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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 1, No. 123, Part II, 23 September 1997



A daily report of developments in Eastern and Southeastern Europe,
Russia, the Caucasus and Central Asia prepared by the staff of Radio
Free Europe/Radio Liberty.

This is Part II, a compilation of news concerning Central, Eastern, and
Southeastern Europe.  Part I covers Russia,
Transcaucasia and Central Asia and is distributed simultaneously as a
second document.  Back issues of RFE/RL NewsLine and the OMRI
Daily Digest are online at RFE/RL's Web site:
http://www.rferl.org/newsline

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Headlines, Part II

* POST-ELECTION MANEUVERING BEGINS IN POLAND

* SERBIAN SOCIALISTS LEAD IN ELECTION TALLY

* WORLD BANK DELAYS RESCUE PROGRAM FOR ALBANIA

End Note : CZECH FLOODS TO HAVE MIXED EFFECT ON ECONOMY

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EAST-CENTRAL EUROPE

POST-ELECTION MANEUVERING BEGINS IN POLAND. Solidarity
Electoral Action (AWS) leader Marian Krzaklewski, whose alliance
won a plurality of seats in the 22 September elections, has said he
should be named prime minister. President Aleksander Kwasniewski,
an ex-Communist strongly opposed to the AWS, said on Polish Radio
on 22 September that he has not decided who should be named
premier. But he was quoted by "Gazeta Wyborcza" the next day as
saying the AWS is most likely to form the new government.
Meanwhile, Jan Krol, a Freedom Union deputy, told Polish Television
that the AWS should head a coalition with his party and should have
the premier's office. The Freedom Union finished third, behind the
AWS and the post-communist Democratic Left Alliance. Final election
results are expected on 24 September, but a new government may
not be named for some time. The parliament does not reconvene
until 20 October, and Kwasniewski then has two weeks to nominate a
premier.

POLAND DROPS CHARGES AGAINST U.S. SPY. The Polish authorities
have dropped all espionage charges against Ryszard Kuklinski, a
Polish military officer who cooperated with the CIA from 1972 to
1981, PAP reported on 22 September. Kuklinski provided the U.S.
with thousands of secret documents about Soviet and Warsaw Pact
military plans. In 1981, he fled Poland and now lives in the U.S. Two
years ago, the Polish Supreme Court lifted the death sentence that
the communist regime had imposed in absentia on Kuklinski. Anti-
communist groups in Poland have long demanded that Warsaw
pardon Kuklinski for his activities.

RUSSIAN PATRIARCH DRAWS HEAVY CRITICISM IN UKRAINE.
Patriarch of Moscow and All Russia Aleksii II has ignited a firestorm
of criticism during his ongoing visit to Ukraine because of his call for
Church unity. Ukrainian Orthodox Patriarch Filaret told journalists in
Kyiv that Aleksii's appeal for all Orthodox congregations in Ukraine
to unite under pro-Moscow Kyiv Metropolitan Vladimir was an effort
to resubjugate Ukraine. Meanwhile, Ukrainian Autocephalous
Orthodox Patriarch Dmitriy told Studio One Plus One television
program that he and his congregation "do not want to unite with the
Russian Church."

CRIMEAN TOURISM OFFICIAL DIES. Dmitriy Goldich, the first deputy
minister of resorts and tourism in Crimea, died on 22 September of
gunshot wounds sustained during an assassination attempt four days
earlier, ITAR-TASS reported.

SWEDE QUITS PROBE INTO "ESTONIA" FERRY DISASTER. Swedish
psychologist Bengt Schager has resigned from the three-nation
commission investigating the 1994 sinking of the "Estonia" passenger
ferry, in which 852 people died, BNS reported, citing the Stockholm
newspaper "Svenska Dagbladet." Schager said he could no longer
trust the commission because it has been too protective of the
Estonian crew and has tended to interpret certain facts in their favor
to avoid creating tension between the Estonian and other commission
members. He also said that it is clear that safety standards were not
observed on board the ferry. Last year, the commission's Estonian
chairman resigned, saying that Swedish officials were withholding
evidence. Some six months later, the head of the Swedish contingent
stepped down after admitting he had lied to a journalist about a
letter connected to the investigation.

