History is made out of the failures and heroism of each insignificant moment. - Franz Kafka
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 1, No. 124, Part II, 24 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

ECONOMIC NEWS from this week's annual meeting of the IMF and
World Bank is online at RFE/RL's Web site:
http://www.rferl.org/nca/special/imfmeeting/index.html

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Headlines, Part II

*LUKASHENKA SAYS NO RUSSIA-BELARUS MERGER IN PROSPECT


*SERBIAN OPPOSITION MOVES TO RECALL DJINDIC OVER ELECTION
BOYCOTT

*BOSNIAN SERBS CLASH WITH SFOR

End Note
NEW POLISH GOVERNMENT TO FACE URGENT ECONOMIC TASKS

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EAST-CENTRAL EUROPE

LUKASHENKA SAYS NO RUSSIA-BELARUS MERGER IN PROSPECT...
Belarusian President Alyaksandr Lukashenka told an assembly at
Almaty State University 23 September that "speculation on the full
merger of Belarus and Russia was dreamed up by politicos who have
nothing better to do," Interfax-Kazakhstan reported. Lukashenka
stressed his country will never give up its sovereignty. The union the
two countries have agreed to, Lukashenka continued, reflects "the
aspirations" of both peoples but not does represent either a "return
to empire" or the subversion of the CIS. He added that any slowdown
in the rapprochement between the two countries is not the fault of
Belarus.

...REMAINS UNREPENTANT ON JOURNALIST'S ARREST. Speaking to
journalists in Almaty on 23 September, Lukashenka stressed his
position that the Belarusian courts will have to decide the fate of
Russian Public Television reporter Pavel Sheremet, who has been
under arrest since mid-July on charges of having violated the
Belarusian-Lithuanian border. Lukashenka repeated his charge that
Sheremet had engaged in a "political act" but added he might
"amnesty" the arrested journalist after the courts reached a verdict.

UKRAINIANS SAID TO BACK DEATH PENALTY. Ukrainian
parliamentary chairman Oleksandr Moroz told Interfax on 23
September that "Ukrainian society is not ready for the legislative
repeal of the death penalty." When Ukraine joined the Council of
Europe in 1995, Kyiv committed itself to abolishing the death
penalty, but the parliament has been unwilling to pass the necessary
legislation. As a result, President Leonid Kuchma is likely to be
subjected to close questioning on the issue when he attends the
Council of Europe summit in Strasbourg on 10-11 October.

UKRAINE WANTS TO HOST 1999 BALTIC-BLACK SEA SUMMIT.
Ukrainian President Kuchma told the UN General Assembly on 23
September that his country wants to promote good relations with all
its neighbors, ITAR-TASS reported. To that end, Kuchma said, Kyiv
now seeks to hold a summit of countries in the Baltic-Black Sea
region in 1999. That meeting would be a follow-up to the summit
earlier this month in Vilnius. As he had promised before leaving
Kyiv, the Ukrainian president called for East European representation
on the UN Security Council (see "RFE/RL Newsline," 23 September
1997).

UKRAINE TO HELP IRAN SET UP AIRCRAFT INDUSTRY. An unnamed
Ukrainian aircraft industry official told ITAR-TASS on 23 September
that the Ukrainian Antonov Aviation Research Complex has won a
bid to build 100 An-140 planes over the next eight years. The
Ukrainian firm will transfer technologies to Iran to enable that
country to manufacture planes on its own in the future. Initially, The
planes, which can be used for both civilian and military purposes,
will be built in Iran with parts produced in Ukraine. In addition,
Tehran has purchased 10 An-74T-200 military transport aircraft for
its ground forces.

UKRAINE WANTS TO SUPPLY TURKISH ARMY. The Ukrainian arms
trading company Ukrspetseksport is displaying firearms and its
latest T-80UD tank at the international arms exhibition in Ankara,
Interfax reported. Ukraine is one of several participants in a tender
to provide military equipment for the Turkish army. Turkish Defense
Minister Ismet Sezgin told Reuters on 22 September that his country
allocates $2.5 billion annually to the modernization of its armed
forces.

