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-RDP79-01090A000400030006-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 6
• Publication Date: February 14, 1950
• Content Type: PAPER

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WESTERN EUROPE DIVISION
OFFICE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGENCE AGENCY
WORKING PAPER
DIVISION WEEKLY
NOTICE: This document is a working paper,
ITOT an official 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 publication. It is intended solely for
the information of the addressee and not for
further dissemination.
DATE: 14 February 1950
DOCUMENT NO.
NO HANGE IN CLkSS. LI
ECLASSIFIED
CLASS. CHANOED TO: TS n
NEXT REVIEW DATE:
-(101-? 931
f
DATE( REVIEWER 372044
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VOL4 VI . No . 6
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SECRET
WESTERN EUROPE DIV I SION
WEEfarf 3ULI7A RY
For week ending
14 Februar7 1950
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AUSTRIA
The Austrians Who are alread ANIDOINILLDLAE
Soviet inten one n us r a, w v ow Aht-hiff-td-dtia?of the
ov e occupa on e emen with considerablesuspicion. At
present, the Austrian Foreign Office is concerned about Soviet
communication facilities. Within the past week, the Soviet
element has again demanded that the Austrlans complete a new
communications line from St. Poelten to Ennsdorf by 15 February,
instead of at the later date originally requested. St. Poelten?
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an important city in the Soviet zone and one utilized
extensively by the Soviet occupation forces, lies on a main
rail line about mid-way between the US zone frontier and
the city of Vienna; termination of the proposed line at
Ennsdorf, on the US-Soviet zone border, has undoubtedly
aroused Austrian suspicions. To date, the Austrians have re-
fused to build the line, taking the view that the Soviet ele-
ment, which wants the line, can build it itself. Last year
this attitude was adopted when the Soviet element demanded a
telecommunications line running from St. Foelten to the
Hungarian frontier, by-passing Vienna; the line was finally
built by the Soviet forces. The latest Soviet request,
however, and the apparent urgency attached to it, has dis-
turbed the Austrian Foreign Office, which regards it as
evidence of Soviet intentions of a prolonged occupation and
suggestive of a Soviet move of some importance.
One other factor, as yet not officially confirmed,
could conceivably be arousing Austrian apprehensions. Reports
indicate at least the possibility of a developing Soviet
economic blockade against Yugoslavia. The reported blockade
has, to date, apparently consisted only of Soviet refusals of
interzonal transit permits for goods loving from the Soviet
zone to Yugoslavia, via western Austria and Trieste. The
Austrians, however, may regard this ban as a hint of further
Soviet actions along this line. Although the present reported
blockade could easily be circumvented by the Austrians, they
will probably be increasingly fearful of stricter Soviet con-
trols, which would contribute to a possible economic partition
of the country.
Strong Socialist control of Austrian workers will
probably be retainecTn the mme a e ture, u w became
increasingly strained if there are no effective wage-price
adjustments. Socialist leadership still exhibits its re-
markable appreciation of Austria's economic difficulties and
the need to prevent an inflationary wage spiral, but, more
than before, its policies involve the calculated risks of in-
creased Communist influence among the workers and greater
dissension within the lower ranks of the party's leadership.
(A new party, the Union of Independents, will probably step
up its efforts to gain labor support, but the Union is not a
serious factor.) The workers have generally been dissatisfied
with the real wage level for a considerable period of time,
and the Socialist campaigns to roll back prices, in lieu of
wage increases, have not had the desired success; a few
scattered wage increases have already proved necessary.
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Despite this situation, Socialist leaders aoe
presently negotiating a new legislative program on prices,
profits and cartel controls with a view to returning
prices to the mid-1949 level AE it appears unlikely that
this objective can be obtained by such a program, the
workers are not likely to be placated in the long run,
although they will probably acquiesce in the settlement?fo
the next several months. Admonitions by labor leaders to
the workers to accept their situation as the best obtainable
at the present,time and to "take their belts in will not
substitute for ar increase in real wages With the Communists
eager to exploit labors legitimate grievances, and eth
,certain elements of the Socialist hierarchy presently resent-
rta of the party's adherence to non-arxist policies, the
ability of the Socialist leaders to withstand these pressues
will become ever more difficult without wage adjusments
SWITZIMLAND
The recent ulaaLLELyia Swiss_yoters ofitRy_furt1:12r
extension 3r7FTEM: housin. suosialcs eMBIlasizes trae
?
