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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 2, No. 200, Part II, 15 October 1998


________________________________________________________
RFE/RL NEWSLINE Vol 2, No. 200, Part II, 15 October 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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Headlines, Part II

* UKRAINIAN PREMIER TRADES CABINET POSTS FOR
PARLIAMENTARY SUPPORT

* SLOW PROGRESS IN SLOVAK COALITION TALKS

* SOLANA SAYS SERBS NOT COMPLYING

End Note: IMF, UKRAINIAN LEADERS DISCUSS REFORMS
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EAST-CENTRAL EUROPE

UKRAINIAN PREMIER TRADES CABINET POSTS FOR PARLIAMENTARY
SUPPORT. Valeriy Pustovoytenko has offered jobs in the
executive, including in government and state committees,
to deputies from seven caucuses of the Supreme Council,
Ukrainian Television reported on 14 October. The price
for those posts is the creation of an "intercaucus"
majority in the parliament to support the government.
"Without fail, we will give jobs in our government
structures to those who deserve them," he said.
Pustovoytenko's offer follows President Leonid Kuchma's
announcement the same day that the government will soon
be reshuffled. Kuchma said the new appointments will be
made "on a purely professional basis," Interfax
reported. Kuchma's spokesman, Oleksandr Maydannyk, told
journalists that the president has invited the
legislature to make "nonstandard proposals" for cabinet
posts. JM

LUKASHENKA SAYS BELARUS HAS ENOUGH FOOD FOR WINTER.
Belarusian President Alyaksandr Lukashenka reassured the
country on 14 October that Belarus has stocked
sufficient amounts of foodstuffs for the winter,
Interfax reported. Lukashenka said food supplies have
doubled, compared with last year. He added that
suppliers were instructed "to deliver to retailers in
the near future foodstuffs produced elsewhere," and he
singled out buckwheat, rice, and sugar. Deputy Prime
Minister Leanid Kozik said the government will continue
to regulate prices and will not allow them "to
collapse." JM

BELARUSIAN DELEGATION IN BELGRADE TO OFFER HELP. A
delegation led by Security Council Secretary Viktar
Sheyman arrived in Belgrade on 14 October to offer
support to Yugoslavia in line with Lukashenka's firm
stance on the Kosova crisis, Belarusian Television
reported. Lukashenka has granted Sheyman the "broadest
powers" to offer "political, economic, and military
assistance to Yugoslavia." JM

NEW ESTONIAN FOREIGN MINISTER SWORN IN. Raul Malk, until
now Estonian ambassador to the U.K., was sworn in as
foreign minister on 14 October, ETA reported. He
replaces Toomas Hendrik Ilves, who submitted his
resignation last month (see "RFE/RL Newsline," 30
September 1998). Malk, who has no party affiliation,
said that finding new export markets for Estonia's
"troubled agricultural producers" is an important aspect
of Estonia's foreign policy. He added that relations
with Russia are another important aspect, commenting
that "we have achieved several positive results" in
those relations. JC

LATVIA TO JOIN WTO. The World Trade Organization on 14
October unanimously voted to invite Latvia to join the
organization, having agreed on the terms of membership.
Latvia will become the first Baltic country to become a
member of the WTO. It will accede to the organization at
the same time as Kyrgyzstan, which is the first CIS
country to be invited to join (see Part One). Renato
Ruggiero, WTO director-general, commented that the two
new members "are paving the way for the entire region."
JC

POLAND LAUNCHES PRIVATIZATION OF TELECOMMUNICATIONS
GIANT. The Polish government has announced it will start
the privatization of Telekomunikacja Polska SA, the
country's sole provider of international and inter-city
telecommunications links, Polish media reported. Twenty-
five percent of shares will be offered from 19 October
and 10 November, while another 25-35 percent will be
offered to a strategic investor in 1999. The company,
who value is put at $5.6-7.4 billion, currently has some
8 million customers. JM

