Bloomberg News

Serbian Parties to Sign Accord to Form Coalition Government

July 10, 2012

Three Serbian political groups will sign a pact today paving the way for a new coalition government to take office later this month and put an end to the stalemate after inconclusive elections.

The Progressive Party of President Tomislav Nikolic, the Socialists of Prime Minister Designate Ivica Dacic and the United Regions of Serbia of former Deputy Prime Minister Mladjan Dinkic, will sign the coalition agreement at 5 p.m. in Belgrade today, the Progressives said in an e-mail. The three groups will together control 131 of parliament’s 250 seats.

The Socialist party is trying to form a new Cabinet by the end of July as the country needs to adopt austerity measures to curb the burgeoning fiscal deficit and public debt. It is taking power for the first time since the ousting of founder Slobodan Milosevic, blamed for fomenting the 1990s Balkan civil wars that destroyed the economy.

A quarter of Serbia’s labor force is unemployed and the economy needs new jobs to avoid a second recession in three years. Gross domestic product shrank 1.3 percent in the first quarter.

Nikolic gave Dacic the mandate on June 28 to form a Cabinet, after the Democratic Party of former president Boris Tadic failed to find allies for a government. No party won an outright majority in the May 6 vote.

Fitch, IMF

Serbia needs to form a government quickly to ease concern about a worsening fiscal outlook as the economy falters, according to Fitch Ratings. It also must to resume talks with the International Monetary Fund over a $1.3 billion precautionary loan, suspended earlier this year when Serbia began slipping on fiscal targets.

The budget gap widened to 7.3 percent of GDP in March, compared with a 4.25 percent target agreed with the IMF. Public debt rose to 52.1 percent of GDP in April, exceeding the 45 percent limit set by fiscal rules, while the current account deficit of 17 percent at the end of April was double the full- year target.

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

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


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