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

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000400020004-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 4
• Publication Date: October 25, 1949
• Content Type: PAPER

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WESTERN EiUM'E DIVISION
OFFICE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGENCE AGENCY
WORKING PAPER
DIVISION VIFXKLY
25X1A9
NOTICE: This document is a working par,
NOT :~n of'icial CIA issuance., It has been
co-ordinated within ORE, but not with txh*
IAC Agencies, It represents current think.
ing by spec.} al.ists in CIA, and is desisned.
for use by others ongagod in similar or
overlapping studies. The opinions oxprosse .
herein may be revised before final and offi:
cial publication. It is intended soioly for
the ;Lnf`ormation of the addressee and not for
further d. i s s e r a: i n? z t i o n
:. TEs 25 October 1949
NO CHANGE IN CLASD.~ LI
I I DECLASSIFIED
GLASS. CHANGED TO. TS
NEXT RLVIEW DATE:
AUTH; Hi
DATE
REVIEWER: 372044
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WESTERN EUROPE DIVISION
WEEKLY SUMMARY
VOT,0 V - No, 15 For week ending
25 October 1949
25X6A
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A Several Soviet-controlled Austrian front organizations
appear to a un ergoi ng e- a state s ren ieningdes, gn
to ensure them a solid position in Austriats post-treaty
economic pictured The case of Intrac, an east-west trading
firm enjoying Soviet approval, is particularly instructive,
Even under conditions of occupation and the existence of USIA
(the organization of Soviet-controlled firms), Initrac has
grown in importance* Legal organizations like Intrac are the
logical successors to the present Soviet economic structure,
which has never been recognized under Austrian law, Operating
not only as a commercial representative of the Satellite
countries, Intrac is enlarging its operations in disposing of
USIA products and trading in other Austrian productions It
is also acquiring a monopoly of Austrian trade with the
Satellites, who prefor to deal through Intrac, Furthermore,,
Austrian producers are under pressure to use Intrac for their
eastern transactionse
Not only will their preferential position In east-west
trade strengthen these Communist-staffed and Soviet-controlled
organizations, but they are also evidently slated to be heirs
to certain assets of Soviet firms that will be relinquished
under the treaty. Orders recently placed in USIA plants for
a future delivery appear likely to give Intrac a post-treaty
legal title to a portion of Austrian productions Some credits
now on the books of USIA may be transferred to the front
companies, A Soviet cover organization called Istegatabl has
reportedly been set up to acquire and exploit patent rights
now held by the Soviet-controlled firms,
In addition, Austrian transportation agencies will find
it difficult, particularly in the eastern trade,, to compete
with the Sovietmoontrolled transport firm, Jusohwneschtrans,
which has hold a near-monopoly during the period when Austrian
companies have conducted very limited operations, There are
indications that the relation between Juschwneechtrans and the
Soviet Danube Steamship Company will be closer after Soviet
shipping claims are sanctioned by a treaty,
B The sensitivity of the French Dublic to US economic
dictatio 3.s a i~ mean as or n the frencxa overnment e a
slow progress toward agreement with the O EC countries on
parallel action to control the export of potential war items
to the Soviet orbit. Following the adjournment of the
14 October plenary session of the EC, held in Paris, the
French representative recommended the transfer of the export
control question from the O1EC to the NAP organization, where
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it would be considered on a purely military basis. US
observers at the meeting believed thtit French dissatisfaction
with the present approach through t 1 EC was clearly demonstrated
during the course of the discussions, which resulted in little
more than a formalization of the Anglo*Fronrh restricted list,
now approxlrnatel7 4$ items short of what the US considers
adequateo France agreed in principle withs (1) the US on the
areas to be included within the Soviet orbit; (2) the UK on
most of the elee ;ronie items still under discussion; and
(3) with all ~: nations on the urgency for reaching agree.a
me>nt. France would, however, prefer a French-sponsored under-
standing among western European countries, in regard to eastern
European trade, unclouded by considerations of US economic
assistanoeo It was, in fact, due only to U1 and Dutch
insistence that Prance belatedly invited the US to participate
In the final OEM meeting.