"ESTONIA" CREW TO BE CRITICIZED IN FINAL REPORT. According to
the Swedish newspaper "Svenska Dagbladet" on 23 September, the
final report of the three nation-commission investigating the 1994
sinking of the "Estonia" passenger ferry will strongly criticize the
Estonian crew for not responding quickly enough when the vessel
began to sink. The newspaper report came one day after a Swedish
expert resigned from the investigation, claiming that commission
members had been too protective of the crew (see "RFE/RL
Newsline," 23 September 1997). The commission's report has been
delayed repeatedly and is expected to be released in November.

TALLINN REJECTS U.S. BID FOR POWER PLANTS. The Estonian
government has rejected the current version of a business plan
drawn up by NRG Energy whereby the U.S. power utility would buy a
49 percent stake in Estonia's two largest power stations. The rejected
plan was criticized for giving the U.S. company "monopolistic rights"
to generate power in Estonia and for including a steep increase in
electricity prices. Counselor to the Ministry of Economics Arvi
Hamburg said more negotiations will soon take place with NRG, which
is likely to offer a new plan within two months. He added that in the
event NRG rejects the government's conditions, a public tender will
be held, "Sonumileht" reported. NRG has pledged $67 million for its
stake in the power stations and $1.1 billion in investments until the
year 2005. This would be the largest single investment in Estonia.

BALTICS URGE EU TO START TALKS WITH ALL THREE. Speaking to
the annual meeting of the IMF and the World Bank on behalf of the
Baltic States, Lithuanian Finance Minister Algirdas Semeta called on
the EU to begin accession negotiations with all three countries,
instead of just Estonia, RFE/RL's correspondent in Hong Kong
reported on 24 September. Semeta said the Baltics welcomed the fact
that Estonia has been invited to begin negotiations but added that
Latvia and Lithuania have made "strong progress" this year and are
now ready to start the process. He also said the Baltics have asked
the World Bank to step up technical assistance in preparing them for
EU membership.

AUSTERITY BUDGET FOR POLAND? Leszek Balcerowicz-- the leader of
the Freedom Union party, which is a probable partner in a new
coalition government with Solidarity Electoral Action--told
journalists in Warsaw on 23 September that Poland must reduce its
budget deficit next year or face a serious financial crisis. The strong,
third-place showing of Balcerowicz's party has been greeted by
financial analysts worldwide (see also "End Note" below).

CZECH REPUBLIC OPENS NATO MEMBERSHIP TALKS. The Czech
Republic opened membership talks with NATO in Brussels on 23
September. Deputy Foreign Minister Karel Kovanda is leading the
Czech delegation in the talks, which are to focus on the political, legal,
and practical aspects of the Czech Republic's membership in the
Atlantic alliance. Hungary and Poland have already opened similar
talks with NATO. Meanwhile in Prague, the Czech trade union
federation (CMKOS) has voted down demands by leaders of the
miners' and railway workers' unions to stage a general strike.
Instead, CMKOS will organize a mass rally in Prague on 8 November
to protest the government's economic and social policies.

SLOVAK FOREIGN MINISTRY REJECTS HORN'S COMMENTS. The Slovak
Foreign Ministry on 23 September issued a statement
"unequivocally" rejecting comments that Hungarian Prime Minister
Gyula Horn made to the parliament in Budapest the previous day,
Bratislava's Radio Twist reported. The ministry criticized Horn's
remarks that the Slovak government's minorities policy does not
comply with European standards and international obligations
undertaken by Bratislava. It called on Hungary to "ensure a higher
standard of minority rights to...at least come closer to the level of
minority rights in Slovakia, instead of making unjustified, one-sided,
and unfounded criticism."

