THE OUTLOOK FOR ITALY

Created: 6/13/1961

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(in til

NATIONAL INTELLIGENCE ESTIMATESupersedes)

THE OUTLOOK FOR ITALY

submitted by the

DIRECTOR OP CENTRAL INTEIJJGENCB

the following intelligence organizations participated tn the preparation ot this estimate: the central intelligence agency caul the intelligence organizations of the departments ot state, the army, the navy, the air force, and the joint staff-concurred tn by the UNITEDELUGENCE BOARD

ate :

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TABLE OF CONTENTS

Page

THE

I.

IL FACTORS BEARING ON POLITICAL

Parties and Pressure

The Democratic

The Antidemocratic

The Socialist Party

Trends AffectingPolitical

Security and Military

(or Political

IIL DEFENSE AND FOREIGN

Role in NATO and the Atlantic Community

Italian Foreign Policy

of Vote in Italian

FIGUREof Italian ONP, Real Wages, and Imports and

Following

FIGUREComposition of the Italian Chamber of Deputies

as of June Following

FIGUREofand Transportation

Following

THE OUTLOOK FOR ITALY

THE PROBLEM

To estimate the outlook for Italy for the next two years orith particular reference to internal political stability.

CONCLUSIONS

political situation in Italyto be one of chronic governmental instability and immobilism. Although the Christian Democratsith theof the other center parties, havein power, they have lacked the strength and cohesion to assure stable and effective government and have been confronted with an erosion of popular confidence and support. The effort of the present CD leadership to enlarge theand parliamentary support of the democratic center throughwith the non-Communist wing of Nennl's Socialist Party (PSI) hasentral and highly controversial issue in contemporary Italian politics.

Although cautious moves toward CD-PSI collaboration have achieved progress at the local level and will almost certainly continue, it is highly unlikelyasis for an actual alliance at the national level

'That I* until the scheduled electionew l'niT.nmtmt la the spring

acceptable to the bulk of both parties can be achieved within the next two years. The maximum that the CD can expectSI which continues its gradualfrom the Communists and Is prepared to abstain when future CD-led governments are formed.

the outlook is for continuedat least through the nextelections, which must bethe spring3 but may comethe present Fanfaniwill probably surviven partumbergroups fear thatwould seize the occasion of acrisis to dissolvecall for new elections in order tohis own chance for re-electionPresidency.

November, President Gronchihis authority to dissolvethe divisive tendencies of thewill revive. This situationto bring about Fanfanl's fall and

rolonged period of political instability. Although efforts willbe made toositive program and anmajority Involving PSI abstention, these efforts willess than even chance of success,D caretaker-type government will probably emerge.

Italy has compiled an impressiveof economic growth over the pastbut popular expectations appear to have risen faster than living standards, and large segments ot the electorate have demonstrated increasing discontent with social and economic inequities. While Italy has the potential for continuedgrowth, the prospects for basic economic and social reforms depend far more upon political than on economic factors. It is improbable thatprogress will have been madethe next two years to improvethe prospects of the CD and other center parties in the next generalor to leadubstantiallyCommunist strength. (Paras.)

Italy's large internal security forces are capable of dealing with much moreand widespread disorders than those which they have controlled successfully in the past. In view of the nonpoliticalof the present officer corps, theare unlikely to intervene in anycrisis envisaged during the next two years, though they would assist thesecurity forces if called upon to do so. )

talian governments will continue to support American objectives in NATO and in Atlantic Community affairs in general. The Italian Government will probably continue toeen interest in the establishmentATO multilateralcapability. There will, however, continue to be difficulty ln securing from Italy financial support for NATOand Organization for Economicand Development (OECD)-sponsored international economic aid programs. Any CD government can be counted on to follow the lead of the US on most foreign policy issues, but cannot be counted upon to supportUS policy on the issue of UNfor Communist China. Italy's trade with the Sino-Soviet Bloc willbut we consider it unlikely that trade with the Bloc would assumeimportance tooticeable effect on Italy's defense or foreign policy.

