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Newsline - September 29, 1998


Russian President Boris Yeltsin both emptied and filled a few more cabinet spots on 28 September, reappointing acting Minster for State Property Farit Gazizullin while firing acting head of the Federal Tax Service Boris Fedorov and acting Deputy Prime Minister Viktor Khristenko. Reuters reported on 29 September Deputy Prime Minister Yurii Maslyukov has already introduced State Duma deputy Georgii Boos to tax service workers as their new boss, despite the fact that the White House has made no official announcement. ITAR-TASS reported on 28 September that Deputy Prime Minister Vadim Gustov told reporters that Deputy Governor of Leningrad Oblast Valerii Kirpichnikov will be appointed minister for regional policy. JAC


"Tribuna" on 29 September characterized the Primakov cabinet as "chaotic" and the formation of an emergency economic program as dangerously delayed. The newspaper concluded that part of the reason why the administration is dysfunctional is because certain cabinet officials, such as Deputy Prime Minister Maslyukov and former Deputy Prime Minister Aleksandr Shokhin, who resigned last week, have been spending most of their time lobbying for jobs for their friends and "torpedoing" positions for their enemies. Maslyukov reportedly tried to get former Deputy Finance Minister Andrei Vavilov appointed as the new finance minister. Then he tried to arrange that his favored candidates be appointed to the posts of Rosvooruzheniye head and deputy minister of trade. Shokhin, meanwhile, had Georgii Gabuniya appointed minister of trade and Andrei Shapovalyants minister of economy. "Tribuna" is financed by Gazprom. JAC


Former head of the Federal Securities Commission Dmitrii Vasiliev has explained his reasons for offering his resignation (see "RFE/RL Newsline," 28 September 1998). He told reporters on 28 September that he wanted to draw public attention to errors in the way the Primakov government is handling the country's economic crisis and "making financial and political catastrophe inevitable." According to Vasiliev, the government's biggest mistake is not reversing its decision of 17 August to default on short-term treasury bonds. He also criticized Central Bank policy, saying that the bank has made no effort to distinguish between viable and problem banks. He added that multiple exchange rates will scare away both foreign and domestic investors. "Moscow Times" reported on 29 September that Western traders reacted to news of Vasiliev's departure with sadness and credited him with maintaining a strong defense of shareholders' rights. "Moscow Times" is owned by Independent Media, which is owned by Menatep. JAC


"Izvestiya" on 29 September predicted that the return of Aleksandr Shokhin to the leadership of Duma faction of Our Home is Russia (NDR) will trigger the party's move into firm opposition to the Primakov government. The newspaper also speculated that former Prime Minister Viktor Chernomyrdin's plan to run for president in 2000 will "oblige him to drift toward radical criticism of Primakov's cabinet." Otherwise, the newspaper concluded, "the movement will not survive the 1999 parliamentary election and overcome the 5 percent threshold." LUKoil and Oneksimbank are major investors in "Izvestiya." JAC


Prime Minister Primakov told President Yeltsin on 28 September that two months' back wages have been paid to servicemen, according to presidential spokesman Dmitrii Yakushin. The money may have come just in the nick of time. Citing Federal Security Service sources, "Segodnya" reported on 26 September that officers in the 130th Far Eastern Division were prepared to block the TranSiberian railroad with their tanks if their back wages were not paid. "Segodnya" also said that certain troops, such as the OMON, the Special Rapid- Reaction Detachment, and border guards, have already been paid, creating resentment among other servicemen. ."Segodnya" is owned by Vladimir Gusinskii's Media-Most Group. JAC


Russian analysts told Interfax on 28 September that the victory of the Social Democratic Party (SDP) in the German election will likely mean less financial support for Russia. Igor Bunin, head of Russia's Political Technology Center explained that the SDP rose to power "without making any commitments to Russia, which will allow it to be more demanding as far as Russia's debt to Germany is concerned." Vyacheslav Nikonov, head of the Politics Foundation, said that "Russian should not count on getting loans over the phone, as it did during the period of friendship between Yeltsin and [German Chancellor Helmut] Kohl." Communist Party Leader Gennadii Zyuganov hailed the SDP victory but added that the only loans that new German leadership will extend to Russia will be ones tied to specific programs and industries. JAC


