| Foreign Relations of the United States 1964- 1968, Volume XII, Western Europe -Return to This Volume Home Page Released by the Office of the Historian Documents 87-98
Italy 87. Memorandum From Secretary of State Rusk to President Johnson/1/ SIT/PM-1 (Revision 1) Washington, January 9, 1964. /1/Source: National Archives and Records Administration, RG 59, Conference Files: Lot 66 D 110, CF 2356. Secret. Drafted by Stout (EUR/WE) and cleared in EUR, STR, AID, RPM, S, RPE, and the Departments of Defense and Treasury. President Segni visited Washington January 13-18. SUBJECT Segni cannot speak for the Italian Government, but he will be accompanied by Foreign Minister Saragat, who can. As chief of state Segni has limited substantive responsibilities, but his influence on Italian policies is increased by his leadership of the largest faction of the Christian Democratic party. He obstructed the formation of Italy's new, center-left government under Prime Minister Aldo Moro because he does not believe the Socialists can yet be trusted in domestic or foreign policy. He could try to influence you to take a very careful attitude toward the new government. He is pro-American and will use his visit to reaffirm Italy's position in the Atlantic Alliance. We want to use Segni's visit to reaffirm U.S.-Italian ties, which have been very close since the war, and to emphasize our identity of views on most world problems. By receiving Segni warmly, we hope to strengthen his friendship for us, since he could be a point of stability should the present government fail. At the same time, we do not want to encourage him in activity that might undermine the government or give the impression that we view current Italian politics entirely as he does. In view of his constitutional position, the ceremonial aspects of Segni's visit should be stressed. It will not be necessary or appropriate to consider U.S.-Italian bilateral relations in depth. The major subjects to be covered are: 1. US-Italy--The high value we place on Italian friendship and our intent to maintain close cooperation. Appreciate cooperation in monetary field and arms purchases. Glad Moro succeeded in forming a government and hope for its success. Need for stable and effective Italian Government in decision-making months ahead./2/ /2/The following parenthetical sentence was crossed out: "If you approve inviting Moro to Washington next Spring, as we are recommending separately, I suggest you let Segni know." 2. General Review of World Situation--Segni wants a broad survey. Might summarize your talk with Erhard on East-West relations,/3/ cover such subjects as Cuba (economic isolation--eliminate Soviets--stop hemispheric subversion--concern over Italian trade), Sino-Soviet dispute (continued deterioration--little sign of solution), Southeast Asia (win in Vietnam--support Thailand--prevent further Communist penetration), Germany (self-determination), and Berlin (access and freedom of West Berlin). /3/See Foreign Relations, 1961-1963, vol. XV, Document 250. 3. Prospects for Relaxation--No détente, but we shall do all possible to reduce tension and war risk. Not too sanguine on multilateral agreements with Soviets, but continue to probe. Possible progress in US-Soviet bilaterals. (Segni (a) may be concerned at Soviet exploitation peaceful coexistence to make more difficult combatting communism in Italy, and (b) may ask your commitment to help thwart a possible Communist coup attempt. In reply, (a) relaxation of tensions would make new difficulties but offer new opportunities; basic Communist strength lies in weaknesses of Italian society, which only Italians can correct; and (b) we could not accept Communist takeover in Italy but would decide our actions as we consider appropriate in circumstances.) 4. MLF--In reaffirming US support indicate appreciation of Italian cooperation and Segni's personal support. Technical talks in Paris and Washington going well. What is Segni's judgment on how rapidly Italy can move on project? (Italian Socialists are reluctant on MLF and if pushed too hard might bring down the government, which we would not want. Knowing Socialist reservations, Segni apparently tried to manipulate MLF issue to obstruct formation of the Moro Government.) 5. Atlantic Partnership--Reaffirm commitment to NATO and working through Alliance, and commitment to defend Europe. Grateful for Italian support for unified Europe in Atlantic partnership, as reiterated by Segni and Moro Government. Essential that EEC Commission have real mandate to negotiate. Support European political unification. Does Segni see movement? Will start Kennedy Round on time and use maximum authority we have. Encourage more aid to LDC's on better terms. A briefing book has been prepared, which contains background material on these topics, as well as other subjects that Segni may raise, including the following: 1) disarmament, 2) Khrushchev's latest proposals on renunciation of force, 3) Soviet relations with Eastern Europe, 4) NATO strategic planning, 5) the NATO Secretary General succession (I expect to talk to Saragat about this), 6) reduction in our forces assigned to SETAF (we see a need for a more equitable sharing of burdens within the Alliance), 7) African disputes. In his private talk with you, Segni may try to establish a channel of personal communication, possibly without the knowledge of the Italian Government. I recommend that you be noncommittal. Dean Rusk/4/ /4/Printed from a copy that bears this typed signature. 88. Telegram From the Embassy in Italy to the Department of State/1/ Rome, January 10, 1964, 8 p.m. /1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 15-1 IT. Secret; Priority; Limdis. Also sent to Bonn, London, and Paris. 1841. For Ambassador Reinhardt. Following are Embassy's comments on Embtel 1814:/2/ /2/Telegram 1814 from Rome, January 9, reported on Ambassador Reinhardt's January 8 discussions with President Segni regarding MLF, Yugoslavia, Germany, and his visit to the United States. (Ibid.) Main subjects raised with Ambassador by President Segni smack of unease with which he regards Italy's current international posture, heightened no doubt by his distrust of center-left government. Would appear he wishes to set forth in Washington especially those worries that he may feel are not sufficiently shared by Moro and in case of Germany and Yugoslavia by US Government. Segni is basically conservative. He therefore is against and fears new center-left government headed by Moro. There is even some speculation that he would like to see it fall as soon as possible and would not be averse to helping bring this about if it were at all possible. Therefore, when Segni urges that MLF be pushed ahead despite Socialist objections, it is