NATIONAL INTELLIGENCE ESTIMATE
probable developments in italy
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PROBABLE DEVELOPMENTS IN ITALY
To estimate probable Italian political and economic trends, rearmament efforts, and foreign policies, both short and longer range.
Inrovincial elections, the Italian center parties, particularly the Christian Democrats, suffered some losses to the left and larger losses to the right. Despite these losses the center coalition will probablyajority in the national elections tentatively setf the coalition doesajority of the popular vote, the new electoral law will give it two-thirds of the seats in the Chamber of Deputies.
The short-run outlook is thusenter government, but we believe that the longer-range trend will be increasingly to the right. We believe that at some point the ChristianParty, in response to this trend, willoderate right-center
Over the much longer run theCommunist threat, the divisions among Italian democratic forces, and the continued difficulty of coping with Italy's social and economic problems mightoderate rightist government tomore authoritarian and lessin its methods. However, we believe the emergence of another fascist regime unlikely.
Under present circumstances there is little likelihood of rapid and sustained Italian economic growth, of substantial emigration or of substantial reduction in the number of unemployed. Present plans for economic development willbe adequate to maintain economic stability. However, these plans are not likely to produce an improvement inand economic conditions sufficient toenter government, such as that now in office, to retain power indefinitely.
Communism's highly developedand social organization in Italy has been weakened by defection and apathy over the past five years. Nevertheless, Communist strength probably remains greater in Italy than anywhere else in Western Europe. We do not believe that the Italian Communists will be able to gain control of the Italian State in the foreseeable future. However, in eventoviet invasion the Italian Communists would probably be able to disrupt lines of communication in Northern Italy and might be able to seize temporary control of key areas.
The cohesion of the Italianmovement is not likely to be seri-
S F. CXE
impaired by the transfer ofin the USSR, unless there shouldisruptive struggle for power within the Soviet Communist party.
Italy's rnilitary establishment has slowly improved with extensive US aid, but the Italian Armed Forces byare presently capable of no morehort-term delaying action in the eventajor attack. Even if US aid is continued at present levels, Italy will almost certainly be unable to meet4 Lisbon NATO goals. Italy has the necessary industrial capacity andbut it is unlikely that thewill be able to impose the sacrifices on the Italian people necessary to achieve these goals.
The Italian Governmenttrong supporter of European integrationwhich it views as offering Italysecurity and material benefits.
While Italy is firmly committed to the NATO alliance, its inability to cope with its basic social and economic weaknesses and to meet its rearmamentwill create continued problems for the US and Italy's other allies. For the foreseeable future Italy will remain one of the weaker members of the Westernand will rely heavily on continued US support.
Moreover, conflicts of interestItaly and Yugoslavia, especially over the Trieste issue, will make political and military cooperation between these countries extremely difficult to achieve, and are potentially dangerous to thebetween Italy and the otherPowers.
Underlying Italy's perennial political and social problems is the fact that Italyoor country, lacking sufficient arable land or raw materials to provide for its populationfor Spain and Portugal, it has the lowest standard of living in Western Europe;Is endemic. Italy's population0 is larger than that of France, but its gross national product is only about half as great. Among the Western Europeanonly In Italy is the demand for landerious nationalajor division also exists between therich and republican-inclined North and the Impoverished and monarchist-Inclined South. Moreover, class lines in Italy are more rigid than most in Europe.
5 the Communists and their allies, the Nenni Socialists, have capitalized on Italy's underlying social and economic weaknesses and war-weariness to pose athreat to Italy's democratic regime. In8 national elections the Italian center parties, led by Premier Dc Gasperl's Christian Democratic (CD) Party and powerfullyby Catholic Action, the lay arm of the Church in Italy,ubstantial victory over the Communist and Nennl Socialist bloc. However, Inocal elections the political extremes of right and left gained strength, while the center coalition won onlyercent of the popular vote, as compared withercent in8 national elections. The Communists and Nenni Socialiststheir proportion fromoercent, and the Monarchists and Nec-Fascistsoercent.
his decline in the center position ismainly to these factors:
a.8 many persons of highlyand nationalistic leanings were fright-
ened into supporting thenited front against Communism; Czechoslovakia had recently fallen to the Communists and there was fear lhat Italy might be next. Many of these people are now returning to their true political allegiance and voting for the Monarchists and Neo-Pascists; moreover, many are dissatisfied with Dc Oasperl's failure to take stronger anti-Communist measures or to press Italianinterests more successfully, especially in Trieste;
continuing high level ofhas increased the number ofyoung people, who have noto support the present governmentare attracted by the promises ofand Fascism;
poverty, poor soil, peasantand high unemployment of(for which the historic outlethas been greatlyertile field for extremistInlections bothright extremes made their greatestsouth and south central Italy;
has been the normal loss ofby any government long Inby the characteristic antipathyfor the government in power.
