CHARLES KRAUSE: For the past week tiny Albania has been in a state of emergency, with anti-government rebels reportedly in control of most of the southern part of the country. Faced with growing unrest, President Sali Berisha was forced over the weekend to promise new national elections by June. He also agreed to set up a coalition government until then comprising all of Albania's political parties. But so far Berisha's concessions have not quelled the fighting in the South, where looting and killings continue and where the army has been forced to cede more and more towns to the rebels.
The unrest is only the latest sign of trouble in this predominantly Muslim country of 3 million people, the poorest in Europe, with a per capita income of only $850 per year. Once a part of the Ottoman Empire, Albania was briefly an independent kingdom before World War II. Then after the war under the Communist dictatorship of Enver Hoxha, Albania became the most geographically and politically isolated country in Western Europe. Indeed, Hoxha's iron rule and ideology were so extreme that he broke with the Soviet Union for being too liberal. For nearly 30 years under Hoxha, Albania remained an impoverished backwater where political opposition of any kind was severely repressed. But the Communists finally gave way in 1991, and President Berisha, who was elected democratically, took power with the approval of the European Union and the United States.
Initially, Berisha maintained the left's support by carrying out a series of free market economic reforms while keeping Albania out of the civil war in neighboring Yugoslavia. But enthusiasm in the West for Berisha diminished as he became more authoritarian. The breaking point came last year after parliamentary elections roundly criticized by outsider observer groups as irregular and unfair. Meanwhile, much of Berisha's remaining support at home collapsed early this year after an economic scandal that turned into an economic disaster.
Despite warnings from international agencies and Albania's central bank, Berisha had allowed nine so-called charitable foundations to flourish. They were able to pay 8 percent interest per month as long as thousands of Albanians continued to deposit their meager savings and money from relatives working abroad into the charitable fund. By the end of last year the deposits totaled a billion dollars, or one third Albania's gross domestic product. But beginning in February the pyramid operations began collapsing. Only five of the original nine funds were still in business, and only one of them is still paying interest to depositors. When the pyramid collapsed, confused and angry Albanians took to the streets and with no adequate response from the government, the protests turned into armed rebellion, especially in the southern part of Albania, where the financial losses and hardships were most severe.
JIM LEHRER: Joining us now are Elez Biberaj, an ethnic Albanian, chief of the Albanian Service for the Voice of America since 1986, and Peter Dickinson, a former field representative in Albania for the International Republican Institute, a U.S. government-funded part of the U.S. Democracy Project. He has worked with the Albanian parliament and political parties.
First on this pyramid scheme thing, who ran these? Who were these--what were these nine organizations and who ran them?
ELEZ BIBERAJ: These were established as far back as 1991 by emerging Albanian businessmen, some of them very shady characters, who eventually established very close links with government officials. What we've seen in Albania is a remarkable lack of leadership on both the government's part, as well as on the part of the opposition. The opposition, itself, did not play the role it should have in terms of criticizing these pyramid schemes. And also the media in Albania, until very late last year, there was no one in Albania who was criticizing this pyramid scheme.
JIM LEHRER: And then what finally happened? What caused them to--they just collapsed of their own weight?
ELEZ BIBERAJ: Eventually they had to collapse. They were providing 15, 20 percent to as much as 80 percent a month. There was no way that they could survive.
JIM LEHRER: And did the government have any direct role? In other words, the people who are upset at the government because they lost their money, did they have a legitimate complaint?
ELEZ BIBERAJ: To a point they do, because the government tolerated it. It was the responsibility of the government to really warn its citizens that this will not work. However, I do not buy the argument that people really didn't know what was going to happen. Probably most of these people thought that they would make some money and eventually somebody else would end up moving money, and not them, themselves.
JIM LEHRER: Well, has anybody been arrested, any charges brought against anybody for these things?
ELEZ BIBERAJ: Yes. Most of the founders of these companies have been arrested and are in prison. Some of them have fled the country and allegedly with large sums of money.
JIM LEHRER: Now, that's what triggered it, Mr. Dickinson, but then--now it's move to other levels, has it not, in terms of this--the uproar and rebellion particularly in the South?
PETER DICKINSON, Albania Analyst: Yes, it has. I mean, the focus of it all was these pyramid schemes. What started it all was protest from a population that didn't understand how their money could disappear.
JIM LEHRER: And a large percentage--roughly, what percentage of the people in Albania participated in these things?
