Friday, 01 September 1995
Volume 2, Issue 170


REGIONAL NEWS
-------------

**HUNGARIAN-ROMANIAN DIALOG MIGHT REOPEN**
  Hungary, responding to a Romanian call for a historic
  reconciliation between the two countries, said yesterday it
  wants to see more concrete proposals from Bucharest.  Romanian
  president Ion Iliescu said on Wednesday that the two
  neighbours should rapidly restart treaty talks which bogged
  down over minority rights last month.  A Hungarian Foreign
  Ministry spokesman said yesterday that Hungary will not take
  any steps until it sees what concrete proposals Romania can
  put forward.


**HUNGARY ANNOUNCES 3-YEAR PLAN**
  Hungary's government took a break from coalition disputes
  yesterday to deal with economic policy.  At a cabinet meeting,
  the government finalized its proposals for the 1996 budget,
  income tax changes, and a 3 year economic strategy.  Finance
  Minister Lajos Bokros said economic results indicate the
  government's austerity measures are suceeding.  They'll hold
  the current account deficit to $3 billion this year, down
  nearly $1 billion from 1994.  He said first quarter results
  show the state budget deficit is declining too.  Bokros also
  insisted the present strategy must continue.

  "There is no alternative to this economic policy.  It can be
  shown that this economic policy has worked not only by the
  mathematical models, but by the economic results. "

  Bokros said despite the hardship, the government wants to
  continue tough measures for the next three years.  In 1996 the
  government is proposing a current a account deficit of $2
  billion and an inflation rate of 19 to 20 percent, down from
  about 28 percent this year. Bokros also announced changes in
  the personnel income tax for next year, requirng even the
  lowest paid Hungarians to pay taxes. Bokros also announced
  that Hungary will devalue its forint by a monthly 1.2 percent
  next year, He added that the government expected gross
  domestic product growth of two percent in both 1995 and 1996.
  --David Fink


**HUNGARIAN SOCCER SELL-OFF**
  Hungary's leading soccer, team Ferencvaros, fresh from their
  European Cup success, is going public. The club's vice
  president Laszlo Deak said the non-voting stock, whose
  subscription period has yet to be set, will be issued jointly
  with Polgari Bank Rt in nominal values of 10,000, 100,000 and
  one million forints.  There is no upper limit to the
  subscription, in which both Hungarians and foreigners can
  participate. The money will be invested in government bonds to
  help finance the team.  Shareholders are also expected to
  receive dividends, Deak said, adding that he hopes emotional
  links to the team as well as financial considerations will
  convince people to invest.  Ferencvaros last week qualified
  for the lucrative European Champions League and over the next
  few months will be playing host to such soccer giants as Ajax
  of Amsterdam and Real Madrid.



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-----------------

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  Group, all rights reserved.  Not-for-profit redistribution of
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  copyright notice, and all other copyright and by-line
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  contained herein is strictly prohibited without the express
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  conditions are subject to change without notice.  For further
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  products, contact your local Reuters office.


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Monday, 04 September 1995
Volume 2, Issue 171


REGIONAL NEWS
-------------

**HONGARIANS PROTEST ROMANIAN LANGUAGE LAWS**
  Thousands of Romania's ethnic Hungarians protested over the
  weekend against a new education law which they say curbs their
  language rights.  As many as 10,000 ethnic Hungarians staged a
  peaceful protest in a square in Odorheiul Secuiesc, in
  Transylvania.  Bela Marko the leader of the Hungarian
  Democratic Union, or UDMR, told the crowd that, under the new
  law, the Hungarian minority would be assimilated into the
  Romanian majority.  The UDMR claims to represent the interests
  of Romania's 1.6 million ethnic Hungarians. Police were
  deployed in the streets surrounding the demonstors, but kept a
  low profile.  Romania's leftist government, which depends on
  nationalists to maintain its coalition, rejects Hungarian
  language demands as separatism and a threat to territorial
  integrity.


