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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 2, No. 68 Part II, 8 April 1998


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RFE/RL NEWSLINE Vol 2, No. 68 Part II, 8 April 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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RUSSIAN MEDIA EMPIRES II
Businessmen, government leaders, politicians, and financial
companies continue to reshape Russia's media landscape. This
update of a September report identifies the players and
their media holdings via charts, tables and articles:
http://www.rferl.org/nca/special/rumedia2/index.html

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Headlines, Part II

* YELTSIN BACKS ECONOMIC PRESSURE ON LATVIA

* KOSOVARS SAY SHELLING CONTINUES

* RUSSIA STILL SHIPPING ARMS TO BELGRADE?

End Note: ESTONIA'S ECONOMY SLOWS, EASING FEARS OF
OVERHEATING

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REGIONAL AFFAIRS

YELTSIN BACKS ECONOMIC PRESSURE ON LATVIA. Russian
presidential spokesman Sergei Yastrzhembskii on 8 April
announced that Boris Yeltsin supports economic measures to
encourage Latvia to end its "unceasing policy of
discrimination" against Russian-speakers, Interfax reported.
Yastrzhembskii denied that the measures would be tantamount
to economic sanctions. Meanwhile, Kemerovo Oblast Governor
Aman Tuleev told ITAR-TASS that he has asked managers of
enterprises in his region to halt deliveries of goods,
including coal, to Latvia. Tuleev is a member of a Russian
Federation Council commission on protecting the rights of
Russian-speakers in Latvia. In recent days, Saratov Governor
Dmitrii Ayatskov, Yaroslavl Governor Anatolii Lisitsyn, and
Moscow Mayor Yurii Luzhkov have all called on the Russian
government to increase pressure on Latvia. LB

LATVIAN POLICE CHIEF FIRED OVER SYNAGOGUE BOMBING... The
government on 7 April fired national police chief Aldis
Lieljuksis, whom Interior Minister Ziedonis Cevers has
blamed for the 2 April bombing of the Riga synagogue. Cevers
says that his orders to install video cameras at the
building were not carried out. Also on 7 April, Juris
Dalbins, commander of the armed forces, handed in his
resignation to President Guntis Ulmanis. The day after the
synagogue bombing, the National Security Council had called
for the dismissal of both officials (see "RFE/RL Newsline,"
3 April 1998). JC

...WHILE SEARCH FOR BOMB CULPRITS CONTINUES. "Diena"
reported on 8 April that according to the Ministry of
Internal Affairs, the search for those responsible for the
Riga bombings has been narrowed down to two individuals. The
police operation in the wake of the two explosions is
described as the largest in Latvia in 20 years, involving
some 2,200 policemen. A total of 265 people were taken into
custody, of whom 40 were wanted in relation to other crimes.
Meanwhile, many government buildings and religious sites in
the capital are under constant police surveillance. JC

ITALY'S DINI SAYS LATVIA'S EU CHANCES IMPAIRED. Italian
Foreign Minister Lamberto Dini has said that recent problems
over Latvia's ethnic Russian community will not help
Latvia's case for EU membership, Reuters reported. Speaking
at a joint press conference with Russian Foreign Minister
Yevgenii Primakov in Moscow on 7 April, Dini said that
Latvia's membership in EU is "not near at hand." He added
that "events like those of recent days distance Latvia
further from the process of preliminary membership." Latvian
President Guntis Ulmanis said on the weekend that recent
events have greatly damaged Latvia's prospects of prompt EU
entry. JC

EAST-CENTRAL EUROPE

MINSK INTRODUCES TOUGH ECONOMIC MEASURES. The Belarusian
Finance Ministry has introduced tough measures aimed at
stabilizing the country's economy, ITAR-TASS reported,
citing the 8 April "Zvyazda". The ministry is demanding that
managers do not import goods if comparable products are
available on the domestic market. It also demands that more
rigorous control be imposed over budget allocations for
administrative purposes. JM

BELARUSIAN OPPOSITION DEFENDS RELIGIOUS HOLIDAYS. The
opposition has called on religious believers not to obey
Belarusian President Alyaksandr Lukashenka's decree last
month canceling the Catholic and Orthodox Easter and All
Saints' Day as public holidays, Belapan reported on 7 April.
The same decree retained the 7 November holiday
commemorating the 1917 Bolshevik revolution. Yury Khadyka,
deputy chairman of the opposition Belarusian Popular Front,
told journalists that the decree is "an openly declared
return to the past" and may exacerbate tensions between
religious groups. JM

