PROSPECTS FOR EASTERN EUROPE

Created: 6/10/1977

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Interagency Intelligence Memorandum

Prospects for Eastern Europe

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NATIONAL SECURITY INFORMATION Unauthorized Disclosure Subject to Criminal Sanctions

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PROSPECTS FOR FASTERN EUROPE

MAIN POIN'iS

-Unrest is likely to grow in Eastern Europe over the next three years. The destabilizing effects of detente, slower economic growth, and dissident activity will all add to the tension between the East European regimes and their peoples.

-The impact will not be uniform. Poland will be thelow-up there, which might bring down Gierex and even conceivably compel the Soviete to restore order, cannot be ruled out. The situation will be less volatile in Eastbut the Honecker regime is going toarder time balancing its economic need for closer ties to the West with the unsettling effect those ties have on the East German people.

-In the rest of Eastern Europe, the tension is not likely to get out of hand. Nowhere will dissident activists byseriously challenge the regime.

Under economic pressures, all of the East European countries will show more interest in expanding their trade with the Kest. Despite misgivings, the Soviets will acquiesce or evensuch expansion because they are increasingly reluctant to subsidize the East European economies. But balance-of-payments problems will help limit East European economic ties to the West.

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-East European leaders will continue to give ground,and reluctantly, on human rights issues of interest to the West. But they will resist anything that looksestern effort to bring about significant political change.*

-If there is no major threat to internal order in any of the countries, the prospects are fairlow evolution toward less authoritarian methods of rule in East Europe.*

-The East Europeans are not likely to seek or get anygreater independence in foreign affairs.

-The US is not likely toajor impact on how thepicture develops in any of the East European countries. But the East Europeans will attach more importance torelations with the US, not only for the possible economic benefits but also for the increased prestige such ties bestow on the current leaders.

oee not agree that Eaet European leaders willo Western views on human rights or that prospects are fairecline in authoritarian methane cf rule in the absencehreat to internalj-zr/believee that the necessity for tight centralised party aorTPTol, the likelihood of growing unrest, constraints imposed by the USSR, and the example of Soviet treatment of dissent all argue against such developments.

DISCUSSION

SCOPE NOTE

DISCUSSION

Economic Trouble

The Dissident Problem. If Leaders

The Soviets

The Western Connection

Poland

Hungary

East Germany

Czechoslovakia

Romania

Albania

Bulgaria

SCOPE NOTE

This paper covers the next three years. It assumes Soviet ability to deal, militarily if necessary, with any serious threat to the USSR's security interests in Eastern Europe. The paper is guided by these questions:

are the prospects for instability in theand in particular countries?

are the various countries' economic prospects?

is the outlook for an amelioration ofCommunist practices?

any of these countries have leewayoreign policy selectively independent of Moscow's in areas of significant interest to the US?

impact is the US likely to have?

Because of its unique statusis the US and the USSR, Yugoslavia is not considered in this paper.

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DISCUSSION

The riots by workers in Poland last year and the emergence of dissident activity in Czechoslovakia, East Germany, and Romania are signs that East European countries will liveore fragile than usual situation over the next two or three years. The underlying causes are unchanged: the chronic disaffection of the East European people with thesystems they are stuck with, nationalism, and theof the West.

But there are some new factore. Moscow's detente policy has reduced the ieolation of the East European people and raised demands for more personal freedomsetter standard of living. At the sane time, the requirements of detente have made it harder for the regimes to deal with their peoples in authoritarian ways abhorrent to Western sensibilities.

New economic problems are also emerging. The East European economies and the material well-being of the Eastpeople have grown significantly over the pastears. But the growth rates are slowing down, end the prospects are good for growing consumer dissatisfaction over the next few years. This is dangerous because rising material expectations were consciously generated by the regimes to help neutralize unfulfillable political and national aspirations.

Economic Trouble

4. The regionhola is resource-poor. Even in good harvest years, the northern countries are not self-sufficient in grain. Eastern Europe is especially dependent upon energy Heavily reliant on foreign trade anyway, thesehave in recent years also suffered the consequences of Western recession and inflation, higher prices for Soviet oil and raw materials, and larger grain import needs due to poor At the same time. East European manufacturing plants are obsolescent in important sectors. The labor force isskilled, but productivity suffers from lack of incentives. Management is beset by the irrationalities and inefficiencies endemic to centralized planned economies.