BUSINESS NEWS
-------------

**MR. MICROSOFT VISITS BUDAPEST**
  Microsoft chairman Bill Gates paid a one-day visit to Budapest
  last Friday.  He was promoting the launch of his company's
  latest personal computer software, Windows 95.  During a
  luncheon at the American Chamber of Commerce in Budapest Gates
  said future economic growth hinges on investment in modern
  communications.  Gates added that "the power of the PC in the
  future will depend on these communication networks being very
  high speed and very low cost".  Gates met Prime Minister Gyula
  Horn and Transport, Communications and Water Minister Karoly
  Lotz.  Gates also met senior officials from Hungary's
  partially privatized telecommunications group Matav to discuss
  the possibility of Hungary becoming a regional communications
  center. He sai in his discussions with government leaders it
  was clear that Hungary appreciated the need for a modern
  communications network.


BUSINESS FEATURE
----------------

**MARKETS BRACE FOR POLITICAL DECISIONS**
  By Tom Hoover

  Budapest led the way again last week in the markets of Central
  Europe.  Thanks to block deals on Friday, including the sale
  of half a million shares of the Hungarian National Savings
  Bank, the Budapest exchange hit 15 84, a new high for the
  year.  The Prague Stock Exchange enjoyed a week of modest
  increases, but more importantly, divided its market into three
  levels, giving the smaller, local shares more visibility.
  While Warsaw was again the site of relative inactivity,
  bouncing back a bit on Friday to offset a week of steady drops
  and closing at 84 36.  CET spoke with Tamas Csonka at CS First
  Boston in London.  Csonka said the foreign investors are
  ignoring Poland for now.

  Csonka:  As it seems the market lacks foreign interest for the
  moment.  The foreigners seem to focus a little bit more on
  Hungary and the Czech Republic at the moment.  Apart from some
  individual stocks like Budimex and Mostosol Exports, which had
  avery good rally on the back of fundamentally good news.  I
  think the market is very likely to move sideways.  An interest
  rate cut certainly will help in the short term, but I don't
  think until the presidential elections we'll see big things
  happening over there.

  CET:  Down to the Czech Republic.  Why the sudden profit taking
  in Prague?

  Csonka:  I think the market has been rather stable and what we
  saw was a refocus of investors from the three or four large,
  blue chip stocks to the second level stocks.  Sectors which
  were very much in favor of foreign investors were, not
  surprisingly, the construction sector, also the chemicals and
  in particular the two paper stocks Piocel and Sepap.

  CET:  How will the news of the three tier market influence
  investors?

  Csonka:  I think in the long run it's certainly positive news
  and it will increase the transparency of the market.  That
  combined with the open OTC trading now, the published OTC
  prices, I think will help to bring back foreign investors to
  the this market.

  CET:  Budapest led the way this week, but what effect are
  Hungary's political difficulties likely to have on the
  exchange?

  Csonka:  What matters is the outcome of the negotiations between
  the liberal Democrats and the Socialists.  I think the main
  thing that foreigners are looking at is whether the liberals
  can stay in the coalition and moreover whether Bokros can stay
  as finance minister.  If these two questions are answered with
  a yes than I think we are saved.  The market had a very good
  rally despite this potential danger on the political side.  I
  think the economic data which came out in the last couple of
  days was very good, especially the trade figures but also the
  budget deficit figures.



ABOUT CET ON-LINE
-----------------

* CET On-Line is Copyright (c) 1995 Word Up! Inc., New Media
  Group, all rights reserved.  Not-for-profit redistribution of
  CET On-Line in electronic format is allowed only if our
  copyright notice, and all other copyright and by-line
  information contained in this publication is included.
  For-profit distribution of this publication or the information
  contained herein is strictly prohibited without the express
  written permission of Word Up! Inc., New Media Group.  These
  conditions are subject to change without notice.  For further
  information, contact Zoltan Nagy at >

  Some portions of the news provided by special agreement with
  Reuters.  For information on Reuters news and information
  products, contact your local Reuters office.


* All "Letters to the Editor" and other comments about
  editorial content should be directed to Duncan Shiels at
  >.  Any comments about distribution or
  production should be directed to Zoltan Nagy at
  >.