Faced with these losses to the right and left, the Christian Democrats and their center allies (the Liberals, Republicans, and Social Democrats) haveew electoral law designed to insure them an effectivemajority in the Chamber. Under the new law whatever linked group of partiesare majority of the national vote in the approaching national election willbe allotted two-thirds of the Chamberf no group succeeds In polling athe seals will be distributedas at present.
Probable Outcome of the Election. Should the center coalition fail toajority in
'These seats will be distributed proportionately among the winning parties; ihe remaining third of the seats will be left for distributionamong the other parties.
the coming election, it will be extremelytoovernment. With at least one-third of the Chamber tightly organizedostile left bloc and perhaps one-sixth composed of Monarchists, Neo-Fasclsts, and other rightist elements, De Gasperi would either have to call new elections or broaden his coalition lo the right. He would befirst tooalition taking in the Monarchists; if that failed because of Social-Democrat objections, he might drop Ihein favor of the Monarchists.
We estimate, however, that the center coalition willajority of the popular vote, even though the Communist and Nenni Socialist bloc will probably retain part ofains and the rightists may even exceedote. Should thegroup win this majority, the Christian Democrats would againovernment which would seek to continue the programs and policies presently pursued by De Gasperi.
The Longer-Term Outlook, Although the short-run outlook is thus for continuationenter government, wc believe that the longer range trend in Italian politics will be increasingly toward the right. Italy is apoorountry of divisions rather than unity, of extremes rather than moderation. These circumstances, together with the basic social and economic problems faced by any government, and the ever present threat from the left, make the task of lhe CD-led centerifficult one Indeed. Tho Christian Democratic Party Itself is heterogeneous in its composition; its various groups are held togetherenter line primarily by their common enmity to Communism, by Catholicism, and by De Gas-peri's firm control and leadership.
De Gasperi isnother leader might be able toentristthe CD party might even comeeader oriented more to the left It is possible that some combination of favorable external developmentssatisfactory international trade conditions, large-scale emigration,US aidmightenterto continue In power for some time.
enter coalition is unlikely topower indefinitely unless lt Is able toubstantial improvement in social and economic conditions. Wc do not believe that tlie center coalition, pulled in oppositeby its own conservative and reformist factions, will be able to act with the vigor and unity essential for Ihe achievement of such
Under these circumstances the appeal of the rightist parties, with their slogans of nationalism, economic revival, and stronger action against Communism, is likely toThis growth of rightist sentiment would give impetus to the divisive forces within the center bloc and encourage the right-wing elements within tlie CD party to even more vigorous opposition to social and economic reform. The basic enemy of the Church and of the CD party is on the left, not the right; neither views the right as Its chief opponent. An alliance between the center and the Communist-Nenni Socialist blocimpossible; an alliance between theand the right against the left presents no Insuperable difficulties.
Consequently, in time the CD party will probably modify the present center coalition in favoroalition further to the right. This first step toward the right wouldbe the creationoderate right-center coalition including the Monarchists. When this development might take placebe estimated; much may depend onfactors beyond Italian control.
Over the much longer run, the continuing Communist threat, the divisions amongdemocratic forces, and the continuedof coping with Italy's social andproblems mightoderate rightist government to become moreand less parliamentary in its methods, perhaps along lines similar to the Salazar regime in Portugal. We cannot estimate that such an evolution will eventually take place, but the possibility cannot be ignoredong-range development. However, wethat the memory of the disasters which
Italy under Mussolini willthe emergence of another fascist regime.
Communist Strongth and Capabilities
highly developedsocial organization In Italy hasby defection and apathy overfive years. Party membershiprop of overfrom Its postwar peak insignificant, membership ln thetrade union federationillion Intoillion. About one andmillion have withdrawn Into twounions und about an equalhave dropped union membership.the non-Communist unions havechallenged Communist leadershiplabor, CominunlsL capabilitieslabor for political purposesconsiderably reduced. Communistand sabotage capabilities havebeen reduced, especially becausegrowth in strength and efficiency ofPolice. Although there areCommunists among the conscriptsarmedigorous andefforts have been made tofrom the officers corps. Webelieve that the Italian Communistsable to gain control of the Italian Stateforeseeable future, either legally orof arms.
