Created: 1/20/1964

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MEMORANDUM FOR: Governor W. Averell Harriman Under Secretary for Political

Affairs Department of State

Trends in Eastern Europe

During- our discussion last Thursday, you indicated interest in the current state ofin the East European satellites. The attached memorandum speaks directly on this subject, and should be helpful. It wasfor Mr. UcCone's information prior to his current trip and has therefore been given only very limited distribution outside CIA.

CI ESTER L; UUU^PtiKCant -Bcpu-ty- Director (Intelligence)

DEPJlRTXSkt opdc/kb (Policy Support)



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SUBJECT: Recent Trends in Eastern Europe

Jrj recent years Soviet authority in Eastern Europe has declined, and tbe Satellite leaders have felt able to behaveessBanner. However, the Soviets retain important levers of power in tbe area, and Rumania's defiant nationalistic stand bos ao far not been emulated to tbe some degree by the other Satellites. Internal stability seems relatively assured in these states for the present except In Czechoslovakia,ombination of economic reverses and party factionalism has seriously weakened tbe position of the top leader. Novotoy. Most of the other states have also begun to experience chronic economic difficulties, which tbey would like to alleviate by expanding their economic relations with the Vest.

1* In an Interriev laat year, Khrushchev observed that acme of tbo East European Ccraainist leaders vere behaving like sons who hod grown too big to spankeventually they would turn on their father and "kick him in the belly." Indeed, the increased obstreper-cusjirbs of the formerly docile Satellites hasroblem for tbe Soviets, andioe when the latter already bave their share of problecs, especially with respect to their economy and the Chinese. In addition, they bave been confronted in tbe past year within the Czechoslovak regime, caused in part by sate severe economic problems which that country is experiencing. This memorandum undertakes to analyze the significance of these developments, and also to discuss recent trends in relations between the Satellites and Western Europe.

Tbe Decline of Soviet Authority

2. Since Stalin's death the Soviets have been led too new relationship with Eastern Europe, based less on direct coercion ond exploitation and more on voluntary cooperation. Khrushchev baa encouraged the Satellite leaders to be less slavish in aping Soviet practice and to shape their domestic programs more

In accordance with local problem. In Poland, for example, Khrushchev baa publicly sanctioned Ocmulka'e rejection of collectivized With Soviet encouragement, Hungary's Kadar, adopting the novel slogan, "Who is not against us is foras also employed methods Id bis internal program which differ Importantly from those practiced by the USSB and the other Satellites.

among the Satellite leaders toward morebave also been stimulated by Khrushchev'e repeated ottenpta

to Improve relations with Yugoslavia, particularly by bisof Yugoslavia's independent status, and his recognition that Tito hasegitimate course inomestic prograa radically different in method from that of ths USSR.

to Soviet power and authority In theaovement have also bad their effect in Eastern Europe. virtually open dispute with the USSReriod ofhaa gained aupporters among tbe world Communiatright in their East European backyard, the Sovietspowerless to prevent little Albania from defiantlyChina. Though none of the other East European CommunistAlbania's sympathies with China, tbey bave become aware that

the decline of Soviet authority provides them with on opportunity. If

Tf I

tbey desire to exercise It, to behave more Independently. Ihey alao realize that the need of the Soviets for support against China enhances tbelr bargaining pcver.

nev situation in the Ooanunist Bloc vasIn the past year by the Puannlac leaders, who refusedtheir program for broad industrialization according toand even hinted that if the Soviets didn't let then doliked with their economy, Rumania might back China Indispute. In response to this defiance, thetried political pressure, and then simply gave In. onsiderable setback to Bloc plans for integratingand Satellite economies, the Soviets publiclynationally oriented economic program and dropped their

own proposaloint planning staff in the CEMA organization.

Rumanians have turned increasingly to tbe Westequipment for industrialization, partly In response toof Soviet support for the large Galoti steel combine,to take advantage of the higher level of Westerntbey have continued to display an independent tendencypolicy, giving the Soviets only qualified supportChinese, and at tines even refusing openly to follow tbe Soviet

load la the UH. In both foreign and domestic policy Rumania's orientation le becoming increasingly nationalistic, often aani-festad In aa anti-Soviet manner, for esoaple, compulsory Russian language training haa been discontinued in Bueaalan schools.

T- lLar forces are present la the other Satellites, though still Latent. Most of the Satellites haveew tendency to act more on their own Initiative in foreign policy and to rely less on the Una provided by Moscow. QoaiUta, for cample, occasionallyosition in regard to tbe Sine-Sonet dispute whichar cry from the unquestioned support vhlch Moscov would like to have. On natters of major Importance, the Satellites are content for ths moment to follow Moscow's lead, though it now seems likely that, following the Rumanian precedent, they would act independently if Important interest* of theirs came Into conflict with Soviet policy.

8. There ore, however, Important limitations to Independent behaviorhese countries. The Soviets still have lapcrtant levers of power in Eastern Europe. Soviet military power is still dominant In the area, and tbe defense of the Satellites themselves Is dependent on military ties established through the ifersav Fact. The Satellite economies continue to be closely linked

vita that of the USSR. Cooperation aad special!aatlon under CEMA ts favored io one respect or another by all the Satellites. By virtue of its policy toward Germany and the NATO powers, the Sovietstrong military force in Bast Gernany, which experience has shown they will use if necessary to support tbe local Ccenunlst leaders in maintaining order. Moreover, both Poland and Czechoslovakia must rely on Moscow to keep Germany divided. In Czechoslovakia, and Bulgaria, the Communist leaders both depend heavily oa Moscow's support for the retention of their positions against competing factions.

