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RFE/RL NEWSLINE Vol 2, No. 188, Part II, 29 September 1998
___________________________________________________________ RFE/RL NEWSLINE Vol 2, No. 188, Part II, 29 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 Headlines, Part II * UKRAINIAN FINANCIAL CRISIS DEEPENS * ALBANIAN PREMIER, INTERIOR MINISTER RESIGN * COHEN SAYS NO EVIDENCE OF CEASE-FIRE IN KOSOVA End Note: BULGARIA'S CURRENCY BOARD CEMENTS MACROECONOMIC STABILITY xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx EAST-CENTRAL EUROPE UKRAINIAN FINANCIAL CRISIS DEEPENS... Ukrainian National Bank Chairman Viktor Yushchenko on 28 September pledged to keep the national currency within the new exchange rate corridor of 2.5-3.5 hryvni to $1, which was introduced earlier this month, AP reported. Yushchenko, however, gave no hint as to how he intends to prevent the currency from further devaluation. He had announced earlier that the National Bank will not use its hard-currency reserves to support the hryvnya. The hryvnya exchange rate fell to 3.37 to $1 on 25 September, compared with 2.25 to $1 at the beginning of this month. JM ...BUT EBRD PLEDGES TO CONTINUE COOPERATION. The European Bank for Reconstruction and Development is determined to continue long-term cooperation with Ukraine despite the country's financial troubles. "The EBRD has a long-term commitment to Ukraine, we will remain involved in Ukraine," Reuters cited EBRD First Deputy Chairman Charles Frank as saying. He added that the bank will focus on support for Ukrainian small and medium-sized businesses, the energy sector, and the privatization of telecommunications and energy companies. Frank noted that Ukraine, unlike Russia, has not defaulted on its debt payments and has not permitted an insolvency crisis in the banking sector. He said Ukraine can count on $1 billion from the EBRD for various projects currently under consideration. JM SELEZNEV URGES UKRAINE TO UNITE WITH RUSSIA, BELARUS... At a meeting with the Ukrainian Supreme Council leadership in Kyiv on 28 September, Russian State Duma speaker Gennadii Seleznev urged Ukraine to unite with Russia and Belarus, AP and dpa reported. "It would be hailed by our people as the most important event of the 20th century," AP quoted him as saying. In their talks with Seleznev, both Ukrainian parliamentary speaker Oleksandr Tkachenko and Foreign Minister Borys Tarasyuk urged the Russian parliament to ratify the Ukrainian-Russian treaty, which was signed by the two countries' presidents in May 1997. Seleznev assured Tarasyuk that the Duma will resume debating ratification of the treaty by the end of this year. JM ...RECEIVES MIXED RECEPTION IN SUPREME COUNCIL. Interfax reported that the next day Seleznev failed to finish his address to the Ukrainian parliament. When the Duma speaker proposed that Ukraine should join the Russian-Belarusian union, mainly Popular Rukh deputies began shouting that his proposal was "provocative" and left the hall in protest. Earlier, the Rukh parliamentary caucus (47 deputies) refused to register for the session. By contrast, the communist parliamentary group (some 120 deputies) received Seleznev's speech with applause. Other deputies frequently interrupted the Russian official, particularly when he spoke disapprovingly about Ukraine's possible admission to NATO and the situation of the Russian language in Ukraine. JM KUCHMA MEETS WITH KWASNIEWSKI. At an informal meeting in Crimea on 28 September, Ukrainian President Leonid Kuchma and his Polish counterpart, Aleksander Kwasniewski, discussed the Russian financial crisis and a wide range of bilateral and economic issues, DINAU reported on 28 September. Kwasniewski assured Kuchma that Poland, following its EU entry, "will not turn its back on Ukraine." According to Polish Radio, Kuchma assured that the reconstructed cemetery in Lviv for Polish youths who fell while fighting against Ukrainians in 1918 will be reopened this year. The cemetery was recently desecrated with paint smears and anti-Polish slogans, provoking a note of protest from the Polish Foreign Ministry. JM UKRAINE, BELARUS PLAN LONG-TERM ECONOMIC COOPERATION. Ukrainian Premier Valeriy Pustovoytenko and Belarusian Premier Syarhey Linh said on 28 September in Kyiv that Belarus and Ukraine are strategic partners, ITAR-TASS reported. They expressed the need to draft a long-term program of economic cooperation. In Pustovoytenko's opinion, the program should be a ten-year one. The Ukrainian government's press service told the agency that the two leaders reached an understanding