News round-up October 1998


Czech Republic: The Czech finance industry announced 6 October that it would inject capital to halt the decline in share prices of the two major (primarily state-owned) banks, despite the government previously ruling this out. It is hoping to privatise both by the year 2000. The Czech National Bank (CNB) announced a cut in its key short-term rate, effective 26 October, by one percentage point to 12.5 per cent yesterday. This was the fourth cut in its interbank facility since August. The discount rate was cut by 1.5 points to 10 per cent, and its last-resort facility, the Lombard rate, by one point to 15 per cent.

Russia: The European Bank for Reconstruction and Development (EBRD) was asked to provide assistance in restructuring Russia's banking sector by the government in early October. On 8 October, senior government officials stated that the crisis was deepening: real budget revenues for the fourth quarter were projected as Rbs60 billion (US$3.7 million), leaving a deficit of Rbs100 billion. An economic strategy was still not decided on mid-month, and talks with foreign bank creditors aiming to find a solution for settling domestic debt (frozen since Russia declared a partial debt moratorium two months ago) began at the end of the month.

Yuri Luzhkov, mayor of Moscow, revealed on 22 October that the city is considering selling land for the first time since the Communist revolution: although still experimental, the money raised could help short-term finance and bring foreign investment into the country.

Slovakia: Following Vladimir Meciar's defeat, the Slovak central bank was forced to abandon the fixed exchange regime for the Slovak crown, previously held within a fluctuation band of plus/minus seven per cent against a central parity of a currency basket based on the D-Mark and the US dollar. The Slovak crown was devalued by around six per cent on 1 October, trading at around 12.5 per cent below its central parity, falling to Sk36.52 to the dollar during late trading. Moody's, the US credit rating agency, had devalued Slovakia for the second time this year shortly before the announcement, but it was greeted as a wise decision by analysts.


Russia: Beeline, Russia's leading mobile phone provider, has seen a decline in share prices to 25 per cent of their value a few weeks earlier, and their US$28 million treasury bill portfolio has been wiped out as the Russian government defaulted on their debts.


Slovakia: Transpetrol, Slovakia's state-owned oil transport company, has been secretly privatised. On 27 October, the management announced that they had been told that a 34 per cent stake had been transferred to private owners to repay a Sk65.6 million (£1.06 million) finance ministry debt. The opposition (who won elections last month) announced that they would reverse any privatisations carried out before the government resigns, as Transpetrol is one of the 'strategic' companies not meant to be privatised by the Slovak National Property Fund.


Albania: Tension continues between the Albanian government and Sali Berisha, leader of the opposition: several days after Pandeli Majko was announced as the premier-designate of Albania, Mr Berisha accused Mr Majko of being the former premier Fatos Nano÷s puppet, alleged mental illness during Mr Majko's student days, and said his appointment would continue the crisis in Albania.

Latvia and Kyrgyzstan: The World Trade Organisation approved entry terms for Latvia and Kyrgyzstan on 14 October, becoming the first two former Soviet republics to qualify: Kyrgyzstan applied in 1996; but Latvia was held up by US objections to audio-visual policy, which were dropped during the summer.

Russia: There are increasing fears about President Boris Yeltsin's health after he cancelled a state visit to Kazakhstan on 12 October, and could not attend a summit with EU leaders on 26 October. The 67-year old premier entered Gorky-9 sanitorium outside Russia on 27 October with bronchitis and nervous exhaustion. The Kremlin signalled the next day that he has given over day to day control of Russia to prime minister Yevgeny Primakov, devoting the rest of his term to revising the Russian constitution. It was later announced that he would outline this reduced role to parliament early in 1999, but does not intend to stand down before his term expires in summer 2000.

The presidential race has begun following Yeltsin's poor health, with Yuri Luzhkov (mayor of Moscow) aiming for communist support early in the month. Yeltsin renounced the possibility of another term on 20 October, and contenders are now making themselves known. They include Victor Chernomyrdin, the former prime minister; Grigory Yavlinsky, the leader of liberal Yabloko party; Gennady Zyuganov, the Communist party leader; Gennady Seleznyev, Communist speaker of the lower house; Yuri Luzhkov, mayor of Moscow; Alexander Lebed, governor of Krasnoyarsk. Yevgeny Primakov has ruled out standing himself.

The Communist party organised protests demanding wage payments and Yeltsin's resignation on 7 October, which passed peacefully: over ten million were claimed to have taken part, although projections had been as high as 40 million.

Macedonia: The first round of the general elections was held on 18 October: only a few of the 120 seats were decided, with the others on 1 November.

Serbia: The international community was outraged by reports of massacres of ethnic Albanians in Kosovo. Mid-month, pressure on diplomatic efforts came from Nato threatening air strikes (members agreed they could now intervene without further authorisation from the UN Security Council): Slobodan Milosevic came to an agreement with US special envoy Richard Holbrooke allowing international surveillance over Kosovo, although western leaders have pledged to keep up the pressure on Belgrade. Milosevic had not meet the conditions in full to avoid military intervention in Kosovo by the end of the month, instituting an internal campaign of repression with police raids on two independent Serbian newspapers. However, the progress made in Belgrade towards Serbian withdrawal from Kosovo led to a suspension of bombing threats from Nato by the end of the month.

Slovakia: The new Slovak government formally took office on 30 October, led by Mikulas Dzurinda, leader of the Slovak Democratic Coalition (SDK). The government will include representatives from the ethnic Hungarian parties for the first time, and announced its priority as ending the country÷s political isolation by asking the EU and Nato to reconsider its application to become a member again. This isolation was due to Vladimir Meciar's authoritarian behaviour, who formally resigned 29 October having lost the elections. The new government also asked the EU to postpone its evaluation of Slovakia until nearer December.

Ukraine: Ukrainian democracy was thrown into doubt on 18 October with the eviction of opposition newspaper Kievski Vedomosti, one of the largest daily newspapers in the country, from its offices over dispute of terms of the building lease. It has a reputation for investigative reporting, particularly into government misappropriation of funds. It is now published in shorter form from the management offices.

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