Unable to generate sufficient exports, the countries ofarge hard currency debt. In order to keep new borrowing down, the East Europeans will have to restrict imports from the West whileto Maximize exports. But economic growth itself depends on quality Western equipment and industrial materials. The East Europeans have already scaled down their growth projections for theive-year plan. There is reason to doubt that even these more modest projections will be met. Tensions will rise as consumers feel squeezed. The regimes will want to raise consumer prices to stem demand, but they will be wary in view of the Polish experience.

In the background loom more severe strains in the, when anticipated declining Soviet oil production will reduce oil imports from the USSR (see Figurend will greatly increase East European hard currency purchases ofesult the East Europeans will have to take steps to increase conservation and to substitute coal for oil in power plants.

All these problems will renew the case for reforms-increased material incentives, realistic price structures, and more decentralization. Most of the East European leaders will be reluctant to embark on this road. In addition to theirideological misgivings, they are likely to want more, not less, centralized controlime when hard economic choices must be made. Under pressure, they are likely to be moreabout Soviet misgivings regarding the orthodoxy of reforms. While reluctant to make basic structural changes, the Eastwill want to increase the output from the private sector

of the economy, and perhaps increase its share of the economy.

economic constraints do not augur wellstability, but how bad things will get politicallyless clear. The East European people know they arematerially than ever before. They also are accustomedeconomic discomfiture and even deprivation. They knowWest is experiencing high levels of unemployment and Experience will tell them they cannot expectfrom the West. With adroit economic tinkering andluck, many or all of the East European regimes may dodge

1 elieves that the decline in Soviet oil production vill net be ae rapid ae indieated in this paper and that theshould maintain production at current or higher levels into the .

' Easier tmope Oi;t

by Country

Czecho- East Hungary Poland Romania Slovakia Germany

Total

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the various hazards of the next few years with the grudqinq support of peoples reluctant to risk their hard-won margins of improvement. The greatest hazards lie in Poland, whose people are the most volatile in the region, and East Germany, where the attraction of West Germany cuts very deep.

The Dissident Problem

isew phenomenon in Easternmcrgence over the past year is of more than usual

9.

But its re-concern to the East European leaders. Their"perrormance*"M' rulers is being judged against Western standards of freedom and human rights,ime when their economic performancethe West is being found wanting. These concerns areby the evidence that dissident activity in one country spills over into other countries. Helsinki hasaior stimulus, Eurocommunism" has added its fuel, and the East European leaders are concerned that the Carter administration's enphasis on human rights will further encourage the dissidents. They also know that Helsinki has impacted, particularly in East Germany, on wide segments of the population in addition to the dissidents.

10. Nowhere do the dissidents seriously threatenrule, nor will they do so in the foreseeable future. The danger for some of the East European leaders is that the cissidents willopulation restive over economic and other grievances. The dissidents also make it more difficult to maintain the kind of political relations with the West and the US that can be helpful on the economic front. Further, their activities create another source of tacticalwith Moscow and among the East European party leaders themselves.

So far' the East Europeans have been given consider-

able latitude in handling the dissidents by the Soviets. But if Moscow decides toougher dissident policy on the East Europeans, then the prospects for miscalculation and serious troubles increase. Specific consequences are far less certain or predictable, although they may well become severe and might even resultituation reminiscent of Hungary6 or bringeader, like Gomulka

Ii Leaders Change

A change in the leaders in any of the East European countries would have an unsettling effect. New leaders might have trouble establishing their personal authority and would have to gain Soviet confidence.

Serious instability in Yugoslavialearlymovement toward the West after Tito would cause

the East European leaders to tighten up their internal control and to take special care in their external policies not to give the Soviets cause for concern. Dissidents and disgruntled elements in countries like Poland, East Germany, and Czechoslovakia might be encouraged by such developments in Yugoslavia to press harder for changes at home.

leadership change in the USSR would have aeffect. The East European leaders areBrezhnev because he has given them considerablemanaging their internal affairs. His demands usuallybeen unreasonable and they have with time gained somehis limits of tolerance. New understandings withmight be reached with relative ease if theypower smoothly and conduct similar policies towardand toward the West. eriod of politicalm the Kremlin, or the emergenceew Sovieta tougher stance toward Eastern Europe, would be very Contradictory Kremlin signals on policies andmight well be mirrored in the politburos of

The Soviets

Moscow is obviously concerned about the unrest in Eastern Europe. low-up in any country not only has important implications for the regionhole and for its ties to the USSR, but also for the tranquility of the Soviet Union itself and for its dealings with the West.

