Implications of a Radical government in Serbia

Implications of a Radical government in Serbia As Serbia waits to see which way the Socialist Party will "tilt," one has to ask: will the consequences really be as drastic as advertised? A government dominated by the Radicals with the support of the DSS of Vojislav Kostunica and the Socialists will be in some ways the most stable and internally coherent in the post-Milosevic era. Its members will have little difference among them either in foreign or domestic policy and will also have the luxury of having a clear majority in Parliament to pass legislation implementing its policies. In the short run, many in Serbia will probably see little economic change or even believe that they are actually better off. The Radical government will be able to do so by undermining, reversing, and taking advantage of the fruits of the economic policies put in place over the past seven years under the guidance and approval of the International Monetary Fund and other international financial institutions. During this period major efforts were made to transform Serbia's socialist/communist economic system into one competitive in the world market economy. Subsidies of basic products were ended; inflation brought under control; foreign currency reserves were built up to 10 billion euro; many socially-owned enterprises privatized; other failing enterprises put into bankruptcy and the dinar stabilized. While all these steps received the highest marks from international financial institutions and would ultimately have had a highly positive long-term impact on the economy, it also caused great pain to significant parts of Serbian society. Perhaps more than 50% of the residents in Serbia live on pensions, are unemployed, have subsistence small farm holdings or are refugees scraping by as best they can. For all of them, the post-Milosevic years actually have been harder in many ways rather than better. Their limited incomes were only viable when basic food prices, gasoline, energy, and apartment costs were minimal and heavily subsidized. The new government, probably with the Socialists in the lead, will undo some of the market-driven changes put in over the past seven years. Moreover, they will use the 10 billion euro foreign currency reserves to finance infrastructure projects, probably raise pension payments, and pay the cost of subsidies in order to demonstrate that their policies are better for Serbia. Western foreign investment will dry up in the face of the economic policy changes and the raised political risk of investment in Serbia. Two or three years (at most) down the road, Serbians will find that inflation is far higher; the dinar far less stable and decreasing in value; and foreign currency reserves far lower. The situation will only continue to deteriorate from then on. The thought that Russian investors will offset all of the above flies in the face of reality. Other than a few high-profile projects, such as the acquisition of NIS in a "sweetheart deal," high-quality investment that actually helps to build the Serbian economy will be very rare indeed. Relations with Croatia and the Bosnian Federation will definitely worsen. The rhetoric of the Radical Party even now is unashamedly nationalist and supports the old concept of "Greater Serbia." Instead of regional reconciliation, there will be a return to regional alienation. This may well mean, for example, that Croatia reintroduces a visa regime for Serbia. Prime Minister Dodik of the Republika Srpska will face increased encouragement/pressure from Belgrade to initiate a referendum on independence and to take other steps to confront the international presence and role in Bosnia. How he responds depends in large measure on how the EU and rest of the International Community deals with Bosnia is this highly sensitive period. Regardless of what government comes to power in Serbia, the strong diplomatic offensive on the Kosovo question will continue, as will the strengthened level of support for the Kosovo Serb community and the de facto partition of northern Kosovo. The difference, however, is that under a Radical/DSS/Socialist government action on all fronts is likely to be more aggressive and confrontational. This means hard times ahead for Kosovo and those trying to deal with it. The Radicals have already announced that there would be no cooperation with the ICTY. This means that efforts (token or otherwise) now being made to find fugitives such as Mladic and Karadzic will be discontinued. This also means, however, that it is likely that the ICTY will stop the practice of permitting certain indictees to stay in Serbia awaiting trial or to return for short breaks to their homes. It is also likely that the Special War Crimes Court in Serbia will either be closed altogether or simply marginalized into ineffectiveness. Under the agreement with the European Union over the Stabilization and Association Agreement (SAA), certain assistance programs with the EU could have proceeded even in advance of formal ratification by all EU countries. This was important because the Netherlands and Belgium have made it clear that there can be no ratification until Mladic and Karadzic are in The Hague. This is highly unlikely to happen during a Radical government, thus the full SAA and further EU integration will definitely be on hold. Given the opposition by some of the potential coalition members to any symbolic "repudiation" of the SAA by Parliament, the DSS may back down from this threat. In any case, it is an open question whether the EU will continue with the financial assistance package and road map for the Schengen visa "White List" given the hostile approach of Kostunica to the European Union and open defiance of the ICTY. The actions taken in the economic area as described above will lead to both the IMF and the World Bank ceasing new programs and assistance projects in Serbia. This is because the policy of both institutions requires that the host country comply with financial benchmarks, which the new policies will violate. Given the intense "bad blood" between the Radials, DSS, and the Socialists on one-side and DS/G17 Plus/LDP/independent media/various non-governmental groups on the other, it seems inevitable that the latter will come under intense scrutiny and even forms of retaliation/retribution from the new government. Threats have already been made that leading figures such as Dinkic, Vlahovic, and others will be arrested. B92 faces a particularly daunting environment. Various privatization deals done during the past seven years will also face intense scrutiny and possible reversal. The specter of any sort of rehabilitation of Milosevic and comeback of his party, as well as the role of Seselj by proxy from The Hague will make headlines around the world. Particularly with statements like the one from Seselj a few days ago that the assassin of Zoran Djindjic should be given the same "glory" as Gavrilo Princip. These events plus the other steps described above will lead non-governmental groups, the media, and influential individual foreign policy specialists active around the world in forming public opinion to aggressively criticize the government and Serbia's new path. The result of all of the above is that relations with the EU, the United States, other Western countries, international financial institutions, and the OSCE will inevitably deteriorate. The new government will try to compensate by improving relations with Russia, China, Iran, and other governments of a similar nature. Government-friendly media will hype the "dynamic" new relationships and their benefits while demonizing the West. There are those in the West who believe that the above path is a necessary catharsis to once and for all "cure" the Serbian people of the pull of nationalism and the Radical Party. Only after reaching the bottom, this theory goes, will Serbia ever be able to truly begin its democratic transition. The only problems with this theory are the instability generated in the meantime in the region as a whole and the cost in human potential in Serbia itself. The heart of the problem facing Serbia today is that all too many may well agree with at least most of the points in the above analysis, but because of anger at how they perceive Serbia has been treated and disappointment over the lack of economic progress in the post-Milosevic era, they either don't care or actually see these points as pluses rather than minuses. The Radicals may look to forge new relationships abroad (Tanjug) For several years now, one of the consistent themes of any political analysis of Serbia was the rising popularity and influence of the Radical Party. The concern over its coming to power seems to be roughly equivalent to the implications of the Barbarian sacking of the Roman Empire or the Communists winning the Cold War. William Montgomery "The result is that relations with the EU, the United States, other Western countries, international financial institutions, and the OSCE will inevitably deteriorate. The new government will try to compensate by improving relations with Russia, China, Iran, and other governments of a similar nature."