possible that he does so not only out of pure pro-Western conviction and ardor. We would therefore recommend repeating to him that the US is prepared to go along as fast as our allies interested in the project feel themselves able to go. We are not trying to rush things neither are we trying to postpone them. We understand what may be British internal problems as we do those of Italy./3/ /3/In his conversation with Reinhardt, Segni stated "he did not understand why Italian action on MLF should be linked with British elections." (Ibid.) On point two, concerning Yugoslavia,/4/ two factors probably underlie Segni's concern: (1) Fact Moro has accepted invitation to visit Belgrade; (2) implications Segni and some of his top advisers may feel flow from US intentions to carry out certain military reductions in Europe, particularly in Italy. It is not unlikely, though we have no direct evidence, that Andreotti has discussed with Segni US proposed reduction in US forces in SETAF through transfer to Italy of certain support functions, and may wish try to head this off, lest such withdrawals lead eventually to complete US withdrawal from SETAF and even now begin give encouragement to neutralist trends and sympathies in Italy. /4/According to telegram 1814 from Rome, Segni stated that the "military posture of Yugoslavia . . . is now directed against Italy . . . . He expressed fear about policies which might be followed . . . by Tito's successors," and concern about border problems. Certainly Segni's concern about Yugoslavia is not consistent with views of Italian FonOff, as reflected by Director Political Office II (Terruzzi) and included in FonOff briefing of Saragat at end December (Embtel 1743)./5/ /5/Telegram 1743 from Rome, December 30, 1963, reported that Moro and Saragat had accepted invitations to visit Yugoslavia. (National Archives and Records Administration, RG 59, Central Files 1964-66, POL 7 IT) It is however consistent with perennial rumors of such Yugo build-ups. They traditionally regard Yugoslavia as Italy's natural enemy. Our Army Attaché however states that he has seen no hard evidence of Yugoslav military build-up along Italian border. In fact in last talk he had on subject with US Army Attaché Belgrade (Sept. 63) he learned that latter also had no evidence that such rumors were worthy of credence. If Segni raises Yugoslav problem while in US, we would hope US officials would air it thoroughly with him and with Saragat, particularly in making clear basic aspects of US-Yugoslav policy which Italian military and perhaps also Segni apparently do not understand and even regard with some distrust. As for Segni's concern about nationalist tendencies in Germany,/6/ Department does not need our advice on how to handle what seems to us to be an exaggerated expression of a fear which is widely held in Italy. We would only suggest, as regards aspect of particular relevance to Italy, consideration of the possibility of turning point around by hinting to Segni that Italian Government should consider jointly with FRG serious effort to improve German public image in this country through emphasis on its European-minded, democratically-oriented, non-nationalistic aspects. Curiously enough, it is usually Communists and other leftist political elements here who are prone to dwell on alleged dangers of German militarism and nationalism, rather than such right-wingish Christian Democrats as Segni. /6/According to telegram 1814 from Rome, Segni told Reinhardt that "he believed that German nationalism could be contained by strengthening Germany's position in an integrated Europe." Williamson 89. Memorandum of Conversation/1/ Washington, January 14, 1964, 3 p.m. /1/Source: National Archives and Records Administration, RG 59, Conference Files: Lot 66 D 110, CF 2356. Confidential. Drafted by Givan and approved in S on January 19. The meeting was held in the Secretary's office. SUBJECT PARTICIPANTS Italy United States The Secretary told the Foreign Minister that we welcomed the opportunity to hear observations and suggested that he select his own subject to begin the discussion. The Foreign Minister preferred to comment first on the Italian political situation. He thought Italy's greatest contribution to Atlantic solidarity could be made by strengthening democratic institutions in Italy and further isolating the Communist Party. His own political activity over the past eighteen years had been aimed at isolating the Communists, particularly at pulling the Socialists away from the Communist Party, which implied abandoning some pro-Communists to the far left. He had always received his greatest assistance from the Christian Democratic party and specifically from Prime Minister Moro, who ranks second only to De Gasperi as the most significant political personality in postwar Italy. This policy is beginning to bear fruit. The Socialists are agreeing, unenthusiastically but increasingly, to move away from the Communists, and they are in the government. In an important speech in Rome recently Nenni said that even if his party had a majority in Italy, it would nevertheless regard the Atlantic pact and Atlantic solidarity as "permanent facts." The internal situation has improved and the shadow of a Communist-Socialist alliance has passed. The present government has better than a sixty per cent majority compared to only fifty-one per cent for its predecessors, which makes it far more stable. The Foreign Minister said that the position of the Socialists has now become irreversible and, after the administrative elections within a year or even earlier, this will in his opinion lead to a new Social Democratic party along the lines of the German party or the Labor Party in the UK, though not so strong. The Secretary asked what Minister Saragat thought would become of the new faction of the PSI: there seem to be several possibilities; one is that this faction will move toward the extreme left. How much possibility is there that it will take a large part of the Socialist following with it?/2/ /2/Reference to the "Carristi" faction of left-wing Socialists which broke off from the Italian Socialist Party at the time of its entry into the Moro government and formed the Italian Socialist Party of Proletarian Unity (PSIUP). The Embassy analyzed the impact of this development in telegram 1882 from Rome, January 14. (Ibid., Central Files 1964-66, POL 12 IT) The Foreign Minister replied that, as shown by Nenni's statement, the trend toward democracy is irreversible. Seven years ago the Socialist Party listened attentively to Stalin; six years ago it listened to Khrushchev. Now it listens to the British Labor Party and soon it may pay attention only to what is good for Italy. At any rate it has clearly become westernized. In this regard, contacts between the Socialists and American political parties would be extremely useful. We have reaped the fruit of years. This is not a haphazard happening; we knew what we were looking for. The Secretary thanked the Foreign Minister and asked when he expected the Socialists and the Social Democratic parties to unite. The Minister said that the first step after administrative elections would possibly be to organize the two parties into a federation, to be followed later by an organic merger. The new dissident Socialist party would end as Daniel Mayer's dissident group did in France; it had dwindled to nothing two years after it left the French Socialist Party. 