PROBABLE DEVELOPMENTS IN SPAIN

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A007300020001-0
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• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 27, 2016
• Document Release Date: August 9, 2013
• Sequence Number: 1
• Publication Date: June 12, 1956
• Content Type: NIE

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ay JIM 1956 NIE 27.1-56
12 June 1956
AWE,
363 8
NATIONAL INTELLIGENCE ESTIMATE
NUMBER 27.1-56
(Supersedes N1E 27.1-54)
PROBABLE DEVELOPMENTS IN SPAIN
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of
State, the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in by the
INTELLIGENCE ADVISORY COMMITTEE
on 12 June 1956. Concurring were the Special Assistant, In-
telligence, Department of State; the Assistant Chief of Staff,
Intelligence, Department of the Army; the Director of Naval
Intelligence; the Director of Intelligence, USAF; and the
Deputy Director for Intelligence, The Joint Staff. The Atomic
Energy Commission Representative to the IAC, and the Assist-
ant Director, Federal Bureau of Investigation, abstained, the
subject being outside of their jurisdiction.
OCK?...!:...7ENT NO.
NO CF1A;?.:CiE IN CLASS. 1
X D!::.;L.A.SSYIED
CLASS. CHANGED TO: TS S C
NEXT t=:'N DATE.
ALITH: HA 70-2
DATE ? REVIEWER: of12_5--.4
253
COPY NO.
SWINE ASSISTANT DIRECTOR , ONE
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41111810111111er
PROBABLE DEVELOPMENTS IN SPAIN
??
THE PROBLEM
To assess the situation in Spain and to estimate probable developments.
CONCLUSIONS
1. The stability of the Franco regime has
not been seriously threatened by the re-
cent student and labor unrest. However,
there are indications that a new political
atmosphere has begun to develop in
Spain. A wave of strikes has occurred for
the first time in five years, urban work-
ers and intellectuals have demonstrated
a new boldness in their opposition to the
regime, and some elements of the ruling
coalition have become increasingly un-
easy about the future. (Paras. 12,23-30)
2. The student and labor opposition is
likely to become more vocal and to exert
increasing pressure upon the regime,
largely because recollections of the terrors
of the Civil War and fear of provoking
new violence are losing their efficacy as a
deterrent to opposition activity. Cleav-
ages among Franco's supporters are likely
to become more troublesome and the re-
gime may be subjected to new strains over
Moroccan policy. (Paras. 31-33)
3. Franco, at present, apparently favors
Juan Carlos, the 18-year-old son of Pre-
tender Don Juan, as the future King of
Spain, but expressions of Falangist op-
position to a monarchy have prompted
Franco to proceed slowly. Even if Franco
eventually arranges for a king to succeed
him, this will merely provide for succes-
sion to the nominal leadership post he
occupies as Chief of State. Among the
aspirants to the real power Franco has
acquired, no man stands out by virtue of
ability, popular following, or Franco's
favor. Moreover, no man stands out as
the clearly favored choice of the army,
the probable ultimate arbiter of the suc-
cession question. (Paras. 28-29)
4. We believe that the present regime will
be able to remain in power for at least
several more years, assuming Franco, who
is now 63 years old, remains active.
Should he leave the scene soon, we believe
that the leaders of the various power
groups which currently support the re-
gime will agree on a successor to Franco.
However, frictions within and among the
various groups will almost certainly in-
crease, as it is unlikely that Franco's suc-
cessor will command the respect of the
coalition as completely as Franco does.
(Para. 34)
5. We believe there is a better than even
chance that Franco's successor will be
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'WINNPIP"
able to preserve domestic order for some
time. However, over the longer run, any
Spanish regime, including the present
one, must face the problem of alleviating
the rising dissatisfaction of the popula-
tion. (Para. 36)
6. The Spanish economic situation has
undergone considerable improvement
over the past six years, but the rate of
economic growth has been irregular,
largely because of the vagaries of the
weather. Inflation continues to be the
most serious economic problem facing the
government. Barring serious adverse
weather conditions, the government is
likely to be able to prevent a dangerous
inflation over the next few years, though
its ability to do so over the long run is
.uncertain. (Paras. 40, 44)
7. Less than half the approximately $425
million of US economic assistance has as
yet entered the Spanish economy. It has
been used primarily to cushion the econ-
I. INTRODUCTION
omy from the loss of foreign exchange
earnings resulting from reduced agricul-
tural exports caused by the droughts of
1954 and 1955 and the severe freeze of
1956. US aid has enabled Spain to main-
tain a relatively high level of investment
and to build up its gold and dollar re-
serves. (Paras. 41-43)
8. The Spanish armed forces are firmly
under Franco's control and are capable
of maintaining internal security. Chiefly
because of US assistance, the capabilities
of the Spanish forces will almost certainly
improve. However, Spanish military
forces will continue to remain incapable
of defending their country against an in-
vasion in force. (Paras. 14, 45-55)
9. So long as Franco retains control of the
Spanish government, present US-Spanish
ties will almost certainly be retained. We
believe that any probable successor gov-
ernment would not repudiate the bilateral
agreements. (Paras. 59-60)
DISCUSSION
10. Spain occupies an unusual position in
Western Europe. Whereas most of its West-
ern European neighbors possess liberal demo-
cratic governments, advanced economies, and
relatively well-educated and technically skilled
citizenries, Spain is an authoritarian regime,
nearly half its citizens are illiterate, its social
structure is rigid, and its economy is retarded.
