TIME: Almanac 1993/TIME Almanac 1993.iso/time/120390/1203007.000

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                                                                                WORLD, Page 76

EUROPE

The Bills Come Due


After a year of freedom, Eastern Europe realizes that toppling
statues of Stalin and Lenin is easier than erecting stable
democracies and free markets

By JOHN BORRELL/WARSAW -- With reporting by Michal
Donath/Prague, Sean Hillen/Bucharest and Connie Sokoloff/Sofia


    What price freedom? The question on the lips of East
Europeans a year ago seemed to have been answered when communist
dictatorships gave way one after another without offering more
than token resistance. The startling disintegration of the East
bloc registered a 7, maybe an 8, on a Richter scale of this
century's most significant events, yet the bill for half a dozen
revolutions seemed exceedingly modest. The cost of erasing the
45-year-old political division of Europe and opening the way
toward democratic pluralism and free-market economies: a few
hundred killed, mainly in Romania.

    One year later, as elected governments from the Baltic to
the Black Sea struggle with the complexities of democracy and
the harsh realities of the marketplace, often hampered by old
demons like nationalism and populism, an awareness is growing
that the full dues have yet to be paid. Whatever the sacrifices
made over the past 12 months -- or the preceding four decades of
communist rule -- citizens in every liberated East European
nation are acknowledging that those were merely small down
payments on freedom.

    Since the revolutions of 1989, all the region's countries
have had democratic, or at least partially free, elections, and
all have pledged to abandon command economies for the free
market. But while small-scale capitalism is beginning to take
root, no country has yet attempted to privatize the thousands of
large-scale industries in the portfolios of state-owned
business. In some countries an entrenched communist nomenklatura
is hanging on to as much economic power as it can; in others,
both government and opposition are so riven by disagreements
that day-to-day administration seems to be coming apart. Says
George Karasimeonov, a political science professor at Sofia
University: "We have experienced the birth of democracy, but
democracy has not yet created its own institutions and
traditions."

    East Europeans are now worrying about jobs, rising prices,
their very futures. Some are looking for scapegoats, turning on
minorities and seeking retribution from former communists.
Others are looking for solace in nationalism or embracing
populist politicians who gloss over the level of pain that will
accompany the transition to market economies. "These are
difficult times everywhere," says Chris Mattheisen of K.M.
Associates, an independent consultancy group in Budapest.
"People are freer but a lot more insecure."

    Compounding the difficulties for Eastern Europe is
political unrest and economic chaos in the Soviet Union as well
as, farther away, the conflict in the Persian Gulf. Turmoil in
the Middle East has pushed up oil prices and curtailed world
markets at the very moment when the Soviet Union, still the East
Europeans' major trading partner, has cut back sharply on oil
deliveries to its former allies and reduced its purchases of
their goods. In Hungary angry motorists have blockaded roads and
bridges; in Bulgaria the government has been forced to order
sharp cuts in the power supply. The oil crisis has made it
impossible to shut down Soviet-built nuclear reactors in
Bulgaria and Czechoslovakia that Western experts consider
unsafe. "The gulf crisis couldn't have come at a worse time for
Eastern Europe," says Daniel Thorniley, an analyst at Business
Eastern Europe, a consulting agency in Vienna. "It has raised
costs and diverted Western attention away from the area."

    One of the region's most immediate problems is a level of
indebtedness to the West far beyond the ability of most
countries to repay. Bankrupt Bulgaria has simply stopped paying
interest and capital on its $10.8 billion debt, while Poland,
with $41 billion, and Hungary, with $21 billion, have been
forced to reschedule or restructure their debts. The shock of
full-speed-ahead economic reform in Poland has lowered real
incomes by as much as 40% this year; thus there is particular
resentment at the debt incurred during the communist years.
These nations want more forgiveness from the West. "At this
stage of such radical change, the West could be crucial in
determining the future course here," says Polish Finance
Minister Leszek Balcerowicz.

    East Europeans also want assurances that they are not to be
poor relations forever. Old political divisions could be
replaced by economic ones, warned Polish Prime Minister Tadeusz
Mazowiecki at last week's Paris summit of the Conference on
Security and Cooperation in Europe (CSCE), "unless the split
into a rich and a poor Europe, an A-class and a B-class Europe,
is overcome." The leaders of the 34 states at the conference
concluded by signing the Charter of Paris, a treaty marking the
end of the cold war and the beginning of a new Europe committed
to "prosperity through economic liberty and social justice."