90. Memorandum of Conversation/1/ Washington, January 14, 1964, 4:30 p.m. /1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, DEF (MLF). Confidential. Drafted by Stout and approved in the White House on January 18 and in S on January 19. The memorandum is "Second of 5 memoranda." All five memoranda are ibid., Conference Files: Lot 66 D 110, CF 2356. The meeting was held at the White House. SUBJECT PARTICIPANTS Italy United States The two Presidents began their private discussion (with only Sensi and the interpreters present) on the Italian political situation,/2/ and then passed on to the MLF. President Segni said that there are still problems within Socialist ranks on MLF. If the Prime Minister and Foreign Minister, however, are faithful to the MLF concept, and the Socialists realize that this is a very important question for the United States; they also will agree to its creation. But it will take a little time, perhaps five or six months, particularly because much of the uncertainty on the part of the Socialists stems from the indecision of the British Labor Party. Segni said that of course Labor may say certain things now and then act differently later on, but Italy wants to form a majority on the MLF issue before the British elections, which will take place about November. /2/In the course of this discussion, Segni expressed concern about "problems arising from the Nenni Socialists," in particular their stand on MLF. In response to a query from President Johnson, he underlined the "renewed firmness" with which both the Christian Democratic Party and Catholic Church were fighting Communism. A memorandum of this conversation is ibid. Later in the conversation, the President thanked Segni for his strong support for MLF. He said he thought the Paris discussions are going well and asked how Segni views them. Segni replied that they had proceeded satisfactorily. The issue would probably turn out as desired, based on conviction on the one hand. On the other hand, when the Nenni Socialists understand how strongly the United States feels about it, their endorsement will be forthcoming. This, incidentally, would ultimately signal their complete break with the Communists. After a short discussion of the Atlantic community, the President asked Segni if he could be certain of Italy's final position on MLF. Segni replied that at this moment he could not speak with complete certainty, but he felt reasonably sure that, with patience and fortitude, and Socialist realization of the importance of the issue for the United States, Italy would be able to support it. Secretary Rusk entered with Foreign Minister Saragat at this point. Reviewing the day's talks with the Foreign Minister,/3/ the Secretary said that there was agreement that Italy could take part in the talks going on about MLF without making any final commitments. Italy has meanwhile agreed to take part in the mixed-manned demonstration on a destroyer with the other five participants. It was agreed during the talks that it was necessary to allow time for discussions among certain elements within Italy and within the government. Hence it appeared that the time required for internal discussions in Italy and for the multilateral talks could coincide. /3/A memorandum of their conversation relating to MLF is printed in Foreign Relations, 1964-1968, vol. XIII, Document 3. See also Document 89. A complete set of memoranda of conversation is in the National Archives and Records Administration, RG 59, Conference Files: Lot 66 D 110, CF 2356. 91. Memorandum of Conversation/1/ Washington, January 15, 1964, 4:30 p.m. /1/Souce: Johnson Library, National Security File, Country File, Italy, Vol. 1. Confidential. Drafted by Meloy and approved in S on January 27. The memorandum is Part I of III. The meeting was held in the Cabinet Room at the White House. SUBJECT PARTICIPANTS United States Italy The Secretary said he hoped Foreign Minister Saragat will give his personal attention to U.S.-Italian differences over air transport. We understand there will be negotiations in March. The Secretary said he hoped the Foreign Minister could keep the situation from deteriorating between now and then. He was not asking for a decision now but wished to avoid any worsening of the problem. Foreign Minister Saragat said that he had talked with the President of Alitalia about the air transport problem and is surprised by what has happened. The President of Alitalia is pro-American but is very much exercised over the matter. He asked Ambassador Cattani to speak to this subject since he was not informed in detail. Ambassador Cattani said he was sure that between now and March the situation can be kept from deteriorating. If the Secretary were asking Italy to grant now what is being asked by the American side, the Italian position would be much more reserved. Italy wants the authorities here to realize something must be done to balance the points of difference. The Secretary said he understood there was a difference of view regarding the interpretation of the existing agreements and hoped the Foreign Minister would personally look into the problem and keep in touch. 