Serbia faces tough choices

Milan Marinković writes from Niš:

After some two months of postelection negotiations, the new Serbian government is finally formed and officially sworn in. With 142 out of 250 seats in the parliament, the ruling coalition enjoys a comfortable majority. That majority consists of the coalitions rallied around three main parties – the Serbian progressive party (SNS), the Socialist party of Serbia (SPS) and the United regions of Serbia (URS) – plus two parties that were part of the coalition led by the Democratic party (DS) and whose leaders (Rasim Ljajić and Sulejman Ugljanin) were ministers in the previous government, as well.  Except for SNS, which has replaced DS, the composition of the new government is virtually the same as that of the old one.

Even so, many people fear the country’s pro-EU course might be reversed over the coming years.

All eyes are on prime minister Ivica Dačić (SPS), who in addition has retained the position of interior minister. Dačić can be best described as a combination of great political intelligence and immense personal ambition. How successful Dačić will be in his new role depends to a considerable degree on his ability to balance these two facets of his personality.

Dačić’s statements, especially those concerning his economic doctrine, are often mutually contradictory. Economists are warning that Serbia is going to experience bankruptcy should Dačić insist on fulfilling his promises from the election campaign.

Troubles are already at hand. The government will have to borrow about 3 billion euros by the end of the year lest it fail to pay its financial obligations. Negotiations with the IMF over a stand-by agreement were suspended a few months ago due to Serbia’s inability – or, rather, unwillingness – to satisfy required conditions.

For the negotiations to resume, the government will likely have to freeze pensions and public sector salaries. Even more opposed to such a measure than Dačić are his coalition partners from the Party of United Pensioners (PUPS), whose name speaks for itself.

Belgrade may try to find the money elsewhere but presumably under less favorable financial – and, perhaps, political – conditions than the IMF would demand. In a recent attempt Serbia managed to sell only about one fifth of the government bonds it had offered, even with an interest rate higher than 15%.

Serbia’s economic woes could present Russia with a unique opportunity to further strengthen its position in the Balkans. Russia’s trade surpluses allow the Kremlin to offer financial aid and loans at relatively acceptable interest rates to countries it looks to drag into its sphere of influence.

A potential risk to the debtors lies in the price of such arrangements. The Russians have openly expressed an interest in buying two Serbian state monopolies:  the electric power industry (EPS) and Telekom. Russian behemoth Gazprom already owns Serbian oil company NIS, and many believe that the opening of a Russo-Serbian emergency center in Niš, a town in southeatern Serbia, a couple of years ago was just a subterfuge for a future military base. Ivica Dačić visited Russia – once according to him, twice according to some other sources – during the interregnum between the elections and government formation. Details of the visit(s) have so far remained largely mysterious.

Alongside the economy, concerns have emerged over management of the security sector.  Aleksandar Vučić – who is now the defense minister, a deputy premier and the leader of SNS – is set to become the coordinator – de facto the chief – of all security and intelligence agencies. Pro-democracy opposition and nongovernmental organizations fear that too much authority concentrated in the hands of an individual – especially of a prominent politician – could easily lead to abuse of power.

Serbia’s economic situation may generate ample work for the security forces, who already face growing challenges from soccer hooligans, organized crime and political extremists.  Whether Mr. Vučić is the right person for the job is another question. We’ll see.

Another fault line might occur in Serbia’s northern autonomous province of Vojvodina. The last election results in Vojvodina were notably different than in the rest of the country.  In addition, the Serbian constitutional court declared a number of articles in the law on Vojvodina’s executive powers to be unconstitutional, thereby further depriving the province of its already negligible autonomy. People in Vojvodina suspect the court’s decision was politically motivated, especially as it came only a day after SNS and SPS announced they were going to form the governing coalition. All this has given rise to political tensions between Vojvodina’s capital Novi Sad and Belgrade.

Where some positive signs can be observed is in the area of media freedoms. The two most powerful figures in the new government, Ivica Dačić and Aleksandar Vučić, have pledged to repeal a highly repressive media law enforced by the previous government, whereas President Nikolić called on journalists to criticize his actions whenever they see fit in order to help him avoid as many mistakes as possible during the presidency. Meanwhile, some of former president Boris Tadić’s close aides seem to be trying to retain effective control over most influential mainstream media outlets.

What is beyond doubt is that tough times are ahead of Serbia. The resumption of the talks with Kosovo, fiscal consolidation and pension system reform account for just a small part of the tasks awaiting the government.  The usual September political season might arrive earlier than usual.