DISCUSSION

INTRODUCTION

he political situation in Italy continues to be characterized by chronic governmentalThere has been an Impressive record of economic growthteady rise in Italian living standards over the past decade, but popular expectations appear lo have risen faster than living standards, and large segments of the electorate haveIncreasing discontent with social and economic inequities. Public disenchantment is reflected in the narrowing electoral base on which all the democratic pro-Western gov-

ernments ol postwar Italy have depended for their survival. There hasonstant danger of polarization lo tlie extremes of the antidemocratic right and left, and adrift of the center of gravity of the electorate to the left has already occurred.

ecause of party factionalism and the heterogeneous nature of their parliamentary support, most governments hove been unable or unwilling to take legislative and executive action to achieve long-promised economic, social, and fiscal reforms. Moreover, the Italian constitutional and electoral systems have operated toeak executiveragmen ted Parliament, therebypopular discontent with the governing political forces. Thuscountry which does nottrong democratic tradition and is beset with severe socialan election period with aentrapped in lmmobHUm.

II. FACTORS BEARING ON POLITICAL STABILITY

A. Political Parlies and Pressure Groups

he Democratic Forces. .Italy has been governed8 by the ChristianPartyither alone or in coalition with the .smaller democratic parties of the center.he parlies comprising the democraticLiberalse-publicans (PRI) and Social Democratsthe votes ofercent of the electorate, but this was the high point of electoral success for the democratic parties.3 they have been able to muster not much more thanercent of the total vote. At the same time, the combined strength of the Communists (PCI) and Nenni Socialists (PSI) in national elections has risen fromercent8 toercenthile tlie neo-Fasclsts (MSI) have held their ownercent. The local elections0 have reflected the same trends. (See Table)

TABLE

DISTRIBUTION OF VOTE IN ITALIANPercent of Total Vote)

'

*

Democrats (CD)

5

SocialistsI>

(PLI)

3J

IPRI)

a*

Center

8

(PCI)

Socialists (PSI)

Loft

0

(MSI) .

1PDI)

Total Right

.

9

9.6

B.8

23

and Nenni Socialists ran together.Neo-Fasdsts and Monarchists ran together.Statistics lorrtaliantatistics forftalian provinces.

he effectiveness of the CD. the largest party, with overercent of the national vote, is impaired by deep-rooted factionalism, with strong progressive and conservativeof almost Irreconcilable viewpoints competing for the supportarge group of uncommitted or opportunistic CD deputies. At present the party apparatus Is controlled by elements who are eager to refurbish the party's imageynamic Instrument of social change. On the other hand, CDhold sympathies genorally closer to the parties of the right than to their own colleagues. They retain considerablewithin the parliamentary delegation and include many prominent and powerfulThe CD Party, which lost itsmajorityas had to-make political alliances with the moderate left or with the moderate right in order tooalition government, and in some instances has had to rely on the extreme right in order tourely CD government. In each case these alliances weakened CD internal cohesion and created public confusion. The result haseries of ineffectualof limited tenure.

he present minority CD government of Premierfani was createdlimate of fear and urgency stemming from an outbreak of antl-Fascist riots whichthe right-wing CD government ofTambronl. The latter's government had been formed in0 with neo-Fascist MSI supportumber of efforts toenter-left government with PSIhad failed. The potential threat to parliamentary government and the fear of further polarization to the political extremes prompted the closing of ranks among the democratic forces within and outside the CD and led to the formation of the Fanfaniin0 with the support of the PSDI, PRI, and PLI. The Monarchists (PDI| and the PSI abstained, leaving theand the neo-Fasclsts in theThis was the first timehen the PSIember of the government coalition, that this party abstainedote of investiture.

The present Fanfani governmentgovernment of truce" or, as its adherents euphemistically termgovernment of parallelt existsufficiently homogenous parliamentarytorogram even if one were to be formulated: The resulting immobllism ls quite acceptable to the extreme rightisis as well as to the Communists and to their fellow travelers In the PSI, since it serves tothe Ineffectuality of the presentmajority. Conservative elements which would be mcllned to strike out at theshould it attempt any major economic or social legislation, including the PLI within the ranks of the government's supporters, are disposed to be quiescent so long as thecontinues to temporize on important legislation. Most other deputies wish toew crisis and possible new elections at least for the present. Thus, paradoxically, the inability of the government to carry out an effective program favors its maintenance in power for the time being.

