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RFE/RL NEWSLINE Vol 2, No. 42 , Part II, 3 March 1998
___________________________________________________________ RFE/RL NEWSLINE Vol 2, No. 42 , Part II, 3 March 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 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RFE/RL CAUCASUS REPORT: A WEEKLY REVIEW OF POLITICAL DEVELOPMENTS IN THE NORTH CAUCASUS AND TRANSCAUCASIA FROM RADIO FREE EUROPE/RADIO LIBERTY This new email weekly covers Armenia, Azerbaijan, Georgia and Russia's North Caucasus. To subscribe, send an email message to firstname.lastname@example.org with the word "subscribe" in the subject line or body of the message. The first issue (March 3, 1998) and all future issues will be online at the RFE/RL Web site. http://www.rferl.org/caucasus-report/ xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Headlines, Part II * EU CRITICIZES BELARUS OVER CONVICTED YOUTHS * NEARLY 300 KOSOVARS INJURED IN PROTEST * SERBIA SAYS KOSOVO SITUATION "UNDER CONTROL" * End Note: BULGARIAN ECONOMY FROZEN EIGHT MONTHS AFTER START OF CURRENCY BOARD xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx EAST-CENTRAL EUROPE EU CRITICIZES BELARUS OVER CONVICTED YOUTHS. The EU has sharply criticized the Belarusian government for its treatment of two youths convicted last week of vandalism, an RFE/RL correspondent in London reported on 2 March. A statement issued by Britain, the current holder of the EU Presidency, said the union considers the six-month pre-trial detention, the heavy police guard during the trial, and the severe nature of their sentences to be disproportionate to the crime committed. It urged Belarusian officials to show clemency to the two youths, one of whom was sentenced to 18 months' hard labor (see "RFE/RL Newsline," 25 February 1998). The statement said that Eastern European countries associated with the EU "align themselves" with the declaration. PB ODESSA MAYOR BLAMES OPPONENTS FOR VIOLENCE. Eduard Hurvits said on 2 March that the political opposition was responsible for the recent spate of violence in Odessa, which he described as an effort to force him out. Hurvits added that police have links with criminal groups that want him ousted. He noted that they have not even investigated the disappearance of city official Ihor Svoboda, Hurvits' friend, who was allegedly kidnapped last week and is still missing. Hurvits is currently engaged in a power struggle with regional administration chairman Ruslan Bodelan, who has filed mismanagement charges against Hurvits and called for him to be replaced. PB UKRAINIAN DEPUTIES CRITICIZE ACCORD WITH RUSSIA. A group of Ukrainian parliamentary deputies on 2 March criticized the 10-year economic cooperation agreement signed by Ukrainian and Russian Presidents Leonid Kuchma and Boris Yeltsin in Moscow last week. Deputy Serhiy Teryokhin said such an agreement must be ratified by the Ukrainian parliament. He added that the country would lose billions of dollars as a result of the accord, which included tax exemptions and lower tariffs for Russian gas transiting Ukraine. PB ESTONIA AIMS FOR STABLE GDP GROWTH. Finance Minister Mart Opmann says his government is aiming for GDP growth of 5.5-6 percent over the next few years, BNS and ETA reported on 2 March. Opmann, who was addressing a group of Finnish financial leaders and businessmen, noted that the Finance Ministry predicts inflation at 9.6 percent this year, down from 10.6 percent in 1997. He said that Tallinn would seek to boost exports in a bid to deal with the foreign trade deficit. And he added that the parliament will approve various austerity measures before the summer recess. JC LATVIAN DEPUTIES BLOCK VOTE OF CONFIDENCE. Latvian deputies on 2 March declined to hold a vote of confidence in the government, BNS and Reuters reported. Prime Minister Guntars Krasts proposed the vote after Latvia's Way, the second largest coalition partner, had accused Krasts of seeking to slow down privatization and failing to abide by the government coalition agreement. Krasts was unable, however, to gather enough support to block a procedural resolution preventing the confidence vote from taking place. The premier told BNS that if the government is not able to show solidarity and if parliamentary deputies interfere with its goals, "we will have to repeat the vote of confidence or find more radical steps." JC LITHUANIA INDICTS ANOTHER SUSPECTED WAR CRIMINAL. The Prosecutor-General's Office has brought formal charges against Kazys Gimzauskas, who was deputy chief of the Vilnius security police from 1941-1944 and is suspected of involvement in genocide against Jews, BNS