BALCEROWICZ RESPONSIBLE FOR UW'S POOR ELECTION
PERFORMANCE? Jan Krol, parliamentary deputy speaker of
the Freedom Union (UW), has hinted that Finance Minister
and UW leader Leszek Balcerowicz may be responsible for
the party's poor performance in the 11 October local
elections, Polish Radio reported on 14 October. Krol
suggested that voters may have been put off by
Balcerowicz's proposals to introduce a flat tax rate in
2000 and to abolish tax exemptions for individuals
building new homes and private investors next year.
Meanwhile, Balcerowicz has submitted to the parliament a
modified tax reform calling for the reduction of
corporate income tax from 36 to 32 percent and the
abolition of major tax exemptions but omitting the
provision for a flat tax rate. He faces strong
opposition to his tax reform from both right-wing and
left-wing parties in the legislature. JM

CHECHEN PRESIDENT IN POLAND. Aslan Maskhadov was in
Poland on 13 October to attend an international
conference on human rights in Warsaw, Polish media
reported. Maskhadov was greeted at the airport by a
group of deputies and senators, but his visit is
considered private by the Polish authorities. At an
unofficial meeting with Premier Jerzy Buzek, Maskhadov
thanked him for the help Poland gave to Chechnya during
the 1994-1996 war. He also told journalists that he
takes advantage of each foreign trip to convince
international communities that Chechens are "normal
people and not terrorists," PAP reported. JM

CZECH DRAFT BUDGET FAILS IN PARLIAMENT. The Czech
parliament narrowly rejected the proposed 1999 draft
budget on 14 October, CTK reported. The vote was 101 to
97 with two abstentions. The draft, which provides for a
deficit of 26.8 billion crowns (some $800 million), was
criticized by parliamentary speaker Vaclav Klaus. Prime
Minister Milos Zeman said the cabinet will submit a new
draft within 30 days, as required by the constitution,
and that the government would look for a way to "show
this assembly that the uses of this deficit ae for clear
growth measures," Reuters reported. PB

SLOW PROGRESS IN SLOVAK COALITION TALKS. Two of the four
parties involved in forming a new Slovak government are
unhappy with the negotiations to date, TASR and Reuters
reported on 14 October. Hungarian Coalition Party (SMK)
leader Bela Bugar said "the approach of the Party of the
Democratic Left (SDL) is unacceptable" and accused the
SDL of attempting to acquire ministerial posts at the
expense of the SMK and the Party of Civic Understanding
(SOP). SOP spokeswoman Helena Hulmanova said the talks
could be more "intensive." PB

NEW SLOVAK GOVERNMENT TO REVIEW RELATIONS WITH RUSSIA.
Eduard Kukan, deputy chairman of the Slovak Democratic
Coalition, said on 13 October that a main priority of
the new government will be to review Bratislava's
relations with Moscow, SITA reported. Kukan said
Vladimir Meciar's government cultivated relations with
Russia that were "out of balance, unsuitable, and out of
the ordinary." Kukan, a candidate for foreign minister,
said the new cabinet will also review Slovak treaties
with Russia. PB

HUNGARY OPENS ITS AIR SPACE TO NATO. The parliament on
14 October voted overwhelmingly to allow NATO to use
Hungarian airspace without restrictions, Hungarian media
reported. The vote was 260 to 11 with six abstentions.
Foreign Minister Janos Martonyi said before the vote
that NATO Secretary-General Javier Solana has sent a
letter to Prime Minister Viktor Orban assuring him of
NATO guarantees for Hungary in the event of threats from
Yugoslavia. Hungary is ready "in principle" to send
observers to the future OSCE mission in Kosova, Foreign
Ministry spokesman Gabor Horvath told journalists. MSZ

SOUTHEASTERN EUROPE

SOLANA SAYS SERBS NOT COMPLYING. NATO Secretary-General
Javier Solana said in Brussels on 15 October that
Yugoslav security forces have not complied with UN
Security Council Resolution 1199's provision that they
withdraw from the province, Reuters reported. "The
information we have at this very moment, this morning,
is that still compliance is not a reality," he said.
Solana added that he will probably sign a document on
verifying the latest agreement on Kosova with Yugoslav
President Slobodan Milosevic in Belgrade within one day
(see "RFE/RL Newsline," 13 October 1998). The NATO
leader said he will tell Milosevic that "the solution
[to the Kosova problem] is not in signing papers" and
that the Yugoslav leader must live up to his
commitments. An unnamed NATO official told AFP on 14
October that the alliance "will be looking for clear
indications of actions, dismantling checkpoints, moving
forces back to their barracks, lifting the heavy-handed
repression from the backs of the civilian population."
PM

