WESTERN EUROPE BRANCH OFFICE OF REPORTS AND ESTIMATES WORKING PAPER BRANCH WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000400010013-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 13
• Publication Date: September 6, 1949
• Content Type: PAPER

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WESTERN EUROPE BRANCH
OFFICE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGEr1CE AGENCY
WORKING PAPER
BCN WEKLY
NOTICE., This document is a working paper,
t an offeial CIA issuance. It has been
co-ordinated within ORE, but not with the
IAC Agencies. It represents current think-
Ing by specialists in CIA, and is designed
for use by others engaged In similar or
overlapping studies. The opinions expressed
herein may be revised before final and offi-
cial publications It is intended solely for
the information of the addressee and not for
further dissemination.
DATE: 6 September 1949
DOCUMENT NO. - %-0'- '
NO CHANGE IN CLASS. i y
CEGLAS3IFYFU
CLASS. CHANGED TO: TS C
NEXT REVIEW DATE:
AUTH:14% ? I~ 372044
'117 /REVIEWER: ---
DAl~I
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WESTERN EUROPE BRANCH
WEEKLY Stn: 11ARY
VOL. V Y- Yo, 8 For week ending
AUSTRIA
6 September 1949
s.."J.=LlCS1 ! oo.ii_ eons will
increase in a s nee. or outsid-
e ass s ance and will
probably result in a decline in living standards. For a
period of six years, Austria will be required to make
annual payments of 25 million to the USSR in freely--
convertible currency. In addition, it will be faced with
obligations under an Austro-French restitution accord, with
miscellaneous Soviet claims, with some of the costs of its
army, and probably with the necessity of reimbursing
nationals of UN countries for properties transferred to the
Soviet Union. Moreover, a treaty will mean an end to the
ti~12 million annual uuS reimbursement for occupation costs and
the 03 million IRO contribution. A further complicating
factor is that the approximately 280 firms seized by the
USSR, and to be returned to Austria under the treaty, will
probably require costly rehabilitation.
It will be particularly difficult for Austria to
make payments in freely convertible curroncies, A rough
estimate of a potential increase in Aus yriat s._incoMe of from
030-60 million after the treaty is concluded indicate: that
W 1 -
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tkf ,-,e
only a very
small portion of this sum will be available
in hard currency. Also, even under presently improving
economic conditions, Austria's dollar reserves are not
increasing sufficiently to meet additional dollar needs.
Although Austria is presently receiviri more per capita
ECA aid than any other country, its fade has increased
to only two-thirds of the prewar leve
It
d
l
.
s
o
lar
deficit (lamely met through ECA), is still running to
x,200 million annually, and the deficit from other curren-
cies is ?4?50 million a year. Furthermore, in the post-
treaty years there will be no immediate restoration of
the invisible receipts on which Austria has depended so:
heavily in the past--receipts from tourists, transit
traffic, insurance, banking, and investments.
Austria's abillt:r to meet its financial obliga-
tions appears to lie in: (1) a large increase in exports,
(2) an increase in trade with Germany, (3) a shift of
purchases to non-dollar areas, and (4) an increase in
trade vaith eastern Europe. Even under maximum Austrian
efforts, it is doubtful that these objectives can be
achieved during the early post-treaty years, during which
Austrian dependence on outside assistance will be particu-
larly acute. Austria will undoubtedly look for continued
ECA assistance at present levels, as well as an inter-
national loan or Export-Import Bank loan,
F'JWT CE
A The French Government's bold treasures intended to
support the year's exce en economic progress by checking
both the reappearing inflationary pressures and the rising
labor and farmer unrest are not likely to prevent the de-
velopniont of a political crisis by Yovember. In fact, such
a crisis may be fostered by these measures which include:
(1) emergency limited food imports to combat sharp price
rises and thereby bring some reduction in labor's wage de-
mands; (2) removal, for the benefit of farmers, of import
quota restrictions on certain industrial items to resist
pressure for a material increase in the price of wheat; and
(3) a directive to the Bank of France designed to tighten
credit to business.
