WEEKLY SUMMARY SPECIAL REPORT ITALY: ROUGH ROAD AHEAD FOR RUMOR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500050026-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 16, 2016
• Document Release Date: November 29, 2004
• Sequence Number: 26
• Publication Date: October 12, 1973
• Content Type: REPORT

 Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
Secret
Weekly Summary
Special Report
Italy Rough Road Ahead for Rumor
CIA
T
3flV;gF
BRAND" Secret
S .Pull
N2 660
U12 October 1973
SOT
ESTflyVn No. 0391/73A
Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
25X1
 25X1 Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
 Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
Ap rt e4 arpR&ease 2005/01/11 : CIA-RDP85T00875R001500050026-9
ITALY:
Summary
The sacrosanct summer holiday is over, Parliament is back in session and the
skeptical Italians are wondering whether the new center-left coalition will do airy
more than the preceding 34 post-war governments to establish public confidence in
the political process. The atmosphere in Rome was relatively harmonious during the
summer, largely because of the emergency conditions under which the government
initiated its economic measures and the sharply reduced area of maneuverability
open to political leaders after Giulio Andreotti's center-right coalition collapsed in
June. Prime Minister Mariano Rumor has also benefited from a Communist strategy
that-for the moment-emphasizes a less hostile approach toward the government.
The four coalition partners now face the tough job of avoiding a resurgence of
traditional rivalries while trying to give meaning to their vague agreements on
controversial social and economic reforms.
 DP85TOO875ROO1500050026-9
Approved For Release 996PET A-R
I I
Background
Veteran observers of the political scene in
Rome have lately detected more conciliation
among Italy's politicians and a more tranquil at-
mosphere in the country. The negotiations lead-
ing up to the formation of Mariano Rumor's
government were unusually rapid and harmoni-
ous, and the opposition has kept a low profile.
Italians are, however, skeptical that the new gov-
ernment will be able to solve the nation's pressing
problems or restore public confidence in the
political process.
Almost any set of circumstances would seem
calm, in light of the jolts sustained by the coun-
try's political system over the last two years.
Beset by economic uncertainties and irritated by
seemingly endle~s strikes, the Italians saw unem-
ployment rise while long-promised economic and
social reforms lagged. Crime and political violence
were on the upswing, and popular dissatisfaction
found expression in support for the extreme
right. In 1971, a bitterly contested presidential
contest helped polarize political forces between
the extremes of left and right. In 1972, the dec-
ade-long center-left partnership between the
Christian Democrats and Socialists dissolved in
acrimony and was replaced by a feeble center-
right coalition, which returned the small and con-
servative Liberal Party to the government for the
first time since 1957.
The ease with which the Christian Demo-
cratic leader, Mariano Rumor, persuaded the
Socialists to rejoin the government after Andreot-
ti's center-right coalition collapsed in June does
not indicate that the two have buried their differ-
ences. Rather, it signals a realization by political
leaders that the options for governing the country
have been reduced to a minimum. While the polit-
ical arithmetic of the 1950s permitted the exclu-
sion of the left from the government, steady
Communist gains over the last decade, coupled
with a neo-fascist spurt in the 1970s, have se-
verely constricted the center portion of the politi-
cal spectrum.
Almost all constitutional variants have been
tried and found wanting. A decade of collabora-
tion between the Christian Democrats and the
Socialists did not produce stable or effective gov-
ernrr,ents. The unprecedented call for early elec-
tions in 1972 only aggravated the situation by
extending the earlier advances of the far right.
The experiment with center-right rule under An-
dreotti proved that the country cannot be gov-
erned for long with a razor-thin parliamentary
majority. As the options narrowed, many became
convinced that the center-left formula was the
only workable one and that it had to work th s
time. This conviction helped Rumor to patch Up
relations between the Christian Democrats and
Socialists. Although his government may not be
Italy's "last beach," as many observers have
claimed, it is certainly true that Italian politicians
have had their area of maneuver sharply reduced.
In Italian politics, however, necessity does
not guarantee success. Whether Rumor can over-
come the obstacles that have immobilized recent
Italian governments will depend in large part on:
-relations within and among the four coali-
tion parties,
-the effectiveness of the opposition,
-progress on major economic problems.
From Center-Left to Center-Right .. .
Rumor's center-left cabinet of Christian
Democrats, Socialists, Social Democrats and Re-
publicans revives the formula for tha coalitions
that governed from 1963 to 1972 anti returns the
Socialist Party to the government after a year in
opposition. The central question is whether the
reunited center-left parties can avoid a resurgence
of bitter disputes that shattered their earlier
partnership. Their differences centered primarily
on economic and social policy and the sticky
question of relations with the powerful Commu-
nist Party.
