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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 1, No. 106, Part II, 29 August 1997



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

* BELARUS SENDS MIXED SIGNALS ON ORT JOURNALISTS

* BOSNIAN SERB CROWD ATTACKS NATO TROOPS

* PLAVSIC WANTS ECONOMIC RELATIONS WITH CROATIA

End Note : MACEDONIA SLOWLY EMERGES FROM RECESSION

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EAST-CENTRAL EUROPE

BELARUS SENDS MIXED SIGNALS ON ORT JOURNALISTS. Russian
President Boris Yeltsin said after his telephone conversation on 28
August with his Belarusian counterpart, Alyaksandr Lukashenka,
that Lukashenka had promised to release two Russian Public
Television (ORT) journalists from detention . However, when he
spoke to reporters after his talks with visiting Russian Foreign
Minister Yevgenii Primakov, Lukashenka did not confirm he had
promised to release the two journalists. He said all problems will be
solved at a meeting with Yeltsin. Lukashenka again blamed the ORT
management for the incident and demanded a public apology. Seven
ORT journalists have been detained in Belarus in the past month in
two separate incidents on charges of violating the Belarusian-
Lithuanian border. Five have been released under pressure from
Moscow, but two -- both Belarusian citizens -- remain in jail. Yeltsin
sent Primakov to Minsk to settle the dispute.

UKRAINIAN PARLIAMENT FAILS TO INCREASE ITS POWERS.
Opposition proposals to increase the powers of the parliament have
failed to win support in an initial vote, Unian reported on 28 August.
The three proposals were aimed at boosting the authority of the
legislature at the expense of the executive and judicial branches and
included the power to override a presidential veto by a simple
majority. The proposals also aimed to limit the powers of the
Constitutional Court and give the legislature the right to interpret the
law. Nationalist lawmakers and centrists loyal to President Leonid
Kuchma had criticized the proposed changes.

UKRAINIAN PRESIDENT ON BLACK SEA FLEET DIVISION. Kuchma said
on 28 August that he is satisfied with the pace of the turnover to
Ukraine of part of the former Soviet Black Sea Fleet. Kuchma made
the remark following talks with Russian Defense Minister Igor
Sergeev in Kyiv, Interfax reported. Kuchma said Ukraine has no
problems with the division of the naval force under the agreement
signed by Moscow and Kyiv in May. Sergeev, who concluded a three-
day visit to Ukraine on 28 August, said Russia is fully abiding by the
transfer timetable. Under the May agreement, Russia is ceding part
of the former Soviet Black Sea fleet to Ukraine, while Moscow has the
right to use most of Sevastopol port over the next 20 years as the
base of its Black Sea Fleet.

LATVIAN CENTRAL BANK CHAIRMAN REAPPOINTED. The parliament
has voted to appoint Einars Repse for a second six-year term as
chairman of the Bank of Latvia, BNS reported on 29 August. The 35-
year-old Repse oversaw monetary reforms in his first term. He
introduced a new Latvian currency called the lat in 1992 and
maintained a strict fiscal policy during Latvia's banking crisis in
1995. Repse also introduced tough regulations for the commercial
banking sector. He told reporters after his reappointment that he
guarantees a stable national currency and decreasing inflation.

LITHUANIAN-RUSSIAN RELATIONS "NORMAL." Interfax on 28
August quoted Lithuanian President Algirdas Brazauskas as saying
that Lithuanian-Russian relations are "normal" and correspond to
current "ties between European states." Brazauskas, who was
speaking after meeting in Vilnius with Russian Deputy Premier
Valerii Serov, said he hoped a border treaty between the two
countries would soon be initialed. Brazauskas and Serov also
discussed economic cooperation, the readmission of refugees, and
avoiding double taxation. Serov is in Vilnius to attend a session of the
Russian-Lithuanian Intergovernmental Commission, BNS reported.

POLISH GOVERNMENT SURVIVES NO CONFIDENCE VOTE. The
government on 28 August easily survived a no confidence motion
less than four weeks before general elections, Polish media reported.
The vote was a formality after the co-ruling Peasant Party (PSL)
abandoned its bid to oust Prime Minister Wlodzimierz Cimoszewicz.
The PSL had threatened to try to bring down the government after
Cimoszewicz refused to provide advance funds for grain purchases
from Polish farmers. In a concession to the PSL, the government --
which is dominated by Cimoszewicz's Democratic Left Alliance --
agreed to buy 300,000 tons of grain. Under the constitution, the no-
confidence motion still had to be held, however.

