NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A029700010041-7
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 13
• Document Creation Date: December 20, 2016
• Document Release Date: August 10, 2005
• Sequence Number: 41
• Publication Date: January 26, 1977
• Content Type: REPORT

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NATIONAL INTELLIGENCE DAILY CABLE
Wednesday January 26, 1977 CG NIDC 77-020C
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National Intelligence Daily Cable for Wednesday, January 26, 1977.
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The NID Cable is for the purpose of informing
senior US officials.
CONTENTS
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Page 5
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ITALY: Labor Agreement
CHINA-JAPAN: Uncompromising
ISRAEL: Defense Spending
TURKEY: Coalition Disputes
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The recent rash of terrorist activity in Spain does
not so tar pose a serious threat to the government's reform
program, although it will complicate Prime Minister Suarez' ef-
forts to lead Spain through a transition to political democracy.
The Suarez government has already weathered several
terrorist attacks without imposing harsh repressive measures
that would alienate large portions of the population. The im-
mediate danger lies in the possibility of a cycle of retalia-
tory killings that would gradually draw the more moderate polit-
ical groups into the violence, leading to a breakdown in civil
order and to military intervention.
The government is probably capable of containing the
violence, however, and there are no signs of impending military
action. The kidnaping of the general who heads the military
tribunals has incensed the military, but intervention by the
armed forces is unlikely unless the situation deteriorates to
the point where the security forces are unable to cope.
I Police have identified the kidnapers as the same men
who are s ill holding a senior politician abducted last month.
They are members of a group that purports to be militantly left-
ist, but the left-leaning Spanish media are speculating that
the kidnapings are, in fact, the work of ultrarightists intent
on discrediting the left.
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I IFrustrated by their inability to slow the political
re orms t rough legal channels, untrarightists have apparently
decided to take matters into their own hands. During a leftist
demonstration in Madrid on Sunday, a student was shot by an un-
identified man who, according to press reports, shouted the
battle cry of the rightwing Guerrillas of Christ the King. The
same group may also be responsible for the machine-gun attack
on a leftist lawyers' meeting on Monday, killing five and wound-
ing four.
Police have arrested an extreme rightest in connec-
tion with the shooting of the student and have detained members
of the Guerrillas of Christ the King for questioning on both
i n r- i rl t- ak-c" _n
The government's efforts against terrorists of both
extremes are complicated by the campaign for amnesty for the
remaining political prisoners in Spain. The government is re-
portedly not averse to releasing most of the prisoners, but
does not want to seem to be caving in to the demands of either
kidnapers or protesters.
Pro-amnesty demonstrations in Madrid have produced
violent clashes with the police, and on Monday another student
died after apparently being hit accidentally by a police smoke
bomb. The three Madrid universities closed down yesterday in
mourning, and the government has banned further demonstrations
for the time being.
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Strident posters calling for the demonstrations today
are ascribed to the Communists and Socialists, but leaders of
both parties have reportedly told government officials that
they hope to calm the tense atmosphere as much as possible. The
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Socialists have told US embassy officials that their party has
nothing to do with the planned rallies and that the posters and
handbills are being distributed by extreme rightists.
I I Despite the current rash of terrorist activity and
aemonsr- rations, Prime Minister Suarez is likely to move ahead
with a strategy for political reform designed to bring the
broadest possible range of political tendencies into the new
system.
A key element of Suarez' plan is to maintain close
communication with the opposition. On Monday, he met with six
opposition leaders to discuss the law setting up a legislative
election for this spring. After the meeting, the Prime Minister
and the opposition leaders issued an unprecedented joint com-
munique condemning political extremism.
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ITALY: Labor Agreement
I Italian labor and industrial leaders have reached an
agreement on limiting labor costs.
I I The union-industry agreement, which shuns any major
tampering with Italy's wage-indexation system, is a setback for
Prime Minister Andreotti's stabilization program. The government
has been consistently unable to secure union compliance for
significant limitations on the escalator, which keeps wages ris-
ing in accordance with the cost-of-living index.
I The cost-reduction package accepted by the unions
mere y provides for curbs on absenteeism, greater labor mobility,
and the abolition of several holidays, and promises restraint in
forthcoming company-level wage negotiations.
Because of the modesty of the unions' concession--
which will probably lead to about a 2-percent reduction in this
year's expected wage bill--the government will likely feel com-
pelled to institute a program of its own to reduce labor costs.
It probably will assume some of the social security costs now
borne by business, while raising income and value-added taxes to
cover the outlay.
Despite Communist urgings for compromise, the unions
have staunchly defended the indexation system, tying all other 25X1
concessions to a government promise to leave the escalator in-
tact. Without a basic reform of the indexation system, however,
labor costs will prove impossible to control.
CHINA-JAPAN: Uncompromising
The new leaders in Peking and Tokyo have apparently
ruled ou early progress on the proposed Chinese-Japanese peace
and friendship treaty. Both sides have reiterated long-standing
and uncompromising positions on the treaty.
