Panama Orders U.S. Envoy Out; Gas Ends New Protest : Services to Canal Zone Threatened

Panama ordered a U.S. diplomat out of the country today, broke up a protest by hundreds of disgruntled hospital workers with tear gas and threatened to cut services to Americans in the Canal Zone if Washington refuses to pay for them.

The government of Gen. Manuel Antonio Noriega has been left virtually without cash by U.S.-engineered economic sanctions and his riot police used tear gas on Monday and again today against workers demonstrating to be paid.

Panama’s Foreign Ministry said Terrence Kneebone, director of the U.S. Information Service here, must leave the country within 48 hours.

In a statement published in the pro-military press, the Foreign Ministry said Kneebone’s “functions in Panama were incompatible with his diplomatic work.”

‘Ridiculous’ Allegation

Kneebone, a leading U.S. Embassy spokesman, has formally responded to several government accusations in the last week, including a formal charge that the United States was preparing to invade Panama.

His response to that allegation was that it was “ridiculous.”

The State Department in Washington refused to accept the expulsion order on the ground that it was not issued by the government of ousted President Eric Arturo Delvalle, whom Washington regards as Panama’s legitimate leader.

Riot police meanwhile fired tear gas, water cannon and birdshot at about 200 doctors, nurses and hospital workers who refused to break up a protest in front of the state Social Security Hospital.

The protesters, chanting “We want money, not bags of food,” and “Down with Noriega. Down with Pineapple Face,” ran inside the hospital gates when about five dozen riot police accompanied by a water cannon truck approached to break up the demonstration, witnesses said.

Children Carried Away

Hospital workers were seen carrying small children out of a day-care center just inside the gates of the hospital yard as tear gas enveloped the hospital compound.

The pro-military press, citing an “authorized source,” said Panamanian services to North Americans living in the canal area could be cut off if the United States does not pay for them.

The Reagan Administration announced last week that it would withhold a $6.5-million payment to Panama for operation of the canal as part of the the pressure against Noriega.

A federal judge in New York added to the pressure today by granting a preliminary injunction at the request of Delvalle barring Noriega’s government from withdrawing up to $50 million on deposit in American banks.

“There is a real threat that these funds will be dissipated and irretrievably lost if dispersed to persons other than the lawful representative of the Republic of Panama,” Judge Lloyd MacMahon said in his 19-page decision.

Number of Services Threatened

The Panamanian newspaper report on Americans in the canal area said the services that could be cut off included garbage collection, fire and police protection and electricity.

A spokeswoman for the Canal Commission said she could not comment on the newspaper report.

The government has said it cannot pay 100% of today’s $35.5-million public employee wage bill and is trying to pay part of the money in food coupons, but supermarkets have refused to accept them.

The Agriculture Ministry began distributing 12,000 food bags on Monday as partial payment of salaries for the 150,000 employees.

A protest by teachers in a working class district on Monday was also broken up by riot police firing tear gas.

Dock workers also protested, mounting a strike that shut down two docks at the Balboa port, after failing to receive their biweekly salaries.