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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 2, No. 19, Part II, 29 January 1998


___________________________________________________________
RFE/RL NEWSLINE Vol 2, No. 19, Part II, 29 January 1998

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

* BELARUSIAN COURT FINDS ORT JOURNALISTS GUILTY

* CZECH GOVERNMENT WINS CONFIDENCE VOTE

* SERBS KEEP UP PRESSURE IN KOSOVO

* End Note: COUNTRIES ACCEDING TO EU FACE MACROECONOMIC CHALLENGES

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EAST-CENTRAL EUROPE

BELARUSIAN COURT FINDS ORT JOURNALISTS GUILTY. Two journalists working for
Russian Public Television (ORT) have been  found guilty of illegally
crossing the Belarusian border last summer and have received suspended
sentences, Reuters reported on 28 January. Journalist Pavel Sheremet
received a two-year sentence and his cameraman, Dmitriy Zavadsky, an
18-month term. The sentences are suspended for one year and will be waived
altogether if the defendants commit no crimes during that period. The
arrest last July of the two men strained Russian-Belarusian relations. The
Russian daily "Nezavisimaya gazeta" called the verdict a compromise, while
observers believe it allows Belarusian President Alyaksandr Lukashenka to
save face while not damaging relations with Moscow. Defense attorneys said
they will appeal the verdict. PB

UKRAINIAN NEWSPAPER SHUT DOWN. The Information Ministry on 28 January
banned the opposition daily "Pravda Ukrainy" citing a registration
irregularity, Reuters reported. Information Minister Zynoviy Kulyk said the
newspaper was registered last July as a joint-stock company in which 76
percent is listed as belonging to an Antiguan group and 34 percent to a
Ukrainian group. Kulyk said because the total is 110 percent, the
newspaper's registration is illegal. "Pravda Ukrainy" was the Communist
Party daily until 1991. It often published interviews with former Premier
Pavlo Lazarenko, who was sacked by President Leonid Kuchma last summer. The
newspaper said it will file a court case against the Information Ministry
for the ban. PB

UKRAINE FINALIZES CONVENTION ON MINORITIES. Ukrainian Justice Minister
Suzanna Stanik presented the ratification instruments of a European
convention on the protection of minorities to the Council of Europe on 28
January, dpa reported. In joining the convention, Kyiv must promote
minority culture and languages in schools, the media, and public life.
Members of the convention also pledge not to forcibly assimilate
minorities. Some 22 percent of Ukraine's 51 million population are ethnic
Russians, and there are also very small minorities of Belarusians,
Moldovans, Bulgarians, and Poles, among others. PB

LARGE NUMBER OF SUICIDES IN UKRAINIAN MILITARY. Vasyl Kravchenko, Ukraine's
chief military prosecutor, said on 28 January that there were 107 cases of
suicide in the armed forces last year, Interfax reported. He added that
five others died as a result of hazing incidents. Kravchenko reported the
statistics in the wake of an incident whereby a soldier shot dead two
servicemen before killing himself. The man was ruled to have suffered
"permanent psychological damage" as a result of hazing. PB

ESTONIA'S OUTSPOKEN INTERIOR MINISTER FIRED. Prime Minister Mart Siimann on
28 January sacked Robert Lepikson for his public attacks on other cabinet
ministers, BNS and ETA reported. The most recent of those attacks came two
days earlier, when Lepikson published an article in "Eesti Paevaleht"
sharply criticizing Foreign Minister Toomas Hendrik Ilves's decision to
join the extra-parliamentary Farmers' Party.  President Lennart Meri, who
under the constitution formally appoints and dismisses ministers, agreed to
Lepikson's dismissal and appointed  former banker Olari Taal to replace
him. Taal, an independent, was the chairman of Hoiupank from 1993 to 1997
and held the construction and economics portfolios in a previous
government. Lepikson, meanwhile, has said he was sacked not because of his
criticism of cabinet members but because of his crackdown on crime. He
commented the results of several probes may have been "an unpleasant
surprise to quite a few people." JC

LATVIAN PREMIER ON FAILURE TO MEET WITH CHERNOMYRDIN. Responding to an
article in the 28 January "Diena," Guntars Krasts said it is difficult to
say whether the failure to conclude a contract on Russian gas supplies to
Latvia prompted  Russian Premier Viktor Chernomyrdin's "reluctance" to hold
talks with Krasts during the Baltic Sea Council meeting in Riga last week,
BNS reported.  Latvian Prime Minister Guntars Krasts underscored that the
proposed agreement, which reportedly would grant privileges to Russia's
Gazprom, was disadvantageous to Latvia. He added that he had rejected the
deal when he was economics minister in the previous government.
Chernomyrdin was expected to meet with his Latvian counterpart last week
but held talks only with President Guntis Ulmanis. On 26 January, Ulmanis
sharply criticized Krasts for failing to make use of the opportunity to
meet with the Russian premier. JC

