WESTERN EUROPE DIVISION WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000400040012-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: November 9, 2016
• Document Release Date: September 24, 1998
• Sequence Number: 12
• Publication Date: June 20, 1950
• Content Type: PAPER

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WESTERN EUROPE DIVISION
WEEKLY SU '1 MRY
VOL. VI - Ho. 24 For w +eek ending
20 June 1950
25X6A
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S E C R E T
Economic measures in the German Democratic
Republic ('DR), designed to convince ~e papu a o - of the
effl Iency o the Corm mist-managed economy, probably will
be launched before the October elections. The prograni. May
be initiated by reducing prices in the state-operated (110)
stores, at the same time ending the rationing of all
commodities except meats and fats. The importance of HO
stores would be augmented by the appointment of commissions
charged with the responsibility of insuring that these stores
obtain the highest quality merchandise, leaving only the
poorest quality goods to move in private channels.
The end of rationing could probably create a
scarcity of goods, thus necessitating further econ'mic steps.
GDR farmers would be required to increase their production,
and credits granted under terms of the Polish-GDR trade
agreement would be used to import commodities from Poland.
Another possible way, after the election, of deal-
ing with the problem of short supply is to reduce the circula-
tion of money through a currency conversion. This action
would also aim at reducing the disparity in the rate of
exchange between the east mark and west mark, a disparity
that has caused some embarrassment to the GDR authorities.
If a currency conversion is not undertaken,
derationing might be made practicable by raising the prices
of selected items, and increasing taxes.
Berliners involved in private trade with Lhe GDR
would inevitable suffer losses in their holdings of east
marks through currency conversion, but the establishment of
a parity between the east and west marks would reduce the
difficulties encountered in trading, unless the GDR raised
new barriers.
The Austrian Communists have failed again to
distinguisi- mse ves, an , indee , have on y eY m sized
their weakness before the eyes of the Soviet occupation
forces. The Communist-sponsored Peace Congress, held in
Vienna on 10-11 June, not only failed to attract the
vaunted thousands, but also neglected to produce the
celebrities who had been billed in advance. According to
the Austrian police, the as meotin" for the Congress
included about 15,000--not an impressive figure, especially
in comparison with a People's Party rally four days earlier
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3 E C H E P
which mustered 35,000 to protest the peace movement. Italyts
Nonni, France's Jolior-Curie, and England9s Dean Johnson
pleaded last :minute sickness, and stayed away. The familiar
Austrian figures were joined only by the Czech Minister of
Health to give the meeting its international toned
In their campaign for signatures for the peace
declaration? the Austrian Communists also appear-to be having
their usual difficulties. After weeks of efforts the
Communist press on 31 May proclaimed that signatures had been
obtained from 250,000 Austrians (only 40,000 more than the
Communist vote last October)* Ton days later, the Corrmuunists
claimed over 4000000 signatures, or about half their goal
Such a figure is probably as much as they will. obtain, and it,
too, Is not startling when the theme of the campaign, the
energy of the collectors, and the presence of the Soviet army
are considered.
Actually, the Comimuni s is have been outmaneuvered and
outorganized. The Austrians, who seldom have an opportunity to
get their teeth into anything they can shake without unduly
provokinC;, the USSR, felt no restraint in the case of hypocritical
ac t:i vi'ty of an Indigenous political party, The Government, the
non-Communist political parties, and the Catholic Church con-
ducted a vigorous campaign against the two-faced "peace" move-
rent, and almost. gleefully exposed and deflated its Meetings
against " peace meetings" wore conducted, and the full force of
the anti- Corrwtunist press ridiculed the movements Chancellor
Figi effectively asked why abolition of only the atom bomb was
being demarxied. Why not total disarmament and total demmobili-,
nation? State Secretary Graf shrewdly pointed out that peace
for Austria does not require thousands of signatures, but only
one--that of 11r. Zarubin (the Soviet treaty negotiator),
If the peace campaign was to be a Soviet test of the
efficiency of the Austrian Communist Party, the Party failed to
impress even the .Austrians
FRANCE
Recent balloting by French workers indicates that
the Commun1 ss t ss have lost s tre g anion abor i.n canoe, but that
hey hav the support of strong p ura ty ofthe
workers when there is no forceful leader of the opposition to
exhort apathetic non-Communists to action. The Communist-led
General Confederation of Labor. (CCT) has the organization
necessary to ensue that all of its members, and many unor-,
ganized workers, will follow its lead when the need arises.