Both Bunin and "Izvestiya" predicted that a subtle cooling in relations between the two countries will occur. According to "Izvestiya" on 29 September, President Yeltsin made no secret of his support for Kohl during a trip to Bonn in June 1998 and did not adopt a balanced enough approach to the SDP and Chancellor-elect Gerhard Schroeder before the elections, which, according to the newspaper, Schroeder has not forgotten. However, a Foreign Ministry spokesman said that contacts with the SDP were "not interrupted even at a time when German Social Democrats were in the opposition." He added that Yeltsin and Schroeder met on several occasions, including in Bonn during June. JAC


"Kommersant-Daily" reported on 26 September that Moscow Mayor Yurii Luzhkov would gain the most from the current plan under discussion to reduce the number of Russia's regions through consolidation. According to the daily, Russia's 89 regions would be consolidated into 23 provinces, and the mayor of Moscow would head a grouping of the nation's most important economic centers, including the Moscow, Tver, Yaroslavl, Kostroma, Ivanovo, Vladimir, Ryazan, Tula, Kaluga, Bryansk and Smolensk Oblasts. Primorskii Krai Governor Yevgenii Nazdratenko would also benefit, gaining control over Amur, Sakhalin, and Chita Oblasts, Khabarovsk Krai, as well as the Jewish and Aga Buryat Autonomous Oblasts. The sources of financing for "Kommersant-Daily" are not known. JAC


More campaign "irregularities" have been reported in Vladivostok. ITAR-TASS on 29 September disclosed that the car belonging to campaign manager for one of the mayoral candidates, Vladimir Maksunov, was exploded by a hand-made bomb. Maksunov was not a front-runner, but, according to one of his staffers, other candidates considered him a nuisance for diverting votes that they needed. JAC


Communist Party leader Zyuganov on 28 September told reporters that while the Communist Party does not require that state television be "nationalized," it must improve its compliance with the nation's media law. Zyuganov added that his party will continue to push for the establishment of supervisory boards in the mass media. On 26 September, Zyuganov told a press conference that his party will demand that the leadership of All-Russia State Television and Radio Broadcasting Company be replaced. However, Mikhail Seslavinskii, chairman of the Federal Television and Radio Broadcasting Service, said that he will not allow dismissals for political reasons. JAC


In an interview with "Novaya gazeta" on 28 September, Igor Malashenko, the former head of NTV, said that in the last few years, Russian government officials seemed to recognize the media's right to an unprecedented degree of autonomy. But he added that now "we have to start all over again" because people have come into power who continue to observe "habits of the old system." During Prime Minister Primakov's first days in office, reporters complained that their access to administration officials was being severely curtailed (see "RFE/RL Newsline," 21 September 1998). Vladimir Gusinskii's Media-Most Group is said to be a financial backer of "Novaya gazeta." JAC


The CIS Interstate Statistical Committee reported that during the first eight months of the year, the Russian economy performed worse than that of any other CIS nations, according to Interfax on 28 September. From January to August, according to the Committee, Russian GDP fell by 2.1 percent and industrial output slipped 2.6 percent compared with gains in GDP of 0.2 percent in Ukraine and 9.2 percent in Azerbaijan. The committee seems to be relying on the CIS nations' own economic reporting, since GDP in Belarus is recorded as having risen an unbelievable 11 percent, while "economic tiger" Tajikistan registered a 6.5 percent growth in GDP. JAC


Addressing local administrators, religious leaders, and field commanders in Grozny on 28 September, Aslan Maskhadov accused former acting President Zelimkhan Yandarbiev of promoting Wahhabism in Chechnya, cooperating with the intelligence services of unnamed Middle Eastern countries, and inciting the population of Chechnya to acts of disobedience, ITAR-TASS reported. In July, Yandarbiev had appeared before the Chechen Constitutional Court to offer to swear on the Koran that he played no role in the 23 July assassination attempt against Maskhadov (see "RFE/RL Newsline," 27 July 1998). Maskhadov also pledged to intensify the struggle against crime and in particular abductions, for which he advocated the death penalty. LF


Former Russian Security Council secretary Ivan Rybkin, who co-chairs the Russian-Chechen negotiating commission, similarly told ITAR-TASS on 28 September that Yandarbiev, together with "extremist Islamic circles" in the Middle East, is backing the three Chechen field commanders who on 23 September demanded that the Chechen parliament launch impeachment proceedings against Maskhadov (see "RFE/RL Newsline," 24 September 1998). Rybkin described Maskhadov as "the legitimately elected president of Chechnya and the guarantor of stability in the region." He also proposed a meeting between Maskhadov and Russian Prime Minister Primakov. Vladimir Zorin, who chairs the Duma's Committee on Nationality Affairs, told Interfax on 28 September that the stalemate in talks between Moscow and Grozny risks strengthening hardliners in Grozny and further weakening Maskhadov's position. Oleg Sysuev, deputy head of the presidential staff, said that Russia should act more energetically to resolve social problems in Chechnya in order to bolster Maskhadov's position. LF