B The reduction in direct EOA dollar aid to France for
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pro6?ram, which will considerably hamper attainment of both the
Immediate and long-term production and investment goals, At
the suggestion of FXA, the out recommended by OEM was Ineroased
so that the aid figure now stands at $673 million, compared to
the requested $860 million, The present gum is over 31% lutes
than the amount for 1948'a49s The effects, however, of the
reduction will be softened by the appreciable decline of US
prices since France estimated its dollar needs early in 1949*
To conform to the aid figure of $673 million., France has
now drafted a further downward rovisiofi of an impost program
based on 4740 millions of LOA aid, which was regarded in
September as the absolute minimum necessary to give the
country a chance to meet its 1949-50 production goals and its
modernization objectives under the Long-Term Programe ,ven
the latest revised import program cannot be adhered to if it
becomes necessary to provide for unplanned lnaporta of grain
The French, finally acknowledging the necessity of some grain
imports, have scheduled $1196 million of the EGA aid for corn
Quite possibly,, however, considerably greater Imports of
grain from dollar areas will be lmperative0 in this case,
there will have to be further cute in imports of raw materials
and equipmento No French Government is likely to take the
politically-dangerous alternative--renewed bread rationing and
requisitions of me ate
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FRLNCH AND SPANISH NORTH AND Z'*J T AFRICA
B Precedent for nationalist defiance of the French has
incidents throughout North Africa. Asked to address some
extemporaneous remarks to the Congress of Islamic Culture
meeting in Tunisia, a wall-known Algerian Intellectual,
Sheik il- kbi, seized the opportunity to castigate French
imperialism in a two-hour tirades Neither the abrupt and
pointed departure of the French Resident General and the
Commander of Armed Forces in Tunisia nor the hurried arrival
of a messenger from the Bey with a plea -do desist deterred
the speakers Tunisian nationalist leader Habib Bourghiba
staged a dramatic entrance at the close of the speech, drew
the Sheik into a political clambake, and sponsored him in
similar talks at Kairouan, Gabes, and Sfax., When called to
account by the Algerian Governor General, the Sheik refused
to be cowed, It probably will be necessary for the French
to hamper his activities, Meanwhile, Bourghiba has achieved
a first step in regaining his political following in Tunisia,
which awaits his next moves
B A new strike b Italian seamen and ort workers over
econom a 'sues may be expec e e ore a en o e present
year. Sue a development is suggested first by the fact that
the l9 day strike of seamen during September, which affected
only Italian passenger ships, failed to satisfy the seamen's
demands for an increase in wages and pensions. Secondly,
both Giulietti, leader of the seamen's union, and De Stefano,
chief of the port worke'rs' union, are now completely under
the control of Di Vittorio, head of the Communist-dominated
General labor Confederation (CGIL) s Further, Glulietti
declared at the recent COIL convention that he was preparing
to urge the longshoremen and stevedores to renew their agitation,
Should such a strike include cargo carriers as well as
passenger vessels, Its purely economic character would
probably enlist more active support from the workers than
was accorded the September strike, the success of which was
compromised by Giulietti's desire to obtain additional
benefits for a personal project*
On the other hand, the complete subservience of
Gr.ulietti and Do Stefano to Di Vittorio and, by implication,
to the interests of the Italian Communist Party might alienate
the support of non'Coxm nist maritime and port workers, lack
of support from these groups would probably prevent a success-
ful strike, particularly in the ports of Naples, Bari., Venice
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and Palermo, where the non-Communist unions have made their
greatest gains. Even without the support of the non-Communist
unions, a vigorous maritime strike would have a damaging
effect on the Italian economy by cutting off a source of
dollar Income and delaying the arrival of basic food supplies
and raw materials for Italian Industry*
VATICAN
k3 Now that subordination of Church to State is virtually
a s s u r e d Vatican will
be more than ever concerned with the problem of holding its
following in these areas. So far, the Roman Catholic Cii;rch's
struggle for survival in eastern Blurope has gone through three
phases: (1) an early period of belief on the part of certain
Vatican leaders that a modus vivendi could be achieved with
eastern Europe; (2) abandonmen ors conciliatory for an
increasingly firm attitude, masked by the Issuance of an
excommunication decree against Czech Catholic participants in
the spurious Government-sponsored groups labelled after the
Vatican lay organization, Catholic Action; (3) increasing
fear of a loss of the faithful, which brought a Papal decree
against Catholic Communists. This latter decree, presumably
issued partly with the idea of holding western Europe, where
Vatican influence Is still dominant, was calculated to make
clear to both clergy and laity the fundamental issue at stake
in the Church-State struggle in eastern 1urope.
Recently the Vatican's minimum conditions for a
rapprochement with Communism have been put on record, probably
because the Vatican: (1) feels it can still gain concessions
from the eastern European governments; (2) wants to leave the
door open for farther negotiations; (3) is anxious to make
clear to the western world the justice of the Church's position.
