Serb Ruling Parties Call for Early Elections on March 16

Serbian Prime Minister Ivica Dacic and his deputy in the government will ask President Tomislav Nikolic to order March elections by Jan. 29 to shuffle the cabinet amid rising unrest over a shaky economic recovery.

Dacic will make the request after Deputy Premier Aleksandar Vucic’s Progressive Party, whose popularity has soared in the past year, pushed for a ballot two years earlier than the government’s term ends.

The largest former Yugoslav republic is working to attract investors and meet demands to mend ties with Kosovo, strengthen the judiciary and make the economy more transparent after starting talks on Jan. 21 to join the European Union. New elections are designed to fight mounting voter anger over unemployment and the view the government is powerless to make changes. Economy Minister Sasa Radulovic resigned on Jan. 25, saying he lost faith in the cabinet’s work.

Elections on March 16 would be the “best possible solution to win new political legitimacy and lead Serbia forward, soothing political tensions in the society,” Dacic said today after agreeing to the Progressives’ demand for snap vote March 16.

Dacic, the head of the Socialist Party, and Vucic are shaking off associations tied to their nationalist pasts in the 1990s, when their party leaders, Slobodan Milosevic and Vojislav Seselj, led Serbia through the Balkan civil wars that devastated the economy, led to the split-up of Yugoslavia and left Serbia far behind other former European communist nations in developing their societies to western Europe.

Progressive Popularity

Vucic’s Progressives have campaigned for early elections for almost a year as the party’s support rose above 40 percent of decided voters in the country of 7.2 million people, according to a December opinion poll by Ipsos Strategic Marketing.

Dacic has reigned over the coalition since it was formed in July 2012, while early elections would most likely give Vucic the reins of government.

“There is some connection between Radulovic’s resignation and the decision to call early elections, giving voters a chance to support the reforms,” said Predrag Simic, a political analyst in Belgrade and the former Yugoslav ambassador to France, in a phone interview yesterday. “The situation is a bit confusing, non-transparent, because everyone is for holding elections and everyone is for reforms, so you don’t see who’s an obstacle to those reforms.”

On Track

Vucic said early elections will not stifle the drive to join the 28-nation EU or slow the government’s commitment to re-establish a precautionary loan agreement with the International Monetary Fund. The IMF will complete its next round of meetings in Belgrade three days before the suggested March 16 elections. Nikolic is also a member of the Progressives.

“We’re looking for a fresh full mandate,” Vucic said at a press conference yesterday in Belgrade. “We believe Serbia can move forward faster and better.” He said he had refused an offer to take the prime minister’s post without elections.

Vucic, who was also elected president of his party, stopped short of pushing for a snap ballot in August, after Dacic ejected former Finance Minister Mladjan Dinkic and his party from the government. Instead, Dacic shuffled the cabinet, giving Vucic the finance and economy ministries.

Along with Nikolic, the Progressives’ former president, its members include central bