CURRENT INTELLIGENCE WEEKLY SUMMARY

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Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE COPY NO. 79` OCI NO. 0312/61 29 December 1961 SECRET State Dept, OSD, & ARMY review(s) completed. ('`V, 4 Rt -~ f, ,5X1 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 ?,o( Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 THIS MATERIAL CONTAINS INFORMATION AFFECT- ING THE NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE LAWS, TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS- SION OR REVELATION OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW. The Current Intelligence Weekly Summary has been prepared primarily for the internal use of the Central Intelligence Agency. It does not represent a complete coverage of all current situations. Comments and conclusions represent the immediate appraisal of the Office of Current Intelligence. Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Next 3 Page(s) In Document Denied Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY WEEKLY REVIEW EAST-WEST RELATIONS The bloc has assessed the Bermuda meeting between Presi- dent Kennedy and Prime Ministe?? Macmillan in almost completely negative terms, with the general conclusion that the talks did not provide grounds for optimism. The roost critical observations have been reserved for the an- nouncement that plans for pos- sible nuclear weapons tests in the atmosphere were being pre- pared. Soviet propaganda concentrated on claims that this decision is another step in the direction of "aggravating international tensions"and part of an attempt to deal with the Soviet Union from a "posi- tion of strength." Izvestia's comment recalled the Soviet warning on 4 December that if the US continued tests, and particularly if it conducted them in the atmosphere,the USSR would be forced to resume its own tests. Moscow has also asserted that there is an "obvious discrepancy" between the announcement on nuclear testing and the appeal for East- West negotiations on Berlin. This line has been accom- panied by further criticism of the Western plan for talks in Moscow on the Berlin question. While Moscow has been careful not to reject the proposed dip- lomatic contacts to be initiated by Ambassador Thompson, the general criticism of this move has been designed to place the West on the defensive. Soviet 'propaganda adopted the position. 'that the Bermuda talks had con?- tributed nothing new to the German question. The main crit- icism has been directed at the commnunique's statement that the purpose of the ambassador's soundings in Moscow will be to determine whether a basis exists for negotiations. Pravda claimed that this is a "strange ap- proach," since the "basis" for negotiations has long existed in the Soviet proposals for a free city and a peace treaty. Izvestia raised the question of whet ier? the West was using the bilateral talks as a maneuver to delay signing of a peace treaty and solving West Ber- lin's status. The Soviets, however, have stopped short of predicting the outcome of these diplomatic probes. One Soviet commentary concluded that it was too early to forecast the result, but that the contacts would be suc- cessful if the US adopted a "realistic approach." Thus, 'the over-all impression conveyed by Soviet propaganda has been that diplomatic contacts are a step in the proper direction, but that the outcome will depend on a shift in the West's posi- tion. This line suggests that Moscow will continue to with- hold judgment on the value of bilateral contacts in order to maintain a free hand to press for more formal negotiations. This approach was reflected in Soviet commentaries prior to the Bermuda meeting which SECRET 29 Dec Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 i 1 of 20 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY reported that one topic on the agenda there would be consider- ation of a meeting with Premier Khrushchev. Moscow added that such a meeting would be fully justified. A deliberate Soviet affront to General Watson, the US com- mandant in Berlin, was also part of the Communist effort to strengthen Moscow's hand for the forthcoming contacts in Moscow. On 21 December, the East German police at the sector border in Berlin had refused to pass the US.politi- cal adviser following his re- fusal to display his identifi- cation papers, even though he was proceeding to a meeting with his Soviet counterpart. On 23 December, the East Ger- mans refused permission for General Watson's three civil- ian aides to accompany him, without identifying themselves, on a pre-arranged visit to the Soviet commandant. The ob- vious Soviet complicity in the East German move suggests that the USSR viewed these encroachments on official US travel as a convenient way of demonstrating the unconditional East German authority over the sector boundary in order to re- move this question from the area of negotiations. The mounting campaign against West Germany was car- ried forward on 20 December with a Soviet note to Belgium repeating the general line of recent notes to other NATO members. The Soviets charged that an agreement between Brussels and Bonn for the es- tablishment of supply depots in Belgium for the West German armed forces would have "dan- gerous consequences." The alleged aggressive in- tentions of NATO were also the subject of a Soviet protest on 23 December to Athens. The Soviet ambassador in an oral statement charged that Greek territory was in danger of being used as a NATO "nuclear-rocket springboard." The protest re- called earlier Soviet warnings to Greece and asserted that Soviet proposals to establish a nuclear-free zone in the Balkans had been rebuffed by the Greek Government. In conclusion, the Soviet ambassador requested an "explanation" of recent reports of the installation of foreign nuclear weapons in Greece. The Communist attacks on the establishment of a joint Danish - West German Baltic command under NATO was continued in an East Ger- man note to Copehagen. As in pre- vious Soviet and Polish demarches, the East Germans charged the Danes with abetting the plans for West German hegemony in Northern Europe. After reiterating proposals for making the Baltic a "sea of peace," the note warned that East Germany would "actively participate" in all security measures introduced by the "Baltic states. SECRET 29 Dec 61 WEEKLY REVIEW Page 2 of 20 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY THE CONGO . Tshombe began to back away from accepting Katanga's subordination to Leopoldville at?an early stage of the Kitona meeting. Ambassador Gullion described him as'not having "psychologically accepted the fact he was suing for terms." Tshombe gave no 'evidence he had changed his views regarding a confederal relationship ins the Congo, and he accepted the eight-point Kitona{agreement only on the basis that .t was subject to approval of the Ka- tanga authorities. Tshombe, when he returned to Elisabethville, seemed to confirm by his actions Adoula's assessment that "each time Tshombe'is close to defeat he asks for negotiations, but when the fighting is stopped he vio- lates the agreement." The Ka- tanga council of ministers de- clared that Tshombe had no authority to commit the Katangan people , and, that . the agreement had no validity because it was imposed