STAFF NOTES: WESTERN EUROPE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000500040033-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 16, 2016
• Document Release Date: October 28, 2004
• Sequence Number: 33
• Publication Date: October 29, 1975
• Content Type: REPORT

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Transition in Spain Coincides W::th
Economic Slowdown . . . . . . . . . . . . . . 1
Lisbon Makes Further Moves To Restore
Order, Authority . . . . . . . . . . . . . . . 3
Swedish Communist Party Split Worsens .
Trade Unionists End World Congress. . . . . . . 8
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Transition in Spain Coincides With Economic Slowdown
Juan Carlos will inherit an. econc;ny that has
experienced a downturn after many years of robust
growth.
The sharp deceleration of the economy, beginning
last fall, was precipitated by a slump in exports.
From 1970 to 1974, Spain's economy grew at a 6-percent
annual rate. Because of rapid inflation and a looming
payments problem, the government has proceeded
cautiously in efforts to revive activity. As a
result, the increase in real Gross National Product
this year probably will be only 2 percent, roughly
half that of 1974.
Industrial production began to falter in the
sum_mor of 1974, plunging steeply after October as
export orders shrank. In the first quarter of 1975,
seasonally adjusted output fell at a 23-percent
annual rate before reviving in April. Industrial
production has continued to-creep up, but remains
well below last year's levels.
Industry operated at only about 80 percent of
capacity during the first half of this year. Unem-
ployment worsened as output sagged, rising to 4
percent officially in late July, compared with less
than 2 percent last year. Consumer prices are
rising at a 17.5-percent annual rate--about the
same as last year--with wages increasing 20 to 25
percent.
While Madrid has increased spending and lowered
the tax on capital gains to bolster output, it
increasingly has focused attention on prices. Anti-
inflation measures introduced this year include:
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--a linking of further wage increases to
rises in the cost of living.
--a freeze on rents and profit margins, and
--a 10-percent tax surcharge on dividends and
profits and a 15-percent tax on interest
earnings from savings deposits.
The foreign sector is a major constraint on
stimulative efforts. Imports are more than double
exports, and we expect the trade deficit to rise
to more than $9 billion this year from $8.3 billion
in 1974. Continued heavy demand for imported oil,
together with the recent 10-percent OPEC price hike,
will push the oil bill to more than $3.5 billion.
Tour,isr revenues and worker remittances have done
well despite the world recession.
We estimate that the current account deficit
may be held to slightly more than $3 billion--about
the same as last year. Madrid has preferred to
borrow abroad to cover the current account gap,
although foreign reserves are adequate at $6.3
billion.
Madrid publicly blames its poor trade perfor-
mance on what it considers unfair treatment by the
EC and the US. Spanish-EC trade negotiations have
been deadlocked since last year. The EC recently
decided not to resume negotiations because of the
execution of terrorists. Madrid also is dissatisfied
with the results of its attempts to gain more favorable
trade treatment from the US.
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Lisbon Makes Further Moves To Restore Order, Authority
The Portuguese government has taken further
steps to assert its authority in the wake of Prime
Minister Azevedo's trip to Porto last weekend.
The first crackdown by the military on
Communist-backed seizures of privately-owned farms
occurred on Monday north of Lisbon when a cavalry
unit arrested ten squatters near the town of Azambuja.
The security forces said the squatters would
be prosecuted for illegal possession of military
firearms. An amnesty for turning in such firearms
expired on Saturday. An attempt to occupy another
farm in the same area was abandoned.
The crackdown by the military is significant
in light of the Communist-inspired seizure of over
half a million acres of prime farm land in southern
Portugal since summer. Because much of this land
is now fallow and large numbers of livestock have
been slaughtered, the take-overs could confront the
government with serious agricultural shortages by next year.
Left-wing demonstrators were ousted on Monday
from the civil governor's offices in Faro, in the
southern Algarve; the demonstrators were protesting
the recent removal of the pro-Communist governor.
In another incident, an infantry regiment intervened
in Santiago do Cacem to prevent violence when leftist
farm workers occupied the local farmers' guild.
The Portuguese army, and particularly Chief of
Staff Fabiao, have come in for harsh criticism
because of lax discipline and their failure to ensure
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public order. An army spokesman said Monday that
18 percent of the army will be demobilized this week
when Fabian is away on a visit to West Germany.
This cutback will add to the country's unem-
ployment problem, already estimated to be 10 percent
of the work force, but it will also give military
authorities an opportunity to remove troublemakers
from the armed forces.