LANDSBERGIS ON MOSCOW'S "CHANGED" POLICY TOWARD BALTICS.
Experts in Vilnius say that a report by the Russian Foreign and
Defense Policy Council proves Moscow has changed its policy toward
the Baltic States, according to Interfax. In an interview with the
Russian news agency, Lithuanian parliamentary chairman Vytautas
Landsbergis described the report--whose contents were summarized
in the 22 September issue of "Lietuvos Rytas"--as a "probe to check
the reaction to Russian policy [in] the Baltic States." He noted that
several years ago, the council had published a report calling for
"political moves" to prevent the Baltic States from joining NATO and
the EU. "What we see now is a similar stance, only in milder form:
there is weaker opposition to the Baltic countries' membership in the
EU but categorical opposition to their integration into NATO,"
Landsbergis said.

FIRST REACTOR AT LITHUANIAN POWER PLANT SHUT DOWN.
Officials at the Ignalina nuclear power plant said they had to shut
down the first reactor after the cooling system failed on 21
September, BNS reported. The closure came only hours after repairs
to the reactor had been carried out. Viktor Shevaldin, the plant's
director-general, said there was no increase in radiation levels either
inside or outside the plant. He added that he expected the power
station to be back on line within two or three days. According to BNS,
the incident measured zero on the international nuclear events scale.
Ignalina's two reactors are of similar construction to those at
Chornobyl. The Ignalina plant is situated 60 kilometers from Vilnius
and supplies about 80 percent of Lithuania's electricity.

COUNCIL OF EUROPE CRITICIZES CZECH SCREENING, CITIZENSHIP
LAWS. The Council of Europe's Parliamentary Assembly said on 22
September that it is largely satisfied with the Czech Republic's
progress toward amending laws since the fall of communism in 1989.
But the assembly adopted a committee report criticizing a 1991 law
banning former communist officials from holding key posts. The
report also says that although the Czech Republic's current
citizenship law has been substantially improved since last year, it
still poses problems for ethnic minorities owing to an allegedly
"discriminatory attitude" among some Czech bureaucrats. In other
news, Czech officials begin talks in Brussels on 23 September on the
Czech Republic's entry into NATO.

SLOVAK NATIONALIST LEADER RAILS AGAINST HUNGARIANS.
Slovak Nationalist Party (SNS) Chairman Jan Slota, speaking on
Bratislava's Radio Twist on 22 September, defended remarks he had
made the previous day at a joint news conference with French
extremist Jean Le Pen. Slota had said that Hungarians are a threat to
Europe and that their probable predecessors, the Huns, killed
children and pregnant women. He had also declared that "what
Americans and the EU present as democracy is dirt" and that
"national minorities are only a tool of those cosmopolitans to cause
war." Slota told Radio Twist that Hungary's policy, particularly
toward Slovakia, is "insidious" and "evil." He accused Slovakia's
Hungarians of wanting autonomy as a first step toward union with
Hungary. Coexistence, one of Slovakia's ethnic Hungarian parties,
announced on 22 September that it will sue Slota.

MECIAR SAYS SLOVAKIA NEEDS REAL SOLUTIONS, NOT
PSYCHOTHERAPY. Slovak Prime Minister Vladimir Meciar told Slovak
Radio on 22 September that regardless of whether Slovakia fulfills all
EU demands, the union's stand on Slovak membership will not
change. He said Slovakia "does not need psychotherapy but rather a
real solution," which he defined as the EU inviting all states with
which it has association agreements to start entry talks. Observers
comment that Meciar's statement underlines that the government is
unwilling to undertake any steps toward democratization.

SOUTH AFRICAN BREWERIES BUYS SLOVAKIA'S SARIS. South African
Breweries, Ltd. (SAB) of Johannesburg, the world's fifth largest beer
producer, has purchased a 97.6 percent share of the Saris brewery in
Velky Saris, "Sme" reported on 23 September. The daily quoted
Rudolf Mosny, the brewery's co-owner until recently, as saying the
Dutch brewery Heineken's entry on the Slovak market has
threatened Saris's standing as Slovakia's top brewery in terms of
quantity, quality, and marketing. He said SAB intends to invest some
$50 million in Saris over the next three to four years.