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SEC RET
This CGT capability was evidenced by the recent social
security elections in which 52 million workers voted for members
of the adnainistrauive councils, which will handle the
distribution of social security funds for the next five years
Whereas the CGT garnered 51;'ol of the ballot in similar elections
in 1946, in the roc3nt elections 45','50'1 of the votes went to the
CGT; next in rank were the Christian Labor Federation (CFTC)
and the Socialist-Force Ouvriere (FO), each with less than
half of the CGT t s total.
Behind this seemin victory for the CGT, however, is
the fact that nearly 2 million workers failed to vote. It is
certain that a large majority of these workers would under no
circumstances support the CGT. A good FO and CFTC campaign
favored with dynamic leadership could probably have captured
a large share of the untapped electoral strength.
This hypothesis is borne out by another recent
election for the important consultative plant committees of the
large (13,000 workers) Michelin Company at Clermont-Ferrand. A
traditional C~armnunist stronghold, this plant now finds most of
its labor unorganized. A single vigorous FO leader was more
successful than six full-time CGT officials in campaigning among
these unorganized workers. The results were: FOB 5 permanent
and 5 substitute seats; CGT, 2 and 2; and CFTC,, 1 and 1,~
Should true non--Comrrtuni s t leaders emerge, it 16
probable that they would. be able to-win the support of almost
as many workers as the COT commands, for the bulk of Frenc1.,.
labor today is unorganized.
THE IJE`I'IIERLANDS
The Netherlands Government probabi_ will continue
to press i ts o1a1ms so 'nt over ear 'i` noe a . er-` e
termination o L a present nter m a n s ra . period at
the end of 1950 despite a minority opinion within the
Government that New Guinea must be sacrificed to Indonesia
to strengthen the Netherlands--Indonesian Union. After the
granting of Indonesian independence there vras considerable
pessimism in and out of the Government because it was felt
that a decision on New Guinea unfavorable to. the Netherlands
would be reached. This pessimism seems now to be replaced
by dogged determination to retain the area.., an attitude that
may to a large extent be due to Australian opposition to
Indonesian contr-)1 of the Dutch half of New Guinea? and to
numerous statements by Indonesian leaders den anding the
area for the Indonesian Republic.
w 5
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A further indication of the Dutch attitude is
contained in the budget for the Ministry of Union Affairs
and the Overseas Realm, which places special emphasis on the
long-range economic development of New Guinea. The reiteration
of the opposing demands of the Netherlands and. Indonesia before
serious discussions on New Guinea have been held will make a
bilateral settlement more difficult and hamper cooperation on
other problems. Although the New Guinea issue probably will
be taken up at the second Union Conference, which is scheduled
for August, it is doubtful that much progress toward a settle-
ment will be made at that time .
Recent parliamentary criticism of the Government@s
"do nothing" Indonesian policy, which necessitated a vote of
confidence, revealed a more united opposition from the minor
rightist parties, two of which are in the Government, and
Indicated the strong stand against any concessions on New
Guinea that may be expected. The stability of the Government
is not likely to be threatened, by this question,, however, before
late 1950 and then only if the concessions to Indonesia virtually
eliminate Dutch sovereignty over the area
With the approach of the third year of RCA aids
the Italian economic outlook, wiE n major m tat
Is better than at any time during the past ten months. A
more optimistic outlook in business circles regarding
Italian economic prospects is sup.)lanting the pessimism
which prevailed last winter and the early spring of this
year. Factors contributing to this improved outlook Include:
(1) the index for industrial production in March was 118
(1938 equals 100), the highest monthly level since the end of
the war. This ":arch index was observed particularly closely
to see if the end of hydroelectric power rationing would
cause production to snap back from a previous slump; (2) the
downward movement of wholesale prices in Italy has stopped
after a decrease of about 20 in 1949; (3) demand for goods
is tending to _-ise, and manufacturers' inventories; which in
many sectors. had risen well above the norm are dropping;
(4) during the first part of 1950, orders to the steel in--
dustry have risen; at the same time the production of one of
the largest steel users, ho automotive industry, continues
its upward climb. (Motorcar production in March was 153
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SE CREW
(1958 equals 100), while truck production was 271); (5)
bankruptcies which reached record highs between November 1949
and January 1950, have since decreased substantially; and (6)
harvest forecasts for 1950 are good In many iriportant crops.
Wheat forecasts in particular are for a crop five to seven
percent larger than the excellent one of 1949.
