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RFE/RL Newsline, Vol. 3, No. 158, 99-08-16

Radio Free Europe/Radio Liberty: Newsline Directory - Previous Article - Next Article

From: Radio Free Europe/Radio Liberty <http://www.rferl.org>

RFE/RL NEWSLINE

Vol. 3, No. 158, 16 August 1999


CONTENTS

[A] TRANSCAUCASUS AND CENTRAL ASIA

  • [01] AZERBAIJANI AUTHORITIES RULE OUT CHANGES TO MUNICIPAL
  • [02] AZERBAIJANI CONNECTION CLAIMED IN UZBEK BOMBINGS
  • [03] DEADLINE SET FOR RUSSIAN BORDER GUARDS TO LEAVE GEORGIA
  • [04] RUSSIAN EXPERTS CONCLUDE INSPECTION OF BOMBED GEORGIAN
  • [05] POPE TO VISIT GEORGIA THIS FALL
  • [06] THREE GEORGIAN POLICE SHOT DEAD
  • [07] KAZAKHSTAN WANTS NORTH KOREA TO RETURN MIGS
  • [08] FORMER KAZAKH PREMIER MAY RUN IN PARLIAMENTARY ELECTIONS
  • [09] HOSTAGES RELEASED IN KYRGYZSTAN
  • [10] TAJIK PRESIDENT IN CHINA
  • [11] UN WELCOMES LIFTING OF BAN ON TAJIK OPPOSITION PARTIES
  • [12] CORRECTION:

  • [B] SOUTHEASTERN EUROPE

  • [13] SERBIAN PREMIER CALLS OPPOSITION 'TERRORIST'
  • [14] OPPOSITION LEADER SAYS REGIME BELONGS IN THE HAGUE
  • [15] REGIME ATTACKS PERISIC
  • [16] WHAT DOES 19 AUGUST MEAN FOR SERBIA?
  • [17] VEDRINE: NO AID FOR MILOSEVIC
  • [18] GENERAL WANTS SERBIAN FORCES BACK IN KOSOVA
  • [19] SERBIAN RESERVIST CONTINUES HUNGER STRIKE
  • [20] SERBIAN OPPOSITION LEADER OPPOSED TO HUNGARIAN AUTONOMY IN
  • [21] MONTENEGRIN POLICE CHIEF PROMISES VIGILANCE
  • [22] UNHCR SEEKS MORE AID FOR SERBIAN REFUGEES
  • [23] DINI URGES KFOR TO BE 'MORE VIGOROUS'
  • [24] ALBANIAN PREMIER VISITS KOSOVA, RECOGNIZES RUGOVA AS
  • [25] THACI VISITS ALBANIA
  • [26] ALBANIAN POLICE SMASHES INTERNATIONAL PROSTITUTION NETWORK
  • [27] ROMANIAN FINANCE MINISTER EXPLAINS TERMS OF AGREEMENT WITH
  • [28] MOLDOVAN RADIO GOES OFF AIR DUE TO UNPAID ELECTRICITY BILLS
  • [29] CZECH COURT ORDERS EXTRADITION OF SUSPECT IN BULGARIAN EX-