KOSOVAR SHADOW-STATE CRITICIZES AGREEMENT... Veton
Surroi, who is Kosova's leading journalist and a member
of the Kosovar shadow-state's negotiating team with the
Serbs, told AFP on 14 October that the Milosevic-
Holbrooke agreement leaves Kosova a "Serbian camp [that
is] under land and aerial surveillance." In Prishtina,
shadow-state President Ibrahim Rugova said that some of
the concessions U.S. special envoy Richard Holbrooke
obtained from Milosevic will help "calm the situation,"
but he stressed that NATO ground troops should go to
Kosova to help protect the ethnic Albanians from Serbian
security forces, the "Financial Times" wrote on 15
October. Rugova and his negotiating team played only a
marginal role in negotiating the Milosevic-Holbrooke
pact, the "Sueddeutsche Zeitung" added. PM

...AS DOES UCK. Bardhyl Mahmuti, who is a spokesman for
the Kosova Liberation Army (UCK), said on 14 October in
Geneva that the agreement is unacceptable because it
allows the Serbian authorities to determine the
timetable and rules for any future elections. He said
the Kosovars will decide themselves when and how to
organize their political system. The spokesman also
charged that Serbian forces continue to shell Kosovar
villages and that "Milosevic is playing the same old
game" of breaking his promises to foreigners. Mahmuti
stressed that any agreement involving Kosova must have
the approval of the UCK and that Holbrooke did not
negotiate with the UCK. "The group of people [around
Rugova]...with whom the Americans are negotiating are
not legitimate for us. No deal will succeed if there is
no agreement with the UCK." In Tirana, the daily
"Albania," which is close to the Democratic Party, wrote
that the Kosovars "are being treated like a defeated
people." PM

SESELJ PRAISES PACT. Serbian Deputy Prime Minister
Vojislav Seselj hailed Milosevic for making only
"minimal concessions" to Holbrooke and for "defending
the territorial integrity and sovereignty" of Serbia,
AFP reported from Belgrade on 14 October. In Podgorica,
President Milo Djukanovic said that the possibility of
military intervention against Yugoslavia remains and
that Milosevic must keep the promises he has made,
RFE/RL's South Slavic Service reported. In Sarajevo,
Zivko Radisic, who is the Serbian member of the Bosnian
joint presidency, said that the Milosevic-Holbrooke
agreement is essential for maintaining peace and
stability in the region, Reuters reported. He stressed
that any conflict in Kosova could seriously endanger the
security of Europe as a whole. Radisic added that Kosova
"was and remains the cradle of Serbian statehood and
spirit." PM

JOURNALISTS DENOUNCE CRACKDOWN. Slavko Curuvija, who is
the editor in chief of the recently banned independent
Belgrade "Dnevni telegraf," wrote Milosevic on 14
October to protest the shutdown of his newspaper (see
"RFE/RL Newsline," 14 October 1998). He noted that
"there were cases in Serbian history of confiscating
newspapers and arresting journalists, but never one of
sacking an editorial board. Nor were there cases, during
the monarchy or under communist rule, of representatives
of any ministry directly editing the news with the aid
of the police." Curuvija appealed to Milosevic to
overrule the Serbian authorities, who, he charged, think
"they can make a modern Serbia with citizens who are
deaf, dumb, and blind." That same day, police evicted
Curuvija from his office. The editor told the "Financial
Times" that "they are fascists." In New York, the
Committee to Protect Journalists appealed to leaders of
the international community to "offer the strongest
possible support to [Serbia's] besieged journalists." PM

