THE CURRENT SITUATIONIN FRANCE SIS
- CENTRAL INTELLIGENCE AGENCY
Papers of HarryS. Tru-an-'!V, President'su[.
THE CURRENT SITUATIONRANCE
BUMMAKY
Premier Henri Queullle (Radical Socialist -rightho resignedirect result of labor'* wagewm succeeded onctober by the eoclslist Jules Moch end onctober by Kene Meyer,Radical Socialist, both of whom felled to form governments because of political maneuvering Intensified by disagreement* over wage-price policy. Onctober the lvpular Republican ex-Premier Oeorges Bl-dault was designated by President Aurtol to succeed Mayer. The next government will be based, as wasiu^dleofthe-road (Third Force) coalition. The domestic poliele* of the Queullle Oovernment tendedesolute checking of Communism,economic controls, and raising the lerel of economic activity. While Frenchthroughout the Union were defended by this government. It also made progress In negotiations for grsntlng some dependentLotos, and Cambodia -certain autonomous right* as Associated State*.
Any Third Force Oovernment faces ardiUnce under even the mostcircumstances The Queullleslowlyeasure of stability down todjournment onuly, but in August and September the political groups comprising the Third Force breams more sharply divided, especially over wage-price policies, and the governmentrowing hostility of eocewrnlche more powerful of rueh interests are the labor federations, the employers' association, and the farmers' alliance. Although the coming weeks are likely toeriod of politicalhird Force coalition will almostbe In power. De Gaulle'* Rally of the French reonlehallenging the present governmental system, has lost Influence In
lthough Itolitical party of considerable strength.
Since the war France has achieved adegree of economic recovery andeconomic progress, In which foreignhas been and will continue to be anfactor. The reparation of warI* far advsnced, and investment forand modemixatlon isigh level. The rale of Industrial production In the first six months0 was mors thanercent above thathile agricultural production8 nearly equalled thathe serious postwar inflation was temporarily brought under control in the springverall economic progress will be slowedIn the current fiscal year,esult particularly of9 drought. Increasing competition for world markets,nd prospective strikes. In-dustrlal production and the reduction of the current account balancc-of-payir^nts deficit with non-dollar areas will probably approach the government'* goals, but the outlook I* leu favorable for improvement in the currentbalance of payment* with the dollar area, as well as for agriculturalounder budget, and betterment of theofing.
Since France abandoned all hope ofthe East-West conflict,mrnent and the great majority of the people haveIncreasingly upon coUecUve security and especially US military and economiche ultimate grantee* of their nationalThus the French havethe EHP, Western Union, the North Atlanticnd the Council of Europe. lo addition, French leader* have appeared to move slowlytoward eventual collaboration with Germany
*ihe Inteltlieaee cetanltaUona of iha
Furceomd In this report- It contains Information aaall&Uc to CIA asOlober .
edVrallted Western Europe. Sovietas hern gradually met In *front with the US end UK In the next twelve months, despite possible recurrences of friction with these powers, no substantial changes In French policy toward the US are anticipated.
The Armed Forces together with theand pcJtce are capable of maintain-Ing security against any Internal threat In time of peace. The lack of heavyand Inability to produce it, will make the Armed Forces Incapable In theyear oftrong aggressor.o prospect of any material Increase In military expenditureshe army includes only two armored and three Infantry divisions up to strength. All nlna existing divisions require modernisation of materiel. The French hope eventually to be capable ofivisions In Use field In case of war, butombat opera lions would ba possible foronth or two. The navy Is in belter condition than ihs army, or air force, but Its combatant ships require considerable rnodernlratlon. The air force la combat would be rendered Ineflectlfe by the obsolescence of equipment and fuel shortages. Communist Infiltration, which Is negligible In the army and nary, ia being graduallyIn the air force.
THE CURRENT SITUATION IN FRANCE
Strohvfllc toportorK* of FroMS).
France Is Important to the maintenance of US security because of ltd geographicIts pro-Western sympathies, Its Influence on continents! Western European affnlni, and particularly lis essential role In the ERP. Francerincipal factor In the closerof Western Europe's economy and In Western Union sirs legk planning, and, unless overrun, would be of enormous assistance as an ally of the US in the eventar with the USSR.
a. Military Aspeeti.
