RFE/RL NEWSLINE Vol 2, No. 90 Part II, 13 May 1998

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RFE/RL NEWSLINE Vol 2, No. 90 Part II, 13 May 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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COMMUNIST HOUSING: A FLAW IN THE DESIGN
More than 170 million people in Eastern Europe and the
former Soviet Union live in decaying housing complexes. This
five-part series examines the issues, compares East Berlin's
rehabilitation success story with Prague's less than
successful efforts, and describes the state of U.S. public
housing. http://www.rferl.org/nca/special/housing/
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Headlines, Part II

* HUNGARIAN OPPOSITION UNITES FOR RUN-OFF

* HOLBROOKE ANNOUNCES MILOSEVIC, RUGOVA MEETING

* MILOSEVIC TO STAGE COUP IN MONTENEGRO?

End Note: TENSIONS WITH RUSSIA OVERSHADOW LATVIA'S ECONOMIC
PERFORMANCE
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EAST-CENTRAL EUROPE

UKRAINIAN PARLIAMENT ELECTS PRESIDIUM. At its first session,
which opened on 12 May, the new parliament elected a
temporary presidium to supervise the legislative process
until the election of a speaker. The presidium consists of
Petro Symonenko, head of the Communist Party; Oleksandr
Moroz, chief of the Socialist Party; Anatoliy Matviyenko,
leader of the Popular Democratic Party; Yuriy Kostenko,
former minister of environment and nuclear safety; and Pavlo
Lazarenko, head of the Hromada party. Also on 12 May, the
Communist faction abstained from repeating the oath of
office, which was read by 78-year-old Yaroslava Stetsko,
leader of the ultra-right Congress of Ukrainian
Nationalists, RFE/RL's Kyiv Bureau reported. JM

KUCHMA CALLS ON PARLIAMENT TO BACK SPENDING CUTS. Addressing
the opening session of the Supreme Council, President Leonid
Kuchma called on lawmakers to support reducing budgetary
subsidies, which account for one-fifth of Ukraine's budget.
The reduction is a key condition for obtaining an IMF loan
worth $2.5 billion. The president added that the cabinet is
to submit a new version of the 1998 budget in which the
deficit is reduced to 2.5 percent of GDP. At the same time,
Kuchma appealed for the tax burden on the wage fund to be
eased to 35 percent in the second half of this year. JM

MOROZ SAYS SYMONENKO HAS 'BEST CHANCES' OF BECOMING SPEAKER.
Oleksandr Moroz, head of the Socialist Party and former
parliamentary speaker, has said Communist Party First
Secretary Petro Symonenko has "best chances to head the
republic's new parliament," ITAR-TASS reported. Moroz also
said the Socialists and the Agrarians will demand that the
government present a report in June on implementing the law
on minimum wages and pensions. He warned that if the law's
targets are not met, there will be a good reason to demand
the cabinet's resignation. JM

JAPANESE COMPANY TO INVEST $2 BILLION IN UKRAINE. Japan's
Mitsui company is to invest some $2 billion in the Ukrainian
economy, ITAR-TASS reported. The company's financial
director told President Kuchma on 12 May that the company is
primarily interested in the joint construction of electric
power stations and mineral fertilizer plants. JM

WILL YUGOSLAVIA JOIN RUSSIA-BELARUS UNION? Tomislav Nikolic,
head of the Yugoslav parliamentary Committee for Foreign
Affairs and Foreign Trade and deputy chairman of the
ultranationalist Serbian Radical Party of Vojislav Seselj,
told the Parliamentary Assembly of the Russia-Belarus Union
in Homel on 4 May that Yugoslavia is halfway toward joining
the Belarusian-Russian union. In an interview with the
Belarusian daily "Zvyazda" published on 12 May, Nikolic
confirmed Yugoslavia's desire to obtain an "official status"
at the Belarusian-Russian legislature. Stressing the common
cultural and religious roots of Yugoslavia, Belarus, and
Russia, Nikolic said that Yugoslavia seeks protection from
attacks by "imperialistic forces from the West and Islam
from the East." JM

BALTIC PRESIDENTS CONDEMN RUSSIAN PRESSURE ON LATVIA...
Following their summit in Riga on 12 May, the presidents of
Estonia, Latvia, Lithuania issued a joint statement
condemning Russian political and economic pressure on Riga,
which, they said, is dangerous for the whole of Europe. They
stressed that this time Baltic unity has been clearly
demonstrated, and they pledged to increase trade and
cooperation between the three states. The presidents also
agreed to establish investigative commissions in all three
countries that will look into the atrocities committed from
1939 to 1991, and especially during World War II. JC