Among negative aspects of the economy, however, are
the continued fall of prices on the Italian stock ma':?ke t, and
the lower level of Italian foreign trade in 1950. Though some
slight Improvement is probable in foreign trade during the
remainder of the year, the first half of 1950 will probably
show a considerable decline in total foreign trade compared to
the same period in 1949
Finally, any trend toward improvement gust be viewed
within the limitations of I taly t s unemployment and investment
situations. Unemployment remains the critical index of basic
Italian economic recovery and stability. Although registered
unemployment has shown a sligitly more-than-seasonal decline
recently, it still remains close to the two million mark, with
all the social and economic problems this entails, Further,
it remains to be seen whether the Italian Government has the
willingness and the ability to form and implement the aggressive
investment program necessary to alleviate unemployment. Such an
investment program is essential If the gains made under ECA are
to be hold. after 1952.
Prospects a, Dear .rrr roved for a rest Lion of
Italo-Etl .o an negotiations lookIn.g toward a compromise
agreement on the former Italian colony of Eritrea. Such
an agreement would not only aid in insuring internal
security in. Eritrea but would also promote US interests
by facilitating a ran rochement between Italy and Ethiopia,
which would redound ttoo? e po 'tical stability of the
strategic east African region.
Italy has recently indicated that it is prepared
to modify its previous demands for the independence of
Eritrea, and Is willing to resume negotiations looking
toward Eritrean federation with Ethiopia,, The Italians
have firmly opposed Ethiopia's desire to annex Eritrea, on
the grounds that the Ethiopian Government Is incapable of
preserving order and protecting Italian nationals in the
area. Italy also regards a collective, Italian, or Ethiopian
trusteeship for its former colony as unfeasible. Continued
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S E C R E T
British administration of Eritrea would probably be satis-
factory to the Italians, but the UK is eager to shed its
responsibilities in this area, and it is unlikely that the UN
would approve an extension of the British administration.
The only solution the Italians now believe to be
generally acceptable is that of a federation of Eritrea with
Ethiopia, allowing a certain measure of Eritrean local autonomy.
Should Ethiopia be willing to make concessions, a bilateral
agreement might be reached paving the way for a settlement at
the next meeting of the UN General Assembly. If Italy and
Ethiopia cannot come to agreement, the.UN might press for a UN
trusteeship, or it might postpone action, in which case Italo-
Ethiopian relations would be further embittered and Eritrea
itself would suffer.
The Fala ye and other supporters of the Spanish
$flbao, apparently with the aim of convincing critics at
home and abroad that they have mastered the situation in
this important Basque resistance center. Franco visited
the city on 19 June, inaugurating a short series of summer
"personal appearances" which may be designed to sample opinion
in various parts of the 'country as a prelude to the long-
expected Cabinet shake-up o , Bilbao has been given a festive
atmosphere, and, although there has not been a mass turnout,
substantial crowds have assembled to cheer the Chief of State.
This holiday mood covers a situation of fundamental
unrest.. The tenacious Basque resistance has come under special
attacks from, the Spanish Government during the past year, some
of them coinciding with the visits to the US, Rome, and Latin
America of the Basque President-in-Exile, Jose Antonio
do Aguirre, spokesman of the opposition to Franco. Important
Basque leaders were arrested and were given long prison
sentences. Subsequently, the Falange Civil Governor of
Guipuzcoa vigorously renewed the attempts to suppress the use
of the Basque language. This action recently resulted in
the refusal by a Catholic Action Youth group to carry out a
large religious meeting at San Sebastian, and an extraordinary
criticism of the civil government in the Catholic Action
weekly magazine, Ecclesia.
As a culminating blow to Basque solidarity, the
Spanish Government has obtained the division of the Catholic
sera ss mo Franco- in the northern n us al city of
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diocese of Vitoria, which formerly embraced the entire Basque
area. into three dioceses. Despite Basque protests to the
Vatican., the new Bishops were appointed without deference to
t :te historic custom which requires that the clergy be natives
of the region, able therefore to understand the Basque lan-
guage and preach in it. The new Bishop of Bilbao, Dr. Morel llo,
has been elevated to this post from that of Auxiliary Bishop
of Madrid, where he was born and where he has been conspicuously
identified with the clergy most closely supporting the Franco
regime. All of the new Bi snap s took the required oath of
loyalty to the Chief of State, and were entertained by Franco
after their investiture.
The new ecclesiastical appointments show Franco's
will and ability to use the Spanish Church to promote the ends
of his.regime. 'T'hese tactics have given rise to a considerable
increase of cynicism among the Spaniards, alienating many from
the Church. Despite their deep Catholicism, the Basques will
be r:io exception to this trend.
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