WEEKLY SUMMARY NUMBER 58

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 05949559
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 21
• Document Creation Date: March 9, 2023
• Document Release Date: May 10, 2021
• Case Number: F-2021-00355
• Publication Date: July 8, 1949

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I WEEKLY SUMMARY
Number 58
wo8 JUL 1949
Document No. 4Z) 0/
NO CHANGE in Class. In
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DA 4 Apr 77
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Date: effri-ca - 70 By: f_.1
CENTRAL INTELLIGENCE AGENCY
Uchival Pecori
&how to & 12.4 atail
J.44 A,
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1. This publication contains current intelligence exclusively
and therefore has not been coordinated with the intelli-
gence organizations of the departments of State, Army,
Navy, and Air Force.
2. This copy may be either retained, or destroyed by burning
in accordance with applicable security regulations, or
returned to the Central Intelligence Agency.
WARNING
This document contains information affecting the na-
tional defense of the United States within the meaning
of the Espionage Act, 50 U.S.C., 31 and 32, as amended.
Its transmission or the revelation of its contents in any
manner to an unauthorized person is prohibited by law.
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1
CONTENTS
Page
HIGHLIGHTS
WESTERN EUROPE
2
EASTERN EUROPE
6
FAR EAST
11
WESTERN HEMISPHERE
12
ARTICL E: US-UK AIR AGREEMENT
13
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HIGHLIGHTS
The rapidly deteriorating financial position of the
UK was brought sharply to the attention of the world during
the past week by Chancellor Cripps' statement to Parliament.
Contrary to expectations, Cripps did not propose sweeping
measures and a full-scale program designed to cure British
economic ills (see page 5). This uncharacteristic indecision
may be indicative of a policy split within the Cabinet or of
an intention to delay decisive action until after comprehen-
sive discussions have been held with US officials and Com-
monwealth finance ministers.
1
The recent action of Marshal Tito in incorporating
the economy of the Yugoslav zone of Trieste into the Yugo-
slav economy will tend to delay an Italian-Yugoslav agree-
ment on the disposition of the Free Territory of Trieste
(see page 9). Tito's move, which may have been designed
to strengthen his bargaining position for a settlement of the
Trieste question, will make it even more difficult for him
to accept any solution which does not assign part of the Free
Territory to Yugoslavia. If, meanwhile, the USSR should
desert Tito on this issue and accept the western proposal
that all Trieste be returned to Italy, the western powers
would be confronted with the problem of choosing between
the claims of Italy and Yugoslavia.
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WESTERN EUROPE
Western Labor The substantial progress made by the
Geneva Conference of Free Trade Unions
toward establishing _a new labor international to counter-
balance the sovietized World Federation of Trade Unions
(WFTU) was to some extent offset by dissension between
the American Federation of Labor (AFL) and the British
Trades Union Congress over organizational problems. One
critical decision confronting the Western labor leaders is
whether to admit non-Communist labor organizations from
such countries as India and Argentina where the US-Western
European concept of free trade unionism is little understood.
They must also decide between the AFL proposal for a large,
well-equipped international to deal aggressively with the
WFTU and the British plan for a smaller, less costly organ-
ization. Finally, they are faced with the problem of select-
ing a Secretary General who would lead the new international
effectively without seeking to dominate it in the interests of
one or more of the big powers. Unless the Western trade
unions can resolve these problems, the new international
may be launched without united cooperation and support
from all Western labor elements.
