Nikolic Sworn in as Serb President, Pushes for Cabinet Talks

Tomislav Nikolic, sworn in on his first day as Serbian president, bypassed his own party in urging political leaders to quickly form a government and avert a looming debt crisis.

Parliament met for the first time today in Belgrade since Nikolic’s Progressive party won 73 seats in the 250-seat parliament, in May 6 general elections, ahead of the Democratic Party of former President Boris Tadic. Neither party has the support to form a majority and the two have ruled out governing together. Nikolic turned to Tadic, whom he beat in a May 20 presidential runoff vote, to find a workable coalition and have a prime minister designate by June 4, or his party will step in.

The 60-year-old Nikolic, whose party ran on a platform of closer ties to Russia, needs to balance economic austerity with social protections, and the former Yugoslav republic’s drive to join the European Union with nationalists’ rejection of independence for the breakaway province of Kosovo.

“I want Serbia to become a full-fledged European Union member and maintain the sovereignty and territorial integrity of Serbia, including Kosovo,” Nikolic said in Parliament.

Relations with Kosovo, which unilaterally declared independence in 2008 and has been recognized by 90 of 193 United Nations members and 22 of 27 EU members, will dominate talks when he meets EU officials on June 14 in Brussels, his first official trip as head of state.

Statesmanship Needed

The president “will require a high sense of statesmanship to overcome the more difficult challenges,” EU President Herman Van Rompuy and European Commission President Jose Barroso said in a joint statement in Brussels on May 21. The bloc called on Nikolic, a former cemetery manager, to undertake a “visible and sustainable improvement” in ties with Kosovo in order to advance Serbia’s membership bid.

Serbia became an EU candidate on March 1 after Tadic, 54, pushed the country to fulfill conditions including the capture and transfer of Radovan Karadzic, Ratko Mladic and Goran Hadzic, the three most-wanted war-crimes suspects from the civil wars that accompanied the breakup of the former Yugoslavia, to the Hague-based International Criminal Tribunal for the Former Yugoslavia.

At home, Nikolic wants to speed up the process that will result in a new government to prevent Serbia from plunging into a debt crisis amid a deteriorating economy.

Seeking Majority

Tadic’s Democratic Party is working with the third-ranked Socialists, which was once led by former Serbian strongman Slobodan Milosevic, to find 126 lawmakers to form the new Cabinet.

The new government is needed to resume talks with the International Monetary Fund, which froze a $1.3 billion precautionary loan program to the Balkan country in February as it became clear Serbia would slip on agreed fiscal targets.

The deficit expanded to 80 billion dinars ($846 million) in the first five months of the year, to between 7 percent and 8 percent of gross domestic product, while public debt approached 50 percent of GDP, the country’s Fiscal Council said on May 30.

It also warned Serbia is approaching a public-debt crisis and the past government’s fiscal expansion was to blame for the dinar’s extended declines. The currency weakened 0.6 percent today to trade at 117.3055 to the euro at 11:22 a.m. in Belgrade, according to data compiled by Bloomberg.

Austerity Moves

Whoever emerges to lead Serbia’s government will need to cut spending, raise taxes and freeze public wages and pensions to stop deeper deficits and debts, increase public investment to jump-start the economy, which contracted 1.3 percent in the first three months, and keep a lid on unemployment, at 24.4 percent in 2011.

Tadic got his party’s support on May 30 to lead coalition talks with the Socialists, an alliance that gives them 111 seats, and an as-yet-decided third partner.

“The Democratic Party will do its best to gather a majority in parliament,” said Tadic. “We are ready to take responsibility” even as “that implies risks because we are in the midst of the second wave of the economic crisis and it won’t be easy.”

To contact the reporters on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net; Misha Savic in Belgrade at msavic2@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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