POLAND PROMOTES ITSELF AS "HEALTHY TIGER." Before leaving for the World
Economic Forum in Switzerland, Polish Finance Minister Leszek Balcerowicz
said  his country is fundamentally stronger than most other emerging
markets, Reuters reported on 28 January. Balcerowicz will attend the
conference with President Aleksander Kwasniewski. Balcerowicz pointed to
Poland's high economic growth, estimated at more than 6 percent last year
and expected to reach 5.6 percent in 1998. He added that investors could
"distinguish healthy tigers from sick tigers." PB

CZECH GOVERNMENT WINS CONFIDENCE VOTE. Josef Tosovsky's cabinet on 28
January won a confidence vote in the Chamber of Deputies after pledging  to
meet the Social Democratic Party's (CSSD) main demand that it submit within
eight weeks a timetable for its privatization program, CTK reported. The
vote was 123 to 71. Earlier, CSSD deputies had proposed that the confidence
vote be postponed "indefinitely."  President Vaclav Havel welcomed the vote
in the legislature, saying it indicated that "the period of instability of
the last two months is essentially over." MS

EXTREMIST LEADER CHALLENGES HAVEL'S ELECTION. Miroslav Sladek, the leader
of the far right Republican Party, on 28 January appealed to the
Constitutional Court to rule on the legality of Havel's election as
president earlier this month. Sladek claims his constitutional rights were
violated because he was imprisoned during the vote and that Havel's
election by a one-vote margin was only possible because of Sladek's
absence. He demands that the president be prevented from taking the oath
before the court rules on the matter. MS

SLOVAK PRESIDENT ON OBSTACLES TO NATO MEMBERSHIP. Michal Kovacs on 28
January told an audience of scholars, experts, and reporters in Washington
that the problems hindering his country's membership in NATO are
"temporary" and will be overcome, an RFE/RL correspondent reported. He said
the Slovaks are genuinely devoted to democratic values and are aware that
good relations with neighboring countries are a "basic requirement for
becoming part of the new Europe." Kovacs said the priority for Slovakia
must be the elimination of a "certain deficit in democracy" and renewing
full trust between itself and the U.S. The Slovak parliament is to elect a
new president on 29 January, but observers say the legislature may be
unable to elect the new head of state before the September parliamentary
elections. MS

SLOVAKIA RENEWS RFE/RL'S LICENSE--FOR TWO YEARS ONLY. The Slovak Council
for Radio and Television on 28 January renewed RFE/RL's license but, as in
the past, did so for only two years instead of the  possible maximum of six
years. RFE/RL Slovak Service Director Miroslav Novesky said "we are
satisfied that the council made this decision, although we would have been
glad to have received a license for more than two years," CTK reported. The
council also decided that the private radio station Twist, which is often
critical of the government, will be given a frequency in the Kosice region
of eastern Slovakia, which means that the station will broadcast to more
than half of the country. MS

HUNGARY SETS DATE FOR ELECTIONS. President Arpad Goncz on 28 January
announced that the first round of general elections will be held on 10 May
and the second round on 24 May, Hungarian media reported. The decision came
after Goncz's meeting last week with the leaders of all the 11 parties that
gained at least 1 percent support in the 1994 general elections. MSZ.

HUNGARY'S MINORITIES TO FORM ETHNIC ALLIANCE. Representatives of Hungary's
German, Croatian,  and Slovak minorities have applied to register an
alliance called the Nationalities Forum, "Magyar Hirlap" reported on 29
January. Mihaly Jozan-Jilling, representative of the German minority, said
the minorities cannot wait for the parliament to make a decision on their
parliamentary representation (see "RFE/RL Newsline," 28 January 1998) and
therefore will form an election alliance based on ethnic criteria. The
Romanian and Romani minorities will decide later whether to join the
alliance. Meanwhile, Foreign Minister Laszlo Kovacs warned against any
further delay in passing legislation on parliamentary representation for
ethnic minorities, noting that Hungary's international reputation and
credibility is at stake.  MSZ