Communist strengthremains greater in Italy thanin Western Europe Thestill particularly strong In tlie heavyand in the transport andsystems of Northern Italy.caches of small arms probablyin Communist hands despiteby the police. In the event ofinvasion at least during the nextthe Italian Communists wouldcapable of seriously disrupting linesIn Northern Italy andbe able to seize temporary control ofSoviet operations would also be aidedCommunist esplonnge and sabotage,
Despite the decline in party membership, Communist electoral support remains great. The basic causes are the absence of any other strong protest party, and the relativelytactics which the Communists haveThe political appeal of thelies in their ability to exploit thegrievances, land-hunger and anti-war sentiment of lurgc segments of theCommunist political strength isby the party's close alliance with the Nenni Socialist party, which still contains about two-thirds of Italian Socialists, and contributes over one-third of the electoral strength of the Socialist-Communistreak between the Communists and the Nenni Socialists, or an appreciable part thereof, might check the drift of Italianto the right and makeeft center coalition government. However,reak now seems unlikely. Theand Nenni Socialists may presentelectoral lists at the next election, but this would representactical moveto attract non-Communist votes.
The cohesion of the Italian Communist movement is not likely to be seriouslyby the transfer of authority in the USSR, unless there shouldisruptive struggle for power within the SovietParty.
The Italian Government Is likely to apply stronger repressive measures which willreduce Communist effectiveness. Against such measures the Communists wouldemphasize "unity of action" tactics and might gain same support from the moderate left. The Communists will also seek to strengthen the underground apparatus, and have considerable potential for doing so. Should the Communists be officiallytheir Influence would be significantly reduced, though their underground apparatus would quickly expand unless it, too, wererooted out. Proscription seemshowever, so long as large numbers of Italians look upon the Communist partyemocratic political party rather thanubversive organization-
Probable Economic Trends
Italy is deficient In almost all basicsave manpower and hydroelectric potential. Overercent of its coal, most of its oil, half Its Iron ore. nearly all Its textile fibers, andonsiderable proportion of its wheat must be imported. Thus. Italy Is highly dependent on forrlgn trade andand very sensitive to internationalfluctuations. Indeed its futureation with free institutions may ultimately depend upon the achievementigh and stable level of foreign commerce, and the reduction of restrictions on tlie International movement of capital and labor. In partEuropean integration would assist greatly in establishing these conditions, the Italian Government strongly advocatespolitical and economic union.
Despite the retarding of its industrial development by Its Inadequate naturalItaly hasubstantial postwar recovery, achieved with U8 assistance.Italy's basic economic problemsthe low rate of capital formation, chronicand low productivity compared with other Western European economiesremain unsolved.
These problems are intensified by various institutional weaknesses ln tlieho inefficient operations of numerous stale-ownedarge-scale state subsidization and protection of Inefficient privatehe forced retention of excess labor on farm and factoryn inflexible price structure resulting from monopolistic business organization andn Inefficient tax system which, together with large-scale tax evasion, limits government ability to mobilize resources by non-inflationary means. These factors have discouraged technological efficiency andin the misuse of the limited savingsby the economy. Corrective measures wouldtrong and efficientand would involve painful Therefore, wc believe lt unlikely that
any center or moderate right government will be willing toeneral program of extensive institutional reforms.
The highly conservative monetary and credit policies pursued by the postwar Italian Government also have tended to restrictexpansion. These policies haveineasure of financial stability, butow level of economic activity. Believing avoidance of inflation to be more important than expandedand full employment policies, thehas restricted private credit, kept budget deficits relatively low, and sharply limited public investment. The government has instituted development programs and land reform, particularly in the South, which it considers costly and extensive. However, these arc unlikely toecisivein the condition of the countryhole.
There is little likelihood that the Italian Government over the next several years will markedly change its conservative attitude and undertake large-scale Investmentdesigned to increase productivity and reduce unemployment. It fears that such programs would generale inflationarywhich wouldreater threat to political and social stability than the present lack of economic growth. In any case, many years would be required before even large-scale development programs could beto overcome Italy's basic economic problems. The pressure of unemployment will probably force the government tosome additional public investment, but it will do so cautiously andiecemeal basis. The government will continue to look for an escape from Its economic difficulties primarily through continued US aid, increased emigration, and European economic
While Italy will probably be able toeconomic stability, lt is probable that there willelatively low rate of economic growth over the next decade. The average annual rate of growth Is unlikely toercent. Most of this new increment will probably go into consumption, leavingmall portion for defense and investment.
