YEAR IN REVIEW 1996: WORLD-AFFAIRS

INDIA Affairs. In 1995, with elections to the Lok Sabha (House of the People) due early in 1996, the major political parties did not appear to be in fighting trim. The Indian National Congress (I) underwent another split, with former minister Arjun Singh, who was expelled, being joined by Narain Dutt Tiwari to form a rival Congress party in May. The Bharatiya Janata Party (BJP), reputed for discipline, was also riven by dissension. The National Front-Left Front alliance was badly damaged with the breakup of the Telugu Desam Party in Andhra Pradesh and squabbles in the Communist Party of India (Marxist). In June a new political party for members of the lower castes was launched by Phoolan Devi, "the Bandit Queen." (See BIOGRAPHIES.) The outlook for the non-Congress parties had been brighter in March-April when, in elections to assemblies in five states, Congress (I) lost power in two major states, Maharashtra and Gujarat, and fared poorly in another big state, Bihar. The BJP won 121 out of 182 seats in the Gujarat Assembly and formed a government under Keshubhai Patel. In Maharashtra it teamed up with another Hindu chauvinist party, the Shiv Sena, and the coalition won 138 out of 288 seats, compared with 81 by Congress (I), and formed a government led by Manohar Joshi of the Shiv Sena. Among the first acts of the new government were the renaming of Bombay as Mumbai and the abolition of the state minorities commission. Within five months it had also canceled the agreement with the U.S. company Enron Corp. to build a $2.8 billion power project on grounds of overpricing. The deal was renegotiated, and Enron agreed to reduce the cost of the second phase by $300 million. In Bihar the Janata Dal under Laloo Prasad Yadav was swept back to power. Congress (I) had the satisfaction of wresting the Orissa Assembly from the Janata Dal, winning 80 out of 147 seats and forming a ministry led by Janki Ballabh Patnaik. It also retained power in Arunachal Pradesh, where Geegong Apang remained chief minister. In Manipur, Rishang Keishing of Congress (I) was sworn in as chief minister for a sixth time. There was also a change of government in Uttar Pradesh. The Bahujan Samaj Party broke away from the Samajwadi Party and formed a government under Mayawati with the support of the BJP. The government lasted just over four months. The BJP withdrew, and presidential rule was promulgated. In Andhra Pradesh, N.T. Rama Rao's ministry was toppled in a family revolt, and his son-in-law, M. Chandrababu Naidu, took away the majority in the Telugu Desam Party to form the government on September 1. The BJP had problems in its stronghold in Gujarat when Shankersinh Vaghela and 46 legislators rebelled against Keshubhai Patel and a new BJP Cabinet was sworn in under Suresh Mehta. In Kerala, Congress (I), bowing to the pressure of its partners in the United Democratic Front, replaced K. Karunakaran with A.K. Antony as chief minister in March. The Punjab chief minister, Beant Singh, was assassinated in a bomb explosion on August 31, shattering the belief that terrorist activity had been put down in the state. Harcharan Singh Brar was the new chief minister. Separatist activity continued in Jammu and Kashmir, and the government's plans to hold elections in the state were negated by the Election Commission because of a fear of violence. The 535-year-old shrine of Nooruddin Noorani at Charar-i-Sharif was burned down by militants on May 11 after a prolonged engagement with security forces. Prime Minister P.V. Narasimha Rao reshuffled his Council of Ministers three times during the year, in February, June, and September. Pranab Kumar Mukherjee was given the External Affairs portfolio. Among those inducted into the Cabinet were A.R. Antulay (Health), Madhav Rao Scindia (Human Resource Development) and K. Karunakaran (Industry). P. Chidambaram returned as minister of state for commerce. Three major welfare schemes were launched from mid-August: a national social assistance scheme for persons over age 65, a school meal plan to benefit 110 million children, and a group insurance scheme, together costing Rs 39 billion annually. The prime minister also announced a plan to build 10 million rural houses. The Indian constitution was amended through the 78th amendment to give protection to certain land laws of states. The Terrorist and Disruptive Activities (Prevention) Act lapsed, and the government introduced a bill to amend the criminal law to deal more effectively with terrorism. The chief election commissioner, T.N. Seshan, continued to be in the news. His petition challenging the appointment of two more members to the election commission was rejected by the Supreme Court, which advised him to mend his ways and reach decisions in the commission by consensus or majority. In another judgment, the court directed the government to appoint an independent authority for allocating airwaves. The court also ruled that the conversion of a Hindu to another religion (e.g., Islam) to contract a second marriage was illegal. The court asked the