Created: 8/21/1962

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1. Premier Fanfani's government, formed onebruary after extensive controversy, is an Important milestone in Italian politics. Fanfanl's Christian Democrstlc partyhich controls aboutercent of the vote andide variety of political views among its membership, Is nowistoric "opening to thehstolitical understanding with Pietro Nennl's Socialists, Italy's third largest party, whichsomeercent of the vote. By this arrangement Fanfanl's coalition of Christian Democrats, Social Democrats and Republicans receives parliamentaryfrom Nennl's party for the enactment of long-needed socio-economic reforms which could undercut the appeal of tbe Communists. Tbe "opening" Isby those who feel that the Socialist party continues suspect because of Its unity-of-action pact with the Communists, which was not brokenhe "opening" is opposed even more strongly by vested economic interests within and outside the CDP who fear the effects of the government's economic reform policies. The President of tbe Republic, former Foreign Minister Segnl, is unenthuslastlc about the experiment.

2. The Italian Communist party has shown steady increases in every Italian election60oint where aboutercent of thenow votes Communist. Continued Communist strength ln the face of Italy's postwar "economic miracle" Is due partly to the fact that economichave not been adequately distributed either


geographically or socially. In addition, thehave profited from strong public cynic las over long-standing bureaucratic corruption, and the widespread feeling tbat workers* Interests have not been adequately reflected in government policy. The break Id the Coaouinlst-Soclalist alliance, however, and the subsequent Socialist-Christian Deaocratlc rapprochement, appear to have seriously disoriented the Coauflunlsteves sore than theforeign and domestic policies of Moscow itself. For the first time the Italian party showed someln tbe local elections Although Togli-attl continues to maintain firm control, there are indications of serious strains within the party over strategy with regard to the present Tanfanland the Socialists.

3. The Socialistfollowing the Hungarian revolt and's denigration of Stalin lncut national political ties with Its former Communist allies amd moved from the parliamentary oppositionosition of benevolent abstention. It la expected to give direct support on specific domestic reform legislation. Nenal has been the motivating force in this process, and his disappearance from the scene would probably slow lt down,but not bring ltalt. The Socialists are increasingly jettisoning the Coramunists from local administrations and forming governments with tbe Christian Democrats, with whom they now governocalities, including Mom* and all Inrge Italian cltlee with the exception of Turin, Bologna, Palermo and Maples; attempts to formovernment ln Maples axe under way. Tbe Socialists remain linked with the Communists ln cooperatives,0 small local governments, and in Italy's largest labortbe Coanwanist-domlnated CGIL. The Socialists, however, have now Joined with tbe cabinet parties ln sending representatives to periodic meetings for coordination of laborpossible first step toward breaking with tbe Communists ln the CGIL. Disentangling from the Communists ln tbe labor field, however, ln bound toelicate and protracted process if the Socialists are to avoid losing thei-maes support. They are increasingly engageditter polemic with tbe Communists over Italian government policies. Soclet censorship, and the undemocratic nature of communism.


4. nev Kovornmont hasprogressrtfora program, which previous governmentsto accomplish. It has movoJ to plugparticularly seriouslnand expand the school program, and tosocial security pensions. It has *Asoliberalising censorship, and has begunoat the prowlsloos ofegional administrationsafeguardItalian tendency to concentrate suthorlty

the national government. This government has also been th* first to be representederies ofmeetings called at its initiative. Its most controverslsl measure has been the bill for nationalization of electricquid pro quo for Socialist support of tbe government. Thiso be the first order of business wh*nllatent reconvenes ln September. It ls sxpected to pass and no serious economic dislocstlon ls However, strong efforts will be asde by right-wing elements to postpone the final vote until the national elections which are due in the spring Of

In foreign policy, this Socialist-backed government bas continued the stronglytern stand of previous Italian governments and continues to cooperate closely with major US goals. The Socialist party has accepted NATO aa an lnstrusent of defense, and Italy continues to aaiatsln US missiles on Italian soil. One house of parliament has alreadyalf percentln the defensehowever,to be one of the lowest ln Western Burops ln relation to the GNP. In this vote the Socialists abstained, refusing for the first time to Join the Communist opposition on this Issue. ocialist spokesman on defense matters stated that ln view of East-West defense increases it would be unrealistic to askeduction ln Italy's defenss budget.

The Fanfanl government continues efforts to promote Italian economic Influence abroad, and th* government's petroleum holding company, headed by oil tycoon Battel, continue* to aprssd its operations ln the Middle Bast, Western Europe, snd Africa. Trade wltn ths Soviet Bloc continues to amount to about six percent of total Italian trade and as

part of an Italian-Soviet trad* agreementattel arranged to supply large-diameter pipe to the Soviets ln exchange for Imports of Soviet oil. (Aboutercent of Italy's oil now comes from the Bloc.) Italian Industrialists in north Italy have appeared encouraged by tbe cordial reception which Moscow gave the Italian trade exhibit there this year, but there is no information available as to orders received. Total Italian exports toChina amounted toillionattel has long been reaentful toward OS oiland others for having left him out of the "seven sisters" Iranian oil consortium of thes. 7 Mattel made aa oilagreement with Iran which continues operative. The present Italian government, like previous ones, agrees in principle with the program for Western aid to underdeveloped countries, but has dragged its fast on Italian economic and military aid to Somalia and pointa to the need for rehabilitating underdeveloped areaa of aoutbern Italy.

7. If tha Italian experiment lngovernment succeeds lnreforms, lt can be expected over theto maintain the strength of theand to isolate and cut into tbeof the Italian Comiunist party. the experiment could strengthenInworking* are nowby the atrength of the extremisttbe experiment faila, Italy will ba in forperiod of political Instability. political atalemate during whichcould be formed waa followed byin minority government baaed onsupport. Tna resultantwere parlayed by tbe Coaaninlataand serious riots. Failure of theexperiment could be expected toof Italian politics by sending

Socialist following, as well as other left-of-center groups, toward the Communists.

Original document.

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