reported on 27 February. Gimzauskas has denied the charges, claiming that he was a member of the anti-Nazi underground. He told BNS that he will repeat his "statement of innocence" under oath. The trial of Aleksandras Lileikis, who was Gimzauskas's superior during the period 1941-1944, is due to begin soon. JC EU OFFICIAL SAYS POLAND LEADS AMONG EASTERN ASPIRANTS. Juergen Trumpf, the secretary-general of the EU Council of Foreign Ministers, said on 2 March that Poland is the leader among former Warsaw Bloc nations seeking to enter the EU. Trumpf, who was in Warsaw for discussions ahead of the 31 March EU membership talks, met with Polish Prime Minister Jerzy Buzek. Buzek said afterwards that it would take Poland about 20 months to adjust legislation to meet EU standards, adding that the most difficult changes will be in the agricultural sector. PB CZECH POLICE DETAIN RUSSIAN CO-OWNER OF WEAPONS EXPORT FIRM. The Russian co-owner of the Kamo company, which exported decommissioned Czech military equipment to North Korea, has been detained, Nova Television reported on 27 February. Vojtech Filip, who is a lawyer and also a parliamentary deputy representing the Communist Party of Bohemia and Moravia, is reported to have helped the company obtain a license, which, however, was not valid for the export of decommissioned material. Filip stressed that the role he played was in his capacity as a lawyer and had "nothing to do with the Communist Party," CTK reported. MS PRAGUE TO END 'SPECIAL RELATIONSHIP' WITH SLOVAKIA. Czech Deputy Foreign Minister Pavel Telicka on 2 March told journalists that the Czech Republic's "special relationship" with Slovakia is likely to end once Prague joins the EU, CTK reported. Telicka, who is Czech chief negotiator in the accession talks with the EU, said Prague would like Slovakia to be included on the list of countries involved in fast-track accession talks. But if that does not happen, he stressed, the Czech Republic will have to act in line with EU directives on the security of borders of member countries. The Czech Republic and Slovakia established a customs union following the breakup of the former Czechoslovakia. MS KOVAC STEPS DOWN AS SLOVAK PRESIDENT. Michal Kovac, speaking at a ceremony marking the end of his term as Slovak president, said it would be "in the interest of Slovakia if intensive negotiations and the good will of all parties involved led to [the] parliament electing a new Slovak president within a short time," Reuters and AFP reported on 2 March. Kovac also criticized the "lack of cooperation" demonstrated by the government headed by Vladimir Meciar. Some presidential powers have passed to Meciar in the absence of an elected successor to Kovac. Some 5,000 demonstrators staged a protest outside the presidential palace, shouting "Meciar-- dictator." MS SLOVAK DAILY REVEALS FINANCING OF MECIAR'S 1994 CAMPAIGN. "Sme" on 2 March reported that the 1994 election campaign of Meciar's Movement for a Democratic Slovakia (HZDS) was heavily financed by "moguls" who had bought major Slovak companies during the privatization process. "Sme" singled out Alexander Rezes, director-general of the Vychodoslovenske Zelenziarne steel giant, and Vladimir Poor from Trnava, western Slovakia, who bought heavily into the oil storage and refinery branches. MS HUNGARY TO FURTHER EXAMINE DAM PROJECT. Hungarian Foreign Minister Laszlo Kovacs told the parliament on 2 March that the cabinet will order further examinations of the Slovak-Hungarian Danube hydropower project before it approves the framework agreement signed in Bratislava last week (see "RFE/RL Newsline," 2 March 1998). Since those examinations will take months, it is unlikely that any agreements related to the project will be signed with Slovakia before the May elections, Kovacs said. MS HUNGARIAN OPPOSITION PARTY TO SUPPORT FAR-RIGHTISTS. The Christian Democratic People's Party (KDNP) on 1 March announced that in some electoral districts, it will support the candidates of the far-right Hungarian Justice and Life Party, headed by Istvan Csurka. In one district, the KDNP will back a candidate of the National Association for Hungary. That party was set up last year by Agnes Nagy Maczo, who is well known for her anti-Semitic views and who was expelled from the Smallholders' Party. MSZ SOUTHEASTERN EUROPE NEARLY 300 KOSOVARS INJURED IN PROTEST. A violent police crackdown on a protest demonstration by Kosovars in Pristina on 2 March left some 289 ethnic Albanians injured, local Albanian-language dailies reported. Major international television broadcasters carried footage that showed police indiscriminately beating even elderly