While Czechoslovakia8 proved that Moscow can be pushed toowill intervene with force if it feels its security interests are seriously threatened, by and large the Soviet leadership under Brezhnev has opted for stability in

Eastern Europe at the expense of ideological purity. Thefeel uncomfortable with the more permissive approaches of the Poles and the Hungarians, but they have reluctantlyboth Gierek and Kadar to fashion their tactics to fit their own circumstances. Gierek and Kadar are, in Soviet eyes, good Communists who will neither be transformed into social democrate nor forget the speclel reletionship with Moscow.

1?. The Soviets helped create the tougher economic environment in which the East Europeans must now operate.oscow sharply increased the price it charged East Europeens for oil and other raw materials, and prices also went up6 Moscow's policies derive from its own economic problems,ingering feeling that the Soviet Union has had to sacrifice to ensure that people in Eastern Europe continue to live better than Soviet citizens.

Soviets will have to continue toEurope, for the alternative ie political unrestthe last thing Moscow wants. Realizing this, Moscowits price increases, accepted payment inpermitted the East Europeans to run sizableand granted credits and supplementary oilthe proper balance between economic andwill become harder as the Soviets begin to face upoil shortage inore conetrictedoutlook generally.

consequence of these economic pressures is

that the USSR will have to continue to look relatively favorably on Eastern Europe's economic ties with the West. They hope that the West will share the burden by continuing to finance Eastern Europe's purchases of industrial end raw materials and agricultural products and by helping to modernize East European industry so that it can pay with quality goods for Soviet imports. The Soviets probably will be willing to countenance suchquestionable arrangements ae joint ventures with Western companies. They will be willing toore favorable political relationship between Eastern Europe and the West to the degree that seems necessary for closer economic ties. They will probably allow some internal reform if it seems to promise economic results. But they will be concerned about the cumulative effect of these trends. How far they will be willing to let the East Europeans go will depend on their confidence in the particular Communist leader's ability to retain essential control and their perception of Western political intentions. Thisomplicated equation that Moscow will recalculate as specific situations arise.

The Western Connection

making any special effort, the West has

a substantial unsettling impact on Eastern Europe. Many in the region identify with Western cultural and social traditions and consider an "Eastern way" in alliance with Russia as alien to those traditions. Other East Europeans are drawn to the dynamic and material features of Western life that contrast sharply with the drabness of their own lot.

the same time, the West has been in somea force for stability. Detente has helped theto gain more latitude in their dealings with thegoods bolster economic growth and enrich consumerWestern credits permit large trade deficits;cater to, as well as arouse, popularEurope's economic needs havetrongfor detente in Europe and for the region's opening

to the West. These needs will grow over the next few years, and while increased trade and credits from the West will notanacea for Eastern Europe's economic ills, they can be of considerable help. The East European leaders will discover that the USSR will be increasingly reluctant to bail out their economies and that they must do more business with the West. Those countries which do not have MFN status will have increased interest in getting it. All will show increased interest in barter arrangements with Western companies and in jointventures.

because of these interests, Eastwill continue to give ground, sporadically andon some human rights issues of interest to the West.'will be hypersensitive to indications that the Westto bring about significant political change in The Soviets in particular will be disposed tothat the West is seeking to make trouble for them

in their backyard. They will continue to see in the USon humanostile political, rather than humanitarian, motivation. If problems of internal order grow seriousfor example therelow-up in Poland or Eastimperative of order will prevail, with theseeing little choice but to accept the damage to wider equities with the West.

