Serbia seen unfit for EU

BELGRADE (Reuters) – Serbia’s central bank governor has said the country is currently in no condition to join the European Union, and called on politicians to draw up a plan quickly to lead it in the direction of membership. «Whether we talk about massive and totally inefficient public spending, a need to restructure public companies, or a need to reform the pension system, we all know that Serbia can hardly join the European Union,» Radovan Jelasic said. Speaking at a ceremony to mark the 123rd anniversary of the National Bank of Serbia late on Monday, Jelasic said it was high time Serbia accelerated reforms, «not for the sake of Brussels, but for its own sake.» «It is vital to urgently set out a timetable of reforms so that our citizens, entrepreneurs, investors know precisely what is ahead till the end of the decade,» Jelasic said. The International Monetary Fund has also urged Serbia to tighten fiscal policies, aim for more public and private savings and speed up privatizations of public monopolies. Last month, Serbia resumed talks with the European Union on a Stabilization and Association Agreement – the key accord that may ultimately lead the country to EU membership. The six-week old government in Belgrade hopes to have the deal signed by the end of 2007 and that Serbia will become an EU candidate by the end of 2008. The government believes Serbia will be ready for EU membership in 2012. Holy cows The coalition led by Prime Minister Vojislav Kostunica has yet to agree on the pace of sale of inefficient public monopolies, including NIS (oil), EPS (power) and Telekom Srbija landline monopoly, railways, postal service and the JAT airline. Reform of the heavily subsidized pension system has been watered down and the 2007 budget will have a deficit, after the government failed to cap public sector wage hikes. Speaking at a business forum yesterday, Jelasic said it was inappropriate for the government to be the «owner, manager, regulator and legislator» in NIS, EPS or Telekom Srbija. «We often hear that we will not give up EPS and Telekom and that NIS is our national treasure. But in five years’ time some of those ‘holy cows’ will have to be privatized because the budget will be empty,» Jelasic said. NIS and JAT are the only monopolies the ruling coalition has agreed to put on sale this year. With the budget at a third of Serbia’s gross domestic product, the central bank fears the fiscal expansion could revive inflationary pressures and has pledged «an appropriate monetary response» to tame prices. Headline inflation rose to 5.1 percent year-on-year in June, from 4.4 percent in May – its lowest level since 1945 – as higher global crude oil prices, electricity and other price hikes, coupled with a softer dinar currency began to feed through. After eight months of monetary easing prompted by fears that it could undershoot inflation targets for the second year in a row, the central bank kept rates on hold late in June, saying that the massive budget would push core inflation, which was at 2.7 percent in June – near the lower end of its 4-8 percent band.

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