...WHILE YELTSIN LAUDS MOSCOW'S STANCE. In his speech to the
Russian Foreign Ministry earlier the same day, President
Boris Yeltsin praised Russian diplomats for their "firm and
fruitful stance" aimed at protecting the rights of ethnic
Russians in the Baltic countries, Russian and Baltic
agencies reported. He added that Russia is proving by its
deeds that it cannot be ignored and that it has sufficient
means to protect the rights of "compatriots abroad." JC

ESTONIAN FOREIGN MINISTER IN BEIJING. Toomas Hendrik Ilves,
currently on a five-day visit to China, met separately with
his Chinese counterpart, Tang Jiaxuan, and Vice President Hu
Jingtao in Beijing on 12 May, BNS and ETA reported. Both
meetings focused on economic issues. The same day, Ilves and
the head of the Chinese Tax Board signed an agreement on
avoiding double taxation and tax evasion. China is the first
Asian country with which Estonia has signed such an accord.
JC

ADAMKUS TO PAY EQUAL ATTENTION TO U.S., RUSSIA. In an
interview with the Russian weekly "Moskovskie Novosti,"
Lithuanian President Valdas Adamkus said he is planning to
pay equal attention to relations with the U.S. and Russia in
his foreign policy, BNS reported on 12 May. Adamkus stressed
that Lithuania considers itself a European state and intends
to "officially coordinate" all its actions with the other
states on the Continent. He added that "the U.S. will also
participate in this process." At the same time, Adamkus said
he does not intend to pay "any special attention" to the
U.S. "Washington will receive as much attention as, for
instance, our eastern neighbor, that is, democratic Russia,"
Adamkus said. JC

DOES POLISH GOVERNMENT INCLUDE COMMUNIST-ERA COLLABORATORS?
Private Radio Zet on 11 May alleged that a minister in the
current Solidarity-led cabinet collaborated with the
communist-era secret services, unleashing rumors about
possible ties of senior government officials to the former
secret police. Under a 1997 law, all senior officials have
to submit declarations on whether they collaborated with the
security police. Those declarations are to be examined by a
special court that has not been set up yet because not
enough judges volunteered to sit on it. Prime Minister Jerzy
Buzek told journalists that all his ministers have denied
collaboration in their declarations. He declined to comment
on the rumors. "Rzeczpospolita" reported on 13 May that
Buzek has ordered that the declarations of some 290 senior
government officials be published immediately in "Monitor
Polski," the government's official mouthpiece. JM

CZECH PARLIAMENT OVERTURNS PRESIDENTIAL REJECTION. With a
comfortable majority of 128-43, the Chamber of Deputies on
12 May overturned President Vaclav Havel's rejection of a
controversial drug bill that bans possession of narcotics.
Havel believes that the draft law provides harsher penalties
for drug users than for dealers and manufactures. The law
goes into effect in January 1999. In other news, 15
political parties and three movements submitted lists of
candidates before the 10 May deadline for taking part in the
early elections scheduled for mid-June, CTK reported on 11
May. MS

GERMAN OFFICERS TAKE PART IN CZECH ARMY MANEUVERS. For the
first time, officers of the German armed forces are taking
part in a Czech army maneuver aimed at coordinating cross-
border cooperation, dpa reported on 12 May citing CTK.
Meanwhile, Jaroslav Sedivy on 12 May became the first Czech
foreign minister to meet with a representative of the
organization of Sudeten Germans, who were forced to leave
Czechoslovakia after World War II. The meeting was initiated
by President Havel, who was unable to participate owing to
ongoing recovery from surgery. MS

SLOVAKIA EXAMINES EXCHANGE SYSTEM AHEAD OF EURO
INTRODUCTION. Marian Jusko, deputy governor of the Slovak
National Bank, told a meeting of the European Bank for
Reconstruction and Development in Kyiv on 11 May that his
country is considering changes in its foreign-currency
exchange mechanisms in preparation for the introduction of
the European currency in early 1999. Jusko said Slovakia
will finalize those changes "within one month" and introduce
the new system next year. He declined to provide further
details, an RFE/RL correspondent in Kyiv reported.
Slovakia's fixed exchange rate is calculated in terms of a
"currency basket" based 60 percent on the German mark and 40
percent on the U.S. dollar. MS