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23. There are definite limits to present and feasible Western economic input to East European economic needs. for Romania, trade with CEMA countries will continue to predominate. Balance of payments constraints will alsoimiting lector. Trade with Western Europe is, and is likely to remain, much greater than that with the US (see

Poland

unrest is more serious in Polandelse in Eastern Europe. It will continue to beths next two or three years. Disaffection withand with Communist rule, is widespread. The moodPolish workers fluctuates between resignation andlast year's riots and sabotage over proposed pricethe workers are ready to express their grievances They know that what they do sometimes counts) in

hey brought down Gorculka. The workers are angryfailure of the Cierek government to make goodetter material life. The quality of lifebut has not kept pace with expectations. Peoplea shortage of apartments, long lines to buy food andand long waiting lists for automobiles,and the

the workers' resentment is not entirelypocketbook issues. The riots last year were also athe sudden and arbitrary nature of the regime's decision

to raise prices steeply. For years, Giarek has been touting his commitment to consultations with the workers; his action gave the lie to his words.

dissidents have tried, through theof such organizations as the Workers Defense League,common cause with the workers. This has not yet paid

off in any tangible way, but they are still working to create the impression that they speak for more than themselves. They are pushing for sxsre freedom in the arts and mass media and for the right to travel. Beyond such personal freedoms, some dissidents areore pluralistic system for Poland in which the Communist Party would share some of its power, for example, with independent trade unions or even with other political parties.

irony is that personal freedoms are greaterthan anywhere else in Eastern Europe. Moreover, it iscountry in the region where agriculture is still largely

in private hands and where the number of people engaged in retail trade and in services is increasing.

position of the already powerful Catholicbeen strengthened by the recent unrest. It hasby urging restraint on the workers and, more recently,

on restive students. The Church calculatesreakdown in order will work against its interests and the prospectsess authoritarian state by bringing to power leaders more orthodox than Gierek, possibly through the directof the Soviets. At the same time, the Church will be exerting increasing pressure on the regime on behalf of its own direct interests and in the area of human rights.

Gierek's primary goal will be to keep the lid on. He can do little else, for there are no short-term solutions to the underlying economic problems. Supplies of consumer goods will continue to fall short of demand. The regime will continue to juggle reserves of foodstuffs and to import extra supplies of consumer goods to take the edge off frustration and get through the sensitive periods of Christmas and Easter.

Much of Poland's economic progress0 has been due to extensive imports of Western technology. This

pace cannot continue during the next few years because of Poland's serious balance-of-payments problem. Central planners must find ways to use the resources already on hand more efficiently. The leadership has hesitantly taken measures to encouragefarmers and craftsmen to expand theirore investment funds will be diverted to the production ofgoods. Poland may well seek refinancing of its Western debt.

the basis of the evidence of the pastseems inclined to moveess authoritarian

Poland. Ha has given new encouragement to the private sector of the economy, has loosened censorship, and is quietly encouraging members of the rubber-stamp parliament to act more like real representatives of the people. He has to proceed carefully because such policies are not universally supported within the party, and the Soviets undoubtedly are suspicious about their implications.

far, the Soviets are acquiescing, for whatmost out of Poland at this juncture is quiet. They

have even helped out with an approximately billion-ruble commodity credit and additional supplies of oil and grain. If order should break down, both Warsaw and Moscow will want to see it restored by Polish forces. Only if these fell will the Soviets intervene.

The policies of the US and the West are not likely tc be critical to what happens in Poland over the next few years. But they will have some effect on Gierek's prospects. On the economic side, he hopes that the US will encourage private lenders tc be responsive to Poland's needs both with respect toand to granting new credits, particularly to cover the importation of consumer goods.

There are few trade barriers to an increase in Polish sales to the US (the US accounts forercent of Polish foreign trade) and little the US can do over the short term to help Polandetter job marketing in the US. But the Poles are concerned that recent protectionist actions againet some of their exports mayrecedent that will restrict their sales in the US. Warsaw wantsby the US that it is doing better in the human rights area and muted coverage of internal and dissident affairs by Radio Free Europe. Above all, it wants tooo vigorous US policy that would arouee Moscow's fears of American intentions in Eastern Europe and generate higher Soviet pressure against Gierek's reforms.

Hungary

The principal question in Hungary over the next few years is whether the Kadar regime will continue to pursue economic and cultural policies that are among the most liberal in Eastern Europe. The prospects seem good.

