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-RDP79-01090A000400020003-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 3
• Publication Date: October 18, 1949
• Content Type: PAPER

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WESTERN EUROPE BRANCH
OFFICE OF iiEPORT8 AND ESTIMATES
CENTRAL 191PtLIGENCE AGENCY
WORKING PAPER
BRANCH W` E 1
NOTICE: This dactmient is a working paper,
rr official CIA issuance., It has been
co-ordinated within ORS:, but not with the
;CAC Agencies & It represents current think--
ing by specialists in CIA, and. is designed
for use by others ex agod in similar or .
overlapping s t ud1es a The opinions expressed
herein may be revised before final and offi-
cial publ dationr It Is intended solely for
the infor.tibn cif the addressee and not for
further die se a nation,
}ATE: 18 October 1949
NO CHANGE IN CLASS. Li
LECLASSIFIED
LASS. CHANGED TO: IS S C
IrEXT REVJEW DAT E:
AUTH: Hid i
DATE. REVIE WER: 372044
DOCUMENT NO.
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WESTERN BUROPE BRANCH
WEEKLY SUMMARY
VOL. V - No. 14 For week er
18 October 194
25X6A
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S E C R E T
25X6A
B The corn ostion of- the east German, government,
aaaraaunce on eto er, n tcaa' a ?? as dro fl be
little change in the Soviet Zone status quo* All
ministerial posts are filled by rnem Q s 'enter of the
soci.al.i t Unit
p Party (SE])) or of the puppet nor-
Coxrmuni.st parties that have long-standing records of
subservience to the Soviet occupation authorities,
The various coiVokents of the former German Economic
Commission O V140 ' the Germa Administration of the
Interior (GAI), aad the lesser acbninistrati,ona have
reappeared intact an ailnistries of the now Govern n,t,
Wilhelm fleck, co-cba,trman of the SE, was selected
as prosidento and Otto Grotewoh1, the other co-chairman..-
was chosen minister-president or remterw Deputy' min .
istQxk-presicl nts are Nusohke (CDU), Kastner (LDP) and
Ulbricht (SED) ? It is probable that Ulbricht will re_
tam actual power wh.i.l.e the others will be figureheads
to presortre the fiction of all-party representation in
the key positions,
In the key ministries, the completeness of SED
domination is even more apparent o The Ministries of
Economic Planning, Industry, and the ilterior are all
staffed by veteran Com ?uniats,, who have long been per-
forming virtually the same functions as administrative
officials. Tn the Ministry for Foreign Affairs, opera-
tions will be directed by. deputy-.minister Anton Ackerm.F,
another veteran Commanist, although a non-Communist holds
the portfolio* SE]) control, follows a similar pattern
In the remaining. ministries,, although el.ightly more
lip-service is paid to the concept of all-party representa.
tion because of the lesser Imports-nee of these departments,
The actual administration of the Soviet Zone will
change very little as the result of the formation of the
now Goverxmlent. Available information indlcatos that
Soviet policy instructions will continue to be transmitted
through the SE D Politburo and party channels,, and it is
doubtful. if the administrative shift has interfered
appreciably with normal operating procedure. The
population can expect little ixprovernent in its
even Tday life, and will continue to attribute its
misfortunes to the USSR and German collaborators
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A Establishuent of close olitical ties between
waste rrz Berlin an the e era e u cc woul bolster
l
e failing mora
e o wes er ers the face of
the economic crisis and unemployment, Although a
tighter political bond would not guarantee an Improve-
ment In economic conditions, Berliners would be
heartened-by a feeling of "belonging" to'a larger, more
effective, political entity,. The French, however, put
forth the argument that inclusion of Berlin into the
Republic would disturb the legal status. ~Luos
a serious breach of the four power agreements
on Berlin, heighten east-west tension, and possibly
lead to an outbreak of war.