  • [C] END NOTE

  • [30] LATVIA'S NEW GOVERNMENT INHERITS DEPRESSED ECONOMY

  • [A] TRANSCAUCASUS AND CENTRAL ASIA

    [01] AZERBAIJANI AUTHORITIES RULE OUT CHANGES TO MUNICIPAL

    ELECTIONS LAW

    Senior Azerbaijani presidential administration

    official Ali Hasanov told Turan on 14 August that the

    amendments to the law on municipal elections proposed by the

    U.S. National Democratic Institute and the Azerbaijani

    opposition Movement for Electoral Reform and Democratic

    Elections are "belated" and counter-productive. Hasanov

    argued that the present version of the law gives local

    councils a greater degree of independence than they would

    have if the amendments were adopted. He added that the

    proposal that half the seats on local councils should be

    allocated under the proportional system is inappropriate

    since not all political parties have branches in all

    localities. Therefore, Hasanov concluded, there is no need to

    convene the emergency session of the parliament demanded by

    the opposition to debate the proposed amendments. The

    previous day, President Heidar Aliev chaired a meeting to

    discuss preparations for the elections, "Azerbaycan" reported

    on 14 August. LF

    [02] AZERBAIJANI CONNECTION CLAIMED IN UZBEK BOMBINGS

    "525-

    gazeti" reported on 13 August that Azerbaijan's National

    Security Ministry has confirmed that the organizers of the 16

    February bombings in Tashkent held secret consultations in

    Baku several days prior to that attack. Uzbek officials have

    claimed that the organizers of the attack include former

    Uzbek dissidents currently living in Turkey. LF

    [03] DEADLINE SET FOR RUSSIAN BORDER GUARDS TO LEAVE GEORGIA

    Meeting in Tbilisi on 13 August, commander of Georgia's

    border troops Lieutenant-General Valerii Chkheidze and

    Russian deputy border guard commander Aleksandr Manilov

    agreed that the remaining Russian border guards deployed in

    Abkhazia and Adjaria will leave Georgian territory by 1

    November, AP and ITAR-TASS reported. They also agreed that

    the Russian border troops' weapons and facilities will be

    divided on a 50:50 basis between Russia and Georgia. The

    following day, Manilov traveled to Abkhazia for talks with

    the breakaway republic's President Vladislav Ardzinba, who

    opposes the withdrawal of the Russian border troops, Caucasus

    Press reported. The Abkhaz authorities refused admission to

    Chkheidze's deputy, Gela Khutsishvili, and to Georgian

    journalists accompanying Manilov, Caucasus Press reported. LF

    [04] RUSSIAN EXPERTS CONCLUDE INSPECTION OF BOMBED GEORGIAN

    VILLAGE

    A Russian military delegation confirmed on 14 August

    that the cluster bombs dropped on the village of Zemo Omalo

    in northeastern Georgia's Akhmeta Raion were Soviet-

    manufactured and of a type banned by international

    conventions, AP and Caucasus Press reported (see "RFE/RL

    Newsline," 10 August 1999). It failed to confirm, however,

    that the two aircraft that dropped the mines belonged to the

    Russian air force. LF

    [05] POPE TO VISIT GEORGIA THIS FALL

    Pope John Paul II will visit

    Georgia this fall, Vatican envoy Giovanni Battista Re

    announced in Tbilisi on 15 August, following talks with

    Georgian Foreign Minister Irakli Menagharishvili and the head

    of the Georgian Orthodox church, Catholicos Ilia II, Reuters

    and AP reported. The date of the visit has still to be

    determined. The pontiff postponed a planned visit to Armenia

    last month because of the terminal illness of Catholicos

    Garegin II. LF

    [06] THREE GEORGIAN POLICE SHOT DEAD

    Three senior police

    officers, including the heads of the Zugdidi anti-drug

    trafficking department and the local special purpose troops,

    were shot dead "while fulfilling their duties" on 13 August,

    Caucasus Press reported, citing the Georgian Interior

    Ministry. LF

    [07] KAZAKHSTAN WANTS NORTH KOREA TO RETURN MIGS

    Kazakhstan's

    ambassador to Japan, Tleubek Kabdrakhmanov, told the Japanese

    Foreign Ministry on 13 August that Astana has asked North

    Korea to return some of the MiG-21 fighter jets that it

    purchased from Kazakhstan at a cost of $40 million, Reuters

    reported. It is unclear whether North Korea has agreed to

    that request. On 12 August, South Korea officially complained

    to the Kazakh embassy in Seoul over the sale (see "RFE/RL

    Newsline," 13 August 1999). In Astana, Kazakhstan's Foreign

    Minister Kasymzhomart Tokaev said on 13 August that his

    country will issue an official statement on the sale of the

    MiGs to North Korea once the criminal investigation into that

    transaction is completed, Interfax reported. Under an

    international convention that Kazakhstan has signed, it has

    pledged not to sell arms to North Korea. LF

    [08] FORMER KAZAKH PREMIER MAY RUN IN PARLIAMENTARY ELECTIONS

    Akezhan Kazhegeldin told Reuters in a telephone interview

