When we can begin to take our failures non-seriously, it means we are ceasing to be afraid of them. It is of immense importance to learn to laugh at ourselves. - Katherine Mansfield
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 1, No. 144, Part II, 22 October 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

CENTRAL ASIA IN TRANSITION: Kazakhstan and Kyrgyzstan. This
six-part report on the RFE/RL Web site details how much has
changed since the collapse of the USSR -- and how much has not.
http://www.rferl.org/nca/special/asia/index.html

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Headlines, Part II

* BELARUSIAN PRESIDENT PLEDGES TO TREAT ALL FAITHS EQUALLY

* POLITICAL TENSIONS MOUNT IN MONTENEGRO

* SERBIA TO VOTE ON 7 DECEMBER

End Note : ENCOURAGING GROWTH, WORRYING IMBALANCES IN
CROATIAN ECONOMY
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EAST-CENTRAL EUROPE

BELARUSIAN PRESIDENT PLEDGES TO TREAT ALL FAITHS EQUALLY...
Speaking at the consecration of a Roman Catholic cathedral in Minsk
on 21 October, Alyaksandr Lukashenka said he will treat all religious
groups equally, Belarusian media reported. But in an indication that
he has not changed his authoritarian ways, Lukashenka told
journalists the same day that "state control over the media" is
"completely natural," Interfax-West reported.

...BUT POLL SUGGESTS HIS SUPPORT IS SLIPPING. A recent poll of
5,000 Belarusians found that only 48.7 percent would vote for
President Lukashenka if he seeks re-election, Interfax reported on
21 October. But the poll also showed that only 4.2 percent would
back former Belarusian leader Stanislav Shushkevich and only 0.3
percent would vote for Belarusian People's Front leader Zianon
Pazniak. Roughly one Belarusian in three supported Lukashenka's
handling of the media, democracy, and foreign policy. Some 57
percent said they backed the Russian-Belarusian union, while 23
percent doubted that it exists in practice.

KUCHMA FEARS "TRADE WAR" WITH RUSSIA. Speaking to a
conference of trade union leaders in Kyiv on 21 October, Ukrainian
President Leonid Kuchma said bilateral talks with Moscow have
failed to prevent a "trade war" between the two countries, Interfax
reported. He said that as a result, bilateral trade fell by 18 percent in
the first eight months of 1997, compared with the same period last
year. In particular, Kuchma criticized Russia's imposition of a 25
percent tariff on Ukrainian sugar. But the Ukrainian leader suggested
Kyiv "is close to finalizing its transitional period" in economic reform.
Other Ukrainian officials, however, were less optimistic. Oleksandr
Ryabchenko, the head of the parliamentary privatization committee,
said on 21 October that revenues from privatization are far short of
projections and will certainly fail to reach the "planned level of 500
million hryvna" ($267 million) by the end of the year, Ukrainian
media reported.

UKRAINIANS SKEPTICAL ABOUT CIS'S FUTURE. Several Ukrainian
political analysts have expressed skepticism that the CIS has any
meaningful future. In a discussion on the upcoming Chisinau summit,
the Kyiv analytic bulletin "Spivdruzhnist" said on 21 October that "for
the first time there is a situation in the CIS where Russia could be in
the minority in wanting deeper integration." The weekly added that
"Boris Yeltsin will have only two more or less reliable allies at the
summit, Armenia and Tajikistan." Other Ukrainian commentators
suggested that the CIS should nonetheless be kept alive "at least for
the Soviet generations, which still cannot get over the shock of the
Soviet Union collapsing."

PROTEST THREATENS ANOTHER UKRAINIAN NUCLEAR POWER
PLANT. At the Khmelnitskiy nuclear power plant near Lviv, workers
have staged a series of rallies to demand payment of back wages,
ITAR-TASS reported on 21 October. The 600 employees of the plant
have not been paid since February. Their action threatens the
continued operation of the plant, even though under Ukrainian law,
workers at such facilities do not have the right to strike.

ESTONIA TO RAISE FUEL PRICES TO EU LEVELS. Excise taxes on
gasoline and heating fuel are to be gradually increased until the year
2001, following the passage of a bill in the parliament on 21 October,
ETA reported. The annual increases, beginning on 1 December, will
bring fuel prices into line with EU levels. Under the first hike, the
cost of a liter of gasoline will rise to 7 kroons ($0.5) from 6.20
kroons. Finance Minister Mart Opmann commented that the higher
taxes will increase state revenues in 1998 by 240 million kroons. The
government has said it intends to use the funds for road repairs.