SOUTHEASTERN EUROPE

SERBS KEEP UP PRESSURE IN KOSOVO. Serbian police shot and wounded an ethnic
Albanian teenager in Kosovska Mitrovica on 28 January, an RFE/RL
correspondent reported from Pristina. In Kosovo Polje, Serbs in civilian
clothes  beat Albanian high school students, sang nationalist songs, and
damaged the building housing the private school. A similar incident took
place in Ljipljan. Police sealed off a village near Decani, fired machine
guns at unspecified targets, and beat several male villagers. Meanwhile,
police stepped up patrols in Pec, Malisevo and Klina the Belgrade daily
"Danas" wrote. PM

KOSOVO SERBS STAGE PROTEST. Some 2,000 Serbs demonstrated in Zvecan,. near
Kosovska Mitrovica,  on 28 January to protest what they called "Albanian
terrorism and separatism."  Speakers also denounced Belgrade's policies,
which they say have led to the current tensions in Kosovo. The son of a
Serbian politician killed by Albanians the previous week told the crowd
that the Serbian authorities "must protect every Serb, every Serbian home,
from Albanian separatism and terrorism" (see "RFE/RL Newsline," 26 January
1998). Another speaker said that the current "terrible situation" has been
brought about by "those who lead this country [but] have no answer to the
[Albanian] separatist strategy." The speaker added, however, that Serbs
should "be dignified and show the world that we are the victims, not those
who kill us." PM

COUNCIL OF EUROPE CONDEMNS BELGRADE'S KOSOVO POLICY. The Council of
Europe's parliamentary assembly passed a resolution in Strasbourg on 28
January condemning "Serbian repression of the ethnic Albanian population of
Kosovo." The resolution said that Belgrade's policies have "led to armed
resistance" in the region. The text added that Yugoslavia is itself to
blame for its continued international isolation and that, if Belgrade wants
to rejoin the international community, it must implement constitutional
reforms guaranteeing freedom of the press, an independent judiciary, and
protection of  basic civil rights. A Yugoslav delegation in Strasbourg
asked that references to Kosovo be dropped on the grounds that the province
is the internal affair of Serbia, but the assembly ruled that human rights
violations cannot be considered solely one country's internal affair. PM

ANOTHER CAR BOMBING IN MONTENEGRO. A bomb destroyed the car of Darko
Rapopovic, a top police official, in Podgorica in the night of 26-27
January, an RFE/RL correspondent reported from Podgorica on 28 January. A
bomb demolished the car of the commander of special police forces in
Podgorica on 24 January (see "RFE/RL Newsline," 26 January 1998). The
previous week, police forces prevented demonstrators loyal to outgoing
President Momir Bulatovic from disrupting the inauguration of reformist
President Milo Djukanovic. PM

LUKASHENKA IN BELGRADE. Belarusian President Alyaksandr Lukashenka arrived
in the Serbian capital on 28 January for talks with Yugoslav officials, AFP
reported. Lukashenka said he hoped to "expand and deepen cooperation"
between the countries, which, he said,  have "common historic roots and
warmest friendly bilateral relations." The two countries signed a
friendship treaty last year. Lukashenka is the first leader of a former
Soviet republic to visit Belgrade. He is to meet with Yugoslav President
Slobodan Milosevic and other officials. PB

BOSNIAN SERB HARD-LINERS YIELD ON PARLIAMENT. Parliamentary speaker Dragan
Kalinic of Radovan Karadzic's Serbian Democratic Party agreed at a meeting
of representatives of Bosnian Serb political parties in Bijeljina on 28
January that the 31 January session of parliament will take place in Banja
Luka, which is President Biljana Plavsic's stronghold. Kalinic and other
Karadzic loyalists had wanted the meeting to be held in the small but
politically neutral town of Teslic. Prime Minister Milorad Dodik, a
supporter of Plavsic, told RFE/RL on 26 January that the hard-liners have
become more cooperative in recent days because of pressure from Belgrade
(see "RFE/RL Bosnia Report," 28 January 1998). PM

NO DEVALUATION OF CROATIAN KUNA. Prime Minister Zlatko Matesa said in
Zagreb on 28 January that there will be no devaluation of the kuna, which
currently trades at roughly one to $6. He added that the stability of the
kuna is a cornerstone of the government's economic policy and that the
authorities will continue their tight money policy in 1998. Matesa said the
government does not want to undermine citizens' confidence in the kuna and
the value of their savings. Many foreign experts consider the kuna
overvalued by at least 20 percent; they expected that the government would
devalue it in order to boost exports. Matesa, however, said that the
government will not devalue the currency in order to help some businesses
solve what he called their "internal problems." PM

