Yugoslavs put economy on the front line

The Yugoslavs have just taken rigorous steps to revitalize their own dangerously drifting economy. But it has taken the Soviet invasion of Afghanistan to rouse West Europeans to the need to help in this process, to stabilize Yugoslavia against the kind of pressures it is most likely to face in its future relations with the Russians.

For this country it all boils down to a matter of independece. Though alert for any contingency, Yugoslavs do not share Western theorizing that they are likely to face direct Soviet military intervention in the post-Tito period.

But the kind of intervention they conceive possible would be Soviet efforts to play on internal discontents brought on by economic problems. Despite the recent slide toward "stagflation," living standards are still improving, but at a much slower pace than before -- especially in social fields like housing.

There are grounds enough for such presentiments, even with military pressur excluded:

* Extreme Croatian nationalists in Western countries smuggle in separatist propaganda -- and sometimes bombs -- aimed at disrupting the federal state.

* The Bulgarians maintain a continuous campaign denying the ethnic existence of Yugoslav Macedonia, a campaign which Belgrade sees as staking out some future claim. "Bulgaria is only the hand," one Communist Party leader says. "The arm to which it is attached goes farther east."

* There is the North-South gap between the northern republics, whose industrialization began under the Austro-Hungarian Empire, and the southern republics, which the Turks held down for 500 unproductive, backward years.

* Albania's Enver Hoxha talks to Yugoslavia and its Kosovo Province with two voices. One proclaims common cause with the Yugoslavs against any aggressor. The other attacks them nonstop over ideology and the alleged inequalities suffered by Kosovo's mainly Albanian population.

These regional or domestic discontents could spell trouble if the economy worsens, as the Russians well know. For several years they have played the "good friend" in their economic dealings with Yugoslavia. Officials here say, "Our economic relations with the Russians are good." But they make no bones about their preference for the European Community as Yugoslavia's main trade partner. And it is only the cheering news of President Tito's remarkable recovery that has overshadowed another item of good news for the Yugoslavs: the European Community's hustle to speed a long-due agreement giving them greater access to community markets for their exports.

Negotiations begin in Brussels this week. The Yugoslavs hope they will be through in time for formal signature by Roy jenkins, president of the European Commission, when he visits here in February.

Mr. Jenkins will be the first senior Western political figure to come here since President Tito's illness and the Soviet invasion of Afghanistan. Despite a foreign trade deficit of $6 billion and foreign borrowing of up to $13 billion , the government is trying hard to maintain the momentum of essential industrial growth. And it is to the capitalist world, with which it does 51 percent of its overall trade, that it looks for the capital, equipment, technology, etc., with which to do it.

EC restraints on many of Yugoslavia's most marketable products meant that last year exports covered only 35 percent of imports from the EC countries. The deficit with the European Community stands in excess of $3 billion annually.

Generous treatment in the new agreement will persuade the Yugoslavs more than words that the West is genuinely concerned for a nonaligned, independent Yugoslavia.

Western observers here see that as the likely decisive factor in ensuring success for the Yugoslavs' own determined bid for the economic stability that, with the Army, will be their best safeguard when finally the "after Tito" time does come.

In that package of austerity laws just adopted, "stabilization" is the single most urgent motive. The new laws cut back heavily on investments -- allowing only projects already 80 percent completed to go forward -- and rigorously reducing every kind of official and public spending.

It is undoubtedly a package "with teeth," and government members admit it will hurt for the next year or so. But it is realistically presented as "the only way" if the present inflation rate -- 23 percent officially, but most Yugoslavs and outside observers put it at 30 -- is to be lowered the planned 5 points this year.