RUSSIA RAISES QUESTION OVER BORDER TREATY WITH LATVIA.
Russian Foreign Ministry spokesman Gennadii Tarasov has
questioned the "purposefulness" of signing a border treaty with Riga
following recent statements by Prime Minister Guntars Krasts
published in Latvia's Russian-language newspaper "SM," BNS
reported on 21 October. Tarasov criticized what he called Krasts's
intentions to "revive the theme of territorial claims in relations with
Russia [by] citing the Riga Treaty of 1920." He also said Krasts's claim
that the problem of Latvia's Russian-speaking population has been
resolved is "absolutely inconsistent with the real situation." Tarasov's
comments come on the eve of Lithuanian President Algirdas
Brazauskas's visit to Moscow, during which he is expected to sign a
border demarcation treaty with his Russian counterpart, Boris
Yeltsin.

LITHUANIA'S 1997 BUDGET AMENDED. Owing to improvements in
macroeconomic performance and tax collection, the Lithuanian
government's budget situation has improved by 270 million litas
($67.5 million) on the projected level for 1997, BNS reported on 21
October. The parliament amended the budget to allocate more than
one-third of the additional revenues to the State Health Insurance
Fund and to increase the wages of public-sector doctors. Smaller
sums will be used to raise heating subsidies for low-income families,
pensions, and teachers' salaries. The decision to allocate 16.6 million
litas to raise judges' wages sparked anger among many deputies, who
claimed this will only widen the social gap between justices and
workers in the education and culture sectors.

POLISH SENATE ELECTS SOLIDARITY CANDIDATE AS SPEAKER. The
newly elected Senate on 21 October approved Solidarity Electoral
Action (AWS) candidate Alicja Grzeskowiak as speaker by a vote of
61 to 35, PAP reported. The AWS has 51 of the 100 seats in the
legislature. But in the Sejm the previous day, the new members
approved four deputy speakers--one each from the Democratic Left
Alliance, the Peasant Party, the AWS, and the coalition Freedom
Union. Also in the lower house, the former Communists said they
expect to be able to name the leaders of as many as nine legislative
committees.

CZECH STATE BUDGET VOTE NOW IN DOUBT. Josef Wagner, the
chairman of the parliament's budget committee, said on 21 October
that he will not vote for the proposed government budget. He
suggested that the budget draft would have to be resubmitted with
modifications in 30 days, "Hosparske Noviny" reported. The coalition
government, which controls only 100 of the 200 votes in the
parliament, was counting on Wagner's vote to ensure passage of
budget proposal.

SLOVAKIA CANCELS EU ASSOCIATES MEETING. Ivan Gasparovic, the
chairman of the Slovak parliament, announced 21 October that he
has canceled a meeting in Bratislava between parliamentary leaders
of the EU associate states and European Parliament leaders, TASR
reported. Gasparovic said he made that decision because Jose Maria
Gil-Robles, the chairman of the European Parliament, has announced
he will not participate. Gil-Robles is reportedly upset with the Slovak
parliament for failing to abide by a Constitutional Court ruling to
reinstate a deputy whom the ruling coalition had expelled from the
legislature.

HUNGARIAN PARLIAMENT TO DEBATE AMENDED NATO
REFERENDUM. The parliament on 21 October voted to hold an urgent
debate on the government's proposal to amend the resolution
approving separate referenda on NATO accession and on land
ownership by foreigners. One week earlier, the Constitutional Court
ruled that the opposition's formulation of the two questions on
foreign land ownership, which has been endorsed by 200,000
signatures, takes precedence over the government version. Gyula
Horn's cabinet now wants to hold a referendum on NATO accession
and a separate plebiscite on land ownership at a later date. The
debate in the parliament will be held on 4 November. Only the
Smallholders' Party voted against such a debate, Hungarian media
reported.

