Eastern Europe Now, the Hangover

By Daniel Benjamin

On New Year's Eve in Prague, a city intoxicated with a sense of liberation, the cobblestones of Wenceslas Square were drenched with champagne. On New Year's Day, the city and all of Czechoslovakia started to sober up. "For 40 years you have heard on this day from the mouths of my predecessors . . . how our country is flourishing, how many more millions of tons of steel we have produced, how we are all happy, how we believe in our government," the newly elected President Vaclav Havel told the nation. "I assume you have not named me to this office so that I too should lie to you.

"Our country is not flourishing . . . Our outmoded economy wastes energy, which we have in short supply . . . We have spoiled our land, rivers and forests . . . We have become morally ill because we are used to saying one thing and thinking another . . . The concepts of love, friendship, mercy, humility and forgiveness have lost their depths and dimension, and for many of us they represent only some sort of psychological curiosity, or they appear as long-lost wanderers from faraway times, somewhat ludicrous in the era of computers and spaceships."

As an inaugural address, Havel's talk was an extraordinary jeremiad -- eloquent, gentle, but unstinting in its criticism. It was the last kind of speech that might have been expected from a man who had just won a war decades long and whose name had been cried out like a victory chant in the same Wenceslas Square the night before. Havel noted the achievement of 1989 by paraphrasing 17th century theologian Comenius -- "Your government, my people, has returned to you" -- but his speech was the antithesis of triumphalism. Instead, it was a bracing recitation of urgent needs, an inventory of the damage done to the spirit by 40 years of communist rule and an exhortation for reform.

And it might have been delivered as fittingly in Warsaw, Budapest, East Berlin, Bucharest or Sofia. For while the changing of the calendar rarely signifies the change of much else, the advent of 1990 throughout Eastern Europe gave the sense that a corner had been turned, that the time for the celebration of a revolution was passing and the time for the painful work of political, economic and moral reconstruction had begun.

/ In Warsaw the new year brought the implementation of an unprecedented plan to transform the Polish economy into a capitalist one. The cold turkey blueprint is well drafted, but initially it is likely to accelerate the nation's hyperinflation and cause serious unemployment and widespread bankruptcies. In Sofia the communist government held its first set of talks with opposition leaders. But already the new government was faced with another challenge: a countrywide general strike and mass protests against the restoration of religious and cultural freedom to the country's minority Turks. Havel's government set out on a course of economic restructuring by devaluing the crown from a rate of nine to the dollar to 38 for tourists and 17 for commercial transactions, thus taking aim at a huge black market in currency and possibly preparing the way for full convertibility of the crown. Prague also took the lead in announcing its intention to reform or disband Comecon, the communist trading bloc whose rules have skewed supply and demand, and therefore the production, of a vast array of goods.

It was Rumania, however, that worked most feverishly to accomplish the most basic work of reconstruction: establishing a measure of government credibility. Two weeks after the overthrow of Nicolae Ceausescu, the regime of the National Salvation Front strove to enhance its reformist image by announcing that the entire Politburo from the Ceausescu government was under arrest. But the N.S.F. was still a long way from enjoying full popular support.

The composition of the eleven-member ruling board struck many Rumanians as containing too many communists and military men who were tainted by association with the fallen tyrant. Both the head of state, Ion Iliescu, and one of the Front's top strategists, Silviu Brucan, though they were purged by Ceausescu and were critics of his rule, fall into this category, as do the other nine in the inner circle, giving rise to fears that Rumania may be headed not for democracy but for some brand of authoritarianism. "Our newspaper changed its name from Informatia Bucurestiului ((Bucharest Information)) to Libertatea last month," says journalist Octav Buruiana, "but virtually the entire staff is the same old people right up to the Communist Party Secretary, who still has the same position, minus the word communist."

The government also faced growing criticism over its plan to hold elections in April. While the N.S.F. has announced its intention to field a slate of . candidates, critics claim that other parties, hampered by a dire lack of telephones and printing presses, will not have enough time to organize campaigns. So far, half a dozen parties have announced their intention to campaign. None, however, have officially registered. Last week the government stuck by its promise of early polling. Claimed Brucan: "When we went before the students they shouted, 'Elections now! March or April!' They were such an important factor in this revolution, we felt we had to respect their wish."

Given the disarray, the N.S.F. is likely to prevail at the ballot box. Yet even if the polling is postponed, it is unlikely that a few solid parties with discrete ideologies will emerge. Rumania, which has virtually no experience with democracy, seems certain to develop the same problem that bedevils much of the rest of Eastern Europe -- masses of small, squabbling parties.

The confusion is in part a legacy of decades during which dissatisfaction with communism was the common political principle that relegated all others to insignificance. And, in part, it is a heritage of cultures that have little history of democratic participation. As the nations of Eastern Europe deliberate on what kind of political and economic arrangements they should fashion for themselves, few have sufficiently defined how thorough their conversion to a market economy should be and how institutions should be reformed. Consequently, politicians and public opinion remain in a kind of suspension, not yet filtered out to the small number of camps necessary for orderly political battle.

