Interview of President Sali Berisha with the British television service BBC World Service PAGE 2

On negotiations to repay foreign debts The democratic government assumed responsibility for and is repaying its obligations to 41 foreign creditor banks, even though the debt was created by the illegal actions of the communist regime Interview of Mr. Dylber Vrioni, Deputy Prime Minister and Minister of Economy and Finance, given to journalist Mentor Shehu On negotiations to repay foreign debts About 700 million dollars - The debt the democratic government inherited from the communist regime The democratic government assumed responsibility for and is repaying its obligations to 41 foreign creditor banks, even though the debt was created by the illegal actions of the communist regime Interview of Mr. Dylber Vrioni, Deputy Prime Minister and Minister of Economy and Finance, given to journalist Mentor Shehu Question: Mr. Vrioni, under what circumstances was Albania’s foreign debt incurred, at a time when Albania, under its Constitution, was not supposed to have debts because it was prohibited from taking loans and borrowings from abroad? As a result of extremist centralism and self-reliance, Albania was cut off from other countries for decades. Under these circumstances, Albania plunged into a profound economic and financial crisis. The years 1985–1991 were marked by a rapid and pronounced decline in production, a rapid means of inflation and major macroeconomic imbalances. In this situation, the country’s financial position deteriorated rapidly. This was accompanied by an immediate and uncontrolled increase in the budget deficit and an unstoppable monetary expansion. During the years 1985–1991 ... Question: When did the first negotiations begin to resolve this inherited financial debt with foreign banks? By decision of the Council of Ministers No. 429, dated 30.8.1993, the Government Committee for Negotiations on the Foreign Debt was established, comprising four members and chaired by me. The committee divided Albania’s foreign debt into four main parts: public debt to Western European countries, about 50 million dollars; private debt to foreign banks, 500 million dollars; clearing debt to the former communist countries of Central and Eastern Europe, about 150 million clearing rubles and dollars; and debt owed by former state enterprises to foreign companies, about 30 million dollars. ... unconstitutionally, without the knowledge of the Albanian people. In practice, this isolated the country from the international financial partners it so badly needed. foreign companies, about 30 million dollars. Bulgaria’s private foreign debt. This solution had an initial present-value cost of over 44% of the total principal, plus interest. It would be paid partly through an immediate buyback, while the remainder, under the Brady Solution, would be restructured as long-term debt according to certain criteria. Question: Could a solution such as Bulgaria’s have been accepted, when Albania was experiencing far more difficult financial and economic conditions than Bulgaria? This point was the Achilles’ heel of our negotiations. We maintained, first of all, that we could in no way afford a solution like Bulgaria’s, since the state of our economy was much more difficult, we had a very tight economic program to stabilize macroeconomic indicators, and we would favor a buyback solution ... ... change the past, but we regarded the existence of such a problem—which constrained the present and future of our country and isolated us from partners with whom we had long dreamed of cooperating—as a misfortune. The Swiss insisted, leaving us with the Bulgarian solution as the only option, but we managed to leave open discussion on beginning negotiations between a Steering Committee of Banks, made up of five banks and representing all our creditors. We continued a lengthy and patient correspondence with the Swiss bank until we persuaded them to hold a meeting in Tirana on 24 and 25 May 1994. This meeting would mark the beginning of regular negotiations with the Steering Committee of Banks. Representatives from UBS, Banca Nazionale di Lavoro, Kreditandstalt and Cred Lyonnais took part in the meeting. was of greatest concern to the more clear-headed observers, given the lack of any control over the budget deficit and the unstoppable monetary expansion. During 1985–1991, Albania’s external position deteriorated markedly, and the balance of payments reflected a substantial deficit with serious consequences for the economy. These deficits were financed by the communist regime through the near-total depletion of foreign-exchange reserves, borrowing from abroad, overdue liabilities, interbank loans and the non-fulfillment of foreign-exchange contracts. The trade deficit, and even more so the current-account deficit, could no longer be financed from domestic sources amid the crisis. The foreign-exchange reserves of the Bank of the Albanian State had been exhausted, reaching almost zero. Under these circumstances, Albania found itself facing a relatively large external debt that was difficult to restructure. This was because, for the first time in the history of debt, such large liabilities had been created through FOREX transactions (currency exchanges), and the foreign creditor banks were deeply concerned about the creation of such a precedent, which in fact constituted financial fraud in the context of international relations between banks. It should be emphasized that all the foreign currency obtained through these liabilities was used, apparently to conceal the real state of the Albanian economy, mainly to buy food, merely to convince the population that, despite the collapse of the communist regimes of Eastern Europe, Albania’s communist regime and its economy were not in crisis. Considering that liabilities to foreign banks alone amounted to around 500 million dollars, and that this entire sum was consumed rather than invested, this constitutes a crime against Albania and the Albanians, who were left bearing such a huge debt. On the other hand, when democracy began in Albania and economic reform began, aiming to open up the Albanian economy and establish normal cooperation with international financial institutions, these obligations included around 50 million dollars in debt, 500 million dollars in private debt owed to foreign banks, Eastern Europe of around former state enterprises to foreign firms of around 30 million dollars. Taking into account both political and strategic importance and financial criteria, the committee decided first to contact the Paris Club regarding public debt and the foreign banks regarding private debt. These were also the recommendations made by the World Bank and the International Monetary Fund. As for public debt, as is known, an agreement with the Paris Club was reached at the beginning of 1994, and by the beginning of September of the previous year all bilateral agreements to restructure these liabilities had been signed. In November 1993, the Debt Committee sent a letter to all foreign banks informing them that the Albanian Government had established the State Government Committee on External Debt, that the banks could discuss this issue only with this committee, and, finally, inviting them to resume contacts and talks in order to find a solution to these liabilities. The banks’ responses varied: some demanded repayment of 100% of the liabilities, some remained silent, and some responded positively to our request for talks. Among the latter was the “Swiss bank,” Union Bank of Switzerland, which also proposed a meeting to discuss how to organize the negotiations. We arranged a meeting with this bank in January 1994, which took place in Tirana. The bank’s representatives suggested that the creditor banks form a “Bank Steering Committee” representing all 41 foreign creditor banks, in order to facilitate the negotiations—a practice that had by then become standard in debt negotiations. However, the Swiss bank made the start of talks and the creation of a debt-negotiation committee in Albania conditional on our accepting the solution that had been set for private debt owed to foreign banks, Eastern Europe of around dollars. solution that had been decided for

