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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 3, No. 158, Part II, 16 August 1999


________________________________________________________
RFE/RL NEWSLINE Vol. 3, No. 158, Part II, 16 August 1999

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

* BELARUSIAN PRESIDENT FORMS TEAM FOR TALKS WITH
OPPOSITION

* SERBIAN PREMIER CALLS OPPOSITION 'TERRORIST'

* ALBANIAN PREMIER VISITS KOSOVA, RECOGNIZES RUGOVA AS
PRESIDENT

End Note: LATVIA'S NEW GOVERNMENT INHERITS DEPRESSED
ECONOMY
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EAST-CENTRAL EUROPE

BELARUSIAN PRESIDENT FORMS TEAM FOR TALKS WITH
OPPOSITION... Alyaksandr Lukashenka has formed a group
to discuss with political parties and public
organizations preparations for the 2000 parliamentary
elections, Belarusian Television reported on 13 August.
The group is headed by presidential aide Mikhail
Sazonau, who said the consultations will begin later
this week. Meanwhile, Lukashenka has said the opposition
Supreme Soviet is a "rotten" group of some 30 former
deputies who do not represent "the opposition as such."
According to him, the authorities are obliged to talk
with representatives of "some 10 percent of the
population," which, in his opinion, currently
constitutes the opposition in Belarus. JM

...WHILE OPPOSITION HAGGLES OVER ITS REPRESENTATION. The
memorandum empowering the Supreme Soviet to form an
opposition delegation that will hold talks with the
regime under the aegis of the OSCE (see "RFE/RL
Newsline," 11 and 12 August 1999) has caused protests
among opposition parties. Social Democratic Party leader
Mikalay Statkevich told RFE/RL's Belarusian Service on
13 August that his party did not agree to delegate full
powers to the Supreme Soviet with regard to the talks.
Liberal Democratic Party leader Syarhey Haydukevich, who
did not sign the memorandum, appealed to the OSCE to
hold a dialogue in Belarus in accordance with the
principles laid down at the OSCE Parliamentary Assembly
session in St. Petersburg on 10 July. According to
Haydukevich, the opposition should be represented by
leaders of opposition parties and NGOs, not by the
Supreme Soviet alone. JM

UKRAINE LOOKS FOR MORE WESTERN MONEY AS HRYVNYA
STABILIZES. A government delegation headed by Deputy
Prime Minister Serhiy Tyhypko left for Washington on 15
August for two day of talks with the IMF, the "Eastern
European Daily" reported. The main goal of the visit is
to discuss the disbursement of an IMF loan tranche to
Ukraine. It is thought that Tyhypko may agree with the
World Bank on the date for releasing a $100 million
tranche under the so-called Financial Sector Adjustment
Loan program. Meanwhile, the Ukrainian hryvnya has
stabilized and returned below the government exchange
limit of 4.6 to $1. On 13 August, the hryvnya was
trading at $4.54 to $1. JM

UKRAINIAN MINERS CONTINUE PROTESTS OVER WAGE ARREARS.
The Independent Miners' Trade Union has threatened to
suspend coal supplies to consumers beginning in
September and to stage a large-scale protest unless the
government reduces its wage debt to coal miners, AP
reported on 13 August. More than 2,000 miners are on
strike in the Donetsk region, while hundreds of miners'
wives and children continue to demonstrate in Luhansk.
First Deputy Prime Minister Anatoliy Kinakh met with the
protesters last week. According to the Independent
Miners' Trade Union, however, "miners' hopes for a
positive resolution of their problems have not been
fulfilled." The government owes the miners more than 2
billion hryvni ($435 million) in back wages, including
145 million hryvni for 1999, according to trade union
leaders. JM

ESTONIAN ECONOMIC MINISTRY FORECASTS DISASTROUS 1999. In
an interview with the daily "Postimees" on 14 August,
the Economic Ministry's chief economic policy
specialist, Indrek Jakobson, predicted that Estonia's
GDP will drop by 3 percent this year. Jakobson said the
prediction is based on the 5.6 percent GDP drop in the
first quarter of 1999 and a predicted 5-8 percent drop
in the second quarter. This contradicts the Finance
Ministry's forecast of 0.4 percent GDP growth this year.
MH

