Officials of the five central European countries preparing their entry to the European Union: Poland, the Czech Republic, Hungary, Slovenia and Estonia met in Prague last week to discuss their strategy towards the EU. They criticised both the EU scheme called accession partnership and measures that make financial aid to them conditional on the progress of reforms. All countries, along with Cyprus, were invited to start detailed membership talks in Brussels next spring.

In Albania a consortium of British and Italian companies have agreed with the Albanian government to rehabilitate and modernise a large part of Albania's chrome industry, with a view to making Albania a leading supplier of ferrochrome to European stainless steel producers. An agreement is expected to be signed in the first quarter of 1998. A US$41m contract for plant equipment and project management have been signed with Albkromi, the Albanian state owned chrome group. The contract is expected to triple the annual production of ferrochrome to 80,000 tonnes and to increase annual output of chrome ore to at least 250,000 tonnes within two years. Albania has the largest reserves of chrome in Europe and the fourth largest reserves in the world, after South Africa, Zimbabwe and Kazakhstan.

The Czech National Bank (CNB) announced that, after price deregulation, its main objective will be control over inflation. The bank said that it would favour price stability policy so that its monetary programme for 1998 would focus on cutting inflation. In the past year the CNB's monetary policy focused mainly on the growth of the M2 money supply. From this year the bank will be monitoring many other economic indicators, such as trade balance, the balance of state budget and the crown's exchange rate.

The Czech Statistical Office confirmed that the trade deficit for the period of January-November was 123.945bn crowns ($3.6bn ), against 140.149bn crowns in 1996. Imports and exports in January-November totalled 775.362bn and 651.407 bn crowns respectively.

The International Monetary Fund gave support to the Estonian government's economic programme for 1998 and approved a stand by loan of $22m. Estonia's 1998 economic programme assumed an annual growth rate GDP of 5 per cent, down from an estimated growth of 7 per cent in 1997. IMF said that Estonia's growth prospects would depend on increasing public savings through fiscal adjustment, monetary measures to restrain credit growth and financial risks, and on accelerated structural reforms to improve productivity.

In Hungary the Ministry of Finance reported that the GDP grew 5.1 per cent in the third quarter of 1997, compared to the same period in 1996. After the GDP growth in the first quarter of 2.1 per cent and 4.3 per cent in the second quarter, the higher than expected growth in the third quarter reflects the recovery of the Hungarian economy, following the government austerity programme implemented two and a half years ago. The programme controlled the current account and budget deficits. With the higher rise in GDP, the government has cut its budget deficit from 4.7 to 4.5 per cent of GDP.

In Lithuania the US credit rating agency, Moody's, has assigned the country a new international credit rating of Ba1 regarding the capacity of the state to repay loans. Last year Lithuania received a Ba2 rating. Standard & Poor's, another agency, awarded Lithuania an investment rating of BBB-. At the beginning of 1997 Lithuania was given a BB+ rating by European credit rating agency IBCA.

The Bank of Lithuania announced that the deficit of Lithuania's balance of payments in the third quarter of 1997 was 613.8m lits ($157.4m), or 8.8 per cent of GDP. The foreign trade deficit amounted to 882m lits in the third quarter, 192m lits less than in the second quarter. Foreign direct investment grew in the first nine months of 1997 by 1.033bn lits and almost tripled compared with the same period in 1996.

A year after the Macedonian government opened the tobacco sector to foreign investment, the country has doubled output of Oriental tobacco to 25,000 tonnes this year. In 1996 three tobacco processing plants have been sold to Greek and US investors. A further 16 are ready for privatisation. The government has ended the monopoly on the tobacco market held by Makedonija Tabak, and has liberalised producer prices. It authorised the new Virginia tobacco plant to be introduced for cultivation in Macedonia.

According to the statistics released by the Central Statistical Office (GUS) in Poland, in November the number of unemployed increased by 8,800 reaching 1,800,500 people (10.3 per cent of the total workforce), 3 per cent lower than in November 1996.

In 1997 Poland received about 2bn cubic metres of cheap gas from Russia. However, from January the price of Russian fuel will increase by 20 per cent. The President of the Polish Oil and Gas Industry, Aleksander Fundzynski, said that the rise in the price for Russian gas is due to the different exchange rate. Poland has been paying for the gas deliveries in the so-called transferable rouble, which was about 7 per cent of the normal commercial price.

According to the Market Research Centre of the Russian Government, three-quarters of accumulated foreign capital is spread throughout ten main regions: Moscow and the Moscow region; St. Petersburg and the Leningrad region; Tyumen and the Arkhangelsk region; and the Republics of Tatarstan, Komi, Marii-El and Primorye Territory. Moscow accounts for 40 per cent of the total investments in Russia, while among the leading foreign investors are the US, providing 30 per cent of total foreign investment in the Russian economy, Switzerland, Great Britain, Germany and Italy. Two-thirds of the investment coming from the US is constituted by direct investment, while almost all Swiss investments come from banks; Germany makes direct investments, while British and Italian financial institutions provide loans.