PETER DICKINSON: It's my opinion that almost every family in Albania has money in one of these schemes.
JIM LEHRER: Every family?
PETER DICKINSON: Almost every family that I knew.
JIM LEHRER: Does that gel with your information too?
ELEZ BIBERAJ: Yes. The figures that we hear out there are the same $1 billion to $2 billion being invested. I think that might be exaggerated a little bit, but the figures I've seen are that as many as 700,000 Albanians may have--
JIM LEHRER: Out of how many?
PETER DICKINSON: Out of a population of 3.2 million.
JIM LEHRER: Yeah. So every family was touched was your point. Go ahead.
PETER DICKINSON: Right. And so the population looked at these as legitimate businesses. Some of the largest ones, in fact, looked like holding companies.
JIM LEHRER: Like they would put money in a savings account, you mean, like a bank?
PETER DICKINSON: They would go in exactly to them because there was no private banking system that functioned in Albania, and only the state bank that people didn't have trusted; they would invest their money. They would go, they would get a book, and they would collect interest every two months--
JIM LEHRER: You mean a passbook?
PETER DICKINSON: A regular passbook.
JIM LEHRER: Checking account, savings account.
PETER DICKINSON: And collect their 8 percent a month, and this went on for two or three years. Later on, some of the more risky schemes started springing up, calling themselves charitable foundations, paying 25 percent a month, and it sort of just built upon itself until it did collapse of its own weight.
JIM LEHRER: Now, then it collapsed. Then what did that collapse reveal in terms of the divisions within the country that it then exploded?
PETER DICKINSON: See, I'm not so sure it reveals divisions within the country as much as it does still an uprising where people are saying we're looking for a way to get our money back. I mean, the biggest violence occurred in Vlore, which was the home of one of the largest schemes, Gilliesii. And the people there were primarily interested in getting their money back.
JIM LEHRER: We've got a map up there that shows. Tirana, of course, is the capital, the large city, and then surrounded down--
PETER DICKINSON: Vlore along the coast.
JIM LEHRER: Along the coast.
PETER DICKINSON: And these popular protests, where people were chanting and gathering in the streets soon led to some violence, and people took their frustration out on symbols of the government and the police. When the police withdrew, there was a vacuum that was created. This led to the population running its munitions locations, taking guns and arms, and essentially it grew from that point. But it's still my opinion that the base of this always based on a population that wants to recover their money. It's taken on political overtones. But I think that at the base of it there is still economics.
JIM LEHRER: Do you agree?
ELEZ BIBERAJ: Yes, I do agree. I would only add that we are dealing with a population what is emerging from 50 years of the most repressive Communist rule that the world has ever seen, and most of these people were raised in this system where the government was responsible for everything; therefore, if--
JIM LEHRER: It was natural to blame the government.
ELEZ BIBERAJ: But in the final analysis it is the government that is responsible for much of what we've seen happening here.
JIM LEHRER: Do you agree, both of you, are you saying, Mr. Dickinson, that if some way could be found to restore these people whole financially that they--their troubles would be over?
PETER DICKINSON: I think it would, but the problem is there is no way, I mean, short of the European Union coming in or the United States with a--
JIM LEHRER: Somebody writing a check, you mean.
PETER DICKINSON: --giveaway program, which isn't going to happen.
JIM LEHRER: Where is the money? Where does $1 billion or $1.2, or whatever, billion, where did that money go?
PETER DICKINSON: The problem is to some degree the money went out of one person's pocket into another's, and the population doesn't truly understand the effect of that. Much of it disappeared, I'm sure, out of the country because there was--these were not just run by Albanians in many cases. Even some of the largest ones, one of them opened an office in Italy and was accepting deposits from Albanians abroad.
JIM LEHRER: So there's no place for the government of Albania or any other legal entity to go and seize this money and give it back? It doesn't exist anymore.
ELEZ BIBERAJ: In the case of two companies the government did freeze about $250 million which the government promised to pay back to the investors, but that's about it.
JIM LEHRER: Right.
PETER DICKINSON: The problem is a person who invested $1,000 was getting 8 percent a month, after a year they got back $960. When they are now told that they have lost that investment, they're looking at themselves out $1,000. They still don't see that the money was transferred from one person to another.