Premier Fanfani and CD Party Secretary Aldo Moro have for some time been trying totable realignment of political forces, in order to provide the support requiredynamic program of social and economicTheir efforts have been directed toward drawing the PSI and its electorate away from their long association with the Communists. Against vigorous and outspoken opposition from the PLI conservatives, from right-wing CD elements, and from influential members of tho Church hierarchy, Fanfani and Moro for the first tune successfully established CD-PSI coalitionsumber of municipal councils following the local electionshis step is the first concrete result of several years of effort on the part of Fanfani and his adherents to hasten the split of the PSI from the Communist alliance. They hope that eventually the PSI willin the establishmentroadly-based center-left government strong and stable enough to cope with Italy's social and economic problems.

The more pressing of these problems are: the poverty of southern Italy (thehich has been an enduring feature of the Italian economyource of socialax system which, althoughas an automatic brake on inflation, serves to intensify the inequities in the distribution of wealth; the lack of effective antitrustand supervision of stock marketan outmoded central administrative structure which hasrime example of red tape bureaucracy; widespreadat all levels of government; lackong-range education program to meet Italy'sand future needs, further complicated by the traditional controversy between the Church and secular authorities; and the ever-present problem of unemployment and underemployment. These problems have been debated at length but only sporadic and Inadequate legislative action has resulted.

Working ln conjunction with the political parties of the democratic centerumber of socio-economic institutions and pressure groups whose influence on specific factions may be crucial to the survival of aor to the direction of lis policies. These groups include the Confederation of Italian Industrialistshe Small Farmers Confederation, and the non-Communist cooperatives and trade union groups. In addition, theretate-owned monopoly, the Italian NationalAgency <ENI) headed by Enrico Mattel, under whose leadership ENI has evolvedstateattelignificant behind-the-scenes role in Italian politics by dispensing funds and patronageariety of political parties, party factions, and influential individuals, thusinimum of government and parliamentary interference in his operations. Confindustria exerts its influence through the PLI and right-wing elements of the CD.with the leaders of the Small Farmers Confederation, representatives of Industry and banking have opposed CD-PSIfearing more governmentand control over the economy. They also profess anxiety that this development would eventually leadeneral increase in Communist influence on government via subversive elements ln the PSI.

The Church, which alsorofound influence on Italian polities, has observed with growing concern the cUlHculties of the CD in forming and maintaining effectiveDespite strenuous effortstbe country, the Church and its political auxiliaries have made little headway in then-attempts to expand or even maintain theirln northern and central Italy,trong socialist and anticlerical tradition flourishes. The Catholic hierarchy hasatter of principle opposed CD-PSIalthough on practical grounds the Church has sanctioned CD collaboration with the PSDI and PLI, both basicallyparties. The majority of the Church hierarchy, one ol whose principal spokesman ls Cardinal Slrl of Genoa, remains opposed lo CD-PSI rapprochement. However, with the decentralization of authority under Pope John XXIII, some key churchmen like Cardinal Montinl have indicated thaL they are more "possibilistic" about such an eventuality. It appears that many CD leaders are determined to proceed with their plans for PSIln the belief that, as one CD leaderit, "the Church will vlolenUy condemn adultery, but will bless the children of adultery."

The Antidemocratic Forces- The neo-Fascists and the Communists have frequently taken parallel actions designed to frustrate and discredit the government. The agitation of these antidemocratic and subversive forces working upon populur dissatisfaction haserupted Into open violence andrioting, but has not so far seriously threatened tlie existence of the parliamentary

he neoFascist MSI made some gams in theocal elections, mostly at the expense of the Monarchist PDI. which Is not likely to survive the next general electionsational political force. Although the total vote of the MSI Is small (about fiveit could, under critical circumstances,umber of conservative voters who have become disaffected with the CD and

other center parties and who fear growing Communist influence in Italy-

The Italian Communist Party is second only to the Church itself in Its ability toItalian public opinion. It is wellfor political agitation andIt has control over the principal trade union federation (the COIL) and also operatesariety of social, economic, and propaganda organizations. Although the PCI has suffered recurrentesult of the Hungarian revolution,0 the PCIembership of. Even allowing for padding in this figure, It is the largest Communist partythe Sino-Sovlet Bloc.

