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-RDP79-01090A000400020010-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 10
• Publication Date: December 6, 1949
• Content Type: PAPER

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WESTERN EUROPT, DIVISION
OFFICE OF REPORTS AND EaTIMATES
CENTRAL INTELLIO~EJTCE AC MCY
WORKING PA J R
DIVISION
DOCUMENT NO.
NO~HANGE IN CLAS . Li
DECLASSIFIED
NEXT REViEVI DATE:
AUTy.
In all
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NOTICE: This document is a trzarking paper,
man official CIA issuanoo, It has boen
co-ordinated within ORE, that 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 publication. It is intended solely for
the information of the addressee and not for
farther dissemination.
DATE: 6 December 1949
 fitiiESTEF ( MOPE DIVISION
WFY SUAR!
' VOL. V . No, 20 o, - For creek ending -
25X6A 6 December 1949
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SWITZERLAND
Switzerland's oonduct of fnreian nfra4.-
neutrality. This polioy, which often means Poll i
WWF
s
the consensus of world opinion, enables Switzerlan
d to
meet changing situations and dananda, as evidenced in
the current Swiss attitude toward the two (Taman
Governments and toward Communist China.
In the case of western Germany, ,the Swiss
Foreign Office has apparently taken a lead for other
Puropean countries In acereditjng'a representative with
tie personal rank of Minister to the Allied High
Cc nin1ssion for Gerenany. Although the Swiss Consul
General in "tenkfurt has been dssignat?d as 'this repre-
sentative, the Swiss expect him to reside more of the
time at Bonn, where he can look after Swiss interests in
-close eantact with the new Government. Although the Swiss
action does not constitute de ure recognitions and the
Swiss would prefer that this issue did not arise, an
indication of eventual recognition lies in Foreign Office
statements that the Federal Republicts Government was
legally elected, and thus Is totally different from that
in eastern Germany,
In the latter area, the Soviet Ambassador
attempted to force the Swiss to apply to the east German
Government for visas for the Swiss mission in Berlin, but
finally granted the visas himself. Switzerland has in-
dicated It is firmly against recognition of the German
Democratic Republic, despite anticipated difficulties In
the work of the Mission.
With regard to Co nmuniat China, Switzerland will
apparently follow the pattern of the Israel recognition.
This will mean that Switzerland will wait until a substan-
tial number of countries have recognized, the new regime
and then join the majority-0
FRANCE
4~ ?i T-k~e- Jocti till af? rious French Government ape~ne3es
oo a focus ? o coca S ssem - e ate on a
bill to prohibit the Importation of.Coca-Cola. This hostilit r
has been directed periodically against other US products such
as permanent wave sets, motion pictures? and autcnobiles0
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The Cooa-Cola bill would empower the Ministry of 116.__j th
to refuse entr
1i
y
oenaes for any beverage, containiy 4
vOgetable extracts, which in
ccaoontrate farm has
tlrsrapautic qualities- The
rowin
fn
te
g
g
t
na3ty of feeling
this question is indicated by the overwhelming vote
of the Public Health Ccanmjasion to forward this bill
.to parliassent for Immediate action under its emorgency
procedure, despite the pressure of critical legislation
involving collective bargaining, the budget,* and
Xv4oahlna ?
This.Cabinets however? will seek to block the
Ccmmiaa .cn's reocmmendaticn, and will argue: (1) that
Frattoe Is acxmnitted under various int
ernati al agree-.
matte to a broad policy of discouraging roatr1atians and
discriminations against foreign products;, and (2) that
the US is pranoting, imports of French roods, in order to
Increase Prance+a critically-needed dollar earnings.
Unless tho Cabinet succeeds in havinn consideration of
the Cocas-Cola bill postponed, Its passage to likely with
both heavy support among the Popular Republicans (P1P)
and Socialists,, and the solid backing of the communists.
r d.
en ~Th
it cal oonsiderationa will weaken c-he i'
t-
enc
...w ., AND rl-?, ,Y" u b 1 ve oppo-
a e;ua by business
farm
atd lab
,
,
or groups to its budget
bill will be critical In December. Hence, it is not
111483-Y to take adequate steps for tigq-tening credit or
preventing an inflationary rise in wages. The ECA Paris
Missions believing that the Government will be in danger
In'the forthcoming budget debates? has abandoned Its
pressure on the Prench Government to adopt a stronger
anti-inflation policy at this time; it has now recommended
to Washington that the 1949 balance of the franc counter-
part fund (about 37 billion francs) be released in December
for investment purposes.,
A renewed upward spiral of prices and rages can
therefore soon be expected. The price rise Itself, which
began Arid-avmmer
i
,
ns continuing; after a rise in the
retail prices index of about be twoon. July and November,
the over-all cost of living for the average Parisian
worker without dependents climbed an additional. 2,44 in
November.
