ECONOMY

Investors and neighbors alike bracing for ripples of Serb vote

BELGRADE (Reuters) – A tight race between nationalist Radicals and pro-Western Democrats in tomorrow’s Serbian general election will be closely watched by investors, neighbors and the European Union as its outcome ripples across the Balkans. Those onlookers are hoping for clarity and stability in a country which is holding its 10th nationwide ballot in eight years. While a Democrat-led government could speed Serbia’s EU accession, a Radical-dominated coalition could make the neighbors nervous and prompt them to seek faster entry for themselves. But analysts say the Radicals have a pragmatic approach to the need for foreign capital and would not necessarily scare off investors. «Investors are not looking as much at who will govern, but at who can govern without there being an election again next month or next year,» said Jens Bastian, economist for the European Agency for Reconstruction, which runs EU assistance programs in parts of the former Yugoslavia. «They are trying to identify a coalition that will have staying power for more than two years, which would already be a success, considering recent history.» In all the years since Slobodan Milosevic was ousted in 2000 the balance tipped in favor of the pro-Western bloc at the last minute. But this time, fueled by Serb anger at Kosovo’s secession in February, the nationalists could prevail. A nationalist government in Serbia could have a ripple effect, encouraging separatist sentiment in Bosnia, where ethnic Serbs resent sharing a country with Bosnian Muslims and Croats. Nationalist desires to partition Kosovo and annex the Serb minority to Serbia could also harden latent Albanian separatist sentiment in southern Serbia and the Former Yugoslav Republic of Macedonia (FYROM), another ethnically fragile republic. Serbia’s influence and its hard-to-get attitude have Brussels bending over backward to woo Belgrade, often stretching EU rules in the hope of defusing trouble in the backyard. Sabine Freizer of the International Crisis Group think tank said whatever happened tomorrow, the European Union should stop treating Serbia as a special case deserving concessions, and apply the same standards as for other aspirant members. »It is not helpful for the EU to condition progress for other parts of the Balkans on Serbia’s progress,» she said. Only Croatia, already advanced on the way to EU membership, would be let into the EU on its merits, said Dragana Ignjatovic, analyst for business intelligence firm Global Insight. «For all other countries it’s going to be harder,» she said, as the EU prefers bloc entry and that slows everything to Serbia’s pace. Hostages of Serbia Ignjatovic said investors would be more comfortable with the Democrats, but not necessarily put off by the Radicals. «Despite the populist rhetoric, the Radicals are ultimately quite realistic about the fact Serbia needs investors. It’s exaggerated to speak of a return to the Milosevic era,» she said. Edward Parker of Fitch credit ratings agency said a Democrat government was likely to be prudent and speed up EU accession, in contrast to the Radicals’ populism. But Fitch’s sovereign rating for Serbia (BB-/Stable Outlook) already factored in a high degree of risk. «We would expect to wait to assess the composition of the new government and its policies before making any potential change in the rating,» Parker said. «The Democrats would also face difficult economic and political challenges.» Some businessmen say the Balkans is generally virgin territory for investment and there will be interest whatever the outcome. But Eldar Dizdarevic, who runs the investitor.ba website in Bosnia, thinks investors may prefer low-cost, stable Asian countries over low-cost, unstable Balkan countries. «The countries of the region will most probably be hostages of political events in Serbia,» he said. Kosovo economist Shpend Ahmeti said that in the past, whenever the Radicals looked poised to win power in Serbia, investors in the region either stayed away or became cautious. «If Serbia is unstable, we all are unstable,» he said. «None of the Balkan countries is an island, none alone is attractive for investors. Our competitive advantage is as a region.» Bastian said a lot now depended on the EU’s decisiveness. The neighbors had by now learnt to deal with Serbia’s instability, he said, but if the Radicals won, it would be a significant shift that would send them running to the EU for reassurance, more aid, and above all, accelerated entry. «That would be an important issue in coming months: to what degree the EU would choose to change its focus in the region if political elites in Serbia decide to go in the other direction,» Bastian said. He worried, however, that this election would not actually set Serbia’s future direction «but produce a divided, weak government that has no majority in parliament and no popular legitimacy to carry out necessary reforms.»