Agreement was reached on 28 September at a nine-hour meeting between President Imomali Rakhmonov, United Tajik Opposition leader Said Abdullo Nuri, and all members of the National Reconciliation Commission representing both camps that the opposition will resume its work in the government and the commission, Russian agencies reported. The opposition had suspended their participation on 26 September pending the arrest of the killers of prominent opposition figure Otakhon Latifi. Rakhmonov and Nuri signed a 10-point program of measures intended to stabilize the situation in the country. Those measures include creating a government-opposition commission to investigate Latifi's murder and expediting the reform of the cabinet that will provide opposition representatives with 30 percent of government posts. LF


The offices in Almaty of the independent Russian-language newspaper "21-iy vek" were destroyed on 26 September by two bombs, RFE/RL 's Almaty bureau reported. The newspaper has regularly printed materials criticizing the Kazakh leadership. Recently, publishing houses have refused to print it. Editor Bigeldy Gabdullin told RFE/RL on 29 September that police have sealed off the burned-out premises and refused him and his staff entry. LF


Meeting in Bishkek on 28 September, the leaders of the Communist, Socialist, Agrarian, and Democratic Parties called on President Askar Akaev to cancel next month's planned referendum on proposed constitutional amendments and private land ownership, Interfax reported. They reasoned that given the acute economic situation, Akaev should instead concentrate on social and economic issues. The opposition leaders also appealed to Akaev to dismiss the present government and to halt what they termed the cabinet's persecution and discrediting of parliament deputies. During a roundtable discussion broadcast by an independent Bishkek television station on 26 September, Central Electoral Commission chairman Sultan Imanbaev said that Akaev decided to put the planned changes to a referendum because the parliament would have rejected those amendments curtailing its own powers, RFE/RL's Bishkek bureau reported. LF


Azerbaijani opposition supporters marched in Baku on 27 September to demand the postponement of the 11 October presidential poll, Russian agencies reported. Earlier, they had reached a compromise agreement with Baku Mayor Rafael Allakhverdiev over the route of the march. The participants also demanded a meeting with incumbent President Heidar Aliev, parliamentary chairman Murtuz Alesqerov, and Constitutional Court chairman Khanlar Gadjiev to discuss their election-related demands. The organizers estimated the number of marchers at 100,000, while the Azerbaijani Interior Ministry said they numbered only 4,000. Police escorted the marchers but took no action against them. Meeting with voters in Sumgait on 26 September, Aliyev accused the opposition of attempting to destabilize the country. He affirmed his readiness to meet with representatives of any political parties, but only if they impose no preconditions for such a meeting, according to Turan. LF


Azerbaijani presidential adviser Vafa Gulu-zade has rejected a statement by Armenian President Robert Kocharian in his 25 September address to the UN General Assembly as "invention," Turan reported on 26 September. Kocharian said that Azerbaijan has exceeded the maximum limit set by the 1990 Treaty on Conventional Forces in Europe in three categories of armaments for land forces. Gulu-zade accused Armenia of violating the treaty and of having acquired from Russia both S-300 and Scud missiles. Gulu-zade also denied that Azerbaijan is setting preconditions for resuming talks on resolving the Karabakh conflict. And he accused Armenia of obstructing such talks by rejecting the principles endorsed at the 1996 OSCE summit in Lisbon. LF


No major incidents or violations were reported during the local elections held in the unrecognized Nagorno-Karabakh Republic of 27 September, RFE/RL's Stepanakert correspondent reported. Voter participation exceeded 80 percent in rural areas but was only 51 percent in the capital, where the unrecognized republic's former interior minister, Karen Babayan, polled 87 percent of the vote to defeat his sole rival, Georgi Petrosian of the Dashnak party's (HHD) Karabakh organization. Petrosian's campaign manager had issued a statement on the eve of the poll claiming that Nagorno-Karabakh state television could not be impartial in its coverage of the vote as its chief director is one of Babayan's proxies. The international community has not commented on the outcome of the elections, which Azerbaijan has termed illegal (see "RFE/RL Newsline," 18 September 1998). LF


