Foreign Relations of the United States, 1955–1957, Western Europe and Canada, Volume XXVII

122. Letter From the Ambassador in Italy (Luce) to the Secretary of State¹

Rome, October 10, 1956.

Dear Foster: The receipt of the OCB Progress Report of August 8, 1956,² on United States policy toward Italy (NSC 5411/2) inspires me to write you a personal review of what I believe to be the accomplishments and disappointments of this Embassy in Italy from early 1953 to date, and of some of the Italian problems on this Embassy’s agenda that we consider as unresolved.

I think few people at home realize how many American policy goals have been attained or were brought nearer to achievement since the early days of 1953. We ourselves have seldom the opportunity to take stock and view in retrospect the road we have travelled in the last 3 1/2 years.

You will recall that during 1952 and into the spring of 1953 the De Gasperi regime³ was under the most severe attack from the Left that it had experienced since the days of 1946. I should like to remind you that at that time despite massive Marshall Plan Aid, Italy was still economically unstable, afflicted with mass unemployment, very low living standards, and labor relations difficulties. As you know Italy has always been relatively poor in basic raw materials. These adverse factors still remain in a large measure since the United States has neither the massive means nor the political justification to do more than to help the Italians to ameliorate the situation.

The collapse of de Gasperi’s leadership in the general elections of June, 1953, set the stage for a long period of political confusions and alarms. The “cold war” loss of Italy to Socialist-Communist control was a recognized possibility. Ideologically, economically and militarily the effects of such a loss would have been calamitous throughout Europe and a serious impairment of our own national security.

Today the threat of a Communist take-over in Italy is all but forgotten. Though the elections of 1953 resulted in a numerically much weaker parliamentary support of the Center parties, the Center coalition has despite all rumored predictions weathered successfully all attacks of the Left and has remained in power under the successive premierships of Pella, Scelba, and Segni. Of course with so narrow a margin of parliamentary strength the coalition has been threatened from time to time. Because of the weakness of the coalition there have been exasperating delays in much important legislation aiming at much needed economic and social reforms. But the overall stability of this pro-Western democratic regime in the last four years has been under the circumstances indeed remarkable. Democratic government itself is supported by far more than half of the Italian public opinion and voters. The policies of the present coalition follow formally the lines of European solidarity and friendship with America. Italy’s ties with NATO have been strengthened to the point where Italy is NATO’s strongest support in Europe, morally, politically, and incredible as it may sound, militarily (with the commitment of so many French units in North Africa, the Italian forces committed in NATO are equal to, if not greater, than those of the French).

There still exists a threat from the pro-Kremlin Socialist Left, but the possibility that Italy would knowingly vote itself into the Soviet orbit is no longer the nightmare it was in 1953 and well into 1954. In fact the danger of what is commonly called here “the opening to the Left” after three years of threatening alliance has not yet taken place. Most of the leaders of the coalition beginning with Prime Minister Segni seem to be generally adamant that it shall not take place.

My own conclusion is that politically and ideologically Italy is more stable than many competent observers predicted three or four years ago it would be today.

I would now like to list some of our more concrete accomplishments, many of which seemed unlikely of early resolution in 1953.

(1) The Trieste settlement.⁴ The settlement of this aggravating and dangerous issue ushered in a better relationship between Italy and Yugoslavia, which is still of a decided advantage to the West despite Yugoslavia’s recent shift of position. Above all, it removed a factor which had for over a decade adversely affected our relations with Italy, and Italy’s relations with the UK and NATO. Today it can be said that at no time in this century have Italo-American relations been more cordial.

(2) The Trieste settlement cleared the way for a much desired US objective, which otherwise was impossible of attainment: namely, The Defense Facilities⁵ under which increasing numbers of US units are being stationed in Italy.

(3) Italian ratification of the long-postponed and much desired Status of Forces Agreement⁶ came a year later.

