THE WEEK: DECEMBER 31-JANUARY 6

NATION

REPUBLICANS BLINK

Confronted with negative polls and a frustrated public, Republicans staged a tactical withdrawal from the three-week government shutdown. At week's end, both houses passed and the President signed legislation returning all federal employees to work with pay through Jan. 26. However, the measures will leave many government functions still unfunded.

WHERE THERE'S SMOKE...

The nation's five largest tobacco companies jointly denounced the Food and Drug Administration's proposed tough new restrictions on tobacco ads and sales to minors as not only unnecessary and unwise but also an "illegal power grab." The attorneys general of 25 states begged to differ. They sent the agency a supportive letter, urging a cooperative federal and state effort to curb teen smoking.

A HILLARY COVER-UP?

Republicans ordered new hearings following the release of a two-year-old Administration memo that identifies Hillary Rodham Clinton as the major player behind the controversial mass firings of White House travel-office employees in 1993. The late deputy White House counsel Vincent Foster was mentioned several times in the memo, leading the Whitewater independent counsel to express dismay that it was not released sooner. Late last week, lawyers for the First Lady also released newly "discovered" billing records of her legal work for the S&L at the heart of the Whitewater probe. Investigators have long sought the documents.

WATT A PLEA

James Watt, Ronald Reagan's Secretary of the Interior, pleaded guilty to a misdemeanor for having attempted to mislead the federal grand jury probing an influence-peddling scandal in Reagan's Housing Department. Watt had originally faced a 25-count felony indictment for his role as a housing consultant. Some observers cited the outcome as evidence that the original charges may have been unduly inflated.

AN ACT OF TERROR?

A car belonging to the lawyer of Jennifer Harbury, a human-rights crusader against the Guatemalan military, was fire-bombed on Friday. The explosion outside the lawyer's Washington home raised fear of a terrorist vendetta. New Jersey Representative Robert Torricelli, a backer of Harbury's efforts to uncover the truth behind the death of her Guatemalan rebel husband, asked Attorney General Janet Reno to open an investigation. A Guatemalan army spokesman denied that the military was involved. On Saturday at least one shot was fired at Harbury's Washington home. She was not at there at the time. The FBI said there appeared to be no connection between the two incidents.

WORLD

SERBS FREE BOSNIAN CAPTIVES

Bowing to pressure from U.S., European and NATO authorities, Bosnian Serbs released 16 Bosnian civilians taken captive in Serb-held Sarajevo suburbs. The abductions had been a serious challenge to the Dayton peace accord, which requires that all of Sarajevo be open to civilian travel.

CLINTON TO VISIT G.I.S IN BOSNIA

President Clinton plans to visit U.S. forces in Bosnia before his State of the Union address on Jan. 23. Although the White House refused to divulge exact travel plans, Clinton is expected to visit Tuzla, headquarters of U.S. operations, late this week.

TOWARD A FACE-OFF WITH CHINA?