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Newsline - January 23, 1998


President Yeltsin on 23 January charged that regional leaders are to blame for the failure to pay all back wages to state employees by the end of 1997. In a nationwide radio address, Yeltsin claimed that "the money left Moscow on time" but that "significant sums went astray" in the regions. He specifically cited allegations that money earmarked for wages was used for other purposes in Tyumen and Volgograd Oblasts, adding that those responsible must be found and punished. Yeltsin said he has already ordered officials to determine how the money was spent and tell him within a week "who sabotaged the presidential decree" on paying the wage debts. In a recent meeting with top government ministers, the president appeared to reject attempts to blame regional officials for the failure to settle the debts (see "RFE/RL Newsline," 19 January 1998). LB


Government spokesman Igor Shabdurasulov told Reuters on 22 January that Russia will tighten control over exports of goods and services that could be utilized to manufacture nuclear weapons. Shabdurasulov added that the agreement was reached during a telephone conversation on 17 January between Russian Prime Minister Chernomyrdin and U.S. Vice President Al Gore. But he declined to confirm that it is part of an effort to prevent Iran from manufacturing nuclear missiles. LF


Minister of Foreign Relations and Trade Mikhail Fradkov has said that Aleksandr Kotelkin, appointed as one of his first deputies in September, 1997, will be dismissed in March, Interfax reported on 22 January. Fradkov said the move is in accordance with a 27 December government directive reducing the number of his first deputies by one and his deputy ministers by two. Over the past week, Russian government officials, including Fradkov, have made contradictory statements on Kotelkin's future (see "RFE/RL Newsline," 16 and 21 January 1998). LF


Grigorii Karasin and Minoru Tamba, the deputy foreign ministers of Russia and Japan, met on 22 January in Moscow, Russian and Japanese media reported. The two sides agreed to form a commission, headed by the countries' foreign ministers, that will flesh out details for a treaty officially establishing peace between Russia and Japan. The Soviet Union and Japan signed a declaration in 1956 ending the state of war that existed between them during the Second World War, but they never concluded a formal peace agreement. Japanese Foreign Minster Keidzo Obuchi is due in Moscow in February for the first session of those peace talks. BP


In an interview with the "Turkish Daily News" on 23 January, Ismail Cem affirmed that both Turkey and Russia stand to gain a lot from improving bilateral relations as much as possible. Cem acknowledged there are "some barriers" to doing so, including Turkey's displeasure over Russia's planned sale to Greek Cyprus of S-300 missiles. But he acknowledged the validity of Russian Foreign Minister Yevgenii Primakov's argument that the deal is "purely commercial." Cem affirmed that Russia has "no intention, and no interest" in trying to prevent the export of Caspian oil via Turkey. He indicated he would not oppose Russia's receiving a share of the oil to be exported via the projected Baku-Ceyhan pipeline. "We are seeking a framework in which all the related countries will be given shares," he added. LF


Meanwhile, Abdullah Ocalan, chairman of the banned Kurdistan Workers' Party (PKK), said in an interview with "Nezavisimaya gazeta" of 22 January, that he recently discussed with a visiting Russian State Duma delegation the prospects for a "strategic partnership" between Russia and the PKK. Ocalan argued that Turkey's increasing investments in Russia present a threat to Russian interests. Ocalan also admitted that the Russian authorities have cracked down on Kurdish organizations in Russia since Russian Prime Minister Chernomyrdin's visit to Turkey in December 1997. LF


Colonel- General Anatolii Kornukov, the newly appointed commander of the Air Force, admitted during a 22 January interview with NTV that he issued the order to shoot down KAL flight 007 in September 1983. Kornukov was commander of air defense forces on Sakhalin when he ordered the downing of the South Korean airliner, which had 269 people aboard, including a U.S. congressman. Soviet officials charged that the civilian airplane, which was in Soviet air space, had been on a spy mission. Kornukov told NTV that he is convinced his decision was correct, adding, "sometimes in front-line operations, battalions were sacrificed to save armies. In this particular situation, I am absolutely sure even now that [the KAL flight] was planned, with very definite intentions." LB


