WESTERN EUROPE DIVISION OFFICE OF REPORTS AND ESTIMATES DIVISION WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000400040010-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 14
• Document Creation Date: November 9, 2016
• Document Release Date: September 24, 1998
• Sequence Number: 10
• Publication Date: June 7, 1950
• Content Type: PAPER

- Approved For Re!Nip 1999/046aifiailia79-0109
25X6A
000400040010-3
WESTERN EUROPE DIVISION
OFFICE OF REPORTS AND ESTIMATES
CENTRAL INTELLIGENCE AGENCY
DIVISION WEEKLY
VOL. VI - No. 22
For week ending 6 June 1950
7 June 1950
NOTICE: WORK1NG-PAPER
This document is a working paper, not an official
issuance, since it has not necessarily been coordinated
with and reviewed by other components of ORE. It re-
presents the formulative thinking of one group of analysts
in ORE and is designed to provide the medium for trans-
mitting their informal views to other intelligence
analysts of the US Government who are working on similar
or overlapping problems. It is intended for the use of the
addressee alone, and not for further dissemination.
Included in this issue are instances of
Economic Situations Detrimental to US Objectives ein Europe:
III. Rehabilitation and Security Are At Odds in Austria.
IV. Swiss Control of Transit Trade is Ineffectii
COPY FOR
,g7.1
OCUMENT NO.
NO CHANG:. IN CLASS.
13 SO
rLr ..
NEXTIA1 ti
4mINCOSINIDIONIMr" AUTI-1.0c1
LATE/ REV1EWE9: 372044 I
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
. Approved For Release 1999/0 09174000400040010-3
WESTERN EUROPE DIVISION
WEEKLY SUMMARY
Vol. VI - No. 22
25X6A
For wee'l ending
6 June 1950
ggffwgti/i&INi/iM/i/t/---
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
5X6A
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
Anmed For Releaar1999/0
A
FRANCE
IIPAe00400040010-3
Sufficient French support for the Schuman pooling plan
to assure its evenfiial ratification in some fornibYthe Assembly is
indicated by the reactions so far of various major groups, Not all of
these reactions reflect wholehearted support, but the heavy balance
is in favor of the plan.
Schuman's own Popular Republican Party (MRP) and
the Socialists will have their main doubts removed by the accession of
six nations to the pooling agreement; thus France will not be left
alone with Germany. The Socialists, however, will still be somewhat
apprehensive of undue advantages for German industrialists, suspecting
that Adenauer was a party to the original planning, and the Socialist
Secretary General is especially fearful that papal diplomacy influenced
France's decision.
In general, public opinion favors the plan, the principal
reservations coming from the trade unions, which foresee a rapid growth
of unemployment among the miners and a possible drop in the standard of
living of French workers to the German level.
Gaullists, following the lead of the General, are likely
to oppose the pooling on the grounds that it does not go far enough toward
a Franco-German rapprochement, and that it cannot, even in its limited
form, be carried tifroug-h succesifully by the Bidault Government. The
rest of the Right is split on the question, with unexpected, though reserved,
support coming from some extremists. The Communist Party will
continue to oppose the move vehemently as being dictated by *US
"imperialism", and to convince the workers, will point to economic dangers.
The steel industry feels it has a just grievance against the plan, because it
was not consulted in advance, and may suffer losses during the transitional
period, but its main opposition may be weakened at a later stage.
Much helpful support for the plan will come from those
influential individuals in France who favor a federated Europe, and see the
Schuman Plan as a major step in that direction.
Approved For Release 1999/09/02 . - _ 79-01090
" 1.
1 t'A`7
Approved For Rele"Ae 1999/e
?1!.. w ? S
? *I':
ker$0300400040010-3
Although several controversial political issues may
cause serious strain to the Bidault Government, it appears likely that
the preseircoalition will be able to remainilipower at least during
the next two months. At its recent National Congress the Socialist
Party, which is outside the Cabinet, could have taken decisions which
might have caused the Government serious difficulties, but there are
now indications that the Party will continue to support the Bidault
coalition.
