The burnt child shuns the fire until the next day. - Mark Twain
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 2, No. 213, Part II, 4 November 1998


________________________________________________________
RFE/RL NEWSLINE Vol 2, No. 213, Part II, 4 November 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

* IMF URGES KYIV TO REVISE 'OPTIMISTIC' 1999 DRAFT
BUDGET

* FINAL RESULTS CONFIRM MACEDONIAN OPPOSITION WINS
ELECTION

* UCK REJECTS KOSOVA AGREEMENT

End Note: ONCE IS NOT ENOUGH FOR BALCEROWICZ
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EAST-CENTRAL EUROPE

IMF URGES KYIV TO REVISE 'OPTIMISTIC' 1999 DRAFT
BUDGET... John Odling-Smee, the IMF's top negotiator in
talks with Ukraine, said in Kyiv on 3 November that
Ukraine's 1999 draft budget is "overly optimistic" and
urged the Ukrainian parliament to revise it, AP
reported. The draft budget forecast a deficit of 0.6
percent of GDP, revenues of 22.5 billion hryvni ($6.6
billion), expenditures of 23.18 billion hryvni, and a 1
percent growth in GDP. Odling-Smee said that both
revenues and expenditures should be downgraded. He added
that further IMF credits to Ukraine imply a decrease of
budget expenditures, the abolishment of state non-budget
funds, and the "optimization of taxation," dpa reported
on 3 November. JM

...WHILE KUCHMA AIDE SAYS GOVERNMENT DOING 'AS MUCH AS
POSSIBLE.' President Leonid Kuchma's aide Valeriy
Litvytskyy said the government is seeking to attract
credits by putting the 1999 budget deficit at 680
million hryvni and by "lowering state consumption as
much as possible," Interfax reported on 3 November.
Litvytskyy added that Ukraine want to discuss with the
IMF a possible money emission. He said that a possible
emission could be via commercial banks and that its
inflationary consequences would be "minimal." Litvytskyy
also stressed that the current limitations on the
purchase of hard currency in Ukraine--which is in
violation of Ukraine's commitments to the IMF--"will not
last longer than a month." JM

UKRAINE'S INFLATION GROWS IN OCTOBER. Litvytskyy told
Interfax on 3 November that inflation last month
amounted to 6.3 percent, compared with 3.8 percent in
September. He added that the government expects
inflation to slow down in November owing to the currency
stabilization program adopted in October. Inflation in
the first 10 months of 1998 totaled 12.8 percent,
esceeding the government target of 12 percent for the
whole year. "This is not the worst price we could have
paid for the financial crisis in the region," Litvytskyy
commented. JM

WORLD BANK SAYS NO AID TO BELARUS WITHOUT REFORMS. A
World Bank delegation, meeting with Belarusian
government officials in Minsk on 2-3 November, concluded
that no aid will be provided to Belarus until it
launches economic reforms. World Bank Vice President
Johannes Linn criticized Minsk for pursuing a
"distorted" exchange-rate policy (Belarus uses four
different exchange rates for ruble-dollar conversions).
"New loans [to Belarus] cannot be made in the
foreseeable future, and definitely not until crucial
reforms have been implemented," AP quoted Linn as
saying. He added that apart from reforming the currency
exchange mechanism, Belarus also needs to limit money-
printing, stop subsidizing outdated and unprofitable
factories, speed up privatization, and liberalize the
economy in general to attract investors. JM

END OF BELARUSIAN ECONOMIC 'MIRACLE'? According to
official data released last month, industrial production
fell by 4.5 percent in September, compared with August,
while the inflation rose to 17.6 percent from 3.8
percent in August. At the same time, the Statistics
Ministry reported that GDP in the first nine months of
this year grew by 10 percent. This week, the Belarusian
ruble slid from 250,000 to 300,000 to $1 on the
interbank exchange market (the official exchange rate is
58,600 to $1). "The Belarusian miracle has ended, having
demonstrated that in economics there are no miracles,"
Reuters on 3 November quoted a Belarusian National Bank
analyst as saying. The analyst added that exports to
Russia in September were 55 percent of last year's
level. JM

