SPECIAL REPORT PAPANDREOU'S FIRST YEAR AS PREMIER OF GREECE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A004800060003-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 19, 2016
• Sequence Number: 3
• Content Type: REPORT

19 March 1965
OCI No. 0281/65A
Copy No. 055
PAPANDREOU' S FIRST YEAR AS PRENBER "U;E GREECE
CENT AL INTELLIGENCE' AGENCY
OFFICE OF CURRENT INTELLIG ENCE
SECRET
GROUT A Excluded from auto-finotic
downgrading and declassificotidn
Approved For Release 2006/11/01: CIA-RDP79-00927AO04800060003-3
ease 2006/11101 CIA-RDP79-00927A0p4800060003-3
 Approved For Release 2006/11/01: CIA-RDP79-00927A0048 0060003-3
HIS MATERIAL CONTAINS INFORMATION A FECT-
NG THE NATIONAL DEFENSE OF THE UNITED S"
VITHIN THE MEANING OF T F, ESPIONAGE
18, ?7SC, SECTIONS 793 AND 794, THE TR,
[ON OR REVELATION OF WHICH IN ANY MANN]
UNAUTHORIZED PERSON IS PROHIBITED BY
Approved For Release 2006/11/01: CIA-RDP79-00927A004800060003-3
 Approved For Release 2006/11/01: CIA-RDP79-00927AO04800060003-3
*AW *MOO
SECRET
The first year in office of the centrist gov-
ernment of George Papandreou has produced marked
changes in Greece's 12olitical. economic and for-
eign policy outlook,
some ex r mme a is a emen s have taken
advantage of the government's tolerance of dis-
sent and become more active. Papandreou's social
welfare and wage support programs have added to
inflationary pressures. The Cyprus dispute has
destroyed Greece's close military ties with Tur-
key, and emotional reaction to any unfavorable de-
velopments there could upset present political
patterns. Uncertainty also surrounds the tenure
of and succession to the 77-year-old Papandreou.
The Center Union Government
The Center Union achieved
its present mandate in February
1964 largely because of Papan-
dreou's talent as an orator and
the popular desire for a change.
He was well known as the pre-
mier of a. wartime government in
1944, and had participated in
several coalition cabinets in
the early postwar years. His
fortunes were in eclipse while
Constantine Karamanlis' right-
of-center governments held of-
fice from 1955 to 1963, but
Pa.pandreou's gift of spellbind-
ing oratory helped the Center
Union take advantage of Karaman-
Lis' difficulties and turn the
political tables. The Center
Union won a plurality of parli-
mentary seats in the elections
of November 1963; two months
later the party won 53 percent
of the popular vote and 171 of
300 seats--a landslide in Greek
politics.
The Center Union is a me-
lange of formerly separate po-
litical organizations whose mem-
bers represent nearly the entire
Greek political spectrum from
disgruntled former deputies of
right-wing parties to one-time
colla,bora.tors with the Communists.
SE CRE T
Approved For Release 2006/11/01: CIA-RDP79-00927AO04800060003-3
 Approved Release 2006/11/01: CIA-RDP79-07A004800060003-3
Its ideological mainstream fol-
lows the slightly left-of-cen-
ter, liberal, and frequently re-
publican tradition in Greece.
Although Papandreou has been in
undisputed control of the party
since the death of party co-
founder Sophocles Venizelos
just before last year's elec-
tions, bitter factionalism is
never far below the surface.
PARTY STRENGTHS IN THE GREEK PARLIAMENT
PERCENTAGES SHOW SHARE Of POPULAR VOTE IN TEERUARY 1944 ELECTION I
ist demonstrations and "peace
marches" such as Karamanlis never
countenanced.
TOTAL
300 SEATS
The Center Union rode the
wave of a growing popular de-
mand for greater personal free-
dom and social justice and for
the relaxation of repressive
measures designed to restrict
Communism. Papandreou treats
25X6 Communism as a social problem
which can be defeated by elimi-
nating those conditions which
he has released severa
SECRET
The Center Union government
has also sought to deal with the
more basic causes of economic
discontent by redistributing in-
come to the benefit of the farmer
and the urban worker. Greece's
underdeveloped economy suffers
from a lack of natural resources,
and agricultural underemployment
characterizes rural Greece. Be-
cause of the wide divergence in
income and job opportunities be-
tween rural and urban popula-
tions, young people are contin-
ually moving to the cities or
emigrating to western Europe in
search of work. The government
has enacted large agricultural
subsidies and promoted substan-
tial wage increases for indus-
trial workers. Papandreou has
also taken steps to modernize
and expand education.