POLISH PRESIDENT SIGNS CONSTITUTIONAL TRIBUNAL LAW.
Aleksander Kwasniewski on 28 August signed a law strengthening
the powers of the Constitutional Tribunal and increasing the number
of its judges, Reuters reported. The new law raises the number of
judges by three to a total of 15. Critics argue that the new legislation
could allow the current government to appoint its supporters to the
expanded Constitutional Tribunal before general elections on 21
September. The opposition wanted to wait for the new parliament to
be formed before appointing additional judges.

EBRD OFFERS FUNDS TO FLOOD VICTIMS. Johan Bastin, the director of
the Municipal and Environmental Infrastructure team at the London-
based European Bank for Reconstruction and Development, told
journalists on 28 August that the EBRD has offered $109 million in
loans to Polish and Czech cities devastated by the recent flooding. He
said the aid is will be used to rehabilitate water supplies, sewerage,
transportation, and heating services. Officials in the Polish city of
Wroclaw have reached agreement with the bank for a $30 million
loan. Bank officials are currently discussing loan terms with
authorities in the Ostrava region of the Czech Republic.

CZECH REPUBLIC OPENS FORMER SECRET POLICE FILES. Czech Internal
Affairs Minister Jan Ruml on 28 August officially opened a
documentation center in the city of Pardubice where Czech citizens
will be able to see files kept on them by the communist Secret Police
(StB). He told journalists that the opening of the Interior Ministry's
Secret Archives and Document Service Section office is a small
compensation for past wrongs committed by the StB. The law on
opening StB files took effect in December 1996, although citizens
have been able to request information only since 1 June 1997. Some
10,000 people have already asked to see their files.

SLOVAK PARLIAMENTARY SESSION POSTPONED. Parliamentary
Chairman Ivan Gasparovic on 28 August postponed until next month
a parliamentary debate on reinstating deputy Frantisek Gaulieder
after the three-party ruling coalition boycotted a special session of
the parliament. It was the third consecutive day that coalition
legislators had refused to discuss a Constitutional Court ruling in July
that overturned the parliament's expulsion of Gaulieder. In December
1996. Gauleider was expelled after the parliament received a
resignation letter from him that he says he did not write. He was
stripped of his mandate after he quit Prime Minister Vladimir
Meciar's Movement for a Democratic Slovakia. Meciar claimed on
Slovak Television on 27 August that Gaulieder had demanded 15
million crowns (some $450,000) in return for giving up his mandate.
When Meciar's party refused, he allegedly began claiming he had not
signed the resignation letter. Gaulieder told journalists on 28 August
that Meciar's statement is a "lie."

HUNGARY TO HOLD BINDING REFERENDA ON NATO, LAND
OWNERSHIP. In an unexpected reversal of its previous position, the
cabinet on 28 August decided to hold binding referenda on the
country's accession to NATO and on the ownership of land by foreign
companies registered in Hungary. Prime Minister Gyula Horn said the
referenda will be held simultaneously on 16 November. The decision
still has to be approved by the parliament. Horn expressed
confidence that the majority of voters will back joining NATO. He also
said that, with 20 percent of the country's arable land lying fallow,
the market price of land is far below its value. "We want to see as
much capital as possible pumped into the agricultural sector," he
remarked. The opposition Hungarian Democratic Forum announced it
opposes the cabinet's proposed formulation on land ownership and
will continue collecting signatures for a referendum proposed by the
opposition.

HUNGARIAN CABINET APPROVES 1998 DRAFT BUDGET. The cabinet
on 28 August approved a draft budget for 1998 providing for a
deficit of 430.8 billion forint (some $ 2.1 billion). The draft foresees
3-4 percent growth in GDP, a 13-14 percent rise in consumer prices,
and a 2 percent growth in real income, Hungarian media reported. It
also proposes to make voluntary pension fund contributions 50
percent tax deductible and regular pension insurance contributions
25 percent deductible. Farmers with no more than three hectares of
land will be able to lease those plots tax free. The draft also calls for
a 10-year tax exemption for investments exceeding 3 billion forints
in regions requiring special development. Corporate tax will drop
from 27 percent to 20 percent, while the tax on dividends will
increase from 27 percent to 35 percent.

SOUTHEASTERN EUROPE

BOSNIAN SERB CROWD ATTACKS NATO TROOPS. A crowd of Bosnian
Serbs threw stones and Molotov cocktails at SFOR troops and UN
police in Brcko on 28 August. NATO troops fired back with tear gas,
in what is the first time the peacekeepers have used such deterrents
against civilians in Bosnia. Two U.S. soldiers and one Serbian woman
were injured, and 25 UN police vehicles were destroyed. U.S.
helicopters flew over the town throughout the night. The hard-line
leadership of Radovan Karadzic called on Bosnian Serbs to rally after
SFOR backed police loyal to Republika Srpska President Biljana
Plavsic in their attempt to take over a police station. Momcilo
Krajisnik, the Serbian representative on the Bosnian presidency and
Karadzic's chief spokesman, congratulated the crowd on Pale Radio: "I
hope that you will repeat this feat a hundred times if we find
ourselves in danger because we have the right to defend ourselves."

U.S. WARNS SERBS NOT TO ATTACK SFOR. U.S. spokesmen in Bosnia
and Washington warned the Bosnian Serbs on 28 August not to
attack peacekeepers again. Brcko was quiet on 29 August after UN
police completed an evacuation of their personnel from the town.
Karadzic's police have surrounded a UN police station outside Brcko.
SFOR increased troop strength in Bijeljina following demonstrations
by organized Bosnian Serb crowds on 28 August. In several other
towns across northern Bosnia, Plavsic's police took control of police
stations. In related news, the "Los Angeles Times" of 29 August
quotes U.S. envoy Richard Holbrooke as saying NATO will protect
Plavsic if Karadzic's supporters try to overthrow her. In Sarajevo,
Alija Izetbegovic, the Muslim member of the joint presidency, said
that recent developments involving rival Serbian factions indicate
that Plavsic is gaining the upper hand in what he called a critical
phase for the Dayton agreement.

PLAVSIC FOUNDS NEW POLITICAL PARTY. The president of the
Republika Srpska founded the Serbian People's League (SNS) in Banja
Luka on 28 August. The new party will take part in the local
elections slated for September and in the Bosnian Serb elections she
has called for October. Plavsic said the SNS will put an end to the
Bosnian Serb practice "of conducting political life as though it were
an intrigue" and will make sure that the media provide "objective
information," an RFE/RL correspondent reported from Banja Luka.
Plavsic was recently expelled from the governing Serbian Democratic
Party, of which she was a founding member. And in Sarajevo,
election organizers from the Organization for Security and
Cooperation in Europe announced that more than 2.5 million Bosnian
citizens have registered to vote in the September elections.

PLAVSIC WANTS ECONOMIC RELATIONS WITH CROATIA. Plavsic told
the independent Zagreb weekly "Globus" of 28 August that she hopes
the Republika Srpska and Croatia will establish economic links "as
soon as possible." She added that she fondly remembers her student
days in Zagreb and knows that Serbs and Croats can get along
without getting into political arguments. Western Bosnia, including
Banja Luka, traditionally had closer economic links to Zagreb than to
Belgrade. Moreover, economic relations with Croatia would make her
part of the Republika Srpska less dependent on Serbian territories
controlled by her rivals. The interview is her first with a Croatian
publication for some time. "Globus" is a popular, nationalist magazine
that made its name through sensationalist, anti-Serb reporting
during the war.

BOSNIAN SOCIAL DEMOCRAT ON ELECTION PROSPECTS. Zlatko
Lagumdzija, the president of the multi-ethnic Social Democratic
Party, told "Oslobodjenje" of 28 August that his party can beat the
nationalists in the local elections. He says that the large Serbian,
Croatian, and Muslim nationalist parties will be deprived of their
usual electoral advantage of having nationally known leaders on the
ballot. Lagumdzija added that his party hopes to win votes by
putting forward well-known local personalities who will offer
concrete solutions to local problems. The Social Democrats -- also
known as the reformed communists -- have previously obtained
their best electoral results in Tuzla and Sarajevo.