SLOVENIAN NAZI VICTIMS SEEK $1.2 BILLION. A spokesman for the Association
of Victims of the 1941-1945 Occupation said in Ljubljana on 27 January that
his organization demands $1.2 billion from the German government on behalf
of some 45,000 Slovenes. The spokesman stated that the money represents
reparations for "internees, refugees, abducted children, forced laborers,
prisoners-of-war, and those who died in concentration camps or who were
murdered" during World War II.  He added that the association will also
press claims against Italy and Hungary, which, together with Germany,
occupied Slovenia during that war. PM

AUDITORS DECLARE ALBANIAN PYRAMID BANKRUPT. A spokesman for the French
auditing company Deloitte & Touche said in Tirana that the VEFA investment
company has only $7 million in assets and that it has only a small income
from its business activities, "Koha Jone" reported  on 28 January. VEFA is
believed to have received more than $300 million in recent years from some
90,000 investors. The spokesman for the French firm, which has an Albanian
government contract to audit the records of the last surviving pyramid
scheme, added that VEFA is losing $200,000 a month because of poor
management. He also said the French company is investigating recent
Albanian media reports that VEFA owner Vehbi Alimucaj has $40 million in
bank accounts in Greece. FS

EU AGREES ON ALBANIAN EAST-WEST HIGHWAY. Foreign Minister Paskal Milo said
in Tirana after returning from Brussels on 28 January that the EU and the
Albanian government have agreed to start constructing an east-west highway
in March. The EU is providing $165 million for the project, which will
eventually link Durres with Istanbul. Elsewhere, a group representing
Italian investors has expressed concern for the safety of foreign
businessmen following the killing of an Italian shoe-factory owner in
Tirana on 27 January. Italians have launched some 200 small and
medium-sized businesses in Albania, far more than any other nationality.
And in Kukes, gunmen attacked an arms depot on 28 January, "Koha Jone"
reported. A shoot-out continued for hours before the unidentified attackers
withdrew. FS

ROMANIA'S DEMOCRATIC PARTY WITHDRAWS FROM GOVERNMENT. Following talks
between President Emil Constantinescu  and the leaders of the coalition
parties on 28 January, the presidential office released a statement the
next day saying the participants "take note" of the decision of the
Democratic Party to withdraw its ministers from Victor Ciorbea's
government.  However, the Democrats will continue to support the coalition
in the parliament. A new protocol on how the coalition will function under
the new conditions is to be drawn up by 2 February. The coalition leaders
agreed to work out a program for accelerating reform and improving
cooperation among its parliamentary deputies. They also agreed to "refrain
from public declarations likely to produce tensions among the coalition
members." MS

NEW GOVERNMENT LINEUP TO BE ANNOUNCED NEXT WEEK. Prime Minister Ciorbea on
29 January said he will announce the new composition of the government on 2
February. Taking into consideration what he called Romania's "vital
interests," President Constantinescu has asked Defense Minister Victor
Babiuc and Foreign Minister Andrei Plesu to stay in the government. Babiuc
has said he will quit the defense portfolio. Democratic Party Deputy
Chairman Traian Basescu said his party is agreed that Plesu, an independent
nominated by the Democrats, should stay on as foreign minister. MS

TIRASPOL THREATENS TO SEND ARMY TO SECURITY ZONE. The Transdniester
authorities are threatening to send armored cars into the security zone if
Chisinau does not revoke the appointment of police Colonel Vitalie Bruma to
the Joint Control Commission, BASA-press and Mediafax reported on 28
January. The separatists claim that by appointing Bruma as a member of the
commission, which is overseeing the truce, President Petru Lucinschi wants
to block that body's activities. Moldovan presidential counselor Anatol
Taranu said that the separatists themselves are using the appointment of
Bruma as a "pretext" for blocking  the commission's work. Tiraspol opposes
Bruma's appointment because he claimed in media interviews that the
separatists are producing military equipment. MS

AUSTRIA PROBES SUSPECTED ILLEGAL BANK TRANSFERS FROM BULGARIA. Wolfgang
Schussel  said in Sofia on 28 January that his government is trying to
establish whether money was illegally transferred from Bulgaria to private
bank accounts in Austria, an RFE/RL correspondent reported. He said bank
secrecy laws hamper the investigations. There are suspicions that former
members of the Bulgarian communist nomenklatura who later became
businessmen had secretly transferred funds to Austria in the 1980s. Ivan
Kostov's cabinet has said that former Communists illegally funneled
thousands of millions of dollars  from state funds into private bank
accounts in Vienna. MS

REGIONAL AFFAIRS

DATE OF NEXT CIS SUMMIT BROUGHT FORWARD. CIS Executive Secretary Ivan
Korotchenya told Interfax on 28 January that the next CIS summit will be
held on 19 February in Moscow. Following the cancellation of the summit
scheduled for mid-January, it was announced earlier this month that the
next summit will take place in late March. According to Korotchenya, the
top item on the agenda will be reforming the administrative structure of
the CIS and developing trade between its members.  LF