by the UN and the US. Foreign Minister Kimba-and In- .terior Minister Munongo--pro- ponents of Katanga's secession -told the consuls in Elisabeth- ville 'llon behalf of Tshombe" that Adoula and Tshombe had agreed only to accept the Bel- gian-drafted constitution-- the so-called Fundamental Law --as the basis for negotia- tion. ` A Katangan government com- munique of 22 December congratu- lated Tshombe for not having committed the Katangan people and declared the Katangan pro- vincial assembly is the "only valid authority" competent to pronounce a decision. Tshombe has sent a Katanga parliamentary delegation to Leopoldville "to discuss modi- fications of certain articles of the constitution." He al- most certainly aims to leave his position sufficiently hazy on the Kitona agreement to give himself time for maneuver, and to try to extract further con- cessions from Adoula. Tshombe himself has expressed doubt that the Katangan assembly--which is scheduled to meet on 3 January-- would ratify the agreement. The assembly, on Tshombe's orders, may reject the whole agreement or portions; of it. . In any event, Tshombe will probably assume the pose that he must abide by the will of the Katangan people. On 24 December, he reas- serted publicly the right of the Katangan people to freedom and self-determination and called on the leaders of the free world to "examine and con- sider if the war against me is fair or if it corresponds with the ideals of the UN." Katangan Foreign Minister Kimba's current trip to West European capitals is probably designed to generate further support for Katanga with the aim of blocking a re- sumption of force by the UN. Ambassador Gullion sug- gests that Tshombe's freedom of action may be limited since Kimba, Munpngo, and Finance Minister Kibwe probably "have the bit in their teeth" and would move against Tshombe if he made any serious move fora settlement. Adoula was extremely wary lest the Kitona talks be used SECRET 29 DEC WT.Y"MrT V "' TTTL'VJ n -s 3 of 20 Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 ,SECRET r CURRENT INTELLIGENCE WEEKLY SUMMARY Bakwanga At/ointlc Lobito A UN 1,950 li~ CoquilhatviIle O7O United Nations Forces* Congo National Army (C.N.A.) - Selected road -t--t- Selected railroad Selected airfield TSf'IOMaE 2,700, uK 1:000 UN 1,100 T,SHOMfSE 4,500 `: ezi The numerical strength of Tshornbe's forces in the Elisabethville area has been reduced iri the recent fighting, but there are no reliable figures on the number of casualties. SECRET u [1,110 scattered Rage 4 of 20 29 D Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY by his opponents within the gov- ernment to undercut him, and he included extremist Minister of Interior Christophe Gbenye as a member of his delegation. Adoula appears to have accepted the agreement only under the advice of UN and US officials. Adoula--as Tshombe?s recalcis trance continues--may become increasingly reluctant to follow a moderate approach. Adoula has threatened "energetic action" against Tshomb? if he fails to im- plement the agreement. Aware of his limited capability in this respect, he and other cen-? tral government leaders have succeeded in getting UN agree- ment to place a Congo battalion with the UN forces in Katanga. While the UN intends that these units will be restricted to northern Katanga, Leopoldville may have other plans. ou a, with his own position threateA'dd, will prob- ably increasingly incline to a tough line toward Tshombe; he has already indicated publicly that further talks with the Katangan lea4 are useless and that Leopoldville has made all the concessions possible. The US Embassy in Leopold- ville reports more signs that the deep-seated struggle for control between the moderates and left wing in the Adoula government may break into the open. The embassy views this struggle--submerged for the Kitona meeting--as remaining acute and one which may end in violence. Top UN officials in New York say they contemplate no military action in Katanga except in self-defense or to hold existing positions and communications. Under Secre- tary Bunche has said that the UN will allow Tshombe up to one month to implement the UN resolutions. The American consul in Elisabethville, how- ever, reports that the hold- fire between UN and Katangan forces remains "fragile" and that both sides are making provocative moves. Pillage and looting by roving bands of Baluba tribesmen and the excesses committed by Ethio- pian ;.troops ' in the TUN com- mand during the fighting are adding to the tensions. Foreign Minister Kimba has stated that Katanga re- serves the right of freedom of movement for its forces, and US Army sources report reliable information that the Katangan forces are taking advantage of the hold-fire to regroup and bring up reinforcements. The American consul in Elisabeth- ville reported on 25 December "an impression" that UN mili- tary circles may be planning a "maneuver" shortly after 27 De- cember if the Katangans do pot accept the Kitona agreement. The civilian population is re- ported "scared and discouraged." Brussels has requested US help to evacuate 2,500 Belgians, mostly women and children. SECRET 29 Dec 61 WEEKLY REVIEW Page 5 of 20 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Efforts to schedule further discussions by the three princes are continuing in the wake of the failure of their initial meeting to reach accord or to provide for a continuation of the talks. At that meeting, held in Vientiane on 27 Decem- ber, Boun Oum, after presenting his position regarding the for- mation of a coalition cabinet, Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY 9 rdng 5oIy\ Baun Neuo PHOi G SALY Muong* __N Sing l Nam Th. iNa M. P: AM4 Hip. Jy Muong Sai Ban Houei ~,? t Sai ~ ~~~?~? r UAN PRA Murfo Luang Prabang uong SAS HC)UR'-r ?, 0o Khoun ? ~` Po Dong ,~ 'N Vang~ieng Tha Thom BBaan HJtr. Muong Bo VdENTIANi_ Borikha ~e~ Pak Sane .--~ - Ban Hin Heup t ,_t!" J Kam &, T NORTHERN LAOS r GOVERNMENT #AI KONG LE - PATHET LAO E~r?, 5y*Amundsen 5eo11 ~ I 5lotion p V ?M M.rdo ~- albn 1V r (U S) a ~>~r ?n? .......I.(u.5.1* volaz y s y le-111-1 o ar ev ka a ......u '.. .Pole of --- N AIR,ROU_?,,,~ } ---- P/ -- ' - ................ Chrislcherch ..... ?.- .... f o Inacm a.ib liry ??---' ,.o r / ? EW ZEALAND A ,JO 1' I i J I . to va., ' i t1 a~1km:e~rle Poro..? IGO A Soeerskayo !Planned M. nn y (1-,- . - i a.. ? f'" 1E' a r cola ~If ~? Coastal Surveys Komsomo1 koya ~t r somm.~, S. r e v Area of planned deep sea ???' 