demonstrators. The footage also indicated that some young Albanians threw stones at police. PM SERBIA SAYS KOSOVO SITUATION "UNDER CONTROL." Federal Interior Minister Pavle Bulatovic said in the parliament on 2 March that the situation in Kosovo is under control and that there is no need for military intervention or to declare a state of emergency. In Pristina, an Interior Ministry spokesman said the authorities will not permit what he called "demonstrations that support terrorism." And in Belgrade, representatives of the Helsinki Committee for Human Rights strongly condemned "brutal police repression against the Albanians." The spokesmen added that repressive measures by the police only serve to "reinforce the existing state-sanctioned apartheid" dividing Serbs and Albanians and to give the Albanians no choice except to use violence themselves. PM KOSOVARS WARN OF "TERRIBLE WAR." Xhafer Shatri, the information minister of the Kosovo government-in-exile, said in Geneva on 2 March that a "terrible war" will break out in Kosovo and affect surrounding countries if the international community does not intervene quickly in the wake of recent violence. In Pristina, shadow state President Ibrahim Rugova appealed to the international community--in particular to the U.S. and the EU--to put diplomatic pressure on Belgrade to "end violence in Kosovo." The steering committee of the Democratic League of Kosovo (LDK), the leading Kosovar political party, also appealed to the international community to help stop what the LDK called the dangerous escalation of violence. LDK representatives conveyed their views directly to U.S. and U.K. diplomats in Belgrade, an RFE/RL correspondent reported from the Serbian capital. PM U.S. APPEALS TO SERBIA OVER KOSOVO. A State Department spokesman said in Washington on 2 March that the U.S. is "appalled" by the police violence in Kosovo and appealed to the Serbian authorities to address the Albanians' concerns. The spokesman also urged both sides to engage in an "unconditional dialogue." He warned, however, that the U.S. may reconsider its February decision to lift some long-standing commercial and diplomatic restrictions on Serbia "in light of Serbian actions in Kosovo over the last three days." He added that Washington is "considering further actions that might increase Belgrade's isolation." PM EU CONDEMNS VIOLENCE... The British Foreign Office issued a statement in the name of the EU on 2 March saying that "the EU unreservedly condemns the violent repression of non-violent expressions of political views, including peaceful demonstrations as well as the use of violence and terrorism to achieve political goals. It regrets that police action led directly to civilian casualties." PM ...AS DOES RUSSIA. The Foreign Ministry issued a statement in Moscow on 2 March noting that Russia "has unequivocally denounced terrorist acts and called for refraining from using force," Interfax reported. It urged the Yugoslav authorities to begin a dialogue with Albanian representatives. "The Kosovo problem should be settled on the basis of the territorial integrity of the Federal Republic of Yugoslavia, and of observing the rights of ethnic Albanians and other nationalities in accordance with OSCE standards, the Helsinki principles, and the UN Charter," the statement said. PM MACEDONIA CALLS FOR ACTION ON KOSOVO. Macedonian parliamentary speaker Tito Petkovski said in Vienna on 2 March that "when the [Kosovo] problem turns into an armed conflict, it will spread beyond Kosovo's boundaries. Without rapid [diplomatic] intervention, the stability of the whole region is threatened, including Macedonia," he added. Meanwhile in Skopje, government spokesman Zoran Ivanov said that the Macedonian authorities are "following the developments in Kosovo with great concern." He said that Macedonia expects the "problem will be solved peacefully, through a dialogue between the authorities in Belgrade and the political forces in Pristina," BETA news agency reported. Ivanov denied unspecified media reports that the border between Macedonia and Yugoslavia is closed. PM SLOVENIA LAUNCHES KOSOVO APPEAL. The Slovenian Foreign Ministry said in a statement in Ljubljana on 2 March that Slovenia "is extremely concerned about the increasing violence and new victims in Kosovo.... The killings should be stopped in order to start a tolerant political dialogue which should replace bloodshed and violence.... Slovenia supports an active role of the international community in settling the situation.... The international community should insist that human rights and liberties are respected." Slovenia currently holds a seat on the UN