SUICIDE RATE REMAINS HIGH IN ESTONIA. Nearly 600 people
commit suicide annually in Estonia, according to the
suicide prevention service Lifeline, BNS reported. Some
40 people out of 100,000 commit suicide annually, which
is much higher than the 10-20 out of 100,000 that
international organizations usually cite. Lifeline said
that during the three years it has been operating, about
3,000 people have called the suicide prevention line. MH

JOINT BALTIC DOCUMENTARY PROJECT ON OCCUPATION. Freyja
Film of Estonia, F.O.R.M.A. of Latvia, and Studioa KOPA
of Lithuania signed an agreement on 14 August to produce
a documentary, entitled "History Denied," on the
occupation of the three Baltic countries, "Postimees"
daily reported. The three-part series will span the
period from the Molotov-Ribbentrop Pact in 1939 to the
withdrawal of Russian troops in 1994. According to
"Postimees," the text of the Estonian section will be
the responsibility of four historians, including Prime
Minister Mart Laar. MH

TROUBLED LITHUANIAN BANK CLOSED. The Bank of Lithuania
has ordered a halt to nearly all activities at the
troubled Litimpeks Bank, which ceased operating on 13
August. The small bank, which accounts for only 2.6
percent of the banking market, faces liquidity, being
unable to cover some 30 million litas ($7.5 million) of
debt, ELTA reported. The central bank stated that
several foreign investors are interested in Litimpeks.
However, they warned that if investors do not
materialize soon, the bank could be liquidated. MH

POLISH PEASANT LEADERS SHARPLY CRITICIZE GOVERNMENT.
Zdzislaw Podkanski, speaker of the Polish Peasants'
National Assembly, called on the parliament to dissolve
itself and the government to resign because of the two
bodies' "anti-peasant policy," Polish media reported on
15 August. The same day, Peasant Party leader Jaroslaw
Kalinowski criticized the government for "forgetting the
farmer," implementing "an extremely liberal economic
model," and putting off the resolution of "farmers' real
problems indefinitely." And on 14 August, the leader of
the Self-Defense farmers' union, Andrzej Lepper,
threatened a nationwide strike "no later than this
October." JM

POLAND'S WALESA SAYS HE IS 'FORCED' TO RUN FOR
PRESIDENCY. Former President Lech Walesa said on 14
August that the situation in the country "forces" him to
run for the presidency once again. "After what [Self-
Defense leader Andrzej] Lepper and others have said, I
have no choice. I am 99.9 percent sure that I will run,"
Walesa said. He added that early parliamentary elections
in Poland cannot be ruled out because of the
government's inability to cope with various problems,
including the farmers' woes. JM

CZECH POLICE LAUNCH INVESTIGATION INTO NEW ODS
IRREGULARITIES ALLEGATIONS. Police have launched an
investigation into the most recent allegations of
financial irregularities linked to the opposition Civic
Democratic Party's (ODS)1996 election campaign, CTK
reported on 13 August, citing IDnes (the Internet
version of the daily "Mlada fronta Dnes"). Earlier, the
daily had reported that the ODS failed to report to the
Finance Ministry that it had received two donations
totaling 7.3 million crowns ($214,000), which were used
to print election billboards and campaign brochures.
According to the daily, the director-general of
Zeleznicni stavitelstvi Brno, Michal Stefl, confirmed
that the donations were made so that his company would
receive orders from the Transportation Ministry for the
construction of railway tracks. Stefl later denied the
allegation, but "Mlada fronta Dnes" says it stands by
its report. MS

SLOVAK FOREIGN MINISTER 'NOT INTERESTED' IN PREMIERSHIP.
Eduard Kukan on 13 August told journalists that he is
"not interested" in taking over the post of premier from
Mikulas Dzurinda "either now or after the EU summit at
the end of the year." Kukan was responding to a report
in the daily "Sme" saying that Kukan's popularity made
him the most likely candidate to replace Dzurinda. Kukan
said he believes everyone "should fulfill that task for
which they are best prepared, which they most enjoy, and
to which they can bring the best results." For him, he
added, this means the position that he now has. Dzurinda
is the "right man in the right place," he argued. Kukan
also said that the dispute between Dzurinda and other
leaders of the Slovak Democratic Coalition (SDK) on
reshaping the SDK into a five-party coalition "must not
be escalated," CTK reported. MS

