely to go much beyond the
present degree of integration during the pe-
riod of this estimate. Even if EDC and EPC
are accepted in some form, open reservations
and concealed opposition will almost certainly
prevent full attainment of the EDC and EPC
objectives. On the other hand, even failure
to ratify EDC would not in itself destroy the
military cooperation among Western Euro-
pean states now existing in NATO, nor exclude
the possibility that NATO might be enlarged
to include West Germany.
48. Nevertheless, the French will remain re-
luctant to accept any development involving
even the possibility of German domination of
Europe, and will attempt to delay every meas-
ure designed to secure West German coopera-
tion in the Western defense effort. This con=
duct will tend to revive German militarism,
extreme nationalism, and hostility to France.
It will make the operation 'of NATO difficult.
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We believe, however, that the French will ulti-
mately be forced to accept some arrangement
for West German rearmament, but that they
will do so reluctantly and hesitantly, and
probably in such a manner as to detract from
the effectiveness of the arrangement. Franco-
German relations will, therefore, continue to
be the central problem of any common West-
ern European political or military effort.
Probable EfFects of Growing Soviet
Nuclear Capabilities
49. A great and recognized growth in nuclear
capabilities may increase the difRculties
presently felt in maintaining an effective
Western coalition under US leadership.4
`For more detailed views, see NIE 100-54, "Proba-
ble Effects of Increasing Nuclear Capabilities
upon the Policies of US Allies," (26 April 1954) .
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