REFERENDUM ON BELARUSIAN-RUSSIAN CONFEDERATION? Belapan
on 3 November reported that an initiative group set up
to organize a referendum on the creation of a
Belarusian-Russian confederation has handed over a list
of its 1,177 members to the Central Electoral
Commission. Syarhey Haydukevich, chairman of the
Belarusian Liberal Democratic Party (BLDP) and the
group's leader, told Belapan that the confederation idea
does not contradict the Belarusian-Russian Union charter
and would not mean the loss of Belarusian sovereignty.
Under the Belarusian Constitution, a referendum may be
launched by the president, the National Assembly, or an
initiative group if 450,000 signatures are collected.
Mikalay Statkevich of the opposition Social Democratic
Party commented that the BLDP's referendum initiative is
"another attempt by this scandalous organization to
attract attention to itself." JM

ESTONIAN TAX BILLS TO BE LINKED TO CONFIDENCE VOTE? The
daily "Eesti Paevaleht" on 3 November quotes Prime
Minister Mart Siimann as saying the cabinet does not
rule out that draft legislation crucial for the 1999
budget will be tied to a vote of confidence, BNS
reported. The government has proposed hiking excises on
tobacco, alcohol, and motor vehicles to add 900 million
kroons (some $69 million) to next year's budget, but the
parliament recently rejected the bills in the first
reading. Siimann commented that a confidence vote would
be an "emergency measure" only but that the possibility
cannot be excluded at this stage. With regard to
speculation that the parliament will again reject the
1999 budget, Siimann said that he has no reason to take
such a "bleak view." Last week, the government returned
the draft unchanged to the legislature after lawmakers
had rejected it without debate (see "RFE/RL Newsline,"
30 October 1998). JC

LATVIA'S ULMANIS NAMES PREMIER-DESIGNATE. President
Guntis Ulmanis has named outgoing Transport Minister
Vilis Kristopans as prime minister-designate. Kristopans
said he will begin discussions with the Fatherland and
Freedom party and the New Party, with which his Latvia's
Way has set up a minority alliance (see "RFE/RL
Newsline," 2 November 1998). The agreement foresees
cooperation with either Andris Skele's People's Party,
which won the 3 October elections, or the Social
Democrats. Kristopans said it will take at least two
weeks to form a new government. JC

MOSCOW PROTESTS LATVIA'S EDUCATION LAW. Russian Foreign
Ministry spokesman Vladimir Rakhmanin on 3 November
denounced the education law passed by the outgoing
parliament during its final session last week (see
"RFE/RL Newsline," 30 October 1998), BNS and Reuters
reported. Rakhmanin noted that the law "completely
excludes" the Russian language from the state
educational system, which, he said, is inconsistent with
international norms. He also criticized the Latvian law
on radio and television, which reduces the amount of
Russian-language programming, and a declaration on World
War II legionnaires as "irresponsible decisions." With
regard to the declaration, which states that Latvian
soldiers were conscripted into the Waffen SS forcibly
and fought only against the Soviet occupiers, Rakhmanin
told BNS that "statements trying to justify SS actions
cannot be supported by any arguments." JC

POLISH GOVERNMENT CUTS MILITARY SERVICE TO 12 MONTHS.
The cabinet has submitted to the parliament a bill
cutting compulsory military service from 15 to 12
months, "Rzeczpospolita" reported on 4 November. If
approved by the parliament and signed by the president,
the bill will take effect on 1 January 1999. The bill
allows full-time university students to defer service,
but part-time students will have to prove they are
studying. Deputy Defense Minister Romuald Szeremietiew
said the army needs some 140,000 recruits. He added that
the Defense Ministry will seek to cut compulsory service
even further and increase the number of professional
military personnel, which currently stands at 90,000.
Under a reform urged by NATO, Poland is reducing its
troop strength from 240,000 to 160,000-180,000. JM

