OMRI DAILY DIGEST
No. 42, 28 February 1995

CZECHS AND HUNGARIANS AGREE TO DIFFER OVER REGIONAL TIES. Czech Prime
Minister Vaclav Klaus and his Hungarian counterpart, Gyula Horn,
discussed bilateral cooperation in Prague on 27 February but continued
to differ over the importance of the "Visegrad Four" regional grouping,
Czech media reported. Horn said the Visegrad forum--which aims to
promote economic cooperation between the Czech Republic, Slovakia,
Poland, and Hungary--is worth maintaining. But he added that he agreed
with Klaus "that it is not good to make a fetish out of it, to give it a
greater significance than it has," Telegraf reported. Klaus has long
maintained that there is no need to institutionalize ties among the four
Central European countries and that the emphasis should be on
strengthening and liberalizing economic cooperation through bilateral
relations. The two premiers discussed ways to reduce Hungary's trade
deficit with the Czech Republic and the two countries' progress toward
applying for membership in NATO and the EU. -- Steve Kettle, OMRI, Inc.

SLOVAKS, HUNGARIANS DISCUSS INTERSTATE TREATY, EDUCATION.
Representatives of the ethnic Hungarian coalition parties in Slovakia
met with a delegation of deputies from the Hungarian Socialist Party on
27 February in the Slovak town of Samorin to discuss the Slovak-
Hungarian state treaty. Miklos Duray, chairman of the ethnic Hungarian
Coexistence movement, said the meeting took place because political
circles in Bratislava have shown no interest in meeting with
representatives of the Hungarian coalition, although Slovak Prime
Minister Vladimir Meciar promised to do so during his visit to Budapest
in January, Pravda reports. Also on 27 February, a group of
representatives from the ethnic Hungarian coalition held a long-awaited
meeting with Minister of Education Eva Slavkovska in Nitra to discuss
"alternative education" for national minorities. Some social science
courses are to be taught in the Slovak language. Coexistence
representative Edit Bauer told Sme that no agreements were reached, and
Slavkovska said that alternative education is expected to start on 1
September. -- Sharon Fisher, OMRI, Inc.

[As of 12:00 CET]

Compiled by  Jan Cleave

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date=2/28/95
type=correspondent report
number=2-174770
title=East Europe/Finances
byline=Barry Wood
dateline=Prague
content=
voiced at:

Intro:  The fragile capital markets of post-communist Europe have
been volatile with stock markets in Warsaw, Budapest and Prague
declining by about 50 percent in the past six months.  V-o-A
economics correspondent Barry Wood has been trying to find out
how vulnerable Eastern European markets are in the wake of the
Mexican financial crisis and the collapse of Britain's oldest
merchant bank.

Text:  Experts say that foreign capital has  not  played as great
a role in post-communist Europe as had been hoped or expected
four years ago.  Foreign capital is  not  present in Eastern
Europe in the major way it is in Latin America or East Asia.

For example, China alone in 1993 attracted foreign direct
investment of 28 billion dollars.  By comparison all of Eastern
Europe and the former Soviet Union attracted a mere six billion
dollars in that same year.  While final figures are  not  yet in,
the same proportions apply in 1994.

Chile, an economy about a third larger than Hungary or the Czech
Republic, attracted capital inflows of four billion dollars in
1994.  Eastern Europe as a whole in 1994 probably attracted  no
more than three billion dollars.

Roger Kodat runs the Prague representative office of Chemical
Bank of New York.  Mr. Kodat says the big Institutional Money
Funds have considered investing in post-communist Europe but as
yet have committed relatively little cash.  Mr. Kodat says the
post-communist economies need more  not  less access to
international capital markets.

                     // First Kodat act //

         It's an issue of where do the resources come from to
         retool (factories), for environmental controls, for
         expansion.  I would suggest that the domestic markets by
         and large are  not  big enough or liquid enough to
         provide the support (that is needed).  So foreign
         capital is the key to overall long term growth in these
         countries.

