MONTHLY REPORT ON EUROPEAN AFFAIRS

• Document Type: CREST
• Collection: Library of Congress
• Document Number (FOIA) /ESDN (CREST): LOC-HAK-320-5-1-9
• Release Decision: RIFLIM
• Original Classification: C
• Document Page Count: 10
• Document Creation Date: January 11, 2017
• Document Release Date: June 10, 2010
• Sequence Number: 1
• Publication Date: January 31, 1975
• Content Type: MEMO

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DEPARTMENT OF STATE
BRIEFING MEMORANDUM
CONFIDENTIAL
To: The Secretary
From: EUR - Arthur A. Hartman
Monthly Report on European Affairs
(January 1975)
There is attached our monthly report on
.developments and trends in Europe. The initial
section summarizes the broad political and
social impact of the economic situation, reviews
developments in Germany, Britain and Southern
Europe, and discusses Europe's relations with
China. The latter section comments on Soviet
detente policy.
Attachment:
Monthly Report
CONFIDENTIAL
GDS
Drafted:EUR/PP:FSpo 4s:bg
1/31/75 x21135
ON FILE DOS RELEASE
INSTRUCTIONS APPLY
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WESTERN EUROPE
Goethe's..famous line that "nothing is:harder
to bear than a succession of fair days" would
raise a few mirthless laughs from European leaders
during a winter that has known few fair days either
politically, economically or meteorologically.
During the month the full vital statistics of 1974's
grim economic, situation came out, showing:
Germany
7.5%
+ $9.7
France
15%.
-- $6.7
UK
20%
-- $8.7
Italy
19%
- $8.6
But worse, according to most expert predictions, is
yet to come---with the first half of this year to see
growth rates approaching postwar lows and unemploy-
ment postwar highs. Small wonder Europeans looked
hard for any glint of silver linings. "Good news:
trade deficit less than predicted," ran a lead head-
line in La Stampa while one in The Times gloated,
"C152m drop in Britain's monthly trade deficit," even
though that particular deficit was one of the worst
in British history. These days less disastrous news
equals good news.
The two headlines say a lot about the current
European mood. Following months of deep popular
apprehension and grim warnings.by government leaders
about economic crisis--after inflation did in fact
go up and employment down--Europeans found comfort in
the fact that bad as things were, they could be worse
and that the rate of economic decline appeared to be
tapering off.
CONFIDENTIAL
balance of payments on-current
prices up account (in billions)
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2..
Amid the Encircling Gloom
Now that Europe finds itself in the middle of
the long-awaited crunch, what were the social and
political effects of this severe recession? The most
obvious characteristic of the January scene was
stability. There was none of the social disorder
that had been widely feared and no appreciable trade,
union agitation, except in Spain and Portugal and
there as much for political as economic reasons.
Politically there was no spread of extremism, and par--
.liamentary opposition parties behaved with remarkable
restraint. Apparently the warnings by government
leaders last fall convinced the public that the eco-
nomic crisis, being world-wide, was bigger than any
individual country and not primarily the responsibility
of the government in power. In'November and December,
as unemployment replaced inflation as the primary worry,
most government leaders were seen to move quickly to
combat it.
The question now is how far public patience can
be stretched. In France and the UK unemployment in
January is well over 700,000 and is climbing steadily
.toward the million mark which, as Embassy London pointed
out, is the panic figure in Britain. In Germany the
million figure was passed during the month. But though
the outlook for unemployment and growth rates is bad
for the coming six months, it is extremely unlikely
that any European government will fall as a result.
In Germany and Britain, however, the situation is
precarious for deeper reasons, and continued economic
difficulties could help to precipitate a political crisis
sometime in the spring.
Shadowboxing on the,Rhine
In Germany most everyone likes Helmut Schmidt
but fewer and fewer people like his party. To the
latest pollster's question, "If an election were held
today, which party would you vote for?", they responded:
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Christian Democrats
53%
Social Democrat.$
38%
Free Democrats
7%
Moreover, in the six forthcoming Land elections,
the Social Democrats face, largely for local reasons,
electoral losses of greater or lesser magnitude,
paralleling those in last fall's elections in Bavaria
and Hesse. The question is whether Schmidt's prestige
can be turned to his party's advantage or whether his
party will drag him down.
For the Free Democrats the situation is even
more menacing since politically they exist at the
subsistence level. Not surprisingly there was in-
creasing speculation during the month that the FDP
might jump to the Christian Democrats, destroying
Schmidt's government but saving themselves. On the
Land level it was not just talk. The party organiza-
tion in Rhineland-Palatinate announced on January 11
that it would like to join the CDU in a coalition
after the March election. However, a similar proposal
in North Rhine Westphalia, which could bring down the
Bonn government, was promptly` suppressed by the party's
leader, Foreign Minister Genscher, and this brought an
end for the moment to the party's drift. Both Genscher
and other party officials have assured Embassy Bonn
that they expect their party to survive in the forth-
coming elections and to remain in the Bonn coalition
until the federal election next year--and even beyond.