IRAN RECALLS AMBASSADOR TO PRAGUE IN PROTEST AT RFE/RL
BROADCASTS. Foreign Ministry spokesman Mahmud Mohammadi
said on Iranian state television on 3 November that
Teheran has recalled its ambassador to Prague to protest
RFE/RL broadcasts to his country. Mohammadi added that
Iran will reduce economic cooperation with the Czech
Republic and "will no longer trade with, or grant
industrial projects to, Czech companies." The Czech
Foreign Ministry said that Prague believes Iran's
decision is "of a mere temporary nature" and that it
will take no "reciprocal measures." A spokesman for
President Vaclav Havel called the Iranian action
"unwarranted," saying the Czech Republic is not
responsible for RFE/RL broadcasts. Interior Minister
Vaclav Grulich said he will propose that the government
discuss the reactions to the broadcasts at its weekly
meeting on 4 November, CTK reported. MS

HAVEL TO DISCUSS SPYING ALLEGATIONS WITH ZILK.
Presidential adviser Jiri Pehe on 3 November said Vaclav
Havel believes former Vienna Mayor Helmut Zilk, whose
alleged links with the communist secret services
prompted the president withdraw an award to Zilk (see
"RFE/RL Newsline," 26 October 1998), "deserves to know
what the findings [about Zilk's case] are." Pehe said
Havel will invite Zilk to Prague and will "personally
meet with him" to discuss the allegations, Reuters
reported. Pehe said no date for the meeting has been set
so far, but he added that he believes Zilk is "inclined
to come here." Presidential spokesman Ladislav Spacek
said Austrian President Tomas Klestil phoned Havel on 29
October to ask about the case. MS

SLOVAKIA APPOINTS 'OLD-NEW' INTELLIGENCE CHIEF. The new
government on 3 November appointed Vladimir Mitro as
chief of the counterintelligence service (SIS), CTK
reported. Mitro replaces Rudolf Ziak, who was SIS chief
for just a few days, after the previous government
dismissed Ivan Lexa (see "RFE/RL Newsline," 29 and 30
October 1998). Mitro headed the SIS under former Prime
Minister Vladimir Meciar but was dismissed at his own
request in 1995 over fabricated accusations that agents
were shadowing Meciar and parliamentary chairman Ivan
Gasparovic. After his dismissal, Mitro revealed that
Meciar had asked the SIS to draw up lists of journalists
allegedly paid from abroad. He also confirmed that
Meciar's Movement for a Democratic Slovakia attempted to
create parallel intelligence structures when it was in
opposition for several months in 1994. MS

SLOVAKIA PLEDGES TO IMPROVE CONDITIONS FOR ROMA. The
government on 3 November pledged to work with the
country's Romani minority to improve living conditions,
TASR reported. In a statement, the cabinet said it
wishes to "create an environment and conditions where
all citizens will feel safe and will have no reason to
leave their country." The U.K. recently imposed visa
requirements on Slovak citizens following a surge of
mostly Romani asylum seekers from Slovakia. MS

INTERNAL DIVISIONS GROW WITHIN HUNGARIAN DEMOCRATIC
FORUM. Hungarian Democratic Forum spokesman Karoly
Herenyi told "Magyar Hirlap" on 3 November that the
party rules out cooperating with just the Socialists,
the Free Democrats, and the Workers' Party, and is
prepared to hold talks with other groups, including the
extreme right Hungarian Justice and Life Party (MIEP).
The four candidates running for the party's presidency
on 19 December are incumbent Chairman Sandor Lezsak,
former Prime Minister Peter Boross, incumbent Justice
Minister Ibolya David, and former Justice Minister
Istvan Balsai. According to the Budapest daily, the
party's options are to proceed toward a union with the
major coalition partner, the Federation of Young
Democrats-Hungarian Civic Party, to approach the MIEP,
or to pursue its own policies. MSZ

SOUTHEASTERN EUROPE

FINAL RESULTS CONFIRM MACEDONIAN OPPOSITION WINS
ELECTION. The Electoral Commission on 3 November
released the final returns of the second stage of the
parliamentary elections, which took place two days
earlier. The coalition of the Internal Macedonian
Revolutionary Organization (VMRO-DPMNE) and the
Democratic Alternative (DA) came first with 58 out of
120 seats. The Social Democrats, who led the outgoing
government, took 29 seats. The two main ethnic Albanian
parties, which fielded joint candidates to ensure that
Albanians were elected in mainly Albanian areas, have 24
seats. The Liberal Democrats won four, the Socialists
two, and the Alliance of Roma one. The election will be
repeated in two districts in which irregularities took
place. PM

WHO WILL HEAD NEW MACEDONIAN GOVERNMENT? The
constitution states that President Kiro Gligorov must
soon ask a leader of the party that won the most votes
to form a new government. It is unclear who that person
will be, dpa reported from Skopje on 3 November. VMRO
leader Ljubco Georgievski said during the campaign that
he would be the prime minister in a VMRO-DA government
and that this is specified in the coalition agreement.
But a DA spokesman said on 3 November that "agreements
can be changed" and suggested that DA leader Vasil
Tupurkovski might become the next prime minister. Many
observers said during the campaign that the purpose
behind the formation of the coalition was to secure the
support of the multi-ethnic DA for the Macedonian
nationalist VMRO in the parliamentary election and the
backing of the large VMRO electorate for Tupurkovski in
the 1999 presidential vote. PM

UCK REJECTS KOSOVA AGREEMENT. Adem Demaci, who is the
political spokesman of the Kosova Liberation Army (UCK),
said in a statement in Prishtina on 3 November that the
UCK is not going to transform itself into a police
force. Albanian state television had reported on 31
October that UCK fighters will become local police
officers in keeping with the agreement between Yugoslav
President Slobodan Milosevic and U.S. special envoy
Richard Holbrooke. Demaci stressed that the UCK is
"protecting the sovereignty and integrity of the
Republic of Kosova," adding that any attempt to abolish
the goal of independence will fail. The same day, Demaci
told AP that no political settlement is possible without
the UCK's consent. He added that it is "unacceptable"
that 15,000 federal Yugoslav soldiers and 10,000 Serbian
police remain in Kosova," arguing that displaced persons
are afraid to return home as long as that number is not
cut to 8,500. FS

U.S. WITHDRAWS BOMBERS FROM U.K. The Pentagon said in a
statement on 3 November that six B-52 bombers will soon
leave the U.K. for their home base in Louisiana. The
text added that the aircraft can still reach targets in
Serbia from Louisiana if ordered to do so. The bombers,
which carry cruise missiles, arrived in the U.K. in
October as part of NATO's campaign to warn Milosevic
that he faces air strikes if he does not comply with UN
Security Council Resolution 1199 on Kosova. Ethnic
Albanian observers in Prishtina suggested that Milosevic
will regard the withdrawal of the aircraft as a sign
that NATO's resolve has weakened or that the alliance's
attention has been diverted to the increasingly tense
relations between the UN and Iraq. PM

RUGOVA VISITS KOSOVAR COUNTRYSIDE. Shadow-state
President Ibrahim Rugova and U.S. Ambassador to
Macedonia Chris Hill visited several localities in rural
Kosova on 3 November. Rugova said that he saw "lots of
destruction of property and houses...[but also] the
beginning of the return of people to their homes. Of
course we have to give them a deeper sense of security
because there is still some fear," he continued. Rugova
has not visited rural areas of the province since 1989
because he feared that the Serbian authorities might
detain him, Reuters reported. It is unclear why he
feared police would detain him in the countryside but
not in Prishtina or Belgrade, where he spends most of
his time. In related news, Euronews television showed
footage of rural Kosova on 4 November that indicated
that the Serbian security forces had burned out the
interiors of many homes, leaving empty shells without
roofs. PM

WESTENDORP UNCOVERS MUSLIM CORRUPTION. A spokeswoman for
the international community's Carlos Westendorp said in
Sarajevo on 3 November that Westendorp has completed a
test study of corruption, which he conducted in Muslim-
held Bugojno. The study revealed massive fraud in
dealings involving the reconstruction, allocation, and
privatization of state-owned real estate. The
investigation found that Muslim religious leaders,
politicians, military officers, and police, as well as
private citizens, illegally bought or sold property
belonging to the state or to Serbian or Croatian
refugees, AP reported. It is unclear when the alleged
illegal dealings took place. PM

