Monday, Jan. 14, 1957

Dreams of Gold

"The Spanish, economy could not look brighter," bragged Spain's Generalissimo Francisco Franco in his annual New Year's message last week. "Many apparently great nations envy us." There was, he conceded, a crisis just at the moment, but that was merely the "natural" result of economic expansion and would soon be straightened out.

Actually, life in Franco's Spain is getting tougher and tougher. Heavy frosts last February destroyed nearly half the nation's citrus crop, at an estimated loss of at least $80 million in foreign exchange. Early last spring, the discontent of Spanish workers, many of whom take two jobs and work 14 hours a day to eke out a living, exploded in a series of illegal strikes. Reluctantly, Franco granted wage raises that averaged about 40%, and paid for them by the dangerous expedient of printing extra paper money.

The Right to Fire. Prices shot up. Olive oil, the staple of Spanish cooking, was raised another 11% last week. Gasoline jumped by a comparable amount. Since Spain's main distribution system depends heavily on trucks, the raise would soon be felt throughout the whole economy. In an effort to counteract inflation with increased productivity, the government decreed, on Christmas Day, that workers would no longer enjoy the state-assured job security that was one of the few blessings they had enjoyed under Franco. Henceforth, businessmen would be free to fire superfluous, incompetent or dishonest workers.

Franco's real need was hard cash to back his paper money, and last week it drove him to something unprecedented in his 20 years as dictator. He had some soft words for that arch villain of a hundred speeches, Soviet Russia. While Spaniards listened in astonishment, Franco declared: "Once Russia halts her persecutions, threats, and subversive actions toward other nations, there will be nothing against Russia as a nation or Russians as a people."

From an Old Enemy. The reason for Franco's sudden mildness was not far to seek. Since 1936 Russia has been sitting on more than half a billion dollars worth of Spanish gold. When the civil war was only three months old, pro-Communist Finance Minister Juan Negrin secretly ordered 7,800 crates of gold out of the Bank of Spain, had it trucked to Cartagena and then shipped to Russia in charge of four bank officials, for "safekeeping." The Russians kept the Loyalist officials in Moscow for months, counting and recounting the gold. By the time they were released, the Republican government was shattered and in flight.

For years, the Russians rebuffed attempts by both Franco and the Republican government in exile to recover the gold on the ground that it recognized neither of them--or, for that matter, their claims. But just two months ago, 64-year-old Juan Negrin died in Paris. Before he died, the Franco government claimed, Negrin willed his old enemy Franco the receipts for the long-disputed gold. With this documentary evidence, Spanish officials are now hopeful that they can force or cajole the Russians into repaying the gold.

Last week Franco dispatched a three-man commission to Moscow, officially to discuss repatriation of Spanish citizens, but believed to be secretly empowered to open negotiations for return of the bullion. In Franco's hard pressed condition, it was certainly well worth a try.

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