The military Importance of France is shown by the fact that Its defense establishmentarger than that of any other Westerncontinental power and Is expected to supply the largest share of the ground forces under the Atlantic Pact. Given sufficient ntllltary aid, France can buildompact and mobile army, improve its already good (but small) navy, and Increase the tactical capabilities of Ha air force. France's keylocation makes Ha airfields, lisMediterranean, and Channel ports, and Its transportation system vital to aprosecutionar In Western Europe. Their controlower hostile to the US would greatly weaken the security position of the US.
Of almost equally great militarythe US is the strategic location of theportions of tho French Union. Into North Africa, the French haveStatesof valyingof Importance to U3 security Inof Africa, the West Indies, the Farthe Indian Ocean. US access to basesareas would be of great value In eventOn the other hand. If someareas were controlled, evenan enemy or were not at theerious dlvcriton of US forcewould be required to seise and .
conomic AspocU,
Energetic French participation In theRecovery Program (ERP) is essential to European recovery. The violent effort* of the Communists78 to disrupt the French economy through strikes, primarily In order to block or delay ERP. Indicate the Importance withthe USSR regards the French position In that program.
French assets of mUltaiy value to the US are: certain raw male rials (bauxite. Iron ore, and potash from metropolitan France; rubber, tin. Iron ore. and tungsUn from the overseasutstanding scientists andabundant skilled labor,roviinf potential for arms production,
C. Importance to USSR.
France Is Important to the USSR in the
C
ltlcat, strategic, and economicSSR recognizes that Francsital link In US strategic planning, and that any weakening of this link would benefit Soviet plans. If France fell under Communistdomination, the political Independence of the Low Countries and Italy would bethreatened and allied control ofGermanyommunist vJo-tory In France would give tremendous Impetus to the spread of Communism In Europe and would provide substantial support for thenion.
Strategically, Soviet access toNorth Africa, and other parts ofUnion would provide the Sovietbases for attacking the US orand supply areas In the Atlantic andwould make It possible for navalsnd aircraft to operate against USin the Atlantic and Mediterranean,make US counteraction difficult.
Economically, France Is not essential to the USSR or Its Satellites In either war or peace. However, Inasmuch as Soviet overallpecialized production Is far lower titan that of the US, control of Frances Industrial pr>
i would be of greater value, to the USSR then to the US. France's supply of trained labor would also be useful.
7. Political Siryotloo.
The French governmental system isIn form and function! under the Comtl-tuticn orrdchicameral legislature consisting of theof the Republic (the upper house) and the National Assembly. Both havefrom metropolitan France and theterritories. The inaln legislative power resides In Uie Assemblyeputies, while the upper house, composedenators, has very limited powers. The two houses Jointly elect the President of the Republic, who, although he has little executiveoften mediates differences among theparties and can exercise some degree of personal influence in the search for aPremier and In shaping his program. The Awmbly possesses considerable control at one stage In the establishmentabinet, inasmuch as the Premier-designate mustthe Assembly's approval of his program before he can name his ministers. Demands for revision of the Constitution have beenbut will probably not be effectualin the eventrolonged political crisis.n particular have pointed toCon-
failure to give the Premier powtr to dtuolve an Irresponsible Assembly.
.
Premier Benrladical Socialist (right otesigned9irect result of labor's wage demands, and was followed first by Julesocialist and previous Minister of the interior, and then by Reneadical Socialist prominent In financial circles, who had served8 In the Schnman and Marie Cabinets. Tbo Rational Assembly confirmed Moch as premier onctoberotenmore than the minimum number lejulred forMayer onupporting vote. Both Moch and Mayer failed to form governmentsesult of political maneuvering IntensiAed by fundamental party disagreement on wage-price policy. Onctober Oeorges Bldault, Popular Republican and former Foreign Min-bier and Premier, was designated byAuilol to succeed Mayer.
A coalition government is necessary in France because of the multiplicity of political parlies, none ot which by Itself possesses much more than one fourth of the seats in thaThe next government will probably be based, aa was the Queulile regime,hird Force) coalition composed of the Soclallsls,adical Socialists, and certain lesser elements of the right of center. The relatively long-lived Cabinet of Henri CfueuUle, establUhed Inas in Its mem-be rthlp and policies slightly more to the Right than most of the postwar governments.cantonal elections ofto the Right, made Its right-of-oeotei ministers more aggressive. The QucuUle Cabinet was somewhat larger than thewithinisters,ecretaries of State,nder-Secrelaries of State.
The Queulile Governments domesticIn general, tended toward:esolute checking of Communism; (b) freerand (c) raising the level ot economic activity. Queuiile's policies with respect to
granting such dtpendert areas as Vietnam, Laos, and Cambodia certain autonomous rights consltUnt with the postwar concept of "Associated States" within the Union.
Ho Third Forcerine the. coming months Is likely to move substantially further toward freeing the French economy of government controls, except perhaps towages, and to decrease foreign trade quotas. The gains against Communism will be expanded. In Vietnam, French implemen-taUon ofarch 1W9 accords with the pro-French Government of Bao Dal willcontinue to he slow. At the tame time, military operations against Communist-led nationalists will be intensified, with emphasis upon defense of the EIno-Vlclnamese border.
it
T " 1
addition, tome further concessions lonationalist asniraUons may be forced upon the French Government by International etrnU, or possibly political pressure In Viel-
olitical FartUt.
Thelthough politicallybecause of their open adherence lo the Kremlin, have thet tingle party In tha Nationaltill possess realImportance bt^ause of their Influence over tabor. The French CP and Its affiliateseats In the lower house, having polledercent of the Totes In the last elections. The Commu-nUU have concentrated their efforts on nub lliying the effect* of European economic and defense programs by means of strikes snd sabotage. Their active propaganda machine continues to attack the Atlantic Pact and ERP, and advocates "peace" and collaboration With the USSR Because of basic economic and social conditions, the Communists are again capable of Increasing snd exploiting labor unrest, and hampering French national defense preparations.
The Popular Republican Movement (MRP) is the second largest party in the Assembly,eats. Since the8 elections, however, It hasubstantial portion of Its following to de Osulle.CuthoHc, It ts left of centerIn Ha economic and labor policies.
The CoclallOs er* the third strongestthe Assembly,eats. Ttvemternatlorutl socialism but areAlthough the Socialist Partyimportant port of the present coalition,traditionally drawn from labor,sharplyhe party**policies, which favorontrolledIt* demand for negotiations with theVict Minh nationalists inGovernment ofbe expected again to bring theserious conflict with Centrist parties- -
The rlght-of-center rtsdlcal-Soclahsts were the leading party In France before the war. Now, In combination with the Democratic and
SoclalLit Resistance Union,eals in the Assembly. Recentfor the upper bouse and forcouncillorsesurgencepopularity. The party supportssmall business and
The recent grouping of Independent Repur> llcans with the Peasant Action Party5 deputies, headed by former Premier Paul Reynaud. This RlghtUt group adro-cAte* free enterprise and represents anto capitalize on France'i recenl "swing toight'
The eery conservative Republican Liberty Party has S2 deputies and, at times, lends to favor the policies of de Oaulle-
Oeneral de Oaulle's followers wereas the Rally of the Frenchhe RPF claimed that it wasfoe all classes and opinions, not aparty. Its alma are to return depower by legal means. Induceby strengtheningtrong governmentby "poliUcal considerations,"the Communlsl menace. Donationalistic foreign policy alms to re-French prestige and leadership onIn the municipal electionshe RPF polled approximatelyof the popular vole and thusthe time being, as the largestIn lbs country. With lis failurede Oaulle lo power, the RPF hasmore and more of tho characterise* ofparty. The RPF does notto regain the rigor It possessed Inunless the Third Force receivessucheries of Cabinet crises,Communlstled wave of strikes,obvious failure to achieve importantpolicy. '
e. Pressure:utstanding among Influential groups ar* the farmers' alliance, the employers'the Catholic Church, and the leading labor federations. The farmers andtogether with the non-Communist labor federations,owerful Influence on the formation of the government's economic poll-
he Catholic Church. tradlUonally the dominant religious body In France, lacksover government policy, the bulk ofopinion, end notably the working class. It to not likely In the coming month* either to force ft reopening In naUonjJ politic* of the chronic controversy over the control of schools, or to produce,esult of the Vall-Ciid cxcommuntcntlonerceptibleIn membership of theGeneral Labor Confederation (COT).
Thehe largest federation of labor unions,embership probably nowto considerably lessrom the postwar peak. It Is the French CP's most dangerous weapon against French economic and polllkal stability. The bulk of Industrial labor still believes that the Flench CP and the COT sre the mostdefenders of working class interests,the exploitation of labor unions forends. The current COT campaign for labor "unity of action" Is encountering local end some national success, and to likely to make further progress on the national level In the fall. If the government makes noconcessions on the growing demands of all labor for bonuses and wage Increases.