of-Efie traditioniM conservative Swiss to reduee the
over-all "emergency" powers of the Federal Government. The
Swiss probably will be more and more sensitive to federal
powers as long as the Swiss economy continuos to return to
normal, Actually, this latest rejection by the people will
not result in any public hardship, because earlier federal
action has succeeded in consideraely reducing the postwar
housing shortage in awitzerland. The stabilization of
construction costs will enable private industry to provide
SwitzeTlandls annual requirement of 13,000 housing units,
and the cooperative building associations will probably be
able to provide adequately for the low-income family groups,
FRANCE
The Bidault Government is not liker to fall in
the irmedrin-TATErrr,?RiFrte 1=Soe=t0T-Yeeeit
, .rOT-T?ii==net. The Socialist Party had been
threatening to wi thdraw from the Government for Several
months, and found i t$ ?ppm, tuni ty When, after the 1950
budget, was adopted, the Government refused to moot the
Socialist demands for a bonus to the majority of worke,rs?
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Although the Socialists seem to have moved a step closer
to the view that the days of middle-of-the-road coalitions
are numbered, they are probably as much opposed as ever to
early elections. As they realize that consistent
opposition on their part to the Government's policies would
necessarily lead to elections soon, they are likely for the
near future to vote or abstain in Parliament so as to avert
the fall of the Government.
The Socialists probably consider the moment
opportune to take up a strong position outside the Government
for appealing to labor and building up their electoral
strength. As labor regains collective bargalnin3 opportunities
after a decade of Government wage controls, the labor con-
federations will seek new members with greater determination,
and the appeal of the Force Ouvriere (F0) will be stronger in
proportion Should the Socialist Party's bargaining position
improve.
proportion,
present moment is all the more opportune for
the Socialists because the Communist Party (PCF)0 by greater
militancy in defense of political objectives, has undermined
the appeal of the General Labor Confederation (CGT).
A If the Chinese Co..unists su.a, Ho Chi Vinh with
,e en., pos on
n n.o,11(na w ? ecame r y untenable in forthcoming
months unless the French receive similar assistance from
foreign sources. The French have already committed the
major part of their available military strength in their
effort to defeat HO, and could provide few reenforcements
of men or materiel to meet an all-out offensive if it were
supported by the type of aid which could be furnished by the
Chinese Communist Army. The Government at Paris clearly
recognizes the Implications of the situation. It has in-
dicated that it no longer considers the Indochinese affair
solely of French concern, but one which affects all the
Western Powers in view of the serious and widespread
repercussions which would follow a collapse in Indochina.
One alternative to foreign military assistance given
directly to the French In Indochina, would involve a successful
strengthening of Bao Dai 'a economic, military and political
position as an anti-Communist leader in Vietnam, and apparently
would require a further relinquishment of French control and
the progressive substitution of Bao Del.'s own military forces
for those French troops presently committed in Indochina. This
alternative, Which Bao Dais, himself appears to favor, offers
a possible means for attracting non-Communist Vietnamese
considerab
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nationalists away from the camp of Communist-supported
Ho Chi Minh.
In any event, the fall of Indochina would lead
to the followinsr results: Communism would expand further
in Southeast Asia. The French Government, which already
enjoys VO better than a precarious stability, would fail
to survive the inevitable strong public censure. French
pride and prestige, just beginning to revive after the
dhock of the nation's military defeat in 1940, would suffer
a dangerous blow detrimental to effective French participa-
tion in the North Atlantic Pact and the MDAP. The morale
of the Frendh Army, envisaged as the basis of the western
European ground defense against aggression fran the East,
would be badly impairei.
In addition, Frendh withdrawal from Indochina would
be widely exploited by the French Communist Party as proof of
Governmental incompetence and vindication of the Communist
campaign for termination of the Indochinese war. This
Communist exploitation together with the popular disillusionment would probably bring a limited increase of strength to the
French Communist Party and would attract greater support of
its efforts to disrupt the !AP and the French armaments in,.
dustry. In North Africa, the Frendh would be faced with more
Importunate demands from the nationalists, and an increase in
unrest.
For those reasons, the collapse of Indochina would
have serious adverse effeots on US interests, wherever those
interests are involved with french political and military
strength or prestige.