on several issues, including barter settlements between their countries. Pustovoytenko proposed to set up a banking consortium with the participation of Ukraine's Prominvestbank, Belarus's Promstroibank, and some Russian banks. According to Ukrainian Trade Minister Serhiy Osyka, the long-term cooperation program is already 70 percent complete and will boost Ukrainian-Belarusian trade by up to $700 million next year. JM LUKASHENKA PLEDGES TO RETURN CHURCH PROPERTY. Belarusian President Alyaksandr Lukashenka said on 27 September in Vitsebsk that the state is ready to give back any property that Communists confiscated from the Church in the 1930s and 1940s, Interfax reported the next day. While attending religious events in Vitsebsk to mark the visit of Patriarch of Moscow and All Russia Aleksei II, the Belarusian president also pledged state assistance to the construction of Orthodox churches in Belarus. "Orthodoxy is the only barrier that protects us from falling into an abyss," the agency quoted Lukashenka as saying the same day in Polatsk. On his four-day visit to Belarus, Aleksei II praised Lukashenka's contribution to the cause of the "spiritual rebirth of his people" and noted that Belarus's greatest assets are "people who very much love their country and their president." JM ESTONIA'S ECONOMIC GROWTH TO FALL TO 4-5 PERCENT? Economic growth in Estonia in the third quarter may fall to 4-5 percent, down from the targeted 8-9 percent, ETA reported, citing a survey by the Estonian Market Research Institute. According to that institute, the economic situation in Estonia has worsened owing to Russia's economic difficulties, the financial crisis in southeastern Asia, the bankruptcy of Maapank, and the rainy summer. The institute also predicted that in six months, Estonia's economic situation will be "somewhat worse" than it is now, with the growth of foreign trade stunted and a worsening foreign trade balance. JC ULMANIS URGES VOTERS TO THINK BEFORE THEY VOTE IN CITIZENSHIP REFERENDUM. Latvian President Guntis Ulmanis on 28 September urged voters to think carefully before they cast their vote in the referendum on amendments to the citizenship law, BNS and Reuters reported. Speaking on state radio, Ulmanis said, "Let those who have decided to vote for a rejection [of the law] think as to whether they are giving Latvia positive impetus or whether their vote will isolate Latvia from the rest of the world." The amendments, which remove the so- called "naturalization windows" and grant automatic citizenship to all children born after August 1991, were passed in June, but the signing into law of those changes was blocked by the Fatherland and Freedom party's initiative to force a referendum on the issue. That vote will take place simultaneously with general elections at the end of this week. JC VOTE ON LATVIAN STATE LANGUAGE LAW POSTPONED. The third and final reading of the state language law was postponed on 28 September owing to the lack of a quorum in the parliament, RFE/RL's Latvian Service reported. Legislators had called an extraordinary session to consider the law. The final reading is now scheduled to take place on 8 October, several days after the general elections and the referendum on amendments to the citizenship law. JC POLAND GREETS SCHROEDER'S VICTORY WITH RESERVE. Poland has greeted the election victory of Gerhard Schroeder's Social Democratic Party of Germany with reserve and lamented the departure of Helmut Kohl, Reuters reported on 28 September. "Kohl, a great friend of Poland, did a lot to better relations between our countries and to integrate Poland into NATO and the EU," Prime Minister Jerzy Buzek said. "It would be much better for Poles if tested political forces had remained at the helm," former Foreign Minister Wladyslaw Bartoszewski commented. President Kwasniewski expressed the hope that German policy toward Poland will remain unchanged. Schroeder visited Poland in June and assured Poles that he will not change Bonn's foreign policy or block EU expansion. But he made clear that he will protect German jobs by temporarily barring Polish cheap labor from the EU after Warsaw gains membership. JM RUSSIA TO PAY CZECH DEBT WITH SPARE PARTS. In an interview with "The Defense News" given during his recent visit to Washington, Czech Defense Minister Vladimir Vetchy says the government has approved his proposal to agree that Russia settle its $ 3.4 billion debt to the Czech Republic by delivering spare parts for the air force and other equipment, ITAR-TASS reported on 29 September. MS CZECH LEADERS HAIL SLOVAK OPPOSITION