SLOVAKIA NEGOTIATES ARMS COOPERATION WITH TURKEY. Slovak
Defense Minister Jan Sitek held talks in Ankara on 23 September
with his Turkish counterpart, Izmet Sezgin, on possible cooperation
in producing the T-72 tank and the "Suzana" self-propelled cannon,
"Sme" reported. Both weapons are on view at an international
weapons trade fair in Ankara. Sitek's spokesman said the two
ministers are due to sign a cooperation agreement on weapons
production when they meet in Bratislava in October. Meanwhile,
Slovak Prime Minister Vladimir Meciar traveled unexpectedly to
Croatia, allegedly for economic talks. "Pravda" reported on 24
September, however, that Meciar is holidaying in Dubrovnik.

HUNGARIAN, ROMANIAN JUSTICE MINISTRIES SIGN ACCORD.
Minister of Justice Pal Vastagh and his Romanian counterpart,
Valeriu Stoica, met in Budapest on 23 September and signed an
agreement on cooperation between their ministries, Hungarian media
reported. Under the accord, the two ministries will regularly
exchange information and will pay special attention to their
experience in bringing nationality laws into line with EU legislation.
Vastagh said that despite some negative trends, it cannot be denied
that Hungarian-Romanian relations are on the whole positive, Radio
Bucharest reported.

SOUTHEASTERN EUROPE

SERBIAN OPPOSITION MOVES TO RECALL DJINDIC OVER ELECTION
BOYCOTT. The opposition Serbian Renewal Movement (SPO) has
launched procedures to recall Belgrade Mayor Zoran Djindjic. The SPO
accuses Djindjic, who is head of the Democratic Party, of having
advocated boycotting the 21 September parliamentary and
presidential elections. Djindjic told BETA he will not resist the call to
resign if a sufficient number of city council members demand his
ouster. But he said the SPO's call for his replacement is an attack on
the entire opposition Zajedno movement. The boycott was intended
to invalidate the poll by reducing turnout to less than 50 percent.
The Serbian Electoral Commission has said 62 percent of the
electorate turned out. The Democratic Party, however, claims turnout
was 49.12 percent. Final election results are due on 25 September.

BOSNIAN SERBS CLASH WITH SFOR. The NATO-led Stabilization Force
clashed with several hundred Bosnian Serbs on roads leading to
Doboj on 23 September. The protesters, opposed to increased SFOR
patrols and check points, threw Molotov cocktails and stones at SFOR
members. No injuries were reported. Also on 23 September, police
loyal to Bosnian Serb President Biljana Plavsic took control of the city
of Prijedor, and SFOR erected checkpoints around Prnjavor, where
pro-Plavsic forces took control two days earlier. RFE/RL's South
Slavic service reports Doboj is now the westernmost town in the
Republika Srpska controlled by the hard-line leadership in Pale.

PALE TV SAYS SFOR, UNHCR CONNIVING WITH RETURNING
REFUGEES. Pale TV on 23 September reported that Muslim refugees
are returning to settle in the Doboj suburb of Makljenovac, contrary
to what it called a "signed agreement." The television station also
accused SFOR and UNHCR of conniving with the Muslims to repair
some 150 houses during daylight hours. The Muslims spend the night
across the inter-entity boundary line in Tesanj in the Muslim-
Croatian Federation.

CROATIA APPROVES TRANSIT OF TANKS FOR BOSNIA. The Croatian
government on 23 September granted approval for a Ukrainian cargo
ship to dock at Ploce and unload ten T-55 tanks, a gift from Egypt to
the Bosnian Federation Army, RFE/RL's South Slavic service reported.
Zagreb had blocked the shipment since early August arguing that
documentation was lacking. Meanwhile, Croatian Prime Minister
Zlatko Matesa said in Zagreb on 23 September during a visit by
Turkish President Suleyman Demirel that Croatia and Turkey intend
to open talks shortly on forming a free trade zone.

ALBANIAN PROSECUTOR REDUCES CHARGES AGAINST GENOCIDE
SUSPECTS. The Prosecutor-General's office has changed charges of
genocide and crimes against humanity against six former senior
communist officials to "abuse of office." The prosecutor-general
dropped all charges against three other former officials, ATA
reported on 23 September. The previous day, the Supreme Court
opened a trial of all nine officials. The court is due to make a ruling
on 29 September.

