ALGERIA'S government - considered one of the most liberal experiments in the Mideast - is basking in its newfound legitimacy.
The sense of crisis that permeated this North African capital three months ago has subsided. A 75 percent turnout in November's elections gave President Liamine Zeroual the approval he needed - at home and abroad.
"The Algerian people have a lot to be hopeful for," says John Voll, a historian of Islamic culture at Georgetown University in Washington. "No matter what they're looking at right now, they have passed a turning point."
Indeed, "what they're looking at" is still pretty grim. With no end in sight to a dirty war between the government and Islamic militants who want to set up a pure Islamic state that has cost some 50,000 lives in the past four years, the third world's former powerhouse also faces a burdensome foreign debt.
What's worse, given more than 30 years of military-backed governments, many privately wonder whether President Zeroual - a retired Army general first appointed to the job two years ago by the ruling military regime - can chart his own course.
"Even if he is an honest man," a young Arabic-language reporter named Nacera, who like others interviewed didn't want to give his last name, says, "he's surrounded [by] hard-liners who oppose any reconciliation and jealously guard their own interest."
The new Cabinet - announced Jan. 4 - is officially billed as a break with the past, the complete "rupture" promised in last fall's campaign. Zeroual, to the delight of some voters, has included a handful of young former diplomats plus three members of the Islamic political parties that fielded presidential contenders.
With the Islamic Salvation Front (FIS) banned from participating in the last elections, Sheikh Mahfoud Nahnah of Hamas seized the opportunity to present a so-called moderate Islamic slate. No relation to the Palestinian party of the same name, Algeria's Hamas takes a publicly pacifist tack - although reliable reporters say party vendettas contribute to the generally violent milieu.
Sheikh Nahnah - with close ties to the military regime - is a savvy survivor who purged party ranks in order to build a consensus around his campaign.
After garnering a quarter of the presidential votes, Nahnah has settled for two minor Hamas postings within the new Cabinet - a signal to some that the government is at least willing to consider options other than "shoot to kill" Islamic partisans.
"However opportunistic Nahnah may be, he represents something different from what once was the government establishment and from the militant Islamic groups on the far extreme," Georgetown's Voll says. "The question now: Is there some way that he could develop a broader base of participatory support or act as a stalking horse for a broader Islamic movement later on?"
But despite a campaign promise of national dialogue with Islamists who were prohibited from participating in November's elections, there is no sign of a substantive opening.
In the wake of November elections, some of the exiled FIS leaders expressed hope that they could participate in the so far unscheduled legislative elections Zeroual says will be held some time this year.
But it is widely reported in the Algerian media that the government is exploiting a deadly new fissure between the armed wing of FIS and the Armed Islamic Group (GIA) - and biding its time while fundamentalists kill themselves off.
"If there is going to be a dialogue, it will be with Hamas," asserts Fateh, a graduate student in the US who was home on a visit. "When it comes to the GIA, we don't speak the same language. So we say this is going to be a fight to the death."
Indeed, local reporters say the military sustains its combing operations, which often involve the murder of innocent bystanders.
Nevertheless, Algeria is considered stable enough now for the European Union to contemplate a trade pact. And, although the latest International Monetary Fund report notes that Algeria has fallen short of a couple of crucial fiscal targets, managing director Michel Camdessus dropped by recently to promote foreign investment.
The combination of political legitimacy and economic legislation that has continually improved since 1986 has assuaged international petroleum companies' anxieties, and the so-called Anglo-American "majors" have begun flocking to Algeria's shores.
British Petroleum signed a gas deal for $3.5 billion last month. Then South Africa came calling, looking for gold as well as gas. Atlantic Richfield is expected to clinch a $1.3 billion oil deal by the end of this month. And DHL, the American courier service, opened offices in the hydrocarbon-rich Sahara, where charter airline service from Atlanta is scheduled to start this year.
At the same, Italy has joined the United States, Japan, Germany, and Canada in suspending new credits to the Algerian government, which faces full amortization of its $30 billion debt burden in 1999. Little of the current commercial activity in Algeria creates jobs in a country where the unemployment rate is about 25 percent.
"I personally don't think the problem is over," says Redha, a computer science student. "But there's more hope now, after the elections. I just hope [the leadership is] aware of that and doesn't lose the momentum.