HUNGARIAN OPPOSITION UNITES FOR RUN-OFF. The Federation of
Young Democrats-Hungarian Civic Party (FIDESZ-MPP) and the
Hungarian Democratic Forum (MDF) on 12 May agreed to
withdraw candidates in favor of those who fared best in the
first round of parliamentary elections. The Democratic
People's Party also announced that it will withdraw its 31
candidates for the sake of FIDESZ. Independent Smallholders'
chairman Jozsef Torgyan has urged that a "reasonable
agreement" be reached with FIDESZ, which, he said, is
playing a "tactical power game "in refusing to hold talks
with his party. Socialist Party chairman Gyula Horn warned
that a government of moderate-right, radical, and extreme
right-wing parties could endanger political and economic
stability as well as delay Hungary's EU and NATO
integration. MSZ

SOUTHEASTERN EUROPE

HOLBROOKE ANNOUNCES MILOSEVIC, RUGOVA MEETING... U.S.
special envoy Richard Holbrooke said in Belgrade on 13 May
that Yugoslav President Slobodan Milosevic has agreed to
meet with Kosovar shadow-state President Ibrahim Rugova in
the Serbian capital on 15 May without preconditions and
without foreign mediators. Holbrooke added that the session
"will be followed within one week by a series of meetings to
take place at least once a week between the delegations of
both sides. These meetings will take place in Prishtina.
They will alternate between sites chosen by both sides."
Holbrooke made the announcement after five days of shuttle
diplomacy between Belgrade and Prishtina, plus one stop in
Tirana. The Kosovars made a major concession to Milosevic by
agreeing to meetings without foreign mediation. PM

...BUT ADVISES CAUTION. Holbrooke, who was the architect of
the 1995 Dayton agreements, said in Belgrade on 13 May that
the meeting between Milosevic and Rugova is "only the first
step for a political solution." The diplomat cautioned that
"the vast differences between the two sides remain as wide
as ever [and the crisis] could escalate into something worse
than Bosnia before Dayton." He praised Milosevic for "taking
personal responsibility" in calling for the talks.
Milosevic's office said in a statement that the meeting of
the two leaders is necessary to end "unnecessary" delays in
establishing a dialogue. PM

YUGOSLAVIA SHUTS LAST CROSSING TO ALBANIA. Yugoslav border
guards on 11 May closed the border checkpoint between
Shkodra and Podgorica, "Koha Jone" reported on 13 May. It
was the last open checkpoint between Albania and Yugoslavia
and was used by primarily Albanian citizens of Montenegrin
origin, who do not need visas to visit Montenegro. The
Yugoslav army also tightened security along the border and
recently began to deploy regularly four patrol boats on Lake
Shkodra. Last month, Yugoslavia closed two border
checkpoints linking Albania and Kosova. FS

WEU PLEDGES SECURITY AID TO ALBANIA. Meeting on Rhodes on 12
May, defense and foreign ministers from the member states of
the West European Union adopted a British proposal to
increase the number of WEU police in Albania from 60 to 90.
The WEU police will help train Albanian border guards as
well as police. The delegates did not act on Albanian calls
for a stronger foreign military presence along the border
with Kosova. Germany and Greece, in particular, were
reluctant to adopt any tough measures, AFP reported.
Meanwhile in Washington, the World Bank approved $44 million
worth of credits to improve health care, sanitation, roads,
and the power supply in Albania. One of the credits will go
to modernize the port of Durres. PM

MILOSEVIC TO STAGE COUP IN MONTENEGRO? The leadership around
Milosevic intends to oust federal Prime Minister Radoje
Kontic, a Montenegrin, on 18 May and replace him with a
Montenegrin whom Milosevic considers more loyal, RFE/RL's
South Slavic Service reported on 12 May. The new prime
minister will then declare a state of emergency in
Montenegro, which is under the leadership of reformist
President Milo Djukanovic, a political enemy of Milosevic.
Leaders of the Socialist People's Party of Momir Bulatovic,
who is Milosevic's main ally in Montenegro, and Vojislav
Seselj's Serbian Radical Party said on 12 May in Belgrade
that they will introduce a measure in the parliament calling
for Kontic's removal "on grounds of incompetence." PM