The scandal Hundreds of thousands more dollars squandered by PS leaders -151 thousand dollars were withdrawn from the Bank from the account of the Central Committee’s Solidarity Fund and squandered by the PS in 1991–92 EDI PALOKA The 400 thousand dollars are only part of the hundreds of thousands of dollars squandered by PS leaders during 1991–92. This truth has been stated several times in “RD,” and the new facts merely confirm it. Another 151 thousand dollars were withdrawn from the State Bank by PS leaders between January 1991 and April 1992. Like the 400 thousand dollars (which were transferred to “ZP” on the order of R.Alia), the other 151 thousand dollars were withdrawn directly from the account of the Central Committee of the PPSH Solidarity Fund. It has now been established that this Fund was created and maintained with money from the state budget, so any misuse of the Fund’s money constitutes a violation of the law. Nevertheless, the Bank ... ... on what grounds did the bank hand them over? It is clear that the PS leaders used the final months of their rule to loot as much as possible. Holding power, they still acted as a state party, even though legally the separation of party and state had already taken place some time before. Let us also remember that some of the Bank’s leaders at the time are now members of the PS leadership. The looting was therefore carried out in broad daylight, at a time when Albanians were desperately rushing toward foreign shores, terrified by the specter of hunger. Almost all of today’s PS leaders are implicated in this scandal; their names will be published soon in “RD.” Meanwhile, the justice system is also working on these facts.

