Defiance - and Wavering - As Albania's Rebels Face Army

President refuses to bend against insurgents in the south

Albanians' resolve to continue an all-out confrontation with the government and its Army seemed to waver as tanks rolling into the southern city of Gjirokaster met with little or no resistance from the previously insurgent local population yesterday.

President Sali Berisha appears staunchly set against any attempt at forming a broader-based government, which would include parties from the opposition.

Observers say the real issue at hand is whether the southern coastal town of Vlora - considered the epicenter of Albania's revolt against the government - will hold out against the approaching tanks.

Thousands of Albanians throughout the country blame the government for the loss of their life savings in fraudulent financial schemes.

Residents of another southern town, Sarand, announced the formation of an autonomous government, and reports of the Army being ill-disposed to challenge the protesters are widespread. In fact, two Albanian jet pilots who claim they were ordered to fire on civilians in Gjirokaster flew their MiG-15 to Italy Tuesday, where they asked for political asylum.

But the concern among opposition members is that Mr. Berisha will ultimately succeed in putting a lid on the violence that has left at least 18 people dead.

Indeed, not all soldiers have hesitated to confront rebellious citizens. The Associated Press reported yesterday that government jets dropped bombs on a town outside Sarand. And soldiers in tanks and armored personnel carriers continue to make their way through the south. According to one resident of Vlora, contacted by phone Tuesday, the mobs who ransacked an Army barracks with hardly any opposition are now rethinking their position in light of the approaching troops.

"First there was this rage. Protesters got the guns and shot like mad in the air," says Farouk, a businessman in Vlora who refused to give his last name for fear of reprisal by Albania's ubiquitous secret police. "Now there is no food, no gas, and the tanks are coming. People are starting to realize what they did, and they are afraid."

Anger against the collapse of the pyramid schemes - in which most of Albania's 3.5 million people invested an estimated $3 billion over the last five years - spiraled out of control last week. People in Vlora stormed police stations and military warehouses, taking control of the town.

Lured by the promise of interest rates as high as 25 percent, many Albanians sold their homes, livestock, and businesses to participate in pyramid schemes overtly sponsored by Berisha's government.

"That's why the people tolerated Berisha for so long after the rigged elections last May," says Gazim, a Tirana resident who also refused to give his last name. "They thought that if the government was behind the schemes, their money would be safe."

The hard-currency earnings of relatives working abroad, as well as revenues from illegal activities such as drug trafficking and smuggling gas into the former Yugoslavia during the war in Bosnia, were also funneled into the investment schemes. Money from one batch of investors was used to pay out exorbitant interest rates to the next batch.

"We knew that pyramid schemes in other countries never lasted more than six months," Gazim says. "But Albania's different. Here we had all that dirty money sustaining the operation."

But in recent weeks, it didn't take a genius to realize that the schemes were starting to unravel, Gazim adds: "The lek [Albania's currency], which had been stable for four years, lost 35 percent against the dollar over the last month and a half."

Berisha was told by the International Monetary Fund and the World Bank that the pyramid schemes would collapse, but he did not heed their warnings. Some say no action was taken because government officials were profiting from the situation, receiving kickbacks from the promoters of the schemes. By the time the IMF and World Bank issued their warnings, however, the schemes were already in full force: Upward of 75 percent of all Albanians invested in them.

Meanwhile, the state of emergency decreed by the government on Monday has gripped the capital, Tirana. Streets are deserted after the 8 p.m. curfew with a few Army vehicles and plainclothes policemen patrolling central Skandenberg Square, where the bulk of the international press has set up its headquarters. The city has also been surrounded by roadblocks.

"We are afraid," says Miriam, a journalist working at the opposition daily Gazeta Sqptari. "It started out like this in Bosnia too, with a few shots and then four years of war." The entrance to the paper, which Miriam says has always been wide open, was barred yesterday - a safety precaution after the burning down of the main opposition paper, Kola Jone, on Sunday. The attack has been widely attributed to Berisha's Shik secret police.

"We took away all the computers and the phones" because of concerns that the government would burn this office down like Kola Jone, Miriam says.

While the latest violence was set off by the loss of life savings, many say Berisha went too far last May when he presumably rigged elections. Polls had him at 35 percent, but when votes were counted, he came in first with 90 percent of the reported ballots.

"That was his big mistake," says Ilir Gurakuci, a journalist working with the Albanian service of the British Broadcasting Corp. Berisha then made a second mistake, he says: "He appeared on television nonstop. His face and his voice were everywhere, all the time. He became just like the old Communist dictators, and people couldn't stand that."

When even Vefa, the most conservative of Albania's pyramid investment schemes, collapsed, the scene was set for violence. "The powder was there," says Gazim. "It just needed a spark."

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