Background Notes on Selected East European Countries from the Department
of StateBackground Notes on Selected East European Countries from the Department
of StateHistorical Highlights
The name Albania is derived from an ancient Illyrian tribe, the Albanoi, from which many Albanians are thought to be descended. The Albanian name for their country is Shqiperia. Historically, Albania has been a nation subject to foreign domination except for a brief period of independence from the Turks 1443-1478. After the upheaval of World War I, Albania was re-established as an independent state largely through the efforts of U.S. President Woodrow Wilson at the Paris peace conference, and remained independent until Italy invaded the country in 1939.
After Italy's surrender in 1943, German troops occupied the country and were challenged by the communist-dominated National Liberation Front (NLF), which gained control in November 1944. Yugoslav communists were instrumental in establishing the Albanian communist party in November 1941, and the NLF regime became a virtual satellite of Yugoslavia until the Tito-Stalin split in 1948. Albania's hard-line brand of communism led to growing difficulties with the Soviet Union under Krushchev and came to a head in 1961 when the Soviet leaders openly denounced Albania at a party congress. The two broke diplomatic relations later that year. However, Albania continued nominal membership in the Warsaw Pact until the 1968 invasion of Czechoslovakia.
In 1945, an informal U.S. mission was sent to Albania to study the possibility of establishing relations with the NLF regime. However, the regime refused to recognize the validity of prewar treaties and increasingly harassed the U.S. mission, so it was withdrawn in November 1946. The U.S. had no contact with the Albanian government between 1946 and 1990.
During the 1960s, China emerged as Albania's staunch ally and primary source of economic and military assistance. But the close relationship faltered during the 1970s when China decided to seek a rapprochement with the U.S. After years of rocky relations, the open split came in 1978 when the Chinese government ended its aid program and terminated all trade. Enver Hoxha, leader of the Albanian Communist Party, decided to pursue an independent, isolationist course. The result was financial ruin for Albania.
By 1990, changes elsewhere in the Communist Bloc began to influence thinking in Albania. The government began to seek closer ties with the West in order to improve the economic conditions in the country. An interim basic law was approved by the People's Assembly in April 1991, and the country is now working to draft a new constitution outlining the structure of its new democratic government.
ECONOMY
The collapse of communism in Albania came later and was more chaotic than in other Eastern European countries and was marked by a mass exodus of refugees to Italy and Greece in 1991 and 1992. Attempts at reform began in earnest in early 1992 after real GDP had fallen by over 50% from its peak in 1989.
The democratically-elected government that assumed office in April 1992 launched an ambitious economic reform program to halt economic deterioration and put the country on the path toward a market economy. Key elements included price and exchange system liberalization, fiscal consolidation, monetary restraint and a firm income policy. These were complemented by a comprehensive package of structural reforms including privatization, enterprise, and financial sector reform, and creation of the legal framework for a market economy and private sector activity. Most prices were liberalized and are now at or near international levels. Most agriculture, state housing, and small industry have been privatized. Progress has continued in the privatization of transport, services, and small and medium enterprises. In 1995, the government began privatizing large state enterprises.
Results of Albania's efforts have been encouraging. Led by the agricultural sector, real GDP grew by an estimated 11% in 1993, 8% in 1994, and over 8% in 1995. Most of this growth occurred in the private sector. Annual inflation dropped from 250% in 1991 to single digits, although this may rise again due to continued deficit spending. The lek stabilized. Albania is no longer dependent on food aid. Farmers' small plots are being intensively cultivated, there are large numbers of new shops in the cities, and rural-to-urban migration is underway. The speed and vigor of private entrepreneurial response to Albania's opening and liberalizing was better than expected.
Relations with Albania's foreign commercial creditors are improving following a mid-1995 debt reduction agreement in which Albania, with World Bank assistance, wrote off its ruinous short-term commercial debt. Debt reduction should improve Albania's access to international commercial lending and increase its attractiveness to foreign investors.
The need for further reform is profound, encompassing all sectors of the economy. However, reforms are constrained by limited administrative capacity and low income levels, which make the population particularly vulnerable to employment loss, price increase, and other actions which negatively affect income. Albania is still dependent on foreign aid and expatriate remittances from abroad. Large scale investment from outside is still hampered by poor infrastructure, lack of a fully functional banking system, untested or incompletely developed investment and tax laws, and an enduring mentality that discourages bureaucratic initiative.
The government has followed an expansionary fiscal policy resulting in an unsustainable budget deficit. Unemployment remains high, particularly in the cities and the northern districts, where there has been little economic activity except smuggling.
GOVERNMENT AND POLITICAL CONDITIONS
Albania's 1976 socialist constitution was declared invalid in April 1991, and an interim constitution was adopted. The country remains without a permanent constitution; a draft constitution was rejected in a November 1994 referendum.
President and Cabinet
The Head of State in Albania is the President of the Republic. He is elected to a five-year term by the People's Assembly using secret ballot, requiring a two-thirds majority of the votes of all deputies. The next election is expected in spring of 1997.
The President has the power to:
--guarantee observation of the Constitution and all laws;
--act as Commander-in-Chief of the armed forces;
--exercise the duties of the People's Assembly when the Assembly is not
in session;
--appoint the Chairman of the Council of Ministers (prime minister).
Executive power rests with the Council of Ministers (cabinet). The Chairman of the Council (Prime Minister) is appointed by the President, ministers are nominated by the President on the basis of the Chairman's recommendation. The composition of the Council must finally be approved by the People's Assembly. The Council is responsible for carrying out both foreign and domestic policies. It directs and controls the activities of the ministries and other state organs.
The cabinet consists of sixteen ministers and nine state secretaries. The Social Democratic Union Party heads one ministry, and the Republican and Christian Democratic Parties hold state secretariats.
Legislature
The Kuvendi Popullor, or People's Assembly, is the law-making body of the Albanian government. There are 140 deputies in the Assembly, of which 115 are directly elected by an absolute majority of the voters and 25 are chosen by their parties on the basis of proportional representation. The Assembly has fifteen permanent commissions, or committees. Parliamentary elections are held every four years.
The parliament which emerged from flawed elections in May 1996 was led by the Democratic Party, which occupied 122 of the 140 seats. The Socialist Party won ten seats, but only one renegade party member occupied his. The ethnic-Greek-dominated Unity for Human Rights Party won three seats, and the right-wing Republican Party and Balli Kombetar hold the remaining five.
The Assembly has the power to:
--decide the direction of domestic and foreign policy;
--approve or amending the Constitution;
--declare war on another state;
--ratify or annul international treaties;
--elect the President of the Republic, the Supreme Court, the Attorney General
and his or her deputies;
--control the activity of state radio and television, state news agency
and other official information media.
Judicial System
The judicial system is administered by the Ministry of Justice, which supervises the organization and functioning of the courts. Reforms in 1990 re-established the Ministry of Justice (the Minister being empowered to overturn court rulings), and guaranteed defendants the right to an attorney. Further reforms were undertaken following international criticism of the unconstitutional removal of the President of the Court of Cassation (supreme criminal court) in 1995.
The court system consists of a Constitutional Court, the Court of Cassation, appeals courts, and district courts. The Constitutional Court is comprised of nine members; five elected by the People's Assembly, four appointed by the President. The Constitutional Court interprets the Constitution, determines the constitutionality of laws, and resolves disagreements between local and federal authorities.
Albanian court verdicts are rendered by a college of three judges; there is no jury trial, though the college is sometimes referred to in the Albanian press as the "jury".
Administrative Divisions
Albania is divided into 12 prefectures. Prefects are appointed by the Council of Ministers. Each prefecture comprises several districts (Rreths), of which there are 36. Each district has its own local administration, and governor. District governors are elected by the District Council, whose members are selected from party lists made public to voters before local elections, on the basis of proportional representation. City mayors are directly elected by voters, while city councils are chosen by proportional representation.
Military
Albania's defense forces consist of 72,500 persons in uniform (60,000 army; 10,000 air force; 2,500 navy); the defense expenditure for 1995 was estimated at 5,100 million lek. The paramilitary forces numbered 13,500 (including an internal security force of 5,000 and a people's militia of 3,500). There is universal male conscription under which men serve for 12 months. Military ranks were approved by the People's Assembly and re-introduced in 1992.
Albanian Embassy
U.S. address - Suite 1000, 1511 K Street N.W., Washington, DC 20005; Telephone: 202-223-4942; fax: 202-628-7342
FOREIGN RELATIONS
Albanian foreign policy has focused on maintaining good relations with its Balkan neighbors, gaining access to European security institutions, and securing close ties with the United States. The Government of Albania is very concerned with developments in the ethnic-Albanian province of Kosovo in neighboring Serbia, particularly in the post-Dayton agreement period. While maintaining a responsible and non-provocative position, the GOA has made it clear that the status and treatment of the Albanian population in Kosovo is a principal national concern. Governmental and public support for Kosovar leader Rugova and his Democratic League of Kosova (LDK) remains strong.
Bilateral relations with Greece improved dramatically since 1994. In 1996 the two countries signed a Treaty of Peace and Friendship and discussed the issues of the status of Albanian refugees in Greece and mother-tongue education for the ethnic Greek minority in southern Albania. The situation of the Greek minority in southern Albania is calm. Albanians have done a great deal to assure the minority's rights, but more could be done, particularly in the area of education.
Tirana's relations with the Former Yugoslav Republic of Macedonia (FYROM) remain friendly, despite occasional incidents involving ethnic Albanians in the FYROM. A principal point of contention is Skopje's opposition to an Albanian-language "university" in the Macedonian town of Tetovo. Tirana remains convinced that a stable FYROM is essential to stability in the Balkans and has repeatedly encouraged the Albanian minority's continued participation in the government of FYROM. The GOA has been supportive of the presence of U.S. troops in the UNPREDEP contingent stationed near the FYROM's border with Serbia.
Foreign Aid
Through FY 1996 the U.S. has committed approximately $219 million to Albania's economic and political transformation and to address humanitarian needs. This figure comprises about ten percent of all bilateral and multilateral assistance offered since 1991. Italy ranks first in bilateral assistance ($421 million) and Germany third ($117 million). The EU has given about $664 million since 1991 and pledged $175 million during 1996-1999 under the PHARE program.In FY 1996, the U.S. provided $21 million through the Support for East European Democracy (SEED) Act, down from $27 million the previous year. The $30 million Albanian-American Enterprise Fund (AAEF), launched in 1994, began making loans to local businesses. AAEF is designed to harness private sector efforts to assist in the economic transformation. U.S. assistance priorities include promotion of agricultural development and a market economy, advancement of democratic institutions, and improvements in quality of life. U.S. programs no longer include humanitarian assistance.
Historical Highlights
Long a crossroads of civilizations (archaeological finds date back to 4600 B.C.), Bulgaria was first recognized as an independent state in AD 681. Bulgarian Orthodox Christanity, which became a hallmark of national identity, was established in the 9th century. Bulgaria was ruled by the Byzantine Empire from 1018 to 1185 and the Ottoman Empire from 1396 to 1878. In 1879, Bulgaria adopted a democratic constitution and invited a German nobleman, Alexander of Battenburg, to be prince.
In the early part of the 20th century, in an effort to gain Macedonian and other territories, Bulgaria engaged in two Balkan wars and become allied with Germany during World War I. It suffered disastrous losses as a result. The interwar period was dominated by economic and political instability and by terrorism as political factions, including monarchists and communists, struggled for influence. In World War II, Bulgaria ultimately allied again with Germany but protected its Jewish population of some 50,000 from the Holocaust. When King Boris III died in 1943, political uncertainty heightened. The Fatherland Front, an umbrella coalition led by the Communist Party, was established. This coalition backed neutrality and withdrawal from occupied territories. Bulgaria tried to avoid open conflict with the Soviet Union during the war, but the U.S.S.R. invaded in 1944 and placed the Fatherland Front in control of government.
After Bulgaria's surrender to the Allies, the Communist Party purged opposition figures in the Fatherland Front, exiled young King Simeon II, and rigged elections to consolidate power. In 1946, a referendum was passed overwhelmingly, ending the monarchy and declaring Bulgaria a people's republic. In a questionable election the next year, the Fatherland Front won 70% of the vote and Communist Party leader Georgi Dimitrov became prime minister. In 1947, the Allied military left Bulgaria and the government declared the country a communist state. Forty-two years of heavy-handed totalitarian rule followed. All democratic opposition was crushed, agriculture and industry were nationalized, and Bulgaria became the closest of the Soviet Union's allies. Unlike other countries of the Warsaw Pact, however, Bulgaria did not have Soviet troops stationed on its territory.