A bomb that exploded 100 meters from the Georgian parliament building in Tbilisi during the night of 28-29 September shattered windows in neighboring buildings but injured no one, Caucasus Press reported. It is unclear whether there is any connection between the explosion and the fifth anniversary on 28 September of the fall of the Abkhaz capital, Sukhumi, or the two-day visit to Tbilisi by NATO Secretary-General Javier Solana, which begins on 29 September. On 28 September, four more members of the Russian peacekeeping force in Abkhazia were injured when their armored vehicle hit an anti-tank mine in Abkhazia's Gali Raion, Interfax reported. LF


Ukrainian National Bank Chairman Viktor Yushchenko on 28 September pledged to keep the national currency within the new exchange rate corridor of 2.5- 3.5 hryvni to $1, which was introduced earlier this month, AP reported. Yushchenko, however, gave no hint as to how he intends to prevent the currency from further devaluation. He had announced earlier that the National Bank will not use its hard- currency reserves to support the hryvnya. The hryvnya exchange rate fell to 3.37 to $1 on 25 September, compared with 2.25 to $1 at the beginning of this month. JM


The European Bank for Reconstruction and Development is determined to continue long-term cooperation with Ukraine despite the country's financial troubles. "The EBRD has a long-term commitment to Ukraine, we will remain involved in Ukraine," Reuters cited EBRD First Deputy Chairman Charles Frank as saying. He added that the bank will focus on support for Ukrainian small and medium-sized businesses, the energy sector, and the privatization of telecommunications and energy companies. Frank noted that Ukraine, unlike Russia, has not defaulted on its debt payments and has not permitted an insolvency crisis in the banking sector. He said Ukraine can count on $1 billion from the EBRD for various projects currently under consideration. JM


At a meeting with the Ukrainian Supreme Council leadership in Kyiv on 28 September, Russian State Duma speaker Gennadii Seleznev urged Ukraine to unite with Russia and Belarus, AP and dpa reported. "It would be hailed by our people as the most important event of the 20th century," AP quoted him as saying. In their talks with Seleznev, both Ukrainian parliamentary speaker Oleksandr Tkachenko and Foreign Minister Borys Tarasyuk urged the Russian parliament to ratify the Ukrainian-Russian treaty, which was signed by the two countries' presidents in May 1997. Seleznev assured Tarasyuk that the Duma will resume debating ratification of the treaty by the end of this year. JM


Interfax reported that the next day Seleznev failed to finish his address to the Ukrainian parliament. When the Duma speaker proposed that Ukraine should join the Russian-Belarusian union, mainly Popular Rukh deputies began shouting that his proposal was "provocative" and left the hall in protest. Earlier, the Rukh parliamentary caucus (47 deputies) refused to register for the session. By contrast, the communist parliamentary group (some 120 deputies) received Seleznev's speech with applause. Other deputies frequently interrupted the Russian official, particularly when he spoke disapprovingly about Ukraine's possible admission to NATO and the situation of the Russian language in Ukraine. JM


At an informal meeting in Crimea on 28 September, Ukrainian President Leonid Kuchma and his Polish counterpart, Aleksander Kwasniewski, discussed the Russian financial crisis and a wide range of bilateral and economic issues, DINAU reported on 28 September. Kwasniewski assured Kuchma that Poland, following its EU entry, "will not turn its back on Ukraine." According to Polish Radio, Kuchma assured that the reconstructed cemetery in Lviv for Polish youths who fell while fighting against Ukrainians in 1918 will be reopened this year. The cemetery was recently desecrated with paint smears and anti-Polish slogans, provoking a note of protest from the Polish Foreign Ministry. JM


Ukrainian Premier Valeriy Pustovoytenko and Belarusian Premier Syarhey Linh said on 28 September in Kyiv that Belarus and Ukraine are strategic partners, ITAR-TASS reported. They expressed the need to draft a long-term program of economic cooperation. In Pustovoytenko's opinion, the program should be a ten-year one. The Ukrainian government's press service told the agency that the two leaders reached an understanding on several issues, including barter settlements between their countries. Pustovoytenko proposed to set up a banking consortium with the participation of Ukraine's Prominvestbank, Belarus's Promstroibank, and some Russian banks. According to Ukrainian Trade Minister Serhiy Osyka, the long-term cooperation program is already 70 percent complete and will boost Ukrainian-Belarusian trade by up to $700 million next year. JM


Belarusian President Alyaksandr Lukashenka said on 27 September in Vitsebsk that the state is ready to give back any property that Communists confiscated from the Church in the 1930s and 1940s, Interfax reported the next day. While attending religious events in Vitsebsk to mark the visit of Patriarch of Moscow and All Russia Aleksei II, the Belarusian president also pledged state assistance to the construction of Orthodox churches in Belarus. "Orthodoxy is the only barrier that protects us from falling into an abyss," the agency quoted Lukashenka as saying the same day in Polatsk. On his four-day visit to Belarus, Aleksei II praised Lukashenka's contribution to the cause of the "spiritual rebirth of his people" and noted that Belarus's greatest assets are "people who very much love their country and their president." JM


Economic growth in Estonia in the third quarter may fall to 4-5 percent, down from the targeted 8-9 percent, ETA reported, citing a survey by the Estonian Market Research Institute. According to that institute, the economic situation in Estonia has worsened owing to Russia's economic difficulties, the financial crisis in southeastern Asia, the bankruptcy of Maapank, and the rainy summer. The institute also predicted that in six months, Estonia's economic situation will be "somewhat worse" than it is now, with the growth of foreign trade stunted and a worsening foreign trade balance. JC


Latvian President Guntis Ulmanis on 28 September urged voters to think carefully before they cast their vote in the referendum on amendments to the citizenship law, BNS and Reuters reported. Speaking on state radio, Ulmanis said, "Let those who have decided to vote for a rejection [of the law] think as to whether they are giving Latvia positive impetus or whether their vote will isolate Latvia from the rest of the world." The amendments, which remove the so-called "naturalization windows" and grant automatic citizenship to all children born after August 1991, were passed in June, but the signing into law of those changes was blocked by the Fatherland and Freedom party's initiative to force a referendum on the issue. That vote will take place simultaneously with general elections at the end of this week. JC


The third and final reading of the state language law was postponed on 28 September owing to the lack of a quorum in the parliament, RFE/RL's Latvian Service reported. Legislators had called an extraordinary session to consider the law. The final reading is now scheduled to take place on 8 October, several days after the general elections and the referendum on amendments to the citizenship law. JC


Poland has greeted the election victory of Gerhard Schroeder's Social Democratic Party of Germany with reserve and lamented the departure of Helmut Kohl, Reuters reported on 28 September. "Kohl, a great friend of Poland, did a lot to better relations between our countries and to integrate Poland into NATO and the EU," Prime Minister Jerzy Buzek said. "It would be much better for Poles if tested political forces had remained at the helm," former Foreign Minister Wladyslaw Bartoszewski commented. President Kwasniewski expressed the hope that German policy toward Poland will remain unchanged. Schroeder visited Poland in June and assured Poles that he will not change Bonn's foreign policy or block EU expansion. But he made clear that he will protect German jobs by temporarily barring Polish cheap labor from the EU after Warsaw gains membership. JM


In an interview with "The Defense News" given during his recent visit to Washington, Czech Defense Minister Vladimir Vetchy says the government has approved his proposal to agree that Russia settle its $ 3.4 billion debt to the Czech Republic by delivering spare parts for the air force and other equipment, ITAR-TASS reported on 29 September. MS


In a telegram to Slovak Democratic Coalition leader Mikulas Dzurinda, President Vaclav Havel on 28 September wrote that he hopes the "big political change decided in a legitimate election" will "lead to a rapid deepening of civic freedoms, the strengthening of democratic institutions,...and economic prosperity." Havel said this was "not only in the interest of Slovakia, but of the whole Europe," Reuters reported. Foreign Minister Jan Kavan told journalists the same day that in the past, "the main argument against Slovakia" in its EU membership bid was "a democratic deficit." He said that "if the new Slovak government convinces its partners that it is able to remove this deficit, I am convinced the chance [of achieving membership] is there and the Czech government will support it." MS


Parliamentary speaker Ivan Gasparovic on 28 September said after a meeting of representatives of Vladimir Meciar's Movement for a Democratic Slovakia (HZDS) with officials from the Slovak National Party (SNS) that although the election outcome was "a failure" for the HZDS, the party remains the largest in the parliament and "that is not insignificant." Gasparovic said the HZDS is interested in negotiations "with all parties that show the same interest," RFE/RL's Bratislava bureau reported. Before the meeting, SNS leader Jan Slota said his party will "respect a stable coalition" formed by opposition leader Dzurinda, but he added that such a government must exclude the Hungarian Coalition, which he called "a threat to Slovak statehood." Meanwhile, representatives of the opposition parties met again on 28 September and repeated their intention to seal an agreement leading to the formation of a new government, AP reported. MS


