Bloomberg News

Serbia’s Dacic Pledges No Return to 1990s as Cabinet Talks Begin

June 28, 2012

Serbia’s Prime Minister Designate Ivica Dacic said his Socialist Party is ready to begin talks with President Tomislav Nikolic’s with the Progressive Party tomorrow to form a government “soon.”

Dacic, 46, a former colleague of late strongman Slobodan Milosevic, pledged there won’t be a “return of the 1990s,” a decade of Milosevic’s rule marked by a series of wars that accompanied the violent breakup of the former Yugoslavia, economic collapse and a surge in poverty. Milosevic was handed over to the war crimes court in The Hague 11 years ago today.

“Dacic has convinced me that his party has garnered a majority in Parliament,” Nikolic told reporters today in Belgrade. “Any new government will have the task of improving standards of living and keeping Serbia on its European Union path.”

Serbia needs to form a government quickly to ease concern over its fiscal outlook as the economy teeters on the brink of recession, according to Fitch Ratings. It also needs to resume talks with the International Monetary Fund over a $1.3 billion precautionary loan suspended earlier this year when it became clear the country would slip on fiscal targets that include keeping the full-year gap within 4.25 percent of output.

Majority Control

The Socialist Party, which fell from power after Milosevic’s ouster 12 years ago, placed third in May 6 elections. Nikolic’s Progressive Party and the United Regions of Serbia will join the new Cabinet, together controlling 131 seats in the 250-member Parliament.

“Serbia is on the verge of bankruptcy,” the Tanjug news wire quoted United Regions Party leader Mladjan Dinkic as saying today in Brussels, adding his party expects to lead the finance and economy ministries.

Dacic will meet the Progressives at 10 a.m. in Belgrade tomorrow and will hold talks with other parties “in the coming days” that will focus on a program that aims to “make Serbia strong, defend the national interests, continue its European integrations and fight against corruption and organized crime.”

Such a government “represents parties and governing instincts that default toward yet more ’statist’ solutions,” Charles Crawford, former U.K. ambassador to Belgrade and a private consultant and member of the London-based ADRg Ambassadors LLP, a corporate and government advisory company, told Bloomberg in e-mailed comments.

“It is difficult to see that working out to Serbia’s advantage in any policy area: the poorer Serbia gets, the less credible its aspirations toward the region and European integration,” he said.

EU Path

Serbia became a candidate for EU membership on March 1 after fulfilling a series of conditions, including the capture and transfer of Radovan Karadzic, Ratko Mladic and Goran Hadzic, the three most-wanted war-crimes suspects from the civil wars that accompanied the breakup of the former Yugoslavia, to the Hague-based International Criminal Tribunal for the Former Yugoslavia.

To prove its commitment to further reforms, the Balkan nation needs to continue to overhaul the judicial system, fight organized crime and corruption, while the making further progress in a dialog with its breakaway province of Kosovo, which unilaterally declared independence in 2008.

Respecting the Past

“I will respect our past, work for our future and I will never allow the return of the 1990s,” Dacic said of a decade when the Socialists ruled together with Nikolic, who was at the time deputy leader of the ultra-nationalist Serbian Radical Party.

The country needs cash to cover the budget deficit, which ballooned because of the economic slowdown and campaign-related spending. Serbia needs to repay about $1.5 billion in maturing dinar debt by the end of year, with a quarter of that total due next month.

The fiscal gap reached 7.3 percent in April, public debt was at 51.1 percent of gross domestic product at the end of March, exceeding the debt limit of 45 percent, and the current- account gap of 17 percent of GDP in the same three-month period, was double the planned 8.5 percent.

To contact the reporters on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net Misha Savic in Belgrade at msavic2@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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