ISRAEL TO RECOGNIZE CROATIA IN RETURN FOR ARMS DEAL? Despite
concerns about Croatia's fascist past, the Israeli government will
recognize that country in the hope of making a major arms sale, the
Israeli daily "Haaretz" reported on 28 August. The deal is allegedly
worth some $200 million and has been under discussion for several
years. Soon after gaining independence in 1991, Croatia began a far-
reaching program to bring its military up to NATO standards. The
Simon Wiesenthal Center has urged Israel not to recognize Croatia,
despite Zagreb's apology for fascist crimes during World War II (see
"RFE/RL Newsline," 28 August 1997).

ALBANIA, ITALY SIGN MILITARY DEAL. Albanian Defense Minister
Sabit Brokaj and his Italian counterpart, Beniamino Andreatta, signed
an agreement on 28 August in Rome to revitalize the Albanian army,
"Gazeta Shqiptare" reported. Italy will help Albania restructure and
modernize its forces by providing equipment, advice, and training
totaling $17 million. Some 300 Italian military experts will work in
Albania, and Albanian officers will undergo training in Italy. Rome
will also provide an additional $200 million to other Albanian state
institutions, such as the police, customs, health services, schools, and
the judiciary as part of a three-year EU program. Meanwhile,
negotiations about the return of 10,000 Albanian refugees from Italy
are continuing. "Koha Jone" reported that the refugees are likely to
be sent home in three stages.

COUNCIL OF EUROPE TO PROMOTE ALBANIAN LEGAL REFORM. An
expert commission from the Council of Europe offered help on legal
reform to Prime Minister Fatos Nano and other top officials in Tirana
on 28 August, "Zeri i Popullit" reported. In other news, Democratic
Party (PD) spokesman Genc Pollo said that the party will not
participate in parliamentary commissions unless it is allowed to
name the head of the chief anti-corruption body, known as the State
Control Commission, "Rilindja Demokratike" reported on 29 August. A
round-table of political parties agreed before the June elections that
a member of an opposition party should head the commission, but
some Socialist legislators now want a Socialist to chair that body.

NEW PROSECUTOR-GENERAL IN ROMANIA. President Emil
Constantinescu on 28 August appointed Sorin Moisescu as
prosecutor-general, RFE/RL's Bucharest bureau reported. He replaces
Nicolae Cochinescu, who was dismissed several days ago. The 58-
year-old Moisescu was appointed a judge at the Supreme Court of
Justice in 1990. He had been a presidential counselor in charge of the
Judicial Department since February 1997. He had also coordinated
the anti-corruption campaign launched by President Constantinescu.
Moisescu was not a member of the communist party and had no links
with the communist secret police, according to a statement released
by the President's Office.

MOLDOVAN PREMIER MEETS CHURCH REPRESENTATIVES. After
meeting with Prime Minister Ion Ciubuc on 28 August, deputy Vlad
Cubreacov, who represents the Bessarabian Metropolitan Church, said
Ciubuc displayed "good-will" toward finding a solution to the issue of
the Church's official recognition, RFE/RL's Chisinau bureau reported.
Cubreacov said that the Bessarabian Church on 25 August submitted
an amended version of its statutes, which take into account
objections raised by the government. He added that the premier was
"in general satisfied with this version," although he still "raised some
objections." Meanwhile, President Petru Lucinschi recently told
Metropolitan Vladimir of the rival Moldovan Orthodox Church not to
"make a drama" out of the recognition of the Bessarabian Church,
Moldovan media reported. Lucinschi added that recognition would
"reduce tensions" and that the Council of Europe is also demanding
recognition of the Church.

MOLDOVAN PRESIDENT PROMULGATES LAND SALE LAW. President
Petru Lucinschi signed the land sale law on 27 August, which is
Independence Day in Moldova. The law, passed by the parliament in
late July, was one of the IMF conditions for signing a memorandum
with the Moldovan government. Meanwhile, the Party of Moldovan
Communists announced that it has collected the 200,000 signatures
necessary for a referendum on the law, which the party opposes.

MOLDOVAN LIBERAL PARTY TO JOIN OPPOSITION BLOC. The
Standing Bureau of the Moldovan Liberal Party (PLM) on 28 August
announced it will run jointly with the Party of Democratic Forces
(PFD) and the National Peasant Party (PNT) in the 1998
parliamentary elections. PLM Deputy Chairman Vlad Darie told
BASA-press that the decision was due to the fact that the other
opposition bloc, the Democratic Convention of Moldova, has treated
the PLM badly. The PNT has adopted a similar decision, but the PFD
has yet to make its position known. The three parties' leaders will
meet on 6 September to decide on forming a joint electoral bloc.