? 11. Spain has now emerged from the diplo-
matic isolation which was imposed by the
victorious powers of World War II because of
its regime's association with the German and
Italian governments. The United States has
extended military and economic assistance to
Spain in order to supplement bases and ar-
rangements already established in Western
Europe and North Africa for the defense of
the North Atlantic Treaty area. Thus, Spain,
though not a member of NATO, forms a link
in its defense. Despite substantial reserva-
tions on the part of many NATO meMbers
over the desirability of association with the
present Spanish regime, the US agreements
with Spain for the construction and joint use
of bases have been accepted by the NATO
powers as part of West European defense
arrangements.
12. There are indications that a new political
atmosphere has begun to develop in Spain.
Urban workers and intellectuals have exhib-
ited a new boldness in their opposition to the
regime. Some of the groups backing Franco
have become increasingly uneasy about the
future. While Franco's position still appears
secure, there can be little doubt that changes
in the temper of Spain have occurred.
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NEOMMINIE
II. POLITICAL TRENDS
The Franco Regime
13. Political power in Spain is centered in the
hands of General Francisco Franco, who came
to power as a result of the victory of rightist
forces in the Spanish Civil War (1936-1939) .
He heads an authoritarian regime which in
general has the support of the army, the
church, business and landholding interests,
and the Falange Movement. The stability of
the regime, which has not been seriously
threatened since its establishment, is a trib-
ute to Franco's skill in handling the often
conflicting interests of the groups which sup-
ported him during the Civil War, in repress-
ing liberal and leftist elements, and in playing
upon popular fears of a recurrence of civil
war.
14. The key element of Franco's support is
the army. Franco needs it to perpetuate him-
self in power, and he has been generous in
filling its budget requests and in granting spe-
cial privileges to its top officers, who are rep-
resented at the highest levels of government.
The army and the police are firmly under
Franco's control, and their leaders appear con-
vinced that their interests can best be served
by supporting Franco.
15. Franco and the Catholic Church appre-
ciate their community of interests. The
Church hierarchy is indebted to him for
numerous political, economic, and social priv-
ileges, and for restoring the Church to a posi-
tion of power and prestige it had not enjoyed
for a century prior to the Civil War. The
Church in return uses its influence over the
faithful to help maintain the Franco regime
in power. However, there is considerable criti-
cism of Franco's policies among a relatively
liberal segment of the Catholic clergy and
laity. This segment advocates economic and
social reform measures and realizes that inti-
mate collaboration with the regime makes the
Church share responsibility for government
actions, with the accompanying danger of
violent anticlerical reactions if the regime
should collapse.
16. Business and landed interests have also
benefited from the regime's policies. Franco's
agrarian and fiscal policies have been pri-
marily designed to enable these interests to
retain their traditional social and economic
hegemony. He has suppressed labor agita-
tion and has protected property and invest-
ments. While some businessmen and land-
owners are critical of the regime and resentful.
of state control over the economic life of the
nation, they consider the Franco regime a
distinctly lesser evil than an alternative gov-
ernment which might confront them with
economic, political, and social changes.
17. The Falange, dominated by Franco, is the
only legal party in Spain. Although most
Spaniards have at least nominal affiliation
with the Falange, it has never gained mass
support nor dominated the Spanish political
scene to the extent that the Fascist and Nazi
parties did in Italy and Germany. Its politi-
cal power and influence are further weakened
by internal frictions. The moderates, who are
in the majority and whose leaders are pri-
marily concerned with perpetuating their
positions in the bureaucracies, are, opposed by
a militant "Old Guard" faction, which still
advocates sweeping social reforms and a
nationalistic, Fascist-type state. Although
Franco pays lip service to the "Old Guard,"
he does not actively support its program. The
Falange Movement, taken as a whole, has
little dynamism, and its political influence in
determining policy is not great.
18. Franco uses the Falange to control the
vertical syndicates in which Spanish labor,
management, and government are represent-
ed, to channel political activity, and to coun-
ter the views and power of other groups sup-
porting him. The Falange is at odds with the
Church over matters of social reform and edu-
cation policy, with the army over foreign pol-
icy, control of the police system, and over how
to deal with the opposition, and with landed
and business interests over administration of
much of the economic life of the nation.
Franco has kept these conflicts under control
chiefly by playing upon his supporters' fears
that he is all that stands between them and
anarchy.