The PCI still retains the votes of one-fourth of the electorate, though many appear to vote Communistorm of socialrather than out of ideological conviction. In0 local elections, the Communists made some gains, often at the expense of the PSI, in areas where economic conditions had actually improved. Nevertheless, the threat of isolationatter of concern to theleadership and it has made strenuous efforts to prevent CD-PSI rapprochement,intimidation, financial pressure, and ideological arguments on individual Socialist functionaries. The Communists have also endeavored to manipulate factions within the PSI. Animosity between the PCI and the leadership of the PSI has increased, and the polemics exchange1 have been vitriolic.

Thehe PSI is at present and will probably continue for some time to be the focusitter struggle between thecenter and the Communists. Theof this struggle may fundamentally affect the future structure of Italian politics. Both the Fanfani and Nenni adherents appear to be convinced that CD-PSI collaboration is an essential prerequisiteocial andlegislative reform program. Theobjective of the left-of-center forcesSI separated from all ties with theparticularly In the trade union and cooperative movements. This separation, however, is rendered particularly difficult for

Pietro Nenni because many local PSIdepend on PCI financial support. Moreover, many PSI functionaries areon Communist support for appointive and elective positions in local administrations throughout Italy. Socialists also areof the Communist-controlled CGIL andumber of posts In that trade union. The traditional abhorrence of Nenni, and of the Socialist movement generally, to splitting the trade union movement lsajorto PSI-CD cooperation, especially in view of the continuing weakness andschisms in the non-Communist unions. Moreover, the decline of the Saragat PSDI since that group split away from the PSI7 remainsrim lerninder to Nenni and his followers of the risks involved in "splitting the left."

evertheless, everhen tho PSI abrogated the unity of action pact with the PCI, Nenni and his "autonomist" wing of the party have been moving steadily away from the PCI, especially with regard to the political means of achieving domestic goals andore limited extent in foreign policy. At the PSI National Congress inenni achieved passageesolutionthe party unconditionally to themethod for the attainment and exercise ofhisormalof the principle of ideological and political alliance with the Communists. Althoughout direct participationDfor the present, the resolution approved PSI parliamentary supportovernment committedoncrete program which wouldshift lo the left" in domestic policy. In foreign affairs, the PSI has moved away from its initial pro-Soviet attitude but remains neutralist In Its official policy and basic outlook. Thus, the PSI. while officially endorsing Italian commitments to NATO and rejecting unilateral disarmament, generally continues to favor elimination of foreignbases in East andan onmilitary obligations and the reduction of existing ones, and the association of Italy with the "initiatives of peace" of the neutral powers.

SKr>RJjT

arty Congress left Nenni inof the PSI butoercent, whileing was ableIts strength6hich must be added the sevenby the Basso group, whichaligns itself with carristithe PSI remains badly divided. Aspast, Nenni. who is now overearsremains the most Important asset ofparticularly to the "autonomist"disappearance from the nationalwould almost certainly retard, ifreverse the development ofpolicy in the party.

B. Economic Trends Affecting Political Stability

economic developmentsa major factor ln preventingpolitical instability fromextreme forms. For the pastItaly has had an average annualGross National Product (GNP) growthtermsonstant prices) of almostwell above the average of mostnations. Italy's currency Isproportion of national income whichdomestic investment is higher thanof the OECD countries. Theefficient industrial capacity providesfoundation for the further expansionexports, which Increased atercent In real terms.radea structural characteristic of Italy'slarge receipts from tourism,Italians living abroad (Including thoseworkingnd fromfinancial operations, have resultedpayments surpluses inForeign exchange reserves

'This name is derived from ihe lace that the members ot this faction supported the brutalol the Hungarian uprising0 accomplished by the Russians with the use or tanks, carri.

