Two Strikes, Chamorro Digging In : Nicaragua: An accord halts the violence, but the underlying conflict that produced it--tough medicine for a sick economy--remains unresolved.

William M. LeoGrande is a professor of government at American University. He is writing a book about Ronald Reagan's Central American policy

Piles of burning tires dotted intersections, enveloping the city in an acrid haze. Teen-agers wearing bandannas and baseball caps, armed with pistols and clubs, stood behind barricades composed of octagonal paving stones--"Somoza bricks," named for Nicaraguan dictator Anastasio Somoza, who owned the company that manufactured them before he was overthrown in 1979. The news footage out of Managua last week looked like reruns of archival footage from the 1978-79 insurrection against Somoza.

Once again, Sandinista loyalists took to the streets in protest against the government, igniting the worst political crisis President Violeta Barrios de Chamorro has faced since her inauguration in April. But important differences marked last week's street clashes from those a decade ago. Then, the demand was for a new government--a revolution. The trade unionists manning the barricades last week, members of the Sandinista National Workers Front, were seeking concessions on such bread-and-butter issues as wages and job security. When the strike was settled Thursday night, the workers had won some of their demands. But basic disagreements over the government's economic policy remained.

Despite clashes between pro-Sandinista and pro-government crowds, the fighting was much less bloody than in 1978-79, when the National Guard killed thousands of civilians in a vain effort to hold on to power. The police and armed forces, still largely under the command of Sandinista officers, obeyed Chamorro's orders to dismantle the barricades, but they assiduously avoided confrontation with the crowds.

Last week's dispute was rooted in Nicaragua's desperate economic situation. Chamorro inherited a country plagued by hyperinflation, without foreign reserves and unattractive to investors. Her economic team's prescription is a tough, conservative stabilization plan to devalue the currency, privatize state enterprises, end subsidies of basic consumer goods and radically reduce government spending. Inevitably, lower-middle-class and working-class people were hit hardest by the program. Prices on consumer goods went up faster than wages; unemployment surged as the government began massive layoffs.

In May, public employees' unions went on strike, demanding wage adjustments and an agreement to limit layoffs. The economic grievances were real enough, but the strike also had strong political undertones. The unions are staunchly pro-Sandinista, and their ability to shut down the country sent a powerful message: Chamorro would have to make policy in consultation with the Sandinistas and their constituents if she wanted social peace. Otherwise, the Sandinistas would "govern from below," as former president Daniel Ortega warned.

Though Chamorro initially threatened to fire all the strikers, the May dispute was settled when the government negotiated an agreement giving the unions a modest wage increase. Here was another, more hopeful, message. The Sandinistas were not eager for a confrontation with the new government. Having presided over Nicaragua's economic collapse, they had no desire to be blamed for sabotaging Chamorro's efforts at recovery. If Chamorro was willing to re-establish an atmosphere of reconciliation, the Sandinistas might do the same. That uneasy truce lasted about six weeks.

The latest confrontation began July 2, when the public employees went out on strike--over essentially the same issues. Inflation, running at more than 100% a month, had long since outstripped the May salary increases. Layoffs continued, with the government targeting union activists, the workers claimed. As the strike picked up support from students and other grass-roots groups, the unions' demands grew as well. They called for a halt to the government's program of returning confiscated land to its original owners and demanded a voice in government budgetary decisions.

Angered by such "political" demands, the government broke off talks with the union last Friday, declared the strike illegal and threatened to fire and imprison anyone who didn't show up for work Monday morning. With that, the Sandinistas took to the streets. Barricades went up.

The current confrontation was more violent than the one in May, but it is not different in kind. The striking workers had legitimate grievances over the impact of the government's stabilization program on their standard of living.

The Sandinistas still do not want to provoke an apocalyptic showdown with the government. When the fighting broke out, Ortega urged his supporters to remain calm and refrain from violence. When Chamorro offered to re-open talks with the unions, the Sandinistas called on the rank and file to abandon the barricades. With both sides eager to avoid further violence, the dialogue quickly produced a settlement similar to the one in May.

This halted the violence, but it did not resolve the underlying conflict that produced the settlement. The Sandinistas want more than wage increases. Under rank-and-file pressure to look out for the welfare of their core constituency, they want Chamorro to soften the impact of her economic policies on the poor.

These are concessions Chamorro is reluctant to make. If she modifies her economic program in response to this strike, what is to keep the Sandinista-backed unions from striking again next month, to demand a further dilution?

Chamorro was reportedly being advised to take a hard line with the unions by legislators elected on her United Nicaraguan Opposition (UNO) ticket, and by the U.S. Embassy. Vice President Virgilio Godoy, the principal advocate of confrontation with the Sandinistas, had called for "brigades" of UNO supporters to take to the streets against the strikers. Some heavily armed former Contras were among the pro-government mobs that responded.

Washington has been urging Chamorro to opt for political confrontation since her election. When she wanted to appoint Sandinista Defense Minister Humberto Ortega as chief of the armed forces, to defuse the volatile issue of political control over the military, Washington pressed her to fire him instead. In her wisdom, Chamorro ignored the advice. Whatever other problems she has had with the Sandinistas, civilian-military relations have been smooth.

The Bush Administration, no less than its predecessor, seems to have an obsessive ideological hatred for the Sandinistas--unsatiated despite their expulsion from government. Washington is lining up with the most right-wing Nicaraguan elements, who will not be satisfied until every last Sandinista is driven out of the bureaucracy, the army, the unions and perhaps out of the political system altogether.

That is a prescription for civil war. If Chamorro listens to the hard-liners, and tries to use the strike as an excuse to break the unions, the street fighting could resume and the people at the barricades may begin to demand more than just changes in policy. Spreading disorder would leave Chamorro little choice but to call in the police and armed forces, whose loyalty would be severely tested.

Chamorro herself seems inclined to follow her instinct for national reconciliation. As the violence escalated, fueled by passions for vengeance that a decade of war had spawned, she sought dialogue and compromise. Before long, however, she will have to deal again with the question of whether to modify her economic policies to soften their impact on the poor.

Chamorro would be well advised to follow the formula that has worked so well in managing the army--a willingness to respond positively to the legitimate interests of her opponents. Economic concessions to the lower classes may slow the government's plans for economic recovery, but there will be no recovery if Nicaraguans continue fighting each other at the barricades.

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