Opposition
19. Despite Franco's success in maintaining
domestic order, discontent is widespread. In
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4illikeggsitg 4
addition to the conflicts within and among
the groups which support him, the vast ma-
jority of all other Spaniards are either apa-
thetic or critical of the Franco regime. Eco-
nomic difficulties beset nearly all Spaniards
who do not belong to the privileged ruling
groups. The level of living of the majority
of the people is very low, and there is only a
small middle -class standing between extremes
of wealth and poverty. Inflationary pressures
have plagued the economy since the Civil War
with white collar and other fixed income
groups being the most severely squeezed.
Moreover, skilled workers are resentful be-
cause of the constant narrowing of differen-
tials between their wages and those of un-
skilled workers. The regime's major brake
on inflationary pressures, a general wage
freeze, which is adjusted only belatedly to in-
creases in the cost of living, is generally
unpopular and will probably become increas-
ingly difficult to maintain.
20. Hostility to the regime is particularly
strong among the urban workers, the majority
of whom are anticlerical and probably retain
their Anarchist or Socialist sympathies.
Rural labor is for the most part illiterate and
politically apathetic, but even this group is
capable of being stirred to violent extremes.
Most students and other intellectuals are
anti-Falangist and are particularly resentful
of the regime's educational and censorship
policies. Thus far, all these groups have been
generally throttled by police action and weak-
ened by their own disorganization and lack of
leadership.
21. The political parties which provided the
main support for the Republic have been out-
lawed and rendered ineffective by the Franco
regime. Those organized opposition groups
which do exist (chiefly the Anarchists, Social-
ists, and Basque Nationalists) , are either
forced to maintain a precarious clandestine
existence within Spain or carry on their lim-
ited political activities from abroad. They
are weak and demoralized largely because of
the strong position of the Franco regime, the
growing estrangement between the domestic
opposition leaders and those in exile, the
paucity of financial and moral support from
their members or foreign sympathizers, and
the increasing acceptance of the Franco re-
gime by the Western democracies.
22. The Communist Party is outlawed and re-
lentlessly pursued by the Spanish government,
and it is ostracised by the non-Communist
opposition groups. There have been no known
Communist-led strikes or acts of sabotage
since 1948, and the party's present capabili-
ties are slight. Estimates of Communist
party membership vary, but hard-core mem-
bership is probably about 3,000. The number
of Spaniards who might swell the ranks of the
Communist Party in the event of a relaxation
of controls is estimated at between 20,000 and
25,000.
Current Political Problems
23. Student unrest. Intellectuals have in-
creasingly manifested their hostility to the
Franco regime during the past six months.
A poll of Madrid University students, under-
taken by the apparently uneasy government
in October 1955, revealed how little the regime
and particularly Falangist propaganda had
influenced Spanish youth. Eighty-two per-
cent of the students criticized the government,
army, church, and educational leadership, and
65 percent predicted that Spain would even-
tually have a socialist government. On 18
October 1955, about 2,000 Madrid University
students, in a public demonstration, ex-
pressed their desire for greater intellectual
freedom.
24. Serious student disorders in February
1956, resulting from enmity between Falan-
gist and anti-Falangist students, led the gov-
ernment to use force to quell them, to close
the University of Madrid temporarily, and to
replace a number of moderate Falangist lead-
ers, including the Secretary General of the
Falangist party and the Minister of Education,
with "Old Guard" adherents. However, the
latter were apparently unable to procure
Franco's backing for heavy sentences against
the anti-Falangists implicated in the riots.
On the other hand, the army held the Falange
responsible for the disorders.
25. Labor disturbances. Urban labor, tradi-
tionally hostile to the Franco regime, has also,
during the past six months, been less inhib-
glaillaigNagif ?
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ited than formerly about expressing its dis-
content. Worker protest over rising prices
and inadequate wages began to increase in
late 1955, and minor demonstrations broke out
early in 1956 in Barcelona, Seville, and Valen-
cia. Apparently sensing that the February
student riots might precipitate labor demon-
strations, Franco granted the workers a highly
publicized wage increase of 20 percent. How-
ever, this apparently did not satisfy them, and
in April of 1956, the most serious strike wave
since 1951 broke out in Pamplona, spreading
to other major cities in the Basque Provinces
and to Barcelona.
26. Prompt police action and threats of re-
pression by the government coupled in some
cases by an acquiescence in further wage in-
creases by the employers, ended the first strike
wave. Many workers remained disgruntled,
however, and subsequently resorted to slow-
down tactics, a maneuver to which the gov-
ernment responded by closing the most seri-
ously affected plants. As a result, up to 50,000
factory workers were unemployed at the end
of April in the Basque Provinces, and slow-
downs were continuing in some plants. By
late May most plants were operating at nor-
mal capacity.
27. The Moroccan problem. The militant Fa-
langists, because of their strong nationalism,
and the top army officers, because of their
strong sentimental ties to the area, were
extremely disappointed over the failure of
Franco's Moroccan policy. For a number of
years the regime had been attempting to
weaken the French hold over Morocco and
to extend Spanish influence throughout the
area. However, when France, in March 1956,
in effect recognized the independence and
unity of Morocco, there was little Spain could
do but follow suit as gracefully as possible.
