Europe The Bills Come Due

By JOHN BORRELL WARSAW

What price freedom? The question on the lips of East Europeans a year ago seemed to have been answered when communist dictatorships gave way one after another without offering more than token resistance. The startling disintegration of the East bloc registered a 7, maybe an 8, on a Richter scale of this century's most significant events, yet the bill for half a dozen revolutions seemed exceedingly modest. The cost of erasing the 45-year-old political division of Europe and opening the way toward democratic pluralism and free-market economies: a few hundred killed, mainly in Romania.

One year later, as elected governments from the Baltic to the Black Sea struggle with the complexities of democracy and the harsh realities of the marketplace, often hampered by old demons like nationalism and populism, an awareness is growing that the full dues have yet to be paid. Whatever the sacrifices made over the past 12 months -- or the preceding four decades of communist rule -- citizens in every liberated East European nation are acknowledging that those were merely small down payments on freedom.

Since the revolutions of 1989, all the region's countries have had democratic, or at least partially free, elections, and all have pledged to abandon command economies for the free market. But while small-scale capitalism is beginning to take root, no country has yet attempted to privatize the thousands of large-scale industries in the portfolios of state- owned business. In some countries an entrenched communist nomenklatura is hanging on to as much economic power as it can; in others, both government and opposition are so riven by disagreements that day-to-day administration seems to be coming apart. Says George Karasimeonov, a political science professor at Sofia University: "We have experienced the birth of democracy, but democracy has not yet created its own institutions and traditions."

East Europeans are now worrying about jobs, rising prices, their very futures. Some are looking for scapegoats, turning on minorities and seeking retribution from former communists. Others are looking for solace in nationalism or embracing populist politicians who gloss over the level of pain that will accompany the transition to market economies. "These are difficult times everywhere," says Chris Mattheisen of K.M. Associates, an independent consultancy group in Budapest. "People are freer but a lot more insecure."

Compounding the difficulties for Eastern Europe is political unrest and economic chaos in the Soviet Union as well as, farther away, the conflict in the Persian Gulf. Turmoil in the Middle East has pushed up oil prices and curtailed world markets at the very moment when the Soviet Union, still the East Europeans' major trading partner, has cut back sharply on oil deliveries to its former allies and reduced its purchases of their goods. In Hungary angry motorists have blockaded roads and bridges; in Bulgaria the government has been forced to order sharp cuts in the power supply. The oil crisis has made it impossible to shut down Soviet-built nuclear reactors in Bulgaria and Czechoslovakia that Western experts consider unsafe. "The gulf crisis couldn't have come at a worse time for Eastern Europe," says Daniel Thorniley, an analyst at Business Eastern Europe, a consulting agency in Vienna. "It has raised costs and diverted Western attention away from the area."

One of the region's most immediate problems is a level of indebtedness to the West far beyond the ability of most countries to repay. Bankrupt Bulgaria has simply stopped paying interest and capital on its $10.8 billion debt, while Poland, with $41 billion, and Hungary, with $21 billion, have been forced to reschedule or restructure their debts. The shock of full-speed-ahead economic reform in Poland has lowered real incomes by as much as 40% this year; thus there is particular resentment at the debt incurred during the communist years. These nations want more forgiveness from the West. "At this stage of such radical change, the West could be crucial in determining the future course here," says Polish Finance Minister Leszek Balcerowicz.

East Europeans also want assurances that they are not to be poor relations forever. Old political divisions could be replaced by economic ones, warned Polish Prime Minister Tadeusz Mazowiecki at last week's Paris summit of the Conference on Security and Cooperation in Europe (CSCE), "unless the split into a rich and a poor Europe, an A-class and a B-class Europe, is overcome." The leaders of the 34 states at the conference concluded by signing the Charter of Paris, a treaty marking the end of the cold war and the beginning of a new Europe committed to "prosperity through economic liberty and social justice."

While Poles have so far accepted austerity measures that have sharply increased prices, reduced industrial output 30% and pushed unemployment over the 1 million mark in a nation of 38 million, the government acknowledges that there are limits to people's patience. Elsewhere in the region those limits are already being tested. Earlier this month, when the Romanian government withdrew state subsidies on a wide range of goods, many prices more than doubled overnight. Workers and students took to the streets demanding the government's resignation and shouting slogans against President Ion Iliescu and Prime Minister Petre Roman: "Down with Iliescu!" and "Roman, resign!" Says Nica Leon, leader of the Free Democratic Party: "It is a very bleak economic picture. The shops are nearly empty, people have no money, and there ^ is little heat in apartments. Little has changed."

When angry Hungarian taxi drivers and truckers blocked roads after a gasoline price rise of 65%, the government backed off: the increase was halved, and officials agreed to consult with unions and other parties on price hikes. Similar protests have erupted in Bulgaria, where electricity is rationed as much as 12 hours a day and store shelves are barer than they were before the collapse of communism. There are even long lines for candles. Two weeks ago, the government announced a 100-day crash program aimed at reviving the crippled economy; the scheme includes some price liberalization and partial convertibility of the lev. Last week the government survived a no- confidence vote while 50,000 people demonstrated outside parliament calling for its ouster and union leaders threatened a general strike.

Conventional wisdom suggests that Polish-style economic shock therapy is the best method to move these countries away from command economies. But if people refuse to accept immediate pain in anticipation of future gain, governments in the region will have trouble pushing through their programs. To forestall more conflict with workers, the Romanian government two weeks ago won special emergency powers to tackle economic problems by issuing decrees rather than working through parliament.