'In alaiO _ ',?w Mirlyy oceanographic surveys. /j 0 uo n / A' I " ao. : . ALIA \ AUSTR 390 I20 100 00 BO 3060 0 90 130 equipment could be delivered in four or five days instead of four?or five weeks. Further- more5aircraft could be used to support a summer research program of three to four months similar to the US program in Antarctica. Mapping operations could be expanded because of the high ceilings of the turbo- prop aircraft, and use of the AN-10--believed to be a "flying laboratory"--would permit an extension of research coverage by airlifted mobile scientific research teams. The economies of air delivery could mean an increase in the number of Soviet stations in Antarctica, beginning possibly with re- activation of Sovetskaya and the "Pole of Inaccessibility." The Ob, the flagship of Antarctic operations, and the Arctic service vessel Koopera- tsiya left Leningrad in November carrying over 3,000 tons of supplies and equipment to the main Soviet Antarctic station, Mirnyy, and to the new Novola- zaryevskaya station in Queen Maud Land. The Seventh Soviet Expedition will involve some 300 people--considerably less than some earlier expeditions but more than last year--about 100 of whom will winter over. In addition, 4 Czechoslovaks, 3 East Germans, and 1 US ex- change scientist will partici- pate in the year-round research. The basic research program of previous years will be SECRET 29 Dec r-1 torOVIrT V Dtv TV W Un -cra 19 of 20 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY continued, including investiga- tions in meteorology, upper at- mospheric physics, glaciology, geodesy and gravimetry, and geology. Air-supported geologi- cal exploration and surveying is to be continued in Queen Maud Land and expanded into Enderby Land--an operation described as one of the most important tasks of the Seventh Expedition. An expanding pro- gram of field observations over the extensive ice plateau from the Indian Ocean to the Geomag- netic Pole and westward to Novo- lazaryevskaya will be possible with the introduction of long- range turboprop aircraft. The delivery of new sledges and tractors and publicized plans to cross areas "previously untrod-den by man" suggest that an extensive traverse may be undertaken, such as the long- deferred crossing from Novo- lazaryevskaya to Sovetskaya. Coastal oceanographic research by the Ob, including hydro- graphic surveys, will concentrate on the area between Queen Maud Land and Enderby Land--the same area into which geological re- search is to be expanded. Soviet whaling operations in Antarctic waters for the coming season will reach a new high. A fourth and new whaling fleet, the Sovetskaya Rossiya, has joined the other fleets, the Slava, the Sovetskaya Ukraina, and the Ivan Dolgorukiy. As many as 78 vessels, including 18 tankers, may be operating in the area. Recognition of the effects of this expansion --at the expense of traditional whaling countries such as Norway, Japan, and the Netherlands--was given in a recent Soviet broad- cast which stated that a whaler is being dispatched to the South African coasts for experimental fishing "because the prospects for whaling in the Antarctic area are deteriorating every year." (prepared by ORR) SECRET 29 Dec Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-310 of 20 Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY SPECIAL ARTICLES EUROPE'S NEUTRALS AND THE COMMON MARKET The applications filed on 15 December by Sweden, Switzer- land, and Austria for condition- al association with the European Common Market (EEC) underscore the deepening foreign policy dilemma of the neutral countries of Western Europe. During the past year, the struggle over West Berlin and the Soviet pres- sures on Finland have emphasized the extent to which the neutrals must ultimately rely for their security on the strength and cohesion of the West. Yet, the neutrals' participation in the prospective European consolida- tion around the Common Market would restrict as never before the basic tenet of their foreign policies: independence of judg- ment and action. ation terms raise difficult problems for the EEC, the accep- tance of which is far from certain. If they are accepted, the neutrals are likely to find that even limited ties with the EEC involve encroachments on sovereignty which may in the long run prove politically intolerable. Moreover, the USSR has repeatedly warned Austria against closer align- ment with the Common Market'; Finland is unlikely in the fore- seeable future to risk Soviet retaliation by approaching the EEC; and through Helsinki, Mos- cow is in a position to exert, strong and continuing pressure on the Swedes. The Political Imperative Only Ireland of Europe's remaining neutrals has decided to opt for the Common Market. As Dublin's bid last July for full EEC membership was largely predicated on the importance to Ireland of retaining its British markets, it is doubtful either that the country is ready for EEC competition or that it appre- ciates the political implica- tions of its move. Nevertheless, in the opinion of the American Embassy, Dublin's endorsement of the overall objectives of the EEC treaty is in keeping with:-.a growing tendency in Ireland to regard its traditional position of neutrality as outmoded and no longer in keeping with the country's present interests. By limiting their proposed participation, the three appli- cants for association are hoping to find 'a middle way between their basic interests in a united Europe and the requirements of continued neutrality. It re- mains questionable whether they can do so. The proposed associ- That adjustment to the prospect of an integrated Europe is so difficult for the neutrals stems largely from the fact that the foreign policies to which they are com- mitted reflect exigencies of law, tradition, history, and geography. Switzerland has been a neutral since 1815, when it was declared an independent and neutral state by the Congress of Vienna. Sweden's policy of neutrality has kept it out of Europe's wars since 1814. Since World War II, Bern and Stockholm have adopted policies of "solidarity" or "active neu- trality" which have permitted membership in purely economic organizations like the OEEC and an active role in the specialized agencies of the UN. For nearly a century and a half, however, both countries have carefully preserved their freedom of action and avoided participation in military or political alliances. SECRET 29 DP. nnnqi~ninn .ef'IA r1 n-7 n nnnn-7 AnnnAnn AAnnnA D?ge 1 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Austrian and Finnish neu- trality policies are, by con- trast, of much more recent origin, but they are far more specific in content. In the so-called Moscow Memorandum of 1955, Vienna agreed to pattern its neutrality after the Swiss model--a commitment subsequently embodied in a constitutional law binding Austria to join no mili- tary alliance and permit no for- eign military bases on its soil. Under the terms of the State Treaty, Austria also agreed to avoid any future union with Germany. Finnish neutrality has its origins in Finland's wartime ex- periences and its proximity to the USSR. Consequently, the Finns are committed to avoid any action which the USSR might re- gard as unfriendly or inimical to Soviet security interests, and under the provisions of the 1948 mutual assistance pact, Helsinki is bound to consult with Moscow in the event of threatened aggression by Ger- many or its allies. The Economic Imperative The necessity of continued neutrality is accepted by an overwhelming majority of official and public opinion in all the neutral countries, and only com- pelling economic reasons have forced them to consider a major adjustment in its practice. In 1960, 55 percent of Austria's exports went to the Common Market countries, from which Austria obtained an even larger percentage of its total imports. Austrian exports are largely manufactures, on which EEC tariffs will ultimately range up to 14 percent. Though somewhat less intensive, Switzer- land's commercial ties with the EEC are comparable to Austria's, and the 40 percent of total Swiss exports which go to the Common Market are