Implications of a Radical government in Serbia

As Serbia waits to see which way the Socialist Party will "tilt," one has to ask: will the consequences really be as drastic as advertised?

A government dominated by the Radicals with the support of the DSS of Vojislav Koštunica and the Socialists will be in some ways the most stable and internally coherent in the post-Milošević era. Its members will have little difference among them either in foreign or domestic policy and will also have the luxury of having a clear majority in Parliament to pass legislation implementing its policies.

In the short run, many in Serbia will probably see little economic change or even believe that they are actually better off. The Radical government will be able to do so by undermining, reversing, and taking advantage of the fruits of the economic policies put in place over the past seven years under the guidance and approval of the International Monetary Fund and other international financial institutions.

During this period major efforts were made to transform Serbia's socialist/communist economic system into one competitive in the world market economy. Subsidies of basic products were ended; inflation brought under control; foreign currency reserves were built up to 10 billion euro; many socially-owned enterprises privatized; other failing enterprises put into bankruptcy and the dinar stabilized.

While all these steps received the highest marks from international financial institutions and would ultimately have had a highly positive long-term impact on the economy, it also caused great pain to significant parts of Serbian society. Perhaps more than 50% of the residents in Serbia live on pensions, are unemployed, have subsistence small farm holdings or are refugees scraping by as best they can. For all of them, the post-Milošević years actually have been harder in many ways rather than better. Their limited incomes were only viable when basic food prices, gasoline, energy, and apartment costs were minimal and heavily subsidized.

The new government, probably with the Socialists in the lead, will undo some of the market-driven changes put in over the past seven years. Moreover, they will use the 10 billion euro foreign currency reserves to finance infrastructure projects, probably raise pension payments, and pay the cost of subsidies in order to demonstrate that their policies are better for Serbia. Western foreign investment will dry up in the face of the economic policy changes and the raised political risk of investment in Serbia.