Security Council. PM ALBANIAN PARLIAMENT WANTS NATO PRESENCE. Albanian lawmakers on 2 March approved a statement saying it is ready to "cooperate in every way" if NATO or the UN request that peacekeeping troops be stationed in the western Balkan region, "Koha Jone" reported. At an emergency parliamentary session, representatives of the Democratic Party proposed holding an all-Albanian national roundtable to formulate a common policy on Kosovo. Elsewhere, Prime Minister Fatos Nano urged the international community to become involved in the dispute, adding that the "developments in Drenica show that efforts to solve the Kosovo problems cannot be delayed any longer." Nano also telephoned with his Greek counterpart, Kostas Simitis, to urge him to use his good relations with Belgrade to help reach a settlement. FS/PM ALBANIAN OPPOSITION CALLS FOR KOSOVO RESTRAINT. Democratic Party leader Sali Berisha issued a statement in Tirana on 2 March appealing to the U.S. and EU to help prevent "any further aggravation of the conflict, which could have unforeseen consequences for Kosovo and the southern Balkans." The former president also called on "the political leadership and individual Albanians in Kosovo to restrain themselves so as not to aggravate the conflict with Belgrade's police regime." Berisha was generally known as a supporter of the Kosovars during his presidency from 1992-1997. PM ROMANIAN PRESIDENT HINTS CIORBEA MAY BE SACRIFICED. Emil Constantinescu said after a 2 March meeting with the National Peasant Party Christian Democratic (PNTCD) leadership that in order to resolve the ongoing political crisis, the PNTCD "must ignore party interests." Observers believe this is a hint to the PNTCD that Prime Minister Victor Ciorbea may have to go if cooperation within the ruling coalition is to be restored. Constantinescu pointed out that the PNTCD is the largest political force within the coalition and that its responsibility toward solving the crisis is therefore "all the greater." He also said Romania is at present experiencing five crises: economic, social, political, moral, and communications-related. The last of those crises, he stressed, is particularly affecting the work of the cabinet. MS ANOTHER COALITION PARTY DISTANCES ITSELF FROM CABINET. Romanian Alternative Party (PAR) chairman Varujan Vosganian on 2 March said the cabinet has lost the authority needed to relaunch economic reform. He accused Ciorbea of delaying the process of drafting the budget and said the premier is suffering from a "centralist perception of the national economy." The previous day, a prominent leader of the National Liberal Party hinted that he backs the Democratic Party's demand that Ciorbea resign (see "RFE/RL Newsline," 2 March 1998). MS MOLDOVAN PRESIDENT ON UPCOMING ELECTIONS. In his weekly address to the nation, Petru Lucinschi on 2 March said that regardless of the outcome of the parliamentary elections later this month, Moldova will have no choice but to pursue reforms. But he warned that the elections could result in the "slowing down" of the reform process and may even "make us lose another five to seven years." Lucinschi said the success of reforms depended to a great extent on cooperation between himself and the legislature. He explained that, for this reason, he was calling on the electorate to back political parties that have already demonstrated their willingness to cooperate with him, Infotag and BASA-press reported. MS RUSSIA WANTS IMPROVED TIES WITH BULGARIA. Igor Stroev, chairman of the Federation Council, said in Sofia on 2 March that Russia wants to improve ties with Bulgaria, which are strained because of ongoing disputes over gas supplies, ITAR-TASS reported. Stroev is heading a Russian delegation that is taking part in the celebrations to mark 120 years since the Russo-Bulgarian victory against Turkey. MS EUROLEFT PARTY FORMED IN BULGARIA. The Euroleft alliance has set up a new party, called Bulgarian Euroleft, whose aim is to unite Bulgaria's leftist formations and to establish a "modern, European social democracy" in the country, RFE/RL's Sofia bureau reported on 1 March. Euroleft was formed by defectors from the Socialist Party and won 14 seats in the April 1997 elections. Its leader, Alexander Tomov, will also head the new party. MS BULGARIAN ECONOMY FROZEN EIGHT MONTHS AFTER START OF CURRENCY BOARD by Michael Wyzan A deep economic crisis began in Bulgaria in May 1996 and reached its apogee when the consumer price index (CPI) rose 242.7 percent in February 1997 alone. The lev fell from 70.4 to the dollar at the end of 1995 to 2,045.5 to the dollar just 14 months later, as the national bank's