HUNGARIAN PREMIER ON RELATIONS WITH SLOVAKIA. Gyula Horn,
speaking in the parliament on 22 September, rejected the accusations
of Smallholders' Party leader Joszef Torgyan that his cabinet is
"continuing the inglorious policies of the Kadar era" and "committing
crimes against the national interest" by neglecting Hungarian
minorities abroad. Horn conceded that Slovakia's ethnic Hungarians
have found it "increasingly difficult" to secure their rights in recent
years. He also noted that there are "many sources of tension"
between the two countries. At the same time, Horn stressed that
Hungary is "ready to continue negotiations" with Slovakia because "it
is not in our interest to search for an enemy or to isolate Slovakia
from the process of Euro-Atlantic integration," Hungarian media
reported.

HUNGARIAN-ROMANIAN MILITARY TALKS. Chief of Staff General
Ferenc Vegh met with his Romanian counterpart, Constantin
Degeratu, in Mehkerek, southern Hungary, on 22 September,
Hungarian media report. They discussed accession to NATO, the
planned Hungarian-Romanian peace-keeping battalion, and other
aspects of bilateral military cooperation. Vegh said Hungary will
continue to share with Romania its experience in European
integration and to support Bucharest's efforts to join NATO.

SOUTHEASTERN EUROPE

SERBIAN SOCIALISTS LEAD IN ELECTION TALLY... The left-wing
coalition headed by the Socialist Party is leading in vote counting for
the 21 September parliamentary election. Despite boycotts by Kosovo
Albanians and part of the Serbian opposition, turnout has been
confirmed at 62 percent. The Serbian Statistical Office said on 23
September that the left-wing bloc will have 98 seats in the 250-
strong parliament, the Serbian Radical Party (SRS) 80, and the
Serbian Renewal Movement 45. The final election results are
expected on 25 September.

...WHILE PRESIDENTIAL CANDIDATES FACE RUNOFF. None of the
candidates in the 21 September presidential election won a majority,
forcing a runoff between Slobodan Milosevic's ally Zoran Lilic and
SRS leader Vojislav Seselj. With nearly 85 percent of the presidential
vote counted, Lilic won 37 percent support, Seselj 28.5 percent and
opposition leader Vuk Draskovic nearly 23 percent, "Nasa Borba"
reported on 23 September. Opposition Democratic Party chairman
and Mayor of Belgrade Zoran Djindic called for a boycott of the runoff
elections Meanwhile, Draskovic has rejected any suggestion of
resigning from the party leadership and said his Serbian Renewal
Movement will not support any candidate in the second round, BETA
reported on 22 September.

WORLD BANK DELAYS RESCUE PROGRAM FOR ALBANIA. Johannes
Linn, the World Bank's Vice President for Central and Eastern Europe,
said in Hong Kong on 22 September that a rapid rescue program for
Albania has been delayed, RFE/RL reported. Linn said that as part of
the international donor effort, the bank has drawn up a $6 million
program to audit, shut down, and dispose of the last of Albania's
pyramid schemes. But he added that the approach envisioned in that
program has been challenged in Albania's courts. He says, however,
that the government is "absolutely committed" to getting rid of the
schemes and will meet any necessary requirements. The IMF is
currently working on a post-conflict assistance program, but one of
its requirements is that the pyramid schemes first be shut down.

BERISHA APPEALS FOR PROTESTS TO CONTINUE. Opposition
Democratic Party leader Sali Berisha has appealed for Albanians to
continue their nationwide protests against the Socialist-led
government, the "Albanian Daily News" reported on 23 September.
Berisha said Albanians must organize protests across the country
because "their children, property, and future have never been so
threatened as now" by hefty taxes, poverty, smuggling, and the
"physical elimination of political opponents."