The foremost element of
instability in the Center Union
government is uncertainty as to
how long the septuagenarian pre-
mier will remain at the head of
his party and government. Papan-
dreou appears to be in good
health but, in view of his ad-
vanced age, a struggle for suc-
cession has been under way ever
since his government was formed.
At first glance, the most
obvious possibility is the pre-
mier's son, Andreas Papandreou.
A distinguished economist and
a US citizen for 20 years,
Andreas returned from California
hundred "political" prisoners
serving terms for crimes com-
mitted during the Communist up-
rising, has restricted police
activity against extreme left-
ists, and has dropped the re-
quirement for loyalty certifi-
cates except for members of the
armed forces and public serv-
ices. He has permitted left-
SECRET
Approved For Release 2006/11/01: CIA-RDP79-00927AO04800060003-3
 Approved For Release 2006/11/01: CIA-RDP79-00927A004800060003-3
Firm
Nwl~
SECRET
at his father's urging to run
in the 1964 elections. On win-
ning an impressive victory, he
was brought into the cabinet
as minister to the prime minis-
ter. He was subsequently trans-
ferred to the post of alternate
minister of coordination, pre-
sumably to take advantage of
his economic talents, but last
November resigned in the face
of opposition charges of cor-
ruption. Even outside the cab-
inet Andreas Papandreou remains
a powerful influence on his
father, who may soon bring him
back into the government.
At least in foreign policy,
Andreas Papandreou exerts a,
leftist influence. He has been
highly critical of US policy
regarding Cyprus, and has made
no attempt to deny reports that
Washington was responsible for
forcing his resignation. As a
former US citizen he may be
overcompensating for his vulner-
ability to charges of being
pro-American. He is rumored
to be contemplating offers to
take over eventual leadership
of a, political grouping to be
created from among members of
the Center Union's left wing
and the Communist-front United
Democratic Left.
Andreas Papandreou's major
rival for Center Union leader-
ship is the able and dynamic
finance minister, Constantine
Mitsotakis. Mitsotakis has
demonstrated astute political
acumen in his present position,
performing his job competently,
permitting no scandals in the
ministry, and carefully avoid-
SECRET
ing intrusion in the affairs
of other ministries. He has
demonstrated loyalty to the
elder Papandreou and has thus
far refused to give encourage-
ment to those elements in the
right-wing opposition who are
seeking a. realignment of politi-
cal parties. His weaknesses
appear to be his
unknown political s reng e-
yond his home island of Crete.
Mitsotakis enjoys the support
of the Athens daily Eleftheria,
which is one of the most influ-
ential journals in Greece.
The Army and the Palace
So far, Papandreou has done
relatively well in managing re-
lations with two major independ-
ent power centers in Greek poli-
tics, the army and the palace,
which traditionally favor strongly
anti-Communist, rightist govern-
ments.
25X6
Approved For Release 2006/11/01: CIA-RDP79-00927A004800060003-3
 Approved FRelease 2006/11/01: CIA-RDP79-007A004800060003-3
SE CRE T
Senior military leaders
closely identified with the
Karamanlis regime were quickly
purged when Papandreou took of-
fice, but those remaining in
high position are believed to
be only slightly less conserva-
tive. Papandreou's defense min-
ister comes from the Center Un-
ion's right wing, and appears
to be generally acceptable to
his military subordinates. Ru-
mors of coup plotting within
the army, which were widely cir-
culated before the Center Union
came to power, have disappeared
in recent months.
Papandreou has also main-
ta.ined at least proper, and pub-
licly cordial, relations with
the palace. Young King Constan-
tine is said to be unhappy with
some of the government's poli-
cies, but the prime minister's
current popularity is sufficient
to discourage the palace from
any attempt to replace him.