GOVERNMENT BANS CONTACTS WITH INDEPENDENT MEDIA. The
Belarusian government has issued a document introducing
restrictions on contacts with the independent media, Belapan
reported on 7 April. The document, which is described as for
official use only, refers to a directive issued earlier by
Lukashenka "to step up counterpropaganda against the
opposition press." The document prohibits state bodies from
passing official materials to the independent media and
warns officials against making comments on state documents
in the opposition press. In addition, the government bans
official advertising in a number of independent newspapers,
including "Naviny," "Belorusskaya Delovaya Gazeta," and
"Narodnaya Volya." JM

PARLIAMENTARY ELECTIONS IN BELARUS IN 1998? Henadz Karpenka,
former parliamentary deputy speaker and head of the
opposition shadow cabinet, told journalists on 7 April that
Lukashenka has decided to call parliamentary elections for
November 1998, Belapan reported. According to Karpenka, the
decision was made under pressure from European organizations
and following acting Russian Deputy Prime Minister Ivan
Rybkin's visit to Minsk. JM

EIGHT PARTIES WIN SEATS IN UKRAINIAN PARLIAMENT. The Central
Electoral Commission has announced the final results of the
29 March parliamentary elections for party-list mandates,
Ukrainian Television-1 reported on 7 April. The 4 percent
vote threshold was overcome by eight parties and blocs: the
Communists (84 mandates), the Popular Rukh (32), the
Socialists/Peasants (29), the Greens (19), the Popular
Democratic Party (17), the Hromada party (16), the
Progressive Socialists (14), and the United Social Democrats
(14). JM

COALITION EXPANSION TALKS CONTINUE IN ESTONIA. The ruling
Coalition Party has rejected a proposal by the Reform Party
to form a coalition composed of itself, the Coalition Party,
and the United Opposition (an alliance of several right-wing
parties), ETA reported on 7 April. The previous day, the
Reformists had refused to join the current coalition, saying
it would be unable to work with the bloc of rural parties
that constitute the junior coalition partner in the
government. Coalition Party leader and Prime Minister Mart
Siimann said his party and the Reformists have reached a
"gentleman's agreement" whereby the government will consult
the opposition before making key decisions and the
opposition will refrain from becoming "obstructionist or
destructive." In the meantime, the ruling coalition will
begin expansion negotiations with Foreign Minister Toomas
Hendrik Ilves's People's Party and the Progressive Party. JC

ADVISER SAYS HAVEL WOULD NAME ZEMAN PREMIER. An adviser to
President Vaclav Havel says that if the Social Democrats win
the June elections and are able to form a majority
government, party leader Milos Zeman is likely to be chosen
to head the new government, the Czech daily "Mlada fronta
Dnes" reported on 8 April. Jiri Pehe, Havel's political
adviser, denied rumors among the media that Havel would seek
not to name Zeman. The previous day, "Pravo" had reported
that Havel wants Jan Ruml, head of the newly formed Freedom
Union, to be nominated as prime minister. Pehe said that
Havel has no special preference for Ruml and that the
newspaper report was "totally false." PB

PROPOSAL FOR DIRECT ELECTION OF SLOVAK PRESIDENT FAILS. The
parliament on 7 April rejected a bill calling for a
referendum on the direct election of the president, RFE/RL's
Slovak Service reported. Of the 119 deputies present, 50
voted for the measure and 44 abstained. A majority of those
present (in this case 60 votes) would have been necessary
for the passage of the bill, which was proposed by the Party
of the Democratic Left. The parliament will try for a fifth
time to elect a president on 16 April. Opinion polls show
that a majority of Slovaks favor direct presidential
elections. PB

SOUTHEASTERN EUROPE

KOSOVARS SAY SHELLING CONTINUES. Some 14 buses, 10 vans, and
10 trucks filled with Serbian special police troops arrived
in Kosova from Serbia proper on 6 April, the Albanian news
agency Enter reported the following day, quoting Kosovar
sources. Within Kosova, police reinforcements, tanks, and
armored vehicles arrived in the Skenderaj and Fushe-Kosova
areas on 6-7 April. Also on 6 April, Serbian artillery
shelled the village of Kopiliq near Skenderaj, wounding two
people, the Kosovar shadow-state's KIC news agency reported.
PM

