In the Czech Republic industrial output rose by an estimated 8.1 per cent in October, compared to the same period a year ago. Much of the rise was due to an increase in vehicle sales, which went up by 52.7 per cent in October compared to the same month in 1996.

In Poland the new banking law will become effective from 1 January 1998, making the new established body of the Council of Monetary Policy responsible for the decisions on monetary policy. At the same time the law will abolish the procedure of approving the annual guidelines of monetary policy by the Sejm. Hanna Gronkiewicz-Waltz, the President of the National Bank of Poland (NBP), said that under the new rules, the bank's main task will be to maintain stable prices. The bank will assist government economic policies only in its basic tasks. Meanwhile, the Council of Monetary Policy will fix NBP's interest rates and the indicies of mandatory bank reserves. The new laws make it possible to set a general credit ceiling, but NBP does not contemplate resorting to this tool in the near future. The laws also make it possible to introduce mandatory deposits on credits drawn abroad, although Gronkiewicz-Waltz stressed she would consider such a move only if macroeconomic stability was in danger.

CAPITAL MARKETS

The operator of the Czechoslovakian pipeline network, Cepro, will be privatised in a move considered to be essential for Ceska rafinerska and its parent company Unipetrol. Ceska rafinerska is planning to invest US$480m in the next five years in modernisation, development and environmental control.

The Council of the Estonian Privatisation Agency (EPA) endorsed the privatisation programme of state property for 1998. The list, to be submitted to the government, contains mainly infrastructure enterprises. Jaak Leimann, the Minister of Economy and EPA's Council Chairman, said that the programme includes Eesti Polevkivi oil shale company, Eesti Energia electric power utility, Eesti Raudtee railway and Telekom.

Last week the EPA and AS Erioli signed a contract for the sale of 100 per cent of shares in the Kiviter chemical plant. Kiviter estimates that its profit in 1997 will be 13m kroons on a turnover of 900m kroons. AS Erioli paid 120m kroons, promising 800m kroons of further investment. Erioli specialises in the sale of fuel and lubricants, transporation services and trade.

It was decided that the Lithuanian State will sell its entire 70.7 per cent in the Vilnius Pienas Dairy. The Lithuanian government prepared the plan for the dairy privatisation and the sale will be carried out in early 1998. Vilniaus Pienas reported sales of 38.1m lits for the first nine months of this year, a decrease of about 25 per cent compared with that of last year, and a net profit of 156,800 lits.

In Poland, during the Sejm session on 3 December, Emil Wasacz, the Minister for the Treasury, said that the new government will continue with the privatisation programme, but that it would be necessary to make a new register of property owned by the State Treasury. He also confirmed that the proceeds from next year's privatisation of state owned assets, estimated at 6.7bn zloty ($1.89bn), will be used to finance the budget deficit and to help finance the pension reform system.

POLITICS

According to the press bulletin from the Embassy of the Azerbaijan Republic on 4 December, the Foreign Ministers of Azerbaijan and Bulgaria have signed a protocol of regular political consultations between the two countries in Baku. Both countries will cooperate in the field of oil transit and transport communication, with Bulgaria having also expressed an interest in participating in the Eurasian transport corridor project.

In the Czech Republic, following the resignation of Prime Minister Vaclav Klaus on allegations of involvement in the improper financing of his Civic Democratic Party (ODS), some market analysts fear strong implications for the financial markets. Pavel Sobisek, an analyst at Zivnostenska Banka in Prague, said that because President Vaclav Havel delayed coalition talks until mid-December, the uncertainties over the composition of the next government will affect Czech stocks and bonds, and possibly even the currency. He said that the sharp fall would initiate some inflationary pressures which, in turn, would have to be curbed by a rise in interest rates. This rise would drive Czech government bond yields, which were at record levels last week, even higher.

The main Czech opposition party, the Czech Social Democratic Party, has called for early elections by 30 June of next year. According to the new law introduced on 2 December, it is now possible to cut the Czech parliament's term of office, which was due to finish in the year 2000. At least 120 votes in the 200-member lower chamber are needed for the proposal to go through; it then needs approval by at least three-fifths of the members of the Senate or the upper chamber.

Leszek Miller, leader of the Social Democracy of the Republic of Poland, told foreign reporters that his party will oppose any attempts by the ruling coalition of the Solidarity Election Action (AWS) and the Freedom Union (UW) to amend the constitution and to shorten the president's term of office.

Russian President, Boris Yeltsin, went on an official 3 day visit to Sweden, departing on 2 December. During this first state visit since the visit of Czar Nicholas II in 1909, Yeltsin announced the north-western military cuts of 40 per cent in ground forces in the Kaliningrad and St.Petersburg area and in the northern and Baltic fleets. This announcement was confirmed by Russian Defence Minister, Marshall Igor Sergeyev. Both countries signed a series of bilateral agreements on the fight against crime, debt rescheduling, and nuclear safety.