28. The succession problem. In the light of
the series of incidents of the past six months,
even greater importance than before is being
attached, particularly among those elements
supporting the regime, to the problem of who
will succeed Franco. Spain has been a nomi-
nal monarchy since 1947 when the Law of
Succession gave Franco the right to nominate
5
a monarch, and, if necessary, a regent to
succeed him as Chief of State. However, Spain
still has no monarch, and it is clear that
Franco is not yet prepared to surrender
power, or even a share of power. Franco, at
present, apparently favors Juan Carlos, the
18-year-old son of Pretender Don Juan, as the
future king and has to some extent been
grooming him for the office, but expressions
of Falangist opposition to a monarchy have
prompted Franco to proceed slowly. In gen-
eral, the idea of restoration of the monarchy
is not widely 'supported, and the choice of a
monarch and the constitutional arrangement
under which he would reign create a further
diversity of opinion.
29. Even if Franco eventually arranges for a
king to succeed him, this will merely provide
for succession to the nominal leadership post
he occupies as Chief of State. The essential
problem, that of designating a successor to
take over the real power he has acquired, will
remain. Among the aspirants to this power,
no man stands out by virtue of ability, pop-
ular following, or Franco's favor. Moreover,
no man stands out as the clearly favored
choice of the army, the probable ultimate ar-
biter of the succession question. In view of
the fact that Franco must play one group of
supporters off against the other in order to
maintain his own position, it is virtually im-
possible for him to name a successor to his
real power without aggravating frictions
among the regime's supporting groups. Even
if a successor were designated, there is no
assurance he could exercise Franco's real
power.
Probable Political Developments
30. Continued political stability depends
largely upon the continued good health and
political acumen of Franco, who is now 63
years old. We do not believe that events of
the past six months have resulted in any sig-
nificant loss of support for Franco among
elements upon which he depends for power.
Although apparently shaken by the recent
unrest, Franco displayed much vigor and skill
in moving to re-establish discipline. While
new flare-ups and continued manifestations
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of disaffection are probable, we believe that
large-scale defiance and disorder are unlikely
in the near future. If they are attempted
during the next several years, we believe that
Franco, with firm army backing, can quickly
suppress them.
31. However, student and labor opposition is
likely to become more vocal and to exert in-
creasing pressure upon the regime. The stu-
dent demonstrations and labor's recent de-
fiance of the regime indicate that recollec-
tions of the terrors of the Civil War and the
fear of provoking new violence are losing their
efficacy as a deterrent to the activity of oppo-
sition groups. Also, Spain's developing asso-
ciation with the US and Western European
democracies almost certainly will increase the
internal pressures for political and intellec-
tual liberalization.
32. Moreover, cleavages among Franco's sup-
porters as to how to deal with: these pressures
are likely to become more troublesome. An-
tagonism between the army and the Falange
may increase. Should the pressure of events,
such as new student unrest, serious labor dis-
turbances, or the succession problem, bring
this divergency to a head, Franco would prob-
ably side with the army against the Falange.
In the unlikely event that the Falange should
break with Franco, the army would almost
certainly keep the present regime in power
and strengthen its own political position.
33. The regime may also be subjected to new
strains over Moroccan policy. In working out
final details on the relinquishment of its zone
of the protectorate it is expected that Spain
will attempt to retain those portions of terri-
tory over which it exercises direct sovereign-
ty ? an Atlantic coastal enclave and five
city or island garrisons along the Mediter-
ranean.' However, Moroccan nationalists will
? almost certainly increase their agitation for
control of these Spanish possessions in the
Moroccan area. The Spanish government is
apparently split on this issue. The Foreign
Ministry favors withdrawal; the army insists
that Spain at least retain its coastal garri-
sons. Franco will probably side with the army
'Ifni, Ceuta, Melilla, Penon de Velez de la Gomera,
Penon de Alhucemas, and the Charafinas Islands.
and attempt to hold the possessions as long as
possible.
34. We believe that the present regime will
be able to remain in power for at least several
more years, assuming Franco remains active.
Should he leave the scene soon, we believe
that the leaders of the various power groups
which currently support the regime will agree
on a successor to Franco because they appre-
ciate the necessity of unity to prevent the
emergence of a leftist alliance. The conflicts
among the major elements supporting the
regime are not irreconcilable. However, fric-
tions within and among the various groups
will almost certainly increase, as it is unlikely
that Franco's successor will command the
respect of the coalition as completely as
Franco does.
35. The Falange, because it is insecure about
its own future, poses the main threat to the
continued unity of the governing coalition
after Franco leaves the Spanish scene. The
Falange, has clearly discernible conflicts with
each of the other main groups of the regime.
Although the Falange represents a variety
of conflicting interests which make it impos-
sible for it to have a coherent social and eco-
nomic program, it is the major channel of
patronage in the regime. Job holders in the
bureaucracy and in the labor syndicates owe
their positions to the Falange. While many
of the civil servants and the office holders in
the organization itself are uninterested in the
Falange's ideological pretensions, they are
fearful that they would lose their positions if
the Falange should be eliminated. While the
Falange is unlikely to challenge the army un-
der normal circumstances, it might resort to
violence if the army moved to take away its
prerogatives. Out of sheer desperation, the
Falange might appeal to the workers for help.