foreign reserves fell from almost $1.5 billion in June 1995 to roughly a quarter of that in January 1997. The average monthly wage nose-dived from over $127 in December 1995 to under $25 in February 1997. Bulgaria's crisis reflected both poor macroeconomic policy and severe structural problems, especially the failure to privatize enterprises and banks or even to change the way they operated. Banks made uncollectable loans to enterprises; when the banks in turn got into trouble, the national bank frequently bailed them out through refinancing (i.e., lending) or programs to replace their bad debt with government bonds. Interest on those bonds became a burden on the budget, especially in 1996, when the deficit hit 11.5 percent of gross domestic product (GDP). The crisis and its aftermath caused a shakeout among large enterprises and banks. In the end, 14 of 27 banks failed. The government of Prime Minister Ivan Kostov, elected in April 1997, introduced a currency board on 1 July. Under such a board, the exchange rate against a major currency is fixed and backed 100 percent (or more) by foreign reserves. The only increases allowed in the domestic money supply result from converting foreign currency into domestic money. The economy has stabilized greatly since the currency board's introduction. CPI inflation has fallen to 0.5-2 percent monthly over the last four months (it was 2.1 percent in January). That it has not fallen further partly reflects the weakening of the German mark against the dollar in July and August of 1997 and January 1998 and the liberalization of food and energy prices. Average monthly wages reached almost $108 in December 1997, twice their dollar level a year earlier. Confidence has returned to the banks, with people converting their money back into leva and redepositing it with them. The international financial institutions have resumed lending to Bulgaria. During 1997 it received $320 million from a loan awarded in April by the IMF, whose Bulgarian mission chief said in February that performance is "better than expected." Bulgaria also signed loan agreements with the World Bank ($100 million) and the EU ($250 million) last year. These factors contributed to a rise in the national bank's foreign reserves to over $2 billion by the end of 1997. For all the good news, the economy remains depressed, with GDP declining by 7.4 percent in 1997. While many observers had predicted rising unemployment this winter, that has not happened: the unemployment rate in January was 14.2 percent, higher than in the autumn, but equal to its level in July 1997. Banks are now flush with liquidity but seemingly unwilling to lend to enterprises. The main use for banks' funds is buying government bonds. With the budget deficit sharply reduced -- it was 3.6 percent of GDP last year and is projected at 2 percent this year -- the government demands less credit. Interest rates are extremely low. The national bank set its basic annual interest rate recently at 5.53 percent, with inflation (optimistically) projected at 16.5 percent. If banks resume lending to enterprises, interest rates on such loans will be much higher. Loans of that type are especially risky now that banks can no longer expect national bank bailouts. One irony is that although the economic crisis began with a huge drop in the lev, that event was not preceded by a large current account deficit. Bulgarian had small trade and current account surpluses in 1996 and larger ones in 1997. However, the continuing inflation under a fixed exchange rate regime will result in Bulgarian exports becoming more expensive and imports cheaper, undoubtedly leading to rising trade and current account deficits. That could occur as soon as this year, especially when the dollar wage exceeds its historical high of $128. Then the question becomes whether financial inflows, especially foreign direct investment, will flow in sufficiently to finance badly needed imports, especially of investment goods. Although there has been disappointment over the failure so far to receive higher credit ratings from international rating agencies, several large privatization deals have been signed involving foreign investors. One positive development is bank privatization. In July, the government announced the sale of the United Bulgarian Bank (Bulgaria's second largest) to several investors, including the European Bank for Reconstruction and Development; and Japan's Nomura won a tender on 18 February to buy 78.3 percent of the Postal Bank. The author is an economist living in Austria. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. 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