Leaders of seven large Russian oil companies on 22 January issued an open letter to Prime Minister Chernomyrdin and the parliament asking that various excise duties affecting the oil industry be reduced, in light of falling prices for oil on world markets, ITAR-TASS reported. The letter, signed by executives from LUKoil, Yukos, Sibneft, Sidanko, Komitek, Surgutneftegaz, and Slavneft, calls for excise duties on oil, gasoline, and various fuels and lubricants to be cut by half or more. It also calls for abolishing the new excise duty on oil transports, which Yeltsin signed into law earlier this month. Commenting on the appeal, minister without portfolio Yevgenii Yasin told ITAR-TASS that current taxes on Russian oil companies are "very high" and should be reduced. He added that the government has long been divided on the issue. LB


LUKoil issued a statement on 22 January saying the consortium of LUKoil, Gazprom, and Royal Dutch Shell may not bid for a stake in the Rosneft oil company, Interfax reported. The consortium was formed last November. The new terms of the auction have not yet been made public, but it is rumored that the government may sell 50 percent plus one share of Rosneft rather than 75 percent of the company. The LUKoil statement said such terms "substantially limit the investment attractiveness of the company" and "will not provide for effective management of the company's subsidiaries." ITAR- TASS quoted Gazprom as confirming that the consortium may not bid for Rosneft. Royal Dutch Shell also said the new privatization plan makes acquiring Rosneft less attractive. Two other major consortia plan to bid for Rosneft: Sidanko and British Petroleum, and Yukos and Sibneft. LB


Communist Party leader Gennadii Zyuganov on 22 January denied that he, Yeltsin, and Prime Minister Chernomyrdin are involved in a "plot" to replace Lev Rokhlin as Duma Defense Committee Chairman, Russian news agencies reported. In a 21 January interview with Russian Public Television, Rokhlin alleged that Zyuganov has agreed to support his ouster and that, in exchange, the government has agreed to accept Communist proposals on forming a coalition government. Zyuganov said "Rokhlin's information is absolutely untrue," adding that no one has promised the Communists any government posts. Aleksandr Shokhin, the leader of the Our Home Is Russia Duma faction, recently announced that Duma leaders have reached agreement on replacing Rokhlin (see "RFE/RL Newsline," 21 January 1998). LB


The Kremlin wants to hold a referendum on whether Russia's electoral system should be changed, "Izvestiya" reported on 23 January, citing unnamed sources in the presidential administration. Under the current electoral law, half of the 450 State Duma deputies are elected from party lists using a proportional representation system, while the other half are elected in single-member districts. The Kremlin wants all Duma deputies to be elected in districts (thereby decreasing the influence of political parties). However, the Duma is likely to reject such changes to the electoral law (see "RFE/RL Newsline," 22 December 1997 and 16 January 1998). Sergei Shakhrai, Yeltsin's representative in the Constitutional Court, has proposed that the referendum question be phrased as follows: "Do you want to be represented in the federal parliament by [political] parties, or do you want to elect your deputies directly?" LB


Chief Military Prosecutor Yurii Demin announced on 22 January that suicides accounted for 487 out of the 1,103 non-combat deaths in the Russian military in 1997, "Nezavisimaya gazeta" reported on 23 January. In 1996, 430 suicides were recorded out of a total 1,046 non-combat deaths in the military; in 1995 there were 459 suicides and 1,017 non-combat deaths. Demin argued that draft commissions are partly to blame for the high suicide rate, since they sometimes admit conscripts who "suffer from chronic and psychiatric illnesses." Afanasii Kim, the military prosecutor of the Federal Border Service, called for laws to hold draft commissions responsible for drafting people who are unfit for military service. Other commentators have attributed the high suicide rate to other factors, such as frequent delays in wage payments, widespread hazing of young soldiers, and poor food and working conditions in the armed forces. LB


