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Serbia's Central Bank

European Commission warns of a “step back” in Serbia's EU bid

(Photo: LukaP)

A decision by Serbia's parliament to limit the independence of the national bank has been described by the European Union as a “step back” in the country's bid to join the EU.

A spokesperson for Štefan Füle, the European commissioner for enlargement and neighbourhood policy, said that the Commission was “deeply concerned” by the amendments, adopted on Saturday. “The adoption of these amendments is a considerable step back in the alignment of Serbia's legislation with the [EU's] acquis in this area,” he said.

The law creates a supervisory body with influence on the management of the bank and possibly on monetary decision-making. Its members are to be appointed by parliament, where the coalition of Progressives and Socialists holds a majority.

The changes prompted the resignation of Bojan Marković, the bank's deputy governor. Dejan Šoškić resigned as governor last week, while the amendments were being put to parliament by Serbia's new government. The new law requires the resignation of the bank's current leadership.

Vladimir Gligorov, an economist at the Vienna Institute for International Economic Studies, said that the significance of the law should not be overstated.

“The change in the law was prompted by the fact that Šoškić didn't want to resign, and there was no other way to get rid of him than to change the law,” he said. “In the meantime, he has resigned and the government changed some of the provisions in the law that had been criticised by the IMF and the Commission. This is only a change of guard, for the time being.”

Criticism from the IMF – the International Monetary Fund – and the Commission prompted the government to drop a provision that would have allowed the central bank to finance the public sector through the purchase of securities in the secondary market. “But [dropping the provision] doesn't mean they won't do it,” Gligorov said, referring to the government. “It all depends on what they want to do, and they're still figuring that out.”

Ivica Dačić, the leader of Serbia's Socialists who became prime minister just two weeks ago has warned the national bank not to work against the government's efforts to generate economic growth.

Serbia's economic situation is deteriorating, with output shrinking by 0.6% in the second quarter of the year and unemployment now standing at 25%.

In February, the IMF suspended a $1.3 billion loan programme because Serbia was failing to meet its budget and debt targets. Other lenders, including the World Bank, have made support for Serbia contingent on agreement between the IMF and Serbia.

Dačić has announced that the government plans to launch a ‘council for economic recovery' by the end of the month.

Serbia became a candidate for EU membership in March, under the previous government, amid widespread hopes that accession talks could be announced in December. But the formation of a government of Socialists and Progressives following the 6 May parliamentary election dampened such hopes; the leadership of the two parties consists of associates of the late Serbian strongman Slobodan Milošević, whose rule saw hyper-inflation and the precipitous fall of the Serbian dinar.

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