MYSTERY SURROUNDS U.S. HELICOPTER INCIDENT. A spokesman
for the Pentagon said in Washington on 3 November that
two members of a U.S. Army helicopter crew received
minor eye injuries from a laser during a flight in the
Zenica area on 24 October. A subsequent search of the
area revealed only one small laser, which was of a type
used in schools to project images on walls. The laser
that injured the helicopter crew must have been larger
than the school "toy," the spokesman added. He noted
that the incident was "totally unexpected" and took
place in a residential area. It is unclear why the
Pentagon waited more than one week to report the
incident. PM

OSCE TO SEND MONITORS FOR ALBANIAN REFERENDUM. OSCE
Ambassador to Albania Daan Everts told Reuters in Tirana
on 3 November that the OSCE's Office for Democratic
Institutions and Human Rights will send 150 observers
for the 22 November referendum on a new constitution.
Norway's Kare Vollan will head the mission. Other
monitors will come from the staffs of embassies in
Tirana, from international organizations present in
Albania, and from the Council of Europe's and the OSCE's
parliamentary assemblies. FS

ALBANIAN GOVERNMENT LAUNCHES ANTI-MAFIA OFFICE. Prime
Minister Pandeli Majko and Prosecutor-General Arben
Rakipi agreed in Tirana on 3 November to create a
special office to fight organized crime, ATSH reported.
The same day, the Bank Auditing Council sent to the
parliament a draft law aimed at stopping money
laundering. In other news, the Supreme Court turned down
an appeal to release former Interior Minister Halit
Shamata, former Defense Minister Safet Zhulali, former
Deputy Secret Police (SHIK) Chief Bujar Rama, and former
Vlora police chief Sokol Mulosmani. The four have been
under house arrest since August pending trial on charges
of committing "crimes against humanity" during unrest in
1997. Also on 3 November, "Zeri i Popullit" quoted
unspecified SHIK sources as saying they have evidence
that Democratic Party supporters have a military
training camp near Shkodra. The Democrats strongly
denied the reports, according to dpa. FS

ROMANIAN PREMIER MEETS WITH FRENCH COUNTERPART. On the
second day of his visit to France, Radu Vasile on 3
November met with Lionel Jospin, with whom he discussed
bilateral relations, French investments in Romania, and
international issues. Jospin told Vasile that France is
ready to help Romania "overcome its present particularly
difficult economic situation" but that "political
stability" is one of the main conditions for that effort
to succeed. Vasile announced that the French Renault
company is interested in acquiring a 51 percent stake in
the Dacia automaker in Pitesti by the end of this year.
MS

OPPOSITION'S CHANCES IN BUCHAREST MAYORAL RACE
IMPROVING. George Padure, an independent candidate who
came third (with 20 percent of the vote) in the 1
November repeat of the Bucharest mayoral elections, has
announced that he is supporting the opposition candidate
Sorin Oprescu in the run off, scheduled for 8 November.
Padure called on his supporters to vote for the Party of
Social Democracy in Romania candidate. Turnout must be
at least 50 percent plus one for the ballot to be valid.
MS

KOSTOV CONGRATULATES MACEDONIAN ELECTORAL WINNERS. Prime
Minister Ivan Kostov has sent a letter to the leaders of
the winning coalition in the Macedonian elections saying
their electoral victory "will further confirm our joint
European values...and help us build a common future in
the EU," Bulgarian radio reported on 3 November. Kostov
told the leaders of the Internal Macedonian
Revolutionary Organization and the Democratic
Alternative, Ljubco Georgievski and Vasil Tupurkovski,
that their victory marks "the rejection of Tito's
communism" and puts Macedonia "on the road of democratic
change" as well as serving to "strengthen stability and
security in our region." MS