Talks on the pact, which would formally end the state
o war t at has technically existed between the two countries
since 1937, snagged nearly two years ago on Chinese insistence
that a treaty include an implicitly anti-Soviet statement op-
posing "hegemonism." The Japanese agreed to such a clause in a
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1972 communique that announced the resumption of Chinese-Japa-
nese diplomatic relations, but have been reluctant to include
it in the proposed treaty; differences within the ruling party
over the hegemony question, as well as pressures from Moscow,
have prompted the reluctance.
I ILast week, Chinese Premier Hua Kuo-feng told the vis-
iting lea er of a Japanese opposition party that Tokyo was re-
sponsible for the stalemate over the treaty. Hua also attempted
to urge Tokyo to move on the issue by suggesting that Peking
questions the sincerity of Prime Minister Fukuda's stated hope
to improve Chinese-Japanese relations.
I Hua also reitereated Peking's long-standing position
that the 1972 anti-hegemony clause must be included in the pact.
Another senior Chinese official, making a similar point with
other visiting Japanese recently, added that no equivocation by
Tokyo would be tolerated.
The firmness of these Chinese views on the hegemony
issue is probably designed, in part, to demonstrate the conti-
nuity of China's major foreign policy objectives, especially
regarding opposition to what China sees as Soviet expansionism.
The new Chinese leaders almost certainly recognize that any
modification of the demand for an anti-hegemony clause might be
interpreted as a softening of Peking's stand against the USSR,
an impression the Chinese are plainly anxious to avoid.
on the Japanese side, Fukuda, while publicly and pri-
vately repeating his desire for early agreement on the treaty,
has shown no sign of conciliation on the hegemony issue. A Japa-
nese Foreign Ministry official last week said that Tokyo saw no
need now to modify the previous administration's stand on the
matter. Former foreign minister Miyazawa advocated a four-point
statement that would enable the Japanese to water down the anti-
Soviet nature of the clause.
I The Foreign ministry official suggested, however, that
Tokyo might be prepared to compromise once serious negotiations
resume, but he provided no hint as to when he thought that
might be. He said the Japanese did not expect any movement from
the Chinese side because of Peking's preoccuption with internal
matters.
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ISRAEL: Defense Spending
I IIsraeli defense spending will probably increase in
rea terms in the fiscal year beginning April 1, 1977, contrary
to official Israeli statements. Earlier this week, the Israeli.
government announced a $13.6--billion budget--including $4.6
billion for defense, which it asserts is a real decline of 8
percent compared with defense expenditures last year.
I uIn calculating the 8-percent decline, Israeli econo-
mists assumed that the increase in military costs equaled the
37-percent rise in 1976 Israeli consumer prices. Israeli de-
fense spending, however, is much less affected by domestic in-
flation than the economy as a whole.
Roughly 50 percent of the defense budget, which is
financed largely by US aid, is composed of foreign purchases,
the prices of which have risen slower than Israeli prices in
general. Military spending is not
tax, which alone accounted for 16
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percent
to
of
the v
the r
alue-added
ise in the
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consumer--price index. Military expenditures
also a
re only mar-
ginally affected by the sharp cuts in food subsidies which
were a major factor in boosting prices last year.
TURKEY: Coalition Disputes
Disputes within Turkey's four-party coalition govern-
ment have again led to speculation that the government will
fall, possibly leading to an early parliamentary election. The
election is scheduled for October, but there is some chance
the government may fall after the budget bill is passed in
March.
I Most of the conflicts stem from intense pre-election
jockeying. Deputy Prime Minister Erbakan's National Salvation
Party and the small Nationalist Action Party are engaged in
bitter rivalry for control of the far right. The Action Party
recently gave its chairman the authority to pull out of the
coalition if he considered it: in the party's interest to do so.
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The problems between Prime Minister Demirel, of the
us ice Party, and the free-wheeling Erbakan continue to multi-
ply:
--During budget debates, the Salvationists and the opposi-
tion Republican Peoples Party have been collaborating on
securing a higher salary increase for civil servants than
that advocated by Demirel. The two parties have also joined
forces to pass through the assembly over Demirel's objec-
tion a postponement of municipal elections from June to
December.
--Erbakan has awarded New Year's bonuses only to white
collar employees in the state economic enterprises his
party controls. Demirel has criticized the action and
ordered his minister of finance to recover the bonuses
if the Salvationists acted illegally.
--The Salvationists have been lobbying for the resignation
of the head of Turkish radio and television because of
his allegedly partisan performance. Demirel continues to
support him.
I I Despite these problems, the Demirel government will
probably survive until October. If it should fall, however, a
successor government could opt for an early election or decide
to hold the vote in October as scheduled. In either case, pros-
pects for significant Turkish movement on the Cyprus issue
could be further reduced.
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