**CET On-Line** is a Word Up! Inc., New Media Group
  Publication.  The New Media Group also publishes the Prague
  Financial Monitor on-line.  For more information on the Prague
  FM, send a message with the word INFO in the body of a message
  to >.

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N E W S L E T T E R

from the Daily Bulletin of the Hungarian News Agency MTI
distributed by the Department for Press and International Information
Ministry of Foreign Affairs, Republic of Hungary

H-1394, Budapest P.O.B. 423.
Telephone: 36 (1) 156-8000
Telefax: 36 (1) 156-3801
No. 164                                                    1. Szept. 1995.



Hungarian Peace keepers Go to Sinai

        Budapest, August 31 (MTI) - A Hungarian peacekeeping group
will leave for the Sinai peninsula on Friday for a 12-month duty.

        According to the Hungarian Ministry of Defense, the 41-member
team is comprised of 11 male and 4 female police officers, as well
as 24 military officers, a physician and a liaison officer.

        All were volunteers for the mission.

        Ten of them left Hungary in early August to prepare the
Hungarian company's smooth adaptation to the international
monitoring force which has been established for control of the peace
treaty signed at Camp David in 1978.

        The international contingent is currently sustained by the
military control companies of 11 countries.
        Hungarian peace keepers will join another major mission this
year: a company will travel to Cyprus to serve under the auspices of
the United Nations with the Austrian forces already stationed  there.

        Hungary has been participating in international peacekeeping
work since 1988. So far it has sent some 250 observers on 12
different military missions. Hungarian police officers were earlier
serving in Cambodia.



OSCE Mission to Chechnya - Report by Meszaros

        Vienna, August 31 (MTI) - Settlement in Chechnya is a long
process and its key question is who should be in power until the
elections and how disarmament and a ceasefire can be realised.

        Hungarian ambassador Sandor Meszaros, head of the Grozny
mission  of the Organization for Security and Cooperation in Europe
(OSCE),  briefed reporters at the Hungarian embassy in Vienna on
Thursday.

        Meszaros, who on Thursday also informed the OSCE Permanent
Council about the mission, believes the organization may play an
important role in Chechnya for a while. There will be such major
tasks as the preparation of elections, counseling, and the
monitoring of the elections.

        The Hungarian diplomat told the Council it would be expedient
to  prolong the six-month commission which expires on October 11.

        OSCE Secretary-General Wilhelm Hoynck said the organization
would decide later whether or not to prolong the mission.

        The secretary-general praised Hungary's contribution to the
Chechen mission saying that it is a major achievement in itself that
such a great power as Russia has consented to let an international
organization help settle an internal affair, the diplomat said.

Government Session - Press Conference

        Budapest, August 31 (MTI) - On Thursday, the Hungarian
government approved key figures for next year's central budget and
the new personal income tax scale, and specified the monthly rate of
forint devaluation under a crawling peg system in 1996.

        Afterwards, Finance Minister Lajos Bokros told reporters that
the government had taken a firm stand for keeping to a stabilization
programme which had already yielded its first results.

        In the first half of 1995 the current account deficit exceeded
USD 2 billion only slightly. By the end of the year, the deficit is
expected to reach USD 3 billion, which will be almost USD 1 billion
down on last year's, the minister said. The central budget is also
encouraging. Its deficit, HUF 146 billion in late March, grew only
by HUF 60 billion in the following five months. The finance minister
felt supplementary budget targets could be met also.

        Inflation is expected to fall to 28-29 per cent this year. It
is  encouraging that the restrictive measures had not thwarted
economic  growth, which is expected to be 2 per cent in 1995, Bokros
said.

        The government sees the need for a strict fiscal policy next
year. It decided that the aggregate public finance deficit should
not exceed HUF 258 billion, 3.9 per cent of GDP, and, within that,
the central budget deficit should not be over HUF 220 billion.
Export and investment promotion will stay priorities. The government
has doubled its funding to the Economic Development Fund.