T ,panic of Fr4ace kiss alr
d
ea
y rejected ECA c s
reocmmendaticmthat it adopt stronger credit controls and
that it especially send up.a "warning signal." by setting
 a higher rediscount rate. The bank professes its
readiness to tighten existing restrictions, give
credit only to essential users, and try to deny
credit doh would be used to finance speculative
aooumulatton of inventories,. It refuses, however, to
take my obviously deflationary action, contending:
(1) that deflation is "difficult to stop once it has
gained momentum"; and (2) that it is unwilling to
Jeopardize" the Gove n ent'a commitments to maintain
full emploomont and a "high level" of economic activityo
The Finance Ministry has admitted to FICA that
the Government is thoroughly aware of the danger of a
general rise in wages following the prospective return
to collective bargaining. A bill providing for this
return has, however, already been submitted to the
Assembly, and will probably be approved with modifications
,within a few weeks. The Government will not delay this
process inasmuch as a prompt returi to collective bargain-
ing Is a major demand of all labor organizaticna. The
Socialists' obligation to push this demand could be ex-
peoted to force them., if necessary, again to place the
life of the Government in jeopardy.
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S E C R E T
A --new Joint front by bovier1u1 er "fA1'1n h )%vtw4YldCod
awu iaro rou s against the adds ono axes prow a `or
2tim .1950 budget will force the unstable Bidault
Government to Weaken sanowhat that draft, The Socialists
,fill insist on the proposed expenditures for nationalized
industries and social security; hence an abandonment of
the new taxes would lead either to a serious curtailment
of governmental investment, or to borrowing which could
have sooie inflationary effect. Right.-of-Center groups in
the coalition, however, which are the political defenders
of farm and business interests, will be ready to mitigate
their demands in return for progress toward both electoral
reform and an advancement of the date for national
elections. Nevertheless, the combined grass roots opposi-
tion to the proposed taxes is sufficiently vehement to
restrict considerably the concessions which Right-of-Center
political groups will find it practicable to offer.
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failu the French Communist Part to
create greater 800-161 Unrest In Branco
and i or
e
r
f
,
a
o
.Titoism will probably lead it to intensify its peace campaign
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chaateder~atiayi of Labor (CQT) should be able to develop
crippling strike action..
The QPP is likely to aim its peace propaganda
increasingly at workersr intellectuals., and religious
groups* This campaign will be used to avert the spread
of Titoism, and also to check the spreading hostility,
to the CPP's'political objectives. Reorganization of
the CPP in the provinces is already being Implemented,
by the replacement of local secretaries of "bourgeois
origin" with members of the working class 0 There are
iw~ cations that the Co monist Para-military organization
in the departmentsa There are indications, that the Cr's
relative ine'feotiveness is causing increased anxiety in
the tin, which feels that the Cc muniat--led General
and further promote the reorganization of its cadres
Francs Tireurs at Partisans Francais-.FTPF) may now be
replaced by a new underground organization, which will
emphasize the quality rather than number of personnel.
The Kremlin's concern for the CPF+s tasks may
be deduced from its increasing dependence on the hard-
core Stalinist members of the Party's Political Bureau?
notably.Andre Marty, 1"tienne Pajon, and Leon Idauvais.,
Recurring rumors that Maurice Thorez, Secretary General
of the CPF, is in disgrace are, however, probably un-
reliable, inasmuch as his recent publication, "Pilo du
Peuple", would have been less likely to receive publicity
in France by the CP had it not been approved by Moscow.
Indonesian agreement this month. The withdravial from the
toward instability after ratification of the Dutch-
Zifir"WEVO
(including two min min or righ ie par ies probably will tend
Cabinet of the two ministers representing, the minor parties
prices, but even a moderate decline in the real income of
moats for six months to prevent any appreciable rise in
overYl-
mer%t has already,. plumed to increase certain subsidy pay-
which were included primarily to assure tha necessary two-
thirds approval of the agreement, would not be of great
importance and would, in sane respects, facilitate Cabinet
decisions on other issues. There are, however? recent in-
dications of growing tension between the two major parties
as a result of the expected rise in the Dutch cost of
living, which probably will not be accompanied by Govern-
ment approval of correepn,dTr vaa ?ncreases Th G
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wOrkers will increase Catholio-Labor conflict and
threaten the stability of the coalition, Cabinet
agreement on domiestic,, economic and social issues and
parliamentary approval of Cabinet proposals will be-
0=8 Increasingly difficult, For the time being, how.
ever, tae praatisee seem more probable than a break-up
because oft (1) the difficulty for the Catholic Party
to form a stable coalition with parties other than
Labor; (2) the existence within the Catholic party of
a substantial pro-labor group; and (3) the greater
advantages to the Labor Party in the Government. than
in the oppositiano
ITALY
- ~?~... ?v~. vsu.Luniaazlon or such expor a y the Villar
Perosa Ccm parry (HIV) of Italy will be circumvented by
the cartel arrangements made between SKF
of Sweden and
RIV,D
Although the arrangements may reduce RIB' parti-
cipaticn in the eastern European market, the i rithdra ia1.
is achieved only by turning this market over to W.