                         // End act //

Could there be unexpected currency devaluations and speculative
crashes in Eastern European markets?  Mr. Kodat says the
liklihood is low but he says Hungary's large foreign debt is
cause for concern.

                     // Second Kodat act //

         It's been difficult for Hungary, in particular, to
         reduce its overall debt.  They (Hungarians) haven't been
         able to generate in the economy the kind of returns to
         be able to pay down the debt.  So if there is any
         economy in the Visegrad group (Hungary, the Czech
         Republic, Slovakia and Poland) I would pay attention to,
         it would be Hungary.

                         // End act //

Hungary is one of the world's largest debtors, on a per capita
basis.  Alone among post-communist countries, Hungary has to sell
bonds regularly on international markets just to raise the hard
currency needed to service the debt.  Hungary also has large
budget and balance of payments deficits.  Its currency is
devalued on a regular basis to  keep export prices steady and to
compensate for high 20 percent annual inflation.

// Opt // Generally, the post-communist economies do  not  offer
derivative financial instruments like stock index futures on
their own capital markets.  Although more primitive forms of such
speculative instruments are bought and sold, sometimes -- as with
the M-M-M Investment Fund in Russia -- with disastrous results.
// End opt //

The stock markets in Eastern Europe and the former Soviet Union
are relatively small.  The capitalization of the Mexican stock
market, for example, is larger than most of the eastern markets
combined.  Nonetheless Poland, the most actively traded market,
did attract considerable foreign participation in 1993 when that
market rose 800 percent and was the world's best performing stock
market.  Experts say most western institutional money has been
now been withdrawn from the eastern stock markets.  (Signed)

neb/bdw/mh/cf

28-Feb-95 11:39 am est (1639 utc)
nnnn

source: Voice of America

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OMRI DAILY DIGEST
No. 41, 27 February 1995

HOLBROOKE STRESSES IMPORTANCE OF POLITICAL STABILITY IN SLOVAKIA . . .
U.S. Assistant Secretary of State Richard Holbrooke, during his two-day
visit to Slovakia, stressed that countries wanting to join NATO will be
judged in accordance with two requirements: military compatibility and
political stability. Pravda on 25 February quoted Holbrooke as telling
Slovak President Michal Kovac that by mid-1995, a NATO mission will
visit Slovakia as well as other signatories to the Partnership for Peace
program, although he warned that no decisions will be made this year. At
the same time, he noted that the U.S. strongly supports Slovakia's entry
into NATO. Holbrooke and Prime Minister Vladimir Meciar discussed
security issues and Slovak relations with Hungary, and Meciar noted that
there were no "basic differences." But in his meeting with parliament
chairman Ivan Gasparovic, Holbrooke said the U.S. is dissatisfied with
the confrontational tone on Slovakia's domestic political scene.
Gasparovic stressed that the changes in television and radio are aimed
at improving programming and broadcasting. Holbrooke also met with
representatives of three opposition parties to discuss the stability of
the presidential office, the mandates of the Democratic Union deputies,
and press freedom. -- Sharon Fisher, OMRI, Inc.

. . . AND PRAISES U.S.-HUNGARIAN RELATIONS. In Budapest for a meeting of
U.S. ambassadors to eight Central and East European nations on how the
region can integrate with Western institutions, Richard Holbrooke,
together with Hungarian Foreign Minister Laszlo Kovacs, told a press
conference that Hungary and the U.S. are already partners and are on
their way to becoming allies, MTI reported on 24 February. Holbrooke
praised Hungary's efforts to conclude basic treaties with Romania and
Slovakia and reiterated that NATO will not accept countries involved in
conflicts with their neighbors. In talks with Prime Minister Gyula Horn
on 25 February, Holbrooke stressed that the basic treaties will promote
the stability and security of the region. -- Edith Oltay, OMRI, Inc.