government to consider the feasibility of a uniform civil code but later clarified that this was not advice but rather a passing observation. A special judge in New Delhi convicted 43 persons of offenses committed during the anti-Sikh riots following Indira Gandhi's assassination in 1984. A judge in Baroda awarded life sentences to 13 Shiv Sena members, and a Bombay judge held 166 persons guilty for their part in the Hindu-Muslim riots of 1993. (See SPOTLIGHT: Secularism in South Asia.) Former prime minister Morarji Desai died in April, a few weeks after his 99th birthday. (See OBITUARIES.) In August, Sonia Gandhi (see BIOGRAPHIES), Rajiv Gandhi's widow, expressed regret over the government's slowness in investigating her husband's assassination in 1991. It was the Italian-born Gandhi's first public statement since the event. The Economy. An official estimate placed the growth rate in 1994-95 at 5.3% and the increase in exports at 27%. Several state-owned industries made public equity offerings, but the government's plan to award contracts for different telecommunications services met political and legal obstacles. The value of the rupee fell sharply in October, but the reserve bank was able to stabilize exchange rates. The stock market plunged in November. Presenting the federal budget on March 15, Finance Minister Manmohan Singh announced increases of 12% and 14.6%, respectively, in the allocations for education and agriculture. Import duties were cut, especially on metals, electrical parts, paper, chemicals, and drugs. Revenue receipts for 1995-96 were placed at Rs 1,007,870,000,000, capital receipts at Rs 663,640,000,000, and expenditure at Rs 1,721,510,000,000, leaving a budgetary deficit of Rs 50 billion. The provision for defense was Rs 255 billion, a rise of Rs 25 billion over the previous year. The annual inflation rate stood at 8.23% during the week ended November 11. SOUTH AFRICA Affairs. Opening Parliament in February 1995, Pres. Nelson Mandela threatened battle against the "forces of anarchy and chaos." He called for the country to become "investor-friendly," warning that freedom did not mean license and that the government did not have the means to meet the demands on it. People must rid themselves, he said, of the "culture of entitlement." A campaign was instituted to try to break the boycott of rent and service payments, estimated to involve 80% of black township residents. Mandela also continued his policy of racial reconciliation, holding a lunch for the wives of former presidents and prime ministers together with those of liberation movement leaders and taking tea with Betsie Verwoerd, widow of a leading architect of apartheid, Hendrik Verwoerd. Mandela expressed his sympathy for the Freedom Front's idea of an Afrikaner volkstaat because "compromise is something very important" in nation building. Implementation of the government's reconstruction and development program proceeded slowly, owing to limited financial resources, bureaucratic inertia, and delayed transference of powers to provincial and local governments. Plans were, however, proposed for a publicly funded and universally accessible primary health care system, and a program of state subsidies for housing for the poor was initiated. A new framework for national education was legislated. In October it was reported that more than 300 rural water projects, benefiting 3.5 million people, and improvements of more than 600 municipal services were completed or would be within the next 18 months. The year was punctuated by tensions between the parties constituting the government of national unity, particularly as local elections approached in November. The issues revolved particularly around the relative powers of central government and provinces. The National Party (NP) became torn by conflict over how to carve an independent profile as a party of opposition to the dominant African National Congress (ANC) while continuing to serve in the government, conflict that was resolved only by the authority of its leader, Deputy Pres. F.W. de Klerk. In January, to the anger of the NP, the ANC denied the validity of the indemnity granted just before the April 1994 election by the NP government in secret to 3,500 policemen and two former Cabinet ministers. It said that their cases had to be considered by the Truth and Conciliation Commission, which was established during the year. In the same month, in an atmosphere of wildcat strikes by black police and accusations of white racism in the police, police chief Johan van der Merwe resigned and was replaced by George Fivaz, who pledged himself to reform in the police force, including the demilitarization of ranks. Concern about the nation's rising crime rate mounted during the year, and the government imposed tougher bail conditions on criminals. The newly established Constitutional Court controversially abolished the death penalty on June 6. The trial of former security policeman Col. Eugene de Kock on 121 charges of murder, kidnapping, fraud, and theft produced further evidence of past police involvement