EUROPE UPDATE

Polish president denounces government

In a move likely to bring down a shaky coalition government, President Lech Walesa has withdrawn his support for Prime Minister Jan Olszewski's team.

After weeks of pressing the prime minister to resign, Mr. Walesa sent a letter to the Speaker of the Sejm (lower house of Parliament) saying he had lost his confidence in the government. He said it was provoking conflicts with the presidency and destabilizing state structures. Walesa stopped short of formally demanding Mr. Olszewski's resignation but it was unlikely that deputies would ignore the president's call.

Parliament recently rejected the government's proposal to continue an austerity program, which opponents say has been too hard on workers and struggling businesses. It is scheduled to convene today for a regular session. Bonn government, opposition hold budget talks

Germany's opposition Social Democrats began rare cross-party talks with the government on the country's budget crisis yesterday, calling on Chancellor Helmut Kohl to make fundamental changes in his economic policy.

The talks were due to focus on growing budget deficits caused by German unification, but other key issues such as a mass influx of asylum-seekers and European union were also expected to be discussed.

Mr. Kohl invited members of the Social Democratic Party (SPD) to talks after a shock surge of support for extreme right-wing parties in two state elections last month, which was seen as reflecting voters' disappointment with the established parties' failure to solve Germany's problems.

Neither side seemed optimistic before the talks.

Oskar Lafontaine, one of the SPD's three deputy leaders, told the Hanover Neue Presse newspaper that the center-right government had financed the rebuilding of former East Germany by raising taxes and duties which hit ordinary people hardest.

Kohl's liberal Free Democrat (FDP) allies, who were also taking part in Wednesday's talks, have shown sympathy for higher taxes aimed at the wealthy.

Kohl's Christian Democratic Union (CDU) insists that government debt can be brought under control without tax hikes. It believes tight curbs on public spending and extra tax revenue generated by economic growth will cut deficits to manageable levels within four years.

Yesterday's talks were preceded by weeks of vigorous mud-slinging between the SPD and the CDU in which the opposition accused the government of having lost its grip. NATO ministers prepare peace role

NATO defense ministers agreed yesterday to consider using alliance forces in a wider peacekeeping role for Europe, but remained deeply divided over the shape of their own military in the post-cold-war era.

Their statement papered over sharp differences within NATO on how more independent Western European defenses should be set up now that the United States is cutting its forces here.

The ministers argued over a controversial Franco-German plan to set up a joint 35,000-strong corps, unveiled last week by Paris and Bonn as the possible nucleus of a future "Euro-army."

The United States and Britain, worried that the idea will undermine the US-led North Atlantic Treaty Organization, lashed out at the idea Tuesday - despite protests by German Defense Minister Volker Ruhe that it was sound.

France was not at the Brussels meeting to defend its view. It quit NATO's military structure 25 years ago, in protest over what it saw as US domination of European security.

If the new peacekeeping mission for NATO is to be approved, France will have to give its approval at a meeting of all 16 alliance foreign ministers in Oslo next week. NATO has until now been limited to the defense of its members.

The meeting also approved a US request for European allies to consider paying a share of the costs involved in storing US military supplies in Europe in case of crisis. The US sought help in footing the bill because of pressure at home to slash spending and planned reductions of US forces in Europe. But, with shrinking defense budgets, those costs will have to compete with many others for available NATO funds.