heavily concentrated on items on which the EEC's tariffs will be the highest. Both countries have established trade ties in the Common Market and would in any case benefit from its trade-creating effects, but outside the EEC both would suffer increasing tariff discrimination and become progressively less attractive to foreign investors. Both Sweden and Finland have the comparative advantage that a higher percentage of their exports are crude materi- als on which EEC tariffs are low or nil. However, in 1960, 31.6 percent of Sweden's exports went to the EEC countries. If the EEC were enlarged by the membership of the UK, Norway, and Denmark, this figure would rise to more than 60 percent of Sweden's ex- ports. The comparable figure for imports is something over 55 percent. Moreover, Sweden's economic growth is geared toward a progressive shift toward ex- ports of more highly processed goods, for which the EEC is al- ready a major market. In Finland's case, the problem is the heavy concentra- tion of its exports on products of the forest industry, about 70 percent of which now go to Western Europe--30 percent to the UK. Should the UK and Fin- land's major competitors--Norway, Sweden, and Austria--all join the Common Market, the Finns' hopes for expansion of their pulp and paper industry would suffer a heavy blow. The Search for Alternatives The neutrals have been searching since the Common Market SECRET 29 Dee 1:11 CDPCTAT. APTT("T.PC Page 2 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY 93' RIF was founded for ways of living with it. Their policies, how- ever, have reflected a curious blend of illusion, wishful think- ing, and contradiction. They shated,'for example, the wide- spread expectation that the EEC would founder at an early date, and, like Britain, they persisted in regarding the Common Market as an economic problem. While refusing to join it on the grounds that it was "political, It they refused to take it serious- ly as a step toward a political union. Thus, in joining with Britain in ardent support of the abortive Free Trade Area (FTA) project, the neutrals were essentially motivated by a desire to avoid the economic consequences of the EEC's pref- erential system. When the FTA collapsed in 1957, they turned to the European Free Trade Association (EFTA) for similar reasons to gain interim advan- tages of a preferential system and to exert economic pressures on the Common Market to come to terms--their terms--on an all- European market. However, so long as its members were unwilling them-. selves to bear the costs of an '"economic split of Europe," the EFTA--the so-called Outer Seven --was a foredoomed experiment which reached its virtual end last July when Britain and Den- mark applied for EEC membership, Although the other members of EFTA have extracted a commit- ment from London not to enter the EEC until their legitimate interests have been met, the neutrals have in effect been left to their own devices, and all the Outer Seven countries have recognized that the EEC is unlikely to be changed in essential respects--except from within. Mutable Neutrality? By applying for direct association with the Common Market under Article 238 of the EEC treaty, Austria, Sweden, and Switzerland have now posed the issue of whether it is possi- ble to reconcile the dictates of neutrality with the long- range objectives of the EEC. Although the three countries have not yet specified in detail the terms of association they are seeking, they have all spurned participation in any moves toward political integration. Moreover, in their efforts of the past few months to concert their views on the exemptions they will require, they have shown special concern over the indefinite duration of the EEC treaty, its provisions for a common commercial policy, and the various other measures which look toward full economic union. It remains unclear whether they propose to align their tariffs as regards non-members with the EEC 's common external tariff-- thus effecting an eventual customs union--or whether they will seek to retain tariff free- dom respecting non-members, thus creating a free trade area arrange- ment with the EEC. These are major issues for the neutrals. Austria, whose trade with the bloc accounts for about 15 percent of its total trade, has long insisted, for example, that its future trade agreements with the USSR must remain a matter for bilateral negotiation between Vienna and Moscow. The same is true of Fin- land. In both Sweden and Austria, the potent Socialist parties have SECRET 29 Dec 61 SPECIAL ARTICLES P.ge 3 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY based much of their opposition to the EEC on the grounds that even association would preclude socialist planning on a national scale. Furthermore, the Swedes, who have long felt a certain se- curity in being removed from po- litical and economic developments on the Continent, retain a deep- seated apprehension of foreign domination of any part of the Swedish economy. The Swiss have also alleged that any very close ties with the EEC would be unconstitutional, since issues which are reserved in Switzerland to popular initi- ative and referendum would be de- cided in EEC forums. Among all the neutrals there is apparently growing realization that even the loosest of arrangements with an enlarged EEC might ultimately mean, because of the disparity in economic strengths, the relinquish- ment of control over economic policy, and with it a large meas- ure of sovereignty. Mutable Common Market? The issues are almost equally complicated from the Common Market's point of view. Despite the experience of EFTA and the essentially free trade area character of the EEC's own association with some 16 African states, the EEC has long been skeptical of free trade area arrangements of the type the neutrals may be seeking. This skepticism is partly a reflection of the technical problem of con- trolling the influx of imports into the area through the member with the lowest tariffs--a prob- lem which might have special relevance to Austrian and Finnish association in view of their past trade ties with the USSR. More- over, if the EEC should accord to the neutrals a privileged access to the Common Market while permitting them to main- tain whatever tariffs they de- sired against non-members, there would be many claimants for simi- lar treatment--most notably among the Commonwealth countries. The prospect that the EEC might involve itself in an amorphous and expanding pre- ferential system also involves a question of principle. The countries which founded the EEC believed that the maintenance of a single tariff against out- siders wad essential not only to their own cohesion but also to their achievement of full economic union. If tariffs are concerted, they hold, this inevitably requires the coordi- nation of commercial policies, which in turn requires the pur- suit of common fiscal, monetary, and economic policies. Thus, even if the neutrals should align their tariffs with the EEC's, they might well find the Common Market reluc- tant to exempt them from align- ing their economic policies in other respects--on the grounds that it would be not only un- workable but possibly even dan- gerous to the EEC. EEC critics of the attempts of the neutrals to obtain the commercial advantages of the