Created: 11/16/1954

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Tht following organisations participated In the preparation of thu estimate; The Central Intelligenceandthe intelligence organization* of the Drpartmcnlt of State;'if* Army, the Hupp, thend the Joint Stay,

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To estimate the current situation and probable developments in Italy


effectivenessATOwill continue to be limited by itsand fundamental economic and social weaknesses, which Italy is unlikely by itself to mitigate substantially during the period of tliis estimate. The Italian Communist Party is the largest inEurope,urther growth in Com-munist-Nenni Socialist strength isHowever, while the battle against Communism is far from over, we believe that the Communists are unlikely to come to power for the reasons stated below.

We believe that the Communists are unlikely to undertake to seize power by force. If, however, the Communists shouldoup, we believe that the government, controlling the publicand military forces, almost certainly would be capable of frustrating the coup. Its present willingness to do so would be substantially increased if it were assured of prompt outside assistance.

A government dominated by theDemocrats in coalition wilh orby other anti-Communist parties

'Tab estimate iupersedesProbable Development* Inated3 andTheutlook Inated

will almost certainly remain in power until the next national elections. Such elections are not now schedulednd the Christian Democratswill not call them before then unless they rate highly their chances ofarliamentary majority or of dealing the extreme Left an electoral setback.

eanwhile, the Italian Government, now under moderate left-orientedDemocratic leadership, is likely to be more vigorous than any previousgovernment in attempting toeconomic and social reforms.the obstacles to the actualof far-reaching reforms are great, the dimensions of popularwide, and the skill and resources of the extreme Left formidable.isely conceived program is carried outroad scale against the political, economic, and social bases of Communist power and prestige, the governmentwill not be able to reverse the trend to the extreme Left, and the Left Bloc's parliamentary representation, now amounting toercent of the Chamber of Deputies, would almost certainlyat the next general election.

We believe that the anti-Communist parties almost certainly will not permit the Left Bloc toovernment or participate in one. Nevertheless, the power of the Communist and Nennilegislators to obstructaction might become so great as to threaten the functioning ofdemocracy. Should this situation arise, anti-Communist forces wouldmeet it byovernment able and willing to carry out drasticmeasures against the extreme Leftovernment would almost certainly be led by Christian Democrats, but its program would probably beto the right, since it would depend for its decisive support upon the rightist parties.

With US assistance Italy hasubstantial postwar economic recovery. However, in spite of this achievement, the average number of unemployed remains at over two millionroughlyercent of the working populationwithan equal number underemployed. The rate of investment, though high, has been inadequate to reduce the backlog of unemployment. This situationto constitute Italy's most crucial economic problem.

The political obstacles not only to carrying out large scale economicbut even to implementing thealready promised are sufficiently great to make it unlikely that rapid and substantial progress will be achieved by the Scelba or probable successorAssuming no seriousrecession, Italy probably will be able to maintain economic stability and to continue the present rate of economic However, even over the long term the unemployment problemwill not be greatly mitigated, unless substantial outside economic aid isto assist inong-range expansion plan.

The Italian armed forces at present are capable of no more than delaying action in the eventoviet attack. However, the military establishment is slowly but steadily improving with US aid, andis considered to be good, though the state of unit training varies widely.efforts have been made to remove Communists from sensitive positions in the armed forces, there aremall number of Communists and Communist sympathizers in the officer corps,reater proportion among conscripts and other enlisted men.

In the event of war between the West and the Soviet Bloc, the Italianunless the military and security forces wereosition to promptlythem, would probably be capable of widespread sabotage in industry,and communications,in northern Italy. They might also be able to seize temporary control of key areas and installations.

the popular appeals ofmay grow, we believe thatunlikely toubstantialthe pro-Western policies of theItaly almost certainlyfirmly oriented toward theparticularly interested inEuropean integration. Itto rely heavily on USTrieste settlement almostresult in some improvement inrelations, although in thenew frictions may arise out ofinterests in the Adriatic.



continues to be confronted withpolitical, economic, and socialpersist chiefly becauseovertyresources, including arable land;failure ol Italy's rulingdevelop effective institutions and tothe national will ln order to copecountry's problems; and the Inabilitypostwar governments to actstill growing population, nowis larger than that of France,gross national product is only aboutgreat. Except for Spain andhas the lowest level of Irving inDespite notable postwarunemployment is largeItalians remain virtuallythe Western EuropeanIn Italy does agrarian reform remainnational issue.