FIRE RAVAGES COASTAL FOREST. A forest fire that broke out on 22
September and burned itself out the following day destroyed
thousands of pine trees in the woods overlooking the southern
seaside resort of Saranda. ATA quotes forestry police as saying the
blaze was set deliberately by citizens who want to construct
buildings illegally in the area. The town's only fire engine was
destroyed during the unrest earlier this year.

ROMANIAN COALITION UNDER THREAT. Bela Marko, the chairman of
the Hungarian Democratic Federation of Romania (UDMR), said on 23
September said the UDMR's continued participation in the ruling
coalition is doubtful, RFE/RL's Bucharest bureau reported. He made
the statement after the Senate's Commission on Education had for the
third time changed the text of the law education (which has to be
submitted to the parliament) and had reinstated the provision
stipulating that history and geography are to be taught in the
Romanian language. The ruling coalition leaders met later but were
unable to reach a compromise. Marko said it is unacceptable for
coalition representatives to break earlier agreements. The coalition
leadership also decided that the issue of the education law is to be
reexamined in consultations between the UDMR and the National
Peasant Party Christian Democratic.

ROMANIAN FOREIGN MINISTER ASKED TO SUBSTANTIATE SPY
ALLEGATIONS. At a meeting of the Supreme Council of National
Defense on 23 September, President Emil Constantinescu demanded
that Adrian Severin substantiate his allegations that some heads of
political parties and leading journalists are foreign agents (see
"RFE/RL's Newsline," 23 September 1997), RFE/RL's Bucharest
bureau reported. Severin said he has submitted and will continue to
submit the evidence to the appropriate authorities, adding that his
source of information was not the Romanian Intelligence Service
(RIS). The RIS has denied receiving any such information. Premier
Victor Ciorbea said Severin was "personally responsible" for the
allegations, which, he said, do not represent the views of the
government. Ciorbea said the matter will be discussed by the
government when Severin returns from New York, where he is
attending the session of the UN General Assembly. Democratic Party
leader Petre Roman said that Severin's allegations do not reflect the
position of the party and must be clarified by Severin himself.
Severin is deputy leader of the Democrats.

RUSSIAN DEPUTY PREMIER SAYS CHISINAU-TIRASPOL COMPROMISE
REACHED. Valerii Serov and Transdniester leader Igor Smirnov met
with President Petru Lucinschi in Chisinau on 23 September. Serov
said later that he succeeded in bringing about a compromise between
the two sides, RFE/RL's Chisinau bureau reported. Lucinschi told
journalists that a protocol was signed providing for weekly meetings
at which negotiations will continue. The meetings will be held at
"presidential" level (meaning Lucinschi and Smirnov) as well as at
government and expert levels. An agreement was also reached on
drafting an economic treaty between Chisinau and Tiraspol. However,
the fate of the assets of the Russian army stationed in the
Transdniester remains unclear. Smirnov said this is a "Russian-
Transdniestrian problem" and that he will oppose the "unilateral
withdrawal of the arsenal."

RUSSIA, MOLDOVA CONCLUDE AGREEMENTS. Serov and his Moldovan
counterpart, Valeriu Bulgari, signed an agreement providing for
deliveries of Moldovan agricultural goods in exchange for Russian gas
supplies. They also agreed to cooperate in military modernization
and conversion technologies.

BULGARIANS SHOW LITTLE INTEREST IN JOINING PROFESSIONAL
ARMY. Chief of Staff General Miho Mihov told journalists in Sofia on
23 September that Bulgaria's effort to transform its army of
conscripts into a professional one is encountering difficulties because
of the low pay offered. A well-publicized campaign to hire 120
trainees in the use of high-technology military equipment has
produced only five applications. The deadline has now been extended
to 22 October. A military spokesman said applicants are offered a
three-year contract and monthly wages ranging from 128,000 leva
($72) in the ground forces to 194,000 leva ($110) in the navy,
Reuters reported.