in assassinations and the fomenting of political violence. Prominent Inkatha Freedom Party (IFP) leaders were alleged to have been in the pay of the security police. A secret report of the Goldstone Commission to President de Klerk in 1994 was published that alleged the security police had been "involved for many years in the most serious criminal conduct including murder, fraud, blackmail, and a huge operation of dishonest political disinformation." Prominent former policemen criticized the report for a lack of facts. In pursuit of the goal of maximum autonomy for the KwaZulu/Natal province, Chief Mangosuthu Buthelezi, IFP leader and home affairs minister, was elected chairman of the KwaZulu/Natal House of Traditional Leaders in January against the opposition of King Goodwill Zwelithini, who--to the consternation of other traditional leaders in KwaZulu/Natal--had distanced himself from the IFP. Both the ANC and King Goodwill declared this House unconstitutionally established. The IFP walked out of Parliament in February, alleging that the ANC had broken its 1994 pledge to international mediation regarding the form of the South African state and restoration of the Zulu kingdom. The ANC claimed that these were matters for decision by the Constitutional Assembly (both houses of Parliament meeting to draw up a final constitution). The IFP returned to Parliament but withdrew in April from participation in the Constitutional Assembly and later from an intergovernmental forum of regional premiers. Buthelezi accused the ANC of attempting to establish a "one-party hegemony" in the country; the ANC in response accused the IFP of advocating secession of KwaZulu/Natal. In response to calls by Buthelezi for the Zulu people to "rise and resist" central government, President Mandela in May threatened to cut government funds to KwaZulu/Natal and stepped up the army and police presence in the province. Mandela claimed Buthelezi was fomenting violence, while Buthelezi claimed he was calling for peaceful mass resistance. In June Mandela admitted that in March 1994 he had given guards at the ANC headquarters in Johannesburg "shoot to kill" orders in self-defense against an IFP demonstration, which had resulted in deaths. To the anger of the IFP, Parliament passed legislation authorizing payment of the salaries of traditional leaders by the central government rather than the provinces. In the KwaZulu/Natal legislature, the IFP tried to secure the passage of a provincial constitution described as "highly confederal," including provision for an army and sovereignty over territorial waters, but could not secure the necessary two-thirds majority for this. There was evidence of tension between hard-liners and moderates in the IFP, the latter favouring greater cooperation with the ANC in government. In the months prior to the April 1994 election, death tolls of 300 persons a month due to political violence were being recorded in Natal. They declined in the months following the election to a low of 57 in March 1995 but began to increase again thereafter, to about 70 a month. There were nearly 80 deaths in one week in July and 55 in one week in August. Accusations were made by the ANC of a "culture of immunity" in KwaZulu/Natal and of failure to prosecute perpetrators of violence. In June a special investigative unit secured the arrest of the IFP's deputy secretary-general, Zakhele Khumalo, and two police officers on 13 counts of murder committed in 1987. Local elections held on November 1, except in certain parts of the Western Cape and Natal, resulted in substantial gains for the ANC. In the NP-governed Western Cape, the elections were delayed because of a dispute with the government over whether the populous African township Khayelitsha should be included in the Tygerberg area or with central Cape Town. The controversy was taken to the Constitutional Court, where it escalated into a dispute over the relative powers of central and provincial governments. A draft constitution presented by Cyril Ramaphosa, the chairman of the Constitutional Assembly, on November 22 would give the regional governments more power in the South African federal structure through a new upper chamber of Parliament. A Labour Relations Act guaranteeing the right to strike was passed. It contained the innovative idea of workplace forums as arenas of management-worker cooperation. The Congress of South African Trade Unions (COSATU), the National Congress of Trade Unions, and the Federation of South African Labour Unions engaged in demonstrations and a half-day general strike in June to secure more favourable terms for workers in the act. The final version of the act was described by COSATU's general secretary, Sam Shilowa, as a "quantum leap for workers." Workdays lost in industrial strikes in 1995 were the lowest in many years. There were, however, wildcat strikes by nurses and a strike in four provinces by municipal workers demanding higher pay. Winnie Mandela, the estranged wife of President Mandela, criticized the ANC for overindulgence in racial reconciliation at the