Austrian Foreign Minister Wolfgang Schussel, in a statement released on 28 September in the name of the EU, said that Meciar's government must respect the election results and make possible the "orderly creation of a new government." Schussel said that if this happens, "Slovakia will satisfy European standards of democratic maturity and fulfill one of the key preconditions for faster integration into the EU." Austria currently holds the EU's rotating chairmanship. In Brussels, the EU Commission welcomed the "free and fair" balloting in Slovakia and expressed the hope that the opposition will soon be able to form a government that will "improve the political climate," AP reported. MS


Police have removed more than 30 Kosova Albanians from the grounds of the Canadian Embassy in Budapest, Hungarian media reported on 29 September. The refugees were demanding political asylum. Canadian diplomats asked police to negotiate a settlement but later authorized the refugees' forcible eviction after the talks failed. The refugees, 19 of whom are children, put up no resistance when riot police placed them into a bus and returned them to a refugee camp in Bicske, some 40 kilometers west of Budapest. Some members of the group had submitted asylum requests three months ago and wanted to pressure the Canadian authorities to process their applications. MSZ


Socialist Prime Minister Fatos Nano resigned that office on 28 September. Earlier the same day, Interior Minister Perikli Teta of the Democratic Alliance Party quit his post. Both resignations came after the five governing coalition parties failed to agree on unspecified government changes. In a letter to President Rexhep Meidani, Nano said that he stepped down because squabbling within the ranks of his party and the coalition had made it impossible to form a new cabinet. He added that "I am not receiving any credible signal of solidarity either from parts of the Socialist Party or from the coalition partners." Teta told journalists that "the Albanian political [elite] is unable to bring the country out of the current grave political crisis." He described the country's leadership as "corrupt and incompetent," the BBC reported. A BBC reporter suggested that Teta was unhappy with Nano's "disappearance" from public view during the recent unrest. FS


Gunfire erupted in several parts of Tirana on 28 September as word of Nano's resignation spread. Political commentator Fatos Lubonja told the BBC that opposition supporters celebrating the resignation apparently fired the shots. Police stepped up patrols in the capital, fearing a repetition of the unrest there earlier this month (see "RFE/RL Newsline," 16 September 1998). Opposition Democratic Party leader and former President Sali Berisha said that Nano's resignation "opens the way for dialogue" between the opposition and the governing coalition. He added that Meidani played an unspecified role in Nano's resignation and added that "the president has paved the way for a political solution [of the] deep crisis." Berisha urged the creation of a government of technocrats and stressed that the new interior minister should be "honest and [not] work with gangs and smugglers." FS


Meidani asked Nano to stay on until a new government can be formed. Socialist Party legislator Musa Ulqini said on 28 September that the party will propose its secretary- general, Pandeli Majko, as Nano's replacement, but he gave no indication that the Socialists will consider new elections, which the opposition Democrats demand. Widely regarded as a reformer, the 31-year-old Majko began his political career in the student protests that toppled the communist dictatorship in 1990. Majko recently tried unsuccessfully to end the feud between Nano and Berisha. Lubonja, however, questioned whether Majko has the experience and authority to fill the current power-vacuum. He suggested that Meidani, whose position has been largely ceremonial, will have to play a greater political role in the future. FS


U.S. Secretary of Defense William Cohen said in Rabat, Morocco, on 28 September that Washington has no evidence that the Serbian forces have stopped their offensive in Kosova, despite Serbian Prime Minister Mirko Marjanovic's statement to the parliament that the fighting has ended (see "RFE/RL Newsline," 28 September 1998). Cohen added that Marjanovic's claim "may be another rhetorical declaration without any intent to match those words with concrete steps. We have seen no evidence that there has been any strategic drawback at this point, and we will insist that whatever words [Yugoslav President Slobodan Milosevic] issues will be followed up by deeds." PM