SESELJ BLASTS 'PLAN FROM HELL.' The Serbian parliament on 7
April voted 193 to four to approve Yugoslav President
Slobodan Milosevic's proposal to hold a referendum on 23
April on whether to allow foreign mediation in the Kosovo
dispute. Serbian Deputy Prime Minister Vojislav Seselj said
that the referendum will give Serbs an opportunity to reject
what he called the foreign "plan from hell for the breakup
and destruction of Serbia and the Serbian people," RFE/RL
reported. A deputy from Seselj's Serbian Radical Party
argued that the U.S. has always "supported our enemies, and
now it wants to destroy the Serbs. If we accept mediation,
we will be signing [our own] surrender." PM

KINKEL CALLS REFERENDUM MEANINGLESS. German Foreign Minister
Klaus Kinkel told the "Frankfurter Rundschau" of 7 April
that "the referendum is an evasion maneuver...being carried
out only to support Milosevic's position. [The referendum]
cannot influence our political actions." The minister said
the question of deploying foreign troops around Kosova's
international borders is "complicated." He suggested that
the UN might extend the mandate of its troops in Macedonia,
and that the WEU might deploy forces in Albania. He added
that "there is probably no majority in the Security Council
for a UN mandate" in Albania with NATO participation. Kinkel
stated that "it is known who supplies weapons" to Belgrade
and that the embargo will make it easy to block such sales.
He added that "at present, the main problem is that weapons
must no longer get to Kosova across the Macedonian or
Albanian borders." PM

RUSSIA STILL SHIPPING ARMS TO BELGRADE? Russian Foreign
Ministry spokesmen on 7 April denied a report in the Moscow
daily "Russkii telegraf" that Russia is continuing to supply
weapons to Yugoslavia, despite the UN Security Council's
embargo on such sales, RFE/RL reported. The daily wrote that
spare parts are continuing to arrive in Montenegrin ports.
It also quoted unnamed Defense Ministry sources as denying
recent Western press reports that Moscow and Belgrade
concluded a $1.5 billion deal for MiG fighters and other
weapons in December (see "RFE/RL Newsline," 26 March 1998).
Meanwhile in Belgrade, Yugoslav and Russian trade officials
signed a $80 million annual barter agreement on 6 April
whereby Yugoslavia will supply meat, butter, fruit,
vegetables, and edible oil in return for Russian gas. PM

PRIMAKOV GIVES WARNING ON KOSOVA. Russian Foreign Minister
Yevgenii Primakov said in Moscow on 7 April that "for us,
two things are absolutely inadmissible: to separate the
Kosova region from Serbia --this is not acceptable to the
Serbs, or anybody else, and can lead to a massacre --and to
send troops to the area, under whatever flag they would be
deployed." PM

CHIRAC PLEDGES AID FOR MOSTAR BRIDGE. French President
Jacques Chirac said in Sarajevo on 7 April that Paris will
work with its allies to ensure that Kosova is spared the
violence that tore Bosnia apart from 1992 to 1995. He urged
Bosnia's Muslim, Croatian, and Serbian leaders to work
together in the spirit of reconciliation as the French and
Germans learned to do after World War II, the Belgrade daily
"Danas" reported. Later in Mostar, Chirac added that France
will help finance the ongoing reconstruction of the
historical Mostar bridge. PM

WHERE IS KARADZIC? Guards are no longer posted near the
apparently empty home of indicted war criminal Radovan
Karadzic in Pale, AFP reported on 7 April. The news agency
added that rumors have long been rife that Karadzic is in
Russia, a possibility that the Russian Foreign Ministry has
repeatedly denied. AFP stated that Sarajevo-based diplomats
say that NATO knows where Karadzic is at any given time and
that the Atlantic alliance hopes to work through the Banja
Luka-based Bosnian Serb leadership to arrest him. PM