The government announced at a 22 January cabinet meeting that it will support the privatization of many cultural assets currently owned by local and regional governments, Russian news agencies reported. According to First Deputy Prime Minister Boris Nemtsov, less than 1 percent of some 70,000 buildings listed as cultural monuments have been privatized. Both Nemtsov and First Deputy Prime Minister Anatolii Chubais, who chaired the cabinet meeting, argued that privatization can attract funds needed to restore such buildings. At the same time, the government agreed to prohibit the privatization of cultural assets of national significance, such as the state cinema archives. It also decided to seek various non-budgetary sources to finance cultural programs. According to Culture Minister Natalya Dementeva, government spending on culture in 1997 totaled just 12 percent of budget targets. LB


The Prosecutor-General's Office has dropped all charges against former International Hockey League president Robert Cherenkov, who was arrested last August on suspicion of ordering the April 1997 murder of Russian Hockey League President Valentin Sych. Prosecutors have also issued an official apology to Cherenkov, "Kommersant-Daily" reported on 23 January. Investigators say that they have solved the murder, and that five suspects are already in custody. LB


Levon Ter-Petrossyan on 22 January called on Prosecutor- General Henrik Khachatrian and Interior and National Security Minister Serzh Sarkisian to take "exhaustive measures" to preclude further attacks on senior officials, adding that he fears for the lives of senior government members. Presidential security chief Roman Ghazaryan, who escaped unhurt when shots were fired on his jeep on the night of 18 January, told ITAR- TASS on 22 January that additional security measures have been taken to protect Russian Federation Council speaker Yegor Stroev during his two-day visit to Armenia, which began that day. LF


Parliamentary deputy speaker Ara Sahakian and Armenian Pan-National Movement board chairman Vano Siradeghian have both characterized the shootings over the past six days as "terrorist incidents." Prime Minister Robert Kocharian told Interfax on 22 January that it is premature to pass such a judgment. He said he does not believe the shootings are connected to internal differences of opinion within the Armenian leadership, which, he added, concern tactics rather than the long-term objective of achieving a settlement to the conflict acceptable to the Karabakh leadership. Sahakian , however, suggested a connection between the shootings and the discord within the country's leadership. He also commented that the current situation of "diarchy...cannot last long," RFE/RL's Yerevan bureau reported. Siradeghian told AFP on 22 January that the movement does not want Kocharian to resign but does want the president to ensure the efficient functioning of the government. LF


Ilyas Ismailov, leader of the Democratic Party of Azerbaijan, told journalists on 22 January that he has reached agreement with former Azerbaijani parliamentary speaker Rasul Guliev on forming a new movement that will seek to prevent election fraud, Turan reported. Last month, Guliev confirmed his intention to contest the presidential elections, scheduled for October. The Azerbaijani Prosecutor-General's Office recently accused him of planning a coup against President Heidar Aliev. LF


Georgian and Abkhaz delegations to the Consultative Council for regulating the Abkhaz conflict met in Tbilisi on 22 January, Caucasus Press reported. Vazha Lortkipanidze, the head of the Georgian delegation, rejected as "preposterous" allegations by his Abkhaz counterpart, Tamaz Ketsba, that Georgian intelligence is responsible for ongoing sabotage in Abkhazia. Revaz Adamia, the chairman of the Georgian parliamentary commission on defense and security issues, said the Abkhaz agreed at the meeting to unspecified measures to counter terrorism. But he added that the problem of terrorism and crime in Abkhazia "will not be solved" until all ethnic Georgians forced to flee the region during the 1992-1993 hostilities have been allowed to return. LF


President Aliyev on 22 January announced he will amend the criminal code to abolish the death penalty and hopes that the parliament will endorse that decision. Azerbaijan imposed a moratorium on capital punishment in 1993. The 128 people currently sentenced to death in Azerbaijan will have their sentences commuted to prolonged prison terms. Abolition of the death punishment is one of the preconditions for full membership in the Council of Europe. Meanwhile, the "Neue Zuercher Zeitung" on 22 January quotes International Red Cross officials as warning that the incidence in Azerbaijani prisons of a strain of tuberculosis resistant to several medications has risen dramatically and constitutes a "time bomb" that threatens the entire country. The disease has also spread to refugee camps and military barracks. LF


