The burnt child shuns the fire until the next day. - Mark Twain
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 1, No. 84, Part II, 30 July1997



This is Part II of Radio Free Europe/Radio Liberty's Newsline.
Part II is a compilation of news concerning Central, Eastern,
and Southeastern Europe.  Part I, covering Russia,
Transcaucasia and Central Asia, is distributed simultaneously
as a second document.  Back issues of RFE/RL NewsLine are
available through RFE/RL's WWW pages:
http://www.rferl.org/newsline/search/

Back  issues of the OMRI Daily Digest are available through
OMRI's WWW pages: http://www.omri.cz/

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Headlines, Part II

* BELARUSIAN KGB INVESTIGATES ACCUSATIONS AGAINST RUSSIAN
JOURNALISTS

* ALBANIAN GOVERNMENT WINS VOTE OF CONFIDENCE

* SERBIAN AUTHORITIES HOUND LEADING INDEPENDENT DAILY

End Note
WHY ESTONIA RATHER THAN LATVIA OR LITHUANIA?

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EAST-CENTRAL EUROPE

BELARUSIAN KGB INVESTIGATES ACCUSATIONS AGAINST RUSSIAN
JOURNALISTS... The criminal case against the three Russian television
journalists accused of illegally crossing the Belarusian border has
been handed over to the KGB in Grodno for investigation, Belapan
reported. Russian Public Television (ORT) reporters Pavel Sheremet,
Dmitrii Zavadskii, and Yaroslav Ovchinnikov are being held by the
Belarus KGB in pre-trial detention in Grodno. A decision is expected
on 30 July on whether they will be freed pending their trial. The
three are charged with illegally crossing the Belarusian border with
Lithuania while preparing a report on the Belarusian border guards.
Belarusian President Aleksandr Lukashenka has accused the Russian
media of waging an "information war" against Belarus (see "RFE/RL
Newsline, 29 July 1997).

...WHILE YELTSIN DEMANDS EXPLANATION. Russian President Boris
Yeltsin on 30 July asked reporters to convey to Lukashenka, that he
is "indignant" over the Belarusian authorities' treatment of the ORT
journalists and wants an explanation, Interfax reported. Speaking
from Samara Oblast, where he is vacationing, Yeltsin warned that
Russia may reconsider the union charter recently signed with
Belarus. He added, "We do not touch Belarusian journalists." ORT
management on 29 July had urged Yeltsin to "take a clear position on
freedom of the press in Belarus." The same day, the Russian Foreign
Ministry summoned the Belarusian ambassador in Moscow, Viktor
Danilenka, to request the release of the journalists, Russian media
reported.

GERMAN FOREIGN MINISTER IN UKRAINE. Klaus Kinkel arrived in
Kyiv on 29 July for two days of talks with President Leonid Kuchma,
Prime Minister Valery Pustovoitenko, and Foreign Minister Hennady
Udovenko, dpa reported. Kinkel is scheduled to visit NATO's
information center in Kyiv, the new premises of the German
embassy, and a Protestant Church. He is accompanied by a business
delegation that will meet with senior government officials. The two
sides will also discuss the issue of trophy art taken to Ukraine by the
Soviets after the end of World War II.

UKRAINE, IMF REACH TENTATIVE STAND-BY AGREEMENT. Goohoon
Kwon, the IMF's resident representative in Kyiv, says an agreement
has been reached in principle with Ukraine on a temporary loan,
Reuters reported. The agreement is tentative and subject to the
approval of the IMF board. Kwon did not say how much the one-year
loan is worth, but Ukrainian officials have said it will total $750
million. Ukraine's last stand-by agreement with the IMF expired in
February. The agreements are seen as a temporary measure until
Kyiv fulfills conditions to qualify for a three-year credit valued at
between $2.5 billion and $3 billion.

RUSSIA URGES DIALOGUE WITH ESTONIA OVER ETHNIC ISSUES.
Ethnic Affairs Minster Andra Veidemann met with his Russian
counterpart, Vyacheslav Mikhailov, in Moscow on 28 July, ETA and
BNS reported. Mikhailov said that direct contacts between the two
ministers could lead to a solution to the problems of Russians living
in Estonia. He urged Tallinn to sign a memorandum on cooperation
between the two countries' immigration authorities. Veidemann
promised to speed up the integration of the Russian-speaking
minority into Estonian society following the European Commission's
recommendation that Estonia be invited to begin talks on accession to
the EU. On 31 July, Estonia's Citizenship and Immigration Department
is to begin registering those people who have no valid identification
documents. It is estimated that there are between 20,000 and 50,000
illegal residents in Estonia, of whom the overwhelming majority are
ethnic Russians.