END NOTE

ONCE IS NOT ENOUGH FOR BALCEROWICZ

by Jan Maksymiuk

	Addressing Solidarity's 10th National Congress on
25 September, Polish Premier Jerzy Buzek boasted that
his Solidarity-affiliated government has done more in
one year than its left-wing predecessor did in four. To
support that statement, Buzek noted that since its
inauguration on 31 October 1997, his government has
launched major reforms in administration, education,
pension, health care, and taxation. The delegates
responded by giving Buzek a standing ovation.
	Poland's current cabinet, which is formed by the
Solidarity Electoral Action (AWS) and the Freedom Union
(UW), doubtless deserves much credit for its reformist
efforts, particularly when compared with the cautious,
rather conservative approach of the previous, left-wing
government of the Democratic Left Alliance (SLD) and the
Polish Peasant Party. However, Buzek's self-
congratulatory assessment loses some of its luster if
one takes a closer look at the systemic reforms
currently under way.
	Hailed as a radical step toward the
decentralization of power, administrative reform nearly
failed when it came to determining how many provinces
the country should have. The government's initial idea
of dividing the country into 10 or 11 economically self-
sufficient regions was unable to overcome the barriers
erected by local communities, the parliamentary
opposition, the president, and even some coalition
deputies who opted to defend local rather than party
interests. In the end, 16 new provinces were created
with few, if any, prospects of economic self-
sufficiency.
	The reform of the health care system has raised
many doubts and apprehensions. The reform bill sets up
so-called patient funds that are to be financed by
employees' mandatory contributions equaling 7.5 percent
of their gross income. Opponents of the bill argue that
the contribution should be at least 11 percent in order
to support the health care system adequately.
	Tax reform, which Buzek also mentioned as one of
his cabinet's achievements, serves, in fact, to
highlight the political discord within the AWS-UW
coalition and may be viewed as a frustrated attempt to
carry out radical transformation in present-day Poland.
	Originally, UW leader Leszek Balcerowicz, who is
deputy premier and finance minister in Buzek's cabinet,
proposed a reform of the tax system. Balcerowicz is
known for his bold "shock therapy" in 1990, when he
liberalized economic policies in Poland, introduced a
free market, and put the country on the path of
sustained economic growth. No less enthusiastically,
Balcerowicz earlier this year prepared a white paper on
tax reform--another form of "shock therapy" or a "tax
revolution," as the plan was called in the media.
	Balcerowicz proposed to abolish the current three-
tier tax system and introduce a flat income tax rate of
22 percent in 2000. (Poland's current tax rates are 19,
30, and 40 percent, which correspond to annual incomes
of below 25,252 zlotys ($7,425), between 25,252-50,504
zlotys, and more than 50,504 zlotys, respectively.) In
1999, the finance minister proposed to introduce two
income tax rates of 22 percent and 32 percent and to
abolish all tax exemptions. In order to soften the
impact of the reform on the poorest segments of society
(who would see their tax rate rise from 19 percent to 22
percent), Balcerowicz envisioned an increase in tax-free
income. In addition, corporate tax was to be lowered
from the current 36 percent to 22 percent in 2002.
	Balcerowicz is convinced that taxes should be used
primarily as a tool to stimulate the economy, not to
curry favor with the electorate. High taxes on high
incomes kill an individual's entrepreneurial spirit, he
argues. Introducing a flat tax rate would boost economic
growth, release the as yet untapped reserves of social
energy, and create new jobs. Let people work and earn
more money instead of looking for loopholes in tax
legislation or evading tax payments is Balcerowicz's
well-publicized credo.
	Balcerowicz's proposal has provoked harsh criticism
from both the left and the right of the political
spectrum. The SLD called it "immoral," saying preference
is given to the wealthiest while the state's fiscal grip
on the middle and lower classes is tightened. The AWS,
arguing that the tax system should be "family-friendly,"
is in favor of tax exemptions for families with a large
number of children.
	The cabinet, which is dominated by AWS politicians,
finally rejected the tax reform proposed by its finance
minister. Last month, it submitted to the parliament a
tax reform bill providing only for the abolition of tax
relief for private investors and those building their
own homes and for the reduction of the corporate tax
from 36 percent to 32 percent. More radical measures
have been postponed until 2000.
	Balcerowicz's failed second attempt at "shock
therapy" may be interpreted as a sign that post-
communist Poland is already beyond the stage where it is
possible to launch "economic revolutions."
Alternatively, it may be an indication that Polish
politicians find it very difficult to answer some basic
questions about their country's further development. For
example, should the rich pay higher taxes than the poor?
Or is economic growth more important than social
equality? Balcerowicz's reform offered politicians a
chance to provide clear answers to such questions. That
chance now seems to have been missed.

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