Ethnic Albanian spokesmen said in Prishtina on 28 September that the Serbian offensive is continuing in several areas to the west of the provincial capital, RFE/RL's South Slavic Service reported. The spokesmen added that the Serbian authorities have "declared war not only on the Kosova Liberation Army [UCK] but on the entire Albanian nation." The BBC reported on 29 September that at least 15 villages west of Prishtina are either being shelled by Serbian forces or are still burning as a result of previous attacks. It added that Kosovar civilians are continuing to flee their homes in those areas where the offensive is in progress. In Prishtina, the presidency of the moderate Democratic League of Kosova (LDK) issued a declaration saying that Marjanovic's statement is aimed at manipulating international public opinion, an RFE/RL correspondent reported from the provincial capital. The LDK called on NATO to intervene quickly to end the crisis. PM


Marjanovic also told the parliament on 28 September that UCK fighters will be granted an amnesty provided that they turn in their weapons to the authorities within 10 days, RFE/RL's South Slavic Service reported. He named Zoran Andjelkovic to head a new provisional Supreme Council to govern the province and called on ethnic Albanian leaders to start a dialogue with the Serbian authorities. Marjanovic added that "peace reigns [in the province] and life is returning to normal.... There is no humanitarian catastrophe.... All assertions to that effect are lies.... As of today, anti-terrorist activities [against the UCK] have ended. They will be renewed only if any new bandit and terrorist activity reappears," "Nasa Borba" wrote. PM


Leaders of six opposition parties agreed in Zagreb on 28 September to call for a parliamentary discussion of possible misuse of the secret services for political purposes by the governing Croatian Democratic Community. The opposition leaders also demanded that the parliament set up a special committee to investigate the charges, RFE/RL's South Slavic Service reported. In New York, the UN Security Council agreed that Croatian local police have become more professional recently but noted that ethnically motivated violence has been on the rise. The council also agreed that the judiciary has been lax in dealing with ethnically related incidents and that the government has not done enough to promote reconciliation between Serbs and Croats. PM


Jos van Kemenade, who heads the independent commission investigating accusations that the Defense Ministry covered up evidence on the role of Dutch peacekeepers in the fall of Srebrenica, said that the charges are unfounded (see "RFE/RL Newsline," 13 August 1998). Speaking in Amsterdam on 28 September, he added that "there are no indications from this investigation that information was deliberately withheld or got rid of by the Ministry of Defense or by others, in other words there is no question of a cover-up." He added, however, that cooperation was poor between several government agencies in response to public criticism of the Dutch role during and after the Serbian attack on the eastern Bosnian town, Reuters reported. PM


Emil Constantinescu on 28 September asked the cabinet to file an official complaint with the Austrian government about the demand made last week by an Austrian citizen of Hungarian descent for Romania's federalization. He said that he will also write to his Austrian counterpart about the incident. Eva Maria Barki had told a Hungarian forum in Transylvania that the problems of Romania's ethnic Hungarians can be solved only if Romania is federalized. Constantinescu said the declaration infringed on Article 30 of the constitution, which forbids "territorial separatism and incitement to public violence." Barki was declared "persona non grata" by the government of Nicolae Vacaroiu in 1994, but that status expired three years later. MS


The opposition Party of Social Democracy in Romania (PDSR) has announced that it may start procedures for Constantinescu's suspension from office. This follows similar statements by the Party of Romanian National Unity and the Greater Romania Party. All three parties said Constantinescu failed to defend Romania's territorial integrity by not reacting to the Barki incident. The PDSR also said Constantinescu undermined the independence of the judiciary in a statement made last week on the struggle against corruption, RFE/RL's Bucharest bureau reported. MS


Javier Solana met with President Petru Lucinschi, Premier Ion Ciubuc, parliamentary chairman Dumitru Diacov, and Foreign Minister Nicolae Tabacaru in the Moldovan capital on 28 September, RFE/RL's Chisinau bureau reported. After meeting with Lucinschi, Solana said the problem of the withdrawal of Russian troops from Transdniester cannot be solved by negotiations between NATO and Russia and must be dealt with "multilaterally, through negotiations." Solana also said he discussed with Lucinschi the conflict with the Tiraspol separatists and praised Moldova's contribution to the Partnership for Peace program. Lucinschi said that Moldova is a neutral state but that does not hinder close military and other types of relations with NATO. He added that he had discussed with Solana plans for a reform of Moldova's military. MS