The odds seem to be against a general success for
the Government's strategy, which has encountered farm and
labor opposition that will come to a head before prices can
be affected, probably in late September. Furthermore, the
potential effectiveness of the increased imports in reducing
domestic prices has been. weakened by the Cabinet's decision
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to retain import duties, except on wine. The directive
on credit will discourage stockpiling of scarce goods,
but Bank of France officials may well continue to cir-
cumvent the Government's orders.
Immediate and defiant complaints have already
been made by key economic groups. The Wheat Growers'
Council has issued an ultimatum threatening drastic
countermeasures by 1 October unless the promised price
reductions are realized at once and increases in certain
other supplies are prevented. Producers would be in-
structed to refuse wheat deliveries at the official price;
the practice of exchanging wheat for bread would be ex-
tended, thus circumventing the official distribution
system; and producers would be dissuaded from obtaining
credit for farm improvement. Even if these threats are
not carried out, the farmers are likely to resort to
considerable hoarding and to reduce acreage sown to wheat.
Meanwhile non-Comtmuiist as well as Conriunist labor has
announced strong opposition to the extraordinary imports
of competitive industrial products. The Socialist-
Oriented Force Ouvriere has reiterated its conviction that
the Governments ou cam. force price reductions from the
profits of merchants and industrialists, instead of re-
sorting to extraordinary imports.
Despite Prenier Queuille's present confidence in
the outcome of the Cabinet's program, increased hostility
of economic groups toward the Government and one another is
weakening the Government's prestige, Adverse effects of
the drought, and the strikes which are increasingly indicated,
are expected to add their blows as the Cabinet faces in
October its greatest test in Parliament since 1948.
The reach delegates t
t
o
he Coon; of Europe will
try to
Germany to the Councilinview of persistent zfears ofsa re-
surgence of aggressive German nationalism, and conflicting
French opinions on the future political status of the Saar.
The idealistic view epitomized by Foreign P.Zinister Robert
Schuman---that "it is necessary to reorganize Europe morall
so that there will be a place for each nation, including
"
Germany"---conflicts with recent statements by responsible
government officials, such as Jules Mioch, Minister of the
Interior, who commented in regard to the German elections
that the Germans had not made any efforts to repent "nor
had they even regretted the crimes of Nazism."
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Policy on the political future of the Saar will
not readily be decided by the French Government, or by the
members of the Consultative Assembly, if France raises the
question. France desires guarantees that the Saar will be
detached politically, as well as economically from Germany.
By indicating that it favors the incorporation of the Saar
into the Council of Europe, possibly as an associate
member, France hopes to wean the Saarlanders fr pro-
Gerraan tendencies which would prove embarrassing in the
event of a future plebiscite. The question of the Saar is
further complicated by the fact that Guy T ollet, Secretary
General of the French Socialist Party, is strongly opposed
to the admission of the Saar prior to a fox ial peace treaty
with Germany.
These French differences of opinion, however, con-
cerning Franco--German relations will probably be reconciled
gradually under the influence of statesmen like Robert
Schuman in a national conviction that hest Germany must be
integrated into a reorganized Europe. In regard to the
Council of Europe, a compromise is likely, involving the
simultaneous admission of both West Germany and the Saar,
FRIOTCH MID SPAITISH TORTII AND WEST AFRICA
B French authorities in Algeria may be storing up
trouble for themselves y overestimating the extent to
which they can ignore the interests of the natives, The
French, apparently confident of Algeria's stability, are
holding in abeyance plans for ameliorating the lot of the
Moslems, while projects benefiting the European minority,
or designed simply for general economic development, will
be undertaken. By overlooking the deep-rooted political
and social instability of the country, the French authori-
ties are prolonging T.Zoslem unrest and encouraging further
Communist exploitation of the anti-colonial propaganda
theme. The French, however, see no necessity to adopt a
more liberal program. They discount the threat of Communist-
nationalist collaboration because the political parties are
small and are. frequently involved in Internecine rivalries.
Current struggles for control,, however, within Algeria's two
leading nationalist parties--the Domocratic Union of the
Algerian Manifesto (TJD14A) and the Movement for the Triumph
of Democratic Liberties (TITLD)---probably will strengthen
these groups., Then the coalition of either one or both of
them with the Algerian Communists would result in serious
opposition to the controlling authorities?
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BI LGIUB4
As a result of the chan ed relationship of the
Socialist Party to M h the Catholic and Communist Parties,
Belgium may experience political instability, if the
Socialists long remain out of the Government. A sharpen-
in; of the differences between the Catholic right wing and
the Socialist extreme left will make a return to a
Catholic-Socialist government exceedingly difficult, The
Catholic Party, in its coalition with the Liberals, is
likely to be influenced more and more by its conservative
members, and may eventually become dominated completely
by them.
In contrast, the Socialist Party, divested of
governmental responsibility and confronted with conser-
vative Government policies, is likely to assume more
positively the role of a left wing labor party. Grudging
cooperation of Socialist leaders with the Communists
against a conservative Government may make the Socialist
membership more susceptible to Communist Influence, The
Corvnunists are strongly stressing "worker unity" and even
attempted to join the Socialist Action Committee" formed
to prevent King Leopold's return, Although rejected by
the Socialists, the Communists may be more successful
later in supporting them on other issues, and may then,
in turn, receive the support of at least some Socialist
workers in Communist-promoted strikes. The loss of
Socialists to the Communist ranks is not.foreseen, but
there may be a rapprochement that will weaken the control
of Socialist leaders over their party or trade union mem-
bership and increase the Communists' ability to foment
strikes and unrest.
ITALY
The Christian Democrats' dominance, now increas-
ing, over Italian political affairs holds two dangers :
First, the possibility that a single-party Government by
the Christian Democrats may develop, presumably under the
control of right-wing elements of the party who would
oppose socio-economic reforms and would tend toward an
authoritarian promotion of their on principles; second,
and more likely for the immediate future, is the possi-
bility that Premier De Gasperi, intent on insuring the
continuity of Christian Democratic control, will continue
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to be so careful not to arouse effective political
opposition that he will fail to achieve any adequate
solution of major social and economic problems.
At the recent Congress of the Christian
Democratic Party, representatives of both the right and
left wings stressed the potentialities of the party for
governing alone. The right wing has strong representation
in the Party's National Council, formed after the Congress,
and such vigorous right--wing exponents of single-party
government as Interior Minister Scelba will undoubtedly
increase pressure on De Gasperi to this end. Scelba has
managed to develop the police forces into a strong weapon
for coping with subversive uprisings, but the indiscrim-
inate zeal displayed by his police on several occasions
suggests that the absence of opposition in the Cabinet
might encourage him to such excessive vigor that the
Communists would find ample grounds for attacking the
Government as authoritarian. Furthermoro, recent picayune
limitations on personal conduct point the direction in
which the right wing Christian Democ_:ats would tend to go.
Associated as they are with conservative and wealthy
elements, the right-wingers would oppose legislation
appreciably altering the economic status quo to the advan-
tage of underprivileged groups.
Although Premier De Gasper.i occasionally threatens
the minority parties in the Government coalition with the
possibility of an all-Christian Democratic Government, he
hopes to maintain the coalition as long as it serves to keep
his party in a position to dominate or neutralize articulate
opposition.
Price controls ma be imposed by local Italian
authorities as a result o the continued failure of retail
prices to reflect the reduction (8 since May) in wholesale
prices. The national Government, recognizing the economic,
social and political dangers inherent in the stickiness of
retail prices, has called together producing, wholesaling,
and retailing leaders in an effort to persuade them to
effect voluntary reductions in retail prices. As it is
doubtful that voluntary and adequate reductions in all areas
will be forthcoming, price controls of the type recently
imposed by the Milan Prefect may be found necessary in other
provinces,
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