expense of the masses. In February, 11 leaders of the ANC Women's League resigned in protest against her conduct as president of the League. In March, while Mandela was absent in West Africa, her home was raided by police looking for evidence of financial misdealing. She was dismissed on March 27 as deputy minister of arts, culture, science, and technology. Though the dismissal was reversed in court on a technicality, she resigned on April 17. During the year President Mandela instituted divorce proceedings against her. The Rev. Allan Boesak, former leader of the Western Cape ANC and ambassador-designate to the United Nations in Geneva, was accused by donors to DanChurch Aid of unlawfully enriching himself at the expense of the Foundation for Peace and Justice, which he headed. He resigned his appointment as ambassador in February. Amid similar cases of alleged corruption, the ANC drew up a code of financial conduct for its parliamentarians, requiring them to reveal their own and their families' business interests. At a conference in April, the South African Communist Party (SACP) reported 50,000 members, 50 of them serving as ANC members of Parliament or government ministers and three as provincial premiers of the nine provinces. Two prominent SACP leaders, Joe Slovo and Harry Gwala, died during the year. (See OBITUARIES.) In one of the country's worst-ever mining disasters, more than 100 miners died at Vaal Reefs gold mine in May when a runaway underground locomotive fell on top of an elevator carrying them down a shaft. The Rugby Union World Cup was staged in the country in May and June and was won by the South African team, the Springboks. The Economy. The economic upswing that began in May 1993 continued, strongly in the second half of 1994 and more weakly in the first half of 1995. Gross domestic product (GDP) grew by 2.3% in 1994--the first year since 1988 that it had exceeded population growth--and by 1.5% in the first quarter of 1995 and 0.8% in the second, pulled down by poor performances in agriculture and mining. GDP growth for 1995 was predicted at 2.8-3%. The upswing was fueled by gross domestic fixed investment (GDFI), which grew by 7% in 1994 (the first year of growth since 1989) and by 5% in the first quarter and 8% in the second quarter of 1995. GDFI was expected to grow by more than 10% in 1995 overall. In 1994 this represented a few big investments by private companies, but in 1995 it was becoming more widely distributed. Official estimates put unemployment at about 4.7 million, one-third of the economically active population. Between 1990 and 1994 formal-sector employment shrank by 8%. Despite the upswing, it declined by 0.5% in 1994 to 7,410,000 jobs, but growth was anticipated in 1995. The upswing continued to stimulate imports of capital goods. A surplus on the current account of the balance of payments of R 500 million in the first half of 1994 was transformed into a deficit of R 2.1 billion for the year overall. During the first half of 1995, the deficit was R 5.6 billion, which led to estimates of an annualized deficit of R 8 billion-R 10 billion. Net capital inflows of R 8.8 billion in the second half of 1994 (compared with an outflow of R 3.8 billion in the first half) and of R 9.8 billion in the first half of 1995 allowed this deficit to be sustainable. At the end of June, gross foreign exchange reserves were R 15.2 billion, about six weeks of exports. The governor of the reserve bank expressed concern that much of the capital inflow was short-term and warned that the upswing was exposing the insufficiency of domestic savings and the nation's low labour productivity. The dual rand (financial and commercial), an exchange control measure, was abolished in March without substantially affecting the value of the currency. In June a series of measures liberalizing trade were introduced, with phased major reductions in tariff protection barriers and the scrapping of the local content requirements in the automobile industry. The first budget wholly drawn up by the government of national unity allocated 46.7% of spending to social services (compared with 44% in 1994-95). Education received 26%, the largest amount, and the allocation for housing and urban upgrading, at 2.7%, was more than doubled from 1994-95. Interest payments on debt accounted for 18.6% of spending, the second largest amount. Military spending was cut by 11.7% to R 9.8 billion, which represented a continuing decline since 1989. A decision on whether to purchase four new corvettes for the navy was postponed by the Cabinet. The budget's deficit before borrowing was projected at 5.8% of GDP, compared with 6.4% in 1994-95. Consumer price inflation reached a low of 7.1% in April 1994, averaged 9% for 1994 as a whole (the lowest since 1972), increased to 11% by June 1995, and fell to 6.4% in September, the lowest rate in 23 years. The money supply increased at rates deemed excessive by the reserve bank, which increased its interest charges to other banks from 13% in September 1994 to 15% at the end of June 1995. AUSTRALIA Affairs. The