VICTORY. In a telegram to Slovak Democratic Coalition leader Mikulas Dzurinda, President Vaclav Havel on 28 September wrote that he hopes the "big political change decided in a legitimate election" will "lead to a rapid deepening of civic freedoms, the strengthening of democratic institutions,...and economic prosperity." Havel said this was "not only in the interest of Slovakia, but of the whole Europe," Reuters reported. Foreign Minister Jan Kavan told journalists the same day that in the past, "the main argument against Slovakia" in its EU membership bid was "a democratic deficit." He said that "if the new Slovak government convinces its partners that it is able to remove this deficit, I am convinced the chance [of achieving membership] is there and the Czech government will support it." MS OFFICIALS FROM MECIAR'S PARTY MEET PROSPECTIVE COALITION PARTNERS. Parliamentary speaker Ivan Gasparovic on 28 September said after a meeting of representatives of Vladimir Meciar's Movement for a Democratic Slovakia (HZDS) with officials from the Slovak National Party (SNS) that although the election outcome was "a failure" for the HZDS, the party remains the largest in the parliament and "that is not insignificant." Gasparovic said the HZDS is interested in negotiations "with all parties that show the same interest," RFE/RL's Bratislava bureau reported. Before the meeting, SNS leader Jan Slota said his party will "respect a stable coalition" formed by opposition leader Dzurinda, but he added that such a government must exclude the Hungarian Coalition, which he called "a threat to Slovak statehood." Meanwhile, representatives of the opposition parties met again on 28 September and repeated their intention to seal an agreement leading to the formation of a new government, AP reported. MS EU SAYS SLOVAK POLL COULD SPEED UP INTEGRATION. Austrian Foreign Minister Wolfgang Schussel, in a statement released on 28 September in the name of the EU, said that Meciar's government must respect the election results and make possible the "orderly creation of a new government." Schussel said that if this happens, "Slovakia will satisfy European standards of democratic maturity and fulfill one of the key preconditions for faster integration into the EU." Austria currently holds the EU's rotating chairmanship. In Brussels, the EU Commission welcomed the "free and fair" balloting in Slovakia and expressed the hope that the opposition will soon be able to form a government that will "improve the political climate," AP reported. MS HUNGARIAN POLICE REMOVE KOSOVA REFUGEES FROM CANADIAN EMBASSY. Police have removed more than 30 Kosova Albanians from the grounds of the Canadian Embassy in Budapest, Hungarian media reported on 29 September. The refugees were demanding political asylum. Canadian diplomats asked police to negotiate a settlement but later authorized the refugees' forcible eviction after the talks failed. The refugees, 19 of whom are children, put up no resistance when riot police placed them into a bus and returned them to a refugee camp in Bicske, some 40 kilometers west of Budapest. Some members of the group had submitted asylum requests three months ago and wanted to pressure the Canadian authorities to process their applications. MSZ SOUTHEASTERN EUROPE ALBANIAN PREMIER, INTERIOR MINISTERS RESIGN... Socialist Prime Minister Fatos Nano resigned that office on 28 September. Earlier the same day, Interior Minister Perikli Teta of the Democratic Alliance Party quit his post. Both resignations came after the five governing coalition parties failed to agree on unspecified government changes. In a letter to President Rexhep Meidani, Nano said that he stepped down because squabbling within the ranks of his party and the coalition had made it impossible to form a new cabinet. He added that "I am not receiving any credible signal of solidarity either from parts of the Socialist Party or from the coalition partners." Teta told journalists that "the Albanian political [elite] is unable to bring the country out of the current grave political crisis." He described the country's leadership as "corrupt and incompetent," the BBC reported. A BBC reporter suggested that Teta was unhappy with Nano's "disappearance" from public view during the recent unrest. FS ...WHILE BERISHA HAILS MEIDANI. Gunfire erupted in several parts of Tirana on 28 September as word of Nano's resignation spread. Political commentator Fatos Lubonja told the BBC that opposition supporters celebrating the resignation apparently fired the shots. Police stepped up patrols in the capital, fearing a repetition