Hungary's8 as the New Economicsome decentralization of decisionreater rols for material incentive,ore reliance on price fluctuations to control supply and demand. The reforms encouraged innovation, productivity, and efficiency. They improved the performance of the Hungarian economy. But they also created political problems for Kadar. Workers complained about growing inequities in wage scales, conservatives about the creationourgeois atmosphere,

and ths Soviets about the implications for socialism. Thehas been some retrenchment and the fall from power of the leading reformists. But Hungary has not returned to the centralized, rigid model of the other CEMA countries.

in its economic dealings with thehas continued to be the most innovative East It has led the way in establishing jointWestern companies and recently has allowed Westernto hold majority ownership in banking and service Hungarian leaders are arguing that increasedwith the West are necessary to cope with theeconomic environment. They have acknowledged thathave been raised within tha "socialist system" about

the compatability of increased economic ties to the West And further economic integration in CEMA. Kadar is under some pressure from the Soviets, other East European leaders, and within his own party ranks not to go too far in orientingeconomy toward the West.

social and cultural policies have been,European or Soviet standards, enlightened. Theis less in evidence, its abuses curbed. Writerscan pursue nonideological work, and there iscensorship. ide range of Western literature,plays is available in Budapest. There are limits, and

the government does not hesitate to enforce them. Intellectuals must take care in commenting on the regime, must not criticize

the Soviets, and cannot question Hungary's commitment to communis The party is sensitive to unauthorized ideologicalof its practices. It clearly wants to avoid giving Moscow reason to believe that questionable practices are hardening into ideological positions.

himself seems to have won the support,otherwise, of most Hungarians. mall number ofhave come out in support of the Charterroup

in Czechoslovakia but have avoided criticism of conditions in Hungary. Kadar has successfully ignored them.

has had some trouble with workers andthe cumulative effects of price increases; last year,Polish riots, thereork stoppagearge None of this got out of control and Kadaron some goods this past winter without incident. He

has also promised no additional significant price increases in consumer goods this year and he has raised some wages. Kadar knows that the consumer will inevitably be facing more stringencies, and he is therefore moving to expand his support. He is seeking better relations with the Catholic Church and will soon visit the Pope. His projected trips to Western Europe are, in part, designed to show the Hungarian people that he has developed an active foreign policy within the framework of Hungary's Soviet alliance. He has alsoewto recover the national treasures held by the US.

light touch has not endeared him to allcolleagues in Eastern Europe. The Soviets are more of Kadar's most powerful argument for his policies iswork, that Hungary does notignificantstability problem and isarxist state faithfulown way to the USSR. But if unrast grows elsewhere inEurope, the external pressures will increase on Kadara tougher regimen in Hungary. His reluctance to linesome of the ideas espoused by 6ome West Europeanparties will also create more trouble for him inthe Soviets get more concerned about Eurocommunism. will be manageable as long as Kadar stays on the scene.

other East Europeans, Kadar looks to the

US to help his country primarily by maintaining the process of detente. He sees the detente atmosphere on balance as favoring the internal autonomy that he has carved out. Specifics are less important, but there are two largely symbolic concessions

that he seeks: the return of the crown of St. Stephen end the granting of MFN statue. Both, in his view, would signal US acceptence of Communist rule in Hungary and recognition of his relatively enlightened policies. Thus they would strengthen his domestic position and his ability to withstand pressures from his own hard-liners and from Moscow. But they would not much affect Hungary's foreign policy, which by necessity if not conviction will continue to follow the Soviet lead.

East Germany

The Honacker regime is not nearly as rigid oras its predecessor, but it remains one of the morein Eastern Europe. It has sought not only to inetill in the average Eastenuine commitment to Marxist goals and strict adherence to regime policies, but also commitment to East Germanyasting nation state. It has not been notably successful.

West Germany is the rub. It keeps alive the ideaerman, rather than East German, identity. Itsgive the lie to East German assertions regarding theof Communism. And its impact in East Germany has besn growing since the two-Germany agreements of the. There have been overillion visits by West Germans in East Germany West German television is watchedEaet Germany; children hum West German commercials, young people get into arguments with party hacks who think they should be watching the right kind of programs on the right stations.

The Helsinki agreement increased the pressure because it seemed to imply that the regime would recognize the right of East Germans to travel and even emigrate to the West. It also gave restive Eastasis on which to apply to leave. By late last year, moread made application to emigrate to West Germany. To make mattere woree, they were the kind ofwell-educated professionals and technicians--alreedy in short supply in East Germany. The regime denied the epplications and also passed the word through the party apparatus that applicants would loee their jobs.

Some did.