Communlst, pro-Oovemmenl, snd SocUJUtorlented "Force OuvrWre" (FO) came Into beingplit occurred within the COT Inhereviously estimateds probably now less than the former figure In view of labor rank and.file cynicismFO leadership. The FO to lessled and has fewer financial resources than the COT. Its national leadership has opposed the COT'S campaign for unity ofbut hrj not been able to prevent some local unions from cooperating; by latelis leaders were thinking seriously of calling widespread "warning" strikes.
Ihe Confederation of Christian Workersredominantly Catholic, has astable membership of, Some of its local unions have taken advantage of the national leadership's permission to Join the COT In unity of action. While theleadership of the CrTC Is convinced ofthe practical necessity of cooperating with the COT In behalf of specific objectives. It has ried to take precautions against Communist control of the unity of action movement At the beginning of October, It was stillto obtain the pa-tkipation of all major national labor unions.tability c! the Oovernment. Fundamental political and economicdividing the coalition parties, anderiodic clashes within both the Cabinet and Parliament, threaten any Thirdrecarious existence eventhe most favorable circumstances. Invproving economic conditions, practicaland growing popular respect enabled the Queullle regime to survive several sharpattacks prior. onuly. Subsequently It was seriously weakened bothrowing Internal cleavage and by sharper attacks fromomk groups, as the results of lis wage-price policies; but It persevered through September defying all forecasts of Its early demise sndew record among postwar governments. Jules klocfa's Investiture,any margin of support lo the Assembly and spparentlyormula likely to satisfy both Left snd Right on the wage-price Issue, did not presage en appreciably greater degree of stability for his regime thannjoyed during September. Theparties and the majority of theapparently prefer, however, to continue with the Third Force, dcsplts Its Inevitable com promises and procrastination on current problems, rather than risk Introducing Oaui-llst or Communist Influence Into theHence, during the comingcrtaslngly likely toeriod of politicalor more Third Force coalitions will almost certainly be In power. AImprovement In over ail political alabiUty must however, await electionewanticipated for the fallnd unlikely to be held, as the result of anycrisis, earlier.
conomk Slluollon. ' ' Despite chronic political in-utility, Francs hasubstantial degree of economic recovery and overall economic progress, In
"*:
m
-fftfe
foreign eulat&nce hu been and will continue to be an important factor. This rateprogress probably will decelerate during the focal. Substantial Improvement over IMS* In Industrial production,and In the balance-of payments position with non-dollar areas, and Increased tourist receipts sue Important objectives which hare fair prospects for attainment In this period, 'iI government's expectations are likely to be disappointed with respect to agricultural production, trade with the US, the budget, and possibly the standard of living.
n AcMetmtnl.
The achievement atasThe repair of war damage was farwith government expenditures for this purpose averaging aboutercent of total expenditures8he bestwas made in production: the tale ofproduction In the first months9 wasercent8 or more thanercent8ercent Increase; andimil production8 nearlyhe goal set originally0 (presentfor the fiscal yearpercent increase over calendar. Theseefforts have uUliied fully the available labor force, to that unemployment, although Increasing slowly, amounts to onlyercent of the working population.
Investment for reconstruction andof equipment has been emphasised somewhat at the expense of sound gains in living standards and fiscal stability. Oroas Investment Is now being maintainedevel somev hat above the best prewarotal net Investment (beyond maintenance) increased rapidly67 beforeoffost of thisercent) was provided out offunds owing to the scarcity ofcapital, lor the duration of ERP, the domestic monetary resources for theInvestment expenditures will be met in port ty KCA-aulliorUed releases (expected to
*
in relation to IHI la oftMal trench ana V8
approachercent of total) from the francof ECA aid-One of the most persistent postwartemporarily broughtcontrol In the springhe wsge-pilce upward spiral apparently haltedthe good harvest and the tightening of credit controls Innd after the government's victory over the COT Inin the battle against wage Increases. By June, wholesale food prices were down nearlyercent below the8 peak. During May and June the cost ofwas fallingthe rate ofercent per month, and average wage rates were rising only slightly. Alio, the franc, afterduring the spring, remained fairly firm In May and June. The black market in dollars was reduced to Insignificant proportions as the dollar quotation droppedrevious high Ofrancsow ofn France's foreign exchangeand the slowly improving fiscal position of the government contributed to the
strengthening of the franc. -v.