Reaction to the bringing of US troops from Austria to Italy and the establishment of SETAF [less than 1 line of source text not declassified] was and still is excellent. Indeed, our military relationship with Italy in Italy could hardly be better. I believe that the government today would be in favor of our stationing even more troops in Italy.

(4) The Trieste agreement also cleared the way for prompt and large-scale Italian acceptance of WEU, when EDC collapsed in France.⁷

(5) Italian Support for European Integration, participation and leadership in the European bodies (OEEC, CSC,WEU, etc.) has since 1953 become ever more wholehearted.

(6) Italian admission to UN, a long desired Italian goal, has been attained. There can be no doubt that Italy will support the US in the UN.

(7) Another accomplishment, general in nature but most important, is the fact that Italy now feels herself to be a full partner in the Western World Alliance.

(8) Last, but not least, we have succeeded in strengthening friendship between the United States and Italy to an extent where such friendship today is a cardinal principle of Italian foreign policy.

Your visit to Rome before last year’s Geneva Conference, Mr. Martino’s appointment as one of the “Three Wise Men” who will seek to give more meaning to the political, economic and cultural aspects of NATO (long an Italian hope) and such other steps as the Italian role in the London Suez Conferences, etc. have all helped to develop an increasing sense of responsibility and maturity in Italian foreign policy and to make Italo-American friendship a cornerstone of that policy. So long as we continue to treat Italy as a partner, such partnership will continue to be of the greatest mutual value. In my letter to you of August 31 I developed this idea of our partnership with Italy at some length, precisely because I believe we have so much to gain from it.

Many American programs and policies have helped to sustain the confidence of Italians in America’s friendship and world leadership. Among them are MDAP aid, Offshore Procurement program, EX-IM Bank and International Bank loans, our surplus commodities agreements, School Lunch Programs, our gifts of goods in the moments of national disaster, floods, droughts, etc. And last, but not least, our Refugee Relief Act, which permitted the issuance of 62,000 visas in Italy.

These are all records of accomplishment and cooperation which the Italians are well aware of and for which they are undoubtedly more appreciative than most European nations who benefitted from our aid.

So much for some of our accomplishments. But while we can be justly proud of our record, we must also frankly recognize that in some respects progress was slow and the achievement of some of our goals are not yet in sight. We have not solved a number of problems primarily because (a) it was not our job to do so in the first instance, and (b) we did not have the tools and means. These unresolved problems are: the continuing existence of a strong Communist apparatus; unemployment and underemployment, especially in the South; the shockingly wide discrepancies in the standard of living (still low despite notable improvements in the last 4–5 years, compared to the rest of Western Europe); the slowness of fiscal and agricultural reforms; excessive government control of and participation in industry; lack of substantial modernization of employer-employee relationships—just to list the more important ones.

With regard to the Communist threat, it had been incomprehensible to US policy-makers that increasing prosperity among Italian workers had so little effect on wooing them from the pro-Kremlin parties. We could understand that two million unemployed, and more underemployed were potential or actual Communists. But we found it hard to understand why many prosperous workers in the North continued to vote for the Communist and Nenni Socialist tickets and gave allegiance to the Communist Trade Union (CGIL). I think we are at last beginning to understand this, and accordingly the situation is improving. Our OSP policy of withholding orders from companies where labor was Communist dominated was the first step. Though our OSP program was small compared to the vast sums of aid in one form or other spent in Italy before 1953, and could not influence per se many unions, the effect of the policy we put into effect beginning in 1954 was cumulative. The ratio of Communist to non-Communist votes in shop steward elections in all Italy has moved in the last year and a half from 65–35 to about 50–50; while the ratio in industries having OSP contracts is about 60–40 in favor of the free labor unions. The important element in this picture is not the loss of votes by the Communist unions and the numerical gain of the free unions, but the growth of prestige, power and self-confidence of the free unions. It was not merely the wage dollars and cents of the OSP withheld from Communist Union control that made the change. It was the encouragement this policy gave to management on the one hand and the free trade unions to fight on a shop level on the other hand that helped turn the trick. Certainly this proved to our Embassy that prosperity alone will not defeat the Communists and their allies, and that US policy must always keep this fact in mind.