SOUTHEASTERN EUROPE

POLITICAL TENSIONS MOUNT IN MONTENEGRO. The State Election
Commission in Podgorica on 21 October announced that Milo
Djukanovic won the presidential election by 5,600 votes. An OSCE
spokesman said the tally accurately "reflects the will of the
electorate." But supporters of outgoing President Momir Bulatovic
charged fraud and claimed that 20,000 votes were stolen from their
candidate. Some 2,000 Bulatovic backers staged a protest, and
Djukanovic charged that Bulatovic is trying to incite violence.
Bulatovic's supporters called for daily demonstrations until the
election results are overturned, an RFE/RL correspondent reported
from the Montenegrin capital. A Bulatovic spokesman that his side
expects "expert help from Yugoslav federal institutions to help verify
the election results."

SERBIA TO VOTE ON 7 DECEMBER. Parliamentary President Dragan
Tomic announced in Belgrade on 21 October that presidential
elections will take place on 7 December. A previous vote took place
on 21 September, but the authorities declared it invalid because less
than 50 percent of the electorate turned out following the
opposition's call for a boycott. The September elections pitted
Socialist candidate Zoran Lilic, who is a protege of Yugoslav President
Slobodan Milosevic, against the Radical Party's Vojislav Seselj, who
led paramilitary forces in the Croatian and Bosnian conflicts. The
opposition says it will take part in the December vote only if the
authorities guarantee fair elections and equal access to the media.
Spokesmen for the large Albanian minority say Albanians will
boycott the vote unless one of the Serbian parties takes a stand on
Kosovo that the Albanians can support.

TRAINS TO RUN BETWEEN SERBIA, CROATIA. Representatives of
Croatian and Yugoslav Railways agreed in Zagreb on 21 October that
train services between the two countries will resume on 11
November. One line will link Vinkovci in Croatia with Serbia's
Bogojevo to the northeast, and another will connect Vinkovci to Sid in
the southeast. Major international trains linking Belgrade to Munich
and Zurich via Zagreb will begin running in 1998, an RFE/RL
correspondent reported from the Croatian capital. A Croatian
spokesman said talks will begin soon on resuming air and river
traffic between the Serbia and Croatia. Meanwhile in Belgrade, more
than 5,000 people walked in silence through Belgrade for the funeral
of Dusan Jovanovic, a Romani teenager killed by skinheads (see
"RFE/RL Newsline," 21 October 1997).

WESTENDORP BLASTS CORRUPTION IN BOSNIA. Carlos Westendorp,
the international community's chief representative in Bosnia,
released a report on 21 October saying rampant corruption is
undermining the peace process. Graft is especially widespread in the
collection of taxes and customs revenues as well in the distribution of
international aid. Money is siphoned off to support criminal
structures that often overlap with official ones among Croats, Serbs,
and Muslims alike. Meanwhile in Mostar, international election
officials announced that a recount of the votes in the recent local
elections gives the multi-ethnic Coalition for a United and Democratic
Bosnia and Herzegovina 15 out of 24 seats, or one more than the
coalition got in the first count. The Croatian Democratic Community,
which demanded the recount, took only nine seats. In New York,
Bosnian co-Prime Minister Haris Silajdzic urged NATO to use force to
implement the Dayton agreements.

CROATIAN OPPOSITION PARTIES WANT OWN TV CHANNEL.
Representatives of the Croatian Social and Liberal Party, the Croatian
Peasants' Party, the Croatian People's Party, and the Istrian
Democratic Assembly introduced a bill in the parliament on 21
October giving the opposition control over the second channel of
Croatian Radio and Television (HRT). Liberal leader Vlado Gotovac
said the opposition wants to establish an "objective" news and
information channel. HRT is controlled by the governing Croatian
Democratic Community, and the opposition regards HRT's political
coverage as heavily biased. Television is the primary source of news
for most Croats. And in Moscow, a military spokesman said Russia
has begun withdrawing 500 of its 700 paratroopers based in eastern
Slavonia. The evacuation of the 500 men and their equipment,
including 75 armored personnel carriers, will end on 15 November.

ALBANIA'S BERISHA CALLS FOR NEW ELECTIONS. Delegates to a two-
day congress of the opposition Democratic Party have re-elected Sali
Berisha as party leader and adopted new party statutes, "Rilindja
Demokratike" reported on 22 October. Berisha urged that new
elections be held soon, saying that the Democrats would win them,
Berisha was re-elected party leader over Peter Arbnori, a senior
party member who was imprisoned during communism. His victory
by 791 to 115 votes suggests opposition to him within the party is
limited, even though some party leaders called for Berisha to be
replaced following the Democrats' massive losses in the June
elections. "Republika" of the conservative Republican Party pointed
out that by keeping Berisha as leader, the Democrats have missed an
opportunity to elect a leader who could form a coalition with other
right-of-center parties and challenge the Socialists.