        The government has approved a  new personal income tax scale
for next year. The zero-rate tax  bracket will be a thing of the
past: annual incomes of up to HUF  150,000 will be subject to a 20
per cent tax. As a compensation,  wage and salary-earners, first of
all low-income people, will be  granted tax breaks, Finance Minister
Lajos Bokros said.

        In 1995 real wages are expected to drop by 8-9 per cent. The
trend will continue next year, but less drastically, he added.

        The government fixed the monthly rate of forint devaluation at
1.2 per cent from next January. From March to June this year the
Hungarian currency was devalued by 1.9 per cent a month. In the
second half of the year, the monthly rate was 1.3 per cent.

        In 1996, consumer prices are expected to increase by 19-20 per
cent as compared with 28-29 per cent this year, the minister said.

        Next year the Hungarian economy will grow again by 2 per cent.
The deficit of the current account will decrease by another USD 1
billion, to USD 2 billion. "This deficit can already be financed
from the inflow of foreign capital, which means that Hungary's
external debt may no longer increase in 1996," the minister said.

        The government discussed a three-year economic strategy for the
period 1996-1998. The programme is designed to create dynamic export
growth. Accordingly, the current account deficit will fall to USD
1.5 billion by 1997 and remain on the same level in the following
year. Exports will continue to grow without any central curbs put on
imports. GDP may increase by 2 per cent next year, 2-3 per cent in
1997 and 4-5 per cent in 1998. From 1997, the public finance deficit
should not exceed 3 per cent of GDP, without revenues from
privatization taken into account. "On the basis of this programme,
Hungary may conclude agreements with the international financial
organizations," the finance minister said.

        Elemer Kiss, Parliamentary State Secretary of the Prime
Minister's Office, said the central budget would grant Duna TV 200
million forints. The government has set up a Foundation for the
Hungarian Human Rights Centre and provided HUF 10 million.


World Gypsy Festival Opens in Budapest

        Budapest, August 31 (MTI) - A World Gypsy Festival entitled
"Rom Som" (I am a man) started in Budapest today. The four-day
festival was opened in Budapest's Ethnographic Museum by Hungarian
President Arpad Goncz.

        The festival will provide the full scale of Gypsy arts for the
public, with artists from all parts of the world presenting their
skills in music, dancing, fine arts, poetry, and theater.

        Letters addressed to the participants by Nobel Prize-Laureate
Anglican Bishop of Cape Town Desmond Tutu and the Dalai Lama were
read out at the opening ceremony.

        A performance in Budapest Convention Centre on Sunday will
close  the event. Funds from the event will go to children from
former  Yugoslavia living in refugee camps at Nagyatad and Debrecen.


Foreign Ministry on Romanian Initiatives

        Budapest, August 31 (MTI) - Gabor Szentivanyi, Spokesman of
the Hungarian Foreign Ministry, commented on the latest initiatives
of the Romanian leadership in an interview with MTI today.

        Addressing a conference in Bucharest on Wednesday, Romanian
President Ion Iliescu proposed that Hungary and Romania should
declare in a joint statement their efforts for a historical
reconciliation of the Franco-German type.

        The Hungarian spokesman said:
        "We have received the latest statements of the Romanian
leadership with interest, and welcomed the intention for historical
reconciliation. This is what Hungary has proposed since December
1989 in the awareness that the two countries+ common goals of
joining the organizations of Euro-Atlantic integration and
strengthening stability and security in their region and Europe as a
whole can only be attained through cooperation based on normalized,
good-neighborly relations. It is on the basis of this principle  that
we are holding talks with Romania on a bilateral basic treaty.

        "Since we are not yet familiar with the details of the
initiative, we are waiting for, and will carefully study, the
concrete proposals which the Romanian foreign affairs spokesman
promised to send us through diplomatic channels.

        "We are convinced that historical reconciliation and  good-
neighborly relations cannot work without the settlement of  problems
in bilateral ties, including the situation of ethnic  minorities, in
keeping with European norms with international legal  force. Nor can
they work without the creation of a democratic  atmosphere based on
mutual confidence, thwarting all attempts at  inducing extremist,
nationalist sentiments."