HUNGARIAN CHURCHES CONDEMN PUBLICATION OF ANTI-SEMITIC
FORGERY. The Hungarian Calvinist Church expressed
"solidarity" with members of the Hungarian Jewish
Community who have protested the recent publication of
the "Protocols of the Elders of Zion," Hungarian media
reported on 14 August. The same day, Hungarian Catholic
Bishops condemned the publication of the book, saying it
could foment hatred on racial or religious grounds. They
expressed concern over the "increasingly frequent
manifestations" of "a lack of respect and tolerance"
toward various religious communities. The Ministry of
National Cultural Heritage on 13 August said it condemns
"any defamation of religions" and expressed solidarity
with "those offended" in this way. The ministry added
that it supports a call by the Federation of Hungarian
Jewish Religious Communities to publish a scholarly work
dealing with the book's false claims. MS

HUNGARIAN FAR RIGHT LEADER INSISTS ON VOJVODINA
REFERENDUM. Hungarian Justice and Life Party chairman
Istvan Csurka told Hungarian Radio on 15 August that
Budapest must insist on a UN-supervised referendum on
northern Vojvodina's re-annexation to Hungary. Asked to
comment on the fact that the region's Hungarian minority
has made no such demand, Csurka said that, like most
Hungarians living outside Hungary's borders, Vojvodina's
Magyars "have a bayonet pointed at their back" and are
thus unable to express their true aspirations. Csurka
said that Hungary must act to save "the southern
region"--a term referring to the historical borders of
Greater Hungary--and that a "tiny border alteration"
would save 300,000-500,000 Hungarians. He added that the
"principle of the inviolability of borders" is a "lie"
and is "violated by the great powers all the time." MS

SOUTHEASTERN EUROPE

SERBIAN PREMIER CALLS OPPOSITION 'TERRORIST.' Mirko
Marjanovic told the state-run daily "Politika" of 15
August that the members of the opposition Alliance for
Change are "representatives of the aggressive policy of
NATO" and "paid killers." He charged that the alliance
seeks the violent overthrow of the government of
Yugoslav President Slobodan Milosevic. Marjanovic added
that the government therefore considers the alliance to
be a "terrorist" one. As proof of his assertion, he
cited recent remarks by opposition leader Vesna Pesic
that the Serbian people might get rid of Milosevic by
using the "Romanian method" unless he goes voluntarily.
Her remarks were an allusion to the violent overthrow of
Romanian dictator Nicolae Ceausescu in December 1989. PM

OPPOSITION LEADER SAYS REGIME BELONGS IN THE HAGUE.
Alliance leader Vladan Batic said at a demonstration in
Trstenik that the Milosevic regime has committed the
"most monstrous terrorist acts" against the Serbian
people during Milosevic's 10 years in office. Batic
added that the only place for the regime's leaders is
the international war crimes tribunal in The Hague. He
noted that "the alliance has no armed forces,
paramilitary troops, or criminal gangs--all of which the
regime has." Several thousand people attended anti-
Milosevic protests in Trstenik and Krusevac on 15
August. Elsewhere, opposition politician and former
General Momcilo Perisic told Belgrade's Studio-B
Television the previous day that the army will not
support Milosevic if he tries to crack down violently on
the opposition. PM

REGIME ATTACKS PERISIC. The state-run daily "Politika"
slammed Perisic on 16 August as a weak commander who was
sacked in November 1998 for incompetence. "It's no
wonder why this tiny-statured, weak, and treacherous
general was not able to resist strains of possible NATO
intervention against Yugoslavia... He is now trying to
compensate for his loser personality and become [U.S.
President Bill] Clinton's lieutenant and a Serbian
Pinochet," AP reported. PM

WHAT DOES 19 AUGUST MEAN FOR SERBIA? Zivorad Djordjevic,
who heads the state-run daily "Borba," said on 15 August
that the opposition has chosen 19 August as the date for
its big rally in Belgrade because that is Clinton's
birthday (see "RFE/RL Newsline," 11 August 1999).
Serbian Renewal Movement leader Vuk Draskovic dismissed
the charge, pointing out that 19 August is the Serbian
Orthodox Feast of the Holy Transfiguration. He added
that "the Communists [in the regime] do not know that
because they are atheists. We hope that 19 August will
mark the beginning of a transfiguration of Serbia into a
democratic society," AP reported. PM

VEDRINE: NO AID FOR MILOSEVIC. French Foreign Minister
Hubert Vedrine told Belgrade's "Vecernje novosti" of 15
August that the international community will give no
reconstruction aid to Serbia so long as Milosevic
remains in power. Any such assistance would only help
prop up the regime, Vedrine added. He stressed that the
time has come to break the "cycle of violence in the
Balkans" by ousting Milosevic. PM