The success of free labor unions—beginning with the defeat in the spring of 1955 of CGIL in FIAT,⁸ a traditional stronghold of the Communist apparatus—was a significant milestone in the course of events. Other policies [1 line of source text not declassified] also have had salutary effects. For example, in early 1955, certain privileges were withdrawn from the Communist press which resulted in a sharp decline both in circulation and advertising.

In my opinion the greatest threat we face in Italy now rises from the new Soviet policy, one of the aims of which is reanimation of the popular front and the use of socialist-democratic party apparatus as a red Trojan horse. The municipal and provincial elections of last May⁹ prove that the new Soviet policy aiming at popular front governments in Italy and in France has definitely assisted the Socialist parties. Both Saragat and the Communist-Socialist-Democratic party (PSDI) and Nenni’s pro-Communist Socialist party (PSI) got large increases in votes. This had the unfortunate effect of putting the leader of the anti-Communist Social-Democrat, Mr. Saragat, on the spot when the inevitable cry of Socialist unity rose in the rank and file.

In my view Socialist unity today without adequate safeguards would involve the more serious danger of Saragat being swallowed by Nenni. The Socialists would then be the second largest party in Italy and could and surely would demand an important role in the government. Even if the Communists were kept out of the government (which I doubt they could be then because of the heavy Communist infiltration in the Nenni Socialist organization) the result would probably be a rapid growth of neutralism in the political arena and strongly established policies in the economic field. We must, I am convinced, do everything in our power to prevent the premature Socialist unity on the present pro-Kremlin terms of Mr. Nenni. Saragat and his supporters are obviously a key factor in this process and we must—bearing unforeseen changes in the situation—do everything we can to strengthen and to guide their hand.

We have sent in a series of detailed reports and recommendations to the OCB¹⁰ which I believe will assist it in lining up a policy to meet the Socialist unity question which remains a real threat. This Embassy must continue as it has done in the past to direct all the means and talents at its disposal toward helping Italian leadership in its struggle against the strongly organized forces of Communism and its allies. Every responsible Democratic leader in Italy recognizes that this struggle is fundamental to the survival of the Republic. They may disagree on how to fight this battle, but all agree that the objective of Communism is the overt goal [overthrow?] of Republican and free institutions and the downfall of Western civilization. It is equally recognized that the battle is far from being won. New strategems by the enemies of Western civilization present new perils which must be met by new plans. The important factor in this struggle is that the great majority of the Italian people have no desire to submit to Communist-Marxist domination. What the Italians may not fully realize and what we must bring home to them every day is that the price of liberty here as elsewhere is eternal vigilance and courage, always more courage.

In this connection I would like to bring up a matter which has been put by the Embassy before the Department several weeks ago. We consider it possible that the Soviet may in the foreseeable future seek to get a foothold in Italy through an offer of a massive assistance project in the form of loans and/or materials not only to help the Italian plan for the South which we have assisted in the past several years, but also the so-called Vanoni Ten Year Economic Development Plan or a version of it which is now in the process of elaboration and which may be called the Four Year Slice of that plan. The evidence that the Soviets are likely to make the Italians such an offer is so far small, but we feel that we should be ready to counter or even anticipate such an offer which, if made, would put the center coalition government in an exceedingly difficult situation. We also feel that the danger of Soviet penetration of Italy will probably increase, in view of the developing Near East crisis which, in turn, has increased Italy’s importance as the southern flank of NATO in the Mediterranean and vis-à-vis North Africa.

I should like now to dwell briefly on the major phenomena of contemporary Italian life, namely economic progress. By 1953, with the help of massive American aid, Italy had largely recovered from the damages of war and defeat. Trains ran on time; fine ships flew the Italian flag on the seven seas; air traffic was expanding; the lire was stable—a notable achievement of Pella and other economic ministers and of the central bank. Nevertheless, poverty continued to dominate a large part of the Italian scene, both the idea of poverty and the fact. There was and still is the centuries-old poverty of the South and there was also in 1953 vast unemployment, and equally objectionable, underemployment throughout Italy.

Today the scene is very different. Italy is still a poor country in comparison to most Western European countries, but today the fact of prosperity is more imposing than that of poverty. During the last four years Italy has made the greatest economic strides in her entire history. The rate of progress has been equal to that of any Western European country, and it is substantial even in the underdeveloped South. Our Embassy and USOM have taken a special interest in this area which includes the famous island of Sicily and the large but sadly neglected island of Sardinia. I am happy to report that American aid has concretely helped to change the pattern of centuries so that today the whole South, including the islands, looks forward to a new economic era.

I may add that in the center and north of Italy prosperity is visible not only in the higher standard of living of the rich and well-to-do; it is even more vividly apparent in the greater enjoyment of life among millions in the middle income group and factory workers. Concrete evidences of this better economic life for millions of Italians are the small cars and motorcycles that swarm the roads of Italy, taking their owners not only to work but also to the beaches, to the lakes, and the mountains and the hundreds of camping sites which have sprung up in the last two or three years. Among the many details in this over-all fact of prosperity, I may cite the continued building of houses and apartment buildings; bulging shipyards; surplus production of wheat and other agricultural commodities; and 8 million tourists this last year straining all facilities of the country. The tourists, together with the export trade expanded under a liberal trade policy, have served to provide a conservative Italian treasury with an imposing dollar reserve of slightly over 1 billion dollars.

What is wrong in this picture is that with all the increase in production and trade and financial stability, the Italian Government has made little progress in the fundamental reform of economic patterns which some wise Italian statesmen like Don Sturzo have persistently urged upon it. The State remains dominant and pervasive in many facets of the economic life of the nation. State monopolies, industries owned and operated wholly or partly by the State and private monopolies and cartels in close relation to the State—all these are aspects of Statism contrary to claims of the Government to be essentially in favor of free enterprise and of socially responsible capitalism rather than of Statist Socialism. In private business, restrictive business practices of past centuries persist and antiquated banking practices with high interest rates throttle the free flow of capital and credit in what is supposed to be a modern capitalistic society.

While all this may be regarded as “domestic affairs”, recognizing today the interdependence of all free and democratic nations, the United States cannot but take a deep interest in the economic and social progress of our sister Republic of Italy.

This Embassy has, I believe, been helpful in assisting our Italian friends in working out some specific reforms.

I would particularly like to cite the recent laws governing foreign investments which have greatly improved the climate for foreign private capital; their petroleum law passed by the House and now pending before the Senate, which while not wholly satisfactory is much better than it was a year ago when it was introduced and which should at least result in bringing in foreign risk capital and enabling Italy to expand her production of badly needed oil. We have successfully urged the Italians to extend their liberal trade policy they adopted toward their OEEC partners to the dollar trading area and in turn we have reciprocated by steps which the United States has taken to improve conditions of trade between the two countries.

In passing, a matter of some personal satisfaction to me is that as a result of my consultation with you in Washington last year and my subsequent representation to Prime Minister Segni and Foreign Minister Martino, on March 14th, the Italian Government has issued a decree banning the production and export of heroin.

