Serbia, which, together with Montenegro, comprises all that is left of the old Yugoslav Republic, is effectively bust. Unemployment is over 40 percent and the economy is still shrinking. Only outside aid and investment can save it from a slump into hyperinflation and political instability. It is this last danger which should be concentrating the minds of Yugoslavia’s neighbors, in particular the European Union. President Vojislav Kostunica has delivered much of what the international community wanted, most particularly the fallen dictator Slobodan Milosevic, who is now on trial in The Hague. It is, therefore, the time for the international community to deliver many of the promises that it has made the Serbs.
The World Bank has said that Yugoslavia will need $4 billion in foreign financial assistance over the next four years and has just completed agreement over a tranche of $1.2billion of assistance. The aid needed is far higher. Yugoslavia has foreign debts of over $12 billion. Most of the money just agreed will be used to service that obligation.
It seems that only $800 million will find its way directly to help rebuild shattered infrastructure and fund a social budget. To raise money, the government is proposing to sell off some factories, the telecom system and the national airline. This plan has already produced understandable disquiet among ordinary Serbs, who suspect that these assets are being sold off too cheaply to foreigners.
The sense of crisis has only been deepened with the enforced closure last week of the four top state-owned banks, which had long been the milk cows for the old Milosevic regime. Burdened with bad loans that would never be repaid, all these banks threatened merely to swallow up any amount of new funding that was poured into them. Kostunica’s government has, therefore, behaved with financial good sense in pulling the plug on them. But that is not the way that the ordinary man in the street is seeing it.
Though his savings are protected under the move, his faith in his country’s financial system will be further shaken. Five years ago, Milosevic filched all the foreign currency deposits in the banking system to bolster his regime’s tottering finances. Confidence was only just returning when this latest shattering news broke.
The clear danger is that these events will increase the doubts of ordinary Serbs about the Western-oriented path down which their president is leading them. There is still a significant proportion of nationalists and Milosevic loyalist hoodlums who are only waiting for the Kostunica government to be discredited. They will then try to make a political comeback.
A stable Serbia and, by extension, a stable Yugoslavia is the key to a stable Balkans. If the international community does not go out of its way to ease Yugoslavia through its current financial troubles, it will be in danger of setting light to a long fuse that will one day reignite the terrible conflict that disfigured the Balkans in the closing years of the last century. Wisdom demands that help for Yugoslavia be accelerated and, if necessary, a large proportion of its debt be forgiven, so that it can get itself back on its economic feet as rapidly as possible.