Although Soviet authorities have not formally
incorporated east Berlin into the east German state,
they have already in effect abrogated quadripartite
agreements on Berlin by locating; the east German
capital in Berlin's east sector and by allowing
Berlin representatives to participate in the selection
of the- Vofl skammer or east German legislature. East
Berlin, re`s ore may be regarded as a de facto appendage
of the new Soviet Zone "Democratic Republrc lthough
the USSR has thus attempted to forestall the inclusion
of west Berlin as the twelfth Land of west Germany,
the possibility of Soviet mill awry' action if Berlin
Is annexed to the western Republic appears to be
negligible. Harassing tactics by the government of
the "Democratic Republic",'aimed at weakening the
western position in Berlin, cannot, however, be
precluded
AUSTRIA
B Formation of the new Government of Austria will
probably e s eye un the en o o ers People's
Party-Socialist negotiations have commenced satisfacto-
rily, but a new Cabinet appears unlikely before the
Socialist convention of 28 Octobero Both major parties
have reiterated their opposition to including the
rightist Union of Independents in a coalition, the
formation of which is not expected to be difficult,
With almost 97% of the electorate casting ballots, and
with around 83% of the total votes going to the two
major parties, these parties will conu:iand 144 seats
out of the total of 165 in parliament0 The Union,
with 16 seats, and the Communist bloc with 5, will
control the remainder0
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S E C R ' '
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Despite the opportunity which exists for the
People's Party (with a plurality of 77 seats) to
align itself with another rightist group and thereby
hold an absolute majority without the Socialists,
such an alignment Is not being considered, With
Austria still lacking a treaty and vitally dependent
on effective use of EGA imports, People's Party-
Socialist cooperation is still recognized as essential
by both parties. Furthermore, the People's Party
recognizes Socialist domination of labor; Socialist
leaders, in turn, are willing to continue the coalition
as long as the People's Party does not turn too far
to the right,
In the formation of new provincial governments,
which were elected Concurrently with the national
Goverment, local People's Party leaders in two
western provinces have showed some inclination to
form governments with Union representatives to the
exo]usion of the Socialists* To date,, national
People's Party leaders have rejected this policy,
In only one provincial diet, that of Vorarlberg,
will Union representation outnumber that of the
Socialists, but the Socialists will be ahead of the
Union by only four seats In three other diets o
Although it appears probable that the People's Party
will coalesce only with the Socialists, western
provincial politics are a potential strain to
national People's Party-Socialist harmony,
SWITI UA2 D
$ Switzerlandas olitical picture shows a continuing
trend o e r , an inorea9 ng aversion to Communism,
and a growing belief that an easing of the cold war is a
distinct possibility* Such attitudes will not alter
Switzerland's technical detachment from the east west
struggles They will more probably result in Increased
Swiss determination to maintain the country's policy of
armed neutrality*
The trend toward the right has been evidenced in
Swiss elections during the past year and a half. The
heavy Corm unist.losses were not surprising, but the
Socialists have suffered unexpected setbacks, For
instance, they recently lost control of the city
government of Zurich after a control of 20 yam's,
Swiss apathy toward the Labor Party (Communist) has
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resulted in public admission by Swiss Communist leaders
of their failure to convin,~:e the Swiss of the peaceful
intentions of the USSRL Moreover, in recent weeks the
Congress of the Swiss textile union has voted to bar
Communists from certain union offices, The Swiss have
increasingly followed the policy of excluding Communists
from Important political and administrative positions
since the Labor Party endorsed thes.ores statement on
refusal to fight the Soviet Union,
The thinking of responsible Swiss on the cold war
has probably been accurately expressed by the Swiss
Undersecretary of State, Believing that the USSR does
not desire to precipitate a war, he feels that progress
may soon be made in adjusting east-most difficulties,
thereby easing the cold war. He has inferred that
western European nations could be made to understand
that US efforts to seek solutions on a bilateral basis
with the USSR were In the general Interest. Apparently
advocating that the US take advantage of any softening
in ,the Soviet attitude,, the Undersecretary also pointed
out the dangers of a serious deterioration in US-Soviet
relations. Despite Its policy of armed neutrality,
Switzerland actually looks.upon the checking of Soviet
influence along with a slackening of the cold war as its
first line of defense*
FRANCE
A Premier Jules Moeh''s failure on 17 October to form
a new a ne , a ou no likely to grey u e the
eve seta lishment of another Third Force coalition
Goverment essentially similar to Queuille a e$ will abet
the political objectives of the Right by reviving
serious talk of Assembly diasol-atiou and now electionse
Meanwhile, there is no indication that either the
Socialists or the moderates (Right of Center), whose
sharp disagreement over wage concessions led directly
to the resignation of former Premier Queuille and
clouded Moob.4s chances of success, are now more dis-
posed toward accommodation of their differences,
The Right, Indeed,, In its discussions with Moch
introduced the new issues of regulating the right to
strike, reductions In taxes,, and reform of the
electoral law--all opposed by the. Socialists. Mooh
himself was unable to bring forward any formula
likely to promote a satisfactory compromise between
the disputants. The outlook is for an intensification
of the discord between them, as a result of the
continuing price rise and the prospective difficulties
In balancing both the 1949 and 1950 budgets.
