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RFE/RL NEWSLINE Vol. 2, No. 169 Part II, 2 September 1998
___________________________________________________________ RFE/RL NEWSLINE Vol. 2, No. 169 Part II, 2 September 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 RUSSIA IN CRISIS Continuing coverage in English and Russian of Russia's economic and political crisis. http://www.rferl.org/nca/special/ruchaos98/index.html xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Headlines, Part II * FOUR CZECH OPPOSITION PARTIES AGREE TO FORM COALITION * CLINTON, YELTSIN APPEAL TO BELGRADE * POLICE BATTLE GUNMEN IN SOUTHERN ALBANIA End Note: LITHUANIA FINDS MAINTAINING FIXED EXCHANGE RATE INCREASINGLY DIFFICULT xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx EAST-CENTRAL EUROPE UKRAINIAN HRYVNYA TO BE DE FACTO DEVALUED. Ukrainian President Leonid Kuchma on 1 September said that the official exchange corridor of the hryvnya will be broadened, the Kyiv newspaper "Den" reported on 2 September. Kuchma explained that the government wants to shield the interests of Ukrainian exporters in Russia in the wake of the financial crisis in the neighboring country. The introduction of a new hryvnya exchange corridor was confirmed by National Bank Chairman Viktor Yushchenko the following day in the parliament. According to ITAR-TASS, financial experts think that the upper exchange limit should be raised to 2.45 hryvni to $1 as a minimum. The government previously pledged to maintain the national currency within the exchange corridor of 1.8-2.25 hryvni to $1 until the end of this year. JM UKRAINIAN TEACHERS START SCHOOL YEAR WITH STRIKE. According to the Ukrainian Education Ministry, more than 320 schools did not reopen in Ukraine on 1 September as teachers launched a strike over unpaid wages, dpa reported. The teachers' trade union claimed that some 450 Ukrainian schools remained closed. Ukrainian Television on 1 September reported that total wage arrears to teachers exceed 400 million hryvni ($177 million). Most affected by the teachers' action are Ternopil, Chernihiv, and Kirovohrad Oblast, where teachers have not been paid for some six months. Teachers in Kherson are proposing a "forced job pause" to allow them to find temporary employment at kolkhozes to earn money for the winter, Ukrainian Television reported. JM BELARUS EXPECTS LOWER GRAIN OUTPUT THIS YEAR. Belarusian Minister of Agriculture Ivan Shakola on 1 September said that bad weather has hit this year's grain harvest, Belapan and Reuters reported. So far, 77 percent of the crop has been harvested, compared with 92 percent in the same period last year. The total grain crop is expected to reach 5.8 million tons, 1 million tons less than in 1997. The average grain yield is 2.34 tons per hectare, down from 2.7 tons per hectare last year. Shakola announced that Belarus will double its feed grain imports this year to 1.5 million tons in order to compensate for the lost crops. JM BELARUSIAN FOREIGN TRADE DECLINES. Belarusian Deputy Foreign Trade Minister Valeryy Sadokha has said Belarusian producers are finding it increasingly difficult to compete on foreign markets, Belapan reported on 1 September. He cited declining exports and a growing negative foreign trade balance. In the first half of this year, Belarusian exports to Canada fell by 67 percent, to Israel by 58 percent, and to Poland by 33 percent, compared with the same period last year. Belarus's negative trade balance with Germany reached $250 million, with Ukraine $226 million, and with Poland $70 million. Sadokha appealed to Belarusian embassies to do everything in their power to enhance foreign trade "under difficult circumstances of [Belarus's] international isolation." JM ANOTHER BANK MERGER IN ESTONIA. The third-largest commercial bank in Estonia, Forekspank, has announced it is merging with the country's fourth-largest, the Investment Bank, ETA reported on 1 September. Under an agreement signed by the boards of the two financial institutions, Forekspank will have a 50.25 percent stake in the Investment Bank. With assets totaling 4 billion kroons (some $266.7 million), the new bank will be smaller than either Hansapank or Uhispank, which earlier this year merged with Hoiupank and Tallinna Pank, respectively. JC LATVIAN PARTIES SPEAK OUT FOR, AGAINST CITIZENSHIP LAW CHANGES. The board of the National Harmony Party has issued a statement urging the party's supporters to vote for the enactment of amendments to the citizenship law, BNS reported on 1 September. A referendum on those amendments is scheduled to take place next month. The party's board said it understands the wish of Latvian citizens to have the referendum but described the vote as the result of "a campaign of misinformation [and] the distortion of the opinion of international organizations." Meanwhile, the alliance of the Labor Party, the Christian Democrats Union, and the Green Party is calling on Latvian citizens to vote against the referendum. The alliance opposes the amendment whereby all children will