END NOTE

MACEDONIA SLOWLY EMERGES FROM RECESSION

by Michael Wyzan

In some respects, Macedonia's macroeconomic performance became
satisfactory by 1996. Retail-price inflation fell to 0.25 percent
annually, the lowest level among transition economies that year.
Price stability continued in the first five months of 1997, with 3.2
percent deflation.

Also in 1996, the budget deficit in 1996 was -0.4 percent of gross
domestic product (GDP) owing to a large surplus on the central
government budget. GDP growth was positive (1.6 percent) for the
first time since independence, as was industrial production growth
(3.2 percent). Those positive tendencies continued in the first half of
1997, with industrial output rising by 2.4 percent.

Nonetheless, the economy still faces severe problems. A comparison
between those seeking work and those officially considered
"employed" yields an unemployment rate of 41 percent for 1996. A
more realistic estimate of those economically active results in a rate
of 27 percent for last year, which is still the highest among transition
countries. Moreover, unemployment continues to rise (and
employment to fall).

Foreign trade results were disappointing in the wake of the end in
late 1995 of both the Greek embargo against Macedonia and of the
UN sanctions against federal Yugoslavia. The current account deficit
in 1996 was $345 million, up from $227 million in 1995. The
increase in the trade deficit from $455 million in 1995 to $520
million in 1996 was due to a fall in exports from $652 million to
$503 million (imports were virtually unchanged). Foreign trade
figures for January-May 1997 reveal little change from last year,
although exports increased slightly.

Before the lifting of most UN sanctions against federal Yugoslavia in
November 1995, Macedonia traded with that country but such
commerce went unreported. After November 1995, a major increase
in (reported) trade with federal Yugoslavia was expected. The delay
until October 1996 in establishing a tariff-free trade regime
undoubtedly limited that increase.

In fact, (reported) exports to Serbia and Montenegro rose from $85
million in 1995 to $241 million in 1996. Another encouraging sign
was the increase in trade with Greece, with exports rising from $14
million to $63 million and imports from $29 million to $83 million.
However, those export increases were more than offset by declines in
exports to the rest of the EU (from $394 million to $239 million) and
to the former Soviet bloc (from $446 million to $126 million).

The government blames those disappointing exports on such factors
as the slowdown in economic growth in the EU, Bulgaria's economic
collapse, and livestock diseases as well as other agricultural
problems. Although such developments undoubtedly played roles in
the export decline, they are not severe enough to explain a fall of the
magnitude that occurred. Moreover, such a situation is especially
worrisome in a country that has attracted little foreign investment, is
accumulating arrears in principle and interest to the London Club of
commercial bank creditors, and whose national bank's foreign
reserves are low ($268 million at the end of 1996) and declining.

Economists often seek to explain a worsening current account by
looking for a "real effective appreciation" of the currency. In other
words, they would look to see if a country's exchange rate failed to
depreciate fast enough to make up for its inflation rate being higher
than in its major trading partners?

But in the case of Macedonia, inflation in 1996 was lower than in the
EU and the U.S. The national bank even calculates that the
competitiveness of the country's exports increased by 4 percent in
1996.
However, since such competitiveness declined in 1994 and 1995, it
was down 9 percent on 1993 levels.

Declining competitiveness is an especially severe problem in former
Yugoslav republics, because their price levels and wage rates are
closer to EU ones than is the case in other transition economies.
Macedonia's average monthly wage has been more than $200 since
September 1994, This means labor costs there are closer to those in
Estonia or Slovakia than to those at similar levels of development,
such as Bulgaria or Romania.

The high price level in Macedonia is partly the result of historical
factors. But it also reflects a strategy beginning in the fourth quarter
of 1995 to make the exchange rate the main economic policy
variable. A stable denar fights inflation but at the cost of declining
export competitiveness and a somewhat depressed economy.

In recognition of this problem, the government in early July
devalued the denar against the Deutsche mark by 16 percent and
introduced such measures as a wage freeze and cuts in public
expenditures. Those steps were taken at the insistence of the IMF,
which has supported and
guided Macedonia's reforms. In November 1996, the fund awarded
Skopje a three-year $80 million loan.

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



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