END NOTE

NEW POLISH GOVERNMENT TO FACE URGENT ECONOMIC TASKS

by Breffni O'Rourke and Chris Klimiuk

        Finance experts say the new Polish government--whatever its
eventual composition--will have some major problems to tackle
quickly if it is to maintain the country's prosperity.
        The right-of-center Solidarity Electoral Action (AWS), which
emerged with the strongest hand from the 21 September
parliamentary elections, is expected to open contacts almost
immediately with its most probable partners, the centrist Freedom
Union and the rightist Movement for Renovation of Poland. The
negotiations are likely to be difficult, as the parties have differing
programs. In addition, some AWS leaders favor an even broader
coalition that would include parties of a very different complexion.
        According to financial specialists, there are two major priorities
facing the new ruling coalition. The first and overriding task is to
bring the rapidly-increasing current account deficit under control
before it threatens the value of the zloty. The second is to make
progress in the socially-explosive task of privatizing the inefficient
state-owned heavy industries.
        Bernd Klett, the Poland specialist at Deutsche Bank Research,
told RFE/RL on 23 September that the current account last year
registered a deficit of only about 1 percent of GDP, some $1.4 billion.
In 1997, the deficit is set to reach almost 5.5 percent of GDP, or $7
billion. If present trends continue, it may reach a full 7 percent of
GDP in 1998. Klett says this problem must be tackled quickly if the
Polish economy is not to be exposed to major dangers.
        Pavel Demczuk, senior analyst with Wood & Co investment
advisers in Warsaw, agrees with Klett's analysis, saying the
government has until about the end of this year to act. Both stress
that the strong consumer demand among Poles must be dampened.
        The Central Bank has already taken measures to achieve that
goal, raising its interest rates several times in recent weeks and
offering the public the opportunity to deposit money in accounts at
an interest rate higher than that offered by commercial banks. That
has had the effect of removing liquid money that might otherwise
fuel consumer demand.
        But experts say that is not enough. They believe the incoming
government must also run a tight fiscal policy aimed at cutting
demand for imported consumer goods, which has a negative impact
on the trade balance.
        Another priority of the new government must be to continue
privatization, which has stalled in recent years as the authorities
have shied away from the difficult task of tackling problem-
industries such as coal mining.
        The Freedom Union, which seems set to be an indispensable
partner in any coalition, has a radical plan aimed at fully privatizing
the economy by the year 2000. The head of the union is Leszek
Balcerowicz, author of the postcommunist "shock therapy," which in
no uncertain terms started the country along the road to free
enterprise
        In an interview with RFE/RL on September 23, Jerzy
Osiatynski, the Freedom Union's senior economic adviser, said his
party wants to see an end to public ownership of coal mining, ship
building, and the steel industry. Given Poland's illustrious tradition of
political activism among workers in those industries, a rigorous
policy of privatization could result in a flash point for social unrest.
Such a development would clearly not be in the interests of the new
government.
        Klett notes that the AWS has a more moderate policy on
privatization. He believes that the Freedom Union will have to tone
down its ambitious plans. Any move to restructure the heavy
industries will have to be handled carefully and social security
measures put in place for those who lose their jobs.
        According to Klett, there are two routes to a market economy:
through creating the right conditions for individuals to start their
own business ventures and through privatization of existing state-
owned enterprises. He says that all Polish post-communist
governments have created a good climate for private enterprise and
investment. And he notes that there has been progress toward
privatization, although the process is far from complete.
        Klett also notes that the coal mining industry will apparently
have a future even after it has been restructured. He recalls that
visiting EU experts expressed the opinion earlier this year that the
Polish coal industry would be a viable business proposition after
modernization.

Breffni O'Rourke is a senior RFE/RL correspondent. Chris Klimiuk is
RFE/RL's Warsaw correspondent.





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