be granted citizenship regardless of their proficiency in the Latvian language. JC LATVIAN BANKS FEEL STRAIN OF RUSSIAN FINANCIAL CRISIS. Latvian National Bank spokesman Edzus Veins told ITAR-TASS on Tuesday that of the three Baltic States, Latvia has been most harmed by the Russian financial crisis. Latvian commercial banks have invested some 72 million lats ($120 million) in the Russian economy, he said. According to Riga's Russian- language newspaper "SM," Estonians and Lithuanians have invested far smaller sums. JC LITHUANIA SUSPENDS MEAT, DAIRY EXPORTS TO RUSSIA. Lithuania on 1 September suspended meat and dairy exports to Russia, ITAR-TASS reported. "The measure was taken mostly at the request of Russian customers" who are unable to pay owing to the ongoing financial crisis, a spokesman for the Lithuanian Agricultural Ministry told the news agency. Lithuania exports some 25 percent of its meat and dairy products to Russia, primarily to Moscow and St. Petersburg. JC POLAND, HUNGARY SAY RUSSIAN CRISIS ARGUMENT FOR JOINING EU. Polish Foreign Minister Bronislaw Geremek and his Hungarian counterpart, Janos Martonyi. said in Warsaw on 1 September that their countries are coping well with Russia's economic crisis, AP reported on 1 September. Geremek said this provides "new arguments in [both countries'] drive to join NATO and the EU." Martonyi supported the opinion by saying that "the crisis shows to the world that Poland and Hungary belong to the West." PAP reported the same day that both ministers failed to reach agreement on Hungarian grain imports to Poland. Following farmers' protests in June and July, Poland last month imposed higher customs duties on imported grain. JM POLAND SCRAPS DEATH PENALTY. Poland's new penal code, which took effect on 1 September, abolishes the death penalty and adjusts criminal law and court procedures to the EU standards, Reuters reported. "All new measures are compatible with solutions adopted in Europe," Justice Minister Hanna Suchocka commented. The code scraps capital punishment, despite opinion polls showing that more than 50 percent of Poles object to this move. It introduces life imprisonment to replace the previous maximum prison sentence of 25 years in cases of especially brutal murders and in some cases of espionage. And it also introduces new categories of crime, including environmental pollution, money laundering, and theft of intellectual property. JM RFE/RL BROADCASTS TO IRAN TO BEGIN IN MID-FALL. RFE/RL President Tom Dine on 1 September said the station is "on schedule" to begin broadcasts to Iran this fall. He denied some Czech media reports that said the radios are postponing plans to begin broadcasts on 1 September. Last week, the Czech government announced it will permit RFE/RL to broadcast to Iran beginning 1 September, and a government spokesman said that through 31 December, the cabinet will review the "security and economic risks" posed by those broadcasts. The government also said that the U.S. must officially ask the cabinet's opinion on planned broadcasts to Iraq, also scheduled to begin this fall. Officials in Iran and Iraq have protested the planned new broadcast services. MS FOUR CZECH OPPOSITION PARTIES AGREE TO FORM COALITION. Leaders of the Christian Democratic Party, the Freedom Union, the Civic Democratic Alliance, and the Democratic Union on 1 September agreed to jointly nominate candidates for the Senate and the local elections scheduled for 13-14 November, AP reported. The agency said the members of the new coalition fear that the Social Democratic Party (CSSD) and the Civic Democratic Party (ODS) may change the constitution if after the Senate elections they have a three-fifths majority in both chambers of the parliament. The new coalition's members fear in particular a move to change the proportional electoral system into a majority one. Christian Democratic Party leader Josef Lux called the new agreement "a fundamental breakthrough" that creates "a strong alternative" to the CSSD and the ODS. MS CZECH SOCIALISTS REACT TO ODS WARNING. CSSD spokesman Libor Roucek on 31 August said ODS deputy chairman Ivan Langer's threat earlier that day to withdraw from the agreement with the CSSD was "irrelevant." He explained that appointments to leading positions in state-owned companies are "not subject to the agreement" between the two formations. Roucek added, however, that "if the ODS raised the demand, I can see no reason for the CSSD and the ODS not to discuss it at their next meeting." Meanwhile, the daily "Mlada Fronta Dnes" on 1 September reported that the ODS owes the state some 2.5 million crowns ($76,000) in outstanding taxes. Langer said that different interpretations of the law are possible but that his party will "comply with the interpretation of the tax authorities." MS CONTROVERSY DEEPENS OVER HUNGARIAN SPYING SCANDAL. Opposition Free Democrat parliamentary group leader Gabor Kuncze on 1 September said that the alleged illegal surveillance of Federation of Young Democrats-Hungarian Civic Party leaders is a "boomerang that has fallen on the head of Prime Minister Viktor Orban," Hungarian media reported. Kuncze said the governing coalition's reluctance to release alleged documents on the affair raises the suspicion that there are no documents to support Orban's allegations. Opposition representatives on the parliament's National Security Committee believe the government wants to postpone the investigation as long as possible. Laszlo Kover, minister without portfolio responsible for the civilian secret services, said the opposition's attacks are aimed at "crippling" the operation of the government. MSZ SOUTHEASTERN EUROPE CLINTON, YELTSIN APPEAL TO BELGRADE. U.S. President Bill Clinton said in Moscow on 2 September that he and Russian President Boris Yeltsin agree that the Serbian authorities must end repressive measures in Kosova. Clinton added that the two leaders also call on Belgrade to allow relief agencies greater access to the province and to pursue an "interim settlement" on Kosova's status. PM MILOSEVIC PRAISES ARMED FORCES. In a statement in Belgrade on 1 September, Yugoslav President Slobodan Milosevic thanked the federal army and the Serbian special police for their "courage and patriotic sense of duty in crippling and bringing to a halt the activities of terrorist bandit groups" in Kosova, RFE/RL's South Slavic Service reported. After Milosevic met with U.S. Ambassador to Macedonia Christopher Hill, the Yugoslav leader's office issued a statement in which Milosevic called for urgent talks between Serbian and Kosovar delegations. Hill told reporters that "there is a possibility that the international community will send a forensic team to help with the identification of the remains" of 22 persons, which the Serbian authorities say they found in Klecka (see "RFE/RL Newsline," 1 September 1998). Hill added that whoever carried out the killings must be "caught, tried, and punished." PM ALBANIA CALLS FOR INTERNATIONAL INTERVENTION IN KOSOVA. The Foreign Ministry issued a statement on 1 September calling for international intervention in Kosova to halt the bloodshed. The statement says that "developments in Kosova are becoming more complex and more alarming every day" and that "intervention by the international community, in all [possible] forms, should be fast and prompt to save the life of tens of thousands of innocent people endangered on a large scale by the flames of war and facing a humanitarian catastrophe." The statement accuses Serbian forces of indiscriminate attacks on civilians and stresses that "hundreds of thousands" of displaced people face food shortages, the threat of Serbian attacks, and the imminent onset of winter. The ministry also rejected Yugoslav charges that Albania supports "terrorism" in Kosova, saying the international community is aware who is "the aggressor and who is the victim in need of protection." FS DJUKANOVIC WARNS OF YUGOSLAVIA'S 'DARK FUTURE.' Montenegrin President Milo Djukanovic said in Podgorica that the Federal Republic of Yugoslavia may split up if the Belgrade authorities do not treat Montenegro as Serbia's equal, the Belgrade daily "Danas" reported on 2 September. He added that "the federal state will not break up because of Montenegrin separatism, but because [the federation has become] politically and economically rotten and because of the autocratic rule of one man," by which he meant Milosevic. Djukanovic warned that the federation faces a "dark future" unless Belgrade changes its policies to Podgorica's liking and that Montenegro's patience is running out. Djukanovic wants a greater say for his republic in federal affairs and the introduction of policies aimed at promoting market reforms, free trade, and open borders. He has also been critical of Milosevic's policies in Kosova. PM EXPLOSION IN BOSNIAN ARSENAL. NATO and Bosnian spokesmen said in Sarajevo on 2 September that an explosion killed at least one soldier of the mainly Muslim and Croatian federal army and wounded several others. NATO and federal military officials are investigating the blast, which took place in an arsenal at Vrela, northwest of Sarajevo. AP reported that the investigators believe the explosion was an accident. PM INTERNATIONAL COMMUNITY ACTS TOUGH WITH NATIONALISTS. Representatives of the OSCE, which is supervising the 12-13 September elections in Bosnia, removed the names of two candidates for the Republika Srpska parliament from the ballot on 1 September. The candidates, who belong to the Serbian Democratic Party, had displayed pictures of indicted war criminal Radovan Karadzic at a recent rally. Also in Sarajevo, the international community's Carlos Westendorp fired Mark Benkovic as mayor of Orasje because he tried to prevent the return of non-Croatian refugees to that town. Westendorp told Ante Jelavic, who heads the Croatian Democratic Community, to select a new mayor within two weeks. Elsewhere, U.S. special envoy Robert Gelbard told Jelavic to stop "involving" uniformed soldiers and officers at his election rallies. Gelbard called the involvement of