of the unrest there earlier this month (see "RFE/RL Newsline," 16 September 1998). Opposition Democratic Party leader and former President Sali Berisha said that Nano's resignation "opens the way for dialogue" between the opposition and the governing coalition. He added that Meidani played an unspecified role in Nano's resignation and added that "the president has paved the way for a political solution [of the] deep crisis." Berisha urged the creation of a government of technocrats and stressed that the new interior minister should be "honest and [not] work with gangs and smugglers." FS MAJKO TO REPLACE NANO? Meidani asked Nano to stay on until a new government can be formed. Socialist Party legislator Musa Ulqini said on 28 September that the party will propose its secretary-general, Pandeli Majko, as Nano's replacement, but he gave no indication that the Socialists will consider new elections, which the opposition Democrats demand. Widely regarded as a reformer, the 31-year-old Majko began his political career in the student protests that toppled the communist dictatorship in 1990. Majko recently tried unsuccessfully to end the feud between Nano and Berisha. Lubonja, however, questioned whether Majko has the experience and authority to fill the current power-vacuum. He suggested that Meidani, whose position has been largely ceremonial, will have to play a greater political role in the future. FS COHEN SAYS NO EVIDENCE OF CEASE-FIRE IN KOSOVA... U.S. Secretary of Defense William Cohen said in Rabat, Morocco, on 28 September that Washington has no evidence that the Serbian forces have stopped their offensive in Kosova, despite Serbian Prime Minister Mirko Marjanovic's statement to the parliament that the fighting has ended (see "RFE/RL Newsline," 28 September 1998). Cohen added that Marjanovic's claim "may be another rhetorical declaration without any intent to match those words with concrete steps. We have seen no evidence that there has been any strategic drawback at this point, and we will insist that whatever words [Yugoslav President Slobodan Milosevic] issues will be followed up by deeds." PM ...AS DO KOSOVARS. Ethnic Albanian spokesmen said in Prishtina on 28 September that the Serbian offensive is continuing in several areas to the west of the provincial capital, RFE/RL's South Slavic Service reported. The spokesmen added that the Serbian authorities have "declared war not only on the Kosova Liberation Army [UCK] but on the entire Albanian nation." The BBC reported on 29 September that at least 15 villages west of Prishtina are either being shelled by Serbian forces or are still burning as a result of previous attacks. It added that Kosovar civilians are continuing to flee their homes in those areas where the offensive is in progress. In Prishtina, the presidency of the moderate Democratic League of Kosova (LDK) issued a declaration saying that Marjanovic's statement is aimed at manipulating international public opinion, an RFE/RL correspondent reported from the provincial capital. The LDK called on NATO to intervene quickly to end the crisis. PM MARJANOVIC SAYS 'PEACE REIGNS.' Marjanovic also told the parliament on 28 September that UCK fighters will be granted an amnesty provided that they turn in their weapons to the authorities within 10 days, RFE/RL's South Slavic Service reported. He named Zoran Andjelkovic to head a new provisional Supreme Council to govern the province and called on ethnic Albanian leaders to start a dialogue with the Serbian authorities. Marjanovic added that "peace reigns [in the province] and life is returning to normal.... There is no humanitarian catastrophe.... All assertions to that effect are lies.... As of today, anti-terrorist activities [against the UCK] have ended. They will be renewed only if any new bandit and terrorist activity reappears," "Nasa Borba" wrote. PM CROATIAN OPPOSITION WANTS INVESTIGATION OF SECRET SERVICES. Leaders of six opposition parties agreed in Zagreb on 28 September to call for a parliamentary discussion of possible misuse of the secret services for political purposes by the governing Croatian Democratic Community. The opposition leaders also demanded that the parliament set up a special committee to investigate the charges, RFE/RL's South Slavic Service reported. In New York, the UN Security Council agreed that Croatian local police have become more professional recently but noted that ethnically motivated violence has been on the rise. The council also agreed that the judiciary has been lax in dealing with ethnically related incidents and that the government has