Although most workers dislike the Falange
syndicates, they might consider the oppor-
tunity favorable to settle old scores with the
rightist coalition and then make an inde-
pendent bid for power. In this event, wide-
spread disorder and prolonged instability
would probably occur.
36. We believe that there is a better than even
chance that Franco's successor will be able to
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preserve domestic order for some time. How-
ever, over the longer run, any Spanish regime,
including the present one, must face the prob-
lem of alleviating the rising dissatisfaction of
the population.
37. Over the next few years the Communists
will continue to promote unity of action with
other opposition groups, but it is highly un-
likely that they will succeed in these efforts.
In the immediate post-Franco period, we do
not believe that the Communists would have
even a remote chance of seizing control or that
they would be able to overcome the antipathy
to their cause existing among other opposi-
tion parties. However, during a period of pro-
longed instability, the Communists would
probably be able to exploit the discontent
among the poor and thereby increase the par-
ty's influence considerably.
III. ECONOMIC TRENDS
38. Almost 50 percent of the Spanish labor
force is engaged in agricultural pursuits.
Wheat, olives, grapes, and citrus fruits are the
principal agricultural products. Livestock
raising, particularly sheep, and fishing are
also important. . Spain also produces many
minerals (coal, iron, mercury, potash, and
copper) and a wide variety of manufactured
goods. Industry and agriculture each con-
tributed about one-third of the gross national
product, which for 1955 was estimated at $7.6
billion.
39. Although the Spanish economy has con-
siderable potential for growth and industrial
development, deep-seated weaknesses make
the realization of this potential difficult.
Spain is the driest country in Europe, with a
broken terrain and poor soil. The scanty and
irregular rainfall has severe effects on the
entire economy because of the resulting wide
fluctuations in agricultural output and power
available to industry. The Spanish economy
is more backward and the level of living is
lower than that of any Western European
country except Portugal. An overly large
section of the labor force is engaged in low-
yield agricultural pursuits. Spanish indus-
try, which is insufficiently integrated and
characterized by relatively small, inefficient
and antiquated units, is hampered by periodic
shortages of electric power and industrial raw
materials, by a lack of modern equipment, and
by inadequate rail and highway transporta-
tion systems. In addition, Spain has a chronic
foreign payments problem largely as a result
of fluctuations in the price and volume of
agricultural products available for export.
40. The Spanish economic situation has un-
dergone considerable improvement over the
past six years, but largely because of the vaga-
ries of weather the rate of economic growth
has been highly irregular. (See figure 1, fol-
lowing page.) Although between 1950 and
1955, Spain's gross national product (in con-
stant prices) is estimated to have increased by
42 percent, the annual increases have fluctu-
ated widely, varying between 20 percent in
1951 and 2.6 percent in 1955. . It is estimated
that Spain's GNP will increase by only 1.5
percent in 1956. The rapid improvement in
the early part of the 1950-1955 period was due
primarily to favorable weather and the favor-
able terms of trade enjoyed during the Korean
War period.
41. US economic assistance in the fbrm of
loans, grants, and the sales for pesetas of US
surplus agricultural commodities did not be-
gin to play an important role in the changing
Spanish economic situation until 1954, and
the full impact of the US assistance program
has not yet been felt. Less than half of the
approximately $425 million of economic assist-
ance has as yet entered the Spanish economy.
It has been used primarily to cushion the
economy from the loss of foreign exchange
earnings resulting from reduced agricultural
exports caused by the droughts of 1954 and
1955 and the severe freeze of 1956. US aid
enabled Spain to increase its imports of food-
stuffs to meet emergency needs and still main-
tain the normal level of imports of industrial
materials and capital equipment.
42. Following the signing of the US-Spanish
bilateral agreements in 1953, the rate of gross
investment began to climb sharply. Whereas
gross investment averaged only about 8 per-
cent of GNP between 1947 and 1953, it rose
to 12.4 percent in 1954 and to 15 percent in
SECRET
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200
150
100
50
,
0946= /00)
Industrial
Production .....
\ ? ..........
SECRET
.......
.
? ?te a ...........
??s?.
..? ?
0?
. .:
?
.?
./
....N.
????? .0-
Gross
Gross National
. real terms)
,....
Product
.......
25480
5-561
Agricultural
Production
1
1
.....
1946 1948 1950 1952 1954 1956
Figure 1: INDEXES OF GROSS NATIONAL PRODUCT, AGRICULTURAL (Estimated)
PRODUCTION, AND INDUSTRIAL PRODUCTION ? SPAIN
SECRET
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#110STOENT
1955.2 Much of the increase has been public
investment in public works, roads, communi-
cations, etc., and largely accounts for the
central government's growing budget deficits
($14 million in 1953; $210 million in 1954;
$217 million in 1955) . The rate of investment
is likely to remain at around 15 to 16 percent
of GNP during the next few years.
