THE PRESIDENT'S DAILY BRIEF 13 JUNE 1974

• Document Type: FOIA
• Collection: President's Daily Brief 1969-1977
• Document Number (FOIA) /ESDN (CREST): 0006007982
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 13
• Document Creation Date: August 14, 2016
• Document Release Date: August 24, 2016
• Publication Date: June 13, 1974

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The President's Daily Brief
/14arnear.ogo"
June 13, 1974
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Exempt from general
declassification schedule of E.O. I 1652
exemption category SB( I
declassified only on approval of
the Director of Central Intelligence
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FOR THE PRESIDENT ONLY
THE PRESIDENT S DAILY BRIEF
June 13, 1974
,PRINCIPAL DEVELOPMENTS
In Italy, political consultations have as yet pro-
duced no compromise on the economic policy differ-
ences that brought Prime Minister Rumor's resigna-
tion. (Page 1)
The French austerity program announced yesterday
was characterized by President Giscard as "harsh"
in a conversation he had with Ambassador Irwin.
(Page 2)
The new leaders.in France and West Germany share a
number of common concerns as they forge their poli-
cies toward the EC. (Page 3)
Military activity in Cambodia is concentrated north-
west of Phnom Penh, where a Cambodian army relief
force is nearing the isolated government base at
Lovek. (Page 5)
Notes on the following subjects appear on Pages 6
and 7:
Soviet and East European grain prospects,
Soviet
The Soviet media reaction to President Nixon's Middle
East trip,
A large Soviet contract to buy US chemical plants,
Japanese reaction to India's nuclear test,
Portuguese Guinea, and
Argentina.
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ITALY
The consultations following Prime Minister
Rumor's resignation have produced no compromise on
the economic policy differences that brought down
the Italian government. The US embassy in Rome
says that Italians are coming to realize that the
current political crisis is more serious than the
routine changes of government they are accustomed
to.
The Socialists continue to oppose the credit
restraints that the Christian Democrats feel are
necessary to stabilize the faltering economy. Mean-
while, the labor unions have made clear that they
will press their economic demands on any new govern-
ment, although they have indicated they would sup-
port .a program that would equitably distribute aus-
terity and avoid unemployment.
President Leone has been consulting with polit-
ical leaders to find a solution. His consultations
end today, but without the slightest sign so far of
a break in the deadlock.
Well-placed US embassy sources report that Leone
has under consideration the possibility of submitting
the issues that divide the government to parliament
for an open debate and vote. Leone may float this
prospect to press the Socialists--who would not want
to bear the full onus of the break-up of the center--
left coalition?to make concessions.
The Socialists are not likely to yield. They
have been .exuding confidence over the Christian Dem-
ocrats defeat in the recent referendum on divorce.
The Socialists interpreted this result as proof of
a basic.shift,in Italian voter attitudes in favor of
more rapid social change.
If, as expected, the regional election next week
in Sardinia results in Christian Democratic losses
and Socialist gains, the Socialists will probably
become even more intransigent.
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FRANCE
The French government yesterday adopted an aus-
terity program designed to slow inflation, restore
the balance of payments, expand exports, And finance
new social welfare measures.
President Giscard characterized the program as
"harsh" in a conversation with the US ambassador.
He said that he hoped to control inflation, which
is expected to be about 15 percent for 1974, within
18 months..
The program, some of which requires parliamen-
tary approval, includes:
--A. reduction of oil consumption by rationing
heating fuels, which account for 40 percent of
French energy consumption.
--An 18-percent increase in corporate taxes for
1973.
--A special tax on companies that would have
paid no tax for 1973.
--An income tax surcharge up to 15 percent for
individuals in the higher brackets, to be par-
tially reimbursed next year.
--A one-time 10-percent tax on real estate prof-
its for 1974.
-7A tax. designed to limit corporate capital
gains derived from inflation.
These tax measures would increase government
revenues this year by 4 to 5 percent. Other items
under consideration are increased prices for gaso-
line And other fuels, and additional measures de-
signed to restrict credit.
Some of the funds derived from the austerity
program will be used to finance the social welfare
measures that Giscard promised during his campaign.
Significant progress in that area is necessary by
fall tomaintain labor peace and appease the left.
The government will announce its social program on
June 19.
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EC
The changes of government in Bonn, Paris, and
London appear to have brought about a new alignment
among EC members and encouraged a more pragmatic
approach. The EC is no longer Eight against France;
instead, an incipient Franco-German entente is
struggling to lead the others in the difficult
search for ways to stop the erosion of the commu-
nity.
Chancellor Schmidt and President Giscard
?d'Estaing, presiding over the two most powerful
economies in Western Europe, share a number of com-
mon concerns. As they forge policies toward the
EC during these first weeks, they see their EC
partners--and the community itself--in serious
trouble.