Since the trade unions are strongest in some of the most labor-intensive and least efficient industries, like steel and petrochemicals, such prime candidates for closure may in fact be the last to go. A recent Polish study shows that the larger and more inefficient an industry, the more effective its unions have been in protecting jobs. Romania this month announced that it would simply cut off energy supplies to rust belt industries, a drastic step that can only heighten the likelihood of conflict.

Under communism few grew rich, but few went hungry; in many cases people enjoyed surprisingly high levels of prosperity. In Poland, for example, wealthy entrepreneurs were able to afford Western luxury automobiles; in Czechoslovakia ownership of second homes was common. Now many may no longer be able to enjoy such extravagance. Worse, there is real fear that hard times will hit almost everyone. "People are asking if they will have jobs next year and where unemployment benefits will come from," says Valtr Komarek, director of the Institute for Forecasting in Prague.

In fact, all of Eastern Europe lived beyond its means in the latter decades ! of communist rule. But there is a reluctance to take responsibility for the consequences. Czechoslovak President Vaclav Havel, preparing for the start of economic reforms on Jan. 1, frequently reminds his countrymen that hard times are the price they will have to pay for not having opposed communism more vigorously.

Havel accompanies such chiding with the advice that the communists should not blamed for everything either. He opposes witch-hunts against former officials similar to the purges the communists mounted on taking power in 1948. That is an unpopular pitch in a country where the desire for revenge is often stronger than the will to rebuild. Last month a group of students pledged not to mark the Nov. 17 anniversary of last year's revolution because, they claimed, the communists had stolen that revolution. They complained that many ex-communists were still in government and were running most of the country's industries. "Havel is wonderful, and we love him," says Hana Kovandova, 22, a third-year economics student. "But he is too soft on the communists."

The same charge is leveled against Mazowiecki by Solidarity leader Lech Walesa, his main opponent in Poland's presidential election this week. Mazowiecki's government has taken steps to prevent the old nomenklatura from grabbing state-owned companies up for sale. But like Havel, he argues that a witch-hunt would abort economic reform and possibly lead to civil war. Bulgaria's new government thought otherwise last week, when it announced that former communist leader Todor Zhivkov would be put on trial, charged with misappropriating $3.7 million during his 35 years in power.

Present uncertainties make rummaging in the past a growing preoccupation -- one that is reviving some nasty habits. Voices of anti-Semitism are again heard in the region, along with virulent nationalistic outbursts that disparage other minorities. Though only a handful of Poland's Jews remain out of a prewar population of 3 million -- and there are none in the administration -- it is not uncommon to hear people blaming problems on "all the Jews in government."

Fierce flashes of nationalism threaten to tear apart Yugoslavia, while nationalists in Slovakia, one of the two partly autonomous republics that make up Czechoslovakia, are pushing hard for a referendum that would allow Slovakia to break away. Yet while they demand independence for themselves, the 5 million Slovaks, a third of Czechoslovakia's population, deny any such choice to Slovakia's 600,000 ethnic Hungarians; the more militant nationalists even insist that the Hungarians should be made to speak Slovak. To combat such trends, Soviet President Mikhail Gorbachev at last week's CSCE meeting called for a new "economic, environmental and technological foundation" to counter "dangerous outbreaks of nationalism and separatism."

A major danger is that falling living standards, large-scale unemployment and political rivalries will produce the kind of aggressive nationalism that has caused the region so much grief in the past. People are all too ready to blame others for their problems. When Havel suggested that Czechoslovakia could not expect open borders with the rest of Europe if it kept its own frontier with Poland closed, he found no echo among his countrymen. A survey by the Public Opinion Research Institute disclosed that while more than 81% of those polled supported Havel generally, only 4% agreed with him on the border issue.

The smugness of Czechoslovaks may stem from the fact that, along with Hungarians, they are relatively free to travel. Not so for others: although the Iron Curtain has crumbled along the entire length of the old East-West divide, many East Europeans find their freedom of movement as curtailed as ever. It is no longer a question of obtaining a passport and an exit permit from a suspicious communist regime. Now the problem for Poles, Bulgarians and Romanians is to obtain visas to the West or even permits to visit one of the other countries in Eastern Europe. Says Andrzej Misiok, a Pole seeking a visa to Greece: "In reality I am not much freer than before."

If East Europeans bridle at such limits on themselves, Poles in particular are beginning to look anxiously eastward to the Soviet Union and hoping that its citizens remain tightly shackled. Should the Soviets do what the West has been urging for decades -- allow its citizens to travel abroad freely -- Poles fear a stampede westward into Poland. And if things get bad enough in the Soviet Union, which some Polish officials consider likely, many Soviets will come regardless of any change in regulations. "There is no way we can police the whole eastern border," says an official. "It is just too porous."

At the same time, a growing number of West European countries are beginning to tighten controls along their eastern frontiers. Austria has dispatched troops to patrol borders once sealed by barbed-wire fences and watchtowers. | Germany is reviewing security arrangements along the Polish frontier, while promising to speed up visa issuance for legitimate travelers. "The worry for Western Europe is not just that the reforms will fail and the region will slip into anarchy and chaos," says Karsten Voigt of Germany's Social Democratic Party. "Even if reforms succeed, it will mean thousands of factories closed down and millions out of work." The prospect is that a stream of political escapees will turn into a flood of economic refugees.

If that is a frightening scenario for Western Europe, it is a terrifying one for the East European countries. So terrifying, in fact, that some may accept half-measures and muddling through rather than take the risks involved in marching toward the goals about which they were so enthusiastic a year ago. If last year's question was "What price freedom?" next year's may be "Can we afford it?"

With reporting by Michal Donath/Prague, Sean Hillen/Bucharest and Connie Sokoloff/Sofia