debate in Australia over republicanism intensified in 1995 when Prime Minister Paul Keating announced that Sir William Deane, a High Court judge, would replace Bill Hayden as Australia's 42nd governor-general. Deane's appointment, which came as a complete surprise, was set to run from Feb. 16, 1996, to Dec. 31, 2000, fitting in with Keating's agenda to replace the post of governor-general with the first Australian president no later than 2001. Uncertainty about the timing of the next general election distracted both the government and the opposition during the year. Keating held the initiative, but he was unable to find a window of opportunity when public opinion was sufficiently on his side to make the risk of calling an early election worth it. In January, Alexander Downer resigned after only eight months as head of the Liberal Party of Australia. He was replaced by former party leader John Howard. Polls later showed much support in the main cities for Howard and the Liberal coalition in preference to Keating's governing Australian Labor Party (ALP). In the electorate, women and minorities were disenchanted by the ALP's failure to live up to its rhetoric on preference for underrepresented gender and ethnic groups. These two issues came to a head when the ALP's national hierarchy took away from a local branch the right to select a candidate for the safe Labor seat of Batman in Melbourne's western suburbs. The local branch wanted either Theo Theophanous or Jenny Mikakos, but Keating intervened, with the help of the ALP national secretary, and installed the outgoing president of the Australian Council of Trade Unions (ACTU), Martin Ferguson, as the ALP's candidate. ACTU Assistant Secretary Jennie George was groomed to replace Ferguson as chief of the trade union movement. The first woman to hold this job, George faced a rapid downturn in union membership, with less than 40% of the workforce paid-up union members. Two cases on Aboriginal rights were before the High Court early in the year. In March the High Court ruled against Western Australia's challenge to the 1993 Native Title Act, thereby reinstating Aboriginal property claims in that state. Less than a month later, a group of Aborigines who had been taken from their families as children under a 1918-53 law in the Northern Territory filed suit in the High Court. Health Minister Carmen Lawrence (see BIOGRAPHIES) saw herself as the target of a royal commission. This view was endorsed by the prime minister, who used all the resources at the government's disposal to protect Lawrence's reputation. For his part, Howard was severely embarrassed by his inability to control a power broker in the west, Sen. Noel Crichton-Browne, who was eventually expelled from the party. The Australian literary and artistic world was rocked in 1995 by three events. Helen Garner published a controversial book, The First Stone, in which she provoked a feminist backlash for her assertion that women should grow up where sexual politics are concerned. The First Stone was overshadowed by the furor over The Hand That Signed the Paper, which won the Miles Franklin Literary Award only to land its author in hot water for misrepresentation of her ancestry. The author, Helen Demidenko, claimed that her tale of Ukrainian complicity in the Holocaust was based on her Ukrainian father's family history. She was later unmasked as Helen Darville, the daughter of middle-class British immigrants. Subsequent arguments over the propriety of writers' using misleading noms de plume were overshadowed by a controversy about the book's main theme, anti-Semitism. Hilary McPhee, the general manager of the Australia Council, ruffled literary feathers by describing Australian artists and intellectuals as malcontents who "deep in their bones seem to me to wish each other ill." McPhee's Australia Council distributed $A 60 million each year and was often criticized because its funding procedures were deemed unfair by some. McPhee responded by saying that the Australian artistic community was unique in its lack of generosity, which had "more in common with a provincial town than a serious nation." There was a literary bright spot during the year when Western Australian novelist Tim Winton (see BIOGRAPHIES) was short-listed for the Booker Prize. A best-forgotten chapter in Australian aviation history closed in 1995 when the government finally bowed to pressure from its military pilots and withdrew the Nomad aircraft from service. Crashes killed 56 people before Sen. Robert Ray, the defense minister, axed the Nomad after a joint army and navy report found that the aircraft was not capable of carrying out its assigned tasks. Originally designed 20 years earlier in the hope that its short take-off and landing capacity would lead to a new export industry, the Nomad was soon found to have a basic design fault in the tail, which, Ray admitted, did not provide an acceptable margin of safety for military operations. The Australian Broadcasting Corporation followed up with a hard-hitting television expos that lamented the prospect