The customs union for industrialized goods
and the single, market for farm products, which are
at the core of the EC,, have started to crumble
under international monetary strains. The moves
last month by Italy and Denmark to curb imports,
and the Italian government collapse over threaten-
ing economic disaster, have shaken the community.
Schmidt and Giscard, both former finance min-
isters, understand well the dimensions of economic
imbalance within the EC and see an urgerit need for
corrective action. Despite their rapport and com-
mon interest in finding effective remedies, the two
leaders face formidable obstacles.
(continued)
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A few specific measures designed to coordinate
member-state economic policies may be adopted before
too long. The Nine will study an EC Commission pro-
posal for an anti-inflation program, a new concerted
float of EC currencies, and large new international
borrowings by the EC monetary cooperation fund.
A better sign of what lies in store for the im-
mediate future came from last week's EC finance min-
isters' meeting, which was described as "devoid of
illusion." Participants at that meeting agreed that
economic stability would probably be best pursued
individually by the member states.
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CAMBODIA: Phnom Penh Area
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Chhanq ?\ 0 Held by communis
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556017 6-74 CIA
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CAMBODIA
Military activity is centered northwest of Phnom
Penh, where a Cambodian army relief force is nearing
the isolated government base at Lovek.
Two government battalions moving toward Lovek-
from the Tonle Sap River thus far have met little
resistance. Their aim is to secure a corridor be-
tween the base and the river for the evacuation of
the 30,000 civilians who have been stranded at Lovek
for over a month.
The Khmer Communists, meanwhile, have moved more
men and supplies, and possibly a 37-mm antiaircraft
gun, into the northwestern battlefront; and an inter-
cept indicates that heavy attacks against Lovek could
begin in the next few days. Communist commanders near
Lovek and elsewhere in the country have been ordered
to carry out more military actions to take advantage
of the government's current preoccupation with inter-
nal political problems.
As part of this effort, the communists apparently
intend to,keep up their almost daily rocket attacks
on Phnom Penh, although these attacks thus far have
been relatively ineffective. Insurgent units south
of the capital, who recently received 150 rockets,
have been ordered to fire them into the city "one
or two at a time."
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NOTES
USSR: Cold, wet weather in the Soviet Union
over the past several weeks is likely to reduce
yields of botliwinter and spring grains. Assuming
average weather for the rest of the growing season,
we estimate that the Soviets will harvest about 190
million tons--down from the record 222.5-million-
ton harvest of last year. This will probably make
it necessary for the USSR to buy foreign grain in
fiscal year 1975.
USSR:
Japan-India: As a means of protesting India's
recent nuclear test, Tokyo apparently intends to
limit its aid to New Delhi, which amounted last year
to almost $100 million. According to press reports,
Japan will announce this decision at a meeting of
the 13-member Aid India consortium which begins on
JUne 13 in Paris.
Portuguese Guinea: Cease-fire talks between
Lisbon and the Portuguese Guinea insurgents are
scheduled to reopen today in Algiers. The first
round of talks, held in London, was adjourned on
June 1 to give the two sides time to study each
other's basic bargaining position. The insurgents
are demanding independence for the territory; Lis-
bon, although recognizing the possibility of inde-
pendence, is insisting on a popular referendum that
will allow the inhabitants of Portuguese Guinea to
determine the territory's political future.
(continued)
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USSR: Soviet media have given minimal coverage
thus far to President Nixon's Middle East tour.
Tass and the domestic service of Moscow Radio pro-
vided brief reports on the President's arrival in
Cairo yesterday, avoiding any hint of the huge wel-
coming crowds. Soviet media coverage to date be-
trays no special concern about the trip, and state-
ments on the coming summit remain highly positive.
USSR-US: The USSR has agreed-to purchase four
ammonia plants worth $200 million from Chemico, a
US firm. This is the largest single Soviet contract
for the purchase of US plants. Signing of the con-
tract is scheduled to occur prior to President
Nixon's arrival in Moscow. The ammonia plants will
be used to produce urea fertilizer and are part of
a continuing Soviet program to import Western 'Ma-
chinery and technology to modernize lagging indus-
trial sectors.
Argentina: 'President Peron, after earlier
threatening to resign, announced late yesterday
that a ten-hour solidarity strike, called by Peron-
ist labor and youth organizations, had given him
the backing he needs to stay on. He is disturbed
by recent economic setbacks that he attributes to
sabotage and sectarianism within the Peronist move-
ment. The fact that Peronist supporters were,or-
dered into the streets immediately after his resig-
nation threat, followed by an equally dramatic an-
nouncement that he would remain, suggests careful
orchestration which could serve as a prelude to new
austerity measures.
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