Yugoslavia Teetering on the Brink

By John Greenwald

The food vanished first. As word spread that the government was drastically raising prices, panicky shoppers snapped up sugar, flour and cooking oil by the crateload, quickly clearing grocery-store shelves. Decorum went next. Chanting "Down with prices!," 5,000 striking steelworkers hurled tin cans and hunks of bread at officials in the southern city of Skopje in the first organized labor protest to hit Yugoslavia since it became a Communist country, in 1945. Cowed officials promptly doubled some wages. In a no less startling outburst, the press and even some Communist leaders intensified calls for the resignation of Prime Minister Branko Mikulic, 59. Amid the turmoil, the devalued Yugoslav dinar plunged nearly 25% on world currency markets.

From one end of Yugoslavia (pop. 23 million) to the other last week, the nation that Josip Broz Tito rebuilt from the rubble of World War II seemed to be nearing collapse. An unruly amalgam of six republics, two autonomous provinces and more than a dozen languages, Yugoslavia has been divided against itself since it was founded in 1918. But the charismatic Tito brought unity to Yugoslavia and took it out of the Soviet orbit. Before he died in 1980, after 35 years in power, Yugoslavia appeared to be a model of innovation -- and a proudly neutral nation wooed and respected by both East and West.

Since then, however, economic woes and regional strife have gradually torn the country apart. While neighboring Hungary and the Soviet Union are moving slowly ahead, Yugoslavia is stumbling backward. Some 1,000 strikes have flared since Belgrade first froze wages in February. The country is staggering beneath nearly 200% inflation, the highest in Europe, and a 15% unemployment rate that only a few European countries exceed. At the same time, Mikulic is desperately trying to finance $19 billion in hard-currency debt. "This is perhaps Yugoslavia's greatest crisis in almost 40 years," said a Western diplomat long resident in Belgrade. "All the indications are that Mikulic cannot survive. But the bigger question is whether the entire country is now heading toward chaos and unrest."

Yugoslavia's economic turmoil was echoed last week in Poland and Rumania. In Warsaw consumers scoured shops for bargains after the government proposed price hikes that would double food costs and triple energy bills. Poles will vote on the reform package, aimed at reviving the tottering economy, in a national referendum this Sunday. In Rumania police reportedly broke up protests by some 5,000 workers in the city of Brasov, demonstrating against harsh labor conditions and growing food shortages.

Mikulic's stature hit a new low last summer when an investigation uncovered Yugoslavia's biggest financial scandal since World War II. Led in part by the country's newly aggressive press, the probe found that Agrokomerc, a giant food-processing firm based in the republic of Bosnia-Herzegovina, had issued up to $500 million in worthless IOUs to 63 Yugoslav banks and other enterprises. The revelations forced the country's Vice President, Hamdija Pozderac, to resign after the Belgrade newspaper Borba and other publications linked him to the scandal. Agrokomerc Chief Executive Fikret Abdic is in jail awaiting trial. At least six top Communist officials in Bosnia-Herzegovina resigned from their posts or were expelled from the party as a result of the scandal, along with dozens of lower-ranking figures. The ousters represented one of the few instances in which the press and public opinion have altered the power structure of a Communist East European regime.

Still reeling from the Agrokomerc affair, Mikulic lurched into his latest crisis last week after pushing painful economic reforms through parliament. A reworked version of a 120-point plan that leaders of the republics flatly rejected last month, the measures froze prices of some food staples but increased others by up to 70%. The goal: to bring prices into line with costs of production. Whatever the economic merit of the moves, they provoked a fire storm of protest and criticism.

Meanwhile, authorities have had to cope with Yugoslavia's long-simmering ethnic tensions. The worst problem is the impoverished southern province of Kosovo, where once dominant Serbs are now outnumbered almost 9 to 1 by ethnic Albanians, many of whom seek independence from Belgrade. Animosity has run high since Yugoslav troops crushed ethnic Albanian riots in 1981. The Serbs complain of rising Albanian persecution in the form of rapes, murders and cattle blindings. Hostility mounted last month when Serbian newspapers quoted former Yugoslav Vice President Fadilj Hodza, a top-ranking ethnic Albanian Communist, as sardonically telling army-reserve officers that Serbian women should move to Kosovo to serve as prostitutes. After a wave of protests by outraged Serbs, Belgrade stripped Hodza of his party membership and embarked on a new federal aid program for Kosovo.

As Mikulic struggles with such problems, a growing number of Yugoslavs believe he will be forced out by next May, when the Prime Minister must seek parliamentary approval to serve another two years. Reports circulating in Belgrade say Mikulic is seeking a successor to enable him to step down. Many citizens openly yearn for a leader with the vision to revamp the sclerotic Communist hierarchy and loosen controls over politics and the economy. That would follow the astonishing growth of press freedom and other rights that have blossomed since Tito's death. But no leader short of a new Tito may be able to advance bold new reforms or successfully end Yugoslavia's crisis.

With reporting by Kenneth W. Banta/Belgrade