CONSULTATIONS ON NEW LATVIAN GOVERNMENT UNDER WAY.
Premier-designate and former Economics Minister Guntars Krasts on
29 July began consultations with the political parties represented in
the parliament on the formation of a new government, BNS reported.
Krasts told reporters that he believed the new cabinet should be as
broad-based as its predecessor, which was composed of seven
parties. He also said he was not categorically opposed to the
nomination by Latvia's Way of Vilis Kristopans as transport minister.
Kristopans resigned from that post after the Prosecutor-General's
Office had announced he violated the anti-corruption law. Krasts's
Fatherland and Freedom party, however, has urged other political
groups not to nominate those former ministers who resigned amid
the recent corruption scandal.

POLISH GOVERNMENT UNVEILS RECONSTRUCTION PLANS.
Government spokeswoman Aleksandra Jakubowska told journalists
on 29 July that 150 schools damaged by the worst floods in centuries
have to be repaired within the next month, before the end of the
summer vacation. She said that, in general, priority would be given
to rebuilding and repairing public buildings such as schools, courts,
hospitals, local government headquarters, libraries, and some sport
facilities. Many bridges, roads, and railways were destroyed by the
floods. Jakubowska said the government planned to repair all
protection dikes by the end of October, clear river beds by 30
November, and repair dams by the end of the year. The government
does not yet have estimates of the costs of repairing the damage, but
independent analysts say some 7.5 billion zlotys ($2.2 billion) will be
needed.

CZECH PRESIDENT TOURS FLOOD AREAS. Vaclav Havel on 29 July
toured flood-damaged areas of the Czech Republic and urged
residents to rebuild their communities so that they are "stronger and
more beautiful," Czech Television reported. He said 40 years of
communism had left many cities and towns run down and
unattractive. The floods give Czechs a chance to improve that
situation, he commented. Havel traveled with Defense Minister
Miloslav Vyborny to one of the worst affected areas, some 150
kilometers east of Prague. The Czech government has announced that
people whose homes were destroyed will each receive 150,000
crowns and be entitled to low-interest loans worth 850,000 crowns.

FRANCE PRAISES SLOVAK CONSTITUTIONAL COURT'S DECISION.
French Foreign Ministry spokesman Yves Doutriaux said on 29 July
that the Slovak Constitutional Court's verdict in the case of former
deputy Frantisek Gaulieder was in line with the "norms of a legal
state that have to be respected by countries aiming for European
Union membership." The court ruled on 25 July that the Slovak
parliament violated Gaulieder's constitutional rights in stripping him
of his mandate in December 1996. Doutriaux commented that "it is
important that the parliament draw conclusions" from that ruling
and allow Gaulieder to take up his place in the parliament once again.
Gaulieder was stripped of his mandate after he left Prime Minister
Vladimir Meciar's Movement for a Democratic Slovakia.
Parliamentary chairman Ivan Gasparovic had produced a letter,
allegedly signed by Gaulieder, in which the deputy stated he was
giving up his mandate. Gaulieder, however, denied signing such a
letter.

RUSSIA TO REPAY DEBTS TO HUNGARY. Russia will repay $320-380
million of the $650 million it owes Hungary by the end of this year,
while the remainder will be paid in equal installments between 1998
and 2000, Hungarian media reported on 30 July. The agreement was
reached by Hungarian Industry, Trade, and Tourism Minister Fazakas
Szabolcs during his visit to Moscow on 28-29 July. The two sides
agreed that Russia will continue to make payments in the form of
military equipment and consumer or industrial goods. Fazakas and
his hosts also agreed on a $10 million credit to increase Hungarian
exports to that country.

TOBACCO COMPANIES TO PAY FOR HEALTH DAMAGE IN HUNGARY?
Hungarian Welfare Minister Mihaly Koekeny suggested on 29 July
that tobacco companies pay compensation for health damage caused
by smoking, Hungarian media reported. The arrangement, similar to
the recent U.S. draft agreement, would ensure tobacco companies of
immunity from lawsuits regarding damage to health. The minister
said smoking causes health damage totaling 90 billion forints ($475
million) each year in Hungary, including the costs of health care.
Foreign tobacco companies say Koekeny's proposal is not feasible
under present conditions, since taxes on cigarette sales are twice as
high in Hungary as in the U.S.

