Special Report: Eastern Europe Chips Off the Old Bloc

By Christopher Ogden

The police held back traffic as an elated throng of 75,000 marchers snaked through the streets of central Budapest waving red-white-and-green Hungarian flags and shouting "Democracy!" Under banners as disparate as those of the liberal reformist Hungarian Democratic Forum and the neo-Stalinist Ferenc Munnich Society, independent political clubs and parties reveled peacefully last week in the first officially sanctioned street demonstrations since last fall, when legislation for sweeping political reforms was introduced, including a multiparty system for the socialist state. Thousands more Hungarians marked National Day by heading -- literally -- for the exits. Easy access to passports and a loosening of foreign-currency rules drew swarms of Hungarian tourists to Vienna's main shopping thoroughfare, where they scooped up stereos and VCRs from special shops bedecked with Hungarian flags that accepted normally nonconvertible Hungarian forints.

Unseasonably warm weather in Warsaw, 340 miles to the north, brought more political change into bloom. Two weeks ago, the Jaruzelski government and the Solidarity-led opposition agreed to hold elections for a second chamber of parliament, a revived senate that would include non-Communist candidates. Party leader Wojciech Jaruzelski, who presided over the crackdown outlawing Solidarity in 1981, was uncharacteristically exuberant: "Significant progress is being made to construct parliamentary democracy in Poland." In a church basement across the city, Solidarity leader Lech Walesa told his supporters that Poland was entering a decisive stage "we hope will lead to democracy and freedom."

Whole segments of the East bloc, once firmly under the thumb of Soviet orthodoxy, are launched in headlong pursuit of a new political and economic order. But not all. In Bulgaria an aging leadership shows no sign of interest in homegrown perestroika. In Czechoslovakia, where leading dissident Vaclav Havel has been sentenced to jail, trials moved into a second month for other activists held on charges ranging from organizing peaceful antigovernment demonstrations to signing political petitions. And in Stalinist Rumania, party leader Nicolae Ceausescu remains the "Idi Amin of Communism," as his neighbors call him. The unregenerate totalitarian, obsessed with stamping his personal mark on the physiology and psychology of his country, brooks no opposition. When six retired high-ranking officials released a letter harshly condemning his brutally repressive regime, Ceausescu arrested the son of one of the signatories on spying charges and ordered a nationwide security alert.

Yet even in these nations, cowed populations are beginning to waken to the possibility of change. Just over a year ago, the worst riots in the history of the regime broke out in Brasov, Rumania. And beginning last August, Czechs have taken to the streets to protest the 1968 Warsaw Pact invasion and the continuing Soviet military presence in their country.

In Communist Yugoslavia, not a member of the Soviet satellite bloc, reform moves have opened yawning rifts between the country's eight diverse republics and provinces and a flock of feuding ethnic groups. Serbian nationalists, led by the charismatic Slobodan Milossevic, are pursuing a dream of dominance in one part of the country, while a divided national leadership is struggling to stave off collapse of the Yugoslav economy.

Not since Stalin slammed down the Iron Curtain four decades ago has Europe witnessed such ferment east of the Elbe as that unleashed by Soviet President Mikhail Gorbachev's campaign to reshape socialist politics and economics. In the past, when opposition escalated, the Kremlin dispatched tanks and troops to crush dissent. But since coming to power in 1985, Gorbachev himself has been the chief dissident, leading the assault on the status quo. Acknowledging that there is no "binding model" for socialism, he has encouraged pluri- Communism in Eastern Europe.

For the past 40 years, Moscow has had two goals in controlling its neighbors: to protect Soviet borders from the threat of the West and to provide trading partners and markets for Communism. Gorbachev appears to have altered these canons. He aims to rework if not junk the centralized and self- contained Communist economies. And he seems to consider the traditional definition of security, in the form of a chain of subservient states, no longer entirely relevant. In fact, his policies indicate that he probably considers revolution or economic collapse within the rigidly controlled Soviet empire a far more plausible threat than attack from the West.