Sofia: The dispute between President Zhelju Zhelev and the Bulgarian parliament intensified after parliament voted to move decisively toward changes in agricultural legislation. The party that holds a majority in parliament (the Bulgarian Socialist Party, made up of former communists) tried on Wednesday evening, for the second time and without success, to pass the amendments. When parliament approved these amendments two weeks ago, Zhelev used his presidential veto to reject them as unconstitutional. Zhelev believes the amendments, which favor the creation of agricultural cooperatives at the expense of private property, would hinder the agricultural reforms the country urgently needs. The President noted that he intended to refer every proposed amendment, article by article, to the Constitutional Court. DPA

- Meta and Legisi side with the conservatives against Majko - B. Zeneli dismissed as head of foreign relations - Will the loyalty Meta is showing to Ruçi be enough for him to take Zeneli’s office? It seems the PS secretary has found division to be the best way to escape division. This is not a paradox, but reality. As is known, the debate that began with Marksxi turned into a real clash between the young Eurosocialists and the Marxist conservatives in the PS. The Eurosocialists, who have as much merit in creating a modern party as they have sins from the dictatorship weighing on the PS, showed the latter that the future necessarily belongs to them, and that the chaff piled up in the heads of Pellumbit, Ruçit and the others must be swept away. But the old foxes, accustomed to seeing politics only as an opportunity for traps and intrigues, decided to escape this challenge by creating a split within the FRESSH leadership itself. Meta and Legisi, along with FRESSH “evaluators” aligned with Majko, proved to be the most suitable elements for this. Today Meta is deputy leader not only of FRESSH but also of the PS. This is precisely what the PS leaders exploited, setting Meta against the current FRESSH leader, Pandeli Majko. They skillfully exploited Meta’s ego and careerism, putting him before two alternatives: staying on the Eurosocialist line or pursuing a career in today’s PS. It seems Meta chose the latter without much hesitation. As soon as he returned from London, where he had been sent to play the role of a pawn, Meta hurried to speak to the press to express his loyalty to the PS conservative group. (Continued on page 2)

In this situation, the country’s financial position deteriorated rapidly.

Inside A scheme of the circles of hell By SAMI MILLOSHI PAGE 5 P. 5 - The week’s sports page with the latest news from around the world Prepared by EDI DILAVERI

Dear readers, we have also informed you about the poll that the PS “conducted” on the political situation in the country. As Ruçi told the newspaper “Ruçi Nano KJ,” they decided to conduct the poll because they “did not trust” surveys conducted by international organizations. Thus the Ruçi barometer poll was carried out, and it turned out to be ten times “more accurate” than the Eurobarometer. The poll was organized by former Security chief G.Ruçi himself and his staff. We managed (this time getting ahead of “KJ”) to obtain accurate information on the methodology, criteria and results of this poll. Ruçi’s officially assigned staff managed, in just a few days, to retrieve from the files the dossiers of former Security collaborators numbered 1 through 400. These were the first people selected to be surveyed in Tirana. The same method was used in the other districts. Another criterion used in each district was the respondents’ length of service. Thus, recruits of the State Security from the 1970s and 1980s were selected, while none of those recruited in the final years before the dictatorship’s collapse were surveyed. But the criteria did not stop there. The most important criterion was that in the meeting with of Banks. Representatives from UBS, Banca Nazionale di Lavoro, Kreditantshalt and Crediti Lyonnais took part in the meeting. During trips to negotiate the public debt in February, March and April, we had met the creditor banks in Austria, Germany and Italy and had, with difficulty, persuaded them each to appoint a representative to form the Steering Committee of Banks and begin negotiations. We took the Tirana meeting very seriously. We also invited representatives of the IMF and the World Bank, who each presented a separate report on the economic situation in Albania. The serious organization of the meeting, the IMF’s and World Bank’s statements that we could not afford the Bulgarian solution, and the signing of the first public-debt agreements with Austria and the Netherlands made a very good impression on the banks, who said so openly, and prompted a serious commitment. At the Tirana meeting, it was decided, on the proposal of the Steering Committee of Banks, to begin reconciling the debt figures with all forty-one creditor banks. Since, in the tradition of debt negotiations, the name Steering Committee of Banks implies negotiations aimed only at restructuring the debt and not reducing it, it was decided that at the next meeting, scheduled for Vienna, the name would be changed to “Bank Advisory Committee,” implying both restructuring and debt reduction. It was also decided that this committee would appoint one of the banks to chair it. These decisions were very important and played a significant role, giving the negotiations a very constructive direction from the outset. At the second meeting in Vienna, in July 1994, the other side changed its name to the Bank Advisory Committee (BAC), implying that the solution to our debt would necessarily include a reduction.