Dimitrov died in 1949. Todor Zhivkov became communist party chief in 1956 and prime minister in 1962. Zhivkov held power until November 1989, when he was deposed by members of his own party, soon renamed the Bulgarian Socialist Party (BSP). The BSP won the first post-communist parliamentary elections in 1990 with a small majority. The BSP government formed at that time was brought down by a general strike in late 1990 and replaced by a transitional coalition government. Meanwhile, Zhelyu Zhelev, a communist-era dissident, was elected president by the Parliament in 1990 and later won Bulgaria's first direct presidential elections, in 1992. Zhelev served until early 1997. The country's first fully democratic parliamentary elections, in November 1991, ushered in another coalition government, which was led by the pro-reform Union of Democratic Forces (UDF) in partnership with the Movement for Rights and Freedoms (MRF). This coalition collapsed in late 1992, however, and was succeeded by a technocratic team, put forward by the MRF, which governed at the sufferance of the BSP for 2 years. The BSP won pre-term elections in December 1994 and remained in office until February 1997, when a populace alienated by the BSP's failed, corrupt government demanded its resignation and called for new elections.
Economy
Bulgaria's economy contracted dramatically after 1989 with the collapse of the COMECON system and the loss of the Soviet market, to which the Bulgarian economy had been closely tied. The standard of living fell by about 40%. In addition, UN sanctions against Serbia (1992-95) and Iraq took a heavy toll on the Bulgarian economy. First signs of recovery emerged when GDP grew 1.4% in 1994 for the first time since 1988, and 2.5% in 1995. Inflation, which surged in 1994 to 122%, fell to 32.9% in 1995. During 1996, however, the economy collapsed due to the BSP's go-slow, mismanaged economic reforms, its disastrous agricultural policy, and an unstable and de-capitalized banking system, which led to inflation of 311% and the collapse of the lev. When pro-reform forces come into power in spring 1997, an ambitious economic reform package, including introduction of a currency board regime, was agreed with the IMF and the World Bank, and the economy began to stabilize.
Since 1990, the bulk of Bulgarian trade has shifted from former COMECON countries primarily to the European Union, although Russian oil exports to Bulgaria make it Bulgaria's largest single trading partner. In December 1996, Bulgaria joined the World Trade Organization (WTO). Bulgaria's slow pace of cash privatization, contradictory government tax and investment policies, and bureaucratic red tape have kept foreign investment among the lowest in the region. Total direct foreign investment from 1991 through 1996 was $831 million. Germany was the largest investor.
The BSP promised to move forward on cash and mass privatization upon taking office in January 1995 but was slow to act. The first round of mass privatization finally began in January 1996 and auctions began toward the end of that year. The second and third rounds were conducted in spring 1997 under a new government. In July 1998, the UDF-led government and the IMF reached agreement on a 3-year loan worth about $800 million, which replaced the 14-month stand-by agreement that expired in June 1998. The load will be used to develop financial markets, improve social safety net programs, strengthen the tax system, reform agricultural and energy sectors and further liberalize trade.
Government and Political Conditions
Bulgaria has been a parliamentary democracy since 1990. Four parliamentary and two presidential elections have been held since the fall of the communist dictatorship in November 1989, each followed by peaceful and orderly change.
The president, elected for a 5-year term, is head of state and commander-in-chief of the armed forces. The president's main duties are to schedule elections and referenda, represent Bulgaria abroad, conclude international treaties, and head the Consultative Council for National Security. The president may return legislation to Parliament for further debate -- a kind of veto -- but the legislation can be passed again by a simple majority vote. Petar Stoyanov, the candidate of a united opposition coalition led by the Union of Democratic Forces (UDF), was nominated to run for president in the country's first primary election, in June 1996. Stoyanov was elected in November and inaugurated in January 1997.
The legislative body is the unicameral National Assembly of 240 members elected to 4-year terms. Political parties must garner a minimum of 4% of the national vote in order to enter parliament. Parliament is responsible for enactment of laws, approval of the budget, scheduling presidential elections, selection and dismissal of the prime minister and other ministers, declaration of war and deployment of troops outside of Bulgaria, and ratification of international treaties and agreements. After the collapse of a socialist government in February 1997, a caretaker cabinet appointed by the president served until pre-term parliamentary elections in April, which yielded a landslide victory for pro-reform forces led by the UDF in the United Democratic Forces coalition. Along with the UDF, there are five other parties represented in parliament.
The Council of Ministers is the principal organ of the executive branch. It is usually formed by the majority party in Parliament, if one exists, or by the largest party in Parliament along with coalition partners. Chaired by the Prime Minister, it is responsible for carrying out state policy, managing the state budget, and maintaining law and order. The Council must resign if the National Assembly passes a vote of no confidence in the Council or the Prime Minister.
Bulgaria's judicial system is independent and is managed by the Supreme Judicial Council. Its principal elements are the Supreme Court of Administration and the Supreme Court of Cassation, which oversee application of all laws by the lower courts and judge the legality of government acts. There is a separate Constitutional Court, which interprets the Constitution and rules on the constitutionality of laws and treaties.
Political Parties
Six out of the 34 political parties and coalitions that fielded candidates in the last election are represented in Parliament. The Union of Democratic Forces (UDF) recaptured Parliament in April 1997 with 123 seats out of 240. Its electoral coalition partner, the People's Union, carried 14 seats. Also in that election, the Bulgarian Socialist Party (BSP) dropped from its 1994 majority of 125 seats to 58. The Movement for Rights and Freedoms (MRF) formed the Alliance for National Salvation with several smaller parties, taking 19 seats. The two other parties are the Euroleft (comprised largely of defectors from the BSP with a social-democratic orientation), which holds 14 seats and the populist Bulgarian Business Bloc (BBB) which holds 12. The next parliamentary elections must take place no later than April 2001.
Military
Bulgaria's defense forces officially consist of 96,000 uniformed personnel (52,000 army, 21,000 air force, 3,000 navy, 17,200 centrally controlled staff, and 2,800 Ministry of Defense staff). The Bulgarian military is suffering from deep budget cuts and a top-heavy structure. Defense expenditures in 1996 were an estimated $419 million. An 18-month conscription is universal for men. The legal basis for civilian control of the military was established by the Armed Services Law enacted in 1996. Bulgaria joined NATO's Partnership for Peace in 1994 and applied for NATO membership in 1997. It is working toward NATO compatibility in communications and training, and has established a Peacekeeping Training Center. The military continues to rely on Russia for much of its equipment needs and spare parts.
Foreign Relations
Bulgaria has generally good relations with its neighbors and has proved to be a constructive force in the region under socialist and democratic governments alike. Promoting regional stability, Bulgaria hosted a Southeast European Foreign Ministers meeting in July 1996 and an OSCE conference on Black Sea cooperation in November 1995. Bulgaria also participated in the 1996 South Balkan Defense Ministerial in Albania and is active in the Southeast European Cooperative Initiative (SECI).
With their close historical, cultural, and economic ties, Bulgaria seeks a mutually beneficial relationship with Russia, on which it is largely dependent for energy supplies. Sporadic negotiations are underway among Greece, Bulgaria, and Russia for construction of a gas pipeline from Burgas on the Black Sea to Alexandropolis to transport Caspian Sea oil.
Bulgaria's EU Association Agreement came into effect in 1994, and Bulgaria formally applied for full EU membership in December 1995. In 1996, Bulgaria acceded to the Wassenaar Arrangement controlling exports of weapons and sensitive technology to countries of concern and also was admitted to the World Trade Organization. Bulgaria is a member of the Zangger Committee and the Nuclear Suppliers Group. After a period of equivocation under a socialist government, in March 1997 a UDF-led caretaker cabinet applied for full NATO membership, which the current government is pursuing as a priority.
U.S. Assistance
In 1989, the U.S. Congress passed the Support for East European Democracies Act (SEED), authorizing financial support to facilitate the development of democratic institutions, political pluralism, and free market economies in the region. The U.S. Agency for International Development (USAID) administers the SEED programs in Bulgaria under the guidance of the U.S. ambassador. Bulgaria has received more than $200 million in SEED assistance as of September 30, 1996, along with an additional $48 million in food programs and a $15-million endowment for the American University in Bulgaria. Much of USAID's assistance focuses on strengthening non-governmental organizations and other grassroots initiatives, promoting the private sector, and enhancing local government effectiveness and accountability. Emergency relief activities in 1997 totaled more than $2 million with the assistance of Project HOPE and donations of $400,000 through the International Federation of the Red Cross.
In addition, the Peace Corps, with 70 volunteers in Bulgaria as of 1997, offers assistance in English-language instruction, small business centers, and environmental protection programs. The Department of Defense provides monetary and professional assistance through several programs including the Joint Contact Team Program, Partnership for Peace, International Military Education and Training, Excess Defense Articles, Foreign Military Financing and humanitarian assistance. Bulgaria serves as coordinator for the South Balkan Development Initiative (SBDI), which is funded through the U.S. Trade and Development Agency to promote infrastructure development in Bulgaria, Albania, and The Former Yugoslav Republic of Macedonia.
PEOPLE
The majority of the 10.5 million inhabitants of the Czech Republic are ethnically and linguistically Czech (95%). Other ethnic groups include: Germans, Gypsies, Poles, and Silesians. After the division, some Slovaks remained in the Czech Republic and comprise roughly 3% of the current population. The border between the Czech Republic and Slovakia is open for former citizens of Czechoslovakia. Laws establishing religious freedom were passed shortly after the revolution of 1989 lifting oppressive regulations enacted by the former communist regime. Major denominations and their estimated percentage populations are: Roman Catholic (39%), Protestant (4%). A large percentage of the Czech population claim to be atheists (49%), and 16% describe themselves as uncertain. About 10,000 Jews continue to live there of a pre-war population of more than 360,000.
HISTORY
The Czech Republic was the western part of the Czech and Slovak Federal Republic. Formed into a common state after World War I (October 18, 1918), the Czechs, Moravians, and Slovaks remained united for more than 75 years. On January 1, 1993, the two republics split to form two separate states.
The Czechs lost their national independence to the Austro-Hungarian Empire in 1620 at the Battle of White Mountain and, for the next 300 years, were ruled by the Austrian Monarchy. With the collapse of the monarchy at the end of World War I, the independent country of Czechoslovakia was formed, encouraged by, among others, U.S. President Woodrow Wilson.
Despite cultural differences, the Slovaks shared with the Czechs similar aspirations for independence from the Hapsburg state and voluntarily united with the Czechs. The Slovaks were not at the same level of economic and technological development as the Czechs, but the freedom and opportunity found in Czechoslovakia enabled them to make strides toward overcoming these inequalities. However, the gap never was fully bridged, and the discrepancy played a continuing role throughout the 75 years of the union.
Although Czechoslovakia was the only East European country to remain a parliamentary democracy from 1918 to 1938, it was plagued with minority problems, the most important concerning the country's large German population. Constituting more than 22% of the interwar state's population and largely concentrated in the Bohemian and Moravian border regions (the Sudetenland), members of this minority supported in large part by Nazi Germany undermined the new Czechoslovak state. Internal and external pressures culminated in September 1938, when, at Munich, France, and the United Kingdom yielded to Nazi pressures and agreed to force Czechoslovakia to cede the Sudetenland to Germany.
Fulfilling Hitler's aggressive designs on all of Czechoslovakia, Germany invaded what remained of Bohemia and Moravia in March 1939, establishing a German "protectorate." By this time, Slovakia had already declared independence and had become a puppet state of the Germans.
At the close of World War II, Soviet troops overran all of Slovakia, Moravia, and much of Bohemia, including Prague. In May 1945, U.S. forces liberated the city of Plzen and most of western Bohemia. A civilian uprising against the German garrison took place in Prague in May 1945. Following Germany's surrender, some 2.9 million ethnic Germans were expelled from Czechoslovakia with Allied approval.
Reunited after the war, the Czechs and Slovaks set federal and national elections for the spring of 1946. The democratic elements, led by President Eduard Benes, hoped the Soviet Union would allow Czechoslovakia the freedom to choose its own form of government and aspired to a Czechoslovakia that would act as a bridge between East and West. The Czechoslovak communist party, which won 38% of the vote, held most of the key positions in the government and gradually managed to neutralize or silence the anti-communist forces. Although the communist-led government initially intended to participate in the Marshall Plan, it was forced by Moscow to back out. Under the cover of superficial legality, the communist party seized power in February 1948.