FIRST CORPSES REMOVED FROM ALBANIAN REFUGEE SHIP.
Authorities in Brindisi have removed 11 bodies from an Albanian
ship sunk by an Italian vessel on 28 March but recently raised by
Italian engineers (see "RFE/RL Newsline," 20 October 1997). The
Italian authorities believe that at least 70 more corpses are still
below deck. Sabri Godo, the head of the Albanian parliamentary
commission on foreign relations, asked for Albanian participation in
the Italian investigation into the cause of the accident. Italy
maintains that the sinking was accidental, but many Albanian
survivors charge the Italian vessel deliberately rammed the
Albanian one.

HUNGARIAN UNIVERSITY TO BE OPENED IN ROMANIA. Visiting Prime
Minister Gyula Horn and his Romanian counterpart, Victor Ciorbea,
have agreed to finance a Hungarian-language university in
Transylvania. The plan to set up separate Hungarian- and Romanian-
language sections at Cluj University will be dropped, RFE/RL's
Bucharest bureau reported on 21 October. Addressing journalists,
Horn said ethnic Hungarians told him the previous day that their
situation has "greatly improved" in the last months. He added that
they are "better qualified" to judge that situation than any one in
Budapest. The two premiers agreed that experts will start working
on plans for a Budapest-Bucharest highway. New border-crossing
points and Hungarian-Romanian bank are also to be set up.

ROMANIAN OPPOSITION LEADER SLAMS GOVERNMENT. At a press
conference on 21 October, former President Ion Iliescu read aloud a
"Letter to the Nation" calling upon the government to honor its
electoral promises or "leave the political scene, making room for
others, who are more diligent and more loyal to the interests of the
country and its population," RFE/RL's Bucharest bureau reported.
Iliescu said a protest meeting organized by several opposition parties
on 22 October is "just the beginning" of joint action aimed at forcing
early elections. Premier Ciorbea said the rally is an "attempt by the
opposition to overturn the government by force" and that the
government "is ready to meet any challenge." Police announced on 22
October that the meeting will be moved to a square different from
that originally authorized, where the "revolutionaries" are on hunger
strike.

ROMANIAN PARLIAMENT ASSUMES CONTROL OVER FOREIGN
INTELLIGENCE. The Chamber of Deputies on 21 October passed a bill
placing the Foreign Intelligence Agency (SIE) under the supervision
of a special parliamentary commission, RFE/RL's Bucharest bureau
reported. The bill, which has already been approved by the Senate,
still has to be promulgated by President Emil Constantinescu. It
stipulates that the director of SIE be appointed by the country's
president and that the Supreme Defense Council supervise the
organization's day-to-day activities.

LUCINSCHI ON RELATIONS WITH RUSSIA. Moldovan President Petru
Lucinschi says relations between Chisinau and Moscow are "strongly
hindered" by the still unresolved conflict with the Transdniester
separatists In an interview with Interfax on 21 October, Lucinschi
pointed out that although Russia recognizes Moldova's territorial
integrity, the Russian State Duma has not ratified "even a single
agreement" between the two countries. This, he said, shows Duma's
deputies "disdain for the bulk of Moldova's population." He also noted
that the separatists control more than "12 percent of Moldova's
population and much of the territory with a strong industrial
potential." This affects trade relations with Moscow because exports
to Russia have to overcome "barriers" set up by the separatists, he
said. Lucinschi stressed he does not expect a "final solution" to
emerge from the upcoming CIS summit in Chisinau.

BULGARIAN PREMIER APPEALS TO FOREIGN INVESTORS. Ivan Kostov
told a conference of foreign investors in Sofia on 21 October that
there will be "no going back" in the country's economic reforms
program. Kostov stressed that the currency board set up in July has
ensured the country has sufficient foreign-currency reserves to
make all foreign-debt payments. He pointed out that the parliament
on 17 October adopted a law halving the profits tax for investments
of more than $ 5 million and for investments creating at least 100
jobs, AFP reported. In other news, trading began on the Bulgarian
stock exchange for the first time since its closure in 1947, RFE/RL's
Sofia bureau reported on 21 October. During the next two weeks,
trading will be limited to shares acquired by privatization funds
through voucher privatization.