But this sounds like bravado, and defeats at the polls
might bring a sudden change of heart.
Being divided and leaderless, the Christian Demo-
crats are not in a position to exploit these signs of
coalition weakness. Like bawling Nibelungs, the CDU
chieftains have been almost as concerned to keep one
another from power as to seize it for themselves. Will
a Siegfried--the lout who is fearless--push them all
aside and take the prize for himself? That was the
question as Franz-Josef Strauss appeared to be preparing
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,4 -
perhaps a final time -he is 60--to take command of
the patty. The spring election campaigns may show
whether Strauss can live down his past and develop
the nation-wide appeal to take leadership of the
party or will remain its perennial second most power-
ful man.
Britain's Labor Pains
Perhaps nothing during the month caught the
condition of Britain better than the fact that unem-
ployment and strike figures could not be issued
because of a strike by government statisticians. In
fact the strike situation has become so grave that
Wilson--in an action that never comes easily to a
Labor leader--strongly condemned striking auto workers,
pointing out that as a result of"such walk-outs in
that industry alone 350,000 man days (20% of the man
days of the whole industry) had been lost during 1974..
Other economic developments during the month
were equally disheartening. Demand continues to
weaken and unemployment to rise. New orders are fall-
ing off in major industries and the investment outlook
is dismal. Prices continue to increase. On the point
of collapse, Burmah oil joined the ranks of major
British firms requiring government assistance to survive.
Doctors and dentists rejected government proposals re-
garding pay and private patients. And even the deus ex
machina in the form of North Sea oil suddenly lost some
of its attraction for investors.
The politically most serious element in this
situation was the growing potential for a split between
the government and the trade unions. Finance Minister
Healey in a speech in early January warned workers
that they have the choice between unemployment and a
reduction in wage increases, which had gone up on an
average of 29% in 1974. Their casuistry equal to any
test, the trade unions denounced the latter proposi-
tion as a pay cut, and consequently the social contract
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could stretched to the. snapping point.- Although
a break between the government and the unions is
not yet inevitable, the differences which have
begun to-surface summon up the specter of the cold
war between them during Wilson-'s second administra-
tion, which itself was in fact brought down by the
unions in 1.970.
As the strain in relations increases, the tensions
between the left and right within the government and
the unions are growing. During the month there were
signs that Britain's version of Strauss, Tony Benn,
was preparing to make his move for power; it is anti-
cipated that he will soon resign, possibly over the
EC issue, and lead a left-wing challenge to Wilson's
leadership. Benn's--and Wilson's--future could hang
as much on the EC referendum as Schmidt's and Strauss'
.as
the Land elections. The referendum, scheduled for
late June, is becoming one of the most divisive issues
of recent British history. Anti-EC groups have formed
a broad coalition with the most influential trade
union leader, Jack Jones, agreeing to play a leading
-role in it. Bringing together the extreme right of
the Tories with the extreme left of Labor, the referen-
dum will not only have historic significance for Europe
but possibly also an important incidental impact on
domestic British politics.
A Pink Dawn in the South?
The month's trends in Southern Europe generally
pointed to the left. The mini-"historical compromise"
between the Christian Democrats and communists in
Venice was reinacted during the month by local Chris-
tian Democratic party organizations in several other
areas of Italy. This development is further evidence
of increasing Christian Democratic interest in reaching
some practical accommodation with local communist parties.
The decision of both the Christian Democrats and com-
munists to support abortion legislation is another sign
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of the social and..political shifts now taking, place
in Italy.
There are also signs of growing fermentation in
Spain though-almost everyone remains paralyzed--or
hypnotized--by Franco. However, recent weeks have seen
some of the worst labor troubles in Spain since the
civil war--work stoppages, plant sit-ins, retaliatory
walk-outs, firings and battles with the police.. Most
of these difficulties started with economic motivations
but became rapidly political once under way. While
all strikes in Spain have a political character since
they are illegal, the one entirely political strike
was the general strike in the Basque country last
month which got out 150,000 workers, as such the most
successful strike since the civil war. The focus of
labor unrest in January shifted to Barcelona and to
a lesser extent Madrid. The prospects are for labor
agitation to go on.
In Portugal the struggle for power became more
open during the month. Although communist popular
support was slipping, the general trend of developments
was clearly to the left. While the moderates in the
Armed Forces Movement remained in the majority, the
leftists in the Movement have the upper hand and
increasingly acted in collusion with the communists.
In the several showdowns during-January, the left
consequently had its way. A communist-supported labor
law that places the trade union movement under commu-
nist domination, thereby providing the communists with
a sure power-base, was approved over the opposition of
socialists and moderates. In Oporto on January 25
leftists successfully forced the cancellation of a
conservative Center Democratic Social Party convention.
The military themselves banned the socialist rally to
be held in Lisbon on January 31. But the moderates
are beginning to organize themselves and could do well
in the April election--though this very prospect could
provoke the left to postpone or cancel it.