The sparks thrown off by the widely divergent policies have ignited a sputtering fuse in the region that could lead to a dangerous explosion. The satellites, no longer forced to operate under the delusion that Communism works, have been given a historic chance to pursue, within undefined limits, their own reform policies. But if Gorbachev is willing to countenance some degree of free play country by country, he seems unlikely to permit any to opt out of the Warsaw Pact.

Eastern Europe's unpredictable volatility also has implications for the West. If Communism does shuffle slowly offstage as a failed experiment in Poland or Hungary, there is no guarantee it will be replaced by democracy. Without substantial progress toward economic recovery, the odds are high that social unrest and political chaos will lead to a dictatorship of the left or the right. Yugoslavia too is rent by such severe economic disparities and political tensions linked to strident nationalism that the country threatens to disintegrate into warring provinces.

Out of the cracks that have opened both within Eastern Europe and between the East and its master in Moscow emerge two crucial questions demanding urgent answers:

-- How far can the satellites distance themselves from Moscow without provoking a Kremlin crackdown?

-- How can the West take responsible advantage of what's happening?

Until now, the West has been remarkably shy about taking a hand in the process of change. Entranced by Gorbachev and anxious to believe the cold war is nearly over, the West has been reluctant to tamper in his sphere of influence. Preoccupied with other regions, Washington in particular has not paid more than occasional attention to Eastern Europe. Wariness is wise, but the current indecision has been paralytic.

At the same time, Western influence is painfully limited. Too bold an intervention might tempt the eager reformers like Hungary and Poland to go too far and court Soviet repression. At bottom, though, the West simply lacks the power to order the universe that it wielded in 1945.

The first question is easier to answer: no one knows how far is too far, certainly not with any precision, perhaps not even the Soviets. "Gorbachev has given his clients considerable leeway," says Adrian Hyde-Price, a research fellow at London's Royal Institute of International Affairs. "But he does not seem to have a carefully thought-through policy for the longer term. It is a dreadful double problem: how to open the floodgates without letting too much water rush out."

Soviet leaders openly disagree about how much freedom should be tolerated, let alone encouraged, in Eastern Europe. Conservative Politburo member Viktor Chebrikov, former head of the KGB, last month berated "antisocial elements" for attempting to "direct the masses toward anarchy." Pravda responded contrarily, suggesting that the ruling party might have to consider even "formal agreements" with independent groups. At the same time, the Kremlin has put down in the Baltic republics the kind of political muscle flexing it has tolerated farther south.

Such confusion aside, there is little doubt about the Soviet determination to hang on to Eastern Europe, the only place where Communist regimes have been successfully maintained at bayonet point from outside. For all the experimentation, Gorbachev has not come close to renouncing the Brezhnev doctrine, which asserts Soviet authority over the bloc. Gorbachev is not the only one without a thought-through policy. Neither the U.S. nor its Western allies have one either, making an answer to the second question elusive. Only now are Western governments beginning to explore the potentially titanic implications of the changes under way.

Some Europeans fear the rate of change in the East may outpace their ability to construct coherent policies in response. Says a senior adviser to French President Francois Mitterrand: "Eastern Europe could become a region of instability and risk." But others scent something better: the possible end to the cold war, on which virtually all East-West security planning is based. "This is the greatest opportunity the West has had to influence this region since the division of Europe after World War II," said Mark Palmer, the U.S. Ambassador to Hungary and a leading advocate of Western activism. "We simply must jump in, not only to advance our own values and economic system but to do all we can to assure that these dramatic changes come with maximum stability. That demands the West have a strategy."