92. Letter From the Director of the Office of Western European Affairs (Meloy) to the Deputy Chief of Mission in Italy (Williamson)/1/ Washington, January 24, 1964. Dear Francis: /1/Source: Department of State, INR Historical Files, Italy 1963-1964. Secret; Eyes Only. The general question of our future covert support activities in Italy has come up again, this time in connection with the Civic Action project. EUR has agreed to continue support for Civic Action this fiscal year, but with the understanding that it will not be asked to approve further extension of this support before we have reviewed the entire program. As the new government takes hold I hope you can give us the benefit of your thoughts on the suitability of existing programs in the new situation and what might be changed usefully./2/ /2/According to notes of the June 4 meeting of the 303 Committee: "The Italian proposal was postponed in order to permit McCone to consider it further." (Ibid., 303 Committee Records) Sincerely, Frank 93. Memorandum of Conversation/1/ Washington, March 11, 1964, 2:45 p.m. /1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL IT-US. Limited Official Use. Drafted by Spielman and approved in U on March 18. The meeting was held in the Under Secretary's office. SUBJECT PARTICIPANTS Italy (Bank of Italy) United States After an exchange of pleasantries, Under Secretary Ball led off by stating that we had been watching Italy's economic and financial problems with great interest and took it that there had been a good turn in the past few weeks. Governor Carli replied by presenting a detailed account of the Italian economic situation along the following lines: 1. Italy had reached a most difficult moment and the stabilization actions of the last month had been a turn for the good. There had been no appreciable variation in the price level last month, but the major concern now was that there be no further large increases in wage costs which would lead to increased prices. Credit restrictions had been instituted last summer leading to some violent public criticism. 2. During the second half of 1962/first half of 1963, there had been an increase in wages which far exceeded productivity increases. The effect was a profit squeeze, which necessitated intervention to increase liquidity in order to finance previously planned investments and new projects which could no longer be financed through internal funding. Increased liquidity contributed to the aggregate amount of credit and helped bring about increased prices, which resulted in a partial reconstitution of profits. The effect of wage increases over productivity increases was a redistribution of income which caused an increase in consumption, decrease in savings, and a concentration of demand for meats and fats which had to be imported. Two-thirds of the B/P deficit was accounted for by increased food imports. 3. Italy would have to solve the problems of completion of its public investment program, reducing capital investment in factories, and partial substitution of real savings with liquidity. Italy's wage explosion had been caused by higher labor mobility in the Common Market which resulted in movement of Italian wages to the levels of other EEC countries. This occurred at a time when the rapid postwar expansion in the capital market had been checked and the market itself was not fully developed. Nationalization of electricity also had had the effect of reducing the efficiency of the market in 1963. The increase in the volume of bank credit had dropped in the past two months from the level of last July. The profit squeeze is continuing and opportunities for placement of issues on the market is being reduced. Accordingly, the public has gotten the message of serious credit restrictions. Economic planning has become necessary regardless of which political philosophy one espouses. A list of priorities in public expenditures is needed. This will also require firm action to limit expenditures by local authorities who usually run large deficits. 4. The Government has two objectives: (a) To reduce the expansion of credit. (b) To reduce the rate of growth of consumption. To achieve this, the Government initiated the stabilization measures of February 22 which have shocked the country and are the subject of lively discussion. Their purpose is to make more resources available for exports and investment, are logical steps, and are making the public more aware of the existence of the problem. The Government desires an expansion in exports of about 10% per year. Italy has an integrated economy rather than a self-contained one, and must act as an open economy integrating itself into a wider market. It must increase its productivity and devote more exports to manufactured products, thus necessitating increased efficiency in manufacturing and completion of plants now under construction. This cannot be done if the price level continues to move upward. Accordingly, the Government must make the credit squeeze felt, which will probably reduce the growth of industrial expansion, but this is a price Italy must pay. In reply to a question by the Under Secretary as to the success of the fiscal measures, Governor Carli said there had been no increase in the deficit of the federal budget, although he did not know whether there had been a marked increase in the budgets of local governments. The restrictions on credit and purchase taxes were designed to cut back consumption of consumer durables, especially automobiles. Carli noted in reply to another question by the Under Secretary that in the last two months short-term movement of capital had been a two-way traffic rather than the one-way traffic of last year. He observed that the credit squeeze had obliged some people to bring funds back to Italy. Mr. Schaetzel asked about pockets of unemployment in Italy. Governor Carli replied some of these remained. However, the migration from South to North had been slowing down. In order to further encourage this, investments in the South must be increased to promote its development. The Under Secretary asked about the shift in Italian dietary habits to greater consumption of proteins. Carli reiterated that two-thirds of the 1963 balance of payments deficit had resulted from imports of foodstuffs. Italy's dietary habits had changed and there was now a demand for more meats and fats. The Under Secretary then asked if Italy could increase its consumer savings by a popular bond issue. Carli replied that the price level must first be stabilized. The Under Secretary referred to Carli's discussions with Treasury officials seeking assistance in respect of Italy's reserve holdings. Carli acknowledged he had been discussing possible financial devices to help in the months ahead, while Italy proceeded with industrialization of the South and modernization of its industry. The Under Secretary commented that we were very sympathetic to developing the kind of defense Italy will need. The lira is an important currency. We have an interest and concern in the stability of the Italian economy following its remarkable recovery in the postwar period. We assume that the political uncertainty of last year had had a substantial effect. If the new Government shows a solidity missing last year, this should be very helpful. We are impressed by what we have seen in the way the Government is moving ahead on the political side. He then asked whether the fears of the financial community concerning the "opening to the left" had abated. Governor Carli replied that he did not feel the Government had fully explained the scope of the measures it was taking, and thought a better job could be done