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French labor has failed recently to make ?ITTreci b]
reduces -thy gray y to a ~w"o.vLa L
will facilitate the formulation resent of ao realistic economic
program by the next Government. The Christian labor
Confederation (CFTC), has attempted to reach a common
understanding on objectives, methods, and timing of
strike action through a committee of 16, composed of
representatives from all the major national labor
organizationse This attempt was promptly rebuffed by
the Force Ouvriere (FO), the technicians union (Coo),
and a ommun s - ed General Labor Confederation (COT),
The FO continues to reject proposals of collaboration
with the CGT because of the practical difficulty of
enforcing CGT observance of whatever terms--.including
objectives and safeguards-rare decided upon by joint
agreement prior to strike actions In addition, the
Socialist.orienteo FO is traditionally critical of the
policies and clerical connections of the CFTC, The
COC has refused offers of joint action because of its
conviction that other labor organizations remain
indifferent to, and are frequently hostile to, the
interests of its higher-wage supervisory workers*
The principal opposition to the CFTC proposals,
however, stems from the CGT'e present willingness to
negotiate with non-Communist labor leaders, whom the
CGT considea-?s the "docile tools" of the Socialists and
Popular Republicans, To the CFTC's proposed establish-
ment of a central committee representing union officials,
the CGT has recommended the convocation of a national
congress of local "unity of action" groups, the congress
to nave the authority to decide details of strike action
without reference to union leadership, The effectiveness
however, of this CGT appeal will be weakened by renewed p
suspicions among non-Communist labor of the CGT's
political motives, as a result of: (1) simultaneous CF
proposals for the establishment of a "Constitutional
Government of Democratic Union" with Communist partici-
pation; and (2) sporadic.COT strikes against Moch, who
as Minister of the Interior used troops against the CGT
in the 1948 coal strike0 The CGT+s leaders, moreover.,
are not convinced that the time is ripe for general
strike action, and there are indications that they
regard as overly-precipitous their recent one-day local
strikes in the coal industry, The possibility of
broader unity of action at this time is further reduced
by the fear of workers of losing pay in the face of
rising food costs, and their continued distrust of
national labor leadership.
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This continuing disunity within organized labor
will prevent it from compelling the next Government
to grant major wage concessions Which might well make
irreconcilable the present differences among the
Third Force coalition partieso
FRENCH AND SPANISH NORTH AND WEST AFRICA
B Tunisiala current olitical calm will be disturbed
by the resume onor-activities o the sar~-""`.~`s.`'
comparatively quiescent for some months, now that the
notorious Neo'aDestour (Constitution) party leader,
Habib Bourghiba, has returned from his 4-year self-
imposed exile a As the principal, Tunisian nationalist
representative to the moribund North African Committee
of Liberation in Cairo, Bourghiba failed completely in
his efforts to mold the Committee into an effective
organizations In his absence hts party was guided by
the ambitious, but inept, Salah ben Youssef, whose
intransigent attitude and demands for outright and
absolute Tunisian independence have proved equally
unsuccessful*
Technically unable to deny Bourghiba's return,
French authorities are faced with unpleasant prospects,
Either Bourghiba, capitalizing on his former prestige
and his rival.la present ineffectiveness, will recapture
his old popularity and provide more vigorous leadership
of the Neo.Destour Party,, or ben Youssef'a derogatory
campaign, v-ill thwart Bourghiba!s ability to stage a
comeback* la either case, the ferment that ii bound to
ensue within the ranks of ' this leading nationalist group
will be detrimental to the status uo. French Prateotor.