The government's problem Is rendered more difficult by the fact that many social and political cleavages divide the population. Class lines remain among the most rigid in Europe, and the nation Is divided by the Issue ofajor division also exists between the impoverished South and themore prosperous North. Moreover, popular feelings ot economic insecurity, frus-trallon, and cynicism continue to grow. More people are demanding fundamental changes in social relationshipseinvigoration of Italian political institutions. In thesethe failure of Italian postwar governments to raise popular hopes forhas resulted in the development of the largest Communist Bloc vote ln Western Europe, and this vote Is slowly but steadily increasing.

A noteworthy weakness of democracy in Italy lies in the absenceovernment dominated by the Christian Deraocrata. The minor center parties are unable to attract many dissident voters. With about three-fourths of thevoters supporting the pro-Communist

Nennl Party, there is no party on the non-Communist left (such as the Labor Party in Britain) to stand as an alternative democratic government.esult, leftist partiespro-Communist solutions nowthe only significant oppositionhristian Democrat-dominated government.


Current Political Situation

In8 national elections the Italian center parties, led by the late Premier De Gas-peri's Christian Democratic Party andsupported by Catholic Action, the lay arm of the Church in Italy,ubstantial victory over the Communist and NenniBloc, receivingercent of the popular vole toercent of the Left Bloc.however,ocal electionslear shift lo the Left and, In3 national elections, the center coalition received only about half of the popular vote, and the Communist-Nenni Socialist Blocercent. Local elections since that time have indicated further gains for the Communist Bloc parties. The Monarchists and the Neo-Fasclsts obtained aboutercent of the voteut local elections since then haveeakening of these parties, and some Christian Democratic recovery.

The decline in the center position8 Is attributable mainly to the following factors:

a.8 many persons of highlyand nationalistic leanings wereinto supporting the Christian Democratsnited front against Communism;had recently fallen to theand there was fear that Italy might be next. Gradually, however, fear of acoup receded, and confidence In the West's ability to deter external aggressionThus, many who supported8 have since shifted their allegiance to the Monarchists and Neo-Fasclsts.

failure of the Christianlo Improve social andhas stimulatedparticular, the continuing high levelincreased the number ofespecially young people, who had noto support center governmentswere attracted by the promises of

has been the normal loss ofsuffered by any party long inby the characteristic antipathyfor any incumbentthe Christian Democrats havethe target of widespread criticismanticlericallsm, resentment ofand arrogance, and impressionscorruption.

"peaceful coexistence" theme ofregime and the abandonmentby the local Communists havemany Italians that there has beenof world tensions Hence. Mcontinually more difficult for theto retain popular support bythe international and domestic dangers

In the most recent general elections, heldhe center coalition obtainedare parliamentary majority. Owing toamong the centereries of cabinet crises followed, until in4 Prime Ministerhristian Democrat, finallyenter party coalition with Social Democrats and Liberals In the cabinet and Republicans supporting lt from theBecause of the coalition's extremely narrow majority In thenyof party discipline withinajor Issue could result in the government's fall.

Establishmenttrong government has been hindered by factionalism within the Christian Democratic Party. At the party congress in Naples Inhe left wing of the Christian Democrats, led by Amlntore Fanfanl, won overwhelming control of the

The party composition of the Italian Chamber of Deputies is shown In the appended chart.