The National Reconciliation Commission has met for the first time since United Tajik Opposition leader Said Abdullo Nuri suspended his group's participation in the commission on 15 January, ITAR-TASS reported on 23 January. According to the news agency, representatives from the contact group, made up of guarantor nations of the Tajik peace accord, took part in the meeting. Tajik President Imomali Rakhmonov is scheduled to meet first with UN special envoy to Tajikistan Gerd Merrem and later with Nuri. BP


Leonid Kuchma on 22 January appealed to the Constitutional Court over a ruling on a parliamentary resolution that in effect bans privatization, Interfax-Ukraine reported. The resolution, passed by the parliament last year following the release of a report on the activities of the State Property Fund, bars the fund from selling property until its chairman is approved by the parliament, as stipulated by the constitution. The parliament has twice rejected appointing Vladimir Lanovoi, the acting chairman of the fund. PB


Lukashenka said in Moscow on 22 January that some 30 people were executed in Belarus in 1997, RFE/RL reported. He added that since he came to power in 1994, he has pardoned just one person facing the death penalty. The Council of Europe bars executions and has threatened to expel Ukraine from the organization if it does not abolish legislation providing for capital punishment. PB


The junior coalition Rural Union and the opposition Center Party have concluded a cooperation agreement whereby they will seek to promote agriculture and protect Estonia's domestic market, ETA and BNS reported on 22 January. The agreement states that each party will support the other during voting in the parliament, according to a Center Party deputy. The Center Party has 10 seats in the 101-seat parliament and the Rural Union seven. The Centrists also have a cooperation agreement with the ruling Coalition Party, but observers say that the accord exists on paper only. JC


NATO Secretary-General Javier Solana told the Polish parliament on 22 January that the alliance will guarantee Poland's security but that Warsaw will need to make a substantial military contribution as well, RFE/RL reported. He added that NATO and the Polish military are aware of the deficiencies within the Polish armed forces (see "RFE/RL Newsline," 20 January 1998) but that there is time for improvement before Poland's planned accession to the alliance in 1999. Solana added that Warsaw will not have to "overspend" in order to upgrade its armed forces to NATO standards. PB


After a meeting on 22 January with the chairmen of the main parliamentary parties, President Vaclav Havel said the likelihood that Josef Tosovsky's cabinet will receive the legislature's vote of confidence on 27 January seemed "greater now," but he added "I cannot be sure about it." Havel said his relative optimism derived from the government's draft policy statement, which, he said, was "basically not at variance with the Social Democrats' program," CTK and Reuters reported. Social Democratic Party (CSSD) chairman Milos Zeman repeated earlier statements that he will recommend to the party to vote confidence in the cabinet if its program does not contradict that of the CSSD. MS


Almost one- third of the Czechs are opposed to co-existence with the Romani minority and 14 percent believe the Roma should be expelled from the country, according to a poll conducted by the Focus agency and released on 22 January. CTK reported that the poll also shows that two-thirds of the respondents are satisfied with the way the Roma community is presented in the media. The same day, a petition entitled "Several Words" was handed to the Council for National Minorities and the Council for Radio and Television. The document demands that the electronic media devote more attention to creating a democratic society that protects the ethnicity of minorities. It also protests the way Roma are depicted in those media. Senate Chairman Petr Pithart is among the signatories. MS


Hungarian Foreign Minister Laszlo Kovacs and his Slovak counterpart, Zdenka Kramplova, meeting in Budapest on 22 January, failed to agree on who should represent Slovakia's ethnic Hungarians on a joint committee monitoring the implementation of minority rights in the two countries. Hungary refused to accept Slovakia's nominee, Istvan Gyorgy, who heads an organization loyal to Slovak Prime Minister Vladimir Meciar. Kovacs said the nominee should enjoy the confidence of all three Hungarian parliamentary parties in Slovakia. Kramplova disagreed, saying those parties cannot be considered the real representatives of the Hungarian minority in Slovakia. She pointed out that Hungary's failure to guarantee parliamentary representation for its ethnic minorities is an "open case of discrimination." MSZ