Any one of the acute political Issues, however,
especially the proposals for amnesty to some collaborators, electoral
reform, and the church-school issue, all of which must eventually be
discussed in the National Assembly, are touchy problems and could
unexpectedly cause the downfall of the Bidault Government. At the
present time the Assembly is discussing the detailed budget bill and
Is not expected to complete its passage until July. Debate on other
Issues may, therefore, be postponed until that time, despite strong
pressure from the Radical Socialists for early discussion of electoral
reform. Although the Radicals, who are in the coalition, may take a firm
stand at their 7 June Party Congress on the scheduling of the electoral
reform debate, their disinclination, and that of other political parties, to
take over the leadership of the nation at a time when unpopular, additional
revenues may be required, are factors tending to preserve the Government's
stability for the next two months.
FRENCH AND SPANISH NORTH AND WEST AFRICA
The French Residency General in Morocco has recently
given evidence of a determination to take more drastic measures in its
effort to weed out active Communist leaders. The stiffening attitude is
apparently a reaction to increasingly brazen Communist activities, in
accordance with the present militancy of the Cominform line, plus a
feeling of stronger support from the Paris Government for vigorous anti-
Communist action.
The unofficial Soviet representative in Casablanca for
the past several years, Moses Daljansky, has been arrested by French
counterespionage police and has been secretly removed to Paris, leaving
behind his French wife and children. Daljansky, a Soviet citizen, lived
in Casablanca since 1940, and in 1947 received a Soviet passport at his
own request from the Soviet Consulate General in Algiers. Since the
?1r.L;C4
7,1AI
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
, Approved For Relehe 1999/09/02 ? CIA-RDP79-0104e000400040010-3
CCM&
beginning of 1950, he has had no visible means of support, and has
been in constant contact with the Soviet Consulate in Algiers and with
local Communists. A few days before his arrest he is known to have
gone aboard the Soviet steamer Murmansk in port in Casablanca.
General Juin, French Resident Gesrierarin Morocco, has requested his
deportation to the USSR.
Commenting on the measures being taken by the
25NatiMbrate Administration to rid the territory of militant Communists,
told a US
consular official: "It is war against the Communists- we are deporting
those people, and we will continue to do so." He added that alien
Communists would be liquidated without pity and that Moroccan
Communists would be apprehended and punished severely for any and all
activities detrimental to peace and good order in French Morocco.
BELGIUM
The Belgian Government's vacillation in the matter of an
unloading port for MDAP equipment may contribute to the doubts of those
Belgians unenthusiastic about the MDAP. The Government originally
planned to use Antwerp, but has since designated the small port of
Zeebrugge. The reason for the change may lie in the recent wild-cat
strike of Antwerp dockworkers, whose economic grievances the Communists
were quick to exploit, and in the current election campaign jitters, arising
from controversy over the royal question. However, the Government's
weakness in facing the problems of unloading at Antwerp, despite assurances
that Communist strength in Antwerp could be controlled, may improve
chances for an increase in the current negligible neutrality sentiment.
Communist propaganda, of course, will link its anti-MDAP campaign with
the Government's attempts to avert labor disturbances because of the anti-
Leopold campaign and embellish it.
ITALY
Increasing disregard of the interests and policies of the
minor Italian coa i ion par es sy re
-5-,
er e
asper s majority Chrialan
51AL
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
Approved For Release 1999/CC
UNC),600400040010-3
Democrats may cause the withdrawal of the moderate Socialists (PSLD
and Republicans from the Government, thereby accelerating the trend
toward a single-party administration. The Christian Democratic
attitude will also tend to support the Communist allegation that De
Gasperi heads an "authoritarian regime".