Despite these economic advances, Italy still suffers from chronic and deeply-rooted economic problems which adversely affect major segments of the Italian population and which must be resolved if genuine political stability is to be secured. Italy's per capita income is still onlyercent that of West Germany andercent that of the UK. Moreover, this average figure does notreflect the great disparity in actual living standards which exist within Italy. Italy continues to suffer from depressedin the South, inadequate development of agriculture. Insufficient technical training to meet the demandsrowing economy, low wages,ontinuing high level of underemployment and unemployment,

Registered unemployment remains static atillion, more than seven percent of the total labor force. Moreover, this figure does not include considerable numbers ofin the agricultural sector, nor does it reflect the large number of workers who are chronically underemployed and impoverished. Unlike the situation ln many other countries with similar problems, population growth Is not atignificant factor. In the, the population increased by only four percent, bringing the total to roughlyillion.

In general, Italian labor has onlyshared in the economic prosperity of recent years. Thereubstantialercent) in the real GNP during the. During the same period, total real wage payments roseercent, but only hah* of this figure represents an increase In real hourly wages (seehewas dueise ln the number of workers. The discrepancy between the rise Ul the GNP and real wage paymentsigh rate of investment, but it also reflects an Increasingly uneven distribution of income.

While Italy undoubtedly has the potential for continued economic growthelatively rapid rate, political and institutional factors make It unlikely that the present rale of growth can be Increased much during the next few years, and It ls possible that tempo-

rary declines may occur. In fact, thetor basic economic and social reforms depend far more upon political than onfactors. The most likely development during the next two yearslightlyactivity in certainheof the road and railetter organized farm program, and possibly some restraint of monopolistic practices. But the unstable character of Italianand their consistent lack of initiative on most issues of social and economic reform make it Improbable that sufficient progress will have been made during the next two years to improve appreciably the prospects of the CD and the other center parties in the next general elections.

C. Internal Security and Military Forces

Were it not for the fact that the central government maintains large Internal security forcesemonstrated capability for quelling riots and disorders, it Is possible that many more political battles would have been foughthe streets than has been the case to date. These well-equippedman Public Security Force0 Carabmieri (militarizedo not appear to have been adversely affected by the frequent changes of government and the general political instability. These forces are capable of dealing with much more serious and widespread disorders than those which they have controlled successfully in the past.

Italy's armed forces consistanman navy,man air force. These are generally wellforces loyal to the government. The officer corps of these forces, whose members are largely of aristocratic or conservative middle class origin, appears to be almostfree of Communist influence and is generally pro-Western and strongly pro-NATO. In view of the nonpolitleal attitude of the present officer corps, the military areto intervene In any political crisisduring the next two years, though they would assist the internal security forces if called upon to do so.

D. Prospects for Political Stability

The present Fanfani government willto lead an extremely precariousbut will probably survive until. in partumber ofgroups fear that President Gronchi would seize the occasionovernmental crisis to'dissofve Parliament and call for new elections in order to enhance his own chance for re-election to thehecould be brought down beforehowever, if the PLI and right-wing CD elements became convinced that Fanfani and Moro were about to expand further their collaboratlon with the PSI_ Should thegovernment continue in office untilits tenure thereafter would be less secure because, with no immediate risk of early elections, divisive tendencies among the center parties would have been revived.

This situation is likely to bring about Fanfani's fall and torolonged period of intensified political instability which would be complicated by the mancuvcrings of the Presidential candidates. In this event, efforts will probably be made toeft-center governmentositive programreconstltuted parliamentary majority Involving PSI abstention. We believe that these efforts have less than an even chance to succeed andD caretaker type ofwill probably emerge, either before or after the Presidential elections in the springhe principal preoccupation ofovernment would be the preparation for general elections which arc presentlyfor the springhough they could conceivably be held earlier.

In the final analysis, the success or failure of PSI autonomy and eventual CD-PS Icentral theme in Italiandepend primarily on theof the present leadership of both parties. We expect the Fanfani and Nenni forces will continue to move with utmost eau-

secret

Uon to. improve the atmosphere for possible lutuieVc&PSl cooperation at the national level.eadership elements of both parties, are-evidently aware that their own politicatJfutures are at stake and neither Nenni nor Fanfani appears to be prepared to risk schisrft> hi their own parties which would most likely, work to the advantage of the ex-tremes iri;both. The political philosophy of the majority of the cd politicians is stillincorrtpatlble with that of the presentf Socialist leaders, including Neruii^Bo, despite their anticommunlsm, remain,emotionally and ideologically opposed to the established order. The maximum the CD can expect during the period of thistherefore,SI which continues its gradual, dissociation from the Communists and is prepared to abstain when future CD-led governments are formed.

