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FOB THE PRESIDENT TdE OMITED STATES
MAJOR PROBLEMS OF
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our. 2
MAJOR PROBLEMS OF ITALIAN GOVERNMENT POLICY
SUMMARY
Premier De Gasperl firu two fundamental problems: (I) to perruade theand war-weary Italian public toefinite alignment with the Western Powerso present to the Italian people tangible economic benefit* tn order to strengthen popular confidence In the government.
The major determining factor In Italian foreign policy will be deve-opxeQU In the East-West struggle. To this struggle, Italy's principal problems of foreign policy are closely related: the question of political and military alliance, disposition of the prewar colonies, return of Trieste, and modification of Peace Treaty restrictions upon Italian military capabilities, Italy will probably find It necessary lo align Itself definitely with the West, even though public opinion at present lags behind the government'sto take this step.
De Oasperl could inspire public confidence In bis adrnirust ration either by offering the Italian people an early Imptovement In their standard of living or at least byold and comprehensive legislative program of economic reforms. Neither development seems probable. Despite the eobd economic gains achieved In Italy through the ECA, no Improvement In the popular standard of living Is likely to become evident within the nest six months. Moreover, the De Gasperl Government has failed so far lo show any signs of hsvlng or of soon developing any program of long-range economic reform forariety of industrial snd sgricultursi problems remain unsolved.
In Industry, the high production costs or Italian manufsclurcrs hinder thef foreign trade. Uneconomic Industries are still subsidised by the State. Strikes and slowdowns, though unlikely to cripple Italian economic recovery, still Impede It. Unemployment continues toajor problem, and emigration, which mightease It, is greatly restrictedariety of factors,ack ofTaxation In Italy remains Inequitable snd Inefficient The economic plight ofItalian middle class Is grievous and ahoai no prospect of relief. Italian agricultural yield, though Increasing, Is Inadequate to restore the Italian d'et to Its prewar level without resort to disproportionate imports of food. Long .range agrarian Improvements are still only prospective. In any constructive approach to these problems, De Oasperl will be hampered by the opposition of Interested pressure groups.
Because of this limitation, snd because of the Inherent difficulties of the domestic problems, De Gasperl Is unlikely to win public spproval of his foreign policies on the basis of having created popular satisfaction over bis approach lo the general problem of domer-Je needs. On the contrary, unless adequate social and economic improve-
Tbta report has been eoneumd lonhalSona ef the DepartmeaU el 6Ute, u* Army, the Kavy. and the Air Force.awdavailable lo CIAarch IKS
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nvenfj 'hrough ECA aid and governmental action become apparent to tht Italianecisive part of tha population Is Itkel/ to shift Its support from De Ouperl to theparticularly to the Communist Party. Althoughhlft would have, except for withdrawal of moderate Socialists, no serious Immediate effect upon theof the present government, the shift would probably resultoss ofmajority support for De Oasperi's Christian Democraticn the national elections
MAJOR PROBLEMS OF ITALIAN GO VF RNMKNT POUOT
1. rDs Oumi Onnvurrr.
The imminent threat ol economic collapse and political chaos which overhung the De Gasperl Government at the beginning8 hid by the middle of the year been pcinoved. permitting De Oasperl, still Premier, to turn from day-to-day crises to more fundamental questions of foreign and domestic policy. .
The national elections of8 gars the Christian Democratic Partymajority of seals In the new Parliament and confirmed the right of that Party to be the dominant element In the Cabinet until the holding of new elections, scheduledhis base of Christian Democratic political strength was broadened by theCabinet participation of the conservative Liberal Party and of the moderate-lef list Socialist Workers (PSU) and Republican Parties.
Even before the April elections, the Inflation that had been leading towardcollapse and social upheaval was slowed down by the vigorous deflationarytaken by Budget Minister (now Picsldcnt of the Republic) Einaudl InT. Although this anti-inflationary program actedemporary brake onthe level of Industrial production has since resumed its upward course, and wages and prices have remained reasonablyurther itablUrtng factor was the asiurence that, through the European Recovery Program, would provide considerable materials and credits for the rehablUUllon of the Italian economy and the gradual raising of the Italian standard of living, which evea In the prewar period had been lower than that of most European countries.