GERMANY
Rail Strike The recently concluded 38-day strike of the
west Berlin railway workers, in addition to
having a long-term effect on the Berlin economy, has laid
the groundwork for future disagreement between the western
powers and the USSR as well as for increasingly strained
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GERMANY
relations between the Berlin city government and the western
zones of Germany. Immediate cost of the strike to the Soviet-
controlled railway administration is approximately 10.8 mil-
lion west marks. Moreover, the Soviet authorities claim that
saboteurs damaged railway installations in the western sectors
to the extent of 40 million west marks. Although the USSR
may not demand immediate compensation for this damage,
the claim may well furnish a pretext for future Soviet action
preventing a permanent settlement of the Berlin traffic con-
troversy. In Berlin, the strike not only has retarded economic
Improvement but has vastly complicated the already staggering
financial problems facing the city government. According to
preliminary estimates, 6.3 million west marks will be re-
quired to exchange the east mark wages of 14,000 west Berlin
railway workers during the next three months. The city govern
meat has no funds to meet these demands, and even more funds
will be needed if a similar demand from railway workers
living in the Soviet sector but working In the western sectors
is granted. In order to meet these demands, further subsidy
from western Germany will be necessary. Such a subsidy
will increase western German irritation over the continuing
need to provide the assistance necessary to meet the crises
that arise from Berlin's position in the East-West struggle.
Berlin Press Many west Berlin newspapers face early
bankruptcy unless they can procure adequate
working capital. Western newspaper circulation is only 44%
of the pre-blockade level, a reduction caused by the blockade
itself and the tight money situation since the 20 March cur-
rency changeover, as well as by the prohibition against western
papers in the Soviet Zone. Any substantial reduction in the
number of west Berlin newspapers would create a situation more
favorable to Soviet-subsidized publications.
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BELGIUM
1
The Royal Question The failure of Catholic Party leader
Van Zeeland to form a Belgian Govern-
ment pledged to the return of King Leopold indicates that the
Catholic Party will have to moderate its demands if the pre-
sent Cabinet deadlock is to be broken. Combined Liberal and
Socialist opposition to Leopold's return will probably force
some compromise of the Royal question. One solution might
be agreement that Leopold return long enough to abdicate in
favor of his son. If some such solution is reached, another
Catholic-Socialist coalition is the most likely eventuality,
Catholic-Liberal differences being too great to make Liberal
participation in the Government a strong possibility.
PORTUGAL
Economic Troubles The stability of Prime Minister Salazar's
regime may be threatened by growing
public awareness of Portugal's serious economic condition
arising from the three year increase in adverse trade balances.
Public confidence in Salazar has depended in large part on
his achievement in establishing a sound currency; a strong
reaction is likely if the currency should depreciate. Austerity
measures greatly curtailing purchases of foreign luxuries have
failed to compensate for the decline in Portuguese exports, and
minimum import requirements have remained at a high level.
Unless substantial foreign relief is reneived, Portugal's un-
encumbered balances of gold and dollar exchange will have
vanished completely by the end of 1949.
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UNITED KINGDOM
Financial Crisis In a widely-heralded declaration to Par-
liament on the critical financial condition
of the UK, Chancellor of the Exchequer Cripps did not, as ex-
pected, prescribe sweeping draconian measures as the cure
for the country's ills (other than postponing "wherever possible"
further dollar purchases).Cripps failed either to recommend
immediate drastic steps to check the rapid dwindling of
British dollar reserves or to offer any concrete suggestions
for the "positive long-term policies' he believes necessary
for a solution of Britain's economic problems. In fact, Cripps
declared emphatically that the Government did not intend to
devalue the pound and that present import contracts would
be honored until a new import program is drawn up in September
in the light of ECA allocations for the coming year and the wryrk-
ing of the new intra-European payments plan. The ban on future
dollar purchases will have little immediate effect on the rate
at which gold and dollar reserves (now at $1,624,000,000) are
being exhausted. Cripps reiterated his now familiar plea for
greater productive efficiency and increased exports to the
dollar area, and has now officially warned the British of the
impending crisis. Cripps' uncharacteristic lack of decisiveness
may reflect conflicting opinions within the British Cabinet, or
he may have postponed the announcement of severe and im-
mediati import restrictions out of: (1) fear of affecting US
legislative action on European recovery, or (2) desire to
wait until after the impending conferences with US officials
and Commonwealth finance ministers.