Attack From the Right
Papandreou is facing an
increasing barrage of assaults
from the only major non-Commu-
nist opposition party, the right-
of-center National Radical Un-
ion (ERE) created by Karamanlis
nine years ago. The current
party leader, Panagiotis Kanel-
lo oulos is a scholarly 0
figure who has
held the par y together, but
failed to inspire his followers.
Many are hoping for the early
return of Karamanlis from his
self-imposed exile in Paris,
although this appears unlikely
at present.
The passage last month
of an EDA-sponsored bill to in-
vestigate alleged illegal ac-
tions of Karamanlis and two of
his colleagues when they were
in office has raised the tempo
of the political warfare. Kanel-
lopoulos has called for creation
of a center-right coalition gov-
ernment. Papandreou has re-
sponded by charging that in 1959
the Karamanlis government used
police measures to ensure re-
election of ERE. Kanellopoulos
followed by calling for Papan-
dreou's resignation "lest there
be bloody developments," and
the premier publicly labeled
the ERE a "fascist" organiza-
tion.
The rapidly mounting ten-
sion between the two parties
apppears to have served Papan-
dreou's purpose of making any
coalition between ERE and dis-
sident Center Union deputies
a virtual impossibility in the
near future. ERE also does not
want to press issues to the ex-
tent of provoking elections,
for all evidence points to the
continued popularity of the
Center Union.
High on the ERE list of
charges against the government
is that it has been "soft on
Communism.,"
The Communist Party it-
self is still outlawed and its
leaders and many of its members
are in exile in the Soviet bloc.
The government has rejected de-
mands to legalize the party and
SECRET
Approved For Release 2006/11/01: CIA-RDP79-00927AO04800060003-3
 Approved For Release 2006/11/01: CIA-RDP79-00927A004800060003-3
SECRET
permit mass repatriation of the
exiles. Nevertheless, the gov-
ernment's relaxation of other
anti-Communist measures has led
to some increased activity by
the extreme left.
On the political scene
Greek Communism operates through
the United Democratic Left (EDA)
party, which holds 22 seats in
parliament on the basis of 12
percent of the popular vote.
The EDA remains isolated, how-
ever. It has failed to make
headway toward forming a common
front with the Center Union, is
being subjected to increasing
verbal attack by the prime min-
ister, and, like the two major
parties, suffers from internal
factionalism.
EDA, however, has made the
most of the new freedom of ac-
tion which it enjoys under Papan-
dreou. New EDA cells and front
organizations have been estab-
lished throughout Greece. EDA
has been particularly success-
ful in rapidly expanding the
30,000-member Lambrakis Youth
Organization, named after a. left-
wing deputy killed under suspi-
cious circumstances when Kara.man-
lis was in power. In addition,
the largest organization of uni-
versity students in Greece came
under Communist control in 1964.
While rejecting EDA bids
for cooperation, Papandreou
faces the continuing problem of
keeping the Center Union's own
left wing in harness. Shortly
alter last year's elections, 32
deputies refused to vote for
parliamentary officers because
the left wing had received short
shift, and Papandreou temporarily
expelled two of the factions'
leaders. This past January he
attempted to heal the breach by
bringing into the cabinet one
of these two leaders, a former
Communist collaborator, as min-
ister of interior.
Papandreou's handling of
this cabinet change illustrates
his approach to the leftist prob-
lem. Before making the appoint-
ment he removed all significant
security functions from the In-
terior Ministry. When a. new
labor law permitted leftists to
gain controlling positions in
the country's largest labor fed -
e:ration, the minister of labor,
with an assist from the courts,
managed to return the organiza-
tion to nationalist control.
Papandreou has attempted--without
much success thus far--to counter
the growth of the Lambrakis Youth
Organization by starting his own
Center Union Youth Movement. He
SECRET
Approved For Release 2006/11/01: CIA-RDP79-00927A004800060003-3
 Approved Felease 2006/11/01: CIA-RDP79-00
SECRET
has refused to outlaw the Lam-
brakis Youth Organization, leav-
ing it to the courts to act if
the organization violates exist-
ing laws.
The Communists' greatest
opportunity probably lies in
exploiting Greece's unresolved
economic problems. The EDA con-
stantly attempts to increase
discontent with the status quo
by demanding extravagant reforms.
Government economists warn, how-
ever, that inflationary pres-
sures may get out of hand unless
agricultural subsidies and wages
are held in line. So far, Papan-
dreou has been unwilling to
risk the political consequences
of doing so, while at the same
time resisting the EDA's extreme
demands.