BAN PROPOSED ON ZAGREB DEMONSTRATIONS. The city government,
which is dominated by President Franjo Tudjman's Croatian
Democratic Community, said in a statement on 7 April that it
will soon send a bill to the city council to ban
demonstrations at street intersections and on squares,
including central Jelacic Square, RFE/RL reported.
Opposition groups usually try to stage their protests on
Jelacic Square. There have been numerous demonstrations in
Zagreb and elsewhere in Croatia since the introduction of a
value-added tax in January. PM

ALBANIAN PRESIDENT PRAISES RELIGIOUS COMMUNITIES. Speaking
on the Muslim holiday of Kurban Bajram during a meeting with
the head of Albania's Sunni community, Rexhep Meidani
praised the role of all religious communities "on the
Albanian people's road toward spiritual revival and material
progress." He commented that religious communities "are
close to the people [and stand] above political parties."
And he stressed that "our joint efforts for Albanians to put
behind themselves the evil of a year ago, in the name of
peace and understanding [and] the country's stability and
consolidation, are also indispensable for the solution of
our national issue" (see "RFE/RL Bosnia Report," 25 March
1998). FS

WEU EXTENDS ALBANIA MANDATE. Meeting in Brussels on 7 April,
the Western European Union Council extended the mandate of
its Multinational Albanian Police Element (MAPE) mission
until April 1999. The council also decided to expand the
force from 60 to 100 men. MAPE is helping reorganize the
Albanian police force and provides training in
administration and professional ethics. FS

VASILE PRESENTS NEW CABINET... Prime Minister-designate Radu
Vasile named his government lineup on 7 April, Reuters
reported. The proposed cabinet, which was formed after five
days of talks with the four coalition parties, has 11 new
ministers and 13 holdovers from former Prime Minister Victor
Ciorbea's last cabinet. Ten members of the National Peasant
Party Christian Democratic have been named, and six from the
Social Democratic Party. Two independents will keep their
key posts: Daniel Daianu as finance minister and Andrei
Plesu as foreign minister. PB

...PLEDGES "DYNAMIC REFORMS." Vasile pledged that the new
cabinet would institute "dynamic and extremely rapid reforms
with a modern social dimension," Reuters reported. Vasile,
who will have to resolve conflicts within his government
over such issues as property restitution and privatization,
said his aim will be to convince foreign investors that
"things are moving" in the government. He said the cabinet
will strive to accomplish three goals immediately:
increasing the authority of the premier, eliminating the
dysfunctional components of the previous government, and
achieving greater efficiency in the government's work. PB

MOLDOVAN PRESIDENT UNDERGOES SURGERY IN GERMANY. Petru
Lucinschi has had surgery to alleviate the effects of a
spinal disease, Infotag reported on 7 April. The operation,
which was carried out in Frankfurt, was successful and his
condition is reported to be satisfactory. Lucinschi had
spent 10 days in a Chisinau hospital before the operation
for treatment of lumbago. In other news, Dumitru Diakov, the
leader of the centrist For a Democratic and Prosperous
Moldova Bloc (PMDP), said that cooperation between his party
and the Communists is unlikely. Diakov said that he is
unhappy with statements made by the Communists about the
PMDP. The Communist Party won 40 of the 101 parliamentary
seats in the 22 March elections. PB

BULGARIAN PRESIDENT CALLS FOR END TO ACCUSATIONS. Petar
Stoyanov appealed for calm on 7 April after Prime Minister
Ivan Kostov said corruption in the country could jeopardize
integration with Western institutions, AFP reported. Kostov
had told the daily "Trud" the previous day that the
country's judiciary is "inefficient and corrupt" and that a
lack of respect for the law is hurting foreign investment.
He added that if the country is not successful in fighting
corruption, it will not be allowed to join either NATO or
the EU. Stoyanov later called on legislators, cabinet
members, and judges to devise a joint strategy to tackle
corruption. He called for an end to the inter-government
accusations, saying they only encourage criminals. PB

BULGARIA TO ADOPT PROGRAMS FOR ROMA. Government officials
said they are planning a program to help educate and employ
the country's impoverished Romani citizens, Reuters reported
on 7 April. Petar Atanassov, the head of the National Ethnic
and Demographic Council, said it will draft a program in
coordination with Romani leaders that will aim to improve
the opportunities available for Bulgaria's some 500,000
Roma. Atanassov added that he is aware that "centuries-old
prejudices" cannot be changed in a few years. PB