Thus by the summeraving been relieved of the critical threats to Italy's economic situation and his own political position, De Oasperl could turn his attention to the problem of guaranteeing the poHt'cal and Military security of Italy through alignment with other Western Powers. The CommunbrU and left-wing Socialists, comprising one-third of Parliament, have offered bitter opposition en this Issue, and have forced the government to approach the problem with caution.ddition, many moderate Socialist* and the left wing of the Christian Democrats hate arguedcar-cut course of Italian neutrality.
De Oasperl realizes that he would obtain greater popular support for hisolicies If he couldonspicuous success In fulllliing domtslic needs. He faces special difficulties, however. In obtaining the long-term measures of economic and social reform necessary to this success. The extreme Left will oppose wbstever recommendations the government may make lit thli field. Moreover, difficultiesnt in attaining the promised and badly needed changes sre aggravated by theof the Liberals and even many of the Premier's own parly to support any far-reaching economic or social legislation. Despite these obstacles, De Oasperl realizes that failure to take positive action would make Mm vulnerable to eritklsm from the moderate Lett as well as the far Left, would strengthen the CommunVj, snd would
handicap the success of the ERP. thereby hampering achievement of better living conditions snd prolonged social stability In Italy.
I. Foruio* Poucr Pkhuki
8. The Western Alliance.
The ce ntral problem ol the Italian Government u- IU conduct of foreign affairs Is to win the support of the Italian people for close political and military alignment with the West. The Premier has been vigorously supported by Foreign Minister Sforra and Defense Minister Facclardl In preparing the ground for an alliance, but there continues to bt strong popular opposition to surrender of neutrality and to anycommitment which would expose Italy to reprisals. Consequently, theand the Socialists of the far Lett have had some success In Ihelr campaign to discredit the Government by denouncing as warmongering anything that Indicate* Official sympathyestern military pact Even left-wing members cl the Premier's own party have protested Ms favorable disposition toward military pacts, although the left-wing party leaders hate indicated that for the sake of party discipline they would follow the majority. The moderate Socialists have also shown their disapproval of militaryheir leader. Sarsgat, has, however, recently conceded that apact "for defense" would not be Inconsistent with Socialist principles.at's moderate Socialist following continues divided on the question of whether or not their Cabinet representative should oppose Italian military commitments.
At the present time, most Italians would prefer to participateollllco-eoonomtc European federation. The projected Council of Europe appears totep to- aidederation, snd Italy has agreed to participate In the London discussions (scheduled for late March) regarding organliallon of the Council Italianin any European union, whatever Its form, would find their main support In two otherwise conflicting groups: the Vstlcan, whichuropean federatloQean; to halt the spread of Cfemnvunlsm, and the mode rale Socialists, who seeederation as the frameworkocialist Europe wWch could developthird force" between the US snd the USSR. Though the Italians are Impelledestern alliance by natural Inclination and some government pressure, they fear Its I- it for Involving them In war.
b. Relottoru with tht Western Powers.
Though llalys relations with the UK hsve been poor sines World War LT, those with the US and France are presently excellent.
The IradllioeuUly close lies between the US and Italy are strengthened by Italy's hope for economic rehabilitation through US aid. In addition. Italians arepatelia to the US for forcing delay In the UN's consideration of the colonial question, which they believed was at the point of being settledanner unfavorable to Italian Interests, Italians look to the US. the Latin American countries, and France to* Interests when the matter is taken up at the9 session of the UN.
. The favorable attitude already expressed by Prance toward the return to Italy ol Its former colonies has been one of the factors In Improving relations betweenountries Another to the promise of the French Government to improae theconditions of Italian emigrant labor Inranco-Italian customs unon, long-discussed, now seems somewhat closer torevious French Assembly adverse vote, the French Government may stilln Italy's favor of the Italo-French boundary provided by the Peace Treaty.many Italians welcome,ecognition of equality, various evidences that Iranee (along with the US) favors Italian participationestern alliance.
In contrast to Italy's improved relations with the US and France, Its attitude toward the UK has become embittered by British claims to trusteeship over Cyrenalca and British opposition to the return to Italy of most of the other former Italian colonies. Some Italia us have also resented the earlier British opposition to Italian entry Into an Atlantic Pact, although this resentment will probably be diminished by the decision of the Weltern Powers to Invite Italy to participate therein.
c.