of the Nomad's still being on sale for civilian purposes. The Economy. Opinions varied on the strength of the Australian economy during 1995. The World Bank rated Australia as the world's richest country by measuring national net worth, including natural resources, and concluding that each Australian had a net worth of $A 1.9 million. With an election due in early 1996, the government and opposition disputed the meaning of economic indicators. The Australian treasurer declared that Australians were living "in very good economic times," pointing to growth in gross domestic product. There were 16 consecutive quarters of positive growth, the best record in 25 years. By August 1995 annual growth stood at 3.7%, which indicated that the economy had broken free of the boom-bust cycle and had slowed to sustainable levels. Howard dismissed the good news as transitory, saying that it amounted only to "five minutes of economic sunshine." The opposition shadow treasurer, Peter Costello, commented that growth levels of less than 4% would not send anyone reaching for the suntan cream and criticized the ALP for hardening the Australian electorate to accepting bad news with equanimity. The Australian current account deficit, said Costello, was unacceptable when compared with those of Australia's trading partners. In May the deficit reached $A 3.1 billion a month, easing slightly in June and July to $A 2.5 billion and $A 2.1 billion. The small improvement was caused by the increase in exports of sugar, gold, coal, petroleum, and gas and brought the deficit into line with the budget forecast of $A 427 billion. Economists and politicians alike agreed that the key question was whether the huge balance of payments deficit and foreign debt would lead to a rise in domestic interest rates, something that would enormously damage the Keating government's chances of reelection. Howard's criticism was dismissed by the governor of the reserve bank, Bernie Fraser. Fraser was himself criticized by Costello for becoming involved in party politics while a civil servant. Privatization remained a major weapon in the government's economic arsenal. The national airline, Qantas, was privatized in 1995 in a relatively successful return of capital to the government. Although foreign buyers snapped up 53.2% of the stock (exceeding the government's 49% limit), investors were happy with the market price. Maximizing the sale price proved possible in the case of Qantas but very hard when it came to selling the national shipping company. The Australian National Line (ANL) had an annual history of high debt and financial loss, but maritime unions and waterfront stevedores resisted privatization. On May 22 the Peninsular and Oriental Steam Navigation Co. (P&O) line emerged as the only bidder. Three months later the auditor general revealed that the ANL had cost taxpayers $A 53.7 million since 1991. At the end of August, the Cabinet agreed to sell 100% of the ANL to P&O, despite the opposition of the Maritime Union of Australia and the ACTU. P&O guaranteed that the ANL would remain under the Australian flag with Australian-only crews on Australian award conditions. The prime minister warned the unions that jobs would be slashed if the ANL remained in government hands and urged the unions to accept the P&O bid. Keating made it clear that restructuring rather than privatizing the ANL would lead to massive job losses, with five of the company's six vessels in international trade scrapped and lost. P&O, on the other hand, promised to keep at least four of the six vessels and to consider replacements for the other two. The management of Australia's largest retailer, Coles Myer Ltd., was subject to intense scrutiny in September 1995 as the company lost its second internal auditor in a month and sacked its finance director. Coles Myer's most vocal activist shareholder, Laurence Gruzman, argued that the firing was an indication of wider problems within Coles Myer. Gruzman identified as the most important matter the transfer of the purchasing power of Coles Myer--one of the largest corporations in Australia--to small private companies. In response, Mark Leibler, a nonexecutive director of Coles Myer, pointed out that more had been written about the company in a week than about any other corporation in recent history and that every column inch had caused the company immense damage. CANADA Affairs. Canada faced a great crisis in 1995 when the voters of Quebec only narrowly rejected secession. With about 93% of eligible voters--almost five million Quebeckers--voting, the plan was rejected by a margin just over 1%, but about 60% of French-speaking residents voted "yes" on the October 30 referendum. The forces urging secession, emboldened by their near victory, vowed to raise the question again, which posed a serious challenge to the national government led by Prime Minister Jean Chrtien. Separatists had received a boost from the election of the Parti Qubcois (PQ) to form the government of Quebec in September 1994. The party was committed to Quebec's "sovereignty," and this was