Probable Trends In Italian Rearmament
Italy's military establishment has slowly (but steadily) improved with extensive US aid, and Italy came close to meeting its Lisbon NATO commitmentsowever, the Italian Armed Forces by themselves are presently capable of no morehort-term delaying action in the event of an attackajor opponent. Morale and training of the armed forces are considered fair to good.0 the Army has improved in combat readiness; however, it is incapable oflarge-scale operations because ofdivision and higher unit training,deficiencies,ogistic system of doubtful effectiveness. The Army hasen Inlpine brigades, and numerous independent units. The Air Force, with0 officers and men,et fighters. It is currently Incapable of fulfilling its air defense or ground support responslbUttles. It Is being re-equipped with US end-Item aid, but Its small number of modern aircraft and relatively smallare serious obstacles to itsThe Navy of0 officers and men is an unbalanced fighting force oflow combat-readiness. It does,have appreciable capabilities for patrol, escort, mincswecping, undersea warfare and similar tasks, and is now being modernized and reconstituted in order to improve these capabilities for combined operations under NATO.
Even if US aid Is continued at present levels, Ilaly will almost certainly be unable to meet4 Lisbon NATO goals3 divisions2 aircraft In operational units,aval contribution ofajor anday naval units andaval aircraft. Italy has the manpower andcapacity to more than meet theseGiven the raw materials and more efficient production methods, Italy couldmany of its own arms requirements and provide equipment for other NATO members. The chief difficulty lies in Italy's apparent
inability lo provide tbe budgetary resources to mobilize this capacity, while still meeting other economic demands. Italy has many competent scientists and an extensivefor controlling and directing military and industrial research. However,facilitiesack of funds have thus far prevented Italy fromajorto Western military research and development.
view of the probable lack of rapidgrowth and probable governmentto undertake what it wouldto be Inflationary financing, woItaly is unlikely to Increase Itsoutlays much above thehe outlook is for stabilizationannual defense outlays at slightlyone billion dollars, or about fH4GNP, over the next several years.will almost certainly be Insufficientthe Lisbon NATO goals.
Ita lion Foreign Policies
Italy's basic foreign policies are to; (a) maintain security; (b) solve Italy's pressing social and economic problems throughassistance and European integration; (c) Improve Italy's status and prestige in world affairs; and (d) Increase Its influence In the Adriatic and regain some of Its lost territory ln the Trieste area. The Italian Government recognizes that the above policies can beonly if Italyartarger Western coalition supported by the US.
Italy hopes through membership in NATO and European institutions not only to obtain greater security and avoid war, but also to: (a) secure continued US military andassistance; (b) obtain freer access to raw materials and increased trade outlets; (c) facilitate greater mobility of labor in Europe and Increase Italy's emigrationand (d) secure support for Italy's own national interests in the Adriatic andareas. The Italians areinterested In promoting greaterIntegration, which they view as offering Italy prestige, security and material benefits.
Italy's interest ln the EDC la secondary to its desire for greater European political andunity, but It Is almost certainly willing to ratify the EDC.
Italy's adherence to NATO and toinstitutions Is supported by all centrist political parties and by Iht- Vatican. v. views the growth of Western strength and unity as an essential bulwarkightist and nationalist government would probably feel compelled by self interest to remain aligned with thecoalition.
However, we believe that future Italian governments will be more Insistent in their pursuits of strictly Italian national interests, and will raise difficult problems for Italy's allies. Although most Italians are apparently reconciled to the loss of their colonies, Italy will probably seek to re-establish its economic influence in Africa and the EasternAbove all, there Is strong nationalist feeling on Adriatic questions, particularly Trieste.
At least so long as the Trieste issuein its present state. It will hamper NATO defense planning ln the area. Italy will strongly object lo ties betweenand NATO and to more extensive US aid to Yugoslavia. De Gasperl hasthat Halo-Yugoslav political andcooperation will bo impossible until the Trieste issue Is resolved. At the same time, the Trieste issuoolitical barrier to Italian participation in the friendship and military collaboration pact recently signed by Yugoslavia, Oreocc. and Turkey, even though Italy almost certainly would like to gain membership in this entente. From the Italian viewpoint such an entente without Italian participation wouldlow to Italian prestige and might adversely affect Italy's Adriatic and Eastern Mediterranean interests.
Thus the Yugoslav-Greek-Turklshtogether with the politicalwhich the Trieste Lssue in its present state represents internally, makes some Trieste adjustment highly desirable to the
Italian Government. In the longer run. Italy might also seek to regain additional Adriatic territory lost under the peace treaty. Other frictions between Italy and Yugoslavia, as well as between Italy and its NATO allies, would result from any developments inwhich adversely affected Italian
Implications for the US
hile Italy is firmly committed to the NATO alliance, its inability to cope with its basic social and economic weaknesses and to meet Its rearmament commitments will create continued problems for the US and Italy's other allies. For the foreseeable future Italy will remain one of the weaker members of the Western coalition and will rely heavily on continued US support. Moreover, conflicts of interest between Italy and Yugoslavia, especially over the Trieste issue, will make political and mililary cooperation between these countries extremely difficult to achieve and are potentially dangerous to thebetween Italy and the oilier Western Powers.Original document.