Common Market while avoiding its sacrifices have been particularly alive to what they consider the political dangers involved. For example, at a recent meeting with Ambassador Mac- Arthur, Belgian Foreign Minister Spaak expressed grave concern SECRET 29 Dec Al SO1?rrTAT. ARmrrrr.Tg D-.ge 4 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY that the enlargement of the EEC with members which do not accept its political objectives could mean the "death knell of polit- ical unification"--especially if the EEC were already mov- ing away from the goal of federal union implicit in the Common Market toward the loose confederation envisaged in the "union of states" proposed by the French. Spaak apparently feels that the neutrals would oppose closer political ties with the EEC for themselves, and also make common cause against political integration with the "minimalists" already in the EEC. There is also concern as to the impact the neutrals might have on the overall polit- ical alignment of the EEC. The Common Market countries might feel a greater sense of responsibility for the "fate" of the neutrals if they were formally associated with them., and perhaps less inclined to take positions on East-West issues which could add to the neutrals' problems. Conceiv- ably, the neutrals could con- tribute to the development of "third force" sentiment within the European Community. The most important objection to the admission of the neutrals, however, is the belief that as long as they must avoid polit- ical and military alliances, they would be a constant drag on the development of European North American ties in the frame- work of an Atlantic Community. Neutrals Between East and West Moscow, which has long been hostile to the EEC, may see European integration in this broader context. The possibility that Austria and Finland would follow the British lead in seeking Common Market ties has prompted an intensive Soviet effort to deter such a decision. In addition to their particular sensitivity to any extension of West German in- fluence in these two countries-- which Moscow believes would re- sult from such ties--the Soviet leaders realize that the consoli- dation of Western Europe would be a major contribution to free world strength. This attitude was reflected in the Soviet aide-memoire to Vienna on 12 December which charged that the Common Market was an active political-military arm of NATO, intended to support Western military preparations.. The NATO countries, the note alleged, were opponents of neu- trality and were attempting to drag European neutrals into active participation in the Western military alliance. Despite the signs of in- creased Soviet opposition, Mos- cow probably does not hold great expectations that Sweden, Aus- tria, or Switzerland can be permanently isolated from their major trading partners. Pros- perous Switzerland and Sweden, lacking extensive trade ties and contiguous borders with the bloc, appear relatively in- vulnerable to any direct counter- measures which Moscow seems likely in the foreseeable future to attempt to take. As mem- bers of EFTA, both Bern and Stockholm have resisted past pressures to accord the USSR most-favored-nation treatment, and neither would find a com- plete severance of trade ties with the bloc an irreparable loss. in Stockholm, however, and to a degree in Bern, the more serious consideration is SECRET 29 Den Fit SPECIAL ARTICLES Page 5 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 SECRET CURRENT ,INTELLIGENCE WEEKLY SUMMARY' the much more vulnerable posi- tion of Finland and Austria. Since 1958, and especially since its 30 October note to Helsinki, Moscow has demonstrated the multiple economic and political pressures it is capable of ex- erting on the Finns, and through them on Sweden. While the Soviets have not directly raised the question of Finland's relations with the EEC, the extensive charges they have made against West German penetration of Northern Europe leave no doubt that the USSR would almost certainly act to prevent any direct association by Helsinki. The outcome of the recent crisis in Finnish- Soviet relations also provides Moscow with a pretext to use Finland as a hostage against Swedish association with the EEC. In effect, Moscow has served a warning that increased ties between West Germany and the Scandinavian countries could lead to further pressure on Finland. Vienna's policy toward the EEC has been geared from the beginning to the expectation that Moscow would not tolerate Austrian membership, and it has been apprehensive of the Soviet reaction even to an ap- plication for association. Al- though the Soviet note of 12 December merely adjured Austria to bear in mind the Soviet po- sition in its negotiations with the EEC, Foreign Minister Kreisky has said he is certain that So- viet reprisal ld follow an Austrian bid. Multiple Dilemmas In reluctantly applying for EEC association, the three neutrals have raised a problem for which no quick or easy solu- tion is in sight. From the point of view of the neutrals, they have been forced to do so; they have no enthusiasm for the broader objectives of European unity. Indeed, the older neu- trals, Switzerland and Sweden, still ardently defend the use- fulness of the role they play as neutrals in international affairs against the charge that they are anachronisms in the present state of world affairs. Unless they are readily accepted by the EEC on the terms which they specify, some of their re- sentment will be directed at the US, which they feel blocked the creation of a loose European trading arrangement and "forced" Britain into the EEC. It will be equally diffi- cult for the EEC to reconcile its conflicting interests with the neutral applicants. All three are important markets to some of the EEC members, notably West Germany, and none of the members would wish to contribute to the economic and political iso- lation of the neutrals, lest this push the more vulnerable among them involuntarily to- ward the bloc. This basic sympathy, however, will be balanced by the suspicion that the neutrals are claiming the profits of integration while SECRET 29 Den 91 SPECIAL ARTICLES Page 6 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY In the seven years since the Indochina War, the Hanoi regime has moved to consolidate its control throughout North Vietnam. Today, with the army, public security forces, and party rank and file under firm control, there is little op- portunity for large-scale re- sistance to develop among the disgruntled but politically apathetic peasantry. In recent months, however, the government has shown growing concern that sporadic anti-regime violence-- in the past, generally confined to areas inhabited by Catholics and the ethnic minorities--could spread to peasants in other areas and to intellectuals and other dissatisfied elements. Catholics Estimates of the total number of Catholics in North Vietnam range between 500,000 and 750,000. They are concen- trated in the Red River delta around Hanoi and Haiphong and in Nghe An and Ha Tinb prov- inces to the south. Initially, the Catholics, who as Vietnamese nationalists had aided in ef- forts to-break away from France, supported the new regime in Hanoi. After 1954, however, relations between the Commu- nists and the church deteriorated rapidly, and Catholics