The Socialists, backed by organized labor,
,;ad been pushing hard for faster progress on
expensive reforms at a time when economic con-
ditions had convinced the other coalition partners
to delay. Moreover, the Socialists were
Special Report
25X1
Approved For Release 2005/01/TT:qIA-RDP85T00875R001500050026-9
 Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
SECRET
campaigning for a closer parliamentary relation-
ship between the government and the Communist
Party. This was unacceptable to the Christian
Democrats, who perceived a rightward drift in the
electorate and responded by taking a conservative
"I aw-and-order "stance.
The rhetoric of the 1972 campaign had had
the effect of freezing the positions of the two
parties on these issues. Both parties took tough
positions publicly and by the end of the race
neither could gracefully bring off the about-face
required to re-form the center-left coalition. The
Christian Democrats reluctantly turned to the
small and conservative Liberal Party-one of the
election's biggest losers-to form Giulio Andreot-
ti's shaky center-right government.
Its razor-thin majority and Christian Demo-
cratic defections on key parliamentary votes led
to a record number of defeats for the government
on major parliamentary issues. The coalition
sometimes appeared to rely on neo-fascist votes-
political suicide in a country where opposition, to
a Fascist revival is the only issue on which nearly
all politicians agree.
And Back Again
Although key Christian Democrats, Rumor,
Aldo Moro, and Emilio Colombo, had been snip-
ing at Andreotti for months, it was veteran party
leader Amintore Fanfani who brought Andreotti
down. Fanfani gal.anized sentiment in the party
i~or a return to the center-left formula. In a series
of closed-door meetings leading up to the Chris-
tian Democratic national congress in June, Fan-
fani-one of the architects of the center-left ex-
periment in the early 1960s-extracted an agree-
ment from leaders of the party's rival factions. As
a result of this behind-the-scenes agreement, the
congress called for a renewal of the coalition
partnership with the Socialists, Fanfani received
the party's top leadership post, and Rumor-
leader of the party's largest faction-was chosen
to succeed Andreotti as prime minister. Rumor
and Fanfani then reassembled the coalition in a
record 17 days-about a third of the time Rumor
took to patch together his last center-left coali-
tion in 1970.
The Christian Democrats' united front is a
fragile thing. There is considerable rank-and-file
Expanded Chamber Majority Under Center-Left Coalition
oter-Lett M
Although not In center-right Includes 5 members of the Monarchist
coalition, PNI supported it in Party who ran on a joint ticket with
Parliament. the Neo-Fascists.
Special Report
PCI -Communists
PSI -Socialists
PSD1-Social Democrats
PRI -Republicans
DC -Christian Democrats
PLI -Liberals
MSI -Neo-Fascists
(Italian Social Movement)
25X1
Approved For Release 2005/01/ ~6@WJP85T00875R001500050026-9
 Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
SECRET
25X1
opposition to this second "opening to the left,"
and Fani'ani took to the hustings over the summer
in an attempt to reassure the party's essentially
conservative electorate. There is dissent-muted
for the moment-in the party's left and right
wings. The left is disgruntled over having to yield
certain key ministries to the Socialists. Opponents
on the right have rallied around former prime
minister Andreotti and former party secretary
Arnaldo Forlani who were dumped somewhat un-
ceremoniously at the June congress.
Although Fanfani--the Christian Democrats'
most experienced politician-is probably the only
party leader capable of turning the party around
so smoothly, he has also attracted the most dedi-
cated enemies. He is vigorously reorganizing the
party in what he portrays as an attempt to stamp
out factionalism. Some reports indicate, however,
that Fanfani, who was bitterly disappointed over
his failure to win the presidency in 1971, is con-
solidating his power prior to another shot at that
office. Others suggest that he expects Rumor to
fail and is preparing to step in as the country's
savior.
Since the break-up of the center-left alliance
in 1972, the Socialists have slowly backers away
from the extreme positions that had made them
an unacceptable partner for the Christian Demo-
crats. The party has sought to retain its left-wing
credentials through continued agitation for re-
form measures, but has toned down its earlier
advocacy of "advanced equilibriums"-which
called for government acceptance of Communist
votes in Parliament. With the election of Fran-
cesco De Martino as party secretary, Socialist
leadership passed into more moderate hands. At
its national congress in late 1972, the party
clearly signaled its desire to resume a role in the
government.