France's Matra Defense company has delivered the first 60 Mistral air defense missiles and 15 Atlas launchers that Hungary ordered last year, Hungarian media reported on 22 January. The delivery is a result of a $100 million tender launched by the Hungarian Defense Ministry last year. "Mistral missiles belong to the most up-to-date missiles and are fully compatible with NATO's air defense system," Hungarian Defense Minister Gyorgy Keleti told reporters. Hungary intends to integrate the missiles into its defense system in April 1999, he added. The French company is expected to deliver another 150 missiles by the end of this year. MSZ


Serbian police killed one man and wounded two women in Donji Prekaz on 22 January. Radio Pristina said the police were pursuing "terrorists" when the incident occurred. Spokesmen for a Kosovo human rights organization said the police cut off telephones and electricity to the village and then fired on it. The village is in the Srbica area, where the Kosovo Liberation Army (UCK) controls some communities. In Belgrade, Milomir Minic, a leader of the governing Socialist Party of Serbia, stressed the authorities "will not tolerate terrorism." He added that ethnic minorities in Serbia enjoy more rights than do minorities in many other European countries. A spokesman for the opposition Citizens' League of Serbia said the Organization for Security and Cooperation in Europe should urgently arrange a dialogue between Serbs and Albanians, an RFE/RL correspondent reported from Belgrade. PM


Some ethnic Albanian Muslim religious leaders in Macedonia recently issued an edict calling for the death of Jakub Selimovski, the head of a rival Islamic organization. The imams charged Selimovski with misuse of funds. State- run media condemned the imams' decision as an attempt to put themselves above the law. Selimovski was the last head of the main Yugoslav-wide Islamic organization before it broke up in 1992. An ethnic Macedonian and a moderate who advocates religious and ethnic tolerance, he has frequently been at odds with Islamic fundamentalists and ethnic Albanian nationalists. PM


A State Department spokesman said in Washington on 22 January that the arrest and extradition to The Hague of indicted war criminal Goran Jelisic was another step toward a lasting peace in Bosnia (see "RFE/RL Newsline," 22 January 1998). The spokesman added that Jelisic's arrest should serve as a warning to other war criminals. In Warsaw, NATO Secretary-General Javier Solana predicted that there will be further such arrests. PM


EU officials have approved a $110 million aid package to facilitate the return of Bosnian refugees, an RFE/RL correspondent reported from Brussels on 22 January. EU spokesmen said they hope that the money will enable "several tens of thousands" of people to go home. In Ankara, Turkish and Bosnian officials signed a $3.8 million agreement to improve agriculture and transportation in Bosnia. And in Bonn, Foreign Minister Klaus Kinkel said in a 23 January statement that the international community should show its support for the moderate Bosnian Serb government of Prime Minister Milorad Dodik by speeding up economic aid to the Republika Srpska. PM


Yugoslav President Slobodan Milosevic said in Belgrade on 22 January after meeting with Dodik and other Bosnian Serb officials that "Yugoslavia will support all efforts aimed at realizing the main objectives of the Republika Srpska, especially to reinforce its unity and overcome divisions which have led to a crisis." Milosevic last met with the top Bosnian Serb leadership on 16 January, one day before Dodik's election. In related news, outgoing Bosnian Serb Prime Minister Gojko Klickovic said he will hand over power peacefully to Dodik, even though he does not consider Dodik's election legal (see "RFE/RL Newsline," 22 January 1998), the Belgrade daily "Danas" reported. PM


Vojislav Seselj, the leader of the Serbian Radical Party (SRS), said in Belgrade on 22 January that his party will not form a coalition Serbian government with Milosevic's supporters, nor will the SRS tolerate a minority cabinet, "Danas" reported. Vuk Draskovic of the Serbian Renewal Movement (SPO) has demanded the Serbian premiership and several key ministries in both the Serbian and Yugoslav governments for the SPO as a condition for his participation in a Serbian coalition, AFP wrote. Milosevic's backers lost their absolute majority in parliamentary elections in September 1997. Serbian law does not set a deadline by which a government must be formed, "Nasa Borba" noted. PM