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Chinks in the Soviet Western Flank
The visits to Peking in January of Dutch Foreign
Minister van der Stoel and Franz-Josef Strauss, who
was unexpectedly invited to see Mao, highlight the
recent, progress in Chinese-European relations.
Since their opening to the West at the beginning
of the decade, the Chinese have increasingly seen
Western Europe as a central element in their objec-
tive of-political and psychological encirclement of
the Soviet Union. The stream of European visitors
to Peking in recent years have all heard the same
litany: Europe should maintain a close alliance with
the United States; NATO conventional forces should be
strengthened; US-European military cooperation must
be sustained; and the American troop presence in
Europe must be preserved. At the same time the
Chinese condemned as a Soviet deception the whole
detente policy as manifested in Ostpolitik, SALT, MBFR
and CSCE. Keeping up a strong political and military
guard, they insisted, was in the West's own best
interest since Europe rather than China was the
primary target of Soviet aggression. The Soviet
Union, they told German Foreign Minister Scheel in
1972, was merely making "a feint to the East while
attacking the West," a statement repeated publicly in
August 1973 and subsequently by.Chou himself.
More and more Europe has become the focus of
Chinese interest, flattery and cajolery. In the past
six or seven months alone Makarios, Heath, Kohl,
Mintoff, Hartling, van der Stoel and Strauss have
visited Peking, and Schmidt, Rumor and Tindemans will
soon follow. In April Vice Premier Teng Hsiao-ping
went to Paris and in October Vice Minister of Foreign
Affairs, Chiao Kuan-hua, visited Bonn and Paris. In Bonn
Chiao spoke out for German reunification, and there
was some press comment at the time that this support
of what is still an official goal was a welcome courtesy
that had not been heard in some time by foreign visitors
to Germany.
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8 -
As-the pace 'of -contacts in recent months increased,
the Chinese attitude toward Europe was given a new
twist. In the wake of US-Soviet detente, Watergate
and the strain on US-European relations, the Chinese
began to deal with Europe separately from the United
States. This new approach was publicly enunciated
last April by Teng at the special session of the UNGA
when he said that Europe has a common bond with the
Third World in the need to oppose superpower hegemony.
One sees here a second important strand of Chinese
policy and one representing a longer-term strategy:
an independent Europe standing in opposition to both
the United States and the Soviet Union.
Chou took up these themes in his January 13
speech to the National People's Conference, and gave
in addition his first public endorsement of European
integration. The new approach is further reflected
in Chinese trade policy in which preference is occa-
sionally shown for European over American products.
Moreover, after years of raising and dropping the
question of formal relations with the European Com-
munity, the Chinese have apparently decided to move
ahead, informing van der Stoel during the month that
they hope to accredit a mission-to the Community in
March or April.
At the moment the Chinese are following both
approaches--Europe with the United States and Europe
vs the superpowers--merely changing emphasis as seems
expedient. In their meetings early in January with
an der Stoel, for instance, they called for Western
Europe to develop an independent and credible nuclear
force while with Strauss a few. days later they stressed
that American and European security interests are in-
separably intertwined or, as Teng put it, "American
defense begins in Europe." There is no evidence so far
that the Chinese are working against our interests in
Europe, and in their meetings with Strauss they argued
strongly for a continued American assumption of much
of the European defense burden.
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Peking's "guest list" and the views expressed
to the.visitors it make it obvious that the-Chinese
are most comfortable with conservatives and old-
fashioned anti-communists. Our Liaison Office in
Peking links Strauss' exceptional treatment with a
statement by Chiao that the most dangerous forces
in Europe are the liberal-socialist governments,
duped by Soviet detente propaganda but, thanks to
the economic crisis, soon to be replaced by conserv-
ative governments less taken in by Moscow. The.
question arises whether this approach could give the
Chinese some scope for mischief in domestic European
politics.
Although a trip to China is now one of the rites
of political leadership, European governments continue
to regard their political relationship with Peking
as essentially platonic. Apart from some trade pro-
spects, they see at the moment little in China for
themselves. Nor are they apt to be a good long-term
proposition for China. They will sooner or later
have to puncture China's dream of turning them and
the EC into instruments of anti-Soviet policy. Helmut
Schmidt did precisely this when he told Chiao that
security and detente are mutually supporting and that
the Chinese defense of Arab oil policy conflicts with
their desire for a strong, unified Europe. And it is
significant that upon his return to Bonn, Strauss met
with Schmidt and joined him in a public statement that
the Federal Republic has no intention of improving its
ties with Peking at the expense of relations with the
Soviet Union.
In sum, China has some importance to the British
because of Hong Kong, may exercise a lurid attraction
to the German right-wing, appeases French antagonism
to superpower dominance and is an object of.some
fascination to all, but she does not otherwise occupy
a significant place in the domestic affairs or the
foreign policy of any Europe.an country. Politically,
there is no yellow fever threat in Europe.
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