ROMANIAN FOREIGN MINISTER MAKES ESPIONAGE CHARGES. In an
interview with the daily "Azi" on 22 September, Foreign Minister
Adrian Severin said that "two or three directors of large circulation
dailies are agents of foreign countries and [that] two leaders of
political parties...are also being financed from abroad." Severin noted
that a few people posing as "great fighters for human rights are
former informers of the Securitate." Some of those combating
corruption are involved in illegal dealings, he added. Severin went on
to say that as a member of the government, he has had access to
documents substantiating those accusations. But he refused to
mention names, saying only that they will "not remain confidential
for long." Severin repeated those comments at a press conference the
same day. The directors of the Romanian Intelligence Service and the
Foreign Intelligence Service both responded to Severin's comments
by denying having such information, RFE/RL's Bucharest bureau
reported.

RUSSIAN LEGISLATORS "NOT OPPOSED" TO ROMANIAN-MOLDOVAN
REUNIFICATION? Ion Diaconescu, the chairman of the Chamber of
Deputies, told journalists in Bucharest on 22 September that State
Duma deputies with whom he recently met in Moscow would not
necessarily oppose a possible reunification of Romania and Moldova,
RFE/RL's Bucharest bureau reported. Diaconescu said the deputies
condition such a step on a referendum carried out on both banks of
the River Dniester, which separates the breakaway region of
Transdniester from the rest of Moldova. Diaconescu said Russian
Foreign Minister Yevgenii Primakov made clear that Moscow
supports the territorial integrity of Moldova. Diaconescu also said
reunification between Romania and Moldova will be possible only
when Romania is an "economically attractive alternative" for the
Moldovans. Observers note that the Transdniestrian leadership and
its Russian supporters have used the "reunification danger" as an
argument for promoting Tiraspol's independence.

RUSSIAN DEPUTY PREMIER IN MOLDOVA. Valerii Serov, arriving in
Moldova on 22 September for a three-day visit, told reporters that
the main purpose of his visit is to prepare the ground for a meeting
of the joint Moldovan-Russian commission, RFE/RL's Chisinau bureau
reported. He also said the time has come to fully clarify the problem
of ownership of the assets of the Russian army in the Transdniester
before the planned withdrawal of the army. Tiraspol claims it is
entitled to a share of those assets. Serov met with President Petru
Lucinschi, parliamentary chairman Dumitru Motpan, and Defense
Minister Valeriu Pasat. On 23 September, he is scheduled to travel to
Tiraspol and meet with the breakaway region's leader Igor Smirnov
and Valerii Yevnevich, the commander of the Russian troops
stationed there.

MOLDOVAN PRESIDENT WANTS EXTENDED POWERS. Petru Lucinschi
told journalists in Chisinau on 22 September that the powers of the
presidency should be extended to allow intervention in the economic
reform process. Lucinschi also said he supported a mixed electoral
system for the 1998 parliamentary elections. He warned that if the
system of party lists used in the 1994 elections is retained, there will
be no link between deputies and those whom they are supposed to
represent. Lucinschi also said his recent visits to France and Italy
should be regarded as an "integral part of Moldova's strategy of
integration into a united Europe," Infotag reported.

BULGARIAN CONSTITUTIONAL COURT APPROVES OPENING POLICE
FILES. The Constitutional Court on 22 September rejected an appeal
lodged by 52 opposition parliamentary deputies to declare the law
on opening communist-era secret police files unconstitutional,
RFE/RL's Sofia bureau reported. The Socialist deputies claimed the
law contravened the constitution and violated citizens' right. But the
court did support the Socialists' claim that the law could jeopardize
the ability of the president, the vice president, and members of the
Constitutional Court to carry out their duties. It ruled that the files of
the holders of those posts should not be opened. Under the law, the
files of top officials--including deputies, cabinet ministers, court
officials, and state media directors--will be made public, while
citizens can apply to see their own files.

FREEMASONRY RELEGALIZED IN BULGARIA. Freemasonry has been
legalized again in Bulgaria after a 57-year ban imposed by the then
fascist government, the Grand Master of the Bulgarian Lodge Ivan
Stavrev said on 22 September. Citing Bulgarian media, AFP reported
that a recent closed-door ceremony brought together some 200
Bulgarian freemasons.

