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cecnomic and military resources are at a very low ebb, and she could not stand the strain of war for more than a very short period without large- scale Axis support. Unemployment and shortage of food might result in internal disorders. In spite of her poverty, Spain has recently been increasing her petroleum stocks very considerably and apart from using her own tanker fleet (10 ships) she has recently chartered 15 neutral tankers and is at present enquiring for a further 17.

Army.

The Army at present is still in the process of re-organisation.

There is a considerable number of men in the country who are partially trained and have had recent experience of war, but it is believed that the equipment available in Spain is insufficient for this number of men.

Recent military dispositions both in the peninsula, in the islands, and in Morocco appear

nevertheless, to have purely defensive purposes; they are equally suitable for offensive action.

Fifth Column.

There are credibly reported to be in Spain a large number of Germans upwards of 80,000 has been mentioned and an indeterminate number of Italians who are evidently organised from Berlin and Rome. The Germans include young men of military age as well as members of the Condor Legion, technicians, and crews of interned merchant ships. All these are capable of assisting and organising any anti-Allied movement, and appear to be in a position to lend support to air landings in Catalonia and along the valley of the EBRO, to assist sea landings along the Levante Coast near ALMERIA, or to effect the seizure of central government organisations in Madrid. evidence that the Spanish Government is taking steps to counteract these activities.

There is no

Conclusion.

Present indications

(such as the recent

anti-Allied demonstrations) therefore seem to point either to France having lost his control of the situation or to his having moved further towards the Axis Powers; (the latter is

illustrated by the Declaration of non-belligerency). We, would, however wish to defer any final

pronouncement as to the future attitude of Spain until such time as H.M. Ambassador has submitted his views.

(Signed) V. CAVENDISH-BENTINCK.

Richmond Terrace, S.W.1.

F.G. BEAUMONT-NESBITT.

11

11

A.R. BOYLE.

11

=

11

COL. A.M. CRAIG.

(for D.N.I.)

B. M. CLARKE,

-2-

(for M.E.W.).

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