In July, however, the first signs of renewed Inflationary pressures appeared.esult especially of the serious rummer drought, wholesale prices reversed their downward trend, and the wholesale food Indexng the sensational rise of fresh vegetables prices) climbedercent In Julygain in August. During the latter month, the inflationary danger became real as rising retail food prices reinforced labor's wageas the likelihood of devaluationand as the black market quotation of the dollar rose once more toranca. Abruptly in Septembersychological, detonating effecthis situation, labor,tronger price rise, grew more restive. The rapidof political stability concentrated public attention on the Indications thatncreases and strikes, as well as the steadyprice rise, would probably make economic.
toils eMetal rate oti to the Cottar waa eiUMliKed la rises ofxetlou bue sate, the commercial rale, aad the official -fret" rats of SM.
progress more difficult over the coming months.
. b. Outlook. '
Over-all economic Improvement, however, will probably continue In the current fiscal year thougherceptibly reduced rate. Industrial production will probabij approach the government's goals. Agriculturalwill further Improve but can beto fall far short of the goalSIncreasehichoodtear. The farmers are generally dls-satisned wltii the government's failure tomaterially the price offered for thewheat crop and may resort to hoarding. Under the best weather conditions, thecrop targets0 would require greater attention lo increased acreageby the price ofuse of fertilizers, and coruolldaUon of small farms, at an accelerated pace notfor In the revised annual programtoOKKC Ineanwhile the prolonged drought Is estimated to hareImpaired several secondary cropspotatoes, sugar beets, andnd to have Jeopardised the gradual Improvement In numbers of livestock. Substantial imports Of If vestock feed and some wheat Imports will therefor* be required,robable further strain upon the foreign balance of payments (seed below).
In other respects, too, economic progress vlU probably be made, but under considerable difficulties. Gross Investment, expected by the government to absorb nearly ooe-fiith of the gross national product, may have to be curtailed somewhat In order to reduce the pressure for Inflationary financing (see sA gradual reduction In the excess of French Imports over exports will probably continue to be made, particularlyesult of devaluation, but will be handicapped by Increasingly keen world trade competition and rising French prices. The resurgentIn fact, although It Is likely to be broughtcontrol before It results In seriousis the most Important adverse factor In the Immediate eoxiorolc outlook. Theuille Government late In August tookaction against the price rise, with an emergency Import program to lowerquotas and In some cases tariffs affecting certain foods and other consumer goodstextiles, wines, and farmhese measures were sharply attacked by the many Interested economic groups which warnedesulting dangerous influx of competitive goods, an excessive decline In French prices, andise InBefore the program could reduceail prices decisively, devaluation powerfully reinforced lnflaUoruuy forces already In existence. Bynd. It appeared probable that labor would sooneneral pay increase, Inasmuch as the alternative of govemment-lmposfd price reductions was now thoroughly discredited. Hence, the pattern was establishedenewed upward spiral of wages and prices. . f
these handicaps are expected to be
overcome sufficiently to permit achievementirable Increase in the gross national prod-nethey with otherwill aggravate three fundamentalbesetting the French economy:f the deficit In the balance ofon cunent account; (b) balancing the Internal budget without recourse to lrulaUoo-aty financing; snd (c) improvement of living standards.
ojPayment! onigh level of foreign trade)
in the current account balance of payments, whereby France would becomeEHP objective which France has fallen far short ofessential forof the French recovery program. The government aspires to reduce by over one-third9he8 cunentdeiiclt (see Tableithoutreducing the volume of imports. This plan assumes that: (a) Metropolitan France's exports can be expandedlmostercentnd (b) althoughn-vislbles" deficit willbecause of Interests payment* on foreignIncrease can be heldess than BO percent8 by some Improvement In the
ping Account and by on Increase of moreercent8 In the credit balance on tourist expenditures. Although someIn the oversea* territories' net deficit Is considered unavoidable, the gov-ernment hopes that,iberal rOog-Wm In-vestment program, the exports of the overseas territories can gradually be Increased enough both to ease Metropolitan France's rawImports requiremenU from non-franc areas and produceavorab'e netIn the overseas territories' account with foreign countries. WhKethUprcf^essUbetng achieved. It Is proposed to meet thelon'i total beJance-ot-pavrnenU deleft (In-eludingmillion on current account and Itoi million on capital account) with TCCA aid. requestedn the sums of |AW millions of direct aid0 millions (dollar equivalent) In drawingate inhowever, the OXfcO was consideringbelow these requestedgreat asercent in direct aidn drawinganticipation of the US Oongass* action on the overall ECA appro priatioo. Although Congressional appropriations were higher than anticipated by the OKKC, compensating adjustments In present French plans appear to be necessary, either by reducing the merchandise deficit or perhapspecial loan or loans.