END NOTE

CZECH FLOODS TO HAVE MIXED EFFECT ON ECONOMY

by Michael Wyzan

The July floods in the Czech Republic have had major economic
consequences. In addition to damage to lives and property, the
disaster and the government's response to it will have unfortunate
short-term macroeconomic ramifications. However, in the medium
and long term, not all those ramifications will be negative.

Expandia Finance, a Prague-based brokerage, has done a detailed
analysis of the effect of the floods on the Czech economy. In a report
published in August, Expandia estimated flood damage at 50 billion
crowns ($1.5 billion, or 3.5 percent of gross domestic product). Of
that sum, 25 billion crowns accounted for damage in industry, 12
billion crowns in agriculture and forestry, 5.4 billion crowns in roads
and railways, and 5 billion crowns in housing.

When assets used in production are destroyed or damaged, output
will be reduced in the future, but the macroeconomic consequences
of such reductions may be small and limited in duration. While
Expandia estimates that 13-15 billion crowns worth of industrial
production was lost (which could reduce GDP 0.9 percent to 1.1
percent), it adds that faster production growth in later months will
make up for part of that loss.

Expandia expects crop damage to be slight, since overall foodstuff
production will be higher than in 1996. The building industry will
probably benefit later in the year from a surge in activity. Expandia
is even more optimistic about the prospects in the medium term (the
next three years), forecasting an increase in renovation of plant and
equipment that is likely to add 0.7 percent to GDP annual growth.

However, it points out that much depends on how reconstruction
activity is financed. If the government increases its expenditures--as
it did by earmarking some 3 billion crowns for rebuilding
infrastructure, assisting damaged enterprises, and subsidizing
apartment building,--it will move the budget further into deficit.
Expandia estimates that government will also have to increase its
spending by 700 million crowns in 1998 to cover interest on the
five-year "flood bonds," which went on sale on 1 August. Those
increases in expenditures follow budget revenue losses totaling 10
billion crowns due to unpaid taxes from industrial companies and
payments by state insurance companies.

Although the Czech Republic ran budget surpluses through 1995 and
had only a tiny deficit in 1996, the state of the budget is a sensitive
issue there. The Czech National Bank is concerned that attempts to
fight inflation--still running at 9-10 percent annually-by tightening
monetary policy will raise interest rates and attract increased
financial inflows. Such inflows and outflows were a contributing
factor to the turbulence in the foreign exchange market in the spring.
Accordingly, the bank is pushing the government to run budgetary
surpluses, which would lower interest rates, in order to fight
inflation.

To an outsider, the Czech Republic's fiscal problems do not seem
overly worrisome. Large capital movements are a fact of life for
many countries in Central Europe, Latin America, and Southeast Asia,
especially the most successful ones. Attempts to stave off such
difficulties by running large budget surpluses will likely lead to a
political backlash. Recent attempts in the Czech Republic to levy a
special 13 percent income tax to help balance the 1998 budget have
failed to gain support among deputies.

Expandia argues that the floods are unlikely to give a long-term
boost to economic growth comparable to that in The Netherlands in
the 1950s (after the dikes broke), since Czech products are not as
competitive as Dutch ones. But the opposite may, in fact, prove the
case. The gap between the productivity of old equipment destroyed
in the floods and that of new machinery replacing it will inevitably
be larger than in a normal market economy and will therefore
provide a bigger growth boost.

In the short-run, jobs have been lost in companies that went out of
business; but in the medium term, jobs in construction will increase.
However, newly installed plant equipment is likely to require a
smaller work force than did its predecessors. Accordingly, if the
flooding expedites the process of replacing outdated equipment, it
may accelerate the still moderate upward trend in Czech
unemployment rates.

Expandia expects the foreign trade deficit to worsen slightly this year
owing to increased imports of capital goods needed for
reconstruction. However, it sees no long-term effects on the trade
balance, since newly installed equipment producing export goods will
be more efficient.

Expandia's view that the floods, especially in the medium and long
terms, will have both positive and negative economic consequences is
in accordance with economists' findings about one-time disasters of
this type in developing countries.

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


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