Besides our concern for fundamental policies designed to assist economic development and the creation of wealth through international trade and investment our Mission has been vigorous in implementing and assisting American activities to sustain the confidence of Italians of American friendship and of our leadership. To mention a few of these activities, I should like to refer to the loans granted to Italy during the last few years by the Export Import Bank $32.6 million (1955/56); the IBRD $90 million (with a $75 million new loan to be signed shortly); surplus agricultural commodities agreement in the amount of $58 million and another $50 million agreement now under negotiation; the school lunch program at the cost of $30 million, bringing home American generosity to about a million children throughout Italy; MDAP aid (total of $1,576,689,000 since 1950); and the Offshore Procurement program which now exceeds a half billion dollars; our gift of food and other commodities in the moments of national disaster such as floods and droughts (approximately $25 million); and last but not least our Refugee Relief program under which 62 thousand visas have been issued to Italians—migration is one of the important means to alleviate the important problem of unemployment.

If we have been less successful in reducing government ownership and operation of all kinds of industries and of archaic Statist patterns, the reason is that the Government operating with a very small majority in Parliament did not feel itself in the position to effect major reforms; and the major party in the coalition, the Christian-Democrats, finds itself hopelessly divided on fundamental concepts of economic policy.

Also we have not been successful in inducing the Italian Government to completely fulfill its NATO commitment for combat-effective forces. Nevertheless, there has been a gradual improvement in Italy’s defense posture. Italy’s defense spending is rising each year and is now close to one billion dollars a year from a G and P [GNP] of $21 billion. To put it in another way, 20% of the Italian budget is reserved for defense building. This record is indeed not too bad. However, I must confess that I am increasingly worried about the future of the Italian defense forces. As you know, we have been supporting the Italian defense build-up on a large scale for deliveries of equipment under MDAP, a program designed to help bring Italian forces to NATO agreed force goals. This program of assistance will be largely completed in fiscal year 1958 and will leave the Italian forces at a level which is apparently much too high for them to maintain on their own. In other words it will leave them high and dry. While the Italians intend to increase their defense budget in the same ratio as their economy develops, we do not think that it is politically or economically possible for them to close the gap between present defense outlays and total requirements in the near future. The Italians having been unsuccessful in their recent appeals to the Pentagon for continued long-term military assistance from the United States are now planning a downward revision of their force goals to a level which they believe they can support independently. I fear these cuts may be deep. We have been told that the General Staff is thinking in terms of a reduction of 50,000 men in the army during fiscal ’58 and of larger cuts involving all three services in fiscal ’59. At this stage it is difficult to predict the magnitude these cuts will assume, but I understand that in fiscal ’58 and ’59 the gap between total requirements and the anticipated budget ranges from 30–40% of the total. I think there can be no doubt that the weakening of the Italian armed forces at this stage will tend to make the Italian Government more timid in its assumption of defense commitments and therefore may produce a tendency towards a less active participation in collective security measures in general. It may also result in a lessening of the confidence of the Government as we now know it in dealing with the Left.

For the future, I think we must push ahead with the steps outlined in the series of reports and recommendations on OCB policy that I have mentioned. I also believe that in view of our many accomplishments on the one hand and the shift in Soviet tactics, the time has come to re-examine and to rewrite NSC 5411/2 of April 15, 1954. While the problems remain essentially the same, the threat has now taken different form and we must find a new, bold approach and technique.

In closing may I say that without your continued support and guidance, I do not think we would have been able to do what has been done in Italy since 1953.

Cordially,¹¹

1. Source: Department of State, Luce Files: Lot 64 F 26, Letters, 1955–56. Top Secret; Official–Informal.
2. See Document 114.
3. Alcide de Gasperi was Prime Minister of Italy, 1945–1953.
4. The Trieste dispute was settled on October 5, 1954, when representatives of Italy, the United Kingdom, the United States, and Yugoslavia signed a memorandum of understanding and certain other agreements. Documentation is included in Foreign Relations, 1952–1954, volume VIII.
5. See footnote 3, Document 72.
6. See footnote 2, Document 72.
7. Italy ratified the Paris Accords, which brought Germany and Italy into WEU, and Germany into NATO on March 11, 1955; the French failed to ratify the EDC on August 30, 1954.
8. See footnote 2, Document 74.
9. See Document 110.
10. See Document 94.
11. Printed from an unsigned copy.