Honecker has also used his large andparty and security organizations to find out why

the Eeet German people ere not happy. When not constrained by overriding ideological or security considerations, he has tried to be responsive. For example, one message he has received is

that there is growing resistance to the government's effort to organize and politicize even the leisure time of its citizens.esult, urban dwellers are now being allowed to plant their own private gardens, and more "free" leisure time is being

cultural scene in East Germany is notas in Poland or Hungary. But Western observers whoto East Germanyong absence are struckprogress that has been made. lourishingin which the regime takes some pride. This doesit from exiling those, like the folk singer Wolfgo too far in their criticisms. But it has hadruce with East Germany's artists andis no organized dissident movement, and the activities

of individual dissidents, like Biermann and the writer Reiner Kunze, do not seam to resonate strongly among the population.

of the most important forces forthe character of the East German people. They arethan the Poles and the Hungarians and farto give expression to their grievances. Materialfor much. The East Germans are the best off peopleEurope, and they know it. But despite their gains,between them and the West Germans remains anfor Honecker. An absolute decline in the standard

of living would be more serious, particularly if there ware no corresponding decline in West Germany. Apathy might grow into unrest and the prospect for disorder, demonstrations, and efforts to get to the West would grow.

To forestall such developments. East Germany needs to maintain or increase its trade with the West. It mustto import Western machinery and technology to keep its economy competitive in Western markets. Its projected economic growth over the next three yearsercent) will mean anof its Western debt8 billion at the end6 to about S8 billion. As Honecker openly admits, the countryerious shortage of hard currency. He also knows that tha East German economy will be under increasing pressureof its energy shortage. The upshot is that East Germany has an increasing economic incentive in maintaining orrelations with West Germany and other Western countries.

At the same time, Honecker feels under increasing political pressures from the West. He is concerned about West German efforts to expand its ties to West Berlin and about

what he regards as its efforts via the media to create trouble for him with the East German people. He also is afraid of increasing person-to-person contacts with West Germany because it further loosens his grip over his own people. He cannot sharply curtail the contacts that already exist because this would jeopardize increased economic dealings with West Germany, wouldtrong negative reaction from the East German people, and could upset Moscow because of its implications for detente in central Europe. Honecker has tried to strengthen the image of East Germanyeparate and fully "normal" nation state by seeking to erode the special status of East Berlin. But this does not help very much with his domestic problems, and it creates problems in his relations with the West. He also has little latitude from the USSR when it comes to Berlin questions: Moscow decides when and how hard to push on Berlin.

East Germans are likely to continue toincreased economic ties with the West over the next two

or three years. If this proves toailure, if theeconomy declines seriously,ightening at homeove to drastically cut contacts with West Germany might well result.

the meantime, the East Germans will pusheconomic ties and high-level contacts with thewould help them improve the regime's image at home. also provide some additional flexibility inwith West Germany. If such ties were to develop,Germans would have an additional incentive to ease uprights questions at home. They would also haveto keep the Berlin situation quiet. Their viewswhile not ruling, have some weight in Moscow. The

East Germans are not likely to stray far from the Soviet line on foreign policy questions, even if relations with the US are significantly expanded.

Czechoslovakia

53. In Czechoslovakia, political and economiccontinue to masquerade as stability. The Husak regime is one of the more orthodox and unimaginative in Eastern Europe.

Operating under the cloee supervision of Moscow, it has worked to limit Western influences and toight lid in the cultural area. Prospects for internal liberalization in the human rights or economic areas are dim. Czechoslovakia's foreign policy will not deviate from Moscow's.

The Prague leaderehip is divided and mediocre and has little genuine support or respect in the country. The economy is hard pressed by Soviet and Western price increases, Daaiy requires extensive modernization, sorely misses theof8 reformers, and needs greeter productivity from an apathetic populace, its growth rete is one of the slowest in Eaetern Europe and ie likely to remain eo.

All these factors would add uperiouslysituation if it were not for the apathy and despair that have characterized the popular mood since the collapse of the

Prague Spring." The emergence of the Charterissident group hasointed reminder that the problems andthat gave rise to the "Prague Spring'8 are still at work. But the dissidente heve notesponsive chord witn the wider population.

The prospect is for more of the same over the next few years. Economic problems are not likely to result in serious popular disorder and, without strong pressure from below, the impasse between the moderates led by party leader Kusak and hard-liners led by Bilak is likely to continue. Moscow seems comfortableivided leaderehip in Prague, and it will continue to be reluctant to endorse any efforts to introduce economic innovations or to bring back into the mainstream of Czechoslovak political and economic life those who were implicated in8 revolution.