^pkrty organization, though not of the party's parliamentary delegation. Although Scelba continues as premier for the present, thegroup of the late Premier De Gasperl, long the dominant faction by virtue of its ability to moderate between the left and right, has lost much of Its power. Moreover, theof the Pella right wing, which lostground within the party at thehas waned further,plit In the Monarchist Party has virtually eliminated for the time being the possibility of an effective Christian Democratic-Monarchist alliance. The left wing, or Inlzlativa Democrat have won control of the Christian Democratic Party principally becauserowing demand by the party rank and file for more dynamic social and economicthe organizational ability of the Fanfanl group, and the loss in3 elections of some right wing strength lo the Monarchists and Neo-Fascists,

of the left wing of theDemocrats, with which Scelbanot been closely identified, thusto the internal weakness of theBecause of Fartfanl's abilitythe party organization, Scelbacould not retain office In thea serious clash over policies with thefaction, orecision by Fanfanihim. At the same timenor the Fanfani elements canfar left too rapidly lest the party beweakened by defections from its

Communist Strength ond Capabilities

the membership of theParty has dropped toecline ofts postwar peak, Itlargest Communist party in WesternIt is estimated toardillion. Membership intrade unionhas also declined from anmillionono significant membership losseshave occurred sincend the



unions have not seriously threatened Communist domination oflabor, which is particularly strong in the heavy industries, transport, and

Despite these losses in membership, the electoral appeal of Ihe extreme Left Isio Improve. The Communlsis and their Nennl Socialist allies maintained their strength In the North in the most recentandising trend in theSouth. Political Intelligence Is scanty concerning southern Italy, but the regionto be becoming politically restive. The Communists, and the COIL also, have been undertaking intensive organizational activl-tles in the area, which traditionally hasonarchist stronghold. With their strength in the North fairly stabilized, the Communists apparently look to the South for thevotes they need toopular majority, though the Christian Democrats also are improving their organization In the area.

Tbe growing popular support of theLett derivesumber of causes. The absence of any other effective politicalwhich attracts protest votes on the left, the relatively moderate tactics which the local Communists have pursued, and the newwhich many Italians see in Soviet foreign policy Increase the Left Dices appeal. In addition, with their high-poweredmachine, their energetic and efficient organization, and their highly skilledthe Communists exploit the numerous shortcomings of the incumbentthe difficulties of the Italian social and economic situation, and the consequent mounting popular sentiment for broadIn Italian political life and social rela-Honshlpa.

Another important factor in the strength of the Italian Communist Party Is its large financial resources. In addition todues, voluntary contributions, and Soviet subsidies, the party obtains financial support from various Communist-controlledIt realizes considerable profit from both legal and illegal trade with Soviet Bloc countries because of the party's control or ownership of Import-export firms. Thealsoumber of cooperatives and concessions and, through theirinfluence over local government administrations, profit from contractingmade on various types of goods and services,

We do not believe that the Communists are likely to undertake to seize power by force. It is possible, of course,evolutionary situation might develop, In which the Left would seek to overthrow the government. The Communists might also Htoup In the eventharp government shift to the extreme right, particularly if theythat this government Intended todrastic police action to destroy the party. Nevertheless, we believe thatommunist coup imminently threatened or was attempted, the government, with itsof the public security and military forces, almost certainly would be capable ofthe coup. Its present willingness to do so would be substantially Increased if it were assured of prompt outside assistance. Wethat ihe Communists share this view and almost certainly would be reluctant to attempt to seize power.

In the event of war between the West and the Soviet Bloc, the Italian Communists,the military and security forces wereosition to promptly suppress them, would probably be capable of widespread sabotage in industry, transportation, andparticularly In northern Italy, and might also be able to seize temporary conLrol of key areas and Installations. Although we believe that most of the wartime arms caches of the Communists have been seized, Borne consisting primarily of small arms probably still remain in Communist hands. Moreover, gun-running to the Italian coast probably would not be difficult. Soviet operations would also be aided by Communist espionage and by some actively disloyal members of the armed forces.

The power of the Communist Party would be greatly reduced if It lost the support of the Nennl Socialists, who comprise about

three-fourths of the Italian Socialists andover one-third of the electoral strength of the extreme Left coalition. Although Nennf's party haa been seriously Infiltrated by the Communists, who might be able to retain control of the party organization even in the event of Nonnl's defection, Nennl himselfast popularity among the Socialistami many of his supporters probably would follow htm. However, we believe that Nenni is so deeply committed to his present course that he ts unlikely to repudiate bis Communist alUes. Accordingly, he would not be acceptedemberhristian Democratic-dominated government.

