RADIO FREE EUROPE / RADIO LIBERTY, PRAGUE, CZECH REPUBLIC
___________________________________________________________
RFE/RL NEWSLINE Vol 2, No. 18, 28 January 1998

HUNGARY TO HELP ESTONIA TRAIN OFFICERS. Following the signing of a
framework agreement on defense cooperation  in Tallinn on 27 January,
Hungarian Defense Minister Gyorgy Keleti told journalists that Hungary is
ready to train Estonian officers at the Budapest Military Academy, ETA and
BNS reported. Hungary also proposed training Estonian military engineers
who could later join their Hungarian counterparts participating in the
peace-keeping mission in Bosnia. Keleti promised that Hungary will "do
everything"  to help Estonia join NATO. Estonia has signed 16 such
framework agreements, including with the U.S., Canada, Poland, and the
Czech Republic. JC

ROMANIAN CONSULATE OPENS IN SOUTHEASTERN HUNGARY. Visiting Romanian Foreign
Minister Andrei Plesu and his Hungarian counterpart, Laszlo Kovacs,
officially opened the Romanian consulate in Szeged on 27 January, Hungarian
and Romanian media reported. The inauguration was attended by the
presidents of both countries.. Hungarian Education Minister Balint Magyar
met with his Romanian counterpart, Andrei Marga, whom he urged to push for
the Chamber of Deputies to pass another version of the education law.
Romania's Hungarian minority regards the version passed by the Senate as
discriminatory. Meanwhile, a Slovak Ministry of Culture official said
Bratislava had protested to the OSCE commissioner for minority affairs over
Magyar's speech at the opening of the Hungarian Institute in Bratislava
last week (see "RFE/RL Newsline," 21 January 1998). MS

MINORITIES WANT PARLIAMENTARY REPRESENTATION NOW. Spokesman for
organizations representing national minorities in Hungary have  protested
the government's intention to postpone the representation of national
minorities in the parliament until  2002. Socialist Party deputy Mihaly
Bihari had earlier argued that a bill providing for minority representation
either in May (when parliamentary elections are due) or in separate
elections in October raises constitutional questions. Interior Minister
Gabor Kuncze responded by withdrawing the cabinet's proposal on special
parliamentary seats for minorities since the bill needs across-the-board
support in the legislature.  In other news, the World Bank on 27 January
approved a $ 150 million loan to Hungary to help implement a comprehensive
reform of the pension system, an RFE/RL correspondent in Washington
reported. MS


THE LEVOCA SUMMIT
by Genevieve Zalatorius

        At a summit of 11 mostly Eastern European presidents in Levoca,
Slovakia, on 23-24 January, some of Slovakia's closest neighbors announced
they will support that country's bid to enter the EU.
        "We cannot imagine Europe without Slovakia," Austrian President
Thomas Klestil said. "We're going to support Slovakia," he said, adding
that it is one of the "core countries" in Europe. Hungary and Poland
expressed similar positions.
        EU officials in December decided Slovakia would not be among the
first countries to begin accession talks. The EU and other Western
institutions have criticized Slovakia for not respecting democratic
principles. But, Slovak President Michal Kovac, trying to remain upbeat
during the summit, said those gathered are "interested in Slovakia becoming
an integral part of Europe." That shows Slovakia is "not shunned and
ignored and that there is no international conspiracy against Slovakia,"
Kovac commented.
        Bulgarian President Petar Stoyanov said the main significance of
the meeting was that the participants have the "same philosophy--the
philosophy of a united Europe."
        Hungarian President Arpad Goncz said Europe "cannot be complete"
without Slovakia. "Slovakia has its place in Europe," he added.
        Polish President Alexander Kwasniewski said Slovakia has confirmed
its desire to be part of European structures. "From the Polish position, we
will support Slovakia wanting to be part of EU and NATO," he added.
        Discussion at the summit concentrated on the integration of all
Central European countries into Western structures such as the EU. The
theme of the summit was "Civil Society--the Hope for a United Europe."
        Romanian President Emil Constantinescu warned that a civil society
"has to be on its guard." He singled out corruption as a problem. And he
also emphasized the need to reach harmony with ethnic minorities.
        Among those attending the summit for the first time was Ukrainian
President Leonid Kuchma, who said his country's long history of
totalitarian domination left it farther behind other countries. Kuchma said
the transition process will be more "painful" in his country than in others
and will "take more time."  Referring to his Moscow meeting with Russian
President Boris Yeltsin, Kuchma said he would deliver "greetings" from the
11 presidents to the Russian leader. We all want to have "normal relations"
with our eastern neighbor, Kuchma said.
        Although Slovak Prime Minister Vladimir Meciar was invited to the
summit, he chose not to attend. His absence only served to highlight the
strained relations between Meciar and President Kovac, the summit's host.
Kovac, who has fewer than 40 days remaining in office, was praised by the
summit participants.
        Hungarian President Goncz reminded summit participants that this
was the last such conference with Kovac. "We see in [Kovac] a person of
great determination. His personality is closely linked with the spirit of
Europe," Goncz said.
        With Slovak presidential elections due on 29 January, those
attending the summit said they will  be closely monitoring the situation.
Czech President Havel took time during his visit to meet with Slovak
oppositionists, including representatives of the ethnic Hungarian minority.
Havel told reporters that Czechs are interested in having better relations
with their Slovak neighbors.
        Hungary is also hoping to improve relations with Slovakia.
President Goncz met with his Slovak counterpart one day before the summit
began for unofficial talks. On that same day, the Slovak and Hungarian
foreign ministers met in Budapest to discuss ethnic minorities and the
Danube dam dispute.