After extensive purges modeled on the Stalinist pattern in other East European states, the communist party tried 14 of its former leaders in November 1952 and sentenced 11 to death. For more than a decade thereafter, the Czechoslovak communist political structure was characterized by the orthodoxy of the leadership of party chief Antonin Novotny.
The 1968 Soviet Invasion
The communist leadership allowed token reforms in the early 1960s, but discontent arose within the ranks of the communist party central committee, stemming from dissatisfaction with the slow pace of the economic reforms, resistance to cultural liberalization, and the desire of the Slovaks within the leadership for greater autonomy for their republic. This discontent expressed itself with the removal of Novotny from party leadership in January 1968 and from the presidency in March. He was replaced as party leader by a Slovak, Alexander Dubcek.
After January 1968, the Dubcek leadership took practical steps toward political, social, and economic reforms. In addition, it called for politico-military changes in the Soviet-dominated Warsaw Pact and Council for Mutual Economic Assistance. The leadership affirmed its loyalty to socialism and the Warsaw Pact but also expressed the desire to improve relations with all countries of the world regardless of their social systems.
A program adopted in April 1968 set guidelines for a modern, humanistic socialist democracy that would guarantee, among other things, freedom of religion, press, assembly, speech, and travel; a program that, in Dubcek's words, would give socialism "a human face." After 20 years of little public participation, the population gradually started to take interest in the government, and Dubcek became a truly popular national figure.
The internal reforms and foreign policy statements of the Dubcek leadership created great concern among some other Warsaw Pact governments. On the night of August 20, 1968, Soviet, Hungarian, Bulgarian, East German, and Polish troops invaded and occupied Czechoslovakia. The Czechoslovak Government immediately declared that the troops had not been invited into the country and that their invasion was a violation of socialist principles, international law, and the UN Charter.
The principal Czechoslovak reformers were forcibly and secretly taken to the Soviet Union. Under obvious Soviet duress, they were compelled to sign a treaty that provided for the "temporary stationing" of an unspecified number of Soviet troops in Czechoslovakia.
Dubcek was removed as party First Secretary on April 17, 1969, and replaced by another Slovak, Gustav Husak. Later, Dubcek and many of his allies within the party were stripped of their party positions in a purge that lasted until 1971 and reduced party membership by almost one- third.
The 1970s and 1980s became known as the period of "normalization," in which the apologists for the 1968 Soviet invasion prevented, as best they could, any opposition to their conservative regime. Political, social, and economic life stagnated. The population, cowed by the "normalization," was quiet.
At the time of the communist takeover, Czechoslovakia had a balanced economy and one of the higher levels of industrialization on the continent. In 1948, however, the government began to stress heavy industry over agricultural and consumer goods and services. Many basic industries and foreign trade, as well as domestic wholesale trade, had been nationalized before the Communists took power. Nationalization of most of the retail trade was completed in 1950-51.
Heavy industry received major economic support during the 1950s, but waste and inefficient use of industrial resources resulted from central planning. Although the labor force was traditionally skilled and efficient, inadequate incentives for labor and management contributed to high labor turnover, low productivity, and poor product quality. Economic failures reached a critical stage in the 1960s, after which various reform measures were sought, with no satisfactory results.
Hope for wide-ranging economic reform came with Alexander Dubcek's rise in January 1968. Despite renewed efforts, however, Czechoslovakia could not come to grips with inflationary forces, much less begin the immense task of correcting the economy's basic problems.
The economy saw growth during the 1970s but then stagnated between 1978- 82. Attempts at revitalizing it in the 1980s with management and worker incentive programs were largely unsuccessful. The economy grew after 1982, achieving an annual average output growth of more than 3% between 1983-85. Imports from the West were curtailed, exports boosted, and hard currency debt reduced substantially. New investment was made in the electronic, chemical, and pharmaceutical sectors, which were industry leaders in Eastern Europe in the mid 1980s.
The Velvet Revolution
The roots of the 1989 civic Forum movement that came to power during the "Velvet Revolution" lie in human rights activism. On January 1, 1977, more than 250 human rights activists signed a manifesto called the Charter 77, which criticized the government for failing to implement human rights provisions of documents it had signed, including the state's own constitution; international covenants on political, civil, economic, social, and cultural rights; and the Final Act of the Conference for Security and Cooperation in Europe. Although not organized in any real sense, the signatories of Charter 77 constituted a citizens' initiative aimed at inducing the Czechoslovak Government to observe formal obligations to respect the human rights of their citizens.
In the days after November 17, 1989, Charter 77 and other groups united to become the Civic Forum, an umbrella group championing bureaucratic reform and civil liberties. Its leader was the dissident playwright Vaclav Havel. Intentionally eschewing the label "party," a word given a negative connotation during the previous regime, Civic Forum quickly gained the support of millions of Czechs, as did its Slovak counterpart, Public Against Violence.
Faced with an overwhelming popular repudiation, the Communist Party all but collapsed. Its leaders, Husak and party chief Milos Jakes, resigned in December 1989, and Havel was elected President of Czechoslovakia on December 29.
The astonishing quickness of these events was in part due to the unpopularity of the communist regime and changes in the policies of its Soviet guarantor as well as to the rapid, effective organization of these public initiatives into a viable opposition.
A coalition government, in which the communist party had a minority of ministerial positions, was formed in December 1989. The first free elections in Czechoslovakia since 1948 took place in June 1990 without incident and with more than 95% of the population voting. As anticipated, Civic Forum and Public Against Violence won landslide victories in their respective republics and gained a comfortable majority in the federal parliament. The parliament undertook substantial steps toward securing the democratic evolution of Czechoslovakia. It successfully moved toward fair local elections in November 1990, ensuring fundamental change on the county and town level.
Civic Forum found, however, that although it had successfully completed its primary objective--the overthrow of the communist regime--it was ineffectual as a governing party. The demise of Civic Forum was viewed by most as necessary and inevitable.
By the end of 1990, unofficial parliamentary "clubs" had evolved with distinct political agendas. These solidified into the parties that make up the Czech political landscape. Most influential is the Civic Democratic Party, headed by Prime Minister and former Federal Minister of Finance Vaclav Klaus. Other notable parties that came into being after the split were the Civic Movement and Civic Democratic Alliance.
By 1992, Slovak calls for greater autonomy effectively blocked the daily functioning of the federal government. In the election of June 1992, Klaus's Civic Democratic Party won handily in the Czech lands on a platform of economic reform. Vladimir Meciar's Movement for a Democratic Slovakia emerged as the leading party in Slovakia, basing its appeal on fairness to Slovak demands for autonomy. Federalists, like Havel, were unable to contain the trend toward the split. In July 1992, President Havel resigned. In the latter half of 1992, Klaus and Meciar hammered out an agreement that the two republics would go their separate ways by the end of the year.
Members of the federal parliament, divided along national lines, barely cooperated enough to pass the law officially separating the two nations. The law was passed on December 27, 1992. On January 1, 1993, the Czech Republic and the Republic of Slovakia were simultaneously and peacefully founded.
Relationships between the two states, despite occasional disputes about the division of federal property and governing of the border have been as peaceful as Prime Ministers Klaus and Meciar promised. Both states attained immediate recognition from the U.S. and their European neighbors.
POLITICAL CONDITIONS AND GOVERNMENT
The Czech political scene supports a broad spectrum of parties ranging from the semi-reformed communist party on the far left to the nationalistic Republican Party on the extreme right. Currently, the ruling coalition comprises the Civic Democratic Party (ODS), the Civic Democratic Alliance (ODA), the Christian Democratic Party (KDU-CSL), and the splinter Christian Democratic Party (KDS). It is generally considered right of center. The ruling coalition includes several prominent economists and derives support mainly from the free market reforms they advocate. As Prime Minister, Klaus represents the coalition and wields considerable power. These powers include the right to set the agenda for most foreign and domestic policy, mobilize the parliamentary majority, override a presidential veto, and choose governmental ministers.
Vaclav Havel, now President of the Czech Republic, is not affiliated with any party but remains one of the country's most popular politicians. As formal head of state, he is granted specific powers such as the right to nominate Constitutional Court judges, dissolve parliament under certain conditions, and enact a veto on legislation.
With the split of the former Czechoslovakia, the powers and responsibilities of the now defunct federal parliament were transferred to the Czech National Council, which renamed itself the Chamber of Deputies. It has become the highest legislative body. Constitutionally, it is bicameral, with the Chamber of Deputies and the Senate.
The Senate has not yet been elected; elections are slated for later in 1994. Chamber delegates are elected from seven districts and the capital, Prague, for four-year terms, on the basis of proportional representation.
The country's highest court of appeals is the Supreme Court, elected by and responsible to the Chamber of Deputies. The Constitutional Court, which rules on constitutional issues, is appointed by the president, and its members serve 10-year terms.
National Security Issues
A major overhaul of the Czechoslovak defense forces began in 1990 and continues in the Czech Republic. The military has assumed a more national-defense orientation. The armed forces that numbered up to 200,000 in 1989 will be cut down to 65,000 by 1995. Other reforms include:
-- Cutting the Czechoslovak Army from 48,000 to 23,000 members. It is now organized into corps with subordinate brigades.
-- Cutting the Czechoslovak Air Force from 55,000 to 27,000. It is now organized into air defense and tactical air corps, each with two air divisions.
-- Dropping the compulsory military training requirement for those more than 18 from two years to one.
ECONOMY
Of the emerging democracies in Central and Eastern Europe the Czech Republic has one of the most developed industrialized economies. Its strong industrial tradition dates to the 19th century, when Bohemia and Moravia were the economic heartland of the Austro-Hungarian Empire. Today, this heritage is both an asset and a liability. The Czech Republic has a well educated population and a well developed infrastructure, but its industrial plants and much of its industrial equipment tend to be obsolete.
According to the Stalinist development policy of planned interdependence, all the economies of the socialist countries were linked tightly with that of the Soviet Union. With the disintegration of the communist economic alliance in 1991, Czech manufacturers lost their traditional markets among former communist countries to the East, some of whom still owe the former Czechoslovakia sizable debts.
The Czech Republic lacks sufficient energy resources as well as many other raw materials. Its major source of energy is highly polluting low-grade brown coal, which is not considered a viable long-term option. Nuclear energy is currently considered the country's most plausible alternative. The Czechs are almost entirely dependent on a Russian pipeline for petroleum and natural gas. For this reason, they have recently signed an agreement to construct an oil pipeline from Germany by 1994.
The principal industries are heavy and general machine-building, iron and steel production, metalworking, chemicals, electronics, transportation equipment, textiles, glass, brewing, china, ceramics and pharmaceuticals. Its main agricultural products are sugar beets, fodder roots, potatoes, wheat, and hops.
The "Velvet Revolution" in 1989 offered a chance for profound and sustained economic reform. Signs of economic resurgence have begun to appear in the wake of the shock therapy that the International Monetary Fund (IMF) labeled the "big bang" of January 1991. Since then, astute economic management has led to the liberalization of 95% of all price controls, annual inflation in the 10%-15% range, modest budgetary deficits of 2%-4% of GDP, low unemployment, a positive balance-of- payments position, a stable exchange rate, foreign reserves at a post- World War II high (about $5 billion), a shift of exports from former communist economic bloc markets to Western Europe, and a manageable foreign debt.
Particularly impressive have been the Republic's strict fiscal policies. Following a series of currency devaluations ending in January 1991, the crown has remained stable in relation to the U.S. dollar. The black market exchange rate, which in the past deprived the government of valuable western currency, has effectively been eliminated. The Czech crown, now partially convertible, should become fully convertible in 1995 or 1996.
In addition, the government has revamped the legal and administrative structure governing investment in order to stimulate the economy and attract foreign partners. Shifting emphasis from the East to the West has necessitated restructuring existing facilities in banking and telecommunications as well as adjusting commercial laws and practices to fit Western standards. The republic has made progress toward creating a stable investment climate.
This success enabled the Czech Republic to become the first post- communist country to receive an investment grade credit rating by international credit institutions. For this reason, the country attracted $3 billion in foreign investment during the period of 1991 to 1993, with the U.S. holding 30% of the foreign investment, in second place just after Germany. The Czech Government welcomes U.S. investment, in particular, as a counter-balance to the strong economic influence of Western Europe, specifically that of their powerful neighbor Germany. Since the Velvet Revolution, the number of U.S. companies represented in Prague (where nearly all the foreign investors are located) has increased from a handful to more than 500.
The government has an ambitious plan to privatize state industries in all sectors of the economy. It hopes to create a private sector rapidly using the following means: restitution of property confiscated under the former communist regime, sale of large and small state-owned enterprises through a voucher system, direct sales and rights to ownership for foreign investors, and encouraging entrepreneurship.
The republic boasts a flourishing consumer production sector and is making marked progress toward privatizing state-owned heavy industries through the voucher privatization system. Under the system, every citizen was given the opportunity to buy, for a moderate price, a book of vouchers that represents potential shares in any state-owned company. The voucher holders could, then, invest their vouchers, infusing the chosen company with valuable capital. State ownership of businesses, estimated to be about 97% under communism, will be reduced to about 30% by the end of 1994. When the voucher privatization process is complete, Czechs will own shares of each of the Czech companies, making them one of the highest per capita share owners in the world. Privatization through restitution of real estate to the former owners was largely completed in 1992. In the words of Prime Minister Klaus, the republic has "crossed the Rubicon" in terms of privatization.
The republic's economic transformation is far from complete--the government still faces serious challenges in transforming the housing sector, privatizing the health care system, solving serious environmental problems, and helping newly privatized state-owned companies adjust to the rigors of free-market competition.
Full membership in the European Union (EU), which the government hopes to achieve by the year 2000, is probably the country's highest foreign policy goal. It became an associate member of the EU in 1993, but it may take a decade or more for the economy to reach Western European standards. As of 1993, wage levels, averaging $200 a month, were 10%- 20% of those in the neighboring Germany and Austria. Productivity also is substantially lower due to chronic underinvestment.
The division of Czechoslovakia has not had an appreciable effect on the Czech economy. An agreement was concluded to divide all federal property of the former Czechoslovak state according to a 2:1 ratio in favor of the Czech Republic. Firm monetary and fiscal policies are likely to be maintained, meeting the objective of a balanced budget. Real GDP is likely to remain stable, with unemployment increasing to about 5% and inflation to the 20% range.
FOREIGN RELATIONS
The foreign policy of Czechoslovakia had, until 1989, followed that of the Soviet Union. Since independence, the Czechs have made integration into Western institutions their chief foreign policy objective.
Fundamental to this objective is Czech membership in the European Union. The government has met most EU demands. Although there have been disagreements over some economic issues, such as agricultural tariffs, the EU has signed various association agreements with the Czech Government designed to facilitate membership.
The Czech Republic is a member of the United Nations and participates in its specialized agencies. It is a member of the General Agreement on Trade and Tariffs (GATT). It maintains diplomatic relations with more than 85 countries, of which 63 have permanent representation in Prague.
PEOPLE
Greece was inhabited as early as the Paleolithic period and by 3000 BC had become home, in the Cycladic Islands, to a culture whose art remains among the most evocative in world history. Early in the second millennium BC, the island of Crete nurtured the sophisticated maritime empire of the Minoans, whose trade reached from Egypt to Sicily. The Minoans were challenged and eventually supplanted by the Mycenaeans of the Greek mainland, who spoke a dialect of ancient Greek. Initially, Greece's mosaic of small city-states were ethnically similar. During the Roman, Byzantine, and Ottoman Empires (1st-19th centuries), Greece's ethnic composition became more diverse. Since independence in 1830 and an exchange of populations with Turkey in 1923, Greece has forged a national state which claims roots reaching back 3,000 years.
The Greek language dates back at least 3,500 years, and modern Greek preserves many elements of its classical predecessor. In the 19th century, after Greece's War of Independence, an effort was made to rid the language of Turkish and Arabic words and expressions. The resulting version was considered to be closer to the classical Greek language of Homer and was called Katharevousa. However, Katharevousa was never adopted by most Greeks in daily speech. The commonly spoken language, called Demotiki, became the official language in 1976.
Greek education is free and compulsory for children between the ages of 5 and 15. English language study is compulsory from 5th grade through high school. University education, including books, is also free, contingent upon the student's ability to meet stiff entrance requirements. Recent statistics indicate progressively poorer results in the annual entrance examinations. Low salaries and status of teachers; lack of books, supplies, labs, and computers; frequent strikes; and continuing reliance on rote memorization methods are all matters of concern for Greek educators.
A high percentage of the student population seeks higher education. About 100,000 students are registered at Greek universities, and 15% of the population currently holds a university degree. Entrance to a university is determined by state-administered exams, the candidate's grade-point average from high school, and his/her priority choices of major. About one in four candidates gain admission to Greek universities.
Since Greek law does not permit the operation of private universities in Greece, a large and growing number of students are pursuing higher education abroad. The Greek Government decides through an evaluation procedure whether to recognize degrees from specific foreign universities as qualification for public sector hiring. Other students attend private, post-secondary educational institutions in Greece that are not recognized by the Greek Government.
The number of Greek students studying at European institutions is increasing along with EU support for educational exchange. In addition, nearly 5,000 Greeks are studying in the United States, about half of whom are in graduate school. Greek per capita student representation in the U.S. is the highest of any European country.
Orthodox Christianity is the dominant religion in Greece. During the centuries of Ottoman domination, the Greek Orthodox Church preserved Greek language, values, and national identity and was an important rallying point in the struggle for independence. There is a Muslim minority concentrated in Thrace. Other religious communities in Greece include Catholics, Jews, Old Calendar Orthodox, Jehovah's Witnesses, Mormons, and Protestants.
HISTORY
The Greek War of Independence from the Ottoman Empire began in 1821 and concluded with the winning of independence in 1830. With the support of England, France, and Russia, a monarchy was established. A Bavarian prince, Otto, was named king in 1833. He was deposed 30 years later, and the Great Powers chose a prince of the Danish House of Glucksberg as his successor. He became George I, King of the Hellenes.
The Megali Idea (Great Idea), a vision of uniting all Greeks of the declining Ottoman Empire within the newly independent Greek State, exerted strong influence on the early Greek state. At independence, Greece had an area of 47,515 square kilometers (18,346 square mi.), and its northern boundary extended from the Gulf of Volos to the Gulf of Arta. The Ionian Islands were added in 1864; Thessaly and part of Epirus in 1881; Macedonia, Crete, Epirus, and the Aegean Islands in 1913; Western Thrace in 1918; and the Dodecanese Islands in 1947.
Greece entered World War I in 1917 on the side of the Allies. After the war, Greece took part in the Allied occupation of Turkey, where many Greeks still lived. In 1921, the Greek army attacked from its base in Smyrna (now Izmir), and marched toward Ankara. The Greeks were defeated by Turkish forces led by Mustafa Kemal (later Ataturk) and were forced to withdraw in the summer of 1922. Smyrna was sacked by the Turks, and more than 1.3 million Greek refugees from Turkey poured into Greece, creating enormous challenges for the Greek economy and society and effectively ending the Megali Idea.
Greek politics, particularly between the two world wars, involved a struggle for power between monarchists and republicans. Greece was proclaimed a republic in 1924, but George II returned to the throne in 1935, and a plebiscite in 1946 upheld the monarchy. It was finally abolished, however, by referendum on December 8, 1974, when more than two-thirds of the voters supported the establishment of a republic.
Greece's entry into World War II was precipitated by the Italian invasion on October 28, 1940. That date is celebrated in Greece by the one-word reply--ochi ("no")--symbolizing the Greek Prime Minister's rejection of the surrender demand made by Mussolini. Despite Italian superiority in numbers and equipment, determined Greek defenders drove the invaders back into Albania. Hitler was forced to divert German troops to protect his southern flank and attacked Greece in early April 1941. By the end of May, the Germans had overrun most of the country, although Greek resistance was never entirely suppressed. German forces withdrew in October 1944, and the government in exile returned to Athens.
After the German withdrawal, the principal Greek resistance movement, which was controlled by the communists, refused to disarm. A banned demonstration by resistance forces in Athens in December 1944 ended in violence and was followed by an intense, house-to-house battle with Greek Government and British forces. After 3 weeks, the communists were defeated and an unstable coalition government was formed. Continuing tensions led to the dissolution of that government and the outbreak of full-fledged civil war in 1946. First the United Kingdom and later the U.S. gave extensive military and economic aid to the Greek Government. Communist successes in 1947-48 enabled them to move freely over much of mainland Greece, but with extensive reorganization and American material support, the Greek National Army was slowly able to regain control over most of the countryside. Yugoslavia closed its borders to the insurgent forces in 1949, after Marshal Tito of Yugoslavia broke with Stalin and the Soviet Union.
In August 1949, the National Army under Marshal Alexander Papagos launched a final offensive that forced the remaining insurgents to surrender or flee across the northern border into the territory of Greece's communist neighbors. The insurgency resulted in 100,000 killed and caused catastrophic economic disruption. In addition, at least 25,000 Greeks were either voluntarily or forcibly evacuated to Eastern Bloc countries, while 700,000 became displaced persons inside the country.
After the 1944-49 Greek civil war, Greece sought to join the Western democracies and became a member of NATO in 1952. From 1952 to late 1963, Greece was governed by conservative parties -- the Greek Rally of Marshal Alexandros Papagos and its successor, the National Radical Union (ERE) of Constantine Karamanlis. In 1963, the Center Union Party of George Papandreou was elected and governed until July 1965. It was followed by a succession of unstable coalition governments.
On April 21, 1967, just before scheduled elections, a group of colonels led by Col. George Papadopoulos seized power in a coup d'etat. Civil liberties were suppressed, special military courts were established, and political parties were dissolved. Several thousand political opponents were imprisoned or exiled to remote Greek islands. In November 1973, following an uprising of students at the Athens Polytechnic University, Gen. Dimitrios Ioannides replaced Papadopoulos and tried to continue the dictatorship.
Gen. Ioannides' attempt in July 1974 to overthrow Archbishop Makarios, the President of Cyprus, brought Greece to the brink of war with Turkey, which invaded Cyprus and occupied part of the island. Senior Greek military officers then withdrew their support from the junta, which toppled. Leading citizens persuaded Karamanlis to return from exile in France to establish a government of national unity until elections could be held. Karamanlis' newly organized party, New Democracy (ND), won elections held in November 1974, and he became Prime Minister.
Following the 1974 referendum which resulted in the rejection of the monarchy, a new constitution was approved by parliament on June 19, 1975, and parliament elected Constantine Tsatsos as President of the republic. In the parliamentary elections of 1977, New Democracy again won a majority of seats. In May 1980, Prime Minister Karamanlis was elected to succeed Tsatsos as president. George Rallis was then chosen party leader and succeeded Karamanlis as Prime Minister.
On January 1, 1981, Greece became the 10th member of the European Community (now the European Union). In parliamentary elections held on October 18, 1981, Greece elected its first socialist government when the Panhellenic Socialist Movement (PASOK), led by Andreas Papandreou, won 172 of 300 seats. On March 29, 1985, after Prime Minister Papandreou declined to support President Karamanlis for a second term, Supreme Court Justice Christos Sartzetakis was elected president by the Greek parliament.
Greece had two rounds of parliamentary elections in 1989; both produced weak coalition governments with limited mandates. Party leaders withdrew their support in February 1990, and elections were held on April 8. In the April 1990 election, ND won 150 seats and subsequently gained 2 others. After Mitsotakis fired his first Foreign Minister--Andonis Samaras--in 1992, Samaras formed his own political party, Political Spring. A split between Mitsotakis and Samaras led to the collapse of the ND government and new elections in September 1993.
On January 17, 1996, following a protracted illness, Prime Minister Papandreou resigned and was replaced as Prime Minister by former Minister of Industry Constantine Simitis. In elections held in September 1996, Constantine Simitis was elected Prime Minister. PASOK won 162 seats, New Democracy 108.
GOVERNMENT
The 1975 constitution, which describes Greece as a "presidential parliamentary republic," includes extensive specific guarantees of civil liberties and vests the powers of the head of state in a president elected by parliament and advised by the Council of the Republic. The Greek governmental structure is similar to that found in many Western democracies and has been described as a compromise between the French and German models. The prime minister and cabinet play the central role in the political process, while the president performs some governmental functions in addition to ceremonial duties.
The president is elected by parliament to a 5-year term and can be reelected once. The president has the power to declare war and to conclude agreements of peace, alliance, and participation in international organizations; upon the request of the government a three-fifths parliamentary majority is required to ratify such actions, agreements, or treaties. The president can also exercise certain emergency powers, which must be countersigned by the appropriate cabinet minister. Changes to the constitution in 1986 limited the president's political powers. As a result, the president may not dissolve parliament, dismiss the government, suspend certain articles of the constitution, or declare a state of siege. To call a referendum, he must obtain approval from parliament.