FRENCH AND SPANISH NORTH AND WEST AFRICA
Thar is a tro
!ossibilit that the skirmidh
which occurre as wee on or Or o pa orocco
and the International Zone of Tangier between a band of
Moors and Spanish authorities was arranged, or was at least
permitted to develop, by the Spanish authorities. The Spanish
are certainly exploiting the incident to cast aspersions on
the administration of the International Zone and justify the
maintenanoe of a large Spanish army in Morocco.
Spanidh authorities claim to have suppressed a
native revolt by the capture, between Ceuta and the Tangier
border, of thirteen Moors with about 30 rifles and 5,000
rounds of smunition. General Varela, High Commissioner of
Spain in Morocco, alleges that the Moors were to have staged
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an irIsn planned by Cherif Si Ahmed ben Seddik? leader of
9.frmtica1 Moslem brotherhood with headquarters in Tangier.
neralVarela is demanding that he Tangier authoritiez turn
reddik to him. The opinion of the Tangier Committoo of
'Control, however, Is that Seddik should be tried in the
International Zone, because of the possibility that he may
become a martyr if extradited. This in turn would raise the
danger of violent reactions by his followers all over Porocco.
It should be observed that General Varelats prest1g9
will be increased if he id able to impose his will on the in-
ternational Government of Tangl.er, Greatly exaggerated
versions of the incidentv including hints of Communist Incite-
ment, perhaps inspired by Varela himself, have been reported
by the Spanish press anC radio.
. Both General Varela and the Spanish Army officers
in Morocco would stand to gain by such a border incident at
this time, as Varela, according to some reports, is scheduled
to be relieved from his highly desirable post, and a substan-
tial cut-back of the armed forces ill Spanish Morocco is
planned.
BENELUX
Partial liberalization of trade under the
October 19-r7=77-r42er7.7an T,nion Agreement has
resulted so far in greater trade among the Benelux
countries, ,and has improved prospects for a comprehensive
Benelux Economic Union by the target data of 1 July 1950.
Belgian shipments to the Netherlands during November and
December 1949 averaged approximately 20:6 of the total
value of Belgian exports for those months in comparison
to 145 for the first two months of 1949. For tiao same
period, Dutch exports to Pelgiom averaged ig!, of the
total value of Dutch exports, compared to 12. for the first
two months of 1949, Over half of the Belgian exports to the
Netherlands consisted of consumer goods, particularly tex-
tiles, which the Dutch had partially freed in December. The
improvement in 7elgiom's December index of production, which
was partly a result of the increased Benelux trade, and the
eventual complete freeing of Dutch import restrictions on
Belgian textiles, probably will make the 73elgians slightly
more amenableto Dutch demands for a reduction in Belgian
agricultural restrictions.
Of 4he remaining obstacles to a complete Economic
Union, differences over agricultural policy a.re perhaps the
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Most serious, and are expected to delay effective integration
f agriculture for at least three years. A continuanco of
lgiuMts restrictive policy on imports of Dutch agricultural
goods, particularly the requirement for minimum prices,
probably will cause the Dutch to press for closer Benelux
ties with west Germany, whidh would serve as a market for
the Dutch.
A solution of the transit trade problem with west
Germany, and the return of the Benelux-German trade to more
nearly the prewar triangular pattern Which solved the Dutch
payments problem with Belgium, would give added impetus and
importance to the Benelux Union.
o ular consultation" on Kin Leo old7s
-status, s e u e. or mi. arc s not expected to clar fy
the problem sufficiently to end the bittec postwar political
*angling, which has been intensified within the past few
Months. It is generally agreed, even privately by some
. .
Socialists, that the national vote in favor of Leopold's
return will meet the 55;') requirement which. Leopold
personally established. It is believed by neutral observers
that Leopold will obtain between 55% and 60%. Although a
slightly higher percentage seems possible, the difficulty
oenters around the expected rejection of Leopold in the
Walloon (southern) area, and in Brussels, despite an expected
Majority vote in favor of his return in the Flemish (northern)
Section of the country. If the vote goes as anticipated, the
contention of the opposition Socialists that Leopold is no
longer ":4.ng of (111) the Belgians" will be pursued vigorously
in the parliamentary consideration of the results of the
"advisore referendum.