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EASTERN EUROPE
CZECHOSLOVAKIA
Attacks on Church me Czechoslovak Communists have
apparently abandoned, temporarily
at least, their frontal attack on the Catholic Church in favor
of indirect tactics designed to weaken Catholic resistance to
Communist control. Reluctant to arrest Archbishop Beran
and thus create another Mindszenty incident, and fearing
renewed outbursts of violence in predominantly Catholic
Slovakia, government officials have been negotiating with
various Czechoslovak church groups in order to insure ad-
herence, or at least prevent violent opposition, to the new
Czechoslovak Church Law. Under this law, scheduled to
become effective on 1 August 1949, the Communists will
have a legal basis for controlling the appointments and pay
of Catholic clergy. Both the National Czechoslovak and
Eastern Orthodox Churches have approved the new law,
and the Protestant Church has indicated that it would not
obstruct its passage. With Catholic-Protestant unity thus
weakened, devitalization of the Catholic Church can then
proceed through legal channels with reduced possibilities
of publicity and violent resistance.
BULGARIA
Agrarian Policy As the first step in adjusting its internal
policies to the Kremlin's plan estab-
lishing Bulgaria's primary role as an agricultural producer
among the Satellites, the Bulgarian Communist Party is now
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GREECE: MILITARY SITUATION MAP
June 1949
(through 4 July 1949)
T 11310
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in Central Greece
Main Road
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50
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50 100
KILOMETERS
11310 Map Branch, CIA, 7-49
CIA Reproduction
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BULGARIA
1
promising concessions to the hostile peasantry. Specific-
ally, the Party recently guaranteed that: (1) abuses already
committed in forming farm cooperatives would be rectified
and future abuses avoided; (2) farmers would be permitted
to sell a larger share of their grain at a higher price; and
(3) farmers would receive more consumer goods in the future.
Although this announcement may have n intended, in part,
to prevent or minimize peasant sabotage during the preset
harvest, the Bulgarian Communist leaders were also prob-
ably motivated by a genuine desire to better relations with
the peasants in the hope of increasing production.
GREECE
Guerrilla Prospects The Greek Communists apparently
hope to prolong guerrilla warfare
indefinitely despite the steady slow decline in rebel strength,
now below 18,000 for the first time since October 1947. The
guerrillas are currently making strenuous efforts not only
to evade further losses in central Greece, here their
strength s now been reduced by two-thirds to a total of
less than 1,400, but also to effect a compensatory bolstering
of their forces in the Vitsi-Grammos sectors on the Albanian
fr, atter, where recent losses have been relatively light. Guer-
rilla leaders have been stressing the necessity of maintaining
a strong defense, otably in the Vitsi area, possibly ith the
idea that by holding a strip of territory and by blunting any
new anti-guerrilla operations they would create a better at-
mosphere for probable new Communist appeasement gestures
In conjunction with the fall session of the UN General Assembly.
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GREECE
Although the somewhat diminished guerrilla forces have
suffered in quality because of the increased proportion in
co 44 .at units of women, boys, girls, and minority elements
of dubious reliability, the high command is evidently counting
on the improved supply of heavy weapons in the Albanian
frontier sector to bolster guerrilla combat effectiveness.
These efforts to tighten up the guerrilla defenses
are likely to be succ ssful for some time to come. The
numerous small bands of guerrillas remaining in central
Greece i ill probably constitute a considerable threat to se-
curtty for some months, particularly if plans are carried out
to transfer sizable numbers of the Greek National Forces to
other operational areas. Moreover, guerrillas in this area
will undoubtedly attempt to regain some of their strength
through small-scale local recruiting and possibly through
some reinfiltration from the north. In the more critical
northern areas of Greece, organized guerrilla forces will
be abhe to maintain emselves againqt the Greek National
Forces at least through the fall of 1849. If necessary, they
III be able to take refuge across the border, provided the
Soviets continue to support the guerrillas from Albania and,
to a lesser extent, Bulgaria. Guerrilla capabilities are un-
likely to be affected materially if Tito halts all aid to the
guerrillas in return for economic concessions from the West
because the already limited potential usefulness of Yugoslav
ses is being reduced even further by the Greek Army's
new offensive in the Kaimaktchalan border area.