The author is an RFE/RL correspondent based in Bratislava.

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RADIO FREE EUROPE / RADIO LIBERTY, PRAGUE, CZECH REPUBLIC
___________________________________________________________
RFE/RL NEWSLINE Vol 2, No. 19, 29 January 1998

HUNGARY SETS DATE FOR ELECTIONS. President Arpad Goncz on 28 January announced 
that the first round of general elections will be held on 10 May and the second
 round on 24 May, Hungarian media reported. The decision came after Goncz's mee
ting last week with the leaders of all the 11 parties that gained at least 1 pe
rcent support in the 1994 general elections. MSZ.
HUNGARY'S MINORITIES TO FORM ETHNIC ALLIANCE. Representatives of Hungary's
German, Croatian,  and Slovak minorities have applied to register an
alliance called the Nationalities Forum, "Magyar Hirlap" reported on 29
January. Mihaly Jozan-Jilling, representative of the German minority, said
the minorities cannot wait for the parliament to make a decision on their
parliamentary representation (see "RFE/RL Newsline," 28 January 1998) and
therefore will form an election alliance based on ethnic criteria. The
Romanian and Romani minorities will decide later whether to join the
alliance. Meanwhile, Foreign Minister Laszlo Kovacs warned against any
further delay in passing legislation on parliamentary representation for
ethnic minorities, noting that Hungary's international reputation and
credibility is at stake.  MSZ

SLOVENIAN NAZI VICTIMS SEEK $1.2 BILLION. A spokesman for the Association
of Victims of the 1941-1945 Occupation said in Ljubljana on 27 January that
his organization demands $1.2 billion from the German government on behalf
of some 45,000 Slovenes. The spokesman stated that the money represents
reparations for "internees, refugees, abducted children, forced laborers,
prisoners-of-war, and those who died in concentration camps or who were
murdered" during World War II.  He added that the association will also
press claims against Italy and Hungary, which, together with Germany,
occupied Slovenia during that war. PM