SOUTHEASTERN EUROPE

ALBANIAN GOVERNMENT WINS VOTE OF CONFIDENCE. The new
parliament overwhelmingly endorsed the government of Prime
Minister Fatos Nano on 29 July. After the vote, Nano invited the
legislators to "build together our common European future... The best
times for every Albanian and the nation lie in its future and not in
the past." His two most urgent tasks are restoring law and order and
revitalizing the economy. Some 20 people were killed by illegally
owned weapons on 28 July alone. Gross domestic product continues
to decline, while vast amounts of industrial equipment are smuggled
out to Montenegro and sold as scrap. Inflation is expected to reach 50
percent by the end of the year, and the government deficit is also on
the rise. Finance Minister Arben Malaj told the parliament on 29 July
that the IMF will send a delegation to Albania in August to reach a
stabilization agreement.

BIG SHAKEUP AT ALBANIAN INTERIOR MINISTRY. Interior Minister
Neritan Ceka's office announced in Tirana on 30 July that he has
sacked several senior officials, including the criminal police head, the
special forces director, the head of the border forces, and the director
of the logistics department. Ceka said that the individuals involved
are incompetent political appointees from the Democratic Party and
will be replaced by "experts" whom the Democrats had fired earlier.

YUGOSLAV DEFENSE MINISTER CRITICIZES MONTENEGRIN
AUTHORITIES. Pavle Bulatovic and officials of the Yugoslav Justice
Ministry said in Belgrade on 29 July that Montenegrin Public
Prosecutor Vladimir Susovic damaged Yugoslavia's interests and
"struck a low blow" in linking Bulatovic to war crimes (see "RFE/RL
Newsline," 29 July 1997). Neither Bulatovic nor the ministry,
however, denied the charges that Bulatovic helped in the deportation
of Muslims to Bosnian Serb territory, an RFE/RL correspondent
reported from Belgrade. Meanwhile in Podgorica, Prime Minister Milo
Djukanovic rejected President Momir Bulatovic's charges that the
authorities encouraged the stoning of a visiting Serbian delegation
(see "RFE/RL Newsline," 29 July 1997).

SERBIAN AUTHORITIES HOUND LEADING INDEPENDENT DAILY. Dusan
Malesevic, the director of the company that owns "Nasa Borba," wrote
Serbian Prime Minister Mirko Marjanovic on 29 July that a $65,000
tax bill leveled against the company is "aimed at snuffing out 'Nasa
Borba' and represents a threat to the independent media." "Nasa
Borba" is Yugoslavia's leading independent daily and has been
harassed by the authorities in the past. Yugoslav President Slobodan
Milosevic said recently that the upcoming Serbian elections will be
free and fair, while the Serbian authorities say that they have
postponed planned measures against the independent media (see
"RFE/RL Newsline," 28 July 1997). Independent human rights groups
charge, however, that the authorities are proceeding with the
shutdown of independent radio stations.

EX-YUGOSLAV WAR CRIMES UPDATE. Croatian Foreign Minister Mate
Granic on 29 July said that Croatia will not turn over to the Hague-
based war crimes tribunal documents that the court has subpoenaed.
Granic charged that the tribunal has no right to make such demands
on a sovereign state. He added that Croatia is not obliged to hand
over information that "is vital to its national security." The
documents in question relate to the Croatian-Muslim conflict in
Bosnia. Meanwhile in The Hague, Sefkija Djidic, the Muslim police
chief in Vitez, claimed at the trial of Croatian Gen. Tihomir Blaskic
that Croatian snipers killed children and old people in that central
Bosnian town in 1993. Court officials, for their part, announced that
international experts have begun excavating a mass grave near Brcko
in Bosnia. The grave is believed to contain the remains of Muslims
and Croats killed by the Serbs at the Luka concentration camp.

CROATIAN GENERAL REPORTEDLY ARRESTED. Gen. Ivan Korade has
been arrested after rejecting his recent retirement by President
Franjo Tudjman and refusing to hand over the command at Varazdin
to his designated successor There has been no official confirmation of
the story, which is reported by Western agencies. Korade is a hero of
the 1995 campaign against Knin, but the Varazdin district prosecutor
charged him in May with "violent behavior" in that town. Korade has
refused to appear in court to answer the charges. And on the island
of Hvar, fire fighters and local citizens succeeded on 29 July in
containing a fire that has already destroyed over 6,000 acres of
forests, olive trees, and vineyards. The authorities have declared two
towns on the island disaster areas.