For the first time, Petar Stoyanov has exercised his presidential veto right, blocking the media law approved by the parliament (see "RFE/RL Newsline," 24 September 1998), an RFE/RL correspondent in Sofia reported on 28 September. Stoyanov told journalists that he objects to the government's appointment of representatives on state television and radio managerial boards, saying political neutrality may be affected. He also objected to the provision in the law allowing broadcasts in languages other than Bulgarian on regional, but not on national frequencies. A third ground for the veto is the stipulation depriving state television of the right to broadcast prime time advertising until the creation of privately owned national stations. Finally, Stoyanov took issue with the provision imposing a new tax on all households for the financing of state television and radio, regardless of whether they own a television set. MS


by Michael Wyzan

Since Bulgaria introduced a currency board arrangement on 1 July 1997, the lev has been trading at 1,000 to the Deutsche mark and has been fully backed by the Bulgarian National Bank's (BNB) foreign reserves.

Under a currency board, the only permissible increases in the domestic money supply are those resulting from converting foreign currency inflows into domestic currency. In principle, the monetary authorities may no longer finance government budget deficits or offer credits to commercial banks. In practice, a BNB department is entitled to serve as a lender of last resort to such banks. It has yet, however, to avail itself of that option.

The Bulgarian experience with the currency board arrangement is relevant for other struggling transition economies, especially Russia, which recently considered introducing one. In such cases as Argentina, Estonia, and Lithuania, the arrangement is designed as a way to instill confidence in macroeconomic policy-making.

While that motivation existed in Bulgaria, establishing the board was driven primarily by the need to end practices that were impeding structural reform. Banks made loans to enterprises, which frequently did not repay them. The BNB then "refinanced" (lent money to, often without collateral) the banks or the government replaced those loans with government debt. With the introduction of the currency board--and even several months before it--such practices abruptly ended.

Based on short-term macroeconomic indicators, the board is an unqualified success some 15 months after its introduction. Consumer prices have fallen in each of the last three months, and inflation was only 6.1 percent in the year to August (as recently as August 1997, the monthly rate was 5.5 percent). The three-year loan agreement worked out with the IMF projects 9 percent inflation for 1998.

The fixed exchange rate under the currency board has restored confidence in the lev, as evidenced by the rise in the BNB's foreign reserves from $381 million in January 1997 to $2.9 billion in June 1998 and by the low level of interest rates (the BNB's base rate is just over 5 percent). The fiscal situation is better than expected: on 1O September, the government announced that there will be a 190 billion leva ($112 million) surplus this year, compared with a projected deficit of 2.7 percent of GDP.

While it is evident that the currency board has ushered in an era of macroeconomic stability, the question remains as to whether it will promote sustained, rapid economic growth. In Estonia, where the board was introduced in June 1992, GDP growth did not resume until 1995, although much of this lag resulted from the after-effects of the breakup of the USSR. By 1997, Estonia was the fastest growing transition country, with the exception of Bosnia-Herzegovina.

Little information is available to date on GDP growth in Bulgaria this year. For the first quarter, growth was an enormous 18.5 percent, but that figure reflects the collapse of the economy in the first quarter of last year. The program for the year projects growth at 4 percent. Other indicators suggest that the economy is picking up: unemployment fell to 11.4 percent in June, its lowest level since October 1996, while the average monthly wage reached $111 in June, the highest since April 1996.

At the same time, there is concern about rising (dollar) labor costs and a deterioration in some balance of payments items, both associated with a fixed exchange rate under continuing inflation. The trade surplus in the first quarter was $61.8 million, down from $305.7 million during the same period of 1997. The current account has swung into the red, reaching $17.2 million in the first quarter, compared with a surplus of $151.8 million from January to March 1997.

Although some observers are raising red flags over those labor-market and external-sector tendencies, such concerns seem premature. At $111, the monthly wage is well below those in Central Europe (including Macedonia) and below its previous peak of $128 in September 1993. Moreover, current account deficits far larger than what Bulgaria seems to be experiencing have accompanied rapid economic growth in many successful transition countries.

Attracting foreign direct investment, which enhances productivity, will be crucial to withstanding the effects on the current account balance of the fixed exchange rate under the currency board. There was a major increase in such investment last year (to $498 million, compared with $109 million in 1996). This year, the government is putting up an increased number of enterprises for sale to foreign investors, and several large deals have made headlines. The success of the currency board experiment will hinge as much on its privatization efforts as on improvements in macroeconomic indicators. The author is a research scholar at the International Institute for Applied Systems Analysis in Laxenburg, Austria.