the military in politics "a fundamental violation of all laws." PM BOSNIA GETS UNIFIED CUSTOMS LAW. The joint parliament passed a law in Sarajevo on 1 September, according to which identical customs regulations will come into effect in January 1999 in both the Republika Srpska and the federation. In unrelated news, a spokesman for the United Nations High Commissioner for Refugees said that some 1,649 persons from Kosova have applied for political asylum in Bosnia since the crackdown began in that Serbian province February. The spokesman added that the total number of refugees from Kosova in Bosnia is "significantly higher," RFE/RL's South Slavic Service reported. PM POLICE BATTLE GUNMEN IN SOUTHERN ALBANIA. On 2 September in Lazarat, near Gjirokastra, "several hundreds" of special troops from Tirana cleared the main highway connecting Albania with Greece of a roadblock that heavily armed peasants had set up the previous day. Seven policemen were injured, and their colleagues are continuing to pursue some of the gunmen in the mountains. The peasants sought the release of three villagers arrested on 31 August for committing a range of crimes, including murder during the unrest in 1997, Reuters reported. Local police chief Islam Qebini said the suspects have since been released. Qebini charged that the latest incident is "a continuation of attempts [by the political opposition] to destabilize this area." Lazarat is a stronghold of the opposition Democratic Party, which gained the majority there in the June local elections. Villagers have repeatedly blocked the highway in the past, prompting the authorities in Tirana to send in special police forces. FS POLICE FILE CHARGES AGAINST ALBANIAN OPPOSITION LEADERS. On 1 September, Tirana police filed charges against Democratic Party leaders Sali Berisha and Genc Pollo for organizing a demonstration in Tirana the previous day (see "RFE/RL Newsline," 1 September 1998). Police had banned the rally, saying they feared "terrorist attacks." The Democrats are seeking the release from prison of six former government officials for alleged crimes against humanity during the 1997 unrest. FS CONFLICTING REPORTS ON POPE'S PROSPECTIVE ROMANIA VISIT. Reuters reported on 1 September that in a message addressed to an ecumenical meeting in Bucharest, Pope John Paul II said he thanked the Romanian president and its government" for the invitation extended in July to visit Romania and "I hope to be able to accept." The last part of the statement was not reported in the Romanian media. Romanian Orthodox Church Patriarch Teoctist told Rompres that a visit by the pope must be "well prepared" and that its timing is "a matter for the Holy Spirit." Also on 1 September, the Ministry of Education announced that Romanian pupils will have one hour of compulsory religious instruction a week. Parents will have to say in writing in which confession they want their children to receive instruction, Mediafax reported. MS VAN DER STOEL MEETS ROMANIAN, ETHNIC HUNGARIAN POLITICIANS. OSCE High Commissioner on National Minorities Max van der Stoel, who attended the ecumenical gathering in Bucharest on 1-2 September, met with Foreign Minister Andrei Plesu, Education Minister Andrei Marga, and chairman of the Hungarian Democratic Federation of Romania Bela Marko, RFE/RL's Bucharest bureau reported. After the meeting with Marko, Van der Stoel said he "needs more time for reflection" before he makes a statement on the controversy over the setting up of a Hungarian state university. Marko said the commissioner told him he "very much hopes" that the amendments to the education law will be passed by the parliament "in the form originally submitted." He also said that Van der Stoel is "well informed" and knows that the UDMR demands have been accepted and included in the ruling coalition agreement. MS TIRASPOL MARKS 'INDEPENDENCE DAY.' Speaking to journalists on the occasion of the eighth anniversary of Transdniester's "declaration of independence," separatist leader Igor Smirnov said he is not concerned about the fact that Transdniester's "statehood" has not been recognized by other countries. Smirnov said that this constituted "no hindrance" because the Transdniester "has achieved the main thing--economic independence." Therefore, Smirnov said, "political issues are of secondary importance, and their solution is only a matter of time." Smirnov said the Transdniester "has all the attributes of statehood, including regular armed forces." He accused the Moldovan leadership of being reluctant to and incapable of solving the conflict, saying that the present Moldovan government is trying to achieve "an internationalization of the conflict--[the] Bosnian way," Infotag reported. MS END NOTE LITHUANIA FINDS MAINTAINING FIXED EXCHANGE RATE INCREASINGLY DIFFICULT Michael Wyzan Lithuania's economy generally receives less attention from foreign observers than its two Baltic neighbors. It is often seen as less reformed than Estonia and Latvia, although since last year its macroeconomic performance has