    While Poles have so far accepted austerity measures that
have sharply increased prices, reduced industrial output 30% and
pushed unemployment over the 1 million mark in a nation of 38
million, the government acknowledges that there are limits to
people's patience. Elsewhere in the region those limits are
already being tested. Earlier this month, when the Romanian
government withdrew state subsidies on a wide range of goods,
many prices more than doubled overnight. Workers and students
took to the streets demanding the government's resignation and
shouting slogans against President Ion Iliescu and Prime
Minister Petre Roman: "Down with Iliescu!" and "Roman, resign!"
Says Nica Leon, leader of the Free Democratic Party: "It is a
very bleak economic picture. The shops are nearly empty, people
have no money, and there is little heat in apartments. Little
has changed."

    When angry Hungarian taxi drivers and truckers blocked
roads after a gasoline price rise of 65%, the government backed
off: the increase was halved, and officials agreed to consult
with unions and other parties on price hikes. Similar protests
have erupted in Bulgaria, where electricity is rationed as much
as 12 hours a day and store shelves are barer than they were
before the collapse of communism. There are even long lines for
candles. Two weeks ago, the government announced a 100-day crash
program aimed at reviving the crippled economy; the scheme
includes some price liberalization and partial convertibility
of the lev. Last week the government survived a no-confidence
vote while 50,000 people demonstrated outside parliament calling
for its ouster and union leaders threatened a general strike.

    Conventional wisdom suggests that Polish-style economic
shock therapy is the best method to move these countries away
from command economies. But if people refuse to accept immediate
pain in anticipation of future gain, governments in the region
will have trouble pushing through their programs. To forestall
more conflict with workers, the Romanian government two weeks
ago won special emergency powers to tackle economic problems by
issuing decrees rather than working through parliament.

    Since the trade unions are strongest in some of the most
labor-intensive and least efficient industries, like steel and
petrochemicals, such prime candidates for closure may in fact be
the last to go. A recent Polish study shows that the larger and
more inefficient an industry, the more effective its unions have
been in protecting jobs. Romania this month announced that it
would simply cut off energy supplies to rust belt industries,
a drastic step that can only heighten the likelihood of
conflict.

    Under communism few grew rich, but few went hungry; in many
cases people enjoyed surprisingly high levels of prosperity. In
Poland, for example, wealthy entrepreneurs were able to afford
Western luxury automobiles; in Czechoslovakia ownership of
second homes was common. Now many may no longer be able to enjoy
such extravagance. Worse, there is real fear that hard times
will hit almost everyone. "People are asking if they will have
jobs next year and where unemployment benefits will come from,"
says Valtr Komarek, director of the Institute for Forecasting
in Prague.

    In fact, all of Eastern Europe lived beyond its means in
the latter decades of communist rule. But there is a reluctance
to take responsibility for the consequences. Czechoslovak
President Vaclav Havel, preparing for the start of economic
reforms on Jan. 1, frequently reminds his countrymen that hard
times are the price they will have to pay for not having opposed
communism more vigorously.

    Havel accompanies such chiding with the advice that the
communists should not blamed for everything either. He opposes
witch-hunts against former officials similar to the purges the
communists mounted on taking power in 1948. That is an unpopular
pitch in a country where the desire for revenge is often
stronger than the will to rebuild. Last month a group of
students pledged not to mark the Nov. 17 anniversary of last
year's revolution because, they claimed, the communists had
stolen that revolution. They complained that many ex-communists
were still in government and were running most of the country's
industries. "Havel is wonderful, and we love him," says Hana
Kovandova, 22, a third-year economics student. "But he is too
soft on the communists."

    The same charge is leveled against Mazowiecki by Solidarity
leader Lech Walesa, his main opponent in Poland's presidential
election this week. Mazowiecki's government has taken steps to
prevent the old nomenklatura from grabbing state-owned companies
up for sale. But like Havel, he argues that a witch-hunt would
abort economic reform and possibly lead to civil war. Bulgaria's
new government thought otherwise last week, when it announced
that former communist leader Todor Zhivkov would be put on
trial, charged with misappropriating $3.7 million during his 35
years in power.

    Present uncertainties make rummaging in the past a growing
preoccupation -- one that is reviving some nasty habits. Voices
of anti-Semitism are again heard in the region, along with
virulent nationalistic outbursts that disparage other
minorities. Though only a handful of Poland's Jews remain out of
a prewar population of 3 million -- and there are none in the
administration -- it is not uncommon to hear people blaming
problems on "all the Jews in government."