Economic Problem!

9* uxber of the Satellites have been encountering economic problems even more severe than those in the Soviet Union. Agricultural production has stagnated for several years throughout the area, preventing any significant Improvement In living Industrial growth has sieved considerably in the more developed Satsllitee. Although the poor results In agriculture have forced some diversion of laports from industrial purposes to food, tbe main reason for the decline In the rate of industrial growth is more rundaasntal. Several Satellites havetage offfjlo^aant at which, having used up exceoa plant

capacity and labor reserves, further significant advances are more difficult to plan and execute. In these circumstances theof the Soviet-type system of eecnocic management has become more manifest.

ID. These problems ore most severe in Czechoslovakia where unrealistic economic plans had been pursued for too long and the regime has been unable tooherent policy. Czechoslovak Industrial production, which bad increased at en annual rate ofercent In the0 *e, did not grow at all Little increase is planned. East Germany also had to scrap Its unrealistic long-term plan andreatly reduced rate of growth. The Ulhricht revise he* made some slight progress in the past year in alleviating food supply problems, but the chronic popular dicea^sfactlcn with tbe regime and with thy division of the country regains. The recent opening of tbe Berlin Vail bos further stimulated discontent. The strength of the Ulbricht regime continues to be precarious, based essentially on tbe continuing presence of large Soviet forces.

Instability in CiecnogloTokla

11. Czechoslovakia's Bovotay lacks even this cold comfort. Bad planning, tbe general lack of strong or effective guidance,

and the consequent glaring economic failures have damaged the morale of managers and party members and have led to severe criticism of tbe Kovotny regime. This criticism has been especially severe in Slovriia, which has been more affected by the economic slowdown and the regime's clumsy attempts to improve the situation.

12. Novotay's position has been affected Blmultaneously by his inept bundling oforrection ofjusei of the Stalin era, especially those inflicted on tbe Slovaks. Hovotny's own heavy involvement in these abuses made him reluctant to do core than make gestures in the direction of de-Stallnization until the end Since that time, under strong pressure from middle-echelon party activists, especially th^se in the Slovak party, Kovotay has usen forced one by one to dismivj hla close associates in thep and to alter his policiesore liberal direction. In September he finally bed to dismiss his closest associate, Prwiier Siroky, end replace him with Josefore popular and younger Slovak who was untainted by Stalinist crimes. At the same tiue Novotny admitted many younger, more liberally inclined menumber of Slovaks into his administration. All this took placeimeively ferment

was taking place in intellectual circles. In this debate tv-ny

of the Issues wore raised viiich tad been questioned and criticised

in Poland and Hanffiry-

13- This ccanination of eventsthe Intellectual ftrnent, the revival of Slovak nationalism, and the dccands frou middle and lover echelons of tbe perry that tbe Wovotny leadership Improve its hand Mag of tbe eccocay and redress tbe political wrongs of thevloditmtion of oar Led instability lajjdaVJiKtp toward tbe end The Soviet* involved taenaolves In thi* In December and aprurently decided to try to keep Novo toy in paver, et lecet for the tlma being. esult, Novctoy Is ecill ths partyut apparently only ono;ad bis basic problemsd. Thee forcedJj- v. acq-iiesce In'soaeone who wouldc'iplite oJw.uge frca thaojt. This maneuver Bighty endf'-nger the stabillof tbem.

js ?- re

lh. o tbe situationhen coerareblo problems existedurber of Bast European countries, tbe conditions which have led to tiw instability in C'.dchoslovskia are not present in the

other Satellites to the none degree. Economic problems and popular discontent exist In East Germany and Poland, but none of the other Satellites Is currently experiencing intraparty factionalism comparable in intensity to that of Czechoslovakia. There is some or this In Poland and Bulgaria, but the political leadershipe appear fairly stable. Hire-over, the factor of Slovak nationalism in ethnically and historically divided Cxechcslovakin is unique in Eastern Europe.

Relations with the West

15. To one degree or another, all the Satellites share abased on economic need, to Improve relations with the West. West Germany has already taken advantage of this tendency by signing agreements with Poland, Hungary, and Rumania which provide for reciprocal resident trade missions with semi-diplomatic status. Negotiations are expected for similar agreements with Czechoslovakia and Bulgaria.* Theae pactsew, more active West German policy which apparently seeks to re-establish historic German economic pre-eminence In Eastern Europe. The West Germans, however, are by no

* in these pacts the Satellites havo surprisingly agreed to Include West Berlin In the "Deutsche Markn arrangement whichwith previous Bloc policy denying any Federal Republic connection with West Berlin, and has antagonized the East Germans.

means tbe only ones active In tbe area. Both ths British and the French Governments bave long been active in extending support to industrial development in Poland, Czechoslovakia, and Rumanle, and within the past year have relied the level of their diplomatic representation In


Rumania, Bulgaria, and Hungary.


16. All of tbe Satellites in the past year have Indicatedto obtain Western credits for industrial equipment. it has tried harder In recent years and haa exports thatmarketable in Western Europe, has been by far the most success- But the other Satellites also are increasingly attracted

Western technology, and probably will try to expand their tradeIndustrlalited West vfaetber or not they receive

credits. This interest will amost certainly increase.



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