TIRANA, ALBANIA, DEC. 28 -- Political change, driven by a severe economic crisis, is coming swiftly to Europe's last hard-line Communist state.

Mass protests that began on Dec. 9 have forced the ruling Albanian Party of Labor, as the Communists are called here, to cave in to demands for pluralism. The protests, which students started in Tirana, spread to several Albanian cities. Workers, with an average monthly wage of 500 leks (roughly $50), took to the streets, shouting slogans in support of democracy.

President Ramiz Alia allowed the Democratic Party, Albania's only legal opposition group, to be formed on Dec. 11. But the government simultaneously moved swiftly to stop the turmoil, meting out sentences of up to 20 years in prison to 157 demonstrators convicted of vandalism.

"The {Communist} party is walking a tightrope. It is trying to open up, to secure Western help, but will never give up power," said a student in Tirana who, fearing reprisal, refused to give his name.

But Albania, which is slightly larger than Maryland, has opened up to Europe more over the past six months than in the preceding 46 years since Communist rule was established by Enver Hoxha after World War II. Hoxha fiercely defended Albania's independence, withdrawing the country from the Soviet-dominated Warsaw Pact in 1968.

Alia, who took over after Hoxha's death in 1985, has diluted his predecessor's cocktail of Stalinism and intense patriotism. Hoxha's slogan, "We'll eat grass, but never abandon our principles," has fallen by the wayside as Albania seeks Western help to overcome its grave economic crisis. Alia has sought the renewal of diplomatic relations with the United States. Relations with the Soviet Union were established this fall.

Gramoz Pashko, a leader of the Democratic Party, said in an interview, "For all these years, Albanian bureaucrats rejected foreign aid and now they're reforming because they need help."

But the system's main pillars, the Communist Party and the security forces, remain intact. The omnipresent secret police, the Sigurimi, still lurk in the shadows of Tirana's muddy streets. But while watching for the Sigurimi, people now dare to approach visiting Western journalists to complain about repression. They dismiss the party's statements on pluralism as superficial and warn visitors not to be deceived. "It cannot reform," said an 18-year-old engineering student. "I fear it can only be overthrown."

But the fledgling opposition also fears that a revolution could result in the reemergence of long-suppressed ethnic and religious conflicts among Albania's 3.2 million population. The Ghegs in the north fought for centuries against the traditionally dominant southern Tosks. Hoxha was a Tosk; Alia is a Gheg.

Albania's three religious groups, Catholic, Moslem and Orthodox, are now working together to rebuild the religious community. About 6,000 Catholics in the northern city of Shkoder celebrated Christmas mass this week for the first time since 1967, when Hoxha declared Albania an atheist state.

Albania still has vestiges of a clan mentality. Hoxha united Albanians and stopped the custom of blood feuds, which obligated a family to exact vengeance for any bloodshed. To avert a resurgence of these feuds and to prevent a chain of retaliation in this small country -- where a large number of people have links with the Sigurimi and many opposition leaders only recently quit the Communist Party -- the Democrats have called for cooperation with the Communists.

"Our party is the first to appeal for national forgiveness, for guarantees that no one will seek revenge. We asked for the immediate release of all political prisoners," said Pashko. Government officials say there are only 85 political prisoners, but diplomats based here estimate that the number could be in the thousands.

Albania's leadership has responded to a few of the opposition's demands, agreeing tonight to allow the Democratic Party to publish a newspaper. The Communists also have given the opposition a car, which is necessary because Albanians do not have private cars.

But the leadership has rejected the opposition's demands for postponement of the first multi-party elections, which are scheduled for Feb. 10. Sali Berisha, a co-founder of the Democrats, said today that the opposition "will use all peaceful means" to delay the balloting so it can organize its campaign.

"I do not believe the {Communist} party can have profound reforms," Berisha said in an interview. "But Bolshevik dogma was forcibly imposed on the people. It is alien to the Albanian spirit and soul."

President Alia, who is also the Communist Party's first secretary, told a party conference on Wednesday that "the party has brought democracy and change to the people." At the same time, however, he warned against "destructive forces" that "want Albania plundered in chaos and at the mercy of the winds."

Liberals in Tirana expressed fear that Alia's speech betrayed a refusal to carry out real reforms. In August, Alia had called pluralism a Trojan horse against socialism. Although a 20-foot statue of Soviet dictator Joseph Stalin was removed from the center of Tirana last week, expectations that Hoxha's legacy would also be dismantled by Alia, his handpicked successor, have not been met.

The Democrats' Pashko, an economist at Tirana's Enver Hoxha University, expressed confidence, however, that the Communists will have to change. "The party cannot fight against the crisis," he said. "They have to take radical measures and prepare for the establishment of a legal state. Only then can Albanians have access to foreign investment and aid."

The Democrats, Pashko said, "are ready to cooperate with the party. We will not exploit the crisis for political gains. This is the first task, because Albania is on the brink of starvation."