HUNGARY'S OUTGOING FINANCE MINISTER WARNS OF STAGNATION. Laszlo Bekesi,
at a press conference on 24 February, warned that Hungary's economy was
at a crossroads between long-term stagnation and growth, MTI reports.
Bekesi, who resigned last month effective 1 March, said that 3% growth
and increased exports in 1994 compared with the previous year were
accompanied by worsening balances and increasing debts. He said the
growth could not be maintained or financed and that urgent measures were
needed to stabilize the economy. Bekesi recommended that the new finance
minister aim to cut the current $4 billion current account deficit by at
least $1.5 billion and reduce the planned 282 billion forint budget
deficit to 200 billion forint. Bekesi said many Hungarian Socialist
Party politicians, including Prime Minister Gyula Horn, believed there
was an easy way out of the economic crisis and had prepared programs
aimed at maintaining growth at the expense of further indebtedness. --
Edith Oltay, OMRI, Inc.

TWO PARTIES QUIT ROMANIAN OPPOSITION ALLIANCE. Romanian Social
Democratic Party (PSDR) leader Sergiu Cunescu on 24 February reiterated
that his formation will not sign the revised protocols of the Democratic
Convention of Romania (CDR), a decision amounting to that party's
withdrawal from the country's main opposition alliance. Radio Bucharest
quoted Cunescu as saying he favored the setting up of a new, unofficial
grand coalition of opposition forces. He denied rumors of an imminent
split in the PSDR but said some members may consider quitting the party
following its break with the CDR. The Council of the Representatives of
the Hungarian Democratic Federation of Romania, the main political
organization of Romania's large Hungarian minority, issued a statement
in Targu Mures on 26 February saying that some documents adopted
recently by the CDR implied that the HDFR and other political parties
belonging to the coalition would separate from the coalition. In a
related development, Nicolae Manolescu, chairman of the Party of Civic
Alliance (another CDR member), on 25 February sent an open letter to
Constantinescu accusing him of having provoked "the dismemberment" of
the coalition. Constantinescu announced the previous day that the CDR
will change its name to the Romanian Democratic Convention and that its
future election symbol will be a key in a square instead of a circle. --
Dan Ionescu, OMRI, Inc.

[As of 12:00 CET]
Compiled by Jan Cleave

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Wednesday, 01 March 1995
Volume 2, Issue 43


BUSINESS NEWS
-------------

**HUNGARIAN ECONOMIC DIRECTION UNCLEAR**
  Hungary's new economic team takes office today.  Yesterday
  in Parliament new Finance Minister Lajos Bokros and incoming
  Privatization Minister Tamas Suchman took their oaths of
  office.  The third member of the economic team is Gyorgy
  Suranyi who will head the Hungarian National Bank.  Bokros says
  he wants to continue the free market reforms of former Finance
  Minister Laszlo Bekesi.  Central bank head Suranyi is also
  viewed as a strong supporter of austerity measures.  But
  Bekesi has said there is little support in the governing
  Socialist Party for his reforms.  He warned recently that the
  International Monetary Fund expects Hungary to get tougher in
  controlling its deficits.  Bekesi quit last month because of
  disputes with Socialist Prime Minister Gyula Horn over
  economic policy.  Former central bank head Peter Akos Bod quit
  in December, also because of disputes with the government,
  while privatization commissioner Ferenc Bartha was fired
  because of the botched privatization of the Hungarhotels
  chain. --David Fink


**BSE NAMES INTERIM HEAD**
  Before Bokros was named finance minister, he headed the
  Budapest Stock Exchange.  Yesterday the exchange named Sandor
  Czirjak as his replacement.  Czirjak will serve as interim
  chairman until the position can be permanently filled at the
  bourse's annual general meeting April 13.  Czirjak is a vice
  president of the Hungarian National Bank.


**HUNGARIAN DRUG CO. TO APPEAR ON BERLIN EXCHANGE**
  Hungary's State Securities authority will allow trading of
  Richter Gideon shares on the Berlin stock exchange.  Richter
  and the National Bank of Hungary also have approved the move.
  Shares in the Hungarian pharmaceutical firm are also traded in
  London and on the Budapest Stock Exchange.


**HUNGARIAN NATIONAL DRINK LOOKS EAST**
  Hungary's Zwack, maker of the Unicum liqueur, is eyeing a
  larger export market, Russia.  The company currently exports
  about seven percent of its product.  That's double its export
  figures for 1989.