not done enough to promote reconciliation between Serbs and Croats. PM DUTCH MINISTRY CLEARED ON SREBRENICA CHARGES. Jos van Kemenade, who heads the independent commission investigating accusations that the Defense Ministry covered up evidence on the role of Dutch peacekeepers in the fall of Srebrenica, said that the charges are unfounded (see "RFE/RL Newsline," 13 August 1998). Speaking in Amsterdam on 28 September, he added that "there are no indications from this investigation that information was deliberately withheld or got rid of by the Ministry of Defense or by others, in other words there is no question of a cover-up." He added, however, that cooperation was poor between several government agencies in response to public criticism of the Dutch role during and after the Serbian attack on the eastern Bosnian town, Reuters reported. PM ROMANIAN PRESIDENT REACTS TO 'FEDERALIZATION' INCIDENT... Emil Constantinescu on 28 September asked the cabinet to file an official complaint with the Austrian government about the demand made last week by an Austrian citizen of Hungarian descent for Romania's federalization. He said that he will also write to his Austrian counterpart about the incident. Eva Maria Barki had told a Hungarian forum in Transylvania that the problems of Romania's ethnic Hungarians can be solved only if Romania is federalized. Constantinescu said the declaration infringed on Article 30 of the constitution, which forbids "territorial separatism and incitement to public violence." Barki was declared "persona non grata" by the government of Nicolae Vacaroiu in 1994, but that status expired three years later. MS ...WHILE OPPOSITION SAYS IT MAY START SUSPENSION PROCEDURES AGAINST HIM. The opposition Party of Social Democracy in Romania (PDSR) has announced that it may start procedures for Constantinescu's suspension from office. This follows similar statements by the Party of Romanian National Unity and the Greater Romania Party. All three parties said Constantinescu failed to defend Romania's territorial integrity by not reacting to the Barki incident. The PDSR also said Constantinescu undermined the independence of the judiciary in a statement made last week on the struggle against corruption, RFE/RL's Bucharest bureau reported. MS NATO SECRETARY-GENERAL IN MOLDOVA. Javier Solana met with President Petru Lucinschi, Premier Ion Ciubuc, parliamentary chairman Dumitru Diacov, and Foreign Minister Nicolae Tabacaru in the Moldovan capital on 28 September, RFE/RL's Chisinau bureau reported. After meeting with Lucinschi, Solana said the problem of the withdrawal of Russian troops from Transdniester cannot be solved by negotiations between NATO and Russia and must be dealt with "multilaterally, through negotiations." Solana also said he discussed with Lucinschi the conflict with the Tiraspol separatists and praised Moldova's contribution to the Partnership for Peace program. Lucinschi said that Moldova is a neutral state but that does not hinder close military and other types of relations with NATO. He added that he had discussed with Solana plans for a reform of Moldova's military. MS BULGARIAN PRESIDENT VETOES MEDIA LAW. For the first time, Petar Stoyanov has exercised his presidential veto right, blocking the media law approved by the parliament (see "RFE/RL Newsline," 24 September 1998), an RFE/RL correspondent in Sofia reported on 28 September. Stoyanov told journalists that he objects to the government's appointment of representatives on state television and radio managerial boards, saying political neutrality may be affected. He also objected to the provision in the law allowing broadcasts in languages other than Bulgarian on regional, but not on national frequencies. A third ground for the veto is the stipulation depriving state television of the right to broadcast prime time advertising until the creation of privately owned national stations. Finally, Stoyanov took issue with the provision imposing a new tax on all households for the financing of state television and radio, regardless of whether they own a television set. MS END NOTE BULGARIA'S CURRENCY BOARD CEMENTS MACROECONOMIC STABILITY by Michael Wyzan Since Bulgaria introduced a currency board arrangement on 1 July 1997, the lev has been trading at 1,000 to the Deutsche mark and has been fully backed by the Bulgarian National Bank's (BNB) foreign reserves. Under a currency board, the only permissible increases in the domestic money supply are those resulting from converting foreign currency inflows into domestic currency. In principle, the monetary authorities may no