    summarized on 13 August that he may soon return to Kazakhstan

    and participate in the 10 October elections to the lower

    house of the Kazakh parliament. But Kazhegeldin added that he

    does not anticipate any letup in the official campaign to

    compromise him. The Prosecutor-General's Office has charged

    him with tax evasion. Kazhegeldin rejects those charges. Also

    on 13 August, Interior Minister Kairbek Suleimanov claimed to

    have information that some opposition leaders plan to provoke

    mass disturbances on the eve of the polls, according to ITAR-

    TASS. He said that police will be placed on alert a few days

    before the 10 October election to the lower chamber of the

    parliament. LF

    [09] HOSTAGES RELEASED IN KYRGYZSTAN

    The presidential press

    service on 14 August announced that the four hostages being

    held by a group of 21 guerrillas from neighboring Tajikistan

    in southern Kyrgyzstan's Batken district were released

    unharmed the previous evening, RFE/RL's Bishkek bureau

    reported. Kyrgyz government officials declined to release any

    information on the whereabouts of the kidnappers or the

    circumstances of the hostages' release. But Interfax on 14

    August quoted "unofficial sources" as saying that the Kyrgyz

    leadership had complied with the kidnappers' demand for a

    ransom. And a police official from Batken told RFE/RL's

    Bishkek bureau that Kyrgyz authorities are continuing talks

    with the guerrillas in the hope of persuading them either to

    surrender their weapons or to leave Kyrgyz territory. The

    country's top law enforcement officers remain in Batken. LF

    [10] TAJIK PRESIDENT IN CHINA

    During a four-day working visit to

    China, Tajikistan's President Imomali Rakhmonov met on 12

    August with Premier Zhu Rongji for talks that focused on

    bilateral trade and economic relations. The following day,

    Rakhmonov and Chinese President Jiang Zemin signed an

    agreement on the demarcation of one section of their disputed

    common border but failed to resolve Chinese territorial

    claims on parts of Tajikistan's Gorno-Badashkhan Autonomous

    Oblast, ITAR-TASS reported. They also signed a joint

    declaration on combating drug trafficking and an inter-

    governmental agreement on automobile travel between the two

    countries. The joint declaration affirmed the two presidents'

    concern at the deteriorating situation in Afghanistan and

    their rejection of "national separatism, religious extremism,

    and international terrorism." Tajik Foreign Minister Talbak

    Nazarov told ITAR-TASS that China is worried by Islamic

    extremism, which it views as a "global problem," according to

    ITAR-TASS. LF

    [11] UN WELCOMES LIFTING OF BAN ON TAJIK OPPOSITION PARTIES

    In a

    statement released on 13 August, UN Secretary-General Kofi

    Annan termed the lifting by the Tajik Supreme Court of its

    1993 ban on four Tajik opposition parties and movements a

    "significant step" toward implementation of the 1997 peace

    accord, Reuters and AP reported. ITAR-TASS on 13 August

    quoted Tajik Justice Minister Shavkat Ismoilov as promising

    that there will be no delay in reregistering those parties.

    LF

    [12] CORRECTION:

    "RFE/RL Newsline" on 13 August cited the

    "Frankfurter Allgemeine Zeitung" as reporting that the U.S.

    Defense Ministry experts currently inspecting the Nukus

    chemical plant in northwest Uzbekistan will also survey an

    island in the Aral Sea where germ warfare cultures are

    believed to be buried. The FAZ report is incorrect. The

    bilateral agreement under which the U.S. team operates covers

    only the Nukus facility.


    [B] SOUTHEASTERN EUROPE

    [13] 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

    [14] 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

    [15] 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

    [16] 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

    [17] 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

    [18] 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

    [19] 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

    [20] 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

    [21] 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

    [22] 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

    [23] 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

    [24] 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

    [25] 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

    [26] 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

    [27] 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

    [28] 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

    [29] 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


    [C] END NOTE

    [30] 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.

    16-08-99


    Reprinted with permission of Radio Free Europe/Radio Liberty
    URL: http://www.rferl.org


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