His domestic economic poli-
cies are considered largely re-
sponsible for the loss of for-
eign assets which is causing
growing concern throughout the
business community. Although
official figures for 1964 have
not yet been issued, it is gen-
erally accepted that foreign
assets fell by $50 million last
year--the first decline in six
years. This was largely attrib-
uta.ble to a failure of capital
inflow and invisible earnings,
notably tourism, to rise during
a year when the country's for-
eign trade deficit jumped by
more than $100 million. Another
year like 1964 would virtually
exhaust Greek foreign reserves,
which now stand at $60 million.
Prospects for improvement
are poor. Potential foreign
investors appear increasingly
skeptical over the attractive-
ness of Greece, partly because
of administrative obstacles.
With the government apparently
in no mood to dampen domestic
demand for goods by reversing
its wage and subsidy program,
imports are likely to continue
growing.
Turkey and Cyprus
The problem of Cyprus and
its ramifications remains the
most intractable problem facing
Papandreou. It has not yet had
any significant domestic impact
beyond providing another subject
for attack and counterattack
among political enemies, but un-
settling international effects
may have far-reaching consequences
in Greece.
Since early in the crisis
the Papandreou government has
consistently demanded "unfettered
independence and self-determina-
tion" for Cyprus--the latter
term being equated with union
with Greece. Papandreou has
countered attacks on his failure
to make progress toward this
goal with reminders that the un-
popular London-Zurich agreements
of 1959 were negotiated by
Karamanlis.
Privately, Greek officials
have indicated a willingness
to move toward any solution
which can be sold to Archbishop
Makarios. There is evidence
that Athens has tried to restrain
SECRET
Approved For Release 2006/11/01: CIA-RDP79-00927AO04800060003-3
 Approved For Release 2006/11/01: CIA-RDP79-00927AO04800060003-3
SECRET
the Greek Cypriots on several
recent occasions. An estimated
10,000-13,000 Greek troops are
on the island, not only to as-
sist the Cypriots against pos-
sible Turkish invasion, but a.p-
parently also to ensure that
Athens retains some control over
military events there. Gener-
ally, however, Papandreou ap-
pears to have been unwilling
to engage Maka.rios in a direct
confrontation over the Arch-
bishop's frequent exercises in
brinkmanship. Papandreou evi-
dently felt that the record re-
quired him recently to assert
that "the capital of Hellenism
is in Athens, not Nicosia."
By reviving the deep his-
toric animosities, the dispute
has virtually ended political
and military cooperation between
Greece and Turkey. The Turks
have tried to force the depar-
ture of Greek citizens long
resident in Istanbul. Even
joint planning for defensive
purposes in the NATO context
is next to impossible.
Most ominous, however, has
been the tendency in Athens, as
in Ankara, to look to Moscow
for diplomatic support. Prior
to the adjournment of the UN
General Assembly last month
Papandreou's policy was based
SECRET
on seeking a, favorable solution
through the UN, and Soviet back-
ing there was considered essen-
tial. Athens' emotional reac-
tion to Moscow's seeming switch
to the Turkish-favored "federal"
solution last December revealed
the extent to which this support
had come to be counted on. De-
spite this flirtation and dis-
satisfaction with US and UK pol-
icy, however, the Papandreou
government has not altered
Greece's basic pro-Western orien-
tation.
Outlook
Given the present instabil-
ity of the Center Union, a, dis-
aster on Cyprus could completely
upset the existing pattern of
Greek politics. Papa.ndreou's
failure to make steady progress
toward a, clear economic goal
leaves him vulnerable to a. major
defeat on such an emotional is-
sue, despite his current personal
popularity. His death or seri-
ous illness before the succes-
sion question is resolved also
could lead to the break-up of
the Center Union and to a rever-
sion to government by successive
unstable coalitions as during
the immediate postwar period,
which would allow the Communists
to break out of their present
isolation. (SECRET)
Approved For Release 2006/11/01: CIA-RDP79-00927AO04800060003-3
 Approved Fr elease 203MIZEVRDP79-00 A004800060003-3
SECRET
Approved For Release 2006/11/01: CIA-RDP79-00927AO04800060003-3