ARBOUR SAYS MILOSEVIC HAS NO AUTHORITY OVER COURT.
Louise Arbour, who is the chief prosecutor for the
Hague-based war crimes tribunal, said at the UN in New
York on 14 October that the Yugoslav president has no
authority over where and how the tribunal's
representatives may work: "The jurisdiction of the
International Criminal Tribunal on the former Yugoslavia
is not for Mr. Milosevic to decide, nor is it subject to
negotiations between him and anyone else." She noted
that the Serbian authorities have granted visas to three
members of her staff that had been pending for several
weeks. She added that she will soon request that a
larger number of persons be granted visas to investigate
possible atrocities in Kosova, Reuters reported. PM

TUDJMAN NAMES GENERAL TO HEAD MINISTRY. Croatian
President Franjo Tudjman on 14 October relieved General
Pavao Miljavac of his military duties and appointed him
defense minister. He succeeds Andrija Hebrang, who quit
after losing a power struggle with mainly Herzegovinian
hard-liners (see "RFE/RL Newsline," 13 October 1998). An
unnamed Western diplomat told Reuters that Miljavac is a
"nice guy...who will have the same enemies as Hebrang."
Observers noted that Croatia is unlikely to win
admission to Euro-Atlantic structures, especially to
NATO's Partnership for Peace Program, if the Defense
Ministry continues to operate like "a Herzegovinian-run
state-within-a state." PM

SLOVENIAN DEFENSE MINISTER ASKED TO QUIT. Prime Minister
Janez Drnovsek on 14 October asked Defense Minister
Alojz Krapez to resign in the interests of preserving
the governing coalition. The minister said he will make
a decision by 16 October. Krapez is involved in a
scandal because he illegally acquired the right to use
an apartment owned by his ministry. The Slovenian
People's Party, which is a small member of the governing
coalition, has called on Krapez to resign over the
affair. PM

ROMANIAN PARLIAMENT APPROVES LIMITED ACCESS FOR NATO
PLANES. A joint session of the parliament has approved
the government's decision to allow NATO limited access
to the country's air space in case of military action by
the alliance in neighboring Yugoslavia, Reuters reported
on 14 October. The vote, which was 244 to 160 with 82
abstentions, will allow NATO planes to fly over Romania
in case of emergencies or "unforeseen situations." The
opposition, led by the Party of Social Democracy in
Romania (PDSR), was almost united in opposing the
decision. Former President and PDSR leader Ion Iliescu
said "fortunately, the U.S. and Holbrooke's perseverance
has helped us preserve our dignity." PB

ROMANIAN HUMAN RIGHTS ACTIVIST KILLED. Stefan Itoafa, an
attorney and human rights activist, has been murdered in
Constanza, AFP reported on 14 October. Itoafa was
stabbed and his throat cut. No other details are
available at present. PB

MOLDOVA IN LINE FOR IMF FUNDS. Mark Horton, the IMF
representative in Chisinau, said on 14 October that
Moldova has a good chance of receiving aid from the fund
by the end of this year, Infotag reported. Horton said
such a loan would be dependent upon "progress in cutting
budgetary expenditures" and steps toward privatizing the
energy sector. The IMF is holding a $28 million loan for
Moldova while the World Bank has frozen a $35 million
loan. The IMF also advised the Moldovan National Bank to
soften its intervention on the foreign exchange market
in an effort to support the leu, which has fallen
rapidly in the past few days. PB

BULGARIA AGREES TO KEEP FINANCIAL SYSTEM OPEN. The IMF
on 14 October announced that Bulgaria has agreed to
adhere to the fund's Article 4, an RFE/RL correspondent
in Washington reported. Bulgaria is the 146th country to
approve Article 4, which prohibits it from
discriminating against a foreign currency or imposing
restrictions on payments and transfers involving
international transactions. This is considered a major
step toward integrating into the global economy. PB