Ultimate disposition of the colonies will have some bearing on thethe Italian people to supportestern military pact, Italy, basing Itsthe assertion that the colonies were acquired before the advent of Fascism,to have them returned, partly for reasons of prestige, partly because ofgain, and partly because of their supposed usefulness as an outlet forpopulation. Wide sections of the press and various nationalist pressurekeep colonial aspirations alive. Though any disposition short ofto Italian control would bring an adverse Italian reaction, most Italiansreconciled to eventual UK control of Cyrenalca On the other hand,report that the US and UK favored awarding mostitrea to Ethiopiapopular bitterness as wellhreat from Foreign Minister Sforra that hicabinet members would resign Ifecision were carried out.of Cy rcnaka, Italy still wishes to participate In administration of the otherthe fact that the Government will have difficulty In securing the fundsthem.
As regards Tripolitania, Italy will be dissatisfied with any dispositionoutright return. Several other proposed solutions, however, would probablythough with varying degrees of reluctance, by the Italianesperate effort of the Italian Government to provide Itself with asolution mhlch would not too greatly sacrifice Its prestige or colonial desires,by certain Italian experts on colonial problems, envisages the formation ofindependent Arab state of Tripolitania which would have dose economic andties with Italy. Another proposal, favored by certain US colonial experts, wouldprovision to Italy of an emigration outlet In Tripolitania through USmight, In fact, welcome US participation In the government of North Africaadditional security for the Mediterranean
d. Tht Pease Treaty.
The government'* cue for revision of the military clauses of the Peace Treaty Is based primarily on Italy's InabUlty to defend Its borders for moreew weeks. In new of which fact many Italians feel that participation tn the Western security arrangements as presently constituted would provide their country with little actual additional protection and would leave It at the mercy of an aolagonlred USSR
t. elations sfifh the
Because ot this desire not to anlagonUe the Soviet Union and because ofeconomic needs, Italy's relations with the USSR and the satellites continueand tiade between Italy and Eastern Europe Is being developed. Recentlytrade and reparations agreements between Italy and the USSR should result In economic benefits to Italy, thereby Increasing the domestic prestige of the Italian Government. The government can Impress the population with the fact that the contemplated trade amounts to almost ten percent of Italy's present foreignrce Furthermore, whelher or not the ambitious goals of the ItaloSorlelare reached, the Italian Government can point to these agreements as proof that, contrary to the contention of the Communists, It Isool of the US.
The withdrawal by the USSR of Its earlier support of Italian colonial claims, although causing an immediately unfavorable popular reaction, has not greatly affected crucial relations between the two countries. Because Italian hopes have beenon western tupport of Italy's claims, Italian bitterness over any unfavorable solution of the colonial or Triesle question would be directed more toward the West than toward the Fast. Soviet obstruction of Italy's entrance Into the UN. however,ore pclnt because of the extreme importance which Italy, for reasons of national pride, attaches to regaining diplomatic parity *ilh other nations. Omission from the Italc-Soviet trade agreements of the wordndicates that, whatever theireconomic needs, mutual trust between the two governments remainso* leva
/. Italy and the Soxltt SattUUet.
Similarly, Italy's relations with Eastern Europe are based largely on economic rather than politicalurrent negotiations with Yugoslavia Involveof Italian reparations to Yugoslavia, compensation for Italian properties eon* ftvatcd by the Yugoslav stale, and conclusionishing treaty; these discussions may result In expanded trade relations between the two countries. The Yugoslavs have made other friendly gestures, inch as the return ot Italian civilians who had been captured by the Yugoslav forces during World War II. In recent months, therefore, tension between Italy and Yugoslavia has consldenbly lessened.
The Free Territory of Trieste, however, continues toource of friction between the two countries Italians are counting heavily on the earlierby the Western Powers that Trieste be relumed, and undoubtedly assume that the return of that territory would follow upon an Italian participationestern bloc.
4
p Probablen Foreign .