Parliamentary deputies are elected by secret ballot for a maximum of 4 years, but elections can be called earlier. Greece uses a complex reinforced proportional representation electoral system which discourages splinter parties and makes a parliamentary majority possible even if the leading party falls short of a majority of the popular vote. A party must receive 3% of the total national vote to qualify for parliamentary seats.
Greece is divided into 51 prefectures (nomarchies), each headed by a prefect (nomarch), who is elected by direct popular vote. There are also 13 regional administrative districts (peripheries), each including a number of prefectures and headed by a regional governor (periferiarch), appointed by the Minister of the Interior. In northern Greece and in greater Athens, three areas have an additional administrative position between the nomarch and periferiarch. This official, known as the president of the prefectural local authorities or "super nomarch," is elected by direct popular vote. Although municipalities and villages have elected officials, they do not have an adequate independent tax base and must depend on the central government for a large part of their financial needs. Consequently they are subject to numerous central government controls.
The Government and Education, Religion, and the Media
Education. Under the Greek constitution, education is the responsibility of the state. Most Greeks attend public primary and secondary schools. There are a few private schools, which must meet the standard curriculum of and be supervised by the Ministry of Education. The Ministry of Education oversees and directs every aspect of the public education process at all levels, including hiring all teachers and professors and producing all required textbooks.
Religion. The Greek Orthodox Church is under the protection of the state, which pays the clergy's salaries, and Orthodox Christianity is the "prevailing" religion of Greece according to the constitution. The Greek Orthodox Church is self-governing but under the spiritual guidance of the Ecumenical Patriarch in Istanbul.
The Muslim minority, concentrated in Thrace, was given legal status by provisions of the Treaty of Lausanne in 1923 and is Greece's only officially recognized minority.
Media.
The Greek media, collectively, is a very influential institution--usually aggressive, sensationalist, and frequently irresponsible with regard to content. Objectivity as known to the U.S. media on the whole does not exist in the Greek media. Most of the media are owned by businessmen with extensive commercial interests in other sectors of the economy. They use their newspapers, magazines, and radio and TV channels to promote their commercial enterprises as well as to seek political influence.
In 1994, the Ministry of Press and Information was established to deal with media and communication issues. ERT S.A.--a public corporation supervised by the Minister of Press--operates three national television channels and five national radio channels. The Minister of Press also serves as the primary government spokesman.
The Secretary General of Press and Information prepares the Athens News Agency (ANA) Bulletin, which is used, with AP and Reuters, as a primary source of information by the Greek press. The Ministry of Press and Information also issues the Macedonian News Agency (MPE) Bulletin, which is distributed throughout the Balkan region. For international news, CNN is a particular influence in the Greek market; the major TV channels often use it as a source. State and private TV stations also use "Eurovision" and "Visnews" as sources. While few papers and stations have overseas correspondents, those few correspondents abroad can be very influential.
In 1988, a new law provided for the establishment of private radio stations and, as of 1989, private TV stations. According to the law, supervision of radio and television is exercised by the Council for Radio and Television. In practice, however, official licensing has not been implemented. Because of this, there has been a proliferation of private radio and TV stations, as well as European satellite channels, including Euronews; more than 1,000 radio stations are currently operating in Greece. The Greek Government is working on a proposal to reallocate TV frequencies and issue licenses.
ECONOMY
The Greek economy is slowly coming out of a slump caused by a drop in investment and the implementation of stabilization policies in recent years. Greece remains a net importer of industrial and capital goods, foodstuffs, and petroleum. Leading exports are manufactured goods, food and beverages, petroleum products, cement, chemicals, and pharmaceuticals.
Recent Economic History
The development of the modern Greek economy began in the late 19th and early 20th centuries with the adoption of social and industrial legislation and protective tariffs and the creation of the first industrial enterprises. Industry at the turn of the century consisted primarily of food processing, shipbuilding, and the manufacture of textiles and simple consumer products.
Greece achieved high rates of growth in the late 1960s and early 1970s due to large foreign investments. In the mid-1970s, Greece suffered declines in its GDP growth rate, ratio of investment to GDP, and productivity, and real labor costs and oil prices rose. In 1981, protective barriers were removed when Greece joined the European Community. The government pursued expansionary policies, which fueled inflation and caused balance-of-payment difficulties. Growing public sector deficits were financed by borrowing. In October 1985, supported by a 1.7-billion European Currency Unit (ECU) loan from the European Union (EU), the government implemented a 2-year "stabilization" program with limited success. Public sector inefficiency and excessive spending caused government borrowing to increase; by the end of 1992, general government debt exceeded 100% of GDP.
Greece continued to rely on foreign borrowing to finance its deficits. Public sector external debt was $26.9 billion at the end of 1993. The general government debt was $129 billion at the end of 1995, or 120% of GDP. Greece's external debt was $32.7 billion at the end of 1994.
Greece, as a member of the EU, is currently striving to reduce its budget deficit and inflation rate in order to meet the prerequisites for the European monetary union. Although growth remained above the convergence program guidelines for 1994-95, high budget deficits and deficient infrastructure continue to dampen the economy's long-term potential growth rate.
In May 1994, the Bank of Greece successfully managed a currency crisis triggered by the lifting of currency restrictions on short-term capital movements. The Bank contained speculative attacks on the drachma by tightening its monetary policy and raising interest rates dramatically: For a few days, interest rates pushed as high as 180%. In less than 2 months, with speculation on the drachma no longer a threat, interest rates returned to normal levels. A similar wave of speculation was beaten back in fall 1997, following the Asian financial crisis.
One of the successes of recent Greek economic policy has been the reduction of inflation rates. For more than 20 years, inflation hovered in the double digits, but a combination of fiscal consolidation, wage restraint, and strong drachma policies resulted in lowered inflation. Inflation was close to 4.3% in February 1998.
High interest rates are still a significant problem, despite recent cuts in both treasury bill and bank rates for savings and loans. The government's strong drachma policy and Public Sector Borrowing Requirement (PSBR) make the lowering of interest rates difficult, but progress was made in 1997.
Principal Sectors
Services, including tourism, make up the largest and fastest-growing sector of the Greek economy, accounting for about 66.5% of GDP in 1997.
Tourism is a major source of foreign exchange earnings. Although it is one of the country's most important industries, it has been slow to expand and suffers from poor infrastructure. With more than 10 million tourists visiting Greece in 1996, the tourist industry faced declining revenues, partly due to the strong drachma. Revenue from tourism exceeded $3.7 billion in 1996 and increased somewhat in 1997 as Greek tourism benefited from problems in neighboring countries and an economic recovery in the European Union.
The manufacturing sector accounts for about 14% of GDP. The food industry is one of the most profitable and fastest-growing areas of manufacturing with significant export potential. High-technology equipment production, especially for telecommunications, is also a fast-growing sector. Other important areas include textiles, building materials, machinery, transport equipment, and electrical appliances.
Greece is traditionally a seafaring nation and has built a successful shipping industry based on its geographic location and the entrepreneurial ability of its ship owners. The Greek-owned fleet (all flags) totaled 3,204 ships (128 million DWT) in 1997.
Construction activity (about 7.5% of GDP) is expected to increase due to infrastructure projects partially financed by European Union structural funds. Through 1999, about $20 billion will go to projects to modernize and develop Greece's transportation network. The centerpiece of this effort will be the construction of a new international airport near Athens. In addition, the Athens subway system is being greatly expanded, and construction or expansion of roads, railway lines, and bridges is either underway or planned.
EU Membership
Greece must realign its economy as part of an extended transition to full EU membership that began in 1981. Greek businesses are adjusting to competition from EU firms and the government has had to liberalize its economic and commercial regulations and practices. However, Greece has been granted waivers from certain aspects of the EU's 1992 single market program.
Historically, Greece has been a net beneficiary of the EU budget. Net payments to Greece increased to $5.1 billion in 1996, representing 5% of GDP. Net inflows were estimated at about $5 billion in 1997, or 4% of GDP. These funds contribute significantly to Greece's current accounts balance and reduce the state budget deficit.
Greece is receiving additional substantial support from the EU through the Delors II package. In July 1994, the Greek Government and the EU agreed on a final plan which provides Greece 16.6 billion ecu ($20 billion) for the period 1994-98 of which 14 billion ecu is from the Community Support Framework and 2.6 billion ecu is from the Cohesion Fund. This total will finance major public works and economic development projects, upgrade competitiveness and human resources, improve living conditions, and address disparities between poorer and more developed regions of the country.
FOREIGN RELATIONS
Prominent issues in Greek foreign policy include a dispute over the name of The Former Yugoslav Republic of Macedonia (F.Y.R.O.M.), the enduring Cyprus problem, Greek-Turkish differences over the Aegean, and Greek-American relations.
The Former Yugoslav Republic of Macedonia (F.Y.R.O.M.)
Greek refusal to recognize F.Y.R.O.M. under the name "Republic of Macedonia" has been an important issue in Greek politics since 1992. Greece was adamantly opposed to the use of the name "Macedonia" by the government in Skopje, claiming that the name is intrinsically Greek and should not be used by a foreign country. Furthermore, Greece believes that an independent "Republic of Macedonia" bordering the Greek region of Macedonia would fuel irredentist tensions in F.Y.R.O.M. The dispute led to a Greek trade embargo against F.Y.R.O.M. in February 1994. Mediation efforts by the UN, U.S., and EU brokered an interim solution to some of these differences in September 1995, leading to the lifting of the Greek embargo. Since the signing of these interim accords, the two governments have concluded agreements designed to facilitate the movement of people and goods across their common border and improve bilateral relations. Talks on remaining issues are still being held under UN auspices in New York.
Albania
Greece restored diplomatic relations with Albania in 1971, but the Greek Government did not formally lift the state of war, declared during World War II, until 1987. After the fall of the Albanian communist regime in 1991, relations between Athens and Tirana became increasingly strained because of widespread allegations of mistreatment by Albanian authorities of the Greek ethnic minority in southern Albania. A wave of Albanian illegal economic migrants to Greece exacerbated tensions. The crisis in Greek-Albanian relations reached its peak in the summer of 1994, when an Albanian court sentenced five members (a sixth member was added later) of the ethnic Greek organization "Omonia" to prison terms on charges of undermining the Albanian state. Greece responded by freezing all EU aid to Albania and deporting tens of thousands of illegal Albanians. In December 1994, however, Greece began to permit limited EU aid to Albania, while Albania released two of the Omonia defendants and reduced the sentences of the remaining four. Today, relations between the two countries are good, and, at the Albanian Government's request, about 250 Greek military personnel are stationed in Albania to assist with training and restructuring the Albanian armed forces.
Greece-Turkey Relations
Greece and Turkey enjoyed good relations in the 1930s, but relations began to deteriorate in the mid-1950s, sparked by the Cyprus independence struggle and Turkish violence directed against the Greek minority in Istanbul. The July 1974 coup against Cyprus President Makarios -- inspired by the Greek military junta in Athens -- and the subsequent Turkish military intervention in Cyprus helped bring about the fall of the Greek military dictatorship. It also led to the de facto division of Cyprus. Since then, Greece has strongly supported Greek-Cypriot efforts, calling for the removal of Turkish troops and the restoration of a unified state. The Republic of Cyprus has received strong support from Greece in international forums. Greece has a military contingent on Cyprus, and Greek officers fill some key positions in the Greek Cypriot National Guard, as permitted by the constitution of Cyprus.
Other issues dividing Greece and Turkey involve the delimitation of the continental shelf in the Aegean Sea, territorial waters and airspace, and the condition of the Greek minority in Turkey and the Muslim minority in Greece. Greek and Turkish officials held meetings in the 1970s to discuss differences on Aegean questions, but Greece discontinued these discussions in the fall of 1981. In 1983, Greece and Turkey held talks on trade and tourism, but these were suspended by Greece when Turkey recognized the Turkish-Cypriot declaration of an independent state in northern Cyprus in November 1983.
After a dangerous dispute in the Aegean in March 1987 concerning oil drilling rights, the Prime Ministers of Greece and Turkey exchanged messages exploring the possibility of resolving the dispute over the continental shelf. Greece wanted the dispute to be decided by the International Court of Justice. Turkey preferred bilateral political discussions. In early 1988, the Turkish and Greek Prime Ministers met at Davos, Switzerland, and later in Brussels. They agreed on various measures to reduce bilateral tensions and to encourage cooperation. New tensions over the Aegean surfaced in November 1994, precipitated by Greece's ratification of the Law of the Sea Treaty and its ensuing statement that it reserved the right to declare a 12-mile territorial sea boundary around its Aegean islands as permitted by the treaty. Turkey stated that it would consider any such action a cause for war. New technical-level bilateral discussions began in 1994 but quickly fizzled.