END NOTE

ESTONIA'S ECONOMY SLOWS, EASING FEARS OF OVERHEATING

by Michael Wyzan

	Last year, gross domestic product (GDP) growth of
about 9 percent made Estonia one the world's fastest growing
economies, with only Bosnia and Georgia among transition
economies displaying greater dynamism. Such rapid growth has
brought with it unwanted side effects, including widening
trade and current account deficits and a tightening of the
labor market.
	Under the currency board arrangement introduced in
June 1992, all foreign currency flowing into the country
must be converted into kroon at the fixed rate of 8 kroon to
the German mark. This means Estonia's considerable success in
attracting foreign direct investment (FDI) and other capital
inflows has led to relatively high inflation; consumer prices
rose by 12.5 percent in 1997, compared with 7.0 percent in
Latvia and 8.4 percent in Lithuania.
	Estonia received more than $1 billion in cumulative
FDI through September 1997. Other sources of capital
inflows, which are becoming increasingly important, include
local government borrowing, portfolio investment, and
medium-term bank credit lines.
	Portfolio investment has largely gone into the Tallinn
Stock Exchange (TSE), which since opening in May 1996 has
become unusually large and liquid for an economy in
transition. The TSE's stock index grew by 280 percent in
1996 and 50-70 percent in the first half of 1997 before
nose-diving in the fall during the East Asian financial
crisis, partly because of higher interest rates late in 1997
in response to a rise in inflation in the summer. Annual
interest rates on commercial bank loans in kroon rose from
7.9 percent at the end of July to 18.3 percent at the end of
the year.
	Capital inflows may spark inflation and fuel
unsustainable stock market booms but are nonetheless
necessary to finance Estonia's current account deficit,
which was $315 million from January to September 1997,
compared with $301 million during the same period the
previous year. Last year's trade deficit was $1.4 billion,
up from $1.1 billion in 1996. The fact that the current
account imbalances are so much smaller than the trade
deficits reflects the large net service inflows resulting
mainly from tourism.
	The current account deficit was about 10 percent of
GDP for the year as a whole, one of the highest figures
among transition and developing countries. Moreover, the
deficit is growing more rapidly than the dollar figures
suggest: measured in terms of the German mark, to which the
kroon is pegged, it was up by 59 percent from January to
September 1997 relative to the same period in 1996.
	However, there are several factors suggesting that the
pegging of the kroon to the mark will not be endangered in
the near future. First, the Bank of Estonia's foreign
reserves continue to grow rapidly, reaching about $825
million at the end of 1997, compared with around $700
million a year earlier. In German marks, they grew by almost
35 percent over that period.
	Second, despite the rising importance of portfolio and
other volatile forms of foreign investment, FDI remained
about half of capital inflows in the first three quarters of
last year. FDI is usually considered to be of a longer-term
nature than other flows and is thus less likely to flow out
again during crises and thereby destabilize the foreign
exchange market.
	Third, much depends on whether exporters can withstand
a situation whereby the exchange rate is fixed for years to
a foreign currency while inflation remains high. In such
cases, rising labor costs are an indicator of declining
international competitiveness. In Estonia from December 1996
to December 1997, unemployment as a share of the labor force
declined from 5.5 percent to 4.6 percent and the average
monthly wage rose from $295 to $302, both worrying signs
from the standpoint of the country's ability to compete on
international markets.
	However, privatization is virtually complete, based
largely on sales to both citizens and foreigners willing and
able to restructure enterprises and improve corporate
government. Many firms, especially those benefiting from
FDI, may be able to withstand upward pressure on labor
costs.
	There are also signs that as of fall 1997, the economy
is slowing down. The decline in the stock market, higher
interest rates, and a rise in the banks' capital ratios from
the 8 percent recommended by the Bank for International
Settlements to 10 percent are contributing to that trend.
	The 1998 budget, which was passed on 17 December,
assumes a GDP growth rate of 5.5 percent for the year. The
same day, the IMF approved a $22 million loan to the
country. One of the conditions attached to that loan is that
the budget surplus total1.8 percent of GDP this year,
compared with 0.4 percent in 1997. Such strict fiscal policy
will help slow the economy and discourage capital inflows.

The author is an economist living in Austria.

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