been at least as strong as theirs. A continuing distinction between Lithuania and the other two Baltic States is that it remains more dependent on trade with Russia: 22 percent of its exports went to that country during January-April, while the corresponding figure for imports was 24.4 percent. The corresponding figures for Latvian trade with Russia during the same period were 17.4 percent for exports and 13.6 percent for imports. Some 8.3 percent of Estonia's exports went to Russia, while 8.5 percent of its imports came from there. Most Lithuanian macroeconomic indicators are highly favorable. GDP in the first quarter of 1998 was 6.9 percent higher than in the same period last year, reflecting an acceleration of economic growth from 1997's figure of 5.7 percent. Sales of industrial production were up by 9.4 percent during the first six months, almost double last year's 5.0 percent. While production has boomed, consumer price inflation has subsided, reaching 6.1 percent in the 12 months to June, compared with 8.4 percent in the year to December 1997. Another favorable macroeconomic indicator is the budget deficit, which as of May was on target to meet the goal of 1 percent of GDP, which was agreed to with the IMF. That deficit fell from 4.5 percent in 1996 to 1.8 percent last year. Wages have been booming, along with the economy: the average gross monthly wage reached $249 in May, compared with $199 a year earlier. This may explain why the unemployment rate has been higher during every month this year than in the corresponding month in 1997. However, by June the difference was negligible, with the rate that month of 5.5 percent only slightly above June 1997's 5.3 percent. Large current account deficits have been a hallmark of the Lithuanian economy. As economic growth turned positive in 1995, the current account imbalance rose from $94 million (2.2 percent of GDP) in 1994 to $981 million in 1997 (a high 10.3 percent). This trend continued into the first quarter of 1998, when the deficit was $514 million, up $118 million on the same period last year. Such deficits have been commonplace in rapidly growing transition economies, especially ones with fixed exchange rates; the litas has been pegged at four to the dollar under the currency board introduced in April 1994. The Bank of Lithuania is currently undergoing a transition to a normal central bank, a three-stage process scheduled to be completed next year. For example, under the currency board, the bank is not allowed to provide overnight loans to commercial banks. In April, as part of the transition to central banking, it set the interest rate it will charge on such loans. To retain confidence in monetary policy, the fixed rate for the litas against the dollar is to remain valid at least until 1999, when the currency will be tied partly to EU currencies; by the end of 2000, the litas will be pegged to the Euro. Although the current account deficit is high, the Bank of Lithuania's foreign reserves have risen steadily, reaching $1.2 billion in June (further augmented by privatization proceeds in July), compared with $939.6 million in June 1997. Another encouraging sign is the rapid rise in foreign direct investment, which was a cumulative $1.1 billion at the end of June, compared with. $727.6 million in June 1997. The IMF's Executive Board in July praised the government for increasing excise taxes, improving tax collection and the budget process, privatization successes in banking and telecommunications; and creating an Energy Pricing Commission. The board called for further fiscal tightening to limit the growth of expenditures and to put the Social Security Agency on a firmer footing, especially by raising the retirement age. These are the standard recommendations that the fund would make to any successful economy in transition. A more interesting question is how vulnerable Lithuania will prove to contagion from the financial turbulence in East Asia and especially Russia. Large current account deficits under fixed exchange regimes are often an indication of such vulnerability. The key issue is whether Lithuania will be able to manage the transition to central banking under a fixed exchange rate or whether it will be forced to allow its currency to weaken, as the Czech Republic did in spring 1997 and Russia on 17 August 1998. In this context, Lithuania's high trade dependence on Russia is worrisome, since the weaker ruble will probably further increase the Baltic State's already large trade deficit with that country. The author is a research scholar at the International Institute for Applied Systems Analysis in Laxenburg, Austria. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. All rights reserved. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx HOW TO SUBSCRIBE Send an email to email@example.com with the word subscribe as the subject of the message. HOW TO UNSUBSCRIBE Send an email to firstname.lastname@example.org with the word unsubscribe as the subject of the message. 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