In January 1996, Greece and Turkey came close to an armed confrontation over the question of which country had sovereignty over an islet in the Aegean. In July 1997, on the sidelines of the NATO summit in Madrid, Greek and Turkish leaders reached agreement on six principles to govern their bilateral relations. Within a few months, however, the two countries were again at odds over Aegean airspace and sovereignty issues. Tensions remain high. However, the two countries are discussing, under the auspices of the NATO Secretary General, various confidence-building measures to reduce the risk of military accidents or conflict in the Aegean.
The Middle East
Greece has a special interest in the Middle East because of its geographic position and its economic and historic ties to the area. Greece cooperated with allied forces during the 1990-91 Persian Gulf war. Since 1994, Greece has signed defense cooperation agreements with Israel and Egypt. In recent years, Greek leaders have made numerous trips to the region in order to strengthen bilateral ties and encourage the Middle East Peace Process. In July and December 1997, Greece hosted meetings of Israeli and Palestinian politicians to contribute to the peace process. Greece plans to host another such meeting in July 1998.
HISTORY
Since its conversion to Western Christianity before AD 1000, Hungary has been an integral part of Europe. Although Hungary was a monarchy for nearly 1,000 years, its constitutional system preceded by several centuries the establishment of Western-style governments in other European countries.
Sharing defeat of the Austro-Hungarian Dual Monarchy (1867- 1918) at the end of World War I, Hungary lost two-thirds of its territory and nearly as much of its population. It experienced a brief but bloody communist dictatorship and counter-revolution in 1919, followed by a 25-year regency under Admiral Miklos Horthy. Although Hungary fought in most of World War II as a German ally, following an unsuccessful attempt to switch sides on October 15, 1944, it fell under German military occupation until the end of the war. In January 1945, a provisional government concluded an armistice with the Soviet Union. It also established the Allied Control Commission, under which Soviet, American, and British representatives held complete sovereignty over the country. The Commission's chairman was a member of Stalin's inner circle and exercised absolute control.
Communist Takeover
The provisional government, dominated by the Hungarian Communist Party (HCP), was replaced in November 1945 after elections which gave majority control of a coalition government to the Independent Smallholders' Party. The government instituted a radical land reform and gradually nationalized mines, electric plants, four heavy industries, and some large banks.
The communists ultimately undermined the coalition regime by discrediting leaders of rival parties and by terror, blackmail, and framed trials. In elections tainted by fraud in 1947, the leftist bloc gained control of the government. Post-war cooperation between the U.S.S.R. and the West collapsed, and the Cold War began. With Soviet support, Moscow-trained Matyas Rakosi began to establish a communist dictatorship. By February 1949, all opposition parties had been forced to merge with the HCP to form the Hungarian Workers' Party. In 1949, the communists held a single-list election and adopted a Soviet-style constitution which created the Hungarian People's Republic. Rakosi became Prime Minister in 1952.
Between 1948 and 1953, the Hungarian economy was reorganized according to the Soviet model. In 1949, the country joined the Council for Mutual Economic Assistance (CEMA)--a Soviet- bloc economic organization. All private industrial firms with more than 10 employees were nationalized. Freedom of the press, religion, and assembly were strictly curtailed; the head of the Roman Catholic Church, Cardinal Jozsef Mindszenty, was sentenced to life imprisonment.
Forced industrialization and land collectivization soon led to serious economic difficulties, which reached crisis proportions by mid-1953, the year Stalin died. The new Soviet leaders blamed Rakosi for Hungary's economic situation and began a more flexible policy in Eastern Europe called the "New Course." Imre Nagy replaced Rakosi as prime minister in 1953 and repudiated much of Rakosi's economic program of forced collectivization and heavy industry. He also ended political purges and freed thousands of political prisoners.
However, the economic situation continued to deteriorate, and Rakosi succeeded in disrupting the reforms and in forcing Nagy from power in 1955 for "right-wing revisionism." Hungary joined the Soviet-led Warsaw Pact Treaty Organization the same year. Rakosi's attempt to restore Stalinist orthodoxy then foundered as increasing opposition developed within the party and among students and other organizations after Khrushchev's 1956 denunciation of Stalin. Fearing revolution, Moscow replaced Rakosi with his deputy, Erno Gero, in order to contain growing ideological and political ferment.
1956 Revolution
Pressure for change reached a climax on October 23, 1956, when security forces fired on Budapest students marching in support of Poland's confrontation with the Soviet Union. The ensuing battle quickly grew into a massive popular uprising. Gero called on Soviet troops to restore order on October 24. Fighting did not abate until the Central Committee named Imre Nagy as prime minister on October 25, and the next day Janos Kadar replaced Gero as party first secretary. Nagy dissolved the state security police, abolished the one-party system, promised free elections, and negotiated with the U.S.S.R. to withdraw its troops.
Faced with reports of new Soviet troops pouring into Hungary despite Soviet Ambassador Andropov's assurances to the contrary, on November 1, Nagy announced Hungary's neutrality and withdrawal from the Warsaw Pact. He appealed to the United Nations and the Western powers for protection of its neutrality. Preoccupied with the Suez Crisis, the UN and the West failed to respond. The Soviet Union launched a massive military attack on Hungary on November 3. Some 200,000 Hungarians fled to the West. Nagy and his colleagues took refuge in the Yugoslav Embassy.
Kadar, after delivering an impassioned radio address on November 1 in support of "our glorious revolution" and vowing to fight the Russians with his bare hands if they attacked Hungary, defected from the Nagy cabinet; he fled to the Soviet Union and on November 4 announced formation of a new government. He returned to Budapest and, with Soviet support, carried out severe reprisals; thousands of people were executed or imprisoned. Despite a guarantee of safe conduct, Nagy was arrested and deported to Romania. In June 1958, the government announced that Nagy and other former officials had been executed.
Reform Under Kadar
In the early 1960s, Kadar announced a new policy under the motto of "He who is not against us is with us." He declared a general amnesty, gradually curbed some of the excesses of the secret police, and introduced a relatively liberal cultural and economic course aimed at overcoming the post- 1956 hostility toward him and his regime. In 1966, the Central Committee approved the "New Economic Mechanism," through which it sought to overcome the inefficiencies of central planning, increase productivity, make Hungary more competitive in world markets, and create prosperity to ensure political stability. However, the reform was not as comprehensive as planned, and basic flaws of central planning produced economic stagnation.
Over the next two decades of relative domestic quiet, Kadar's government responded to pressure for political and economic reform and to counter-pressures from reform opponents. By the early 1980s, it had achieved some lasting economic reforms and limited political liberalization and pursued a foreign policy which encouraged more trade with the West. Nevertheless, the New Economic Mechanism led to foreign debt in pursuit of economic stimuli for unprofitable industries.
Transition to Democracy
Hungary's transition to a Western-style parliamentary democracy was the first and the smoothest among the former Soviet bloc, inspired by a nationalism that long had encouraged Hungarians to control their own destiny. By 1987, activists within the party and bureaucracy and Budapest-based intellectuals were increasing pressure for change. Some of these became reform socialists. Others began movements which were to develop into parties. Young liberals formed the Federation of Young Democrats (FIDESZ); a core from the so-called Democratic Opposition formed the Association of Free Democrats (SZDSZ); and the neopopulist national opposition established the Hungarian Democratic Forum (MDF). Civic activism intensified to a level not seen since the 1956 revolution. In 1988, Kadar was replaced as prime minister, and Reform Socialist leader Imre Pozsgay was admitted to the Politburo. That same year, the parliament adopted a "democracy package," which included trade union pluralism; freedom of association, assembly, and the press; a new electoral law; and a radical revision of the constitution, among others.
A Central Committee plenum in February 1989 endorsed in principle the multiparty political system and the characterization of the October 1956 revolution as a "popular uprising," in the words of Pozsgay, whose reform movement had been gathering strength as communist party membership declined dramatically. Kadar's major political rivals then cooperated to move the country gradually to democracy. The Soviet Union reduced its involvement by signing an agreement in April 1989 to withdraw Soviet forces by June 1991. National unity culminated in June 1989 as the country reburied Imre Nagy, his associates, and, symbolically, all other victims of the 1956 revolution. A roundtable, made up of representatives of the new parties and some recreated old parties (such as the Smallholders and Social Democrats), the communist party, and different social groups, met in the summer and fall of 1989 to discuss major changes to the Hungarian constitution and the steps in the transition to a fully free and democratic country. In October 1989, the communist party convened its last congress, which ended with a substantial victory for the party's reform faction and a change in name to the Hungarian Socialist Party.
In a historic session on October 16-20, 1989, the parliament adopted legislation providing for multiparty parliamentary elections and a direct presidential election. The parliament aimed to transform Hungary from a people's republic into the Republic of Hungary, to protect human and civil rights, and to ensure separation of powers among the judicial, executive, and legislative branches of government. It asserted the "values of bourgeois democracy and democratic socialism" and gave equal status to public and private property as a prerequisite for moving toward a market economy.
National Security
Hungary spearheaded the move leading to the dissolution of the Warsaw Pact Treaty Organization by its 17% reduction of defense expenditures and the 30% reduction of its armed forces between 1989 and 1992 to a level of 100,000. This latter figure includes 26,000 civilian employees of the Hungarian Home Defense Forces (HHDF). The military HHDF (or Honvedseg) is undergoing major restructuring in organization, orientation, and training. Hungary is also coping with severe budget constraints while attempting to adopt a Western-style defense force that can be integrated into NATO. Both the previous and the present governments have declared a desire to join NATO, and Hungary has welcomed the "Partnership for Peace" initiative. The Honvedseg includes the army, which is the largest, followed by the air force and a small naval contingent that patrols the Danube River.
On March 11, 1989, Hungary and the Soviet Union concluded an agreement under which the latter withdrew all 65,000 troops from the country in June 1991 and asked that Hungary compensate the former Soviets for the military bases they relinquished. Hungarian counterclaims charge that some of the bases were built without permission and do not conform to Hungarian building codes. Toxic wastes and other Soviet materials left behind at these bases constitute a serious environmental hazard. The zero option of no claim for compensation by either side was finally worked out. As compensation for a portion of state debt to Hungary, both sides--Hungary and Russia--agreed that a sum of up to $800 million in military equipment would be made available to Hungary.
POLITICAL CONDITIONS
The prime minister selects the ministers in the cabinet. Under a system of checks-and-balances, each cabinet nominee appears before four parliamentary committees in open hearings. The unicameral Hungarian National Assembly is the highest organ of state authority and initiates and approves legislation sponsored by the prime minister. A 15-member constitutional court has power to challenge legislation on grounds of unconstitutionality.
Hungary's first free, multiparty elections in more than 40 years were a milestone in the move toward a parliamentary democracy. In 1990, the Hungarian Democratic Forum (MDF) won 43% of the vote to 24% for the Alliance of Free Democrats (SZDSZ). As a result, the MDF leader, Jozsef Antall, became prime minister and formed a center-right coalition government--with the Independent Smallholders' Party (12%) and the Christian Democratic People's Party (6%)- -to command a 60% majority in the parliament. In addition to a small number of independents, the other parties represented in the parliament were the HSP, who gained 8%, and the Young Democrats (FIDESZ), who received 6%. Upon the death of Josef Antall in December 1993, Peter Boross succeeded to the post of Prime Minister.
The Antall/Boross coalition governments achieved a reasonably well-functioning parliamentary democracy and laid the foundation for a free market economy.
In May 1994, four years after it peacefully surrendered power, the reformed Hungarian Socialist Party (MSZP) came back to win a plurality of votes and 54% of the seats in parliamentary elections focused largely on economic issues and the substantial decline in living standards since 1990. A heavy turnout of voters swept away the right-of-center coalition but soundly rejected the extremists on the right and the left. Although it has a majority, the MSZP, which has announced its intention to continue economic reform and privatization, to preserve political rights, and to seek a historical reconciliation with Hungary's neighbors, formed a broader based coalition with the left-of-center Alliance of Free Democrats (SZDSZ), which took second place with 18% of the seats. This coalition, which assumed power on July 15, commands the two-thirds majority required to pass certain key legislation such as a law on electronic media and constitutional amendments.