Yet so far, the West has little more than vague principles to offer, not a comprehensive vision. Former Secretary of State Henry Kissinger, an influential figure among Bush Republicans, has argued that Washington and Moscow should directly negotiate the future of Eastern Europe at a kind of "Yalta Two," a latter-day reprise of the much criticized wartime agreement that cemented the East-West division of Europe. Moscow would agree to tolerate hitherto unprecedented political and economic liberalism in the East and would renounce the Brezhnev Doctrine. In return, the West would assent to the "legitimate" Soviet security interests there, including the implicit promise not to seek the reunification of Germany or pursue any other military advantage.

Western conservatives object that Yalta Two would simply concede continued Soviet dominance over the area. They do not favor cementing the status quo or illogically and unrealistically attempting to extend NATO's influence into the East. Instead, they recommend that both sides try to thin out their troop presence.

The wise course for the West is to overhaul its long-standing policy of "differentiation," which has meant, primarily, dealing with each East European country directly rather than through Moscow, and rewarding human- rights improvement with economic prizes like most-favored-nation trade status. But, says a Western diplomat in Vienna, "quite frankly, differentiation is a reactive policy, a cautious policy. It does not initiate and it is not crafted to take account of the complex issues that are now at stake."

The West needs to give definition and vigor to a basically sensible approach. It must identify what trends it should encourage, where involvement can have the greatest impact and where initiative would be largely wasted. Poland's Foreign Minister Tadeusz Olechowski, for one, has made it plain to Secretary of State James Baker that he welcomes help: "The United States should not be absent."

The U.S. does not intend to be, but the West is divided by the question of how, and how much, to help the East bloc. One school, which includes Italian Prime Minister Ciriaco De Mita, is eager to launch a Communist Marshall Plan to deal with the bloc's $131 billion indebtedness -- a 60% increase in three years -- rung up by outmoded and mismanaged state industries. "An expensive irrelevance," snorted the Economist. Critics are wary of throwing money at Eastern Europe without a clear idea of what they should extract in return. Former U.S. National Security Adviser Zbigniew Brzezinski wants any assistance to be met by "deliberate movement toward the adoption both of a free-pricing mechanism and of genuine freedom of political choice."

Yet most of what the West can realistically do is smaller in scope and largely aimed at nudging the bloc toward market economies. The U.S. is prepared to help, but not with money. "It would be hard to move legislatively," said a top presidential aide, in an era of tight budgets. But, he added, "if they make the kind of changes they ought to make," the Administration would back Poland and Hungary with the International Monetary Fund, support extending trade waivers, increase high-level contacts and boost exchange programs. Ambassador Palmer recommends joint ventures and small loans directed to specific projects and placed with small commercial banks. He wants President Bush to make an East European tour.

Private funding can also help. This month the bloc's first privately financed business school will open in Budapest. A Rockefeller Brothers Fund program assists private agriculture in Poland. But so far the private stake has been small. In the past, the East bloc regimes have disdained such capitalist assistance. Now Western investors worry about instability. "If they want new money and new investment from the West, they've got to create an economic and social climate so Western business executives will sense they're dealing with a stable situation, unfettered by bureaucracy, ((with)) a normal return they can repatriate," says Peter Tarnoff, president of the Council on Foreign Relations.

The optimists believe economic progress will inevitably provoke political progress. "If economic reform works," says Franz-Lothar Altmann, deputy director of the Sudost Institut in Munich, "it will legitimize political change." The eventual goal is a gradual Finlandization in which certain bloc countries move toward Western-style market economies and adopt the political democratization that goes with them, reducing the adversarial nature of the East-West relationship.

Realistically, there is no intent to pry the East away from Moscow and destabilize the region militarily. But there are those who see every reason to seek systemic change. "Rather than trying to separate Poland from the bloc, we ought to encourage changes there to spread back to the Soviet Union," says Michael Mandelbaum, a senior fellow at the Council on Foreign Relations. "Why stop at the Elbe? Let's roll Communism all the way back to Moscow." Unlikely. But if the U.S. and its partners want to move it at all, now is the time to get started.

With reporting by Kenneth W. Banta/Vienna, with other bureaus