in this regard, especially in pointing out the curtailment of public expenditures. In reply to a question by Mr. Johnson as to whether the EEC tariff reductions had affected Italy's competitive position, Mr. Ranalli stated that the problem was not one of competition, but one in which Italian demand had been larger than supply. As for automobile imports from the EEC countries, only 1/5 of Italy's 44% increase in automobile registrations last year had resulted from foreign car imports. The Under Secretary concluded the discussion by expressing his appreciation for Governor Carli's lucid exposition of Italy's problems, and stated that we wanted to be as helpful as we could in solving them. 94. Memorandum From Secretary of the Treasury Dillon to President Johnson/1/ Washington, March 13, 1964. /1/Source: Johnson Library, National Security File, Country File, Italy, Vol. 1. Confidential. SUBJECT I am attaching a copy of an Italian Government announcement/2/ describing the agreements reached between Under Secretary Roosa and Governor Carli of the Bank of Italy. It will be given to the press in Rome Saturday afternoon for release Sunday morning. There will be a simultaneous release here in Washington. /2/Not printed. The agreements on the part of the United States total $733 million of assistance in one form or another. In addition, since yesterday the Germans, at our urging, have agreed to a $150 million swap with Italy and the British have agreed to a $100 million swap. The overall total has been rounded up to "approximately $1 billion" in the announcement. As I explained yesterday,/3/ the United States assistance will include activation of the remaining $150 million of the $250 million standby swap arrangement between the Federal Reserve and the Bank of Italy--a new $100 million swap between the Treasury's Exchange Stabilization Fund and the Bank of Italy--a $200 million Export-Import Bank line of credit--$250 million in standard three-year CCC credits for the purchase of agricultural commodities, and the purchase by the Treasury of $33 million in lire which is the balance required to offset our outstanding medium-term borrowings from Italy. None of these transactions will have any adverse effect on our balance of payments and the CCC and ExIm credits should result in larger U.S. exports than would otherwise have been the case. /3/According to the President's Daily Diary, Secretary Dillon met with President Johnson at 5 p.m. on March 12. (Johnson Library) No record of the meeting has been found. As I told you yesterday, the information given us by Governor Carli of the Bank of Italy leads us to believe that the Italian program to redress their balance of payments will be effective and stands a good chance of eliminating the Italian deficit over the next 18 to 24 months. The funds available to Italy as a result of the current agreements are considerably more than adequate to care for this year's prospective deficit. The announcement of the large total is designed to obviate any threat of speculative attack on the lira. The urgency and timeliness of this action is evidenced by the fact that rumors of a weekend devaluation of the lira swept the exchange markets today causing one large New York bank to suspend all dealings in Italian exchange. Italian foreign exchange losses today also exceeded $60 million. The CCC program has been cleared with Under Secretary Murphy at Agriculture and the entire program, including the text of the Italian statement, has been cleared by us with the Department of State. Douglas Dillon 95. Intelligence Information Cable/1/ [document number not declassified] Washington, March 13, 1964. /1/Source: Johnson Library, National Security File, Country File, Italy, Vol. 1. Secret; Priority; No Foreign Dissem; Controlled Dissem; No Dissem Abroad; Background Use Only. Sent to Army Staff Command, DIA, State Department, and NSA. COUNTRY DATE OF INFO SUBJECT PLACE & DATE ACQ REF SOURCE AND APPRAISAL The following remarks were made to one or another of sources by the Italian officers indicated below during the course of a round of business and social calls which sources made to these officers. Although the conversation was friendly and informal, the comments were delivered with some degree of seriousness [1 line of source text not declassified]. This report reflects a facet of opinion held by a segment of Italians and thus appears to complement Department of State incoming telegram no. 5541, dated 8 March 1964,/2/ from the United States Embassy in Rome, Italy, which presents an excellent review of the current situation. We feel that the views expressed by the Italian officers are sincere and that they believe them to be true; nevertheless, these views are in line with their traditionally rightist and conservative views and reflect reaction that is probably more subjective than objective. /2/Reference is to telegram 2384 from Rome, March 8, which outlined the economic problems facing the Moro government. (Ibid.) 1. General Giovanni de Lorenzo, Chief of the Italian Carabinieri Corps, [less than 1 line of source text not declassified], expressed to source his concern over what he regards as a progressively deteriorating political-economic situation in Italy. He stated that he had been fairly optimistic in January 1964, but that he no longer felt that way. He observed that the interplay of political and economic factors, combined with what he described as a completely supine government, was leading the government toward a condition of increasing discrimination, strikes, lockouts, and mass demonstrations. 2. Volunteering at the outset that it was not a matter of a coup d'etat, de Lorenzo hastened to add that the time had come for responsible leaders of the country to make responsible decisions. The Moro government, he said, could not go on as it had been, because, if it did, the country would go Communist by default, and he and people like him would become "the usual refugees." Now, he said, is the time to show firmness, while the forces of public order--especially the Carabinieri--are still able to command the situation. If there were to be demonstrators in the piazza, let them come and be dealt with firmly, even if such action should produce casualties. 3. The present Moro government, according to de Lorenzo, must give way to a government headed by Giovanni Leone (former Premier) or Cesare Merzagora (President of the Senate), or Paolo Emilio Taviani (Minister of the Interior), or to a "Government of National Salvation," or even to a revitalized Moro government with backbone and a definite line of action. But it must be made clear to Moro and other leaders that this is a time for decision. 