THE PONZI REVOLUTION

By Bruce W. Nelan

The front line in Albania's armed rebellion begins about 25 miles north of the Adriatic port city of Vlora. There, posted across a series of low ridges, about 100 men and boys in civilian clothes, armed with rifles and machine guns, keep watch over the main coastal road, halting the few cars on the move, checking documents and asking questions. The tall man in charge of the group is Krenar Hoxha, who says, "We are waiting in the hills to repel the army of Berisha." Young insurgents fire their weapons into the air and shout, "Down with Berisha."

That would be President Sali Berisha, a hard-line conservative who has used the past six weeks of demonstrations as an excuse to tighten his personal grip on power. With protests over the collapse of fraudulent investment schemes convulsing Albania, Berisha dismissed the government and shook up the armed forces. Last week he declared a state of emergency and then had his rubber-stamp Parliament re-elect him President. Protesters reacted by switching their targets from the Ponzi schemes to the one-man rule of Berisha. Simmering economic differences between the poorer north and the south boiled over, and several southern towns exploded into insurrection--or anarchy.

As Albanian army units rumbled toward them, roadblocks sprouted all across the south last week. Insurgents blew up bridges to keep government tanks out of town and seized police stations and looted military arsenals. The insurgents are now armed with automatic weapons and grenades, even a few tanks and patrol boats.

The revolt in Vlora began six weeks ago, in defiance of swarms of riot police and agents of SHIK, the state security service, who were trying to stamp out demonstrations. Vlora, a town of 70,000, had recently been prosperous, at least in Albanian terms, largely because some of its residents are noted for their skill at smuggling. Since they had money to lose, they lost more than most Albanians in the collapsing pyramid funds. They have had it with Berisha. "He is a thief who stole our money," says Idris Nimet, a carpenter turned rebel. "Berisha will never get to Vlora. The people are with us, the soldiers are afraid, and everyone has guns."

Indeed they have. Vlora's angry residents wrecked the town hall, the police station and SHIK headquarters, where six officers were killed in the attack. They looted the bank and warehouses and raided army depots abandoned by unhappy and undisciplined soldiers. It seems that every man in town has an AK-47 and fires it with abandon. At nightfall the constant crack of machine guns and the booming of explosives tossed into the harbor are deafening. Since last week 20 people have been killed and more than 100 wounded by gunfire, and a nurse at the Vlora hospital says perhaps half of the shootings are accidental.

In the city center a crowd of about 1,000 gathers to hear a speaker demand the ouster of Berisha, but he is preaching to the converted. "Here in Vlora," says Velo Cazin, 44, "all people think as one. Berisha must come down." They also think they can somehow be given back the money taken by the pyramid funds, even though almost every Albanian lost some savings.

With a standoff shaping up, Berisha sat down for five acrimonious hours on Thursday with opposition political leaders in the capital, Tirana, then agreed to a two-day halt in military operations in the south. He is offering amnesty to citizens who turn in their weapons and have not committed crimes, which he did not define.

It was a step in the right direction, but the rebels were not impressed. On Friday, Albert Shyti, 27, an insurgent political leader, replied with the demands of his newly formed Committee for the Protection of Vlora: The army must pull back, an interim government must be set up in Tirana, and swindled Albanians must get their money back. In spite of such determination, the residents of Vlora and other southern towns like Saranda and Delvina will not be able to march to Tirana and enforce their demands. But they could inflict serious damage on any government troops that might try to take the city.

Berisha should be worried. Albania's European neighbors and the U.S. certainly are. They have been lecturing him on the need for a peaceful settlement, and they are sending emissaries to try some cool-headed mediation. To make it work, the rebels will have to moderate their demands, and Berisha will have to switch to a more conciliatory approach. If they do not, the next step is likely to be into a real civil war.

--Reported by Massimo Calabresi/Vlora and Douglas Waller/Washington

With reporting by MASSIMO CALABRESI/VLORA AND DOUGLAS WALLER/WASHINGTON