ANALYSIS
--------

**HUNGARY AND THE NEW WORLD ORDER**
  By Duncan Shiels

  Today, CET begins a series of three interviews with the United
  States Ambassador to Hungary, Donald Blinken.  Blinken has
  just finished hosting a meeting of U.S. ambassadors to the
  region and top officials from Washington.  The eastward
  expansion of European institutions dominated the agenda.
  Blinken began by explaining why the gathering was necessary.
  He quotes U.S. Assistant Secretary of State for European
  Affairs Richard Holbrooke, who was the keynote speaker at the
  ambassador's meeting.

  Blinken:  The reason for the conference was simply this, and I
  want to quote if I may from an article that Ambassador and
  Secretary Holbrooke recently wrote which is going to appear in
  Foreign Affairs in March.  And I think this tells you why this
  region and why this conference was important.  He said, quote,
  local conflicts, internal political and economic stability and
  the return of historical grievances have now replaced Soviet
  expansionism as the greatest threat to peace in Europe.
  Western Europe and America must jointly ensure that tolerant
  democracies become rooted thoughout all of Europe.  That is,
  you might say, the fundamental theoretical and political basis
  for having a regional conference like this in Central Europe.
  Europe is gradually moving eastward in terms of its
  institutions, democratisation and free markets and we find
  today that the hub, the centre of this new eastern movement is
  Hungary.  Hungary, in my view, is in a sense playing the role
  in the 1990s, and will at the turn of the century, that Vienna
  played and Austria played in the 50s, 60s and 70s.  It's the
  furthest Western outreach, and it's going to become as a
  result increasingly important.

  CET:  Would you share the view that there is a dangerous
  period now of possible impatience and disillusionment with the
  pace at which this integration is or is not happening?

  Blinken:  I think that might have been a fair comment about a
  year ago when Partnership for Peace was announced and there
  was some initial disappointment that we weren't talking
  together with our 15 other allies about immediate assension to
  NATO, not to mention the European Union.  But I think in the
  past year, and I think the conference last weekend confirmed
  this, there is  a much greater recognition on the part of our
  host countries in the region that Partnership for Peace is,
  in fact, a very useful institution and a very useful step
  towards NATO, at least for those countries that can expect to
  be invited to join NATO in the few years ahead.

  CET:  Looking ahead, there's also the question of
  collaboration within the countries, cooperation between the
  Central European countries, notably the Visegrad Four, which
  the Prime Minister of the Czech Republic has said no longer
  exists, that no longer is there a need for this political
  cooperation.  Did the ambassadors from the other countries
  agree that perhaps the Visegrad cooperation was no longer
  necessary and that it's clearly perhaps just an economic
  collaboration that's necessary?

  Blinken:  I think that there was a general agreement that the
  Visegrad notion or description doesn't have the gravitas or
  the weight it may have had two,three years ago.  What is
  happening is that certain countries clearly have demonstrated
  or are demonstrating that they're closer to being ready for
  NATO than, perhaps, others.  And as a result, we may find, for
  example, that when the time comes, and it will not come in
  1995, when the time does come for certain countries to be
  invited to take the next step toward NATO membership, it may
  be one country, it may be two or three countries, it may be
  three or four countries, but I think it is fair to say that it
  will not be limited to, or circumscribed by a Visegrad
  description.

  CET:  I'm wondering after that process whether there will be
  a considerable divergence in US policy, because a
  conference like this also shows the differences more greatly
  in terms of development, and even the things that were
  already there, between these countries?

  Blinken:  There may well be some divergences.  I'm sure that
  some countries will be more prepared than others to move
  ahead, but one has to assume that you're probably correct,
  there will be some countries that move more quickly, others
  that move more slowly.  But, I'm afraid, to answer that one
  you'll have to come back and talk to me about a year from now
  and we'll have a better idea.

ABOUT CET ON-LINE
-----------------

* CET On-Line - copyright (c) 1995 Word Up! Inc. All rights reserved.
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