4. To this end, de Lorenzo said, he had an appointment on [less than 1 line of source text not declassified] to see Antonio Segni, President of Italy, with whom he intended to talk in very similar terms. He also said that he had an appointment on [less than 1 line of source text not declassified] to talk to Merzagora for the same purpose. He mentioned no one else by name. 5. When sounded out concerning the attitude of the military, de Lorenzo replied that they had always avoided involvement in such matters; he seemed to imply that, while the military might share his views, they were not involving themselves. As regards the large industrialists, he indicated their concern and frustrations, but he cited none by name or otherwise. 6. De Lorenzo went on to describe himself as normally being a patient man, but said his own patience was wearing thin. He had had numerous contacts recently in various quarters, he indicated, and had found considerable support for his point of view. 7. [4 lines of source text not declassified] 8. As being of possible significance in relation to the above, the following remarks which reflect concern on the part of several senior members of the combined Armed Forces Intelligence Service (SIFAR) are also noted: A. On [less than 1 line of source text not declassified] said he was depressed by a discussion he had had the previous day with Umberto Ortolani, President of the Istituto Nazionale per le Case Degli Impiegati Dello Stato (INCIS; National Institute for Houses of State Employees). Ortolani painted a dark picture of the Italian economic situation, predicted that, if things continued as they were, some 25,000 construction workers would be laid off in the next couple of months and this would result in public demonstrations. Ortolani described Giovanni Pieraccini (Minister of Public Works) as an able and honest man, but said that his hands were tied by those around him; therefore Pieraccini could do little about the present economic crisis. The SIFAR officer stated that he had found confirmation of Ortolani's views in other financial and commercial sectors. For example, the Olivetti firm was trying to get Giuseppe Pella (former Minister of the Budget) to take over as president, in an effort to inspire more confidence in investors. This SIFAR officer felt that the present government would fall before long, perhaps within the next couple of months, and that it would be just as well for it to fall now as later. B. On [less than 1 line of source text not declassified], source met briefly Colonel Renzo Rocca, Chief of SIFAR's Economic and Industrial Intelligence Office, who had just emerged from a discussion of the current situation with General Egidio Viggiani, Chief of SIFAR. Rocca, who in the past has regularly blamed the flight of Italian capital on the lack of confidence in the center-left government, said that the situation is definitely not good, and it is not getting any better, and that certain changes (unspecified) are essential. [1-1/2 lines of source text not declassified] C. Viggiani expressed himself as being in general agreement with de Lorenzo, but not quite to the gloomy extent of the latter. He said that the situation is actually not bad at present, but that the potential danger is great. He felt that, in order to head off the threat of a serious deterioration, forceful economic and financial measures are called for; otherwise, the country would reach the point of collapse--which could benefit only the Communists who would be ready to exploit the resultant chaos to install a Communist system. He agreed with de Lorenzo that a new government was called for, and thought that such a government should include technicians like Donato Menichella (Administrative Councilor of the Association for the Development of Industry in the South) for finance, some important industrialist for commerce, and so on. While such a government should include political figures, they should be only those of demonstrated competence. As for an adequate chief of government, he acknowledged that this was the biggest problem of all. He found Moro timorous and vacillating and charged him with playing into Communist hands in his dealings with Italian General Confederation of Labor (CGIL) leaders on labor matters. He observed that Moro had given recently a pitiful performance on television and considered him much too weak for the job. He said that names mentioned for leadership of the government include: Taviani, Leone, and Merzagora, but felt that none of them would be a good choice. Randolfo Pacciardi, who has recently broken away from the Italian Republican Party, had no following; Emilio Colombo (Minister of the Treasury) was too young. For him, the most capable man was Amintore Fanfani (former Premier) whom he regards as definitely and strongly anti-Communist, notwithstanding the opportunistic traits he has shown in the past. But, regardless of who might head it, a new government is needed in the near future to take vigorous steps to restore confidence in the economy, adopting austerity measures where necessary, reducing the outflow of capital, and perhaps obtaining foreign loans. There must be no further sliding by the government toward positions of increased strength for the Communists; and, if the latter attempt to force the issue through demonstrations, they should be stopped now, even at the cost of a few casualties. Viggiani felt that the temper of the people is such that, instead of creating martyrs and leading to an even more tense situation, this (i.e., stopping of demonstrations at a cost of a few casualties) would have a settling effect on the public at large. He agreed with de Lorenzo that the forces of order are now able to control the situation but that, with further slippage, they might no longer be able to do so. 9. Field dissem: none. 96. Airgram From the Embassy in Italy to the Department of State/1/ A-1641 Rome, May 26, 1964. /1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, POL 12 IT. Secret. Drafted by Peters and cleared by Colonel Patch and Hulse. SUBJECT This report contains the gist of a long after-dinner talk the reporting officer had May 19 with Lt. Gen. Giovanni de Lorenzo, Commander of the Arm of the Carabinieri, at the residence of the Embassy Air Attaché. The General commented frankly but, of course, off the record, on such issues as the strength of Pacciardi's movement for a "second" Republic, the political thinking of the top Italian security and military officers, and the Communist menace in Italy. During part of the conversation Brig. Gen. Luigi Violante, until recently Italian Air Attaché in Washington, was also present. The two men differed markedly in their ideas on the Italian political situation. While de Lorenzo was tolerant and even sympathetic towards Moro's center-left government, Violante