lit. DEFENSE AND FOREIGN POLICY

A. Italy's Role in NATO and Atlantic Community

Italian governments have consistently supported American objectives ln NATO and in Atlantic Community affairs in general-With the obvious exception of theand PSI left-wingers, most of Italy's political leaders regard NATO as essential to the preservation of peace and, above all, vital to the security of Italy against Soviet Bloc intimidation or aggression. Thus, even ln the face of the persistent and highly organized attacks by the left, Italy was the firstNATO country to accept IRBM bases on its territory, and it haseen interest inATOnuclear capability as proposed by the US last year.

There are some differences of opinion which cut across party lines as to the extent to which Italy should devote Its wealth and natural resources, and subordinate itsof action, to NATO requirements.domestic political considerations also affect the outlook of Italian politicians onaffairs. Conservative elements of the center and right parties are apprehensivelobal detente benefit the Socialists or the Communists at the polls. On the other hand, certain elements of the center and left hopeetente in the belief that it would facilitate the process of rapprochement with the PSI. However, under the circumstances likely to prevail during the period of thisItalian governments will continue lo support and to participate in NATO activities at present levels. There will, nevertheless, be continuing difficulties in securing increased financial support from Italy lor NATO programs.

whichharter member ofEconomic Community (EEC),and other regional organizationsto the principle of Europeanprobably continue totaunchof European integration and wouldgo further than either France orin surrendering sovereignachievenion. To the degreeeconomic life becomes Integratedother nations of the EEC group, Italya larger identity of interest withmajor continental powers, FranceWe believe, however, that forof this estimate, Italy will continuealignment with the US.

B. Other Italian Foreign Policy Issues

Any CD-dominated government can be counted on to follow the lead of the US on most foreign policy Issues such as Berlin, nuclear testing, and disarmament, although it may not always agree with American tactics. Italian governments cannot be counted upon for support of present US policy on the issue of UN membership for Communist China.

On the matter of financial contributions to OECD-sponsored international economic aid programs, Italian governments will plead domestic priorities. Pointing to their own underdeveloped South, the Italians have failed to respond to US urgings to contribute to foreign aid programs, and they will probably continue to do so for some time to come. Italy has also been reluctant to assumeresponsibility for the provision ofassistance and training to its former trust territory, the Somali Republic.

.on* ultima though strains has'

Austria have appealedh their current dispute rol. The AustrianGerman-speakingaintain* that Italy has un to the terms of the de Agreement7 which, by Interpretation, promised an tatus to the German-speaking that area. Italy has fromhis demand, fearing that the Austrian goal is secession. AI-.ff^ bitterness which caused severe Auitro-Itahan relations0 somewhat, the Issue will certainlyoource of friction for some time to'cbmo.

talian foreign trade activities, notably those of Mattel and bis state-owned oilwill probably continue to cause some friction between Italy and the US. Mattel has waged an aggressive campaign to obtain oil concessions in competition with ihe major US and other Western firms, with significant success hi Iran, Libya, and Ghana, In view of

Mattel's enormous Influence in domestic politics, the enticement of cheap oil for Italian Industry, and the prestige of an ItullansymboUxed by the ENI banner inareas, lt Is unlikely that the Italian Government will attempt to curb Mattel's activities significantly.

attel has also recently promoted anItalian-Soviet trade agreement under which the USSR will supply someercent of the crude oil to be refined annually In Italy, in exchange for oil pipeline materials, tankers,

and other Important heavy industrial goods. Given Italy's increasing Interest in securing foreign markets, trade with the Bloc (which includes some dealings with Communist China) is likely to Increase overresent level of about six percent of Italy's total foreign trade. Particularly In view of Italy's growing ties with the other Common Market countries, however, wc consider it unlikely that trade with the Bloc would assumeImportance to have any noticeable effect on Italy's defense or foreign policy.

PARTY COMPOSITION OF THE

ITALIAN CHAMBER OF DEPUTIES

1

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