1,1
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TRIESTE
Yugoslav Intentions Although Yugoslav requests for western
. � guidance on the Trieste problem indi-
cate that Tito may eventually cooperate with the western
nations, the immediate. effect of his recent incorporation of
the Yugoslav sector of Trieste Into the Yugoslav economy will
be to delay any Yugoslav-Itallati agreement on the disposition
of the Free Territory,. Among Tito 's motives for Ulla ap-
parently precipitous "inclusion" of the Yugoslav sector of
Trieste are: (1) a fear that the USER would withdraw its
support of Yugoslav claims for Trieste territory; and (2) a
desire to strengthen his "bargaining position" for an eventual
settlement with the I lians. If, the USSR should desert Tito
on this issue and openly accept the western proposal of March
1948 for e return of the entireTerritory of Trieste to the -
Italians, Tito's prestige at home would be reduced and at the
a me time the onus for any further delay in solving the Trieste
probiem would be shifted to the western powers. Such a
surprise" move by the USSR would confront the western
'powers, now c mmitted to supporting the Tito regime
Yug slavia., with the alternatives. of: (1) re-affirming their
desire to have all of the Territory of Trieste returned to Italy
and thus damaging Tit&s prestige with his people; or (2) -
modifying their original position and accepting a division of
the Territory if Trieste between Italy and Yugoslavia. -
Although Italy. Would initially resist any suggestion
for assigning part of the Territory of Trieste to `rug slavia,
such a division would probably be the only solution accept-
able to Tito at this time. Yugoslav leaders have long since
abandoned their aspirations for the city of Trieste. which they
realise would be a political and financial liability. Moreover,
Tito has recently indicated that he might be interested in
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0
0
0
0
0
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ET
TRIESTE
negotiating a bilateral settlement of his Trieste claims pr
vided such a settlement would be satisfactory to the western
powers. The Italians, for their part, might accept after con-
siderable discussion a d delay the idea that it would be better
to regain the larger part of the Territory of Trieste rat '-r
than have international administration of the territory con-
tin ed indefinitely.
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FAR EAST
JAPAN
Labor Unrest As Ja, nese bor unrest nd de ..onstrationz
flared in the wake of the first large-scale
layoffs under the new Economic Stabilization Program, the
Japanese Government may be forced to declare a state of
national emergency. Undersc ring the critical need of the
Government to find a solutio to its steadily mounting un-
employment problem is the recent arrival, of 2000 Japanese
prisoners of war from the USSR-the vanguard of 95p000
scheduled to arrive in 1949. The USSR preb big timed its
repatriatim schedule to coincide with grovrtng labor in
rest under the governmentts retrenchment program. Al-
though the majority of the returning prisoners will probably
not have bei fully converted to Communism by intensive
Soviet indoctrination, they will c rtainly be more susceptible
to Communist blandishments if they fail to find either food or
jobs in a labor glutted yapanese commercial and agricultural
market.