longer finance government budget deficits or offer credits to commercial banks. In practice, a BNB department is entitled to serve as a lender of last resort to such banks. It has yet, however, to avail itself of that option. The Bulgarian experience with the currency board arrangement is relevant for other struggling transition economies, especially Russia, which recently considered introducing one. In such cases as Argentina, Estonia, and Lithuania, the arrangement is designed as a way to instill confidence in macroeconomic policy-making. While that motivation existed in Bulgaria, establishing the board was driven primarily by the need to end practices that were impeding structural reform. Banks made loans to enterprises, which frequently did not repay them. The BNB then "refinanced" (lent money to, often without collateral) the banks or the government replaced those loans with government debt. With the introduction of the currency board--and even several months before it--such practices abruptly ended. Based on short-term macroeconomic indicators, the board is an unqualified success some 15 months after its introduction. Consumer prices have fallen in each of the last three months, and inflation was only 6.1 percent in the year to August (as recently as August 1997, the monthly rate was 5.5 percent). The three-year loan agreement worked out with the IMF projects 9 percent inflation for 1998. The fixed exchange rate under the currency board has restored confidence in the lev, as evidenced by the rise in the BNB's foreign reserves from $381 million in January 1997 to $2.9 billion in June 1998 and by the low level of interest rates (the BNB's base rate is just over 5 percent). The fiscal situation is better than expected: on 1O September, the government announced that there will be a 190 billion leva ($112 million) surplus this year, compared with a projected deficit of 2.7 percent of GDP. While it is evident that the currency board has ushered in an era of macroeconomic stability, the question remains as to whether it will promote sustained, rapid economic growth. In Estonia, where the board was introduced in June 1992, GDP growth did not resume until 1995, although much of this lag resulted from the after-effects of the breakup of the USSR. By 1997, Estonia was the fastest growing transition country, with the exception of Bosnia-Herzegovina. Little information is available to date on GDP growth in Bulgaria this year. For the first quarter, growth was an enormous 18.5 percent, but that figure reflects the collapse of the economy in the first quarter of last year. The program for the year projects growth at 4 percent. Other indicators suggest that the economy is picking up: unemployment fell to 11.4 percent in June, its lowest level since October 1996, while the average monthly wage reached $111 in June, the highest since April 1996. At the same time, there is concern about rising (dollar) labor costs and a deterioration in some balance of payments items, both associated with a fixed exchange rate under continuing inflation. The trade surplus in the first quarter was $61.8 million, down from $305.7 million during the same period of 1997. The current account has swung into the red, reaching $17.2 million in the first quarter, compared with a surplus of $151.8 million from January to March 1997. Although some observers are raising red flags over those labor-market and external-sector tendencies, such concerns seem premature. At $111, the monthly wage is well below those in Central Europe (including Macedonia) and below its previous peak of $128 in September 1993. Moreover, current account deficits far larger than what Bulgaria seems to be experiencing have accompanied rapid economic growth in many successful transition countries. Attracting foreign direct investment, which enhances productivity, will be crucial to withstanding the effects on the current account balance of the fixed exchange rate under the currency board. There was a major increase in such investment last year (to $498 million, compared with $109 million in 1996). This year, the government is putting up an increased number of enterprises for sale to foreign investors, and several large deals have made headlines. The success of the currency board experiment will hinge as much on its privatization efforts as on improvements in macroeconomic indicators. The author is a research scholar at the International Institute for Applied Systems Analysis in Laxenburg, Austria. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. 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