END NOTE

ENCOURAGING GROWTH, WORRYING IMBALANCES IN CROATIAN
ECONOMY

by Michael Wyzan

        Croatia is in an unusual position among transition economies. It
has a developed and stable economy, successful tourism, and
considerable trade dependence on the EU. Yet it is the only country
boasting such an economy with which the EU has not signed a Europe
Agreement, much less invited to accession talks.
        That situation results from foreign-policy considerations,
especially the view of the Western powers that the government has
not done enough to promote the Dayton peace process. Until recently,
the IMF had been refusing under U.S. pressure to release two $40
million loan tranches, and the World Bank did the same with a $30
million loan. The U.S. pointed to Zagreb's failure to hand over 10
alleged war criminals to the war crimes tribunal in the Hague and to
meet other requirements of the Dayton agreement. The war criminals
left for The Netherlands on 6 October, and the IMF approved
releasing the tranches four days later.
        In some respects, Croatia's economy is a star performer. Growth
of gross domestic product (GDP) was a healthy 4.2 percent in 1996
(previous years had seen either decline or slow growth). This year,
GDP rose by 3.3 percent in the first quarter and 4 percent in the
second. However, there are some concerns about capital flight after
the delays in releasing the IMF and World Bank funds; as a result,
growth may slow later in the year.
        The economy is diversified. This year's growth has been
buoyed both by industry (industrial production was up 5.2 percent
from January to July over the same period last year) and by positive
trends in tourism. Tourist arrivals in July and August were up by 34
percent over those months in 1996, with foreigners accounting for 80
percent of tourist nights.
        A striking feature of Croatia's economy under transition has
been low inflation. Following the introduction of a stabilization
program in October 1993, retail prices fell by 3 percent in 1994.
While inflation has returned since then, annual rates are very low:
3.7 percent in 1995, 3.4 percent in 1996, and 3.5 percent in the 12
months to August 1997. This is the lowest average inflation among
transition economies over the last three-and-a-half years.
        High dollar wages and substantial unemployment have
characterized Croatia's labor market. The official unemployment rate
has been above 15 percent since late 1995, while monthly wages
have been just shy of $400 since mid-1996. Both the high dollar
wages and the low inflation reflect a peculiarity of former Yugoslav
republics: namely, currencies whose values are closer to those in the
EU than is the case of conventional formerly planned economies.
Croatia has a price level similar to Austria's but wages like those in
the Czech Republic.
        One of the ramifications of that situation is popular
disgruntlement with the standard of living. There are also persistent
worries about the competitiveness of the country's manufactured
exports and about the trade and current account balances, especially
when imports are growing rapidly, as is the case at present.
        From January to July, the trade deficit was $2.4 billion,
compared with $1.7 billion during the same period last year.
Zagrebacka banka, the country's leading commercial bank, forecasts a
$4.4 billion trade deficit (compared with $3.3 billion in 1996) and a
$2 billion current account deficit ($1.5 billion last year) for 1997 as a
whole. Another growing imbalance is the government budget deficit,
which the bank forecasts will be 2.5 percent of GDP this year (0.1
percent in 1996).
        The growing foreign imbalances suggest the economy may be
overheating, as imports are increasing faster than exports. Unlike in
other transition countries, however, that is not because the currency,
the kuna, is failing to depreciate fast enough to take into account
higher inflation than in the country's trading partners. In fact, the
kuna has been depreciating this year in such terms.
        Both the successes and problems of Croatian stabilization are
similar to those of the Visegrad and Baltic economies. A vote of
confidence in Croatia's stabilization efforts came with investment-
grade ratings from three ratings agencies in January. Those ratings
helped make the government's launching of a Eurobond issue
successful.
        On structural issues, Croatia is less of a star performer.
Privatization has been proceeding, but in a way that favors
enterprise managers and the administration's political cronies and
actually increases the share of state ownership. That increase
occurred because the government decided to clarify many
enterprises' ownership status by making them explicitly state
property, rather than leaving them in the vague category of "social
ownership" inherited from the communist period. Meanwhile, the
parliament has been resisting privatizing the post and
telecommunications monopoly.
        However, observers praise Croatia's bank restructuring and
privatization efforts. And the economy has model companies, such as
pharmaceutical firm Pliva, which in 1996 became the first company
in the region to place shares on the London Stock Exchange.

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

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