On the economic front, the government has
announced a series of measures intended to stop the
flight of capital and strengthen the currency.
Foreign exchange transactions by Po.rtugnese nationals
are severely limited.
The government-sponsored airlift of Angolan
refugees ends this week, by which time nearly 200,000
returnees will have reached Portugal.. The embittered
and frustrated refugees have refrained from taking
direct political action, reportedly for fear of
reprisals against friends and relatives still in
Angola.
Last weekeni, however, a group believed associated
with the refugees claimed responsibility for a bomb
attack on a left-wing cultural center. The group,
which blamed the government refugee agency for the
pliylit of the returnees, said it had decided it
would "answer force with force and violence with
violence."
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Swedish Communist Party Split Worsens
A controversy within the Swedish Communist Party
between the party leadership and Stalinist factions
in the northern provinces took a turn for the worse
last week when the party's executive committee dis-
missed a northern district chairman. In addition,
the chairman and three others were banned from the
executive committee.
The long simmering dispute flared up last spring
at the party congress. The Stalinists demanded that
the party follow more orthodox lines and attacked the
leadership for its past criticism of the Soviet in-
vasion of Czechoslovakia and the expulsion of
Solzhenitsyn from the Soviet Union. The Stalinists
were defeated at the party congress but have continued
their attacks in Norrskenslammen, their daily news-
paper.
A party split is particularly dangerous for the
Communists at this time. Elections are coming up in
1976 and the party must poll four percent of the
popular vote to be represented in parliament. The
latest opinion polls give the Communists exactly four
percent of the popular vote.
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Trade Unionists End World Congress
The International Confederation of Free Trade
Unions (ICFTU) concluded its world congress last
weekend in Mexico City. Secretary General Otto
Kersten and President P. P. Narayanan were re-elect-
ed, as expected, for a three-year term. The con-
gress appears to have achieved its objectives with-
out any irreconcilable disagreements between dele-
gations. This smooth sailing was facilitated in
large part by a pre-congress agreement not to take
up the status of ICFTU's Latin American regional
affiliate. An element of confusion--and presumably
ennui--was introduced in that the simultaneous trans-
lation equipment failed to function during the entire
conference.
A number of significant resolutions were
adopted on topical political situations including
those in Chile, Portugal and Spain. The resolution
on Portugal, in particular, gave rise to an acrimon-
ious exchange. The West Germans, with the support
of several trade secretariats, managed in the end to
include a direct reference to--presumably inter-
national--Communist involvement in Portuguese devel-
opments.
A highlight of the congress was an emotional
discussion of Washington's anticipated notification
of intent to withdraw from the International Labor
Organization (ILO). Many trade unionists expressed
alarm over such a step and most denounced AFL-CIO
chief George Meany as the alleged culprit. The
American embassy comments that the prevai.ent feel-
ing among the delegates seemed to be concern that
Washington is abandoning the ILO to the Communists.
The final resolution expresses strong support for the
ILO and reflects concern over the US notification,
although withdrawal is not mentioned.
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The delegates gave enthusiastic support to the
UN resolution which calls for a new international
economic order and the wide-ranging discussion of
related issues appears to have been responsible ana
informed. An especially cogent and balanced speech
was given by Devan Nair, the General Secretary of
the Singapore labor confederation. Nair harshly
criticized the behavior of rich nations in the cur-?
rent economic crisis, but at the same time he
castigated the policies of corrupt elitist govern-
ments in developing countries that lead to a widen-
ing of the gap between haves and have-nots. He also
noted that the total contribution in development
assistance from Western industrial countries is
only about 0.33 percent of their GNP's. Evenhanded-
ly, he charged that it is about time that the UN's
Group of 77 looked into the far sorrier record of the
developed communist countries.
After many fervid speeches, the congress un-
animously adopted a report on multinational companies
which calls upon national governments and inter-
national organizations urgently to enact legislation
to curb their operations. The comprehensive report
charges that a voluntary code of conduct aimed at
their control is timid and inadequate. It calls for
such specific measures as disclosure in an annual
company report of shareholders, including minority
participation; financial, marketing or technical
links with other companies; location of all plants;
extensive financial information including that re-
lating to capital structure and movements, profit-
ability, and company solvency and liquidity.
The driving force of the congress were the
European delegates. The United Mine Workers and a
few international trade secretariat leaders attend-
ed from the US, but they appear not to have been
especially active.
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