From this point on, whatever the prevailing relations
between the Satellite Governments and the Roman Catholic
hierarchies, the Vatican can be expected to concentrate on
intensified indoctrination of the population by priests in
eastern Europe, The clergy will probably attempt to win
popular support for the Church by keeping alive local
patriotic opposition to foreign political control. The
Church will utilize its traditional skill in organizing
undergrounds to provide the core of future governments
cooperative with the Vatican; any attempts by the local
Governments to persecute Church leaders or other Catholics
connected with the underground will be exploited by the
Vatican propaganda media. Beyond these attempts, the Roman
Catholic Church in eastern Europe will bide its tii.io until
the unpopularity of the present governments or the advent of
war disrupts the status _quo in the Soviet Satellites:
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B In an port .ents c:h to Porto guese rovincia1 governor Viers Sa ?zar bias begun prepar 'fig t hi pu`~9038a roes of the colonies in Asia, and has intimated that
his reputedly dictatorial, powers are limited by Cabinet
opposition to his proposals for the formation of a more
representative National Assembly In the November election,
The National Assembly this year, for the first time,, will
have constituent powers. Salazar explained that the list of
no ilnees for the National Assembly had been compiled so as to
provide legislative continuity, by retaining some of the former
deputies while bringing in new talent. The Prime Minister
intimated that his dictatorial powers were not complete When
he said that despite his wishes and attempts to prevent it,
more than 50% of the candidates are civil servants. (The
Salazar regime has beon repeatedly criticized for being overt-
burdened with civil servants,) The Prime Minister also
suggested that an inner cabinet be established, composed of
ministers having the function of coordinating the activities
of departaents a thus suggesting that he may have been having
some trouble with the Ministers of State,
Referring to the Portuguese possessions in the Far East,,
Salasar said that the Asiatic continent is undergoing one of
Its century-long transformations with the" coning into power
of the two great states in the Indian subcontinent, the
Coamu.a ist victory in China and the formation of the Indonesia
Republic* He did not discount the distinct possibility of
the loss of all or some of the Portuguese possessions in south-
east Asia (Goa, Mbacao,, and Timor) when he noted that strength
alone could not overcome the difficulties there,
A .lthough the speech was made only two days before General
Franco's visit, Salazar made no reference to that event or to
Portuguese relations with Spain.
If Franco ahould meet with lion Juan in Porto al to discuss
a pel tica ~? gg~ msait, Vkz Pretender veil c the tun-,. Tie
is unlikely to consider anr now promises from Franco to restore
the monarchy by 'evolution" of the present regime. Don Juana s
advisers believe that Franco may soon have to bow out if he is
not strengthened by foreign aid; the Pretender is therefore
maintaining a position of willingness to answer Spain?s call
for h 4m to assume, control in the event of Franco e s loss of
Army support
One of the conditions Don Juan would require in a meeting
with Franco is the presence at any conference of some of the
Prate -ider ~ s advisers,, among them Jose Maria Gil Robles* Last
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year Franco insisted on a secret talk with Don Juan alone?
The Pretender Is in a good position at this time to deal
with Franco, The economic situation in Spain has deteriorated
at about the rate Don Juan predicted when he met the Caudlilo
a year ago* Since then, in spite of the propaganda truce
Maintained by the Monarchists, Don Juan's following in Spain
has remained at least constant, while the morale of the Arrnr,
hitherto completely loyal to Franco, has been impaired by the
depression and Franc,ots failure to obtain foreign loans and
military aide In addition, the Pretender has been promised
support and given a free hand by the anti-Communist Socialists,
who represent the only Spanish leftist and labor groups which
have retained prestige and confidence am;-long the western
hu ropean countries and the important US labor leaders. T -is
ig quite a handful of good cards, and Don Juan has demons rated
that he can play them patiently*
Should k'ranoo meet with Don Juan under these conditions,
the Monarchists would take it as a sign of weakness, and an
admission by Franco that he fears he will not be able to obtain
US aid in tine to avert a dangerous political reaction resulting
from the national economic crisis The psychological effects
of this crisis may be allayed by relief from the caroughtD
seasonal upswing in certain lines of business, and other factors.
For basic rehabilitation, however, foreign aid is 1mporativem
Meanwhile, the deterioration has gone 8o far, and the
Government and the national economic structure have become so
tangled In a web of half-measures, temporary expedients and
extraordinary expenditures, that restoring the country and
reorganizing its overexpanded governmental and military
establishments, without creating chaos, would be an almost
superhuman ta8ka No new government could expect to accomplish
it without prompt assurances of substantial foreign aid.
Such considerations already have deterred some Army officers
from planning a military coup in Don Juan - s favor. Both to
preserve the dignity of his position as the legitimate
Pretender and for these obvious practical reasons, Dori Juan
will not accept the responsibility of pulling Franco's
"chestnuts out of the fire" but will require some form of
tr.-andatee For the present he will merely wait and see how
events wove in Spalne
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