Probable Political Trends

Over the short term at least, little change in the present parliamentary alignment o> the non-Communist parties is likely. TheDemocratic-dominated coalition,the Liberals, Social Democrats, andprobably will continue, and so will the cooperation between the Monarchists and and the Neo-Fascists The Scelbaprobably will remain in office4 and possibly until the parliamentew President of the Republic In

With Italy's extreme rightists temporarily disunitedesult of electoral setbacks and factionalism, and the right wing of theDemocratic Party at least temporarily in eclipseesult of the sweeping victory of the Fanfanl left at the last party convention, the stage appears to be setoderateswing In Italian domestic policy. Bycelba himself is likely to beby Fanfanl, oranfanl candidate, and other ministerial changes are likely.there is some uncertainty as to Fan-fani's intentions, and he might be willing to make deals with the Italian right, we believe lt more likely that he will continue his left-center orientation.

The Scelba government, and morea successor government led by Fanfani or his nominee. Is likely to be more rigorous than any previous postwar governments in attempting to implement economic and social reforms already legislated or planned. The coalition parties recognize more clearly than ever that modest antt-Communist measures and improved party organization cannot by themselves undermine the electoral power of the extreme Left, and that tangible results in such fields as tax, land, and bureaucraticas well as unemployment relief, are

However, the obstacles to the actualof far-reaching reforms areThe costs of the necessary programs will seem to the Italian Government to exceed its economic capabilities. Divisions andwithin the coalition, and within theDemocratic Party as well, probably will hamper the application of any resoluteThe need to placate right wingsupporters, who oppose anymodification of existing conditions, probably will force the leaders into frequent compromises in order to preserve theslim majority.

National elections are not now scheduledhe constitutional limit on the life of the present Parliament, and they almost certainly will not be held before the falletween those dates the Cabinet may pass through periods of instability, which will evoke demands from the extreme Left and possibly the right for immediate elections. However, the Initiative for calling elections will remain with the Christian Democrats by virtue of their near-majority position inand they almost certainly will not call an election8 unless they rate highly their chances either of wirmlng amajority themselves or, inwith other anti-Communist parties, of dealing the extreme Left an electoral setback.

Meanwhile, the government almostwill carry out further harassingagainst the Communist Party. Theanti-Communist program willbe more thorough and aggressive than that of any previous postwar government. If wisely conceived and effectively executed,rogram would almost certainly hamper the party's activities substantially and probably

would result In some reduction in Communist electoral strength. Many voters who now support the Communist Bloc for personal rather than ideological reasons wouldshift their supportovernment which demonstrated strength and resolution, and which deprived tbe Communists of theirto provide material benefits for theirOn the other hand, indiscriminate anti-Communist measures which hurl non-Communists as well probably would provoke an adverse reaction among some supporters of tho government. In any event, the basic political appeal of the Left Bloc probablybe substantially reduced as long as the hopo of amelioration of unsatisfactoryeconomic, and social conditions by aregime remains frustrated.

Al the same time, the Christian Democrats will make strenuous efforts to improve their party organization throughout the country.ecession in the popularity ofand Neo-Fascists likely, particularly In the South, the Christian Democrats may make limited net gains in electoral support In some areas, especially if the Vatican supportsunity within the Christian Democratic Party and the reform program ofrty.

isely conceived program isoutroad scale against the political, economic, and social bases of Communist power and prestige, the government probably will not be able to reverse the trend to the extreme Left, and the Left Bloc'srepresentation, now amounting toercent of the Chamber of Deputies, wouldcertainly Increase ut the next general election.

In any event, we believe that the anti-Communist parties almost certainly will not permit the Left Bloc toovernment or permit It to participate In one. Nevertheless, the power of the Communist and Nennl Socialist legislators to obstruct parliamentary action and to capitalize on potential divisions among the center parties might become so great as to threaten the functioning ofdemocracy. Should this situation arise, anti-Communist forces would probably meet It byovernment able and willing to carry out drastic repressiveagainst the extreme Left. Such awouid almost certainly be led by Christian Democrats, but its program would probably be further to the right since lt would depend for Its decisive support upon the rightist parties.