Storms and gale-force winds crippled transportation and disrupted the electric power system across much of Croatia on 21 and 22 January. Bus services between Zagreb and the coast and ferry services between the islands were canceled. PM


A spokesman for the Prosecutor-General's Office has said that the office will question legislators who were recently in Shkoder about their role in the disturbances there. He added that the office may ask the parliament to lift the immunity of some of those deputies. Parliamentary Vice Parliament Jozefina Topalli, who belongs to the opposition Democratic Party, tried to mediate between rebel policemen who occupied the local prefecture from 19-21 January and special police forces from Tirana. Meanwhile, local police have reestablished control over the city. Local police have arrested two of the dozen or so rebel policemen and charged them with staging a rebellion, "Koha Jone" reported. In related news, the Council of Ministers has appointed Ali Lacej from the Democratic Alliance Party as prefect in the northern town. FS


The Turkish army will reconstruct the southern naval base of Pasha Liman, "Gazeta Shqiptare" reported on 22 January. Investments totaling some $5 million will also be used to upgrade the naval academy in Vlora. Both the port and the school were largely destroyed during unrest in March 1997. Pasha Liman is Albania's oldest developed harbor, dating back to the Roman Empire. It became a military port during the Ottoman Empire and served the Soviet Union as its only base on the Adriatic before Albania's break with the Soviet bloc in the early 1960s. FS


Romanian media reported on 22 January that Premier Victor Ciorbea has offered the Democratic Party the first deputy premiership in charge of reforms and Minster of Reform Ilie Serbanescu has resigned in protest. According to those reports, Ciorbea has not accepted Serbanescu's resignation. Mircea Ionescu-Quintus, the leader of the National Liberal Party (PNL), said he does not believe the offer to the Democrats will solve the crisis. On 22 January, the PNL Standing Bureau again delegated Ionescu-Quintus to mediate between the Democrats and the National Peasant Party Christian Democratic, both of which say they want the coalition to continue. The next day, however, the PNL Standing Bureau announced it will withdraw its ministers from the government on 28 January if negotiations on Ciorbea's replacement have not begun by then. MS


The government on 22 January approved a draft regulation that will reduce the income tax imposed on wages from a maximum of 60 percent to 45 percent, RFE/RL's Bucharest bureau reported. Incomes below 250,000 lei (some $30) a month will not be taxed. Also on 22 January, the Senate approved a banking law providing for the National Bank's increased control over the country's banks. The law differs in part from legislation approved earlier by the Chamber of Deputies. In line with parliamentary regulations, a mediation commission will now have to seek to reconcile those differences. MS


The Moldovan custom authorities are prohibiting the transit of trucks from CIS states unless the documents presented at the border are filled out in the Romanian language, which is Moldova's "state language." Radio Bucharest said on 22 January that similar measures have been instituted by Russia, Ukraine, and Belarus. In other news, the authorities in the Transdniester breakaway republic have reduced electricity to Moldova by 10 percent, RFE/RL's Chisinau bureau reported. Chisinau owes Tiraspol $15 million for energy supplied by the Dnestrovsk power station, which accounts for some 40 percent of Moldova's electricity consumption. The Tiraspol authorities rejected a Moldovan offer to pay 30 million lei (some $6.5 million) and insist on the full settlement of the debt. MS


President Petar Stoyanov, marking first anniversary of his inauguration on 22 January, told Bulgarians they must continue to support market reforms. Stoyanov said on national radio that reform "is not a single act after which we can stop and rest." He said Bulgarians must make a permanent effort if they want to participate in global markets and take a share of prosperity, Reuters reported. Meanwhile in Bonn, German Foreign Minister Klaus Kinkel told visiting Bulgarian Prime Minister Ivan Kostov that Germany wants Sofia to join the EU and NATO as soon as possible. But Kinkel rejected calls to lift visa requirements for Bulgarians who want to visit Germany, dpa reported. MS


The Socialist Party on 22 January moved a no-confidence motion against Ivan Kostov's cabinet, blaming it for the rising costs of health care, Reuters reported. The motion is the first no-confidence move against the nine- month-old government, but is certain to be defeated owing to the Union of Democratic Forces' absolute majority in the legislature. MS


by Michael Wyzan

Last year saw a large divergence in economic performance among the transition countries. That continued a long-established trend whereby the Visegrad countries and Baltic States are the leading performers and other countries struggle to carry out the most basic economic reforms and resume economic growth.