BOSNIAN ROUNDUP. Carlos Westendorp, the international
community's chief representative in Bosnia, announced in Sarajevo
on 29 July that he is setting up a commission to investigate
corruption in the Bosnian government. Westendorp's agency will be
independent of a similar body set up by President Alija Izetbegovic
in response to criticism by visiting British Foreign Secretary Robin
Cook, an RFE/RL correspondent reported from Sarajevo. Cook, for his
part, said that all sides have failed to carry out the Dayton agreement
sufficiently or ensure freedom of the media. Cook also slammed the
existence of power centers outside state structures, and cited the
Bosnian secret service as an example. Meanwhile, "The New York
Times" reported on 30 July that the White House will send envoy
Richard Holbrooke back to the Balkans to encourage implementation
of the Dayton agreement.

ROMANIAN PRIME MINISTER MEETS WITH TRADE UNIONS. Victor
Ciorbea on 29 July met with representatives of the main trade unions
to discuss the negotiations under way with the IMF. He said that in
the coming weeks, four unprofitable state-owned refineries and
several mines will be closed. The trade unions demanded adequate
social protection for affected workers as well as the indexation of
wages to reflect price increases, RFE/RL's Bucharest bureau reported.
Also on 29 July, the National Commission for Statistics announced
that inflation in June was 2.3 percent, similar to that in May.
Inflation since December 1997 totals 101.2 percent. The Agency for
Development reported the same day that foreign investment in
Romania has reached $2.57 billion, of which $372 million have been
invested since the beginning of 1997.

CLUJ MAYOR ACCUSED OF INTER-ETHNIC INCITEMENT. Alexandru
Farcas, the prefect of Cluj, on 29 July asked the Prosecutor-General's
office to open an investigation into the local nationalist mayor,
Gheorghe Funar. He accused Funar of having instigated the incident
in which a Hungarian flag was stolen from the Hungarian consulate
(see "RFE/RL Newsline," 28 July 1997). He said if the mayor is found
guilty, he will be dismissed. Funar, for his part, said he will sue
Farcas for slander, RFE/RL's correspondent in Cluj reported. The
previous day, Funar had addressed open letters to Prime Minister
Ciorbea and Foreign Minister Adrian Severin demanding that the
government abolish the ordinance allowing bilingual signs, declare
the Hungarian consul in Cluj "persona non grata" in Romania, and
close the recently opened consulate.

MORE DIE IN ROMANIAN FLOODS. Three more persons have died as a
result of the floods in Vaslui County, eastern Romania, bringing the
total of those who have drowned in the recent floods to four,
RFE/RL's Bucharest bureau reported on 29 July.

IMF STIPULATES CONDITIONS FOR LOANS TO TRANSDNIESTER. David
Owen, who is heading an IMF delegation in Tiraspol, said on 29 July
that the granting of credits to the breakaway region is conditional on
the pace of normalization of relations with Chisinau, an RFE/RL
correspondent in the Moldovan capital reported. Owen also said the
fund will not approve credits to the Transdniester without first
consulting Chisinau.

BULGARIA, TURKEY SIGN MILITARY AGREEMENT. Turkish and
Bulgarian officials, meeting in Ankara on 29 July, signed a military
agreement providing for cooperation in defense and security,
military technology, logistics, and instruction. At the signing
ceremony, Turkish Chief of Staff Gen. Ismail Kakki Karadayi said the
two sides will reduce the number of troops deployed near the
countries' joint border to further enhance mutual trust. His Bulgarian
counterpart, Gen. Miho Mihov, said the agreement was further proof
of Turkish support for Bulgaria's drive to join NATO, RFE/RL's Sofia
bureau reported.

IMF PRAISES BULGARIA. In a statement released in Washington on
29 July, the IMF praised Bulgaria's efforts to stabilize its economy,
Reuters reported. The fund says financial markets have reacted
favorably to the introduction of the currency board in Bulgaria and
that the country now has an "excellent opportunity to reinvigorate
and complete the reform [process]." But it warns that there is "no
room for slippage or complacency, as significant risks remain." In
other news, it was announced on 28 July that Bulgaria's National
Investigation Service will seize the passports of more than 1,5000
citizens suspected of involvement in corruption. The group includes
former ministers and deputies, bankers, credit millionaires, and
heads of insurance companies suspected of racketeering.