ECONOMY
Before World War II, Hungary had a predominantly agricultural economy. Following the standard Stalinist pattern, industrialization was forced on Hungary in the post- war period. Under communism, most economic activity was conducted by state-owned enterprises or cooperatives, although various small businesses were allowed to operate. Agriculture was collectivized, undoing the immediate post- war division of large estates among small peasant owners. Today, farms are being privatized, both to small holders and to agribusiness firms.
In 1950, more than 50% of the labor force worked on the land; in 1993, slightly less than 7% engage in agricultural activity. Recently, Hungarian agriculture has been generally self-sufficient and an important source of export earnings. Both the agricultural and industrial sectors have suffered from a lack of investment since the late 1970s. In the 1970s and 1980s, Hungary accumulated a huge foreign debt, largely to finance subsidies to consumers and to unprofitable state enterprises. Net foreign debt rose from about $1 billion in 1972 to about $15 billion in 1993, giving Hungary the highest per-capita debt in Central Europe. Its repayment record, however, has been excellent.
Changes introduced by the communist regime, particularly during its last two years, eased the transformation to a market economy. When Antall took office, 150 state enterprises already had been privatized under a "business transformation" law. Private firms had rights equal to those of state enterprises under a law on corporate association. A joint venture law was in place, and foreign companies had begun to invest in Hungary. A little-used bankruptcy law was in place. A value-added tax and a progressive personal income tax had largely replaced the former arbitrary levies on profits of state enterprises. The 1990 budget passed by the communist parliament had slashed the annual deficit by cutting subsidies while raising charges on fuel, cigarettes, and liquor.
The Hungarian Government has encouraged the founding of private busi-nesses and moved forward on privatization of state enterprises. In 1993, the private sector generated about 50% of GDP.
The 1993 federal budget ended with a deficit of 6% of GDP, stalling a three-year program with the IMF, as revenue short- falls exceeded budget cuts. The government cut all consumer subsidies and reduced the real value of subsidies to the remaining state enterprises. Subsidy cuts led to increases in the price of medicines, bakery products, sugar, rice, railroad and bus transportation, postage, telephone calls, water and sewerage services, electricity, coal, and gas. Charges on concessionary home mortgages were increased substantially.
The deregulation of prices begun under the communist regime was extended by the Hungarian Government; more than 95% of prices have been decontrolled. The reform effort incurs painful, immediate costs to achieve more productive use of economic resources and higher incomes in the longer term. Phasing out uneconomic activities and reducing exports to the former Soviet bloc helped lead to a decline in the gross domestic product (GDP) in 1992 that amounted, in real terms, to 2.3%. Unemployment rose from 1.7% of the labor force in 1990 to an average of about 12% in 1993.
Foreign Trade
Hungary has shifted much of its trade from its former Soviet- bloc partners to Western countries. In 1993, 70% of Hungary's trade was with Western countries; Germany now is Hungary's principal trading partner, providing more trade with Hungary than with all of the former Soviet republics. Trade with Russia has been further reduced because of declining oil exports to Hungary. Trade with the United States is increasing; total trade has risen to more than $800 million in 1993. The U.S. has extended to Hungary most- favored-nation status, Generalized System of Preferences concessions, Overseas Private Investment Corporation insurance, and access to the Export-Import Bank. The two countries have concluded a bilateral intellectual property rights agreement and are negotiating a bilateral investment treaty.
Foreign concerns have invested over $7 billion in Hungary-- more than half of all foreign investment in Central and Eastern Europe. The United States is the largest investor, with about $3.6 billion invested by mid-1994, followed by Germany and Austria. Foreign capital is attracted by low wages for highly skilled workers, generous tax incentives, favorable geographic location, fertile land, and knowledge of the market of the former Soviet bloc.
Any Hungarian person or enterprise may engage in international trade now, and about 90% of imports have been freed from license restrictions.
FOREIGN RELATIONS
Except for the short-lived neutrality declared by Imre Nagy in November 1956, Hungary's foreign policy generally fol- lowed the Soviet lead from 1947 to 1989. During 1948-49, Hungary maintained treaties of friendship, cooperation, and mutual assistance with the Soviet Union, Poland, Czechoslovakia, Romania, and Bulgaria. In 1950, it concluded a friendship treaty with the then-German Democratic Republic. It was one of the founding members of the Soviet-led Warsaw Pact and CEMA, and it was the first Central European country to withdraw from those organizations, both now defunct.
Along with other European associates of the former Soviet Union, Hungary has been participating in East-West cooperation agreed upon at the 1975 Helsinki Conference on Security and Cooperation in Europe (CSCE). It has signed all of the CSCE follow-on documents since 1989. Hungary's record of implementing CSCE Helsinki Final Act provisions, including those on reunification of divided families, remains among the best in Eastern Europe.
Hungary has been a member of the United Nations since December 1955. As with any country, Hungarian security attitudes are shaped largely by history and geography. For Hungary, this is a history of more than 400 years of domination by great powers (the Ottomans, the Habsburgs, the Germans during World War II, and the Soviets during the Cold War) and a geography of regional instability and separation from Hungarian minorities living in neighboring countries.
Hungary's current foreign policy, a direct response to these factors,
has three equal priorities: integrating rapidly with the West and its institutions,
improving relations with neighboring countries--particularly those with
ethnic Hungarian minorities--and supporting the rights of Hungarian minorities
abroad. Currently, the Hungarians view ethnic instability as the greatest
threat to European security.
PEOPLE
Poland today is ethnically almost homogeneous (98% Polish), in contrast with the preWorld War II period, when there were significant ethnic minorities4.5 million Ukrainians, 3 million Jews, 1 million Belorussians, and 800,000 Germans. The majority of the Jews were murdered during the German occupation in World War II, and many others emigrated in the succeeding years.
Most Germans left Poland at the end of the war, while many Ukrainians and Belorussians lived in territories incorporated into the U.S.S.R. Small Ukrainian, Belorussian, Slovakian, and Lithuanian minorities reside along the borders, and a German minority is concentrated near the southwest city of Opole.
HISTORY
Poland's written history begins with the reign of Mieszko I, who accepted Christianity for himself and his kingdom in AD 966. The Polish state reached its zenith under the Jagiellonian dynasty in the years following the union with Lithuania in 1386 and the subsequent defeat of the Teutonic Knights at Grunwald in 1410. The monarchy survived many upheavals but eventually went into a decline which ended with the final partition of Poland by Prussia, Russia, and Austria in 1795.
Independence for Poland was one of the 14 points enunciated by President Woodrow Wilson during World War I. Many PolishAmericans enlisted in the military services to further this aim, and the United States worked at the postwar conference to ensure its implementation.
However, the Poles were largely responsible for achieving their own independence in 1918. Authoritarian rule predominated for most of the period before World War II.
On August 23, 1939, Germany and the Soviet Union signed the RibbentropMolotov nonaggression pact, which secretly provided for the dismemberment of Poland into Nazi and Sovietcontrolled zones. On September 1, 1939, Hitler ordered his troops into Poland. On September 17, Soviet troops invaded and then occupied eastern Poland under the terms of this agreement. After Germany invaded the Soviet Union in June 1941, Poland was completely occupied by German troops.
The Poles formed an underground resistance movement and a governmentinexile, first in Paris and later in London, which was recognized by the Soviet Union. During World War II, 400,000 Poles fought under Soviet command, and 200,000 went into combat on western fronts in units loyal to the Polish governmentinexile.
In April 1943, the Soviet Union broke relations with the Polish governmentinexile, after the German military announced that they had discovered mass graves of murdered Polish army officers at Katyn, in the U.S.S.R. (The Soviets claimed that the Poles had insulted them by requesting that the Red Cross investigate these reports.) In July 1944, the Soviet Red Army entered Poland and established a communistcontrolled "Polish Committee of National Liberation" at Lublin.
Resistance against the Nazis in Warsaw, including uprisings by Jews in the Warsaw ghetto and by the Polish underground, was brutally suppressed. As the Germans retreated in January 1945, they leveled the city.
During the war, about 6 million Poles were killed, and 2.5 million were deported to Germany for forced labor. More than 3 million Jews (all but about 100,000 of the Jewish population) were killed in death camps like those at Oswiecim (Auschwitz), Treblinka, and Majdanek.
Following the Yalta Conference in February 1945, a Polish Provisional Government of National Unity was formed in June 1945; the U.S. recognized it the next month. Although the Yalta agreement called for free elections, those held in January 1947 were controlled by the Communist Party. The communists then established a regime entirely under their domination.
Communist Party Domination
In October 1956, after the 20th ("deStalinization") Soviet Party Congress at Moscow and riots by workers in Poznan, there was a shakeup in the communist regime. While retaining most traditional communist economic and social aims, the regime of First Secretary Wladyslaw Gomulka liberalized Polish internal life.
In 1968, the trend reversed when student demonstrations were suppressed and an "antiZionist" campaign initially directed against Gomulka supporters within the party eventually led to the emigration of much of Poland's remaining Jewish population.
In December 1970, disturbances and strikes in the port cities of Gdansk, Gdynia, and Szczecin, triggered by a price increase for essential consumer goods, reflected deep dissatisfaction with living and working conditions in the country. Edward Gierek replaced Gomulka as First Secretary.
Fueled by large infusions of Western credit, Poland's economic growth rate was one of the world's highest during the first half of the 1970s. But much of the borrowed capital was misspent, and the centrally planned economy was unable to use the new resources effectively. The growing debt burden became insupportable in the late 1970s, and economic growth had become negative by 1979.
In October 1978, the Bishop of Krakow, Cardinal Karol Wojtyla, became Pope John Paul II, head of the Roman Catholic Church. Polish Catholics rejoiced at the elevation of a Pole to the papacy and greeted his June 1979 visit to Poland with an outpouring of emotion.
In July 1980, with the Polish foreign debt at more than $20 billion, the government made another attempt to increase meat prices. A chain reaction of strikes virtually paralyzed the Baltic coast by the end of August and, for the first time, closed most coal mines in Silesia. Poland was entering into an extended crisis which would change the course of its future development.
The Solidarity Movement
On August 31, 1980, workers at the Lenin Shipyard in Gdansk, led by an electrician named Lech Walesa, signed a 21point agreement with the government which ended their strike. Similar agreements were signed at Szczecin and in Silesia. The key provision of these agreements was the guarantee of the workers' right to form independent trade unions and the right to strike. After the Gdansk agreement was signed, a new national union movement"Solidarity"swept Poland.
The discontent underlying the strikes was intensified by revelations of widespread corruption and mismanagement within the Polish state and party leadership. In September 1980, Gierek was replaced by Stanislaw Kania as First Secretary.
Alarmed by the rapid deterioration of the PZPR's authority following the Gdansk agreement, the Soviet Union proceeded with a massive military buildup along Poland's border in December 1980. In February 1981, Defense Minister Gen. Wojciech Jaruzelski assumed the position of Prime Minister as well, and in October 1981, he also was named party First Secretary. At the first Solidarity national congress in SeptemberOctober 1981, Lech Walesa was elected national chairman of the union.
On December 1213, the regime declared martial law, under which the army and special riot police were used to crush the union. Virtually all Solidarity leaders and many affiliated intellectuals were arrested or detained.
The United States and other Western countries responded to martial law by imposing economic sanctions against the Polish regime and against the Soviet Union. Unrest in Poland continued for several years thereafter.
In a series of slow, uneven steps, the Polish regime rescinded martial law. In December 1982, martial law was suspended, and a small number of political prisoners were released. Although martial law formally ended in July 1983 and a general amnesty was enacted, several hundred political prisoners remained in jail.
In July 1984, another general amnesty was declared, and 2 years later, the government had released nearly all political prisoners. The authorities continued, however, to harass dissidents and Solidarity activists. Solidarity remained proscribed and its publications banned. Independent publications were censored.
Roundtable Talks and Elections
The government's inability to forestall Poland's economic decline led to waves of strikes across the country in April, May, and August 1988. In an attempt to take control of the situation, the government gave de facto recognition to Solidarity, and Interior Minister Kiszczak began talks with Lech Walesa on August 31. These talks broke off in October, but a new seriesthe "roundtable" talksbegan in February 1989.
These talks produced an agreement in April for partly open National Assembly elections. The June election produced a Sejm (lower house), in which onethird of the seats went to communists and onethird went to the two parties which had hitherto been their coalition partners. The remaining onethird of the seats in the Sejm and all those in the Senate were freely contested; virtually all of these were won by candidates supported by Solidarity.