GENERAL WANTS SERBIAN FORCES BACK IN KOSOVA. General
Nebojsa Pavkovic, whose Third Army's zone of operations
includes Kosova, said that KFOR troops have not
fulfilled their obligations under the June peace
agreement, RFE/RL's South Slavic Service reported on 16
August. He demanded that NATO troops leave the province
and that the UN allow his forces to return. PM

SERBIAN RESERVIST CONTINUES HUNGER STRIKE. Miodrag
Stankovic said on 15 August in Nis that he has decided
to continue his hunger strike for back pay, which has
entered its fourth week. He added that he will move his
protest from the city center to the Sveti Jovan
monastery, where a local monk blessed him. Stankovic
said that the government claims it cannot pay him or his
fellow soldiers, but he noted that it provides General
Pavkovic with a large apartment and luxury cars. Several
other reservists recently stopped their hunger strike
for back pay at the urging of doctors and Serbian
Orthodox priests. PM

SERBIAN OPPOSITION LEADER OPPOSED TO HUNGARIAN AUTONOMY
IN VOJVODINA. Nenad Canak, who heads the League of
Social Democrats of Vojvodina, said in an interview with
Hungarian Radio on 15 August that he opposes granting
territorial autonomy to Vojvodina's ethnic Hungarians.
He charged that providing autonomy "would only
facilitate the spread of Serbian nationalism in
Vojvodina and lead to new disputes." Canak added that he
opposes the concept of "personal autonomy" because it
would involve a "redistribution of budget funds" based
on the numerical strength of ethnic communities, meaning
that "the small Ruthenian and Ukrainian minorities would
get practically nothing." In an interview with the
Belgrade weekly "NIN" on 15 August, Alliance of
Vojvodina Hungarians chairman Joszef Kasza said that as
long as the Yugoslav authorities "struggle for their own
survival," they will have "neither the strength nor the
means to deal with minority issues." MS

MONTENEGRIN POLICE CHIEF PROMISES VIGILANCE. Interior
Minister Vukasin Maras said in Podgorica on 15 August
that Yugoslav Prime Minister Momir Bulatovic and his
Socialist People's Party seek "at any cost to
destabilize" the Montenegrin government of President
Milo Djukanovic. Maras rejected a recent charge by
Bulatovic's supporters that the government plans to
discredit the Yugoslav army by staging a fake coup
attempt involving men dressed in Yugoslav army uniforms.
The interior minister said that Bulatovic himself is
behind the accusation. Magas pledged that the police
will firmly resist anyone who tries to start a civil war
in Montenegro, RFE/RL's South Slavic Service reported.
PM

UNHCR SEEKS MORE AID FOR SERBIAN REFUGEES. Dennis
McNamara, who is the UNHCR's special envoy for the
Balkans, said in Prishtina on 15 August that he will
seek an additional $20 million for his office's 1999
budget. This will bring the total to $60 million. He
said that the continuing exodus of Serbs and Roma from
Kosova prompted him to seek the increase. In Kraljevo,
refugees told Reuters that Serbian police "stopped us in
each town and did not want to let us through." On 14
August, the private Beta news agency reported that a
Serbian convoy of more than 100 vehicles left Gjilan for
Serbia proper the previous day. PM

DINI URGES KFOR TO BE 'MORE VIGOROUS.' Italian Foreign
Minister Lamberto Dini told "La Repubblica" of 14 August
that "the Serbian population [of Kosova] is suffering a
repression that is much smaller but just as brutal and
repugnant as that suffered previously by Albanians,"
Reuters reported. He stressed that "KFOR [must take]
more vigorous action. Violence against the Serbian
population must be prevented." He urged the Kosova
Liberation Army (UCK) to show a "responsible attitude."
Dini stressed that the international community must give
"no aid for reconstruction if we don't see a commitment
to combat crime and drug trafficking" on the part of the
Albanians. He noted that the international community did
not launch its bombing campaign against Serbia in order
to put the UCK in power, adding that independence for
Kosova could destabilize the Balkans. The following day,
the UCK's General Agim Ceku stressed that an independent
Kosova will be a "factor of stability in the Balkans,"
RFE/RL's South Slavic Service reported. FS