END NOTE

Why Estonia rather than Latvia or Lithuania?

by Michael Wyzan

        On 15 July, the European Commission announced it was
recommending that Estonia -- together with the Czech Republic,
Hungary, Poland, and Slovenia -- begin negotiations on accession to
the EU. Estonia may well be the most advanced economic reformer
among the postcommunist countries. Equally important, with 1.5
million people and a gross domestic product of some $4 billion, it is
so small that it will not present a burden to Brussels's coffers.
        Estonia is the wealthiest country to emerge from the former
Soviet Union; in April, the average monthly wage stood at DM 406
($235), about two-thirds of that in the richest Visegrad countries. It
has a strong Western trade orientation: the top five export
destinations in 1996 were Finland, Russia, Sweden, Latvia, and
Germany. While 98 percent of exports went to other Soviet republics
in 1990, that figure was only 40 percent (24 percent for the CIS
alone) in 1996.
        One hallmark of Estonian economic policy has been liberalism
toward domestic and foreign activity; for example, it has no import
tariffs. It has modeled its privatization methods on those of the
former East Germany, focusing on the search for cash-paying
strategic investors, especially foreign ones. Estonia's use of such
methods has resulted in unusually high volumes of foreign
investment (DM 1.3 billion or some $800 million through the end of
1996).
        Another characteristic has been rigorous macroeconomic policy.
In June 1992, Estonia became the first former communist country to
introduce a currency board (since adopted by Lithuania, Bulgaria,
and Bosnia), which eliminates most discretion on the part of the
monetary authorities to stimulate the economy. Under such an
arrangement, the central bank is barred from financing government
budget deficits.
        Moreover, Tallinn has been unusually tough in closing failed
banks and dealing with the consequences of such failures. The
Estonian Central Bank imposed a moratorium on three banks in
November 1992; and in January 1993, it proceeded to close one of
those banks (without compensating shareholders or depositors) and
to merge the other two, providing only partial compensation to their
depositors.
        Those policies have paid off in macroeconomic performance.
Monthly inflation, though slow to come down, was only 0.7 percent in
the 12 months to March 1997. GDP grew by 4.3 percent in 1995 and
4.0 percent in 1996, after declining in previous years. The state
budget has either been virtually balanced or in slight deficit, while
the public debt is low.
        Estonia is closer to meeting the EU's Maastricht convergence
criteria than many current members of the union. Even its worst
problems, especially large and growing trade and current-account
deficits, are similar to those of such obvious candidates for accession
as the Czech Republic.
        The question to be asked is not why Estonia was invited to
begin membership talks, but why Latvia and Lithuania were not
invited to do so. The EC justified its decision not to include them on
the grounds that they lagged behind in establishing market
economies.
        But Latvia seems an only slightly less attractive candidate than
Estonia. It used similarly tough methods to deal with a far more
severe banking crisis than Estonia's. Between February and May
1995, five of Latvia's 10 biggest commercial banks became insolvent.
Like Tallinn, Riga provided only partial compensation to depositors
and tightened capital requirements and banking regulations.
        Those tough policies paid off. While Latvia weathered a bad
year in 1995 (GDP fell by 0.8 percent), it saw a marked improvement
in 1996 (GDP rose by 2.8 percent). Inflation has generally been lower
than in Estonia (in 1995, Riga registered inflation of 13.2 percent and
Tallinn 15 percent). Latvia is also the leader in pension reform
among post-communist countries.
        Latvia's demerits include relatively slow and non-transparent
privatization and trade oriented less toward the West (and a lower
volume of foreign investment). It suffers from a high degree of
political instability, with no fewer than five ministers resigning over
the past two months and the premier following suit earlier this week.
But Estonia has suffered from similar problems in the past.
        Lithuania seems a somewhat less alluring candidate than its
northern neighbors, but the gap between it and the others is not so
big. By 1996, inflation was running at 13.1 percent, while GDP
growth has been positive since 1994. It was the first Baltic State to
move ahead with privatization, although the voucher-based system
introduced early on proved unsatisfactory.
        While Lithuania's relations with the IMF have been more
difficult than those of the other two Baltic States, they nonetheless
remain on track. However, it is the poorest state of the three and has
the least welcoming attitude toward foreign capital.
        In conclusion, the EU may have to expend more effort
justifying its decision not to invite Latvia and Lithuania to the
negotiating table than was needed for the decision to invite Estonia.


The author is a research scholar at the International Institute for
Applied Systems Analysis in Laxenburg, Austria.





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