DJUKANOVIC SAYS MILOSEVIC PREPARING STATE OF EMERGENCY.
President Djukanovic said in Podgorica on 12 May that
Kontic's ouster will be a prelude to Belgrade's declaring a
state of emergency in Montenegro. He added that the name of
the new prime minister will be made known shortly. RFE/RL's
South Slavic Service reported that Bulatovic is likely to be
appointed to that post. In Belgrade, spokesmen for the
United Yugoslav Left, which is headed by Milosevic's wife
Mira Markovic, hailed the move by Bulatovic's and Seselj's
parties. Representatives of Vuk Draskovic's Serbian Renewal
Movement did not say how they will vote but indicated that
the party is unhappy with the government. PM

BELGRADE MOVES AGAINST ELECTRONIC MEDIA. The Association of
Independent Electronic Media in Yugoslavia (ANEM) said in a
statement in Belgrade on 12 May that the government has
committed "the most flagrant breach of media freedoms in
Yugoslavia to date" by imposing stiff fees for radio and
television frequency licenses. The government made the
decision on 7 April but "kept it secret until now," the
statement continued. The new monthly fees of $35,000 are
prohibitively high for private broadcasters in Yugoslavia.
"It is obvious that the aim of this decision is to stifle
media freedoms by economic measures, in view of the fact
that administrative" measures have failed to do so, the
statement concluded. PM

CROATIA YIELDS ON REFUGEE RETURN. U.S. ambassador to Croatia
William Montgomery told RFE/RL's South Slavic Service on 12
May that the Croatian government has accepted all demands
made by the international community to liberalize policies
regarding the return of Serbian refugees. Montgomery added
that the government will issue a statement on its new
policies on 15 May, and that the measure will go into force
immediately. PM

IZETBEGOVIC SLAMS KLEIN. Alija Izetbegovic, the Muslim
member of the Bosnian joint presidency, sharply criticized
recent remarks on the late Croatian Defense Minister Gojko
Susak made by Gen. Jacques Klein, who is a deputy to the
international community's Carlos Westendorp in Bosnia.
Izetbegovic wrote in an open letter to Klein: "I was amazed
at your arrogance. The [Dayton] peace accords did not
establish a protectorate in Bosnia, and you are not the
protector.... Our people like foreigners as friends but not
as tutors. Don't try to be one," "The Los Angeles Times" of
12 May quoted Izetbegovic as saying. Klein praised Susak,
who worked closely with Klein when the general was the UN
administrator in eastern Slavonia in 1996 and 1997, as a
"man of vision." Most Bosnian Muslims regard Susak as a
warmonger who would have gladly partitioned Bosnia between
Croatia and Serbia. PM

JEWISH CEMETERY DESECRATED IN ROMANIA. Unidentified persons
have desecrated the Jewish cemetery in the Transylvanian
town of Targu Mures, Mediafax reported on 12 May. Anti-
Semitic inscriptions such as "Death to the Jews" and " Jews
to Israel!" were scrawled on the cemetery's walls. A local
police officer said the incident occurred two days earlier.
In 1994, several tombstones were overturned by unidentified
vandals in the same cemetery. The Jewish community in Targu
Mures today numbers fewer than 100. Of the 7,500 Jews
deported to Auschwitz by the Hungarian fascist regime in
May-June 1944, only 1,197 survived. MS

LUCINSCHI WANTS TO 'DE-POLITICIZE' GOVERNMENT. Speaking on
national television on 11 May, Moldovan President Petru
Lucinschi said Prime Minister Ion Ciubuc must form a
government of "genuine professionals" that will not be an
"arena for political battles." Lucinschi said the new
cabinet must be "as de-politicized as possible" because its
main task is that of coping with the country's economic
problems. Among the main problems facing the government he
listed the de-monopolization of the energy sector, the
reform of local government, and speeding up privatization,
Infotag reported. MS

WORLD BANK ON BULGARIAN ECONOMY. The World Bank believes
Bulgaria's economic prospects have "improved significantly"
in the last year but warns that economic reform is still in
its early stages and that the greatest threat to it is
complacency. The bank's views are included in a recently
adopted "country strategy" document made available to an
RFE/RL correspondent in Washington. According to that
document, if the government continues to pursue reform, the
bank will consider granting over the next three years
structural-adjustment loans of up to $300 million and so-
called investment financing of up to $400 million. MS

BULGARIAN DEPUTY PREMIER ON ECONOMY. Alexander Bozhkov told
the meeting of the European Bank for Reconstruction and
Development in Kyiv on 12 May that his country will meet the
criteria for membership in the EU currency union by the year
2001. Bozhkov said this increases Sofia's chances of joining
the EU in the not too distant future, an RFE/RL
correspondent in the Ukrainian capital reported. He
attributed the upswing in Bulgaria's economy during the last
year largely to the currency board set up at the insistence
of the IMF. MS

