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Finance Minister Says Comecon ‘Has No Reason to Exist’

January 4, 1990

PRAGUE, Czechoslovakia (AP) _ The new finance minister said Thursday there is no reason for the continued existence of Comecon, the East bloc economic alliance, and he said Czechoslovakia would quit the organization unless it is overhauled.

Finance Minister Vaclav Klaus, an outspoken advocate of free-market reforms, also announced the devaluation of the Czechoslovak crown by 18.6 percent against Western currencies.

A Polish newspaper quoted Klaus as saying Czechoslovakia would propose the dissolution of Comecon when the alliance meets in Sofia on Tuesday.

Asked at a news conference whether Czechoslovakia would propose the alliance be disbanded, Klaus replied: ″Comecon cannot function, the way it is now and there is no reason for its existence anymore.″

″I don’t have to call it dissolution, but if all our proposals are accepted, it will not be the same organization,″ he said.

Klaus, 49, who was appointed Finance Minister in Czechoslovakia’s reformist government last month, is a non-party economist who was forced to serve as a lowly bank clerk for his beliefs through the 1970s.

Czechoslovakia will propose the abolition of a whole range of agreements concluded earlier between Comecon members, Klaus said.

Those agreements ″are so far binding our hands,″ he said, adding that if the Czechoslovak proposals are not accepted, ″we are ready to get out of such commitments unilaterally.″

Andrej Barcak, the foreign trade minister, said Czechosolvakia was not able to function within the organization ″on the economic rules which exist.″

″It is quite obvious that from a multilateral point of view we are not able to form any, kind of fundamentally deep integration and not many countries are going to even attempt that,″ Klaus said.

He said most of the bloc’s activities would be transformed into bilateral relations between countries.

Comecon, which stands for the Council of Mutual Economic Assistance, was formed under the guidance of the Soviet Union in 1949 and has since controlled trade among Soviet-allied countries. The member nations are the Soviet Union, Bulgaria, Cuba, Czechoslovakia, East Germany, Hungary, Mongolia, Poland, Romania, and Vietnam.

Dramatic political changes recently in Eastern Europe have radically decreased the power of Communist rulers and many Comecon members have begun moving away from centrally planned economies.

East bloc countries say Comecon’s payments framework doesn’t work because it is based on barter, fixed prices and a non-convertible currency, the Soviet ruble.

More reform-oriented countries like Czechoslovakia say they need hard currency to breathe new life into stagnating economies.

The devaluation of the crown against major currencies means that, as of Jan. 8, one dollar will buy 17 Czechoslovak crowns, compared to the current rate of just over 14.

A new tourist rate will be introduced on Jan. 8 giving the tourist 38 crowns, up from 9 crowns, for one U.S. dollar, in a bid to match the current black market rate in hard currencies.

At the same time, Klaus said the crown would be revalued by 10 percent against the transfer ruble, to encourage exports to Western countries.

Referring to the new crown rate for tourists, Klaus said: ″We know this is not going to destroy the black market completely, but it should be a serious obstacle.″

Klaus also said that a currency and rate committee of the Comecon is to meet in Prague on Jan 16.-18. ″All the things we cannot settle in Sofia we can take care of then,″ he said.

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