Pcrfc*mane*9 In reduclniFrance's trade deficit withon current account hasB except for tradedollar area (see Tableo themonths of the year, exports to thetone paid for onlyercent oflag In the development ot exports toarea Is explained lo large part by:French prices of competitive goods;progress of the French in adaptingto selective US demands; andecline In US imports. TheIncrease in the dollar deficitonly serious remaining problem;
Metropolitan France has made someIn con trolling the deficit In theaccount, omciai dollar receipt*greatly Increased In thespecially because theattraction for dollars virtually
The overseas territories' current account pcollloQ (see Tableeteriorated ateadlly8illion deficit for thatnd to farpparently continuing to declineate In excess ofear. Noteworthy causes of this trend are: the heavy Import* of machinery and consumer goods; the drop in world price* of rawwhich are the principal export* of the territories; and the harassment of Vietnam's economy by war.
The outlook I* tor appreciable reduction of the Union's current account balance-of-pay<menU deficit, althoughenders difficult at this time any forecast of the full extent of this reduction. It lahowever, that the government'*9 estimate7 percent reduction belowwill result from greater tourist recelpUigh level of exportsale of almostercent8 was reached ti the first seven month*. It does not, howerer,
r
ir that the programmedercentf import* will be actually carried out,-and this failure win offset tome of the ad-vantage of the export* performance.ritical merchandise trade deficit with the
TABL* TT
SXXRCItANDISE TKADI ACCOUNT
or ue-tropoijc with forsiom countries
f dollari)
-
lUmiinder SoUsr fee* Btrrt tng Sow
4SS
4i>
ass
rap* (HI
U
4
III
-Hi
19J
; MaL
MJ
4.4
-US
IIS
10
-HI
14
SSI
-III
TIA
M
I > SMI
*4
III
SS-4
SOS
ml
Art* will probably not increase over lrlS, Finally, the overseas territorieswul probably Increase by more than theillions,
s. Cocernmenf Budget.
The second fundamcaUl problem Affecting further eccriornlethebudget by lion-Inflationarysomewhat closer to solution9 than It washis year abort-termhas so far involved only negligible turns, whereas8 aboutercent of total funds was raked la this way. Policiesto this sdueiemcnt have been some tax increases, moderate cuts in expenditures, and particularly recourse to the francfund, which Is serving this year to finance almostercent of the totaldeficit. Performance9 has not, however, fulfilled expecUUona. Thehas severe] times narrowly avoided financial crises which would have forced it to abandon Its commitments to Parliament and to ECA not to resort to direct Inflationary financing. Unexpected deficiencies In taxand higher deficits In the nationalized JnWiloj forced the government to wort laboriously with Parliament In May snd June on Finance Minister Ittschc's Plane vision of the budget, and then to turn to ECA late in June snd sgtln In early August for extraordinary counterpart releases.
*"vV
The outlook Is for renewed fiscal dlfiVuMe* In the late fall, which though troublesome lo the government are not likely to impedeprogress substantially. Thecounterpart release of SO billion francs announcedugust must be repaid loWhen Parliament reconvenes inthe government win endeavor toIt with fresh proposals for meeting9 deficit, as well0 budget Disagreement within the coalition, however, will be accentuated, and will probably prevent another salutary overhaul of the tax and administrativerompt anduts In the cost of thelonalised Industries and governmentuttons to social security. Without such re- *ftBfc forms the government'* budgetaryill probably not materially Improvendeed, It could worsen considerably should gasoline tax receipt* continue lo fall far abort of cjpectattons and/or the financial burden -of military operations In Vietnam.e increased. On ths other hand, total counterpart funds will probably notubstantially less0 than9
result of th* cut In ECA aid. Inasmuch ashas ledO percent increase In the number of franca deposited in the fund (or eachorth of ECA roods received. But should ECA resist more strongly later French requests for counterpart releases to eoTer indirectly current operatingand should Important economiesto be politically inexpedient, themay have to resort to some further Inflationary shoes-term borrowing as well aa curtail aomeabat Its suable lnresttnent
; tandard ofUetno.