Therefore, the availability to the USSR of anti friction
bearings of western Zuropean manufacturers is not reduced.
The extent of this eastern European trade is indicated by
RIV'g open or covert shipment in 1948 of at least 3r00Q,,p0?
ball bearings, and probably about the same number in 1949,
In shifting to a concentration on the western European
market, RI's operations will be expanded, assisted by a
recent ERP credit of $1,S52,000o Sweden will supply RIVss
steel,
to emerge Wuzcn is likely
om current Socialist un ca on congress,
may accelerate action on a progressive socio-economic
program by the Government, but may also be susceptible to
extremist views in foreign policy. Such a party would
stand between the Nonni Socialists (PSI) on the Loft, and
the Italian Party of Socialist workers (PSLI) on the Right 4
It would include most of the PSLS canter and left wings
r z~c~-splitting from the section of the
~af.cYz are party led
by S arc gat . Tice S ara gat group, in the event of the return
1
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S E C R E T
of its representatives to the Cabinet, would be a weaker
force in the Government in w4ioh rightist influence has
already Increased,
A new Socialist party, acesmanding greater
parliamentary and workers' support than Saragat'a groups
could form an independent opposition and partially offset
rightist influence in the Government by pressing for re..
forms, partiou arty in the socio-eoonamic field. On the
other hand, should such a Party be daninated by the
Ranita autonomists (the last group to leave the pro-
Caist PSI), it might be vulnerable to Communist over-
tures for collaboration on important issues, or at least
its program might be popularly associated with that of
the Corm unists. Should it succumb to extreme leftist
coaxing, its position, especially on foreign policy,
would be contrary to US interests in Italy.
THE VATICAN
The cueation inf re atjc
.
..,it A.%-- ,
a
id
aticaagTw . o z s likely to uw~~d~ -ijuviowiL ro me
r
ge recognition of the regime
powers. The Holy See is anxious to establish
some sort of relationship, formal or informal, for the
following reasons: (1) to reestablish connection with the
Catholic population in China and to protect Church interests
there; (2) possibly to extend the propagation of the faith
in that area; (3) to have Vatican representatives available
on the spot to detect and, counter anti-Vatican propaganda
by the Chinese Canraurlists; and (4) generally, to maintain a
hold in the Eastern hemisphei e9, where Soviet influence is
spreading.
This last purpose is presumably a subject of in-
creasing concern to the Vatican. Reports suggest that
Catholic groups in the Far East, to Increase their prestige
with native populaticns, are considerin,; espousing in-
dependence for some colonial, areas.
Recognition of the Mao Government by one of the
three major western powers would probably be followed by
similar Vatican action. Meanwhile, the Vatican will attempt
to establish informal relations with China through the
dipl+c itic channels of some intermediary country, preferably
a, Catholic one.
E_U
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 SPAIN
$
treaty - - ..s .. v v+-Jar vu Qaiaiaer
!mt a P camera* ua the Us bas
give"' evidefee of itttentiort to o!>Qie to Spain t s aid" is
part of the onrrentiy patent effort of the Spanish
Government to blame President Truman and the Secretary
of State for spite eaanamic crisis. Franco tries to
=alftatn the fiction, for the benefit of the US public
even more than for the Speniai'de themselves, that the
Truman a&LAlatrrtion has put an embargo on US trade
With Spain.
Ths SPsnieh Goverment for some months has
engaged in a campaign to secure US financial assistance
can a purely political basis, rather than on an eocmaaic
basis. Minister of industry and Camnerce Suanaes has
told the US Charge d'Affaires that economic data requested
for the National Advisory Council's study of the Spanish
eacnollty Would not be forthcomin ;s as Spain could not
qualify for an economic loam and such Information would
only detract from Spain t s vase for a
liti
po
cal loan. This
case in being carefully built up by hired public relations
experts and legal counsel in the US and in the talks of
Spanish officials with viaitin7 US congressmen, military
figures, and others. Syndicated columns in US newspapers
have been used to make the false charge that the US,
maintains a boycott an private as well as official
oaameraial relations with Spain, and that this boycott has
Produced the growing economic crisis.
Every use has been made in the controlled Spanish
preen of statements favorable to the Franco regime by
4merioan visitors. These statements have undoubtedly
stimulated hope for early US aid, and have likewise renew,--d
the contusion and uncertainty of the moderate forces in
opposition to Franco. Both trends will strengthen the
position of the Spanish regime during the critical winter
months,
R 'R
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