Duarte imposes economic austerity. Salvadorean leader tries to shore up flagging credibility with the people

President Jos'e Napole'on Duarte's new economic austerity plan is seen as a clear attempt to retake the political initiative on this critical issue. Some analysts have predicted that the economy could be the most important issue of his 19-month presidency. The President seemed to realize what was at stake as he started his hour-long television presentation Tuesday night. He began with a personal appeal to his viewers to believe in him and his commitment to the ``poor and humble.''

Although it was a masterful performance by a consummate populist politician, the fact remains that Duarte's credibility is at a low point and the economic effects of the austerity plan threaten to further reduce his already sagging popularity, say diplomats, political analysts, and even members of his own party.

One high-level Christian Democrat official acknowledged that the government is facing its most difficult period since Duarte became President in June 1984. He pointed out that the economic problems are more serious than the decline in military support for Duarte.

``We're seeing a gradual erosion of the base of popular support,'' says one European diplomat.

The austerity plan, urged by the United States, consists of a currency devaluation, an increase in taxes aimed at reducing the large government deficit, and slowing inflation, which jumped almost 20 percent in the space of a year.

The devaluation is expected to spark an immediate increase in prices, further hitting the already economically hard-pressed Salvadorean family, say economic and political analysts.

``It's an inopportune time to implement the plan,'' says Hugo Carrillo, Secretary General of the rightist National Conciliation Party. ``We are a country at war. Implementing economic measures, which will hurt the majority of the population and allow the left to make political inroads again, is a mistake.''

``It's an economic vision and not a socio-political vision,'' Mr. Carrillo added. ``The US and the International Monetary Fund are putting the democratic process in danger.''

The United States Embassy has pushed the government hard to implement the austerity plan, say informed sources.

Few observers see the economic package putting Duarte in any immediate danger. The greater danger is the long-term erosion of confidence in Duarte, the man many view as the only alternative to the leftist rebels.

Analysts point out that if Duarte's promises of peace and reforms are shown to be empty, the left could become a viable alternative for poor Salvadoreans increasingly hurt by the protracted war and the economic crisis.

``Duarte's Achilles heel is the economy,'' says a European diplomat. ``It's not macroeconomics or the coffee growers that's most important. It's the effect on the man in the street. Duarte has to control that but it's not clear he can.''

In his speech, Duarte tried to soften the blow by promising to control prices of basic goods and limiting the increase in the prices of public transportation, chiefly used by the poor.

The unions have pointed out that price controls are already in effect but the government has been incapable of enforcing them.

Duarte tried to sweeten the plan by offering public workers, who launched major strikes last fall, a $10 monthly wage increase. One political analyst called the raise ``chickenfeed.''

Informed sources predict that public-sector strikes will occur despite Duarte's appeal to workers not to play into the hands of ``those who are trying to destabilize the country.''

``The poor campesinos (peasant farmers) are the ones who will suffer the most from the package,'' says a peasant leader from the Democratic Popular Unity (UPD), Duarte's major labor base of support in 1984. The UPD, a union of approximately 500,000 workers and farmers, has become disillusioned with the President's failure to fullfill his campaign promises of peace and an improved economy.

The wealthy and conservative private sector opposes the measures which hurt them -- a tax on a company's net assets and a stiff tax on El Salvador's premier export, coffee. Economic analysts note that austerity plans generally favor business and hurt consumers.

Political analysts note that the private sector, aside from the coffee growers, has received preferential treatment from Duarte's government.

One diplomat says that the right realizes that by destabilizing the government, the left would stand to gain. Many think the austerity plan will help the left rebuild its formerly large political base.