Such uunor polk/ retrenchments will probably be found preferable, for reasons of political expediency, to any materialof etandard<*Urlng objectives. The continuing social unrest la France, prolonging Communist capabilities for exploiting wgsnlxed labor for political ends.ajor potential threat to thepolitical sUblllt/ and economicHence the modest official goal for the current fiscalsame total per capita consumption of goods and services as in 1Mb (representing an Increase ofercent above the second half8 and only one-fourth of the total Increase planned for the remaining three years of the Four-Yearprobably be emphasised at the expense of full export, or fiscal, orobJecli.es, or any combination of these. This goal, rnoreover, will be found more dim-cult to attain than was anticipated Inesult of the drought, prospective Industrial production losses through strikes, and the impact of the price rise on purchasing power.
Even full realization, however, of theaverage per capita consumption of total goods and servicesould probably not mean that the continuing Inequalities of tho poslaar period had beenvailabilities ofgoods reached levels wellut foods wereercent and housingercentven, there are expected to be somewhat amallerof edible oils, cotton goods, and gasoline thanew exmsurneras coal and shoes, will be Insupply. More serious, perhaps. Isdlatrlbuiton of real purchasingby the postwar inflationesult of strict wage controls,market, and hoarding by farmers.toward overcoming these variousIn the French standard of livingslow and must depend on pressure foraction, resulting from theof In teres led economic
The fa tor able factors raporufblc for the over-all record of economic progress achieved by the French had byutweighed the handicap* In the coming twelve months further progress Will be made, but unfavorableof the drought, resistance to Increased productivity, fiscal difficulties, labornd the precarious politicalpersist and in some respects bo aggravated. In addition, ECA dollars, hitherto th* chief means by which France has met Its dollar deficit, will be reduced while that deficit, therefore, shift* In economic force* will probably slow up economic progress.
oreign
After France abandoned all hopes ofthe East-West conflict, Frenchmen came gradually to base the security of the nation mainly upon US military and economic power. The government and the great majority of the people now rely upon collect!re security as exemplified in Western Union and thePact, prompt US military aid, and ECA assistance. Foreign Minister Bchuman has consistently worked with US representative*ound diplomatic and economic partner-ehlp based on mutual coopcratlveness andInhis goal wascJouded, though perhapseries of InternationalPresident Truman'* announcement of an atomle explosion in the USSR fostered an underlying apprehension of the Frenchthat US aid might bo effectiv* only after Fiance was again crushed. UK
ml approach to the sterling crisis and toof the West German mark rendered theoref their American end llrltlsheanwhile, the French Oovrjoraeot has teen adjusting by degree* Its attitude toward Oermany. From the nation's virtually unanimous dls-truvt that was the pivot of its tradlUonalpolicy, French leaders have appeared to moveesire for eventual Oerman collaborationederalized Western Europe. French public opinion, however, does not yet by any meansnanimous ahlft In this direction.
a. Emt-Wtit Conflict
The chief Immediate challenge to Frenchbeen gradually metorxunoo front with the US and UK. Early InchumanUS Ambavador Bruce that France would impose formal restrictions on East-West trade, to lbs same degree as thatby the UK, although taplerrtenUtlou of
"lit .
tembcr by disagreements between theof Foreign Artalrs and the Ministry ofand Commerce. In the complexquestion, France's primary aim has been toevival of Oerman domination In Europe. This has led the Frenchinto many sharp disagreements with the US snd UK over types of security controls which these three powers should ererclse In Oermany, for example, through theAuthority for the Ruhr and the Military Security Board. Disagreements were alsoIn connection with the establishmentest German Government Since the painful accommodation of differences In the8 negotiations leading to the London Agreements of that year, however, the French have acceded to compromises, though often reluctantly, and haverowing sense of lesponslblllty for strengthening Western Europe against the Soviet threat
VS arguments for freeing European trad* and travel have produced eiterulve French cooperation with the OKEC in easing theobstacles snd moving toward the sup-
:
presslon of Import eruoU reslrfctlons (certain restrlelionsercent of trade with ERP countries are to behe French have, however,lagged In steps to implement theunion with Italy, negotiated in IMS. In all major phases of trade relations with foreign countries and the overseas territories, France's growing dollar deficit has been an Important factor (see "Economic Sltuatkon'O. b. TVls Council Ofistinguishable from but not Inconztrtent with this "pro-US" policy, has been the strong French encouragement of the solidarity of Western Europe Including Oermany. In the' negotiation and Implementation of theTreaty of IMS, the French havetheir conviction from experience that to Join with their neighborsimelysnd mutual defense measure against possible aggression Is the first essential of an adequate foreign policy. Their persistent and successful opposlilon to British views of the projected Council of Europe highlighted the
the long-range need was for the development of not merely organs for cooperation among the governments,nion of the peoples of Ihjrope.