The De Gasperl Oovemment will Ukedefinite position on the side of the West, bothreasons of national security and because western support Is Indispensableavorable settlement of Italy's major problems In foreigne timing of Italy's actual comrnliment to the western bloc depends on various fluid fa:ton.International tension. This tension. It appears, has won De Oasperl the backing of his Cabinet for an alliance of Italy with the West, but protracted parliamentarywould follow any proposal by the Premier that Italy participate In the Atlantic Pact at this time.
3. DoMtanc Psnuuau.
Because De Oasperl was elected on the understanding that economicresult from US aid, the government will obviously lose popular support andto Communist attack If the public falls to see material proof of theActually, the ECA has Already helped to bringubstantia!of economic recovery, but the effects have not yet appeared in material formcommon people, whose standard of living Li still below the prewar level.'level, the program Itself does not envisage an improvement In the Italianof livinghus, (he government will have only limitedreUInlng Its public support through proof of Immediate economic gains. In lieugains, however, the government might be able to Inspire some confidence Inpolicies by proposing and attempting to carryegislative programbe clearly designed both to complement the ERP and to satisfy some of thedemands of most Italians for economic snd social reform. Without suchthe ECA cannot In any case attain ultimate success nor can anyIn lbs standard of living be
eview of some of the salient problems of economic recovery In Italy will lllus-trats the difficulties of attaining any markedn the standard of living within the life of Ihe European Recovery Program and the even greater difficulties of achieving any perceptible, change within the next six months. ,
#l* AgrtcvUuroi Needs.
In agriculture, the Immediate problem Isecure maximum yields of food, and thus, without dlsproportloriate Imports, restore the Italian diet to at least Its) level. Despite the progress madeven this modest goal will not be achieved with9 harvest, rerliluers, Insecticides, and farm machinery are still Insufficiently utillred, despite the greater quantity of these supplies now available. In some areas, an Increase In yield may ultimately depend on the enacting andof legislation to reform land holdings, as required (though withoutof time) by the Constitution ofecemberuch long-range reforms,would not eJTect present agricultural production, and (he uncertainty which surrounds these reforms has restrained many large landowners from Investment in Improved agricultural techniques which might otherwise Increase this production.
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toward agrarian reform will be slowed through the opposition of Tested Interests and the need of educating tenant fanners In methods of operating small holdings Nevertheless, large sections of the rural population willrogram of agrarian reform as the price ot their confidence In the government, even before implenveotaUon ofrogram is possible.
C. ir.
In Industry, during UlB, the) level of production was attained, and long-term potentialities in this field are good. The high cost of prediction,presently handicaps Italian exporters In the development of foreign markets. Contributing factors Include obsolescent Industrial equipment, obligatory retention of unheeded workers (especially In the mechanicalariety oftaies ERP aid will permit modernisation of some manufacturing plants, but none of these high cost factors lends Itself to quick solution.
Increase In Industrial output Is further hampered by the presence of certain uneconomic Industries which were developed during the Fascist regsse In order to make Italy economically insufficient and prepared for war.Industries, mostly In the mechanical field, are still subsldbcd by the state. Although the government rccogniies the ultimate advantage of abandoning them, It Is reluctant to do so because theylvrithood to many workers for whom there Is now no substitute employment.
d. strikes and i
Industrial production has ben somewhat hampered by Communist-InjpUcd strikes and slowdowns, which are likely to continue. The Corrunun'st-donunaledof Labor (COIL) has recently favored the use ot the slowdown, rather than the strike. In the hope ofider support among organised labor and lessening public antagonism to labor demonstrations. Within thehe oppositionepublican and moderate Socialist minority la diminishing the effectiveness of the slowdown. However, in strikes called on economic issues, such as wages and theof workers, the COIL continues to attract non-Communist support, eien at times the backing of the Calbollc-Ied Free Confederation of Workers (LCOlL).the government will probably be able, byinimum of attention to the basic Issues Involvrd, to keep such strikes and slowdowns from crippling economic recovery.
- e. vnmplctyvunt and tmiorotkm.