Although the pro-Leopoldists have sufficient
strength in Parliament to approve Leopold's return if 55% of
the total national vote favors latm? a clear rejection by the
Walloons will cause most of the Liberalg and many Catholics
to seek a graceful way for the King to abdicate. Several
events Within the past month which may influence undecided
Ioters to reject Leopold are: (1) a securities scandal
i,nvolving prominent individuals who belong to the Catr.olic
Party; (2) the revelation that at tae time of Leopold's
Organ/1U? marriage during the War he assumed German titles
*doh had not been used since 1920; and (3) the last-minute
doncession of the Catholics in Parliament that the referendum
rylets,will parry the statement that the vote as to whether
.14k; Leopold should "resume his constitutional rights" in no
involves the continuation of the -lonardhy.
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ITALY
Italy is ortezt1n& its trade and its cormercial
poll.pies toward. Germany at the expense of its trade re-
lations wifh Vrance. Italian economic publications are
stressing again the complementary nature Of the Italian-
German economies as compared to the competitive nature of
the Italian-French economies. It was this economic
circumstance which helped make Germany the most important
prewar trade partner of Italy. Although still falling far
short of prewar totals, Italian exports to Germany in the
first eight months of 1949 increased to 057 million, almost
three times those of the same period in 1948. Imports to
Prance in the first. eight Months of 1949 wore $35 million,
slightly less than in the same period in 1948*
, Italy appears now to oppose western European
economic arrangements which do not include western Germany
,as one :of the principals. As a consequence, the Franco
Italian Custams Union proposals are becoming a dead issue.
Italy is showing reluctance to participate in the "Finebeln
multilateral trade agreements being negotiated among Italy,
France, Belgium, Netherlands, and Luxembourg unless western
Germany is included. (Hitherto, France has been the dhief
opponent of western (ermany's inclusion.) Italy, on the
other hand., expresses considerable enthusiasm for the
Hoffman proposals for the integration of western Europe, with
which it is assumed western Germany will be associated.
Leaders of the minorit, .arties re resented in the
new Italian over en are su or " a oss o suppor among
ii1r o ow ngs. rhe rank and file of these parties are
dissatisfied with the limited ability of their leaders to
influence Government policy. In addition, the rank and file
have long found difficulty in reconciling continued collabora-
tion with the Christian Democrats with their own party
ideologies.
Although there has been no decrease in the number
of Cabinet posts allocated to the Italian Socialist Workers'
and Republican Parties, the potentialities of the former for
adhieving its reformist program are severely restricted by the
minor nature of the ocenomic portfolios it holds. Moreover,
in the case of the Republicans two of the three ministries
they hold (Foreign Affairs and ,Defense) aro ones in which
national policy has already been determined by Italy's
participation In the ERP and the NAP. Still, any popular
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resentment over Italy'a international status would be
directed primarily agelest these Republican ministers.
The rank an,:' file of the Socialist Workers' and
Republican Parties have for some time been irritated at what
they consider the eeoplacency shown by their loaders toward
increased clerical iefluence in the Government. ?A gap has
been developine witiitn both parties between the leaders and
,tbeir follawines, whtdh feel that its representatives in
the Government ete mdre interested in maintaining themselves
in office than in seeking to attain party objectives. This
gap has already led some of the dissatisfied elements to
leave the Socialist Workers' Party and participate in the
forMation of a new Soolalist Party, outside the Government,
tf the two parties, ail a consequence, dhould suffer an
evident loss of papular strength at this spring's regional
and local elections, they might feel obliged to withdraw
from the GoVornment, leaving their leaders, if they so
desired, to temain in an independent capacity.
SPAIN
G A.re,. t s n Ice of Madrid t I owners and yore
aver a gaeo ne pr co nerease s sugges ve o e un,er-
current a:Spanish labor dissatisfaction. Strikes are
Illegal :1'n..Spain, and are attempted very rarely. The taxi
strike oecurred on 1-3 January, but wee not reported in the
Spanish press. The problem of the cabmen was turned over.
after tee strike, to the official Traneport and Communications
57n4icate.? the?sole legal channel ,throughWhidh the workers in
a :tad are entitled to register their needs or grievances.
beet:inertly, authorities, ordered three-fourths of Madrid's
4,500 teXis to remain out of service dailye This means that
each drtver will now lave only a little over a day's work each
Week.
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