Italy is deficient in almost all basicsave manpower and hydroelectricOverercent of its coal, most of Its oil, half of its iron ore, nearly all of its textile fibers, and even some of ils wheat must be imported. Thus the Italian economy Is dependentigh and stable level of foreign commerce and substantial receipts fromand It is sensitive to internationalfluctuations. Indeed Italy's ability to preserve free institutions may ultimatelyupon the maintenanceigh level of international trade, and upon the reduction of restrictions on the international movement of capital and labor.

Despite Its Inadequate natural resources. Italy hasubstantial postwar recovery, achieved with large US assistance. Much plant and equipment have been replaced and modernized, new production methodstransport and marketing improved, and new products and new IndustriesGross national product3 was approximately seven percent above thatramework of stable price levels, there were substantial increases inoutput, agricultural production, value uf imports and exports, gold and foreignreceipts, savings deposits, andIn many cases prewar levels were greatly exceeded. Moreover, there have been petroleum and natural gas discoveries which have benefited some industries and consumers, although their ultimate potential forreducing Italy's high petroleum and coal imports has not yet been determined. In spite of these achievements, the averageof unemployed remains at over tworoughlyercent of the working populationwith probably an equal number

underemployed. The rate of Investment, though high, has been inadequate to reduce the backlog of unemployment. This situation continues to constitute the most crucialof the Italian economy.

economic problems arevarious institutional weaknesses,the inefficient operations ofproductive enterprises,inherited from the fascist era butreorganized; (b) large-scaleand protection ofenterprises; (c) the forcedexcess workers on farm, factory, andpayrolls; (d) the adverse effectsprice structure and on innovation ininitiatives resulting frombusiness organization andand (e) an inefficient taxtogether with large-scale taxthe government's ability toby noninflationary means.have made it more difficult fortake full advantage of the economicarising from its substantialprogress.trong and efficientand would involve painfulThe ascendancy within theParty of left-center elements,as the pivotal role played by thesince the last election, enhancefor needed reforms. The Scelbahas pledged itself to policies ofdevelopment and reform, Increasedand financial going forward on the0 year economic expansiondesigned to alleviate unemploymentfour million Jobs over that period.

we believe lhat politicalto achieving broad reforms, andout comprehensive economicwould require large-scaleare sufficiently great lo make itthat rapid and substantial progressachieved by the Scelba or probablegovernments. Important rightwithin the coalition, whosegovernment needs, oppose many reforms.

Moreover, these groups fear that radicaland large-scale investment wouldInflationary pressures and dislocations which wouldreater threat to political and social stability than the failure tothe rate of economic expansion. In addition, the government itself, ln the last analysis, probably will make large-scalepolicies contingent on tho receipt of foreign aid and, if this aid does not become available, will not be likely to increase its investment expenditures sufficiently to carry through these policies.

no serious internationalItaly will probably be able tostability and continue theof economic expansion. However,the long term the unemploymentprobably will not be greatlysubstantial outside economic aidto assist ln financing aplan.


Italy's military establishment is slowly but steadily improving with US aid, and morale is considered to be good. Individual training is generally good, while the status of unit training varies from fair to excellent. Although the services are predominantly loyal to the government. Communist Infiltration of the Air Force, the Army, andesser extent the Navy, makes probable some sabotage and harassment In the event that Italy were toeneral war against the BovM Bloc. Although efforts have been made to remove Communists from sensitive positions In the armed forces, there aremall number of Communists and Communist sympathizers in the officer corps,reater proportion among conscripts and other enlisted men.

Tlie Army consists ofnfantry and three armored divisions and five Alpineas well as numerous independent units. The strength of the Army will probablyabout the same, varying roughlyepending on the number of conscripts In service. Modernization of weapons has been extensive, and deficiencies in equipment eventually may be overcome


through US aid. Although it is now capable ofimited defensive- role, if the Army continues to Improve at Its present rate it will probably be able to engage in sustained combat

Within the past two years the Air Force has achieved substantial progress,in equipment, training, and combat readiness. Its strength isnd men (includingithet fighters. Of these,ighters are assigned to nine fighter-bomber squadrons, which are currently combat-ready. Nevertheless, seriousstill exist in the Air Force, especially In air defense and maintenance capabilities.he Italian Air Force probably will have made additional progress tn solving these deficiencies; nevertheless, some units will continue to remain below SHAPEreadiness slandards and the over-all numbers of men and aircraft probably will not be increased appreciably. The mostadvance will probably occur in air defense, as existing interceptor squadrons are re-equipped and an operational aircraftand warning system is developed.