Among the restrictive legislative measures sponsored
by the Christian Democrats but opposed by the minor parties, the following
are outstanding: (1) a school reform bill increasing Church influence in
education; (2) a bill limiting divorce; (3) a labor bill restricting the right
to strike; and (4) legislation governing local and regional elections.
Of these measures, that dealing with the elections has
particularly antagonized the MI and Republicans. Recently, the
Christian Democratic majority on the Chamber of Deputies Committee
discussing the regional elections bill forced through an amendment pro-
viding for the election of the regional councils by the provincial
assemblies. (A province is a subdivision of a region.) The minor parties
have denounced this act as a flagrant violation of the Christian Democrats'
previous pledge that the regional councils would be elected by popular
vote, a principle subsequently incorporated in the draft law.
With regard to the local elections, the PSLI and
Republicans are opposed to the majority system advocated by the Christian
Democrats in communes between 10,000 and 100,000 population, whereby
80 percent of the council seats are warded to the victoriouo party and the
remaining 20 percent to the runner-up. The minor parties fear that unless
a third of the seats in this class of communes are distributed proportionally,
the minor parties will completely disappear, except in communes over.
100,000 where the proportional system obtains.
The increasing tendency of the Christian Democrats to
assume the prerogatives of a one-party Government and to accentuate
restrictive legislation rather than constructive measures in the field of
agrarian and fiscal reform and investment will further weaken the Govern-
ment's prestige among large segments of the population. It will also
facilitate the Communist strategy of isolating the Government and portray-
ing it as an authoritarian regime.,
SPAIN
ganah.CideteLSt sptut.Eaprajrucangtidexing.
reorganization which, because of increasing domestic criticism of the
regime's economic policies and the failure of the regime to obtain a large,
DzkiN?, lU
111,ak,
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
Approved For Releahe1999/09/02 : Vdff79-01096A1100400040010-3
COM ENITAL
political loan from the US, centers on the possible removal of Juan
Antonio Suances as the Minister of Industry and Commerce. A conse-
quent shift of emphasis in economic policy would probably provide for
some liberalization of the pre6ent restrictions against foreign enter-
prise in order to attract outside economic support. No far-reaching or
drastic modification of economic controls, however, is likely at present,
because of the political hazards involved, although Franco may take the
risk of displacing Suances in an effort to stave off the growing domestic
complaints and the danger of national bankruptcy. Though not imminent,
bankruptcy cannot be denied as probable within a few years unless
present trends are checked.
Suances has become the principal target of criticism,
both foreign and domestic, as the author of the Government's policies
of economic regimentation. He cannot be removed summarily, however,
because of his power as President of the Institute of National Industry
(INI), the instrument of Government expansion into industrial and
financial enterprise, and as head of the Foreign Exchange Institute.
Ile occupies a position in Spain similar to that formerly held by Miranda
of Argentina as the "economic czar" of the Peron Government. 'NI is
much more than a Government trading agency and has taken the Spanish
Government into the field of production on a pattern inspired by the Berman
Goeringwerke of Nazi Germany. Suances' determination to develop through
INT a Government-controlled industrial empire at any sacrifice has proved
disastrous to domestic food production and generally inimical to private
enterprise. Moreover, the regime is now confronted by the awareness in
business and financial circles that these policies have proved a major
deterrent to private foreign investment and even to minor US aid in the
form of Export-Import Bank loans. Suances, for example, is known to
have blocked the efforts of private mining interests to apply for Export-
Import Bank aid because he wished such assistance to be handled only
through entities under his control.
At the same time, the regime is criticized by all observers
for the corruption and graft in the bureaucracy, which, traditionally large
and inefficient under previous Spanish regimes, has been greatly expanded
by the Franco Government. Little can be done in present circumstances
to overcome this liability. The machine which Suances has built up to
administer controls, especially over foreign exchange and raw materials
allocation, would undoubtedly hamper efforts to establish a more liberal
- -
ZIAL
ioliBeftr
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
Approved For Relee 1999/0
it14000400040010-3
economic system. The Government is better able politically to
respond to the demands being voiced for elimination of the black
market, which the Falange and the Army control. The gradual
derationing of food and supplies has already begun at a cautious rate.