e. Probable
No substantial changes lo Frenchtoward the US are to be anticipatednest twelve months, despite possibleof friction wltl) toe U8 andshould the reduction In ECAaccelerated, substantial US military aidand/or the USSR engage In apeace offensive, Third Forcenot likely to shift their ultimateUS power or diminish materiallytoward the ultimate objectivespolicy. At the same time, however,will probably attempt to exertfor economic cooperationWejUmFAirocean countries.Forte type of government willcontinue to actundamental ,of Soviet political alms, and hence
be prepared In any further effortsrade agreement with the USSR to'X*
the concludon of u; treaty in order toWestern in tern u.
Should the Third Fore* coalition be aban-doneil In the coming fear, however, Important changes In French foreign policy axe likely, although any foreseeable governrneot would continue to be oriented fundamentally toward theovernment dominated by the non-Coinmunlrt Lett, although It would not wish to weaken France* solidarity with the West against Soviet eiparaloa, wouldcurtail materially French defenseightist government would work to demonstrate greater French Independence and prestige within the broad frameworkommon policy with the West
ilitary SituoBon.
A internal and trternat Security. The French Armed Forces together with the gendarmerie and the poUcs srs capable of maintaining the Internal security of theagainst any threat which might arise during peacetime from either the Communist paramilitary organisation of0 or General de0 fouo-eis organised In the -Serviceerious lack of heavy materiel and Inability toIt or essentia] replacement parts, would prevent the Armed Forces fromtrong aggressor. The morale of the Armed Forces, which numberen. Is generally good.
b. the Army.
The French Army is composed ofen, organized Into ninearmored, five Infantry, oneand on*regimen is, and S9 battalions. Of the divisions the two armored snd three infantry are up to strength, the re-malnlng four are undermanned and low on equipment; all require modernliaUon of ma-Uriel The heavy demands of the wax in Indochina have necessitated the diversion of much materiel and manpower to that theatre, where France maintains an army ofemaining troops are deployed asn metropolitan0 In tha German and Austrian Zones of Occupation,
n French Worth Africa,0 elsewhere. Trained manpower Is available to form eight more division* within on* yeareneral mobilisation, but no equipment cxUts In France for arming them. French planning Is directed toward the eventual establishment of an army capable of putting between twenty and thirty divisions In the field In ease of war. Under cunent conditions, paucity of materiel replacements would limit major combatto no moreonth or two.Infiltration of the army has beenreduced under the Chief of BiafT, Ocoeral Rivers. The armyoyal to tha present government.
cTKaHatf. -
The French Navyn belter condition for combat than Is Ins army or sir force. Its personnel, which are loyal to the government and little troubled by Communist infiltration, numberssships, aggr*gating0 tons, are maintained la fair condition, but require considerable rooderoUauon,In fire control and electronicsto be fully eflecUre. Chief deficiencies are anil aircraft and anU-submarin*Existing reserve personneldequate to permit the expansion of the fleet in anSerious deficiencies In modern aircraft and other equipment strictly limit thec4 Ue Naval Air am.
ct The Atr
Although the French Air Force possesses slightly fewerlanes, ofn In tactical units, fuel shortages and the obsolescence of Its aircraft would render it Ineffective under combat ectndltton* The UK however,urnishing some Jet fighters to the French, who hope to producethemselves by the end of ItSO. With modern planes and equipment, the airhose strength Is0 couldbecome an effective tacticalThe air forcehole Is believed lo beo the government, but the degree of^filtration Is higher than In the Iwoother *ci vices. Efforts to lessenIncidence '
of Cbmraunkra were started In8 and are continuing with cofuadevabb success
a. police and security for cel.
The gendarmeriend Republican Security) organiied Into eightfoe metropolitan France, have, on numerous oc-audonsftemonstrated their ability to maintain order and prerent serious Ototurbancea.
f. future dtvtlopmentt. No Immediate Increase to expected in the eapablllUea of the Armed Forces to defendfrom invasion, even within theof the Atlantic Pactradual rxowthIn combat effectiveness will occur only if mill-tary aid in the form of heavy material be-comet available. France Ls not expee led to in-crease Its military expenditures greatly dor- -Ing the next year.
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Original document.
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