43. US aid receipts during fiscal 1954 and 1955
have enabled Spain to build up its gold and
dollar reserves by about $71 million to a total
of $221 million by December 1955. This was
partly because normal capital movements
(foreign private loans and investments, etc.)
during this period resulted in a $37 million
surplus and partly because Spain's earning
on invisible account (tourist expenditures,
shipping receipts, immigrant remittances,
etc.) with the US almost covered its trade
deficit with the US.3 Because of extraordi-
nary imports under the aid program, the cur-
rent account deficit will probably rise sub-
stantially in the next several years. However,
Spain will be able to build up its reserves
somewhat more by substituting imports un-
der the aid program for a part of its normal
imports from the dollar areas.
44. Despite the marked improvement in pro-
duction which has taken place in Spain in
the last few years, inflation continues to be
the most serious economic problem facing the
Spanish government. Though the govern-
ment has attempted to control wage rates and
influence the price at which imported basic
foodstuffs and goods were sold, the official cost
of living index for 1955 showed a 68 percent
increase over 1946. (See figure 2, following
page.) By pre-1951 standards, however, the
percentage of increase in the cost of living
during 1955 was not alarming (four percent
over 1954) . Current inflationary pressures,
2 The rate of investment has not yet reached the
point where any appreciable part of two million
surplus workers in agriculture are beginning to
be absorbed into the industrial labor force. The
increase in employment resulting from the
growth of investment was sufficient, however, to
absorb the increment to the labor force, and
thereby prevented an increase in agricultural
underemployment.
In 1954, the current account deficit was $14.5
million; in 1955, Spain had a surplus of $700,000.
which are geherated by the drive for economic
development, are likely to be more difficult
to control than those which arose out of
temporary shortages in the pre-1951 period.
Where worker protest in the former period
was apparently directed at obtaining wage
increases merely to offset the unceasing rise
in prices, the most recent strikes suggest that
workers in the most advanced industrial cities
are pushing for a better standard of living.
Prospects for greater availability of imported
capital equipment and raw materials are also
beginning to encourage the private sector of
the economy to expand capacity. Barring a
serious drought in 1956 or 1957 or a repetition
of the damaging cold wave of early 1956, the
government is likely to be able to prevent a
dangerous inflation over the next few years,
though its ability to do so over the longer run
is uncertain in view of the changing psychol-
ogy of labor and the business community, the
government's industrialization drive, and the
? general inefficiency of the government's mone-
tary and fiscal control mechanisms.
IV. MILITARY CAPABILITIES
45. Spain's principal military contributions to
the defense of Western Europe are its adher-
ence to the US-Spanish bilateral agreements
and its strategic geographical location on the
southern flank of Europe. The Spanish armed
forces are capable of maintaining internal
security, but would be unable to resist success-
fully an invasion in force. However, they
could delay an invasion through the Pyrenees
and provide security for lines of communica-
tion. Their offensive capabilities are slight.
46. Army. The Spanish army numbers
335,000 men organized into 19 divisions ? 1
cavalry, 1 armored, 4 mountain, 12 infantry
divisions, and 1 special mixed coastal group
of division size ? and numerous independent
brigades, regiments, and battalions. An ad-
ditional four infantry divisions could be
formed by grouping existing units in Spanish
Morocco. The actual strength of the infantry
and mountain divisions is 5,600 and 9,000,
respectively, although table of organization
strength is 8,900 and 11,800. About two-thirds
of the army are professional soldiers, while
1ftuT
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200
150
100
50
(1946= /00)
PERCENT INCREASE OVER
PREVIOUS YEAR
1946
1947 +17.7
1948 + 6.7
?
1949 +5.4
1950 +10.9
1951 + 9.4
1952 - 2.0
?
1953 + 1.7-
1954 + 1.2
1955 7+ 4.0
25481 5-561
I
1946 1948 1950 1952 1954
Figure 2: INDEX OF COST OF LIVING ? SPAIN
BMW
1956
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?
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ril&@!MIF 9
the remainder are two-year draftees. Army-
trained reserves are estimated at approxi-
mately 1,030,000, but their mobilization would
be hampered by the lack of heavy equipment.
47. The army suffers from training deficien-
cies and lack of modern weapons and
equipment. The troops are tough and well
disciplined, and the number of officers with
combat experience is high. Although the
quality of leadership is generally good, there
is an undue number of over-age officers in
the top echelons. Infantry wearions and field
artillery pieces up to medium calibre are suf-
ficient for current army needs. However,
heavy artillery, self-propelled guns, armored
vehicles, and dependable motor transport are
insufficient for sustained-combat operations.
Spanish industry produces sufficient light
weapons for the army but is incapable of pro-
ducing tanks, medium and heavy artillery, and
military vehicles in quantity. The army is
capable of maintaining internal security, but
not of resisting successfully an invasion in
force. Its offensive capabilities are negligible.