    Fierce flashes of nationalism threaten to tear apart
Yugoslavia, while nationalists in Slovakia, one of the two
partly autonomous republics that make up Czechoslovakia, are
pushing hard for a referendum that would allow Slovakia to break
away. Yet while they demand independence for themselves, the 5
million Slovaks, a third of Czechoslovakia's population, deny
any such choice to Slovakia's 600,000 ethnic Hungarians; the
more militant nationalists even insist that the Hungarians
should be made to speak Slovak. To combat such trends, Soviet
President Mikhail Gorbachev at last week's CSCE meeting called
for a new "economic, environmental and technological foundation"
to counter "dangerous outbreaks of nationalism and separatism."

    A major danger is that falling living standards,
large-scale unemployment and political rivalries will produce
the kind of aggressive nationalism that has caused the region
so much grief in the past. People are all too ready to blame
others for their problems. When Havel suggested that
Czechoslovakia could not expect open borders with the rest of
Europe if it kept its own frontier with Poland closed, he found
no echo among his countrymen. A survey by the Public Opinion
Research Institute disclosed that while more than 81% of those
polled supported Havel generally, only 4% agreed with him on the
border issue.

    The smugness of Czechoslovaks may stem from the fact that,
along with Hungarians, they are relatively free to travel. Not
so for others: although the Iron Curtain has crumbled along the
entire length of the old East-West divide, many East Europeans
find their freedom of movement as curtailed as ever. It is no
longer a question of obtaining a passport and an exit permit
from a suspicious communist regime. Now the problem for Poles,
Bulgarians and Romanians is to obtain visas to the West or even
permits to visit one of the other countries in Eastern Europe.
Says Andrzej Misiok, a Pole seeking a visa to Greece: "In
reality I am not much freer than before."

    If East Europeans bridle at such limits on themselves,
Poles in particular are beginning to look anxiously eastward to
the Soviet Union and hoping that its citizens remain tightly
shackled. Should the Soviets do what the West has been urging
for decades -- allow its citizens to travel abroad freely --
Poles fear a stampede westward into Poland. And if things get
bad enough in the Soviet Union, which some Polish officials
consider likely, many Soviets will come regardless of any change
in regulations. "There is no way we can police the whole eastern
border," says an official. "It is just too porous."

    At the same time, a growing number of West European
countries are beginning to tighten controls along their eastern
frontiers. Austria has dispatched troops to patrol borders once
sealed by barbed-wire fences and watchtowers. Germany is
reviewing security arrangements along the Polish frontier, while
promising to speed up visa issuance for legitimate travelers.
"The worry for Western Europe is not just that the reforms will
fail and the region will slip into anarchy and chaos," says
Karsten Voigt of Germany's Social Democratic Party.

closed down and millions out of work." The prospect is that a
stream of political escapees will turn into a flood of economic
refugees.

    If that is a frightening scenario for Western Europe, it is a
terrifying one for the East European countries. So terrifying,
in fact, that some may accept half-measures and muddling through
rather than take the risks involved in marching toward the goals
about which they were so enthusiastic a year ago. If last year's
question was "What price freedom?" next year's may be "Can we
afford it?"


____________________________________________________________
THE BILLS COME DUE:


    BULGARIA: The first non-Communist President in four decades
was named in August. The Sofia government has been forced to
order food rationing and power cuts, has stopped payments on its
$10.8 billion foreign debt and has just announced a crash
100-day economic-reform program. The outlook is for a grim
winter.

    CZECHOSLOVAKIA: Led by the much admired Vaclav Havel,
democracy has taken root, but so has a long-hidden nationalism:
Slovaks are now demanding independence. A market system will be
introduced on Jan. 1 that will raise prices and thus sorely test
the government.

    HUNGARY: In less than a year Hungarians have been able to
exercise their right to vote no fewer than six times. But the
government says inflation could reach 35% in 1991, and falling
living standards will put additional stress on a population that
may have little tolerance left.

    POLAND: After a sweeping victory in last year's elections,
Solidarity has been split by the rivalry between Lech Walesa and
Tadeusz Mazowiecki for the presidency. While more food is
available, rapid economic reform has lowered real income nearly
40%, pushed unemployment above 1 million and sharply increased
prices.

    ROMANIA: Though elections were held in May, the Salvation
Front government has tended to deal brutally with its
opposition. Romanians face a harsh winter: unemployment is
widespread, fuel and electric power are scarce, and prices have
doubled because of the elimination of government subsidies.