The failure of the communists at the polls produced a political crisis. The roundtable agreement called for a communist president, and on July 19, the National Assembly, with the support of some Solidarity deputies, elected Gen. Jaruzelski to that office. Two attempts by the communists to form governments failed, however.
On August 19, President Jaruzelski asked journalist/Solidarity activist Tadeusz Mazowiecki to form a government; on September 12, the Sejm voted approval of Prime Minister Mazowiecki and his cabinet. For the first time in more than 40 years, Poland had a government led by noncommunists.
In December 1989, the Sejm approved the government's reform program to transform the Polish economy rapidly from centrally planned to freemarket, amended the constitution to eliminate references to the "leading role" of the Communist Party, and renamed the country the "Republic of Poland."
The Polish United Workers'(Communist) Party dissolved itself in January 1990 creating in its place a new party, Social Democracy of the Republic of Poland. Most of the property of the former Communist Party was turned over to the state.
The May 1990 local elections were entirely free. Candidates supported by Solidarity's Citizens Committees won most of the races they contested, although voter turnout was only a little over 40%. The cabinet was reshuffled in July 1990; the national defense and interior affairs ministersholdovers from the previous communist governmentwere among those replaced.
In October 1990, the constitution was amended to curtail the term of President Jaruzelski. In December, Lech Walesa became the first popularly elected President of Poland.
Poland in the 1990s
Poland in the early 1990s made great progress toward achieving a fully democratic government and a market economy. Free and fair elections were held for the presidency in November 1990 and for parliament in October 1991 and September 1993. Freedom of speech, religion, assembly, and the press were instituted. A wide range of political parties representing the full spectrum of political views were established.
In November 1990, Lech Walesa was elected President for a fiveyear term. From 1991 to 1993, three parliamentary coalitions of postSolidarity origin parties governed in quick succession, none longer than 14 months. Jan Krzysztof Bielecki, at Walesa's request, formed a government and served as its Prime Minister until October 1991. His government continued the Mazowiecki government's "Big Bang" package of economic reform, which introduced world prices and greatly expanded the scope of private enterprise.
Poland held its first free parliamentary elections in October 1991. More than 100 parties participated. No single party received more than 13% of the total vote. President Walesa then asked first Bronislaw Geremeka leader of the Democratic Unionand then Jan Olszewskithe candidate of a minority coalition of five partiesto attempt to form a government. Olszewski succeeded in putting together a coalition government that was ratified by parliament. After a vote of noconfidence in June 1992, however, Olszewski and his cabinet were forced to resign over their efforts to purge alleged former secret police informers from political life.
Five weeks later, a new minority coalition government, led by Prime Minister Hanna Suchocka of the Democratic Union, was voted into office. Deep ideological differences created tension among the coalition partners, however, especially when a controversial antiabortion law was passed in the Sejm. The Solidarity Union's decision to withdraw support for the Suchocka government led President Walesa to dissolve the parliament on May 28, 1993, after a vote of noconfidence.
The Suchocka government continued to govern until parliamentary elections in September 1993. These elections took place under a new electoral law designed to limit the number of small parties in parliament by requiring them to receive at least 5% of the total vote to enter the Sejm . The Democratic Left Alliance (SLD), comprised of the SDRP and more than two dozen parties loyal to it, received the most votes, with 21%, and the Polish Peasant Party (PSL) with 15% came in second. The largest postSolidarity party, the Democratic Union, came in third with 11% of the vote. Most of the small center and right parties failed to enter the parliament, as did the Solidarity Union.
After the election, the SLD and PSL formed a governing coalition. Waldemar Pawlak, leader of the junior partner PSL, became Prime Minister. Relations between President Walesa and the Prime Minister remained poor throughout the Pawlak government, with President Walesa charging Pawlak with furthering personal and party interests while neglecting matters of state importance.
Following a number of scandals implicating Pawlak and increasing political tension over control of the armed forces, President Walesa demanded Pawlak's resignation in January 1995. In the ensuing political crisis, the coalition removed Pawlak from office and replaced him with the SLD's Jozef Oleksy as the new Prime Minister.
In November 1995, Poland held its second postwar free presidential elections. SLD leader Aleksander Kwasniewski defeated Walesa by a narrow margin--51.7% to 48.3%. Soon after Walesa's defeat, Interior Minister Andrzej Milczanowski accused Oleksy of longtime collaboration with Soviet and later Russian intelligence. In the ensuing political crisis, Oleksy resigned. For his successor, The SLDPSL coalition turned to deputy Sejm speaker Wlodzimierz Cimoszewicz--who is linked to, but not a member of the SLD. Polish prosecutors subsequently decided that there was insufficient evidence to charge Oleksy, and a parliamentary commission decided in November 1996 that the Polish intelligence services may have violated rules of procedure in gathering evidence in the Oleksy case.
The Cimoszewicz government's main legislative accomplishments included reform of the central government structure and strengthened civilian control of the military. However, during this period the governing coalition engaged in bitter disputes over tax law, abortion, and the redistribution of several key ministerial posts. Much of the SLDPSL infighting was conducted with an eye toward the next parliamentary elections, scheduled for no later than autumn 1997.
GOVERNMENT AND POLITICAL CONDITIONS
The current government structure consists of a council of ministers led by a prime minister, typically chosen from a majority coalition in the bicameral legislature's lower house. Under the constitution, the president must be formally consulted in the appointment of the ministers of foreign affairs, internal affairs, and defense, and may technically reject any proposed minister. The presidentelected every five yearsis head of state. The judicial branch plays a minor role in decisionmaking.
The parliament, consisting of 460 members of the Sejm and 100 members of the Senate, was elected in September 1993 in free and fair elections in which 19 political parties participated. A 1993 electoral law stipulated that with the exception of guaranteed seats for small German and Ukrainian ethnic parties, only parties receiving at least 5% of the total vote could enter parliament; under this law, six parties gained representation.
The current government is a coalition of the Democratic Left Alliance (SLD) and the Polish Peasant Party (PSL) under the leadership of Prime Minister Wlodzimierz Cimoszewicz. The coalition has maintained generally promarket economic policies and made clear its commitment to a democratic political system. Programmatic differences between the PSL and SLD have caused significant tension within the coalition many times since its founding in 1993.
Former SLD leader Aleksander Kwasniewski was elected President in November 1995. President Kwasniewski has supported Polish membership in NATO and the EU, and backed the SLD's legislative agenda on issues such as central administration reform, redrafting of the constitution, and abortion liberalization.
General parliamentary elections are scheduled for September 21, 1997. Poland's next presidential election is scheduled for the year 2000.
Along with the parties of the ruling coalition, other parties represented in parliament are: the Union of Freedom (UW), the Union of Labor (UP), the Confederation for an Independent Poland (KPN), and the Nonpartisan Bloc in Support of Reform (BBWR). Both KPN and BBWR have undergone internal splits since the 1993 elections. The two most significant political groupings outside of parliament are: Solidarity's Electoral Action (AWS), a centerright coalition anchored by the Solidarity Trade Union; and the Movement for the Reconstruction of Poland (ROP), a rightist/nationalist bloc led by former Prime Minister Jan Olszewski.
National Security
Poland's top national security goal is to pursue integration with NATO and other Western European defense, economic and political institutions. Polish military doctrine has been revised and reflects the same defensive nature as its NATO neighbors.
Poland maintains a sizable Armed Force currently numbering 234,000 troops divided among an Army of 165,000, an Air and Air Defense Force of 52,000 and a Navy of 17,000. This total represents a reduction of over 50 percent from the pre1989 period. Future reductions in size are expected. Poland relies on military conscription for approximately 60 percent of its personnel strength. All males are subject to a 15month term of military service. The term of conscription is expected to drop to 12 months.
Poland met all of the CFE-mandated equipment reductions as required by November 1995 and completed its first multiyear defense plan in 1996. The Polish military is in the process of modernizing its equipment and operational planning techniques. In addition, restructuring programs are underway in the Army, Air and Air Defense Forces and Navy to implement a corpsbrigade model better suited to operate with NATO and other Western militaries. Lean defense budgets continue to make this a significant challenge as Poland seeks to replace aging fighters, upgrade communications structures to meet NATO standards, maintain a robust military educational and training regime and to form wellequipped units available for future rapid response missions in defense of Poland or for use in UNmandated or NATO Peace Support Operations. The country is actively seeking Western equipment and technology which can be adapted into the Polish defense industrial base.
Poland has been a regional leader in support and participation in the NATO Partnership for Peace Program and has actively engaged each of its neighbors and other regional actors to build stable foundations for future European security arrangements. Poland continued its long record of strong support for UN Peacekeeping Operations by maintaining a battalion in Southern Lebanon and by being among the first to contribute a combat battalion to NATO's Bosnia Implementation Force (IFOR).
ECONOMY
Poland underwent a profound transformation as the government introduced a free market system to replace over 40 years of centrally planned economy. The "shock therapy" economic reform program introduced in 1990 liberalized prices, stabilized the currency, and privatized most small enterprises, which brought an end to chronic shortages of consumer goods. The reform program could not spare Poland from a severe recession in the early 1990s, with sharp declines in industrial production and increases in unemployment rates. In 1992, the economy began a strong recovery. Inflation and unemployment rates have now stabilized and are decreasing steadily, while growth rates are in the 56 percent range. Poland was admitted into the OECD in 1996 and expects to join the European Union sometime after the year 2000.
The United States and other Western countries have supported the growth of a free enterprise economy by reducing Poland's enormous foreign debt burden, providing economic aid, and lowering trade barriers.
Agriculture
Primary agriculture employs onefourth of the work force but contributes only 6% to the Gross Domestic Product (GDP), reflecting a relatively low level of productivity compared to other sectors of the economy. Food processing accounts for roughly an additional 6 percent of GDP. Unlike the industrial sector, Poland's primary agricultural sector remained largely in private hands during the decades of communist rule. A large share of the former state farms are now being leased to farmer tenants. Lack of credit is hampering efforts to sell former state farm land. Currently, Poland's two million private farms occupy 90% of all farmland and account for roughly the same percentage of total agricultural production. These farms are small (8 hectares on average) and often fragmented.
Privatization within the food processing sector is the most advanced in the food concentrate, brewery, and confectionery industries and the weakest in the grain milling, sugar refining, and potato processing industries. Processors often rely on imports to supplement domestic supplies of wheat, feed grains, vegetable oils, and protein meals, which are generally insufficient to meet domestic demand. However, Poland is the leading producer in Europe of potatoes and rye and is one of the ten largest producers of sugar beets. Poland is also a significant producer of rapeseed, grains, hogs, and cattle. Attempts to increase domestic feed grain production are hampered by the short growing season, poor soil, and the small size of farms.
Membership in the European Union is among the main priorities of the government. Efforts to modernize and transform the agricultural and food sectors are being implemented to enhance Poland's future competitiveness as a full member of the Union.
Implementation of the government's privatization program in the agricultural sectorspecifically the breakup of the state monopolies in procurement and distributionhas helped bring the costs of inputs and production into balance, but the small size and often fragmented nature of land holdings and the large portion of the population engaged in farming will continue to limit profitability.
Industry
Before World War II, Poland's industrial base was concentrated in the coal, textile, chemical, machinery, iron, and steel sectors. Today it extends to fertilizers, petrochemicals, machine tools, electrical machinery, electronics, and shipbuilding.
Poland's industrial base suffered greatly during World War II, and many resources were directed toward reconstruction. The communist economic system imposed in the late 1940s created large and unwieldy economic structures operated under a tight central command. In part, because of this systemic rigidity, the economy performed poorly even in comparison with other economies in Central Europe.
In 1989, the Mazowiecki government began a comprehensive reform program to replace the centralized command economy with a marketoriented system. Many large scale stateowned industrial enterprises, particularly in the mining and steel sectors, have remained resistant to the change and downsizing required to survive in an open market economy.
Economic Reform Program
Poland was the first former centrally planned economy in Central Europe to end its recession and return to growth after a deep recession in the late 80's and early 90's. Since 1992, the Polish economy has enjoyed an accelerated recovery. The private sector now accounts for nearly twothirds of gross domestic product and employs some 60% of the work force. However, unemployment remains relatively high (11.7% as of May 1997), especially in rural areas.
The sweeping economic reforms introduced in 1989 removed price controls, eliminated most subsidies to industry, opened markets to international competition, and imposed strict budgetary and monetary discipline. These reforms have achieved positive results in reducing inflation