48. United States materiel assistance to the
Spanish ground forces is intended to equip
three infantry and two mountain divisions as
well as two AA regiments. The moderniza-
tion of these units, all located in the region
of the Pyrenees, is intended to increase the
defensive stature of Spain against aggression
from continental Europe. The increase in
effectiveness of these units will not necessarily
reflect a correspondingly improved military
posture throughout the army. However, the
receipt of MDAP equipment has made the
Spanish army more aware of the need for
logistical planning and technical training ?
two basic weaknesses; thus, it is estimated
that United States aid, directly and indirectly,
will result in a slow, moderate improvement
in the capabilities of the Spanish ground
forces.
49. Navy. The personnel strength of the
Spanish navy is approximately 36,000 officers
and men, including about 7,900 members of
the naval infantry. Vessel strength includes
5 old cruisers of various classes, 21 destroyers,
6 submarines, 21 escort and patrol vessels,
and 21 mine-warfare vessels. Combat effec-
tiveness is limited by want of experience in
naval warfare and by lack of POL reserves,
modern electronic detection gear, AA and
ASW armament, arid mine countermeasures
equipment. At present it has almost no capa-
bility to meet its primary mission which is
defensive in nature.
50. However, the capabilities of the Spanish
navy, chiefly because of US assistance, will
probably improve somewhat over the next few
years. Although US funds have been made
available to expand naval facilities for US-
Spanish use, the program has proceeded
slowly, because of differences in operating pro-
cedures and interpretation of the agreements
and because of adverse weather conditions.
Work on the naval air station and other facili-
ties at Rota is only about eight percent com-
pleted, and projected construction work on
the naval facilities at Cartagena, El Ferrol,
and Mahon has not yet commenced, although
land is being acquired at Cartagena and El
Ferrol. (See map.)
51. The US aid program also includes instal-
lation of modern weapons systems on board
present Spanish navy ships and others under
construction, and an MDAP-supported build-
ing program which includes 7 escort de-
stroyers, 4 submarines, 9 escort and patrol
vessels, and 4 minesweepers. Although the
modernization and building plans are only
beginning and will not be completed for sev-
eral years, we believe that the net effect of
the entire program will be to help make the
Spanish navy capable of some patrol, escort,
ASW, minelaying and sweeping, unit AA de-
fense, and submarine operations.
52. Air Force. The current capabilities of the
Spanish air force are negligible because of
obsolete equipment and insufficient experience
in tactical operations. At present, there are
35,000 men in the air force including 1,000
trained pilots. This air force has approxi-
mately 760 aircraft, mainly obsolete and for-
eign piston types, about 135 of which are
combat ready.
53. During the past 18 months there have
been minor improvements in air force capa-
bilities owing principally to MDAP deliveries
(30 jet trainers and 40 F-86Fs) and training.
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.011PININIff 10
These capabilities are expected to improve
further over the next several years. By 1957,
the Spanish air force? is scheduled to be
equipped with 7 squadrons of jet fighters
(F-86F), 1 logistical support squadron
(C-47) , and 1 air sea rescue squadron of
amphibians and helicopters. By 1958, the
seven fighter squadrons will have attained a
substantial degree of combat readiness there-
by contributing to Spain's air defense capa-
bility. The Spanish aircraft industry, with
US assistance, will be able to provide partial
maintenance support for the newly equipped
air force.
54. Construction and improvement of Spanish
airfields is progressing at a fairly rapid pace,
with principal emphasis directed toward those
fields covered by the US-Spanish Base Agree-
ment and financed with US funds. (See map.)
In addition other major airfields, civil and
military, are also being expanded and im-
proved primarily from Spanish funds. A sig-
nificant element in this airfield complex will
be an extensive system of POL pipelines, stor-
age depots, pumping stations, and related
facilities. By 1959, completion of the airfield
program will not only improve Spain's own
air defense capabilities but also provide an
airbase complex for heavy bomber operations.
55. Quasi-Military Forces. The Spanish na-
tional police forces are directly controlled by
Franco's Minister of Interior. They include
the uniformed Civil Guards (52,000) , the
Armed and Traffic Police (24,000) , and the
plainclothes General Police (7,200). The two
former are quasi-military organizations and in
time of national emergency would be quickly
integrated into the army. The quality of the
police personnel is fairly high, and they are
feared because of their extraordinary powers.
The Minister of Interior has indirect control
over the unarmed urban police, who are nor-
mally recruited from the Falange by munici-
pal authorities, and over the rural Home
Guards.
V. FOREIGN POLICY
56. Franco's foreign policy over the past dec-
ade has been aimed at extricating Spain from
the political quarantine established following
World War II. Between 1946 and 1948, many
states, upon the recommendation of the UN,
withdrew their chiefs of diplomatic missions
from Madrid, France closed the Pyrenees bor-
der, and the US excluded Spain from Marshall
Plan aid. Franco has been remarkably suc-
cessful, particularly during the past three
years, in overcoming Spain's diplomatic isola-
tion and raising its international prestige. He
successfully cultivated close relations with
most Latin American countries, the Arab
States, and Portugal, and concluded a Con-
cordat with the Vatican. His single most im-
portant foreign policy achievement was the
conclusion in 1953 of bilateral economic and
defense agreements with the US. In 1955
Spain was admitted to the UN and acquired
observer status in the OEEC. Today most
nations outside the Soviet Bloc, again main-
tain full diplomatic relations with Spain.