The need to sort out goals has led to ironies that would have hardly been conceivable six months ago. As in Rumania, the opposition in Bulgaria is asking for a six-month delay of elections past the scheduled date of June 1. The same wish has also been expressed by some of the newly formed parties in East Germany, where elections are scheduled for May 6. Afraid that the communists' hold on power in Prime Minister Hans Modrow's government will give them a formidable edge in the elections, six opposition parties last week merged to form Election Alliance 90. But the combination covers an almost unimaginable band of the political spectrum, and doubts were soon voiced about whether such a coalition made sense. "How can you reach compromises in an alliance of Trotskyites and free-marketeers?" asked Gerhard Bacher of the East German Green party, which did not join. "Our aim is to get rid of the last vestiges of the old power," said Konrad Weiss of Democracy Now, which did join. The differences, he added, "can be overcome."

First politics, then economics. Not surprisingly, that has been the general rule in Eastern Europe: not until the Communist Party has been forced to abandon its leading role -- and Rumania remains an ambiguous case -- can a reform program be implemented. Not until elections are held and a government gains legitimacy can ambitious reforms be put in effect. Poland alone has met both demands, and on Jan. 1 its experiment with transitional economics commenced. Overnight, the government of Prime Minister Tadeusz Mazowiecki slashed subsidies across the board, ended most price controls and introduced convertibility of the zloty. The first and predicted effect was to ignite prices like so many Roman candles.

The short-term aim of this self-induced shock treatment is, curiously, to halt hyperinflation, which in December ran at a rate of 600%. Finance Minister Leszek Balcerowicz hopes that will happen because of restrictions aimed at preventing wages from skyrocketing too. The overall effect of the program should be to dampen demand and impose financial restraint on a populace accustomed to having the basics provided. The reforms also aim to cut government spending, thus satisfying the strictures of the World Bank, the International Monetary Fund and Western nations considering aid to and investment in Poland.

Actually, there is room for belt tightening, since communism encouraged collective irresponsibility. The question is whether the cure will be worse than the disease: estimates of the number of people who will lose their job run from the government figure of 400,000 to as high as 3 million in a population of 38 million. Thousands of bankruptcies are expected, and the country could find whole industries going bust. How great public tolerance will be for such hardships could determine whether democracy and capitalism take root in Poland.

The experiment is one that every politician in Eastern Europe will be watching, not least because the rush to open up centrally planned economies has turned into a race for aid and investment. The competition, however, is hardly one among equals. Hungary, for example, is somewhat chagrined because its slow and steady revolution from above -- parliamentary elections are set for March 25 -- has put it behind Poland and Czechoslovakia in dislodging communists from the government. This pace of change has caused a partial dimming of the country's image as a pathbreaking reformer. And its position, oddly enough, seems to have worsened because of the pro-democracy upheaval in East Germany. Budapest fears that much of the investment it might have expected from West Germany will be funneled into East Germany.

Wherever they are on the paths to reform, most countries in the region stand to gain if Czechoslovakia's effort to revamp or abolish Comecon makes any headway at the organization's meeting in Sofia this week. Since intra-bloc commerce claims an average of 70% of each country's trade, replacing the noncompetitive barter system with bilateral, hard-currency agreements could free industries to turn their attention to non-Comecon nations. Historically, the Comecon system has encouraged inefficiency, low-quality production and poor planning. "It made each country in the bloc more anxious to consume than to produce," says Hans-Heinz Kopietz of the International Institute of Strategic Studies in London. The sooner Comecon is scaled back or abandoned -- and many experts believe Moscow will acquiesce in this to help its own economy -- the sooner the East Europeans can begin adapting themselves to competition in the world market.

Ironically, the country that probably has the least interest in cutting the economic ties that Moscow imposed in the late 1940s is Rumania, which under Nicolae Ceausescu was more hostile to the Kremlin than any other East bloc country. He so ruined the national economy that for years to come it may have little to export beyond small agricultural surpluses, and serious market reforms may take just as long. Now that the insane policy of exporting everything but the barest necessities has ended, however, the country will probably avoid the kind of collapse that threatens Poland, because Rumania's farm production will probably be adequate for the nation's needs.

More aid to Rumania is on the way, and from a source not known for its largesse -- Moscow. Last week the Kremlin promised to supply Rumania with some of the oil and gas needed to fuel economic recovery. The gesture of goodwill was combined with a hastily arranged visit to Bucharest on Saturday by Soviet Foreign Minister Eduard Shevardnadze. Moscow's solicitousness may be attributed to a desire to quell the discontent of ethnic Rumanians in the Soviet republic of Moldavia, a region Stalin annexed from Rumania in 1940. Now that Ceausescu is gone, the Kremlin has every reason to expect that secessionist fervor will be rekindled. Evidently Soviet President Mikhail Gorbachev hopes Bucharest can be bribed not to fan the flames -- proof, if any were needed, that the road to reconstruction may take some highly unpredictable turns.

With reporting by Kenneth W. Banta/Bucharest, John Borrell/Cluj and James O. Jackson/Bonn