The party's acceptance of Rumor's invita-
tion to return to the government in July was riot
unanimous. A substantial left-wing minority, led
by former party chief Giacomo Mancini, wanted
to hold off on full participation, preferring in-
stead to limit the party's commitment to parlia-
mentary support. These dissidents are not partici-
pating in Rumor's government and are threaten-
Special Report
Christian Democratic Party Secretary Xmintore Fanfani
ing to create a row if the more moderate Social-
ists in office do not tilt the coalition sufficiently
leftward. The dissidents strongly opposed the gov-
ernment's recent decision to allow a gasoline price
rise and are likely to rebel if-as expected-the
government continues to grant selective price
increases to large companies. The left-wing So-
cialists regard these as gifts to big business.
Although the smaller coalition parties-
Social Democrats and Republicans-are more
homogeneous than the Socialists, they have spe-
cial interests, and this could have a destabilizing
influence on the coalition. The Social Democrats
-4- 12 October 1973
Approved For Release 2005/01/W.QIy4- P85T00875R001500050026-9
 Approved For Release 2005/01 /~E 9P85T00875R001500050026-9
will not hesitate to castigate the Socialist Party if
in the eyes of the former the latter begins to
cooperate too closely with the Communists.
The mercurial leader of the Republican
Party, Ugo L.a Malfa, could create problems if his
advice on economic matters is not heeded. As
Treasury Minister, La Malfa, together with
Finance Minister Emilio Colombo and Budget
Minister Antonio Giolitti, is responsible for the
government's initial efforts to ease the country's
economic problems. La Malfa, a persistent advo-
cate of budgetary austerity, will, however, almost
certainly clash with those in the coalition, espe-
cially the Socialists, who want expensive reform
measu res.
La Malfa has a long record of intransigence
when his recommendations are thwarted. His res-
ignation over economic policy differences helped
precipitate the collapse of Emilio Colombo's cen-
ter-left government in early 1972. In May of this
year, he undercut Andreotti's efforts to stay
afloat by withdrawing Republican parliamentary
support. He has already drawn the line wiih
Rumor by refusing to attend a meeting concern-
ing wage increases for railroad workers. La Malfa
reportedly also sent a letter to Rumor urging that
the coalition abide by the economic policy com-
mitments made at the time the new government
was formed.
The atmosphere of guarded optimism that
surrounded Rumor's early efforts stemmed
largely from his government's energetic attack on
the country's most obvious economic problems.
The agreement that brought the four parties back
together, howe""er, glossed over a number of divi-
sive issues. The parties achieved only a very gen-
eral accord on long-promised, but as yet unful-
filled, economic and social reforms. The fact that
these matters were papered over or set aside in
the coalition negotiations means that Rumor's
troubles are just beginning. Sharp clashes are al-
most inevitable as the parties try to work out the
timing and content of reforms.
The tendency, as usual, is to postpone these
potentially explosive issues. This is best seen in
the frantic maneuvering by all parties, except the
Special Report
25X1
neo-fascists, to avoid holding the long-delayed
referendum on the repeal of the bill legalizing
divorce. Originally planned for the spring of
1972, the referendum was postponed automati-
cally when the parliamentary elections were
called. It is now scheduled to take place next
spring.
The political campaign that would accom-
pany the referendum would almost certainly po-
larize the parties and refuel some of th?2 coumtry's
bitterest feuds. Among the democratic parties,
only the Christian Democrats oppose legalized
divorce, and this places them at odds with their
coalition partners. Moreover, the Christian Demo-
crats are squirming over the possibility of being
allied with the neo-fascists. Even the pro-divorce
Communists are working for postponement, fear-
ful that many of their supporters might defect on
this issue. The Church has not spoken, but the
Vatican is said to be concerned that the referen-
dum, which seems more and more likely to pro-
duce a pro-divorce majority, would be interpreted
as a general judgment against the Church.
Prime Minister Mariano Rumor (I) and Socialist
Party leader Francesco De Martino (r)
Approved For Release 2005/01/1 &.E F 85T00875R001500050026-9
 25X1 Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
Next 1 Page(s) In Document Exempt
Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
 Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
SECRET
25X1
Communists and the unions will insist on early
action to benefit fixed income groups, they have
so far refrained from sabotaging the government's
recovery program with large-scale strikes and de-
mands for immediate across-the-board pay in-
creases.