COUNTRIES ACCEDING TO EU FACE MACROECONOMIC CHALLENGES
by Michael Wyzan

At a seminar organized by the Vienna Institute for Comparative Economic Studies
 on 22 January, George Kopits, assistant director of the IMF's Fiscal Affairs D
epartment, discussed the requirements that countries acceding to the EU will ha
ve to meet and the policy issues facing them.
On balance, he was upbeat about the ability of the five postcommunist countries
 invited by the European Commission in July 1997--the Czech Republic, Estonia, 
Hungary, Poland, and Slovenia-to meet those requirements. Indeed, in many impor
tant respects, they are ahead of Greece and the Iberian countries as they prepa
re for accession.
Those countries will have to adhere to "ERM2" for two years before adopting the
 euro. That is, they must use the exchange rate mechanism currently followed by
 most EU members before the euro is introduced next year. That means keeping th
eir currencies at a parity to the euro with a 15 percent corridor in each direc
tion.
The countries slated for accession may also have to meet the various "Maastrich
t criteria" (including a budget deficit no larger than 3 percent of GDP). It is
 safe to assume that they will need to adhere to such institutional requirement
s as using market-based monetary instruments and maintaining central bank indep
endence from political influences.
Other tasks include eliminating all trade barriers with the other EU members; e
stablishing the common external tariff; and implementing common procedures for 
consumer and environmental protection,  public procurement, banking regulation,
 and tax harmonization.
As a benefit, the five countries will have access to the Structural Funds (SF),
 the Cohesion Fund (CF), and perhaps to the Common Agricultural Policy (CAP). W
hile the transfers potentially allocated to them could be enormous according to
 current criteria, it seems likely  that the amount available to them will be l
imited to 4 percent of GDP.
The five countries seem to be doing rather well in meeting those criteria. Infl
ation and long-term interest rates have come down, although they remain above t
he EU averages. There is progress on adopting market-based monetary tools and e
stablishing central bank independence.  Budget deficits in several countries al
ready fulfill the Maastricht criteria, although there may be significant extrab
udgetary and quasi-fiscal expenditures. Their external sectors are already libe
ralized,  and there is progress on antimonopoly and consumer-protection legisla
tion.
However, much remains to be done in the areas of environmental standards, banki
ng regulation, harmonization of indirect taxation (especially rates of value-ad
ded tax and payroll contributions), and procurement procedures.
It is unclear is whether the countries acceding to the EU will be able to opera
te within ERM2, given the myriad pressures on their exchange rates. There are f
actors  that may lead to the appreciation of their currencies, including foreig
n direct investment and short-term capital inflows, and the productivity-driven
 adjustment of their prices to the levels of their EU neighbors. But there are 
also pressures for depreciation. Growth of wages tends to exceed that of labor 
productivity; budget deficits and rapid monetary growth persist; and speculativ
e capital occasionally flows out.
Another issue is whether the countries can remain within the EU's fiscal guidel
ines while dealing with major structural challenges. Accession will bring some 
budgetary advantages, including transfers under the SF, CF, and CAP programs; t
he elimination of sectoral subsidies; reform of budgetary practices; and lower 
interest costs.
At the same time, accession will also pose budgetary challenges, such as the ne
ed to co-finance the transfer programs (such as the SF, CF, and CAP) and make n
ational contributions to the EU budget, eliminate tariffs against imports from 
EU members, and adopt the common external tariff. Those countries will also hav
e to provide for tax harmonization, which will force major reductions in VAT ra
tes; adopt  EU accounting practices; and incur restructuring costs, especially 
for investments in the infrastructure.
Despite such challenges, Kopits is generally optimistic about the outcome of ac
cession. The process has been successful in Spain and Portugal, although less s
o in Greece. The five postcommunist  countries have many similarities with the 
three Mediterranean ones at the time of their accession: low income levels, low
 productivity, a need for enterprise restructuring, and scope for infrastructur
e investment.
Many differences between the transition and Mediterranean countries suggest the
 former have more advantages than did the latter: they are more open to foreign
 trade and capital movements (especially than was the case of Spain and Greece)
, have smaller macroeconomic imbalances, and, ironically, have less widespread 
state ownership following their privatization efforts. However, the enlarged EU
 will be different from the European Community of the 1980s, particularly since
 the community was a customs union only, not a single market, and did not have 
a common monetary policy.
In the author's view, the five countries seem better prepared for accession tha
n many observers realize. There is more doubt about the viability of upcoming c
hanges to the EU's functioning-especially the single currency and reform of the
 transfer programs-than about the ability of those countries to adopt current p
rocedures.
The author is an economist living in Austria.

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Copyright (c) 1997 RFE/RL, Inc.
All rights reserved.
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