soon be- came the most vocal critics of the regime. A violent outbreak oc- curred in Nghe An Province in November 1956. The smoldering resentment of the Catholic peas- antry was brought into the open by the brutal excesses of the land reform program. By Hanoi's admission this three-day revolt involved 4,000 dissidents, but refugees report the number may have exceeded 10,000. More than 5,000 troops reportedly were rushed to the scene. Since that time, there have been occasional reports of similar, smaller scale disturbances in the same area. An outburst occurred in April 1957; again in March 1959, ac- cording to one report, some 2,000 Catholic youths clashed with provincial Yiilitary units. In April 1960 still another dem- onstration was broken up by troops and police. Recognizing the fairly sizable resistance potential of the Catholic minority, Hanoi has alternated between policies of conciliation and harsh re- pression. After crushing the 1956 revolt in Nghe An the regime was placatory. Pro-Communist Catholic leaders and newly formed lay groups were encouraged to hold special services for Catholic "comrades" killed in the war against the French. Party officials were. directed to appoint Catho- lics to village agricultural ex- ecutive committees and to re- store and repair churches "req- uisitioned" during the land reform program. Six months later, however, Hanoi began denouncing individual priests and accusing the church of political activities. This crackdown was followed by another brief period of relaxation in the fall of 1958. Bell-tolling and requiem masses were permitted following the death of Pope Pius XII, and official greetings were extended to the new pontiff. At present, official harass- ment is the pattern. All church schools are closed, and political indoctrination sessions are scheduled to conflict with church functions. In contrast to Communist China, North Vietnam has a rela- tively high proportion of native Catholic clergy and thus has been less dependent on foreign mis- sionary efforts. For this rea- son, the expulsion -of the remaining foreign priests in 1958 and 1959 may not have greatly .SECRET 29 De' A' .qvv.. FAT. Ar?TT('T.1 S Page 7 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE ? WEEKLYSUMMARY CHINA ;RAIN TRIBES Thai Muono Phong Tho Lai Chau, 'Muong Khoa Phong Saly Dien Bien Phu vli,I' VAC, '( %NC)MOUS f:r,lON Lang Son. NbR Hab L A 0 S 'Luang Prabang Haiphong-. V/ETNr4 Nam Gjnh' on Cay Thanh' Hon - ti ill(Jff AN PROVINCE North Vietnam weakened the Catholic community. The church's continuing strength is reflected in a series of arti- cles last summer criticizing the recalcitrant native clergy. In June, a "Father-Trull in Thai Binh Province near Hanoi--pos- sibly the bishop of the diocese-- was attacked in a North Viet- namese publication for allegedly ordering priests to refuse to hear confessions by Catholic peasants who had joined co- operatives. These press attacks on the intractable clergy document a passive opposition that, if not widespread, is at least suffi- ciently prevalent to cause the Communists a good deal of con- HAINAN SOUTH tern. One of the regime's coun- termeasures has been the promotion of a more docile priesthood organized as the Association of Patriotic and Peace-Loving Catholics. The association has not been generally successful in attracting priests, however, and laymen prominent in its activities are ostracized by fellow Catholics. Ethnic Minorities The ethnic minorities of the highland areas, numbering 1,500,000 or more, view the Vietnamese of the delta and coastal plain with suspicion and frequently with open hostil- ity. Mountain tribes such as SECRET 29 Dec 61 SPECIAL ARTICLES rage 6 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY the Meo, Thai, Muong, and Man, have long regarded themselves as masters of the rugged hinter- land of North Vietnam. Al- though the regime now claims that more than three quarters of the peasant families in minority areas have joined co- operatives, it has always moved with caution in leading them "along the road to socialism." Hanoi's, deference to the minor- ities was illustrated by the establishment five years ago of the so-called autonomous regions: the Thai-Meo in the northwest bordering Laos and the Viet Bac in the north bor- dering China. The fighting in Laos, where Meo tribesmen have been highly successful in activities behind the lines, has apparently com- plicated Hanoi's problems. The Meos have effectively harassed supply routes from North Vietnam, and Hanoi has been concerned lest guerrilla dissidence spread to its own Thai-Meo territory. Hanoi's concern derives from a previous history of dif- ficulties. Since early 1958 there have been reports indicat- ing unrest near North Vietnam's frontiers. In January 1958 several clashes were reported between government forces and Meo guerrillas near Muong Khoa. Later that winter incidents were said to have taken place near Phong Tho, and the situation in the area apparently remained unsettled for more than a year. Hanoi's troubles with Meos apparently continue. According to a recent report, the Meos last spring obstructed census operations and balked at govern- ment efforts to regroup unruly villagers in an agricultural camp. More than a dozen party officials were poisoned, and the army had to restore order. Food shortages have figured in many reported disturbances. Dis- content over shortages may have prompted reported disorders in the southwestern portion of the Thai-Meo Autonomous Region early in 1960. Two villages were burned, and there were desertions from regular army units in the area. At the same time about 70 percent of the population in the Dien Bien Phu district was said to be hostile to the regime be- cause the people were required to deliver more than half their harvest to the local authorities. In North Vietnam, the., peasantry comprises about 90 percent of the population, and a sizable proportion has been antagonized by the drastic land reform program between 1954 and 1956 and by the subsequent measures to collectivize the countryside. More than 100,000 peasants were arbitrarily labeled "landlords" and their property expropriated. Many were jailed and some executed by "people's courts." After mid-1960, the regime accelerated its drive for col- lectivization throughout the lowlands. Collectivization, however, has been concomitant with widespread food shortages. Although the poor harvest in 1960 and the absence of suc- cesses this past year have been due primarily to adverse weather conditions, the situa- tion seems to have been aggra- vated by passive resistance on the part of the? -,peasants, who have planted less in some areas and harvested in haphazard fashion in 25X1 others. SECRET 29 Dec 61 SPECIAL ARTICLES Page 9 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY peasants failed to build proper dikes and had not fertilized properly. Many peasants also reportedly refused to sell their food "surpluses" and killed livestock for their own use. The persistent lack of confidence in government rice collection and redistribution procedures is reflected in continual com- plaints in the party press about peasant "hoarding." Intellectuals The French-educated pro- fessional classes in North Viet- nam, for a time outspoken critics of the regime, in re- cent years have remained