Given its disabilities and priorities, the Czechoslovak leadership looks hardly at all to the US for help and is unwilling to modify its internal or foreignto get it. Increased contacts could, over time, help promote change, but the real impetus will have to come from within Czechoelovakia.

Romania

58. Party leader Ceausescu is not likely to lose his firm grip on Romania's rigidly authoritarian political and economic system during the next several years. Party cadre

and popular resentment of Ceausescu's authoritarianism and personality cult may grow, but we judge that Ceausescu can contain or thwart any such reactions.

faces an economic slowdown becausebalance-of-payments constraints will prevent itits projected annual growth rateercent. affect the Romanian consumer and could spurthe leadership over Ceausescu's overly ambitious But it probably will not provoke serious popularor threaten Ceausescu's predominance. Ceausescu

has long slighted consumers, alwayseen sense of what they will bear, and in the past has successfully blamedfor economic shortfalls.

is unlikely to relax the strictwhich he considers necessary to maintain hisand to allow him freedom of maneuveris theappearance of Romanianfeeble as it

has alarmed him, and he has also stepped up his efforts tovigilance in the media and cultural affairs.

For the past year there haserceptible thaw in Soviet-Romanian relations, symbolized by Brezhnev's visit to Bucharest in The thaw appears to be limited, however, largely to bilateral issues and toecision of both sides to mute polemical exchanges over some contentious issues. Romania's interest in assuring supplies of Soviet raw materials may haveole. Both sides, however, continue to assert fundamentally conflictingof how relations among Communist countries both within and outBide Warsaw Pact should be conducted. This breach of the "unity and cohesion" of theundamental Soviet aim, remains the major source of tension between the two Romania's other foreign policy initiatives are of lesser concern to the Soviets.

A fundamental shift in Romanian policy is,unlikely. Nationalismundamental part of Ceaucescu's psychology and notloy to enhance his leadership Moreover, while Ceaucescu enjoys considerablelatitude, even he probably could not undertake any major move to return Romania to subservience to the USSR withoutajor upheaval in party ranks.

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-OONFIDBNT-IAL

63. Ceausescu will continue tospecialwith the US and the West as well as the Third World. It provides psychological sustenance for his maverick stanceis Moscow and has helped support Romania's economic growth. The economic motivation will grow as the Romanian economy slows down.

Albania

Serious ideological differences with China and reduced Chinese assistance to the Albanian economy haveprompted Tirana to move out of its isolation in Europe. It has made some cautious overtures to Greece, Turkey, and France in search of increased trade. It seems likely that these efforts will continue. The Soviets want to get back into Albania, but their prospects are poor.

How far Tirana will go in overcoming its xenophobia depends in part on how its internal politics develop. These have been in Borne turmoil,umber of younger people have emerged whose political orientation is not clear. No major adjustments are likely as long as party boss Hoxha and Premier Shehu are in power. But our information on Albanian internal forces is fragmentary,olitical upheaval should not be excluded. Should oneits policy

it couldestabilizing focus for other endemically troubled nationalist currents in the Balkans.

Bulgaria

66. Bulgaria has been, and probably will continue to be, the most stable country in East Europe. The recent purge of party loader Zhivkov's long-time associate Boris Velchev could precipitate other changes farther down the party hierarchy. But these are unlikely to change Bulgaria's close economic and political affiliation with the Soviet Union. Popularfor Russia predates the birth of Bulgarian Communism, and Bulgaria can be counted on topear for Soviet foreign policy positions.

67. Bulgarian domestic policies will continue to be among the most conservative in Eastern Europe. There has been evidence of some limited popular dissatisfaction with economic and social conditions, but the chances of large-scale unrest seem very remote. Intellectual dissent will remaininor irritant, in large part because Bulgaria is bothand intellectually far removed from the West.

Operating under the close supervision of Moscow, it has worked to limit Western influences and toight lid in the cultural area. Prospects for internal liberalization in the human rights or economic areas are dim. Czechoslovakia's foreign policy will not deviate from Moscow's.

The Prague leadership is divided and mediocre and has little genuine support or respect in the country. The economy is hard pressed by Soviet and Western price increases, badly requires extensive modernisation, sorely misses theof9 reformers, and needs greater productivity from an apathetic populace, its growth rate is one of the slowest in Eastern Europe and is likely to remain so.