was violently opposed to it and predicted that the government would resign by the end of summer. The ideas expressed below are those of Gen. de Lorenzo, unless otherwise indicated. Pacciardi's Movement Belittled Randolfo Pacciardi's Democratic Union for the Second Republic (cf. A-1581 of May 14)/2/ was not taken seriously by Italy's security and military leaders. Pacciardi had some good ideas and was honest and in earnest, but his approach was totally wrong. His weakest point was to attempt to attract all kinds of people and to draw everybody in his movement who had a grudge against the present Italian Republic, from the extreme left to the extreme right. This motley group of people had no political or ideological cohesion; their only common denominator was dissatisfaction with the status quo. Particularly weak and uninfluential were old ex-military officers who have flocked to Pacciardi's banner. Pacciardi's movement will end like Giannini's Qualunquismo of the late 1940's. /2/Not printed. (Ibid.) Armed Forces Could Support Well-Organized Rightist Party The top security and military officers would very much prefer to see organized a strong rightist political party which they can support and from which they can obtain political and ideological orientation. But such a party must be democratic and ready to respect the Republican Constitution. Unfortunately, however, the Italian right is in disarray and, aside from the Liberal Party (PLI), poorly led and generally discredited. The Monarchists are all but finished because they lack political vision and realism. The Neo-Fascists (MSI) leaders are hopelessly divided, squander their time in gambling houses, and still pretend to live in an age (the Fascist Era) which the great majority of the Italians abhor. There is no future for them in Italy; both should dissolve themselves as soon as possible. The Liberals are a respectable and democratic group, but they are too preoccupied with the preservation of their vested interests. They have made no serious attempt to establish contact with the military. What the country's security and military leaders wished was the emergence of a new party, with the PLI as the nucleus, which would embrace all the right-wing forces, including moderate-elements that now belong to the MSI and the Monarchist Party, who believe in the preservation of the Italian Republic. Such a party would have the full support of the security and military establishments either indirectly in elections or directly, if need be, should the security of the state be threatened through Communist subversion. Reliability of Security Establishments Gen. de Lorenzo gave a detailed account of what he called the "order of reliability" of Italy's security and military establishment. As expected, he placed the Carabinieri Forces at the top of the list as the mainstay of the state institutions. These forces of some 80,000 strong (the figure is the General's) were most reliable because of their long tradition and their recruitment procedures. A thorough investigation was conducted on each member of the force, and particular care was taken in checking the records of prospective brides of all Carabinieri troops and officers. Second in reliability come the Public Security (Pubblica Sicurezza, some 75,000 strong) forces, whose ranks are also carefully checked before they are recruited. In the three armed services (Army, Navy, and Air Force), the cadres (officers and professional non-commissioned officers) are reliable, but the situation among the "troops" (ranks) is not so good; too many of them seem to have voted for the PCI in the 1963 national elections. Generally reliable are the Alpine and the Bersaglieri units. The morale of the Carabinieri is very high despite constant snipings by the Communist and Socialist press. It is the policy of the Carabinieri high command to promote or otherwise confer deserved rewards on any officer or man who gets into difficulties during labor disturbances. Also, it is the policy of the high command to exaggerate the number of Carabinieri casualties as a consequence of such disturbances in order to discredit the labor unions (principally the Communist-controlled CGIL). For instance, de Lorenzo revealed, his command claimed that there were nearly 150 Carabinieri casualties during the labor riots last October at Holy Apostles' Square in Rome, whereas actually only four or five Carabinieri were hurt (Embtel 1008 of October 10)./3/ De Lorenzo personally visited the injured men in the hospital at once and either promoted them on the spot or commended them for their valor. /3/Not printed. (Ibid., POL 25-1 IT) Communist Problem There is general agreement at the top levels of the security and military establishments that the most efficient way to eliminate the internal Communist menace would be for the PCI to take the fatal step of staging an open revolt. The revolt would be so ruthlessly suppressed that the PCI would be eliminated for good. Unfortunately, however, Togliatti and his associates are fully aware of the consequences of an open rebellion, and they are accordingly banking on assuming power through parliamentary procedures. De Lorenzo did not think they had a chance to assume power this way, but General Violante violently disagreed, fearing that the PCI would continue to gain among the electorate and that following a few more national elections, the PCI and the Socialists (both Nenni's and Vecchietti's) might manage to obtain an absolute majority. In de Lorenzo's view, however, the Nenni Socialists (including Riccardo Lombardi and his associates) had crossed the Rubicon and had burned all bridges behind so far as collaboration with the PCI was concerned. The PSI could therefore be counted on to stay in the democratic camp, unless it sought its self-destruction. On Moro's Government Despite de Lorenzo's unconcealed hope for the creation of strong rightist party which would enjoy the support of the security and armed forces, he was not critical of Moro's center-left government, although it was obvious he did not think much of Moro as the leader of the government. De Lorenzo would have preferred Colombo or Rumor, especially the latter, whom he had learned to respect and admire when he was Minister of Interior in Leone's government last year. (De Lorenzo had no respect at all for the present Minister of Interior Taviani; Taviani, he confided, was timid to the point of being a coward in cases involving labor disturbances.) De Lorenzo expressed high respect also for Nenni, who, he said, had demonstrated a strong sense of responsibility on problems dealing with labor strikes. Comment Although Gen. de Lorenzo gave the impression that he was expressing the general views of the security and military