JIM LEHRER: All right, now. Whatever--the money started it or not--what have we got now? How serious a situation is this in terms of the country coming apart, or--
ELEZ BIBERAJ: I think we have a very, very serious problem. The country came very close to civil war. I think it has been averted, at least for the moment. We have this very major agreement reached on Sunday between President Berisha and the opposition parties. It provides for the establishment of a coalition government and a new election by the end of June. The immediate problem is to restore law and order. Half of Albania is under--under the control of--under government forces. There's larger looter going on. It is not sure who's really in control, and until you restore some sort of order in that part of Albania, it's going to be very difficult really to establish any conditions for fair and free elections.
JIM LEHRER: And how--
ELEZ BIBERAJ: --a transition.
JIM LEHRER: How is that order going to be re-established? I mean, the army is going to have to do it?
PETER DICKINSON: Well, it's going to be a very difficult thing. I mean, that is the large question. I mean, the potential is still there for a very dangerous incidence to occur.
JIM LEHRER: Time Magazine said in a piece today that the threat of civil war was very real and, and possible.
PETER DICKINSON: I'm not even, again, sure so much it's civil war as it isn't insurrection. A lot of--a lot of population--a large number of people who've gotten weapons, which rumors now have them as far North as Lisnia, and I checked with the embassy.
JIM LEHRER: Where is that?
PETER DICKINSON: That is two towns South of Tirana, the capital.
JIM LEHRER: So that's very--we're getting very close there.
PETER DICKINSON: Very close. The town just north called Kavaja is the stronghold of the Democratic Party.
JIM LEHRER: And where are they getting these arms?
PETER DICKINSON: They're taking them right out of the military bases.
JIM LEHRER: Breaking in to armories and--
PETER DICKINSON: Breaking--the military's left, and they've taken it.
JIM LEHRER: All right. I'm sorry.
PETER DICKINSON: I was just going to say at this point the town above there, there's rumors that the mayor had opened up the military there to Democratic Party supporters.
JIM LEHRER: The Democratic Party is--
PETER DICKINSON: Pro-government--
JIM LEHRER: Pro-government.
PETER DICKINSON: --supporters. You have the potential for two opposing sides, not necessarily North versus South, but pro-government, anti-government in a close proximity.
JIM LEHRER: Now, what do we need--those of us who have not followed Albania closely as you have, the two of you have, what do we need to know about Berisha, the president? What--characterize him for us.
ELEZ BIBERAJ: Berisha came to power. Berisha, his Democratic Party came to power at the most difficult period in Albania's recent history. They took over after the economy had literally collapsed.
JIM LEHRER: He's a doctor, right? He's a cardiologist.
ELEZ BIBERAJ: Yes, that's correct. Yes. A very, very ambitious person, a person who wanted to do great things for Albania but somehow got sidetracked by problems he--the problems began back in November 1994, when he tried to push through this referendum, a constitutional draft which would give the president more power than the opposition was willing to, and that referendum was defeated by voters, and I think it scared him and his party, that they were going to lose power, and things began to get really nasty during 1995, and then we had the elections last year which were marred by manipulation and criticism from the international community. And the results of those elections were not very nice by the opposition. Now the core problem, the way I see it, is that although we have a multiparty system in Albania, we really have seen two main political forces, the former Communists, the Socialists, and the ruling party. And the core problem has been that these two parties have based their dealings, their relations on confrontation, rather than cooperation. And that has been the problem. Now they--they sort of promised that they will work together to get their country out of this very difficult period, but that remains to be seen.
JIM LEHRER: Does Berisha have the power to keep this from unraveling, keep this from going into a civil war?
PETER DICKINSON: That's questionable. I mean, I would have been shocked if somebody told me two months ago that President Berisha would agree to early elections and a coalition government with socialists. I mean, he's stated--
JIM LEHRER: What's that say to you, he's running scared?
PETER DICKINSON: It says to me that he is; that there's something happening there he feels that is out of his control. It may explain why a week ago--now I'm in a very bad situation--he had himself re-elected president for a five-year term by a parliament composed solely of his own party.
JIM LEHRER: Should Americans see this just as an isolated problem? Does this have any spill over effect in that part of the world?
ELEZ BIBERAJ: It does have, mainly as far as Greece and Albania, as far as Greece, and if they are concerned. I don't think we have the potential for an explosion in terms of spreading towards Macedonia or--at this point, but if things were to get really nasty and we have confrontations, military confrontations between government forces or democratic party supporters and these insurgents, then a lot of people are likely to emigrate to Greece or try to--
JIM LEHRER: So there'll be some spill over.
ELEZ BIBERAJ: That's right.
JIM LEHRER: All right. Gentlemen, thank you both very much.