Unemployment perennially handicaps the solution of all other problems of the Italian economy. The population is Increasing byear, and each year about one-quarter million more people eoter the labor market.havingotal otillion in early IMS. I> nowillion, and shows no tendency toward further reduction except through emigration. Indeed, eren fulfiHrocnt of the government's goal ofillion additional Jobs in Italy during the life of ERP (IMS-SI) would represent only the estimated Increase In unemployable population for that period. Emigration, which might otherwise pro-
in thgcmpV
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racticable means of reducing the number of Ihe unemployed. Is presently mulcted byvariety of fx Ion, Including shortage of trans-Atlantic shipping and the reluctance of many countries to accept Immigrants.ermanent emigration it not likely to exceed thathus, approximately ft millionalf unemployed2 aie In prospect. f. Tht Tax System.
he Italian Governmenturther problem In Its system of taxation. Despite tax evasion by Italian manufacturers, their production costs axe considerably Increased by social security charges and by the "turnover tax" vhleh tbey meet at every stag* of Industrial output.esult, the high cost of ItadUn manufactured goods Impedes the development of Italy's export trade. Moreover, the large part of national revenue derived from indirect taxation falls dfepropoiUonately upon the poorer classes. The government recognises lha need of revWng the entire tax structure, with emphasisrogressively graduated Income tax, and is conducting studies toward thishorough overhauling of the presently Inefficient administrative system ofand collection of taxes would be ft prerequisite to any such revision. Because the level of civic morality In Italy is notoriously low, however, the government will have great difficulty in achieving these refc-rrns, and their Implementation will probably be delayed. The existing forms of taxation In Italy will, therefore, probably continue to burden certain fields of business enterprise and to demoralize low-Income workers. These groups, however, couM be reassuredlear-cut government program of tax reform even before legislation Had final Implementation produced positive iam^ 9 Th* Pitch* Cl the Ml&SUCiaes.
In the rapid postwar upward eplrallng of prices and wages, the white-collar workers and the middle class In general have lost ground, and no substantial relief of their painful situation Is In (he offing. The government budget cannot bear the additional outlay which would be required to restore the piewar real Incomes ot public employees People dependent In whole or In part upon Income from rents cannot expect any appreciable increase in rentals, the one phase of the Italian price structure which has been successfully controlled. Glmllarly, ftllevlation of theplight of other fixed Income groups and the unemployed could be achieved only at the risk of creating new Inflationary pressures.
A. Elements OiHtrvctiie to
teady movement toward economic expansion would not be reflected Immediately In betterment ot the lot of most Italians. Moreover, the movement toward economic expansion will be slowed here and there by the special pressures of Interested groups. Some Industrialists will seek to employ ECA-flnanccd raw materials In the manufacture of high-profit Items regardless of their contribution to recovery. The CommunltU, on the other hand, will continue their agitation to have EGA counter-put funds devoted to temporary relief projects which can provide no basic, sustained advantage to the Italian economy. Betides their efforts to encourage squandering of ECA aid, the Communists, who control ft third of Parliament, will promote lengthy debate In order to delay legislative action essentialecovery program. -
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t. Probable Developments In Domettie
The Inherent dlrScullles of resolving the problems of economic expansion In Italy and the obstacles Interposed thereto by Interested eectora of the population will continue to block atUlnment of tangible Improvement In the Uvea of the people. Within the neat alx or eight months, at least. Improvement of this sort will not be Impressive. Despite these limitations on what It csn offer In the immediate future, the government could Inspire public confidence byold, comprehensive legislative program. To date, however, it has failed to give Indications either of having or of soon developingrogram. Consequently, the government cannot look forward to winning popular approval of Its foreign policies on the buis of having created popular satisfaction over Its approach to the problem of domestic needs.
There rerrutfns, moreover, the danger that3 an Important segment of the Italian public. If adequate social and economic improvements through ECA aid and governmental action are not forthcoming, will shift Its support back to the Left, particularly to the dynamic Communist Parly. This reaction would not immediately affecterious degree the composition of the present government, but It would probably lead to the withdrawal therefrom of theThe national electionsowever, would probably resultecisive loss of popular support for De Ossperi's Christian Detrwrst*.*
* Ho mention *aiinS above, 'DoroesMcocwitlc threat laQupertorKanttaUon (apyroalmiiUb*
rmedctmuUy broux una wiarjraUon baa not to Sate become saWart pUve (actor aOectUif iwmmenl poller on either of the ttro luadamenUlla this paper.
Original document.
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