SE ET
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WESTERN IfIEMISPIIERE
ARGENTINA
British Trade The new five-year trade agreement between
the UK and Argentina, providing for much-
needed expansion of trade between these two countries without
exacting dollar expenditures, is another important example
of bilateral agreements necessb -ted by 4e acute world
dollar shortage. From the Argentine vie point, the agree-
ment will have a generally stabilizing effect on the country's
detpriora.ting economy, but will in no sense be a panacea for
the ration's basic economic difficulties. Annual exports re-
portedly were set at $500 million each way, but there is no
guarantee that trade will actually reach that figure. The only
firm commitments made to date are that: (1) all payments
will be made in non-convertible sterling; (2) a one-year meat
contract will be executed; and (3) the UK will make petroleum
products available. The principal shortcoming of the agreement
from the Argentine view is the low price agreed upon far Argen-
tine meat e i�orts; thus, the Government, already burdened by
the need to subsidize meat packers, may be forced to assume
the additional burden of a subsidy program for cattle raisers
In order to avoid decreased production. Although Argentine
trade with Britain will u dioubtedly increase, the five-year
non-convertibility sterling clause will prevent a return to
the nrewar triangular pattern of trade through which Argentina
obtained its supplementary dollar require lents from the US.
Thus, dt ith US sales already reduced by the Argentine dollar
shortage, Argentine imports of US petroleum and machinery,
as well as other goods not in competition wit. British exports,
, will be even further reduced.
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SE ET
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US-UK AIR AGREEMENT
Growing pressures from Southeast Asia areas may
force a modification of e liberal competitive principles of
the US 41K Bermuda air agree ..ent of 1946 which have since
been generally adopted by the important international airline
operators. Such a development would encourage the already
marked trend in other countries toward restricting the opera-
tions of foreign carriers and be directly detrimental to US
international air operations.
Australia's recently concluded air transport agree-
ment with Pakistan calls for predetermined division of traffic,
and a similar air agreement is reportedly pend betwee
Australia and India. These two agreements will strengthen
dia's position in insisting upon a restrictive air agreement
with the UK. The UK feels that some deviation from the
liberal ermuda principles may be required in view of the
political necessity for maintaining Commonwealth lines of
communicatio and av iding any action which might strain
the slender ties linking India to the Commonwealth. Mean-
while, the UK has agreed to postpone the air negotiatio s with
India provided the US agrees to immediate discussions on a
revision the US-UK 'Bermuda agree IA e ts. B rring a US-
UK compromise formula which would be acceptable to India,
the UK and India will almost certainly sign a restricted air
agreement. Such a deviation from the iermuda pact by one
of its two signatories could; (1) strongly influence the Philip-
pine Government in its forthcoming negotiations rith Pakista
India, T iland, Egypt, and Australia; and (2) sit engthen the
determination of the Arab states to seek restrictive provisions
In the air agreements currently being negotiated with the US
and the UK.
ait
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Secretary of State
Secretary of Defense
Secretary of the Army
Secre ry of the Navy
Secretary of the Air Force
Chairman, National Security Resources Board
Executive Secretary, National Security Council
Assistant Secretary of the Navy for Air
Chief of Staff, US Army
Chief of Na I Operations
Chief of S ff, U.S. Air Force
Director of Plans and Operations Ge eral Staff, U.S.Army
Deputy Chief of Staff (Operations) U.S. Air Force
Deputy Chief of Naval Operations (Operations)
Director of Plans and Operations, U.S. Air Force
Special Assistant to Secretary of State for Research
and Intelligence
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30,31,32,33,34.
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Director of Intelligence, General Staff, U.S. Army
Chief of Naval Intelligence
Director of Intelligence, U.S. Air Force
Director of Security and Intelligence, Atomtc Energy Comm
Executive Secretary, Military Liaison Committee,
Atomic Energy Commission
Chief, Acquisition ei Distr don Division, CCD, Dept. S t
Director, Federal ureau of Investigation
Secretary, Joint Chiefs of Staff
Chief, Policy Planning Staff, Die* rtment of State
Secretary of S to (Atte .tion: Chief, Policy Reports Staff)
Deputy Director, Joint Intelligence Group, joint Staff
Secretary, Joint Intelligence Group, Joint Staff
US Air Force Representative on Joint Stratogic
Survey Committee
Administrator, Economic Cooperation Adraftnistration
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U S. GOVERNMENT PRINTING OFFICE
2631-IS---1948
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