The State Statistical Committee of the Russian Federation reports that in December the CPI rose by 1.2 per cent, bringing the annual inflation to 11.3 per cent.

The Slovak Statistical Office (SU SR) presented estimates of the Slovakian economic performance in 1997. It expects a GDP growth of 5.9 per cent for the whole of 1997. In December inflation was 6.3 per cent higher than in December 1996, while the unemployment rate for the year is estimated to be 12.9 per cent. SU SR expects a GDP growth of 5.1 per cent in the first quarter of 1998, inflation at 5.9 per cent and growth in unemployment to 13.5 per cent.

The Ukraine and Russia have signed an inter-governmental agreement on the clearing of arrears from 1 January 1998, announced the Ukraine's Finance Minister, Igor Mityukov. According to that agreement part of Ukraine's debt ($3,074m) will be written-off by Russia in exchange for the offset of the lease by the Russian fleet of the naval base in Sevastopol.

In Estonia, AS Imavere Saeveski sawmill signed a contract for a 30.8mDM ($18.1m) syndicate loan with the European Bank for Reconstruction and Development, Hansapank and the Estonian Investment Bank. The loan is for a term of six and a half years. Imavere Sawmill is to invest a total of 280m kroons ($20m) in the modernisation of the plant. The company has estimated production capacity in 1997 to be 75,000 cubic metres of sawn timber.

In Hungary, Ganz is planning to invest 900m forints ($4.5m) to update its main production units over the next four years, and to develop company products and market expansion. Ganz will receive finance from Special Restructuring Programme Hungaria (SRP), launched by the European Bank for Reconstruction and Development in January 1997. The agreement was signed by the President of Ganz Machine Factory Holding, Kft Zoltan Fitos, and the Managing Director of SRP Hungaria, Josef Sandtner.

The European Bank for Reconstruction and Development (EBRD) is planning to invest in Lithuania's Utenos Trikotazas knitwear company. The company's board has decided to sell 15 per cent of the company's 18.32m lits ($4.6m) share capital to Scandinavian Baltic Development Ltd, a fund operating within the framework of EBRD's financing programmes. The fund will inject 10m lits into Utenos Trikotazas. The company is 17 per cent state owned and 50 per cent owned by Kaunas SBA group. The shares of Utenos Trikotazas are traded at the Lithuanian Stock Exchange.

The Central Bank of Russia has granted a licence to Rossiisky Kredit commercial bank, reflecting the new requirements of the Federal Securities Commission on the stock markets operations to perform securities transactions in the next three years. The licence permits the bank to act as a dealer, broker and to perform depositary and trust management functions with regards to securities.

FUNDS

Hansa Asset Management plans to increase investment funds by targeting local investors in Latvia and Lithuania next year. Hansa Asset Management currently runs the Baltic Growth, Hansa Russian Growth, Hansa Money Market and Hansa Privatisation Funds.

The US President, Bill Clinton, was visiting Bosnia to stress US commitment to peacekeeping and to urge Bosnians to rebuild their country. Last week Clinton confirmed the US decision to keep US troops in Bosnia with other international Nato-led forces.

On 19 December, after his meeting with Solidarity members during the 9th Solidarity Congress in Poznan, Polish Prime Minister, Jerzy Buzek, told reporters that the government needs to have a dialogue with Solidarity and other trade unions on every aspect of economic and political issues.

On 23 December Romania's Foreign Minister, Adrian Severin, announced his resignation after an inquiry failed to back his claim that local politicians and press officers had worked as spies for foreign governments. His resignation as deputy leader of the Social Democrats, junior partners of the four party coalition, must be endorsed by Prime Minister, Victor Ciorbea. (Reuters)

Boris Nemtsov, the first Deputy Prime Minister of Russia, lost his political authority over Gazprom, Russia's largest company . Nemtsov was ousted from the government board which he himself had established in 1997 to oversee Gazprom and of which he was Chairman.Using his position and influence on the board, he argued in favour of bringing the gas monopoly back under state control. He had tried to renegotiate the terms of the Gazprom management contract, but during the weekend of 21 December the Minister of Fuel and Energy, Sergei Kiriyenko, who replaced Nemtsov as Head of the Government Supervisory Board, signed a trust agreement with Gazprom's Chairman, Rem Vyakherev, who was also reappointed as a manager of a 35 per cent state's stake in the company.

Milan Milutinovic, candidate for Serbia's ruling Socialist party and former federal Yugoslav Foreign Minister, won the presidential elections with 58.6 per cent of the votes. His opponent in the run-off, Vojislav Seslej, leader of the ultranationalist Radical party, received 38.14 per cent of the votes.