However, Spain remains excluded from NATO.
57. Relations with the US. Spain's most im-
portant foreign ties are with the US. The
1953 bilateral agreement stipulated that the
US would construct air and naval facilities
for joint US-Spanish use, and would provide
military end-item assistance, and economic
and technical assistance. In 1955 an agree-
ment was concluded concerning cooperation
in the peaceful uses of atomic energy. In ad-
dition, the Spanish government authorized
the US to participate in a joint survey of
Spanish uranium resources.
58. Implementation of the bilateral agree-
ments has resulted in some friction. Some
spokesmen for the Falange, the Church, and
the army still feel that the military agree-
ments, by providing for the presence of US
military personnel on Spanish soil, may in-
fringe upon Spanish sovereignty and are a
disturbing influence on Spanish society. Most
high officials of the regime are more inter-
ested in the economic than the military as-
pects of the agreements and remain unsatis-
fied with the relatively small amount of eco-
nomic aid allotted.
59. Although Spain will continue to press for
a greater proportion of. economic as compared
with military aid, we believe that the US bi-
lateral arrangements will continue to be im-
plemented, and that the Franco regime will
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continue to cooperate with the US. We also
believe, however, that the degree of coopera-
tion will depend on the extent of continued
US military and economic aid.
60. We are far less sure of the course of US-
Spanish relations after the departure of
Franco. The successor regime would be
strongly influenced to continue the present
arrangements because of the importance of
US aid to the country's economic stability and
growth. The successor regime's attitude
would also be influenced by the degree of sta-
bility it achieved, the world situation existing
at the time, and the nature and extent of
available US aid. However, it is unlikely that
the bilateral agreements would be repudiated
by any probable successor to the Franco
regime.
61. Relations with NATO and the NATO
States. We believe that Franco desires to gain
membership for Spain in NATO. His Foreign
Minister recently stated that Spain is willing
to accept an invitation to join NATO. How-
ever, in view of the lingering hostility of sev-
eral of the NATO governments, any of which
could legally veto Spain's application for
membership, Franco is unlikely to have any
early success.
11
62. Among the NATO members, Portugal is
Spain's closest ally, and is likely to remain so
as long as both Franco and Salazar remain in
power. Although French and British hostility
to Franco have declined, there are still serious
problems which divide them from the Spanish
regime and which would tend to prevent close
cooperation in military and political ques-
tions of Free World or West European concern.
Franco has succeeded in strengthening ties
with West Germany, but with the remaining
NATO members his relations, though correct,
are not particularly close, nor are they likely
to become so over the next several years.
63. Relations with the Soviet Bloc. There is
no diplomatic or open commercial contact be-
tween Spain and the Soviet Bloc. Franco is
bitterly anti-Communist and anti-Soviet.
While it is possible that, under pressure of
lucrative trading arrangements or a promised
release of the Spanish Republican gold, the
Franco regime might at some time be induced
to normalize commercial relations, it is un-
likely that any real improvement in Spanish-
Soviet relations will be brought about under
the present Spanish regime.
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continue to cooperate with the US. We also
believe, however, that the degree of coopera-
tion will depend on the extent of continued
US military and economic aid.
60. We are far less sure of the course of US-
Spanish relations after the departure of
Franco. The successor regime would be
strongly influenced to continue the present
arrangements because of the importance of
US aid to the country's economic stability and
growth. The successor regime's attitude
would also be influenced by the degree of sta-
bility it achieved, the world situation existing
at the time, and the nature and extent of
available US aid. However, it is unlikely that
the bilateral agreements would be repudiated
by any probable successor to the Franco
regime.
61. Relations with NATO and the NATO
States. We believe that Franco desires to gain
membership for Spain in NATO. His Foreign
Minister recently stated that Spain is willing
to accept an invitation to join NATO. How-
ever, in view of the lingering hostility of sev-
eral of the NATO governments, any of which
could legally veto Spain's application for
membership, Franco is unlikely to have any
early success.
11
62. Among the NATO members, Portugal is
Spain's closest ally, and is likely to remain so
as long as both Franco and Salazar remain in
power. Although French and British hostility
to Franco have declined, there are still serious
problems which divide them from the Spanish
regime and which would tend to prevent close
cooperation in military and political ques-
tions of Free World or West European concern.
Franco has succeeded in strengthening ties
with West Germany, but with the remaining
NATO members his relations, though correct,
are not particularly close, nor are they likely
to become so over the next several years.
63. Relations with the Soviet Bloc. There is
no diplomatic or open commercial contact be-
tween Spain and the Soviet Bloc. Franco is
bitterly anti-Communist and anti-Soviet.
While it is possible that, under pressure of
lucrative trading arrangements or a promised
release of the Spanish Republican gold, the
Franco regime might at some time be induced
to normalize commercial relations, it is un-
likely that any real improvement in Spanish-
Soviet relations will be brought about under
the present Spanish regime.
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4111251
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