ate officials, however, are-o'p' igiat a prolonged rift
within the party will develop and weaken it indefinitely,
BELGIUM
B The critical Bel. inn coal our lus is expected to
continue as a result or high pr caes and reduced foreign
demand, and may bring a decrease in economic activity
and an Increase in unemployment. A rise in the Govern..
mentwfixed export price of coal from an average of 686
francs to 700 francs per ton accompanied by reduced
subsidies, and Belgium's decision to devalue the franc
less than the currencies of its best coal consumers
(the Netherlands and France),, will tend to curtail coal
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exports further and to raise costs and export prices
in other segments of the economy dependent upon Belgian
ooa1-r-notably steels The Government's action in
raising the coal price is intended both to relieve
profitable mines of the burden of subsidizing unprofit.
Able ones and to reduce the budgetary load of Government
subsidies. Half of the mines will be reorganized, and
some may eventually be abandoned. As a result, however,
of the reorganization plan and the expected reduction in
coal export demand, unemployment probably will increase,
adding to the political difficulties of the already weak
and unstable coalition Cabinet.
ITALY
A The deterioration of Italo-UK relations will, if
continued, eopar ze a a po oa an economic
cooperation with the West I n general. Purported British
opposition to restoring to Italy any part of its former
colonies has greatly injured Italian national feelings,
The inspection by Marshall Montgomery, Chief of Staff of
the Western defense organization, of fortifications on
the Franco-Italian border has created an unfavorable
impression on the Italian public, and has alarmed
Italian military leaders who believe that the British
favor the elimination of Italy from the area of western
Europe to be defended in case of war with the USSR?
More recently, the exclusiveness of US'UK negotiations
leading to devaluation of the pound sterling, and the
extent of devaluation, have antagonized Italian public
and governmental opinion. In general there is a strong
feeling among Italians that the British are pursuing a
selfish policy, designed to achieve maximum military
protection and economic benefits for themselves with
little regard for the continental countries of western
Europe. Although Italian irritation'over these and
other Issues night have been directed also against the
US, two factors--the extensive anti-British sentiment
which has accumulated in Italy since the end of the war,
and the direct dependence of Italy on the US---have led
the Italians so far to use the UK as the scapegoat for
their resentment over various international developments
unfavorable to theme But the leadership of the US in
matters of military defense and economic affairs
involving western Europe, and its policy of close
cooperation with the UK on issues affecting Italy may,
if the Italians remain dissatisfied, cause a distinct
shift in the present strongly pro-US attitude of the
Italians to one less cooperative with the West and more
conciliatory toward the USSR*
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C State control over the ex loration and development
of t h e m e a ;as an petroleum resources o e o
Valley seems virtually assured; private enterprise,
both native and foreign, will probably be relegated to
the marginal areas outside of the Po Valley,
A bill which would have liberalized the mining laws
to protect private investment in the petroleum field has
bogged down in parliamentary procedure and has little or
no ; chance of emerging.- On the other hand a new draft
bill is being prepared, which, according to Finance
Minister : Vanoni, will eliminate the grave consequences
of private monopoly". He expects the methane gas and
the petroleum deposits of the Po to afford the State
"an economic rent which may well be exceptional",
Furthermore, according to Vanoni, State control of these
resources would assure the just distribution of the
deposits to Italian industry. For these reasons, the
new draft bill will reserve explorations in the Po
Valley to the State and will restrict private companies
to exploration "in the rest of the national territory".
(A US oil company has indicated that it does not consider
any of the territory outside of the Po as promising
enough to warrant exploration expenditures.)
These views of Vanoni, who is also a spokesman for
AGIP (the Italian Government petroleum administration),
are believed to represent the attitude of the Christian
Democratic Party,.-and his draft proposals are very
likely, therefore, to be adopted by Parliament,
VATICAN
B Disa ointin
results in ital. of the decree a_ainst
Catholic omEnun s s WIL11 pro a 17--d omp eerie Vatican to
con ve a pa cy of flexible interpretation of the decree.