silent, muted by the futility of re- sistance. During the Vietnamese Communists' "hundred flowers" interlude the leading literary journal Nhan Van published let- ters to the ;e i.tor bitterly criticizing the regime. In December 1956 ldhan Van was sup- pressed, and a more orthodox magazine was launched with the party's blessing. The follow- ing year the successor journal was closed down for printing cartoons deriding the applica- tion of socialist realism to art. The regime's highly ef- fective campaign against intel- lectuals entailed a sharp de- nunciation of personal lives and habits; intellectuals were accused, as a class, of secret vices--opium smoking and sexual immorality. The majority ap- pear to have resigned themselves to their isolation and have made no further efforts to vocalize their anti-regime attitudes publt.c ly . Sabotage References to "bandit ac- tivity" have been cropping up in the North Vietnamese press with increasing frequency since midsummer. Hanoi leaders are understandably apprehensive about anything they interpret as an effort to repay in kind their-own guerrilla war against South Vietnam's President Diem. In October, the party paper Nhan Dan reported that "major fires broke out in a few warehouses, factories, and crowded localities ...and had bad effects on pro- duction." A large proportion of this arson was attributed to the ."enemy's sabotaging hands," and home service broadcasts have warned, "The nearer the enemy draws to his final defeat, the more desperate his cunning and hazardous activities." Open defiance of the regime is rare in urban areas, where the security apparatus is most effective, but the particularly acute food shortages this past spring may have sparked violent demonstrations in Hanoi itself. According to one report, in June a government-organized demonstra- tion against Diem and the US turned into a wild anti-regime riot damaging an important oil storage area near the capital. Hanoi's home-front crusade against saboteurs, spies, and "counterrevolutionary elements" suggests an element of official concern lest certain long-dis- satisfied elements in the popu- lation be incited to open opposi- tion. Judging by the tone of current references to "bandit" activity, however, Hanoi does not feel it faces a major internal security threat at the moment. Press treatment rather suggests that "enemy sabotage" and the capture of "Diem commandos" is being given publicity as a do- mestic reminder of the governmenth all-pervading watchfulness--and the quick punishment meted out to all who disturb the established order in North Vietnam. SECRET 29 De' r-, RDR(TAT. ARTICLES Page 10 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927A003400110001-3 The elections in Greece on 29 October 1961 confirmed that country's present political sta- bility. Premier Constantine Karamanlis, who has held office since October 1955, was returned to power:, and his party, the Na-. tional Radical Union (ERE), won a sizable increase in popular vote over that received in the 1958 elections. The terms of the electoral law limited the party's increase in parliament to only a few seats--it now holds 176 of the 300, as com- pared with 172 in 1958. The period of rule by what has been basically the same right-of- center government since 1952 will probably be extended to at least the end of Karamanlis' term in 1965. Greece had 20 governments and 435 cabinet ministers in the eight years following its liber- ation in 1944. POLITICAL AND ECONOMIC TRENDS IN GREECE LIBERALS k 36 UNITED' DEMQCRATIC LEF1'_(EDA) NATIONAL RADICAL UNION (ERE) 172 SEATS 300 "PACE,-the Progressive A9rariar Democratic Union was a coalition of four small *PAME, the Pon-Democratic Agrarian Front of` Greece, was a caalition of al partiesy including Morkezinis`Progressives, created only for the period of the United Democratic Left (EDA) and a small IeflIIStagrarian party creoted by= elecfians. EDA in 1960. Independentsreceived 0.2% of popular votes in 1958, .and 1 . 1% in 1961, but no seats, SECRET Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET" CURRENT INTELLIGENCE WEEKLY SUM?ARY The Opposition uties--as compared with nearly 25 percent of the vote and 79 deputies in 1958, when it be- came the largest opposition party in the Chamber o? Dep- uties. That position now falls to the non-Communist Center. Union. This grouping, led.by veteran politician George Papan- dreou, was hastily formed several small parties befo^? the elections, in which it won. 86 seats. However, some of the leaders of its diverse factions may find it impossible to contin- ue to subordinate their person- al ambitions to the demands of party unity. The other member of the so- called nationalist opposition is the Progressive party of Spiros Markezinis, with 14 seats. Markezinis, who was the only member of his party elected in 1958, has emerged as a potential rallying point for many of Karamanlis' non-Communist oppo nents. His party was well organ- ized, had a consistent program, and presented attractive candi- dates. Markezinis himself, how- ever, tends to be rigid in his views and is unwilling to share in leadership, factors which The Communist-front United Democratic Left (EDA), operating under a new label, the Pan-Demo- cratic Agrarian Front, this year won less than 15 percent of the popular vote and elected 24 dep- GREECE : RESULTS OF NATIONAL ELECTIONS IN 1958 AND 1961 29 Dec 61 SPECIAL ARTICLES Page 11 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 have limited his political po- tential in the past. All opposition parties have denounced the "intimidation" and "adulteration of the vote" which they claim occurred before and during the election. Papandreou and most Center Union deputies as well as all the EDA deputies boycotted the opening sessions of parliament. The Progressives, however, have taken their seats in the Chamber, and it is assumed the other opposition deputies will return when parliament re- convenes in January. Even so, the charge that the Karamanlis victory was "illegal" probably will continue to embitter domes- tic politics. Economic Situation Karamanlis' victory was due in large part to the"accomplish- ments of his government. He capitalized on the nation's financial stability, on his reputation as a "man of works," and on his promise that another four years will, allow him to complete his program. He has done much to improve transporta- tion,, electric power, and irri- gation and to stimulate the ship- building, steel, aluminum, and fruit-processing industries. Under him, Greece has also re solved most of the economic re- construction problems which con- fronted it after World War II and the three-year war against Communist rebels. (1946-49). Grave economic and social problems remain, nevertheless, including the basic one of limited' natural resources. The annual per capita income has. risen slowly to $300--but re- mains far lower than in most Western European countries. Underemployment in the poverty- stricken countryside has led to a heavy movement from rural to urban areas. This not only has destroyed the traditional stabil- ity in rural Greek society but has increased the problem of unemployment in the cities. In addition, the maldistribution of wealth between the rural areas and the more prosperous cities has not been remedied but has continued to grow. The