END NOTE

TENSIONS WITH RUSSIA OVERSHADOW LATVIA'S ECONOMIC
PERFORMANCE

by Michael Wyzan

	Latvia has recently been buffeted by Moscow's threats
to impose unilateral economic sanctions. Russia has sought
to justify those threats by citing what it considers to be
anti-Russian activities in Latvia and Riga's incorrect
treatment of the country's Russian minority.
	Russian officials have suggested that their country
develop new ports to avoid having to use Latvian ones on the
Baltic Sea. Russian border guards have refused entry to
Latvian drivers who cannot produce notarized Russian
translations of their driver's licenses. And Russia's
Transportation Ministry has threatened to limit the number
of entry permits issued to Latvian truckers.
	The threats have already had an affect on Latvia. The
cabinet on 6 May approved legal amendments granting
citizenship to all children born in Latvia after 21 August
1991. That change may well be for the best (it was
recommended by the Organization for Security and Cooperation
in Europe). But meanwhile the economic effects of Russian
pressure are proving harmful. Since early April, there has
been a significant decline in freight traffic on Latvian
railroads and through its ports. And the Dow Jones Riga
Stock Exchange Index fell from 336 on 16 March to 275 on 23
April (before recovering slightly more recently).
	These shock waves have hit a rather healthy and well-
managed economy. In mid-April, the IMF Executive Board
lauded Latvia for its excellent performance and "prudent
financial policies," although it stressed the need for
further progress on large-scale privatization, tax
collection and administration, and making the budget process
more transparent.
	Last year's achievements followed the 1996 strong
recovery from the downturn of 1995 (which was sparked by a
banking crisis). GDP grew by 5.9 percent in 1997, compared
with 2.8 percent in 1996, and the growth of industrial
production accelerated from 1.4 percent in 1996 to 6.1
percent in 1997. Unemployment fell from 7.2 percent in
December 1996 to 7.0 percent one year later, while the
average monthly wage in the public sector rose from $242 in
December 1996 to $272 last December.
	Consumer price inflation sank to 7.0 percent from 13.1
percent in 1996 (in both years, it was the lowest in the
Baltic States). It declined further to 6.1 percent in the 12
months to February 1998. Last year, the state budget was in
surplus for the first time since 1993.
	The lats has been pegged to the IMF's Special Drawing
Right since 1994, so it has not depreciated in tandem with
inflation, which, though low for a transition country,
remains higher than in Latvia's Western trading partners.
The trade deficit rose from $877 million in 1996 to $1.1
billion last year, while the 1997 current account imbalance
is projected at $460 million, similar to 1996's and a high 9
percent of GDP.
	The foreign reserves rose from $729 million at the end
of 1996 to $778 million one year later. Thus, a capital
account surplus was sufficient to cover the current account
deficit. A rise in cumulative foreign direct investment from
$645 million at the end of 1996 to $850 million on 30
September contributed to that surplus.
	How much would Russian sanctions hurt Latvia? Russia
remains the leading destination for Latvia's exports,
accounting for 21 percent in 1997. By the same token, Russia
accounted for 15.6 percent of imports, slightly less than
the 16.0 percent supplied by Germany, Latvia's leading
import source. Latvia's exports to Russia in 1997 were worth
more than $350 million.
	A special feature of Latvian trade with Russia is the
fact that its ports are important entrepots for Russian
exports to third countries. Some of this trade is reflected
in the goods worth $425 million that Latvia officially
imported from Russia last year.
	Another factor is Latvia's total reliance on Russia
for its natural gas, for which it pays world market prices.
Latvia is not in arrears in paying for that gas, and Gazprom
is a shareholder in the Latvian gas company. Thus, it would
appear that Gazprom, an important foreign policy actor in
its own right, is unlikely to favor sanctions against the
country. Russia is also a significant investor in Latvia,
accounting for 10.4 percent of the total foreign direct
investment stock in September 1997, second only to Denmark.
	Nonetheless, recent events suggest that Latvia will
probably be forced to follow the example of those CIS states
that seek to reduce their economic dependence on Russia. If
Moscow persists in thwarting the normal economic intercourse
between states--for example, by refusing to use Latvian
ports or denying Turkmenistan access to its gas pipeline to
Europe--for political ends, it will increasingly be seen as
an unreliable partner. Developing such a reputation is in no
one's interest, least of all Russia's.

The author is an economist living in Austria.

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