PORTUGAL
The recent progress of the ECA program in Portugal is
threatened by the dampened enthusiasm of the Portuguese Government
arising out of difficulties in arranging ECA assistance for Portugal's
colonies. The Portuguese Government has expressed disappointment
because the ECA mission recommended that, to promote colonial
development, Portugal purchase heavy equipment in Europe out of its
counterpart funds. The Portuguese reaction arises partly from over-
optimism regarding the liberality with which ECA is authorized to act,
and partly from Portugal's limited counterpart fund and shortage of
Investment capital. Some Portuguese officials tend to think that, the
difficulties encountered in getting ECA aid for the colonies are created
deliberately to make US private capital the only source of funds. ECA
mission in Lisbon believes that ECA must find some method of
financing the requisite purchases for the Portuguese on a long-term basis.
VIAL
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
Approved For Relee 1999/09/02 : CIA-RDP79-0109QA000400040010-3
comnitioniu
SPECIAL ARTICLE
ECONOMIC SITUATIONS DETRIMENTAL TO US OBJECITVES IN
EUROPE
A Trade practices inimical to US interests and objectives
spring up easily in western Europe, as a result of short sightedness,
fear of competition, lax government controls, the desire for profit, and
the demands of the international political situation. Three cases are
examined here.
25XsA
Approved For Release 1999/09/02:
0A000400040010-3
5X6A
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
Approved For Fteease 1999/09/02 ._? CIA-RDP791090A000400040010-3
25X6A
III. Rehabilitation and Security at Odds in Austria
The position of Austria as a full participant in the ERP,
and its treatment as an economic unit, are frequently at variance with
the US export control objective of denying strategic goods to eastern
Europe. The USSR is able to purchase in and via Austria goods it could
not otherwise obtain, because of its position as an occupying power, and
because of Western policy, which has been directed toward building up
the Austrian economy while maintaining the political status quo and
making progress toward a treaty. The .Nest has, ther?eiraTede
Austria a full participant in the ERP, and has treated the country, in-
cluding the Soviet Zone, as an economic unit. This policy has preserved
Austria's unity, brought the country a measure of economic prosperity,
contributed to Austria's pro-Western orientation, and reinforced Austria's
resistance to Soviet- Communist pressures It has also permitted Western
influence in an area bordering on the Soviet Satellite states.
Any change in the policy would involve the risk of the
economic partition of Austria, and would incur the opposition of the
Austrians themselves. Nevertheless, Austria's participation in the ERP
and its treatment as an economic unit pose problems for Western security
in three connections; (1) part of the output of the strategic industries being
built in Austria?even in the western zones-- is shipped to the East; (2)
some ECA goods received in Austria find their way into Soviet hands, either
as raw materials or as finished products, despite end-use checks by the
Vienna screening committee; and (3) Austria is a transit area for goods
from various western sources to the East.
By virtue of its special position in Austria, the USSR,
either directly or through numerous profiteering middlemen, can and does
purchase on the Austrian market, places orders iL iNestern countries for
goods via these Austrian middlemen, and ships these goods eastward from
Austria without being subject to Austrian export regulations. The Western
occupation forces have no authority to stop goods moving from western
Approved For For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
Approved For Release 1999/09/02 : CIA-RDP79-01090A000400040010-3
ArdileamitaistAiiiii
SECRET
Austrian firms or through western Austria into the Soviet zone;
the Austrians themselves cannot cut off shipments without inviting
Soviet retaliation on interzonal goods movements. For either the
Western Powers or the Austrian Government to undertake such a
policy would risk economic partition of the country. Although the
Austrian Government secretly cooperates with US officials in screening
ECA imports to firms in the eastern zone, even this participation would
probably be risky for the Government if it became known to the USSR.
