At the end of World War II, Italy suffered a number of territorial losses as a result of its military defeat, most along its northeastern border. As is known, the Peace Treaty of 10 February 1947 reshaped the frontiers between Italy and Yugoslavia in favor of the latter, whileTrieste was made a “Free Territory” (FTT) to be formally built by a governor being appointed by the United Nation Security Council; a sort of buffer state consisting of Trieste (Zone A) occupied by the British-Americans, and Capodistria/Koper (Zone B) under Yugoslav occupation. Despite the Peace Treaty provisions, it was not possible to establish the FTT and the question of Trieste remained unresolved for a long time. Relations between the Great Powers increasingly deteriorated at the end of the war, and a great rift opened up in Europe between the Soviet Union and the United States. Due to the rivalries between the superpowers, the United Nation Security Council could not agree on whom to appoint as governor. The FTT was never created and remained subdivided among its different occupiers, with British-American forces in Trieste and Zone A, and Yugoslav troops in Koper and Zone B. This was the international and local situation that Italy had to cope with after the conclusion of the Peace Treaty in its search for a viable solution to the question of Trieste. Between 1947 and the early 1950s, in order to accomplish an equitable settlement, Italy’s rulers tried to follow a dual policy toward Yugoslavia, a sort of “stick and carrot” strategy. On one hand, Italy requested a revision of the Peace Treaty in order to obtain all of the FTT or at least most of it, including not only the city of Trieste and Zone A, but also Istrian towns and tiny villages in Zone B, which at that time were inhabited by Italian populations. Moreover Italian authorities planned an unyielding strategy for the defense of national identity in the border areas, especially along the Italian‒Yugoslav boundaries. To this effect, a government agency – called “Ufficio zone di confine” (Office for Border Areas) – was established in Rome under the Presidency of the Council of Ministers. Initiatives and functions of the government agency were meant to ensure the “defense of Italianism” against any Yugoslav attempt to eradicate the Italian cultural and political presence in the FTT. But the activities and practices of the agency often resulted in aggression toward political opponents and ethnic minorities. On the other hand, Italy tried to improve economic and trade relations in order to chart a new course with Yugoslavia and normalize the political and diplomatic relationship. For the time being it was better to leave the major political problems in the background and spend some time building up trade with Yugoslavia. Bilateral economic relations had, in fact, the potential to be fully integrated and much more extensive. Italy was an industrialized country without large natural resource reserves; natural resources, however, were abundant in neighboring and less developed Yugoslavia. Italy’s strategy was thus to leverage the complementary character of Italian and Yugoslav production structures and exploit the high degree of “economic unity of the Adriatic basin.” To do this, a trade agreement was to be negotiated that would underline Italy’s firm desire to start a “real and consistent good neighbor policy” with Belgrade. The aim was to encourage trade and economic relations, to ignore the political angle and try to ease major tensions in the meantime. Italy therefore attempted to meet Yugoslavia’s economic needs as much as possible, hoping that a “new political atmosphere” could be established and an overall improvement in bilateral relations attained.
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