END NOTE

IMF, UKRAINIAN LEADERS DISCUSS REFORMS

by Lily Hyde

	Since Ukraine's recent agreement on a reform
program with the IMF, the country has been hit by new
economic problems. Some Kyiv-based international
financial experts say this is complicating Ukraine's
efforts to fulfill the program's aims.
	A Ukrainian delegation, including Prime Minister
Valeriy Pustovoytenko, Finance Minister Ihor Mityukov,
and National Bank Governor Viktor Yushchenko, met with
IMF officials in Washington recently. They discussed
what must be done to obtain further tranches of a $2.2
billion loan that are attached to the reform program.
	An outline of the program is posted on the IMF's
web site. It includes steps to ensure progress in
stabilization, to create a smaller and more efficient
government, to accelerate deregulation and
privatization, and to reform the financial sector. Other
measures are restructuring key economic sectors,
increasing competition, and improving protections for
the most vulnerable members of society.
	Aleksei Sekarev, an economic adviser with the
Ukrainian-European Policy and Legal Advice Center, calls
it "a very ambitious program for Ukraine." His research
center is funded by the EU. Sekarev says that it will be
"very difficult for Ukraine to fulfill many of the
conditions." But he says he believes that there is "a
readiness on the part of the IMF" to be realistic about
how many of the conditions can be met.
	Ukraine's program for economic revival underwent
drastic modification even as it was supposed to be
getting off the ground. By the time the government and
the IMF board of directors reached a final agreement on
the loan on 4 September, the Russian financial crisis
had hit and many of the financial benchmarks written
into original plans had become unrealistic.
	In a letter to the IMF, the government indicated it
would not be able to replenish the Ukrainian National
Bank's depleted reserves as earlier promised. The letter
also mentioned a new exchange rate band of 2.5-3.5
hryvna to the dollar, effectively devaluing the national
currency.
	The government also introduced a new set of
financial benchmarks, including ones on gross domestic
product, consumer price inflation, the state budget
deficit, money supply, and foreign currency reserves.
	Since then, the economic situation has deteriorated
further. At the end of September, the National Bank's
foreign reserves stood at $1.08 billion, some $250
million short of the target.
	Patricia Bartholomew, an economist at the Kyiv
office of Germany's Commerzbank, says she expects more
problems ahead. "Ukraine needs to develop a competitive
economy, but there has been trouble getting legislation
through the parliament." She expresses the view that the
situation in Ukraine will "continue to frustrate the
IMF."
	The parliament has already postponed discussion of
the budget until 15 October and is unlikely to approve
it. Since July, Ukraine has issued seemingly
inconsistent presidential and cabinet decrees, some in
line with goals agreed with the IMF, some taking a side-
ways step, and some directly in opposition.
	The clear conflict is between measures toward
deregulation and steps that allow for government
intervention in the economy, such as protecting
Ukrainian-produced goods, writing off tax arrears, and
expanding the list of excise exemptions on local goods.
	Sekarev of the EU-funded research center speculates
that the IMF may be willing to overlook measures that
contradict the spirit of IMF policy as long as they do
not contradict agreed conditions and as long as most
legislation remains consistent with agreed reforms.
	IMF officials say that production goals and other
targets and deadlines in the government's memorandum to
the IMF are flexible.
	Patrick Lenain, the IMF's top official in Kyiv,
says "we know we have to remain flexible and we have to
adjust". He said IMF officials know that "a lot is not
going to happen, or it will happen faster, or slower"
than planned and new measures may be necessary. Lenain
went on to say that if criteria are not complied with,
IMF officials will consider waivers.
	While quarterly reviews will look at long-term
trends, the IMF will also review Ukraine's progress
before deciding to release each monthly tranche of the
loan. The frequency may be an indicator that the IMF has
doubts about Ukraine's ability to keep its promises.
Only Russia has disbursements with the same frequency;
other IMF country loans are regulated quarterly or even
half-yearly.
	The IMF money is critical to balancing Ukraine's
budget, servicing high-interest government debts, paying
for imports, and maintaining the hryvna as a viable
currency. Moreover, loans from the World Bank are
conditioned on the government keeping to the IMF
program, and private lenders and investors rely heavily
on the IMF as an indicator of Ukraine's economic
prospects.
	Commerzbank's Bartholomew expresses the view that
"the IMF is in a very difficult position." She says
"they do not want to seem too strict, they are trying to
get as much reform through as possible without pushing
it too far and causing a backlash against reform. But,"
she says, "they also don't want to be seen as a
pushover."

The author is an RFE/RL correspondent based in Kyiv.

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