Two or three years (at most) down the road, Serbians will find that inflation is far higher; the dinar far less stable and decreasing in value; and foreign currency reserves far lower. The situation will only continue to deteriorate from then on. The thought that Russian investors will offset all of the above flies in the face of reality. Other than a few high-profile projects, such as the acquisition of NIS in a "sweetheart deal," high-quality investment that actually helps to build the Serbian economy will be very rare indeed.

Relations with Croatia and the Bosnian Federation will definitely worsen. The rhetoric of the Radical Party even now is unashamedly nationalist and supports the old concept of "Greater Serbia." Instead of regional reconciliation, there will be a return to regional alienation. This may well mean, for example, that Croatia reintroduces a visa regime for Serbia.

Prime Minister Dodik of the Republika Srpska will face increased encouragement/pressure from Belgrade to initiate a referendum on independence and to take other steps to confront the international presence and role in Bosnia. How he responds depends in large measure on how the EU and rest of the International Community deals with Bosnia is this highly sensitive period.

Regardless of what government comes to power in Serbia, the strong diplomatic offensive on the Kosovo question will continue, as will the strengthened level of support for the Kosovo Serb community and the de facto partition of northern Kosovo. The difference, however, is that under a Radical/DSS/Socialist government action on all fronts is likely to be more aggressive and confrontational. This means hard times ahead for Kosovo and those trying to deal with it.

The Radicals have already announced that there would be no cooperation with the ICTY. This means that efforts (token or otherwise) now being made to find fugitives such as Mladić and Karadžić will be discontinued. This also means, however, that it is likely that the ICTY will stop the practice of permitting certain indictees to stay in Serbia awaiting trial or to return for short breaks to their homes. It is also likely that the Special War Crimes Court in Serbia will either be closed altogether or simply marginalized into ineffectiveness.

Under the agreement with the European Union over the Stabilization and Association Agreement (SAA), certain assistance programs with the EU could have proceeded even in advance of formal ratification by all EU countries. This was important because the Netherlands and Belgium have made it clear that there can be no ratification until Mladić and Karadžić are in The Hague. This is highly unlikely to happen during a Radical government, thus the full SAA and further EU integration will definitely be on hold. Given the opposition by some of the potential coalition members to any symbolic "repudiation" of the SAA by Parliament, the DSS may back down from this threat.

In any case, it is an open question whether the EU will continue with the financial assistance package and road map for the Schengen visa "White List" given the hostile approach of Koštunica to the European Union and open defiance of the ICTY.

The actions taken in the economic area as described above will lead to both the IMF and the World Bank ceasing new programs and assistance projects in Serbia. This is because the policy of both institutions requires that the host country comply with financial benchmarks, which the new policies will violate.

Given the intense "bad blood" between the Radials, DSS, and the Socialists on one-side and DS/G17 Plus/LDP/independent media/various non-governmental groups on the other, it seems inevitable that the latter will come under intense scrutiny and even forms of retaliation/retribution from the new government. Threats have already been made that leading figures such as Dinkić, Vlahović, and others will be arrested. B92 faces a particularly daunting environment. Various privatization deals done during the past seven years will also face intense scrutiny and possible reversal.

The specter of any sort of rehabilitation of Milošević and comeback of his party, as well as the role of Šešelj by proxy from The Hague will make headlines around the world. Particularly with statements like the one from Šešelj a few days ago that the assassin of Zoran Đinđić should be given the same "glory" as Gavrilo Princip. These events plus the other steps described above will lead non-governmental groups, the media, and influential individual foreign policy specialists active around the world in forming public opinion to aggressively criticize the government and Serbia's new path.

The result of all of the above is that relations with the EU, the United States, other Western countries, international financial institutions, and the OSCE will inevitably deteriorate. The new government will try to compensate by improving relations with Russia, China, Iran, and other governments of a similar nature. Government-friendly media will hype the "dynamic" new relationships and their benefits while demonizing the West.

There are those in the West who believe that the above path is a necessary catharsis to once and for all "cure" the Serbian people of the pull of nationalism and the Radical Party. Only after reaching the bottom, this theory goes, will Serbia ever be able to truly begin its democratic transition. The only problems with this theory are the instability generated in the meantime in the region as a whole and the cost in human potential in Serbia itself.

The heart of the problem facing Serbia today is that all too many may well agree with at least most of the points in the above analysis, but because of anger at how they perceive Serbia has been treated and disappointment over the lack of economic progress in the post-Milošević era, they either don't care or actually see these points as pluses rather than minuses.