Serbia: What next?

There is now a tandem of former arch-nationalists running the country, given that Nikolic also has a nationalist background. Interestingly, both men, at one time or another, stated that joining the EU was a waste of time and that Serbia would be better off becoming a province of Russia. Yet everyone is allowed to change their mind and Dacic has been quick to reassure the international community that it’s “all systems go” towards the EU. Some 13 years after NATO bombed Belgrade, Serbia is an EU candidate. The road to this point has been difficult and often painful: War criminals such as Ratko Mladic have had to be arrested and sent to the International Court in The Hague, while tough decisions related to Kosovo have also had to be made that have left many bitter.

Normalization of relations with Kosovo is key for deeper EU integration. While Dacic has alluded to partitioning Kosovo, he has also committed to continuing talks with Prishtina launched under Tadic. Recent comments by Serbian Minister of Economy and Finance Mladjan Dinkic in the Serbian daily Danas state “the new government of Serbia should accept everything that was previously promised to the EU regarding Kosovo.” This would mean Belgrade accepting the opening of Serbian offices in Prishtina and that of Prishtina in Belgrade. The elimination of illegal structures of the Serbian government in the north of Kosovo will also need to be dealt with. Dinkic also added that the Serbian government was ready to speak openly with Prishtina in order to resolve the problems of the people in Kosovo, the economic development in that region including encouraging Serbian banks to go to Prishtina, as well as Zagreb and Sarajevo. History has shown that strengthening economic ties strengthens peace.

But on the issue of recognition of the independence of Kosovo and Prishtina receiving a seat in the UN, the position remains the same -- no way. It still remains unclear how the EU is going to deal with this in the longer term. Former UN envoy for Kosovo, Marti Ahtisaari (who won the Nobel Peace Prize for his work on Kosovo, although his plan was blocked in the UN Security Council by Russia) recently repeated that Serbia should not be allowed to enter the EU until it recognizes Kosovo. Of course Ahtisaari cannot speak for the EU, and one would hope the EU will take a much more nuanced approach rather than adopt a risky “take it or leave it” policy, not least because Serbia is very much the lynchpin for regional stability and reconciliation. The situation is delicate, more so because a number of EU member states still do not recognize Kosovo. Furthermore, such conditions were not laid down in other similar situations such as Northern Ireland.

An equally top priority is sorting out Serbia’s finances with the country’s economic health in a critical condition with a debt of some 55 percent of gross domestic product (GDP). While the 2012 budget forecasts 1.5 percent economic growth, the International Monetary Fund (IMF) has given a much lower estimation of only 0.5 percent, reflecting the EU’s own woeful economic outlook. The global crisis led to a 50 percent spike in poverty and unemployment, with the country now having one of the highest unemployment rates in Europe at around 25 percent. The average monthly wage is around 340 euros.

While the government has requested a World Bank loan of around $400 million to safeguard its economy until a new economic roadmap is prepared, and has also requested Moscow to reallocate $300 million of an $800 million loan, there is an urgent need to get relations with the IMF back on track. A $1.2 billion standby loan for a period of 18 months was signed in August of last year but has been frozen since February as Serbia was unable to keep to figures agreed for the 2012 budget. Getting this deal unfrozen will be crucial for the macroeconomic stability of the country.

There are also plans to work on increasingly foreign investment. However, unless Serbia’s atrocious corruption, lack of rule of law and organized crime is seriously tackled, foreign direct investment (FDI) may prove to be thin on the ground. The government has vowed a top-down approach; we will see if it happens, whether this coalition is able to work harmoniously and constructively or if the cronyism and corruption of the past continues.