The Italian Navy of0 officers and men la being reconstituted with US aid primarilymall-ship dcfcnslvo force. This program includes modernization of older ships, acquisition of ships from the US, and construction of new vessels in Italy. Itseffectiveness is at present limited byin training and equipment and by lack of modern submarines and effectivewarfare aviation. In the event of general war, however, it could contribute combat elements which could performrninesweeping, and escort and patrol duties at acceptable standards.

With respect to fulfillment of4he Army Is meeting Its numerical force goals, butIn equipment, training, qualified active and reserve personnel, and logistical support must be overcome before even SHAPE minimum readiness standards are reached. Ar present the Italian Air Force ts notits NATO commitments, and the chances

for5 NATO provisional goals are slight. Currently, the Italian Navy could not fully carry out Its assigned NATObecause one-third of theships are either undergoing major modernization or are under construction. Because of anticipated delays in the delivery of new vessels, the Navy will probably fall short of units scheduled under5 NATOoals.

ack of funds is the chief barrier to attainment of NATO goals. Italy has more than sufficient manpower and industrial capacity to meet these objectives and, into produce equipment for its allies. However, in view of the government'son financing economic and socialand its probable unwillingness to undertake what lt would consider to befinancing, we believe that Italy will reduce even lis present defense outlay.

taly has many competent scientists and its theoretical research is both good and well organized, but its applied research andIs poorly financed and severelyOwing primarily to inadequate funds, Italy's research facilities and scientific and technological manpower probably will notsignificantly to Western military or economic strength in the near future. At present Italy is not engaged In research or development in the field of militaryof atomic energy, although it hasInterest in peaceful uses.


Italy's current foreign policy objectives are to: (a) obtain foreign economic assistance, secure outlets for excess population through emigration, and promote Europeanall primarily as contributingolution of Italy's pressing economic and social problems; (b) improve Italy's status and prestige in world affairs; and (c) increase Italian influence in the Adriatic.

However, Italy's ability successfully to take the initiative on any importantquestions is limited, and the Italian Government recognizes that Its objectives can be realized only if Italyartestern


coalition supported by the US. Through membership ln NATO and Western European Union Italy hopes nol only to obtain greater military security and avoid war, but also to achieve Its other fnrolgn policy objectives. In general, the Italians consistently haveall moves toward greater European Integration.

taly's adherence to NATO and toinstitutions Is supported by all center political parties and by the Vatican.ightist and nationalist government would probably remain aligned with the Western coalition. Although the popular appeals of neutralism may grow, we believe that they are unlikely toubstantial effect on the policies ot the Italian Government, which almost certainly will remain firmly oriented toward the West for the foreseeable future. Italy almost certainly will remain attached to NATO and Western European Union, and its policies toward the Soviet Bloc and Westwill closely parallel those of the US. While Italy will seek greater trade with the Soviet Bloc,ill not oppose US leadership on questions of trade control to llie samethat may be expected from France and the UK.

Although most Italians almost certainly are reconciled to the loss of their colonies. Italy will probably continue Its efforts toeconomic Influence in Africa. There is strong nationalist feeling on Adriatic

The Trieste settlement will almostresult in some Improvement In Italo-Yugo-alav relations, thus greatly facilitating NATO defense planning In the area. Xloreover, Italy eventually mayember of the Balkan Alliance. However, In the longer run, new frictions between Italy and Yugoslavia may arise out of conflicting Interests ln the Adriatic, which may also cause some strain on relations between Italy and Us NATO allies.

While Italy probably will remain firmly commuted to the NATO Alliance, Its basic social and economic weaknesses will create continued problems for the US and Italy's other allies, and lt will rely heavily onUS support.


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