Issuance of the decree Is said to have been urged by
Jesuit leaders but opposed by many Dominicans o The
latter presumably considered it impolitic to force a choice
between religious and economic beliefs, especially in
areas of extreme poverty Catholic peasants have come
to regard the Communist program as the most attractive
solution offered for their economic ills, and many
agricultural workers in Italy can be expected to cling to
this platform, Apprehension In Vatican circles lest
Catholics turn to the civil marriage rite rather than
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abandon affiliations with Communists -- an apprehension
probably supported by reports from the local clergy --
may have precipitated the publication of a liberal
interpretation of the decree with reference to
religious marriagese
It is impossible at this time to measure the effect
of the decree on the strength of the Communist Party.
IItalian Communist prostige, however, was well on the
wane before issuance of the decree; and there is no clear
evidence to indicate that the decree has been the cause
of important additional losses to the Party, except in
Sicily, where the conservative and religious tradition is
strong. Communist expressions of alarm over the decree
may have been uttered mainly to solidify Communist
following. Like the Vatican itself, -the Communist Party
has been anxious to avoid a showdown, and Communist
propaganda attacks have been carefully pointed at the
Church organization rather than against the Catholic
religion itself 0 The Communists have been vigorously
seeking to exploit the extensive anticlerical sentiment
in Italy by pointing to the Papal decree as an example
of Vatican efforts to dominate non-religious affairs o
PORTUGAL
i3 General Franco's visit to Port lg scheduled for
22 oc '"r, Aga_e e en : iusiasm by the
Portuguese Governmento The Spanish Caudillo will be
a self-invited guest whose previous effort to make the
visit,, just a year ago, was forestalled by Portugal
through diplomatic exchanges. Now that Portugal Is
definitely aligned with the west through the Atlantic
Pact, it has more self-assurance in receiving Franco,.,
but has nothing other than vague promises to offer hi.m0
Spanish officials had reason to hope that the Portuguese
t,11nistsr of War, -ntos Costa would support Spain's
inclusion in the Atlantic Pact at the current defense
committee meetings In Washington, because the Minister
stated during his recent visit to Spain that while he
was in the US he would defend Spanish interests. At
the last minute,, howwever, Santos Costa did not attend
the meetings,, It was explained that he remained In
Portugal because of concern over the security of
Macao, and to prepare for Francois forthcoming visit
Both reasons appear superficial. It is quite likely
that the Portuguese Government did not wish to be
represented in Washington by anyone wh.o had taken such
a definite stand on the Spanish question0
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Portugal,, attached to Spain by geography and by
mutual cultural and political ties has boon careful
not to enter into negot3ttions ws.tA other countries
which would endanger its cordial relations with Spain.
At the same time, Pvrtutal has declined to enter into
any co tments with Spain which would preclude freed
of action with other countries a The Portuguese can be
expected to continue a polio of friendship toward
Spain as far as is consistent with maintaining the
best possible 'relations with the Urger powers the
Atlantic Pact.
SPAIN
Franco's robable. s ' the via t to
Portage s a that ssbl to o repea
a,3.ure
of his cause In t M10, he in. 'fact possesses international
pro atige, as claimed for him by the controlled Spanish
press, The demonstration mad, ,be intended to impress
pr maHly the Spanish WW., whose morale deteriorated
considerably during the sumer$ as well as other doubters
at homes In foreign ;t~lationa the journey may give
ammunitloa to the political elements in various oountriea
that are pressin0 their govermmtts for action favorable
to Px coo Arrangements for the visit which is In return
for a state call paid go years ago by hsident Caxtoni
to King Alfonso XTSI, apparently were made by Franco
personally through his brother, who Is Spanish Ambassador
to Lisbon, with little or no con6ultation with the Cabinet.
The diplomatic. -isolation of the Pr=66 Government,
despite the benefits of a reiallagre ents with other
countries, has been ex1e of the regime's weakneases at
home, the past Fra idc sought to ccnpensate for this
by exploitation of close relations with Argentinao Now
that Argentina is no longer an? aggressive friend of
Spain 2n'international affairs,. it is.perha s hoped that
Portugal,, whose international prestige has been raised
b7;' its participation In tlie? Atlantic Pact and MP, will
fill this gape In any ease, a demonstration of Iberian
solidarity a t this time may improve the morale of the
Spanish, Axe, offloers,, by renewing hope of benefits ' to
Spain through defense plans under the Atlantic Pact o
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