conspicuous consumption of lux- uries by the wealthy, combined with increasingly frequent con- tact with tourists and other representatives of Western Eu- rope and the US, has stimulated the demand among the middle-in- come and lower economic classes for rapid change of both the economic and social order. In the drive for economic improvement, Karamanlis is re- lying heavily on his Five-Year Economic Development Program (1960-64) and the recently nego- tiated association of Greece with the European Economic Com- munity (EEC). A main aim of the development program is to achieve an annual rate of in- crease of national income of about 6 percent for the five- year period, with an increase in per capita income to around $380. Owing in large part to good weather during the past year, the over-all increase in gross national product for 1961 now is projected at 7-8 percent because of a rise of at least 11 percent in agricultural out- put. This is considerably above the increase in GNP in 1960-- less than 4 percent--and has improved the prospect of achiev- ing the annual 6-percent target. SECRET SPECIAL ARTICLES Page 12 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET CURRENT INTELLIGENCE WEEKLY S RY The second major goal of the plan--to create 400,000 new jobs by 1962--will probably be more difficult to reach and in any case is probably too low to take care of the unemployment problem satisfactorily. In late 1960 unemployment Plus under- employment added up to a shortage of about 700,000 full-time jobs. The unemployment problem has been somewhat ameliorated in the past by the heavy emigration of unskilled workers--chiefly to `Nest Germany--but with the heavy influx into the labor force of youths born after World War II, the situation will probably now become worse. Development Financing The program projects a five- year total of investment spending of about,$3.68 billion. To fi- nance this program, the govern=ment anticipates that $600,000,- 000 will be supplied by foreign capital. Greece has received over $1.65 billion in US eco- nomic aid since 1947, including about $50 million in grant aid and PL 480-Title I and Develop- ment Loan Fund credits in 1961. Aid in the form of grants is expected to be greatly reduced in future years. In his policy statement to parliament on 5 December, Kara- manlis noted that continuation of external defense aid is of basic importance to his program for economic development. He cited the economic burden Greece is under in maintaining its de- fense organization, most of which is committed to NATO and for which Greece devotes a larger proportion of its budget--about 28 percent--than most countries. Recent Greek efforts have been devoted to securing continued US aid at past levels while ob- taining increased aid from other NATO states--particularly West Germany. Karamanlis has also pro- posed establishment of a special fund within NATO to help financi- ally weaker members preserve their defensive capabilities. In addition, a three-member NATO mission is investigating the special economic problems of Greece and Turkey and is to report to the North Atlantic Council on "considerations justifying the requests of these countries for aid in implementing their economic plans." Further economic aid to Greece from Western sources would be facilitated if the government could settle its defaulted pre - World War II debts--a problem Karamanlis was reluctant to approach before the recent elections. EEC Association The association agreement with the EEC was signed last September after nearly two years of complex negotiations. Under the terms of the agreement, which is expected to become operative in early 1962, Greece will be granted a period of 22 years for readjusting its tariff structure and general economy before joining in a full cus- toms union with the EEC. To accelerate economic development, the EEC bank will loan Greece $125,000,000 over a period of five'years. Association with the EEC should also permit Greece to re- direct its exports to Western European markets and away from dependence on-the Soviet bloc. SECRET 29 DF- r"I SPECIAL ARTICLES Page 13 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET Exports to the bloc have in- creased from 6.2 percent of to- tal exports in 1953 to an esti- mated 25.3 percent in 1961, this trade being of particular import- ance for the agricultural sector of the Greek economy. Greece's balance of pay- ments problem has grown more acute with the gradual increase in consumer purchasing power. It appears that for 1961, less than 40 percent of Greece's im- ports will be covered by exports. There has been a steady rise in recent years in earnings from emigrant remittances, shipping, and tourism, but only foreign aid has permitted Greece to re- frain from drawing heavily on its convertible reserves, which totaled $212,000,000 in July 1961. The government's current program emphasizes stimulation of domestic production, both to provide substitutes for imports and to increase exports, and encourages private savings rather than consumption. Foreign Relations Contacts with the Soviet bloc are coldly formal but are frequently interspersed with threats from the USSR and Bul- garia over Greek participation in NATO. Bulgaria has long been active in sending espionage agents into Greece. Relations have never been re-established with Albania since World War II, and Greek leaders and the press have reacted nervously to the situation developing in the Bal- kans since the appearance of the Albanian-Soviet rift. Greek of- ficials have indicated that Greece prefers three kinds of communism to only one or two on its northern border; attitudes are also heavily influenced by its historical claim on part of southern Albania. Despite public assurance by government spokesmen that rela- tions with Yugoslavia remain, harmonious, there. is an under- current of suspicion in G',eece over Yugoslav designs on Mace- donia--much of which is incor- porated in northern Greece. Re- lations with Turkey were greatly improved following the settle- ment of the Cyprus controversy in,1959, but a residual disc trust of the Turks is currently mainfested in Greek fears that the new Turkish Government will eventually move toward a neu- tralist course in East-West re- lations. Attempts over the past few years to maintain good relations with the LIAR have not prevented the imposition new pressures on the Greek mi- nority in Egypt and the subse- quent flight of many of these persons to Greece. Criticism of Nasir now appears more fre- quently in the speeches of gov- ernment leaders and in the press. None of these foreign po- licy problems, however, is like- ly to come close to attracting the attention Karamanlis' gov- ernment will be giving its eco- nomic program. The government's ability to continue to outdraw its opposition will depend even.- tually on whether it can inspire a pace of economic development- which will not only be faster than in the past but will be fast enough to meet the higher expectations of the Greek elec- torate. SECRET 29 Dec r-1 OTt'IITAT AD1 TrTL'Q 10--- '14 of 14 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 SECRET SECRET Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 Next Page(s) Next 3 Page,(s) In Doc Approved For Release 2007/10/23: CIA-RDP79-00927AO03400110001-3 u ment Denied