As the country's leading newspaper has
noted, undue importance should not be attached
to the "first few bars of the score." The Commu-
nists' tolerance of Rumor would quickly dissolve
once they perceive a tactical advantage in pur-
suing a tougher line. The best explanation for
their present muted opposition is that the revival
of the center-left coalition has faced them with a
dilemma. On the one hand, failure of the center-
left could usher in events that the Communists
would find painful, such as a resurgence of sup-
port for the right or a successful attempt by the
Christian Democrats to win a majority in new
elections.
On the other hand, it is in the interests of
the Communists to try to weaken the govern)
and keep it on the defensive in order to exploit
popular dissatisfaction and increase the part 's
following. I Iin
the new government expects t e Communists to
begin to step up their attacks on the government
late this year and to assume a position of outright
hostility by next summer. In any case, he is
convinced that the Communists will become in-
cieasingly critical as the 1975 regional and admin-
istrative elections approach.
... And the Right
While manifesting utter contempt for the
new government, the neo-fascist Italian Social
Movement is probably rejoicing over the revival of
the center-le-Ii. The return of the Socialists to
government makes it possible for the neo-fascists
agair to adopt a clear opposition stand and thus
Politically motivated violence has tarnished the image of the extreme right.
 Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
SECRET
bid for th3 support of conservative Christian
Democrats and Liberals who cannot stomach the
swing back to the left. During Andreotti's year in
office, the neo-fascists could not play effectively
on the themes that transformed a once minor
movement into the country'; fourth largest
party-behind the Christian Democrats, Commu-
nists, and Socialists.
Neo-fascist fortunes began to rise in 1970,
mainly because of the dynamic leadership of
Giorgio Almirante. Aided by impressive oratorical
skills and a distinguished appearance, Almirante
gave the party new purpose and discipline. The
neo-fascists worked hard to project the image of a
youthful democratic movement of the right and
exploited popular dissatisfaction over the de-
pressed economy, crime, and political violence to
score dramatic gains in local elections in 1970 and
1971. The momentum carried over into the 1972
national elections. In the voting, Almirante's
party gained in 92 of the country's 94 provinces
and received some 9 percent of the vote, almost
double its earlier share.
The moderate image that the neo-fascists
have carefully nurtured has suffered since 1972,
largely as a result of public revulsion over a recent
wave of right-wing political violence that included
a series of bombings and murders. Many Italians
profess to see parallels between these events and
the violent pre-Mussolini period of 1919-1922.
Over the last year, a series of judicial inquiries
revealed clear links between the right-wing ex-
tremists responsible for the incidents and Almi-
~ante's party.
Scattered local elections in late 1972 sug-
gested that the neo-fascists may have passed their
peak. These hopeful auguries could change, how-
ever, if Rumor's reform efforts fall flat, especially
those aimed at the underdeveloped south. That
region has been the locale of the most consistent
neo-fascist successes. The neo-fascists are already
exploiting the recent cholera outbreak in hopes of
benefiting from the government's inept response.
The conservative, business-oriented Liberal
Party, while technically in the opposition, is not
likely to pose a serious obstacle to Rumor, al-
Special Report
Neo-fascist chief, Giorgio Almirante
25X1
though it has every reason to be resentful after
having been, in effect, booted out of the govern-
ment at the Christian Democratic congre::s in
June. The fortunes of the Liberals have plum-
meted in recent years and the party's image was
further tarnished by its lackluster performance in
the Andreotti government. The party proved un-
able to put into practice its platform of sound
fiscal planning and reduced government spending.
Now its only hope is that Rumor's agreement
with the Socialists will break down and that the
government will revert to the center-right for-
mula. A narrow electoral base, unimaginative
leadership, and organizational problems make it
unlikely that the Liberals will be able actively to
encourage such a sequence of events.
- 9 - 12 October 1973
Approved For Release 2005/01/1'GTA'-F~D~85T00875R001500050026-9
 Approved For Release 2005/01/11 : CIA-RDP85T00875R001500050026-9
SECRET
When the Rumor government was formed,
inflation was running at a rate higher than at any
time since the economy was stabilized after World
War 11. During the first half of 1973, prices were
rising at the highest annual rate of any Western
industrialized country-almost 12 percent. In this
situation, a continuation of the Andreotti govern-
ment's economic program, which had fostered
economic growth at the expense of price stal-,;iity,
was clearly not feasible. Rumor has su?.ght to
cool inflation through a temporary iieeze on
prices and low-income rents, by selective credit
controls, and by holding the line on government
spending. The price ceilings apply to staple food
items and to the products of large firms that
account for approximately 75 percent of Italy's
industrial output. Unwilling to jeopardize Italy's
precarious economic recovery, however, the gov-
ernment has shied away from using stringent fis-
cal and credit measures to control inflation. As a
result, the underlying causes of Italy's record-
breaking inflation have continued unchecked.
