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Report of the Administration
of the British - United States
Zone of the Free Territory of Trieste

1 January to 31 March 1949

by
Major General T. S. Airey CB. CBE.
Commander British - United States Zone
Free Territory of Trieste

Report Number 6

Section 1.
Introduction

This, the sixth report on my administration of the British - United States Zone of the Free Territory of Trieste, deals with the period from 1st January to 31st March 1949.

Steady progress has been made toward the rehabilitation of Trieste's industry and commerce, details of which will be found in the following sections of this report. The Zone, however, has been a participating member of the Organization for European Economic Recovery for less that six months and some time must necessarily elapse before more tangible results, such as a substantial increase in employment, can be expected. During the past three months I have taken additional steps to set up advisory groups which will cooperate with AMG [Allied Military Government] in the actual implementation of the economic recovery programme and carry out further exploration of all possible means of industrial and commercial rehabilitation.

There are hopeful signs of the gradual return of a proportion of Trieste's former transit trade with central Europe. In a recently initialled trade agreement between the governments of Italy and Austria, the former has set aside the sum of three billion lire with which to enable Austria to pay for expenses incurred in Trieste. Representatives of Allied Military Government have also in recent months visited the capitals of countries of central and Eastern Europe which have traditionally used the port for their commerce. Progress in this direction, however, is still tentative and slow and the port has relied primarily upon the handling of United States supplies to Austria and upon the development of trade with Italy, particularly the export of refined oil products to that country. It would be vain and indeed dangerous to expect, under modern conditions of trade restrictions and currency control, a full return of that remarkable volume of transit and entrepot [warehousing, transshipment] trade which had reached its peak before the first world war and when the hinterland possessed a more homogeneous character. It is not on the conditions of the past that the economic future of Trieste can be rebuilt.

Allied Military Government has proceeded, and will continue to proceed with steps toward the rationalisation of its budget. Here I must again point out that I have had to move slowly and with great caution in order to impose as little hardship as possible upon a population that has suffered much from the uncertainty of its political future and from the sombre effects of both factions of the Communist Party to blunt economic recovery for their own ideological ends. I have repeatedly pointed out that Trieste, separated as it is from Italy, is no longer a viable entity. In its present circumstances it inevitably requires, in miniature at least, the governmental departments of an independent state and for that reason alone the budgetary must necessarily be high. I would point out, moreover, that the principal administrative functions of the Zone are being carried out by officers designated by Great Britain and the United States and that their cost is at present a financial commitment accepted by the governments of these countries. Since the territory was constituted on 15 September 1947, apart from the funds supplied by the United States of America under the European Recovery Programme for planned economic rehabilitation which have been indispensable to the economy of the Zone, I have had to find the means with which to sustain the life and administration of the population of this Zone. Italy has provided 22.3 billion lire and the equivalent of 1.6 million dollars in foreign exchange, representing a total value of 40.4 million dollars. On these funds have depended, inter alia, the health services of the Zone; the building of urgently needed housing; the relief of all unemployed workers, and the pay, prospects and domestic security of government employees together with the police, fiscal, forestry, and coast guard services which are included within the framework of the Venezia Giulia Police Force. It is of great importance that these facts should be clearly faced in determining the future of Trieste. The severance of the sinews which connect it with Italy would surely deprive so large a proportion of its population of its means of livelihood.

I believe that the future of Trieste must be settled in accordance with overriding economic and ethnic factors rather than by consideration of power-politics, strategy and ideology. after eighteen months of government in the conditions which prevail in Europe today, I see no prospect that Trieste can become, in foreseeable time, a viable entity outside the Italian state. This fact, together with the danger to peace which enshrouds the permanent separation of a large Italian population from its mother country, leads me to reaffirm the conclusion, which I have already more than once expressed, that the only reasonable and secure solution to the problem of Trieste lies in its return to Italy.