END NOTE

COUNTRIES ACCEDING TO EU FACE MACROECONOMIC CHALLENGES

by Michael Wyzan

        At a seminar organized by the Vienna Institute for Comparative
Economic Studies on 22 January, George Kopits, assistant director of the
IMF's Fiscal Affairs Department, discussed the requirements that countries
acceding to the EU will have to meet and the policy issues facing them.
        On balance, he was upbeat about the ability of the five
postcommunist countries invited by the European Commission in July
1997--the Czech Republic, Estonia, Hungary, Poland, and Slovenia--to meet
those requirements. Indeed, in many important respects, they are ahead of
Greece and the Iberian countries as they prepare for accession.
        Those countries will have to adhere to "ERM2" for two years before
adopting the euro. That is, they must use the exchange rate mechanism
currently followed by most EU members before the euro is introduced next
year. That means keeping their currencies at a parity to the euro with a 15
percent corridor in each direction.
        The countries slated for accession may also have to meet the
various "Maastricht criteria" (including a budget deficit no larger than 3
percent of GDP). It is safe to assume that they will need to adhere to such
institutional requirements as using market-based monetary instruments and
maintaining central bank independence from political influences.
        Other tasks include eliminating all trade barriers with the other
EU members; establishing the common external tariff; and implementing
common procedures for consumer and environmental protection,  public
procurement, banking regulation, and tax harmonization.
        As a benefit, the five countries will have access to the Structural
Funds (SF), the Cohesion Fund (CF), and perhaps to the Common Agricultural
Policy (CAP). While the transfers potentially allocated to them could be
enormous according to current criteria, it seems likely  that the amount
available to them will be limited to 4 percent of GDP.
        The five countries seem to be doing rather well in meeting those
criteria. Inflation and long-term interest rates have come down, although
they remain above the EU averages. There is progress on adopting
market-based monetary tools and establishing central bank independence.
Budget deficits in several countries already fulfill the Maastricht
criteria, although there may be significant extrabudgetary and quasi-fiscal
expenditures. Their external sectors are already liberalized,  and there is
progress on antimonopoly and consumer-protection legislation.
        However, much remains to be done in the areas of environmental
standards, banking regulation, harmonization of indirect taxation
(especially rates of value-added tax and payroll contributions), and
procurement procedures.
        It is unclear is whether the countries acceding to the EU will be
able to operate within ERM2, given the myriad pressures on their exchange
rates. There are factors  that may lead to the appreciation of their
currencies, including foreign direct investment and short-term capital
inflows, and the productivity-driven adjustment of their prices to the
levels of their EU neighbors. But there are also pressures for
depreciation. Growth of wages tends to exceed that of labor productivity;
budget deficits and rapid monetary growth persist; and speculative capital
occasionally flows out.
        Another issue is whether the countries can remain within the EU's
fiscal guidelines while dealing with major structural challenges. Accession
will bring some budgetary advantages, including transfers under the SF, CF,
and CAP programs; the elimination of sectoral subsidies; reform of
budgetary practices; and lower interest costs.
        At the same time, accession will also pose budgetary challenges,
such as the need to co-finance the transfer programs (such as the SF, CF,
and CAP) and make national contributions to the EU budget, eliminate
tariffs against imports from EU members, and adopt the common external
tariff. Those countries will also have to provide for tax harmonization,
which will force major reductions in VAT rates; adopt  EU accounting
practices; and incur restructuring costs, especially for investments in the
infrastructure.
        Despite such challenges, Kopits is generally optimistic about the
outcome of accession. The process has been successful in Spain and
Portugal, although less so in Greece. The five postcommunist  countries
have many similarities with the three Mediterranean ones at the time of
their accession: low income levels, low productivity, a need for enterprise
restructuring, and scope for infrastructure investment.
        Many differences between the transition and Mediterranean countries
suggest the former have more advantages than did the latter: they are more
open to foreign trade and capital movements (especially than was the case
of Spain and Greece), have smaller macroeconomic imbalances, and,
ironically, have less widespread state ownership following their
privatization efforts. However, the enlarged EU will be different from the
European Community of the 1980s, particularly since the community was a
customs union only, not a single market, and did not have a common monetary
policy.
        In the author's view, the five countries seem better prepared for
accession than many observers realize. There is more doubt about the
viability of upcoming changes to the EU's functioning--especially the
single currency and reform of the transfer programs--than about the ability
of those countries to adopt current procedures.

The author is an economist living in Austria.


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