Attempts to counter inflation have been
complicated by burgeoning public spending. De-
spite the government's insistence that the 1974
Italy's Mounting Inflation
Index is not seasonally adjusted
1970=100
Italy's Industrial Upturn
Industrial Production Index
Index Is seasonally adjusted
1970=100
25X1
1151 F M A M 1 J A S O N 01.1 F M A M J 1
budget not be exceeded, parliamentary pressure is
mounting for enactment of long-awaited social
reforms. Significant spending cutbacks are un-
likely; indeed next year's deficit could rise well
above the stated limit.
The shaky position of the lira has further
complicated Rumor's efforts to put the economy
back on a sound footing. He has introduced mea-
sures to cut back short-term funds used to specu-
late against the lira, to make investment abroad
by Italians more expensive, and-while restricting
over-all credit growth-to encourage a shift of
funds into more productive investment. These
measures have had only limited success.
This winter, Italians face the possibility of
fuel and food shortages as well as spiraling prices.
Although the major unions have adopted a rela-
tively moderate stance in the opening phase of
contract talks this fall, pressure from the rank and
file will increase if the government fails to curb
inflation over the long term. Across-the-board pay
increases and large-scale strike activity at this
juncture would disrupt industrial production and
cut short the recent economic upturn, laying to
1001 F M A M J J A S 0 N DIJ F M A M 1 J
$5.678 ill !, 1 9 7 2 19 7 3
Special Report
- 10 - 12 October 1973
Approved For Release 2005/01/1'f"-Cho'-&85T00875R001500050026-9
 Approved For Release 2005/01/11 -. DP85T00875R001500050026-9
SECRET
rest government hopes of at least a 5-percent
growth in real GNP during 1973.
Over the short term, the fate of the revived
center-left will probably depend mainly on its
handling of the country's most pressing economic
problems. The government's relatively successful
enforcement of a price freeze over the summer
has contributed to a guardedly hopeful atmos-
phere, but the breathing spell provided by this
stop-gap measure is aboi-t to expire. The eco-
nomic program is entering its "second phase,"
and Rumor will now have to deal in a more
comprehensive way with the inflationary pres-
sures that have continued to accumulate behind
the price-freeze wall.
If Rumor stumbles and the coalition comes
apart this fall, few options will be open to politi-
cal leaders. Rumor is not a forceful leader, and
the failure of his government would not neces-
sarily be interpreted as proof that the center-left
formula cannot work. Veteran Christian Demo-
crat Amintore Fanfani is waiting in the wings and
would probably step in as prime minister or tap
another prominent Christian Democrat to form
another center-left coalition.
25X1
Comparative Growth of Real GNP
0 Italy
4.9
5.7
%
0 OECD Europe
5.0
4' 5
%
Special Report
4.9
25X1
In the event Rumor's government should
collapse under circumstances unfavorable to an-
other try at center-left rule, some Christian Dem-
ocrats would lobby for a renewal of the center-
right partnership with the Liberals. The thin par-
liamentary margin of this alignment, however,
makes it doubtful that the Christian Democratic
party would select this option.
If relations with the Socialists were to deteri-
orate severely, the Christian Democrats might for
the second time call early parliamentary elections.
They would try for an absolute majority-a goal
that has eluded the party since 1948. The risk in
this course is that there is an even chance that
voter disenchantment with center-left politics
would be translated into neo-fascist and Com-
munist-and not Christian Democratic-gains.
The past failure of all these courses has kept
alive talk of institutional changes and rumors of
military coup planning. A switch to a stronger
executive system-along the lines of the French
Fifth Republic-does not enjoy wide support at
this time, although it is frequently mentioned as a
course favored by Fanfani, who may fancy him-
self as Italy's De Gaullej the
revival of the center-left partnership as already
renewed discussion among both military and non-
military circles of a possible coup. There is no
firm evidence, however, that the current talk is
backed up by a concrete plan: i action.
None of these options seems very inviting to
Italian politicians at the moment. They have en-
joyed the respite afforded by the conciliatory
mood of the last three months. That fact, along
with the country's precarious economic situation,
is Mariano Rumor's strongest ally.
25X1
25X1
Approved For Release 2005/0'9 E3DP85T00875R001500050026-9