the second occasion on which the issue had been placed before the electorate. Quebeckers had rejected independence by a 60-40% margin in 1980, but the party was resolved to try again. In February the PQ government led by Premier Jacques Parizeau conducted hearings all over the province to take the sovereignty option before the people. The opposition Liberal Party, led by former premier Daniel Johnson, had boycotted the hearings, and a report based on the public consultations was released in April recommending that sovereignty be declared after it had been endorsed in a popular referendum. The government then would enter into negotiations with the rest of Canada to work out a new political and economic partnership. The three groups in the province advocating sovereignty came together in a common front on June 12. Premier Parizeau, leading the PQ, was named head of the coalition. He was joined by Lucien Bouchard, leader of the Bloc Qubcois (BQ) and the Partie de l'Action Dmocratique, under Mario Dumont, who put forward a more moderate version of Quebec nationalism. Following the summer recess the Quebec legislature, dominated by the PQ, began preparations for a referendum on the question. Furthermore, a bill was passed that looked to the drafting of a constitution for an independent Quebec. It stated that Quebec would continue to use the Canadian dollar and sought to reassure both the aboriginal population of the province and the English-speaking minority that their rights would be respected. The campaign got off to a slow start in early October but began to generate excitement when Parizeau named Bouchard, a fiery and widely popular speaker, to be the chief negotiator with Canada following a referendum victory. He placed less emphasis on sovereignty than Parizeau had done, dwelling on the advantages of a new partnership with Canada. His model was a European-style economic union, which he stated the rest of Canada would be forced to enter because of economic realities, and he used his considerable oratorical skills to appeal to the self-esteem of the Quebec people and their pride in their language and culture. The present federal system had nothing to offer Quebec, Bouchard claimed; it was time for a virage, a turning. Bouchard's activities galvanized pro-sovereignty sentiment, and Daniel Johnson countered by pointing out the dangerous economic risks that would arise from Quebec's sovereignty; there could be no guarantee that Canada would enter into a partnership with Quebec, and sovereignty could lead to a mounting Quebec deficit as the new state took on its share of Canada's national debt and lost the federal transfer payments it received for social services. Chrtien had always expressed the view that the separation of Quebec would never receive a popular mandate, but late in the campaign, worried about the impact of Bouchard's message upon Quebec voters, he took a more active role, speaking several times in Quebec and addressing a massive outdoor rally in Montreal three days before the vote. Chrtien also began talking of constitutional change, holding out the prospect of "distinct society" status for Quebec and a constitutional veto for the province. In the end, 2,361,526 voters (50.6%) voted "no" to the sovereignty proposal, and 2,308,028 (49.4%) voted "yes." Only 53,498 votes divided the two sides. Although "yes" votes were more numerous in 80 of Quebec's 125 voting districts, a number of regions returned large majorities for "no." One was the island of Montreal, home to most English-speaking Quebeckers and virtually all the immigrants living in the province; another was western Quebec north of the Ottawa River, where the national capital is the principal city; and a third was communities in the Eastern Townships along the United States border. In the far north the Cree Indians and the Inuit voted to stay with Canada. After the results became known, Parizeau launched an angry tirade against Quebec's ethnic minorities and the power of big business, and he announced his retirement from public life. The way was now open for Bouchard to succeed him as premier of Quebec and carry on the sovereignty struggle. Bouchard announced he would stand for the PQ leadership in November, a position he was expected to win easily. The result of the referendum was a blow to Prime Minister Chrtien, who had seriously misjudged the nationalist mood in his native province. His new task was to offer constitutional and administrative reforms that would meet Quebec's demands for distinct status while satisfying those who viewed Canada as a union of equal parts. If Chrtien's position in Quebec was weak, he nevertheless had a good grasp of political conditions in the rest of Canada and was trusted there as its spokesman in the debate over Canadian unity that was bound to continue. The federal government had pursued a careful course in 1995, avoiding steps that might antagonize Quebec voters before the October referendum on independence while reassuring the rest of Canada that it was not being soft toward Quebec's demands. Thus, a major reform