The Soviet position in Austria thus constitutes a steady
drain on Austrian production and recovery and enables the USSR to
profit by Austria's position as a recipient of ECA aid. But the USSR and
its Satellites apparently profit to a much greater extent through the use
of Austria as a buyer of Western goods. Western European countries
have embargoed the shipment of some strategic items to the Soviet bloc,
but the shipment of strategic goods from western Europe countries to
Austria is virtually unrestricted. Once in Austria, the control of these
shipments is effectively nullified because the Western Occupation Powers
do not have the authority to stop shipments, and the Austrians will not
stop them and contribute to the partition of their country.
Austria's occupied status, its geographic location, and its
trade position in relation to eastern Europe underlies the conflict between
Austria's recovery and US export controls. US controls on direct ship-
ments to Austria, implemented by the end-use checks of the special
Vienna screening committee, have had some restrictive effect on the
direct flow of US strategic exports to Austria. There are no effective
controls, however, on US goods to Austria transshipped through western
European countries, which regard the US technique of end-use checks in
Austria as unduly cumbersome, and exercise no controls of any conse
i4uence on their own exports to Austria.
End-use checks alone on all imports by Austria would
probably fail to prevent a flow of goods to the East; they would further
more probably prove to be politically unwise in Austria, where the people
would not only resent the discrimination, but would also fear the ultimate
Soviet pressure such checks would invite. On the other hand, if western
European countries cooperated in exporting to Austria only those goods
needed by the Austrian economy, a more effective deterrent to the east-
ward flow of goads might result.
The flow of Austrian goods to the East will not stop,
however, simply as a result of regulating the imports into Austria.
Account must also be taken of Austria's need to export, and the problem is
to direct the country's shipments to the West. At present, the ease with
- 12 -
? _ al
Approved For Release 19990179-01090A000400040010-3
. Approved For Re!elle 1999/09/t
7 n --7.911flitie000400040010-3
-
which Austria can dispose of its industrial products to the East, and
the growing size of this trade, legal and illegal, while trade with the
West is more difficult, demonstrate that Austria's economy must be
made more complementary to that of the Western nations. Until this
is done, Austria s recovery under ECA will serve to increase the
industrial capacity available to the USSR and its 3atellites. This is
a problem presented by the ECA investment program in Austria, where
plants are being rehabilitated and industrial capacity is being increased,
frequently at the expense of US security interests.
IV. Swiss Control of Transit Trade is Ineffective
The recent flow of strategic items through Switzerland
again highlights the important way in which Switzerland contributes to
the evasion of US and western European export controls to the Soviet
Orbit. Switzerland is normally an important transit point for shipments
eastward, and is becoming increasingly important as a break-through
point for ,Vestern strategic commodities. Sffliss restriction for security
reasons of either its own exports or of transit shipments is likely to be
mild, even though the 3wiss continue to assert that they will cooperate
in general with the US export control program. Actually the Swiss
have been in possession of 1-A and 1-B lists and the AEC A and 13 lists
for some time, but they have taken no steps to stop the shipment to the
East of strategic items, apart from war materiel (such as aircraft parts).
Furthermore, it appears that only the US and Canada (and to a lesser
extent, western Germany) are making end-use checks in Switzerland.
Lastly, Switzerland, as a primary center of international finance, furnishes
unexcelled facilities for the expedition of this traffic.
The Swiss, in reality, are probably unwilling to institute
controls to an extent satisfactory to the West. This reluctance stems from
a fear of jeopardizing the very delicate position they hold between the West
and the East, and from an aversion to inviting retaliation by the Soviet
bloc. The solution to the problem of transit trade through Switzerland
will require strong, coordinated effort on the part of all the Western
nations.
g TiA% 3
Approved For Release 1999/09/02 : CIA-RDP7910106A u -00400
A I