ALBANIAN PREMIER VISITS KOSOVA, RECOGNIZES RUGOVA
AS PRESIDENT. Pandeli Majko arrived in Prishtina on
13 August for a two-day visit--the first ever by an
Albanian head of government to Kosova. Majko
condemned ethnic Albanians who are harassing Serbs,
saying that "if the Albanians do that, then they
will play a part in Milosevic's survival. Albanians
must know how to work in calm and peace," AFP
reported. Majko also met with moderate Kosovar
leader Ibrahim Rugova, whom he addressed as
"president." During his meeting with Rugova, Majko
proposed the construction of a highway linking
Durres with Prishtina and announced plans for
opening a diplomatic representation in Kosova.
Majko also met with UCK leader Hashim Thaci, OSCE
Ambassador Daan Everts, UN Special Representative
Bernard Kouchner, and U.S. diplomats. FS

THACI VISITS ALBANIA. Thaci met with President
Rexhep Meidani in Durres on 15 August. Meidani's
spokesman Mentor Nazarko told RFE/RL's South Slavic
Service that Meidani pledged to provide university
teachers and other experts for Kosova. Both sides
urged the international community to establish
international control over the divided town of
Mitrovica. Thaci warned that there is a "heavy
presence of Serbian paramilitaries and agents" in
the north of the city, who are trying to partition
the town, dpa reported. FS

ALBANIAN POLICE SMASHES INTERNATIONAL PROSTITUTION
NETWORK. Albanian police have cracked a network
smuggling prostitutes from Russia, Moldavia, Ukraine,
and Romania via Albania to Italy, dpa reported on 15
August. Police detained 13 prostitutes and three men in
a motel near Shkodra on 15 August. The detainees had
apparently entered Albania from Montenegro. Several days
earlier, police detained 12 prostitutes in Shkodra. Also
on 15 August, Prosecutor-General Arben Rakipi said that
Italian Mafia bosses are active in Albania. Three weeks
ago, he said, Albanian police arrested Giuseppe Muolo of
Sacra Corona Unita, a Mafia group from Puglia. In other
news, police found three members of the notorious gang
of the Gerdhuqi brothers killed in their car near Vlora
on 13 August, AP reported. The three had been released
from jail in July for lack of evidence. They had been
charged with various crimes ranging from robbery to
murder. FS

ROMANIAN FINANCE MINISTER EXPLAINS TERMS OF AGREEMENT
WITH IMF. Decebal Traian Remes on 13 August said the IMF
will not disburse any more tranches of its $547 million
stand-by loan to Romania until Bucharest meets the terms
of agreement it signed with the fund earlier this month.
Remes added that the IMF will not agree to the 2000
budget being an "election-oriented" one, adding that in
accordance with the April agreement, the IMF will review
its implementation in September and December 1999 and in
February 2000. The agreement does not allow the
government to make any interest-rate or tax cuts without
the fund's prior permission and without measures being
taken to compensate losses in budget revenues. Remes
said macroeconomic policy will concentrate on fiscal
consolidation and wage restrictions in order to reduce
domestic demand, RFE/RL's Bucharest bureau reported. MS

MOLDOVAN RADIO GOES OFF AIR DUE TO UNPAID ELECTRICITY
BILLS. Moldovan Radio went off the air for two hours on
13 August when its electricity supplies were cut off,
RFE/RL's Chisinau bureau reported. Supplies were
restored after the management promised that the
company's 600,000 lei (some $55,000) debt to the
government will be paid this week. Ion Verbenciuc,
deputy chairman of Teleradio-Moldova, said that "what
happened is quite normal in a market economy." The same
day, the independent Flux agency reported that
electricity supplies to prisons in Balti and Rezina were
also cut off owing to the nonpayment of bills. MS

CZECH COURT ORDERS EXTRADITION OF SUSPECT IN BULGARIAN
EX-PREMIER'S MURDER. A Prague court has ordered the
extradition of Angel Vasiliev, who is suspected of
having murdered former Bulgarian Prime Minister Andrei
Lukanov in October 1996, BTA reported on 13 August,
citing Bulgarian Radio. Vasiliev, chief executive of the
Prague-based Colonel construction company, was arrested
on 4 June. Vasiliev's wife told Bulgarian Radio that the
extradition order will be appealed because her husband
will not have "a fair trial in Bulgaria." MS

END NOTE

LATVIA'S NEW GOVERNMENT INHERITS DEPRESSED ECONOMY

by Michael Wyzan

	Recent weeks have been eventful on the Latvian
political scene. Vaira Vike-Freiburga, a politically
independent former emigre to Canada, was elected by the
parliament to the post of president on 17 June. One
month later, on 16 July, Andris Skele of the former
opposition People's Party (who was prime minister from
December 1995 to July 1997) formed a new government.
	With regard to the economic sector, Skele's
government has its work cut out for it. Hit hard by the
Russian economic crisis that broke out in August 1998,
Latvia's economy is beset by declining GDP, rising
unemployment, and falling foreign trade volumes
(especially exports to Russia).
	Latvia's GDP contracted by 2.3 percent in the first
quarter of 1999, following a 1.9 percent decline in the
final quarter of 1998, which demonstrates that the
economy is technically in recession. Latvia has been
dealing with the effects of a collapse in Russian trade
for longer than has Estonia or Lithuania. Trade with
Russia began to decline in spring 1998, when relations
between the countries worsened following events
surrounding the March demonstration by mostly Russian-
speaking pensioners in Riga.
	Industrial production was down by 15.8 percent
during the first five months of 1999, compared with the
same period in 1998. Latvia's official unemployment rate
was 10 percent in June, just shy of the record 10.2
percent registered the previous month and up from 7.2
percent a year earlier. Unofficial estimates put that
rate as high as 16-17 percent.
	Inflation is low, with consumer prices rising by
2.8 percent on a December-to-December basis in 1998 and
by only 1.9 percent in the 12 months to June. The
average monthly gross wage in the public sector was $257
in May, up from $235 a year earlier. The wage in lats
was up by 9 percent over this period, while GDP fell,
employment declined slightly, and inflation was minimal.
Thus, wage growth seems high, given the depressed state
of the economy
	Latvia's fiscal position deteriorated this year,
and expenditure cutbacks may have to be made in the
fall. The 1999 budget, passed in February, foresaw a
deficit of about 3 percent of GDP. On 5 August, the
parliament approved amendments to the 1999 budget that
cut spending by 64.4 million lats ($109 million) to take
into account a shortfall in expected revenues of 93.1
million lats.
	There has been one positive consequence of the
declining economy: the current account deficit fell from
a very high 11.5 percent of GDP in 1998 to 8.7 percent
of GDP in the first quarter of 1999. The poor external
sector results in 1998 show that Latvia was not
particularly successful (compared with Estonia, for
example) in compensating for lost trade with Russia by
boosting commercial ties with the EU. Total exports rose
from $1.673 billion in 1997 to just $1.812 billion last
year, while total imports rose from $2.724 billion to
$3.189 billion over the same period. As a result, the
trade deficit increased.
	This year, while the trade volume has declined, the
fall in imports has exceeded that of exports. This means
that the trade deficit has contracted from $383 million
in January-April 1998 to $318 million over the same
period this year.
	Behind the slow growth of total exports has been
the collapse of the Russian market. Exports to that
country decreased from 21 percent of the total in 1997
to 12.1 percent in 1998. Imports fared better, declining
by 10.4 percent and accounting for 11.8 percent of the
total, compared with 13.3 percent the previous year. The
decline in trade with Russia has continued this year:
exports to that country constituted 7.1 percent of the
total in January-April 1999 and imports from there were
9.3 percent of the total over the same period.
	The share of exports to the EU has risen from 48.9
percent of the total in 1997 to 64.3 percent in January-
April 1999, while for imports the EU share has increased
from 45.4 percent to 56.1 percent over this period.
	Despite all the gloomy statistics, Latvia may be
over the worst effects of the Russian crisis, with some
observers forecasting a strengthening of the economy in
the second half of 1999. However, there are still too
many banks in Latvia (24, compared with only five in
Estonia), many of which are exposed to developments in
Russia. A wave of bank failures and consolidations seems
likely, which would prolong and deepen the economic
downturn. Another key policy issue is the fixed exchange
rate of the lats. Maintaining that rate necessitates a
particularly stringent fiscal policy, another factor
that would keep the economy from turning around quickly.

The author is a research scholar at the International
Institute for Applied Systems Analysis in Laxenburg,
Austria.
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1996 Friends and Partners
Natasha Bulashova, Greg Cole
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Updated: 1998-11-

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Please write to us with any comments, questions or suggestions -- Natasha Bulashova, Greg Cole