establishments, the reporting officer had the feeling that the General was revealing mostly his own position. It would be presumptuous to gauge the political climate of the security and armed forces leadership on the current situation in Italy by two or three samplings. The reporting officer has, however, had previous conversations with Brig. Gen. Franco Picchiotti, now de Lorenzo's assistant, and Colonel Vito Mele, Commander of the Second Carabinieri Regiment in Rome, both of whom have expressed ideas akin to those of de Lorenzo. For the Ambassador: Julian P. Fromer 97. Editorial Note On two occasions in June 1964, the personal views and evaluations of Italian President Antonio Segni (of the Christian Democratic Party) on the prospects of the current Italian Cabinet were made available to the U.S. Government. On at least one of these occasions, these views were conveyed to President Johnson's Special Assistant for National Security Affairs, McGeorge Bundy. Noted were Segni's concerns that the recently established Italian Cabinet, consisting of an unprecedented coalition of Christian Democrats and Socialists and led by Christian Democrat Aldo Moro, was unlikely to last, was drifting toward more radical political policies, and was not alleviating the economic plight of Italy. Thus, at a time when the United States was officially supportive of the new coalition government in Italy, certain U.S. Government officials were aware of the skeptical views of President Segni. 98. Telegram From the Consulate in Frankfurt to the Department of State/1/ Frankfurt, June 25, 1964, 1 p.m. /1/Source: Johnson Library, National Security File, Country File, Italy, Vol. 1. Confidential; Priority. Also sent to Bonn, Rome, Brussels, and Paris. 1132. For Tyler from Rostow. Herewith major conclusions my two-day intense education in Rome./2/ /2/The Embassy in Rome reported on Rostow's June 22-24 visit to Rome in telegram 3484, June 24. (Ibid.) 1. Italian problem a classic dangerous example stabilization-development dilemma. Deflation has begun but foundations not yet laid for expansion needed to avoid political and social rupture. 2. Import decline has yielded favorable balance of payments position past several months. Prices steady. Good harvest in sight. Unemployment and partial unemployment rising. Import decline and other signs suggest unemployment rise to perhaps dangerous proportions by autumn. 3. Government struggling to get wage settlements in key industries at sharply reduced rates of increase, as compared to past several years. 4. Past wage increases and end of mass labor reserve in south require radical increase in industrial investment for Italian industry to remain internationally competitive. Vast flow to northern cities in past decades has created great deficit in housing, schools, hospitals. Concentration on durable consumers goods production last decade has left great deficit in docks, roads, and other infra-structure. Italy needs a big investment boom in both private and public sectors. 5. Politically, Moro's government is a group of good men of integrity and mutual loyalty. Moro holds them together in Rome as he used to hold together the DC Party. But he and they do not project a strong image to the country in part because their problems will not yield to simple quick solutions in part because some of the solutions are extremely difficult for the left wing to take. As men, they feel themselves beleaguered in the stockade, with two groups of Indians circling about and shooting flaming arrows. They are not disheartened. They would like time to work all this out. They like and trust each other as men. They realize they represent a parliamentary majority and a popular majority if they can hold together. But they also realize the government could fall at any time. 6. Outside the government there are strong right wing elements who wish to bring the government down and business groups who are sitting on their hands hoping for devaluation of the lire. There are also the Communists who are distracted by both international schisms and some puzzlement as to how to play domestic wage policy, but basically the Communist unions are pressing for inflationary wage increases and making life difficult even though the odds are for a right wing rather than left wing succession, should Moro fail. 7. Now for the rescuing cavalry. Marjolin came to town and made a good impression with his manner and his advice. He apparently urged strong, quick deflationary medicine. As a fellow-socialist his advice had more impact than that of some other European commentators on the scene. Not knowing what he said, in fact, I can only comment on the state of Italian thought post-Marjolin. 8. There is a potentially dangerous confusion between two proportions [positions]. One, Italy needs deflation. Politically and socially Italy can stand very little deflation, and a deflationary process is already underway. Two, Italy needs the acceptance of wage guidelines which would relate future wage movements to productivity changes and guarantee that expansion in public and private investment would not lead to price increases. This is the crux of the matter. 9. Moro and Carli are apparently hoping that if they get through the current wage negotiations and the DC Congress in tolerable style they will be able to relax the restrictions on private credit. I doubt that this modest prospect, combined as it will be with new austerity taxes, will prove sufficient for Nenni to hold his cohorts in line. What Nenni needs, I am convinced after a long talk with Lombardi and others, is an add-on in the form of a public investment program. But Italy does not command the resources for this add-on unless there is an absolute wage freeze for a substantial period. And this is tough. 10. The critical economic and political question as I see it, therefore, is whether Europe via Marjolin can generate a large capital infusion into Italy, if Moro and Nenni can, in effect, get wage guidelines installed. As is typical in these stabilization-development problems, what the politicians may be able to do depends partially on their knowing what help is available from the outside if they do it. 11. If this analysis is shared in Washington, Rome, and Brussels what is required, therefore, is a continuation of the Marjolin-Rome dialogue to see if this parlay can be pulled off. 12. My conviction about all this was strengthened at lunch yesterday by somewhat higher and more knowledgeable authority. Carlo Schmidt told me that the Pope, whom he had seen, fears a dangerous right wing reaction in Italy if unemployment rises and Moro fails, urging on Germans and Europeans a program of assistance to Italy. Ford |
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