Financial Scandal Rocks Macedonia

An alleged illegal transfer of 11 million German marks from Macedonia's national coffers to relatives of defence minister Ljuben Paunovski has thrown the country's fragile government into crisis at a crucial time for regional peace.

A visibly shaken Prime Minister Ljubco Georgievski reported the loss at a meeting of his governing VMRO-DPMNE party last Sunday, stating that over the past three months the money has been transferred into "accounts of companies whose employees are in close kinship with the defence minister".

Taking personal charge of a three-man party commission to investigate the scandal, the prime minister declared, "the matter must be straightened out".

Paunovski had left the meeting early, giving confused replies to reporters' questions. But he later stoutly denied any wrongdoing and accused political rivals of manufacturing the charges.

"I won't submit my resignation until the entire scandal is cleared up because my family is involved into it," Paunovski said. He promised to respect the results of the inquiry's findings.

The story has filled the Macedonian press, with reports that some of the money removed from the defence budget went into an account operated by Paunovski's father-in-law, Ljubco Petkovski, and also into the account of his brother-in-law Vladimir Talevski.

Political analysts predicted that the prime minister would be obliged to bring forward to this year the elections which had been scheduled for 2002.

It is a headache he could well do without at a time when delicate negotiations are going on between Macedonian and Albanian representatives.

It was only a month ago that the government and the National Liberation Army, NLA, called a halt to fighting in north west Macedonia to allow negotiations on demands by the country's ethnic Albanian minority for improved civil rights. The negotiators are scheduled to reach their findings in June.

At the same time, intensive inter-party negotiations are going on to form a new government backed by a wide coalition which, it is hoped, could stabilise the political scene in this Balkan nation of 2.2 million people, which broke away from the Yugoslav Federation in the early 1990s

The proposed coalition would bring together the two major Macedonian parties (the governing VMRO-DPMNE and the opposition Social Democratic Union of Macedonia, SDSM) together with the two leading Albanian parties in Macedonia (the Democratic Party of Albanians led by Arben Xhaferi, which is a member of the ruling coalition, and the opposition Party for Democratic Prosperity headed by Imer Imeri).

Until now the main sticking point in coalition negotiations has been distribution of ministerial seats. The opposition insisted on running the justice and interior affairs ministries. Now the financial scandal has thrown up a whole new area of dispute.

Some opposition leaders described the affair as "a classic example of war profiteering". They said the illegal transfers were made immediately before and during the clashes with Albanian fighters.

The scandal unfolded in stages. First the Skopje TV station Channel 5 reported that about three million marks had been secretly siphoned off into the accounts of Paunovski's relatives. Other Macedonian media pounced on the story and gave progressively higher figures. But the sum finally announced by the prime minister topped them all.

Critics have asked why the scandal should be investigated by a party commission instead of the public prosecutor, Stavre Dzikov. The prosecutor, a member of VMRO-DPMNE, was appointed two years ago, after the party won parliamentary elections.

Dzikov has made himself unavailable to the media while the fuss is going on. But journalists believe he will not be able to dodge the issue for long. Georgievski himself confirmed that, regardless of the inquiry's finding, the case will be investigated by the judiciary.

Georgievski has placed great confidence in Paunovski over the last three years. A one-time art critic, Paunovski enjoyed a meteoric rise through the political ranks. After acting as party spokesman for the VMRO-DPMNE while it was in opposition before 1998, he was made culture minister in 1999 and defence minister in August 2000.

Known for his bruising political style, Paunovski has taken a hard, combative line towards his critics. He has openly feuded with interior minister Dosta Dimovska about ways to deal with Albanian rebels.

Dimovska has long been regarded as Georgievski's right-hand in running the country as well as the party. Now, Paunovski claims that because of his disagreements with Dimovska he is "a victim of inter-party intrigues" aimed at his political elimination.

Nevena Angelovska is an IWPR contributor