of the social welfare system, promised by the Liberal Party when it assumed office in 1993, was shelved until after the referendum. The most controversial piece of legislation was a gun-control bill that would ban the sale of some handguns and require registration of all firearms. Although there was broad public support for the bill, Western and rural MPs attacked its provisions as an ineffective and costly way to combat violent crime. The bill was passed in the House of Commons on June 13 by a majority of 192-63. It was then sent on to the Senate, where it passed on November 22. The Liberal Party's comfortable majority in the federal House of Commons was not shaken during the year. It won three by-elections on February 13. Two seats in Ottawa and Montreal were easily retained, while a third one in Quebec's Eastern Townships was wrested from the separatist BQ. Party standings after the by-elections were: Liberals 177; BQ 53; Reform Party 52; New Democratic Party (NDP) 9; Progressive Conservatives 2; independents 2. There was only one Cabinet change during the year. Lucienne Robillard, elected in the Montreal by-election, was named minister of labour on February 22. A former minister of health and education in the Quebec provincial government, she led the federal government forces in the referendum on separation. Canada gained its first governor-general of Acadian extraction when Romo LeBlanc, a former teacher, journalist, and Liberal Cabinet minister, was installed in the largely ceremonial post on February 8. The Acadians, French-speaking residents of the Maritime Provinces, saw themselves as quite distinct from the citizens of Quebec. Four of Canada's 10 provinces held elections in 1995. Only in the most populous, Ontario, did the government change hands. On June 8 the Progressive Conservative Party, vowing to cut public spending, decrease the deficit, and reduce personal income taxes, swept into power. The Tories captured 82 seats in the 130-seat legislature, defeating the NDP administration that had been in office since 1990. Michael Harris was sworn in as Ontario's 22nd premier on June 26. In Manitoba the Progressive Conservatives under Gary Filmon won a third term on April 25. Next door, in Saskatchewan, the NDP under Roy Romanow easily won a second majority government on June 21. Romanow's record as a responsible manager of the province's budget had been a major factor in his victory. In the Atlantic province of New Brunswick, the Liberals under Frank McKenna won a third term, capturing 47 of the 54 seats in the legislature. The victory on September 11 reflected voter satisfaction with McKenna's efforts to attract high-technology industries to the province. The Northwest Territories elected a new Assembly on October 16. A form of consensus government is followed in the Territories, and the 24 members of the new legislature elected a speaker and a leader of the government from their number. It was the final election scheduled before the eastern portion of the Territories became the self-governing region of Nunavut in 1999. The Economy. In 1995 Canada experienced modest economic growth. The annual rate of increase in the economy was expected to reach 2.5%. Gross domestic product (GDP), seasonally adjusted at market prices, was estimated at Can$777.2 billion at midyear. A slowdown in the U.S. economy led to weak exports, although buoyant prices in the pulp, paper, and metal industries offered prospects for growth. Capital investment was heavy in these industries. A national rail strike in March slowed the economy, and consumers remained cautious in the face of the debate over Quebec's future. Interest rates fluctuated little during the summer, and the consumer price index stood at 2.1% in November. There was virtually no change in employment from the end of 1994, with the unemployment rate in November standing at 9.4%. The Canadian dollar, battered in foreign money markets by the uncertainty over Quebec, fluctuated from U.S. 70 cents in January, its lowest level since 1986, to U.S. 74 cents in September. Finance Minister Paul Martin drastically reduced federal government expenditures in his second budget, introduced on February 27. Spending for government programs was slated to decrease by $10.4 billion, or 8.8% for fiscal year 1996-97. This was expected to bring the federal deficit down from $37.9 billion in 1994-95 to $24.3 billion two years later. The new figure represented the equivalent of 3% of Canada's GDP, a goal set by the Liberal government when it assumed office in 1993. Martin's financial plan hit the federal public service industry especially hard. Forty-five thousand jobs, 14% of the total, were to be eliminated over the next three years in the largest workforce reduction ever made by an employer in Canada. The Department of National Defence saw its expenditures cut by 14% over two years with six military facilities and three service command headquarters to be closed. Transportation subsidies of $560 million to assist Canadian farmers in marketing their wheat were terminated. Martin introduced few