        "President Iliescus statements  confirm our view that settling
the issue of national minorities is  of vital importance for
relations between the two countries.

        "Of course, caring for the fate of ethnic Hungarians living
beyond our borders is a duty arising from the constitution even for
us. We would like to see the members of the minorities feel at home
in the native country where they are living and, by preserving their
identity, culture, and tradition, become contented citizens of that
state. Accordingly, the Hungarian government presses for the
international and European norms to be enforced in the case of both
ethnic Hungarians in Romania and national minorities in Hungary.

        "In our view, Hungary's espousal of the cause of Romania after
the fall of Ceausescu's dictatorship in December 1989 and the
negotiations held since then convincingly prove for the Romanian
people and its leaders that Hungary respects the internationally
recognized boundaries and develops its ties with its neighbors on
the basis of the accepted European norms, and contributes this way
to regional and European stability. In this spirit, Hungary has
concluded basic treaties with 18 countries, including four of its
neighbors: Ukraine, Slovakia, Slovenia, and Croatia. This is what  it
strives for with regard to Romania, too," the Hungarian foreign
affairs spokesman said.


Moscow: Malev Staff Returns to Wrecked Office

        Moscow, August 31 (MTI) - The Russian Foreign Ministry on
Thursday expressed regret over the break-in incident at the Moscow
office of the Hungarian airline Malev eight days ago.

        On August 23 at dawn, employees of the Veles company (claiming
ownership of the building) entered the central Moscow office by
force, removed the sign advertising Malev, threw furniture through
the shop window, took control of the office and prevented staff from
entering to work in the morning. Malev staff returned to the office
today.

        Addressing reporters, Foreign Affairs Spokesman Grigory Karasin
hoped the incident would do no harm to Russian-Hungarian relations.

        The Russian foreign affairs spokesman said that on August 23
the  Hungarian embassy informed the ministry in a note about what had
happened in the Malev office. Upon receipt of the note, the Foreign
Ministry took the necessary measures. The August 28 resolution of
the local district committee in charge of real estate confirmed
Malev's right of lease on the office, and expressed its readiness to
conclude a new lease at once. Karasin stressed that those who broke
the law by attacking the office would be called to account.

        Under a valid writ issued by a prosecutor, Malev staff,
accompanied by policemen and local authority and Veles
representatives, returned to jointly record and witness the state of
the office today. The back rooms of the office remained undamaged
but the reception hall had been wrecked by the intruders. Gyorgy
Varhelyi, head of the office, opened two of the three safes. In the
first safe he found cash contents (USD 2,000) in order, but money
belonging to staff members (USD 33,000) had disappeared from the
other safe. The computers were undamaged and all the unused air
tickets were found. The locks of the office have now been replaced
and new keys handed over to Varhelyi. Staff will start taking an
inventory on Monday.


Record Turnover Expected in Hungarian-German Trade

        Budapest, August 31 (MTI) - Based on the first half year
development tendencies of Hungarian-German trade, the value of
bilateral trade can, by the end of the year, surpass the record of
USD 6.4 billion achieved in 1994.

        According to figures by the Ministry of Industry and Trade, the
value of total turnover in the first six months of 1995 was more
than USD 3.3 billion. Hungarian exports were worth more than USD 1.5
billion, 15 per cent up on the corresponding period of 1994. Imports
increased in a greater degree, by 20 per cent, and were valued at
USD 1.8 billion.

        With respect to Hungary's import of foreign working capital,
Germany is in second place after the United States. Its share of the
USD 9.5 billion invested in Hungary so far is nearly 20 per cent.
There are nearly 5,000 Hungarian-German joint ventures.

        According to figures by the State Property Agency, German
partners acquired shares in 81 companies in the course of Hungarian
privatization. Between 1990 and 1994, 119 joint ventures with
Hungarian stakes were set up with a total equity of nearly USD 6
million.


        Germany is Hungary's most important foreign trade partner, and
shared nearly 26 per cent of the total Hungarian foreign trade
turnover in the first half of the year. Twenty-nine per cent of
Hungarian exports are to Germany, with German imports accounting for
24 per cent.