All these factors would add uperiouslyituation if it were not for the apathy and despair that have cnaracterized the popular mood since the collapse of the

Prague Spring." The emergence of the Charterissident group hasointed reminder that the problems andthat gave rise to the "Prague Spring"8 are still

siden" have notesponsive chord with the wider population.

prospect is for more of the same overfew years. Economic problems are not likely toserious popular disorder and. without strong pressure from

between the moderates led by party leader Husak and hard-liners led by Bilak is likely to continue. Moscow seems comfortableivided leadership ln Prague, and it will continue to be reluctant to endorse any efforts to introduce economic innovations or to bring back into the mainstream of Czechoslovak political and economic life those who were implicated in8 revolution.

r its disabilities and priorities, the

Czechoslovak leadership looks hardly at all to the OS for help ana is unwilling to modify its internal or foreign,_lncreased contacts could, over time, help

; bu* che realwill have to come from within Czechoslovakia.

Romania

eaderis not likely to lose his

-irm grip on Romania's rigidly authoritarian political and economic system during the next several years. Party cadre

COiWnnENTIAL-

and popular resentment of Ceausescu's authoritarianism and personality cult may grow, but we judge that Ceausescu can contain or thwart any such reactions.

faces an economic slowdown becausebalance-of-paymants constraints will prevent itits projected annual growth rateercent. affect the Romanian consumer and could spurthe leadership over Ceausescu's overly ambitious But it probably will not provoke serious popularor threaten Ceausescu's predominance. Ceausescu

has long slighted consumers, alwayseen sense of what they will bear, and in the past has successfully blamedfor economic shortfalls.

is unlikely to relax the etrictwhich he considers necessary to maintain hisand to allow him freedom of maneuveris theappearance of Romanian dissidence--as feeble as it

has alarmed him, and he has also stepped up his efforts tovigilance in the media and cultural affairs.

For the past year there haserceptible thaw in Soviet-Romanian relations, symbolized by Brezhnev's visit to Bucharest in The thaw appears to be limited, however, largely to bilateral issues and toecision of both sides to mute polemical exchanges over some contentious issues. Romania's interest in assuring supplies of Soviet raw materials may haveole. Both sides, however, continue to assert fundamentally conflictingof how relations among Communist countries both within and outside Warsaw Pact should be conducted. This breach of the "unity and cohesion" of theundamental Soviet aim, remains the major source of tension between the two Romania's other foreign policy initiatives are of lesser concern to the Soviets.

A fundamental shift in Romanian policy is,unlikely. Nationalismundamental part of Ceaucescu's psychology and notloy to enhance his leadership Moreover, while Ceaucescu enjoys considerablelatitude, even he probably could not undertake any major move to return Romania to subservience to the USSR withoutajor upheaval in party ranks.

PiAL"

63. Ceausescu will continue tospecialwith the US and the West as well as the Third World. It provides psychological sustenance for his maverick stanceis Moscow and has helped support Romania's economic growth. The economic motivation will grow as the Romanian economy slows down.

Albania

Serious ideological differences with China and reduced Chinese assistance to the Albanian economy hoveprompted Tirana to move out of its isolation in Europe. It has made some ceutioua overtures to Greece, Turkey, and France in search of increased trade. It eeems likely that these efforts will continue. The Soviets want to get back into Albania, but their prospects are poor.

How far Tirana will go in overcoming its xenophobia depends in part on how ita internal politics develop. These have been in eome turmoil,umber of younger people have emerged whose political orientation is not clear. No major adjustments are likely as long as party boss Hoxha and Premier Shehu are in power. But our information on Albanian internal forces is fragmentary,olitical upheaval should not be excluded. Should oneite policy

it couldestabilising focus for other enderaically troubled nationalist currents in the Balkans.

Bulgaria

has been, and probably will continue tomost stable country in East Europe. The recent purgeleader Zhivkov's long-time associate Boris Velchevother changes farther down the party hierarchy.are unlikely to change Bulgaria's close economicaffiliation with the Soviet Union. Popularfor Russia predates the birth of Bulgarian Communism,can be counted on topear for Sovietpositions.

67. Bulgarian domestic policies will continue to be among the most conservative in Eastern Europe. There has been evidence of some limited popular dissatisfaction with economic and social conditions, but the chances of large-scale unrest seem very remote. Intellectual dissent will remaininor irritant, in large part because Bulgaria is bothand intellectually far removed from the West.

Original document.

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