The big story in the Visegrad countries was the economic plight of the Czech Republic. The country experienced a currency crisis in the spring and a natural catastrophe--flooding--in the summer. Gross domestic product GDP grew by only 1.2 percent, down from 4.1 percent in 1996. The budget deficit increased, while foreign investment inflows fell by 35 percent.

A long period of political uncertainty and weak government culminated in the December resignation of Vaclav Klaus, prime minister since 1992, over a campaign-finance scandal. Both his and the economy's fortunes were tied to the premier's economic approach. In the early years of his tenure, his commitment to trade and price liberalization as well as to austere macroeconomic policy stood the country in good stead. Later, following his failure to comprehend such subtler issues as government regulation of the economy and the transparency of capital markets, Klaus became a liability.

Slovakia's economy performed respectably in 1997, even though GDP growth was down and inflation up slightly. However, serious problems are looming, including a ballooning current-account deficit largely caused by the strength of the Slovak crown, which is now worth more than its Czech counterpart. The budget deficit was about 5.7 percent of GDP and is expected to rise further this year. And the foreign-debt burden reached worrisome proportions.

As in the Czech Republic, the quality of political leadership is the main problem. Slovakia's incomplete democratization has alienated the EU to such an extent that it is only Visegrad land not invited to accession talks. Its insider-dominated privatization methods have scared away foreign investors. Moreover, matters are unlikely to improve this year, given the disincentives to sound economic policy that are likely to prevail until September's general elections.

The other three Visegrad countries registered sound performances. Hungary is reaping the benefits of the austerity measures introduced in 1995 and political stability under the Socialists. Virtually all its economic indicators are favorable and improving, although inflation remains stubbornly high. The economy is largely in private hands, and foreign investment inflows remain enormous.

Virtually the same could be said about Poland, although the budget situation is worrisome. Many major enterprises remain in state hands, and differences between the governing coalition partners may hinder progress. Slovenia continues to turn in respectable, if unspectacular, economic results but needs to speed up privatization (especially of banks) and rein in budget expenditure and wage growth.

The year 1997 was even more troubled than usual in the Balkans. In Albania, the entire social order imploded in the wake of the failure of pyramid schemes, and GDP declined by about 15 percent. In Bulgaria, the socialist government's failure to deal with festering structural problems and to reach agreement with the IMF led to a severe currency collapse in the winter that damaged the economy (GDP fell by 7.4 percent). Both countries have new leaderships; and particularly in Bulgaria, where a currency board was introduced on 1 July, there are grounds for optimism.

Romania's situation is similar to Bulgaria's: a government elected in November 1996 has embarked on radical reforms with IMF support. Unlike in Bulgaria, however, the regime is a weak coalition of feuding parties and the IMF has become increasingly standoffish as the government has had trouble meeting its commitments on structural reforms. Its economic indicators in 1997 were unimpressive: GDP declined by about 5 percent and inflation remained more than 100 percent.

The other former Yugoslav republics followed strikingly diverse patterns. Macedonia has enjoyed political stability under the same prime minister since 1992, but relations between Macedonians and Albanians have deteriorated while ties with Greece (its only never-communist neighbor) are disappointingly slow to improve. Still, GDP growth picked up slightly in 1997 and inflation remained among the lowest in the region.

Croatia is in a unique position, with progress on reform and the standard of living putting it among the leading transition countries in many respects. Foreign-policy problems, however, keep it in the EU's waiting room without even an association agreement. Its economy is growing rapidly, and it has extremely low inflation. But the current account deficit is large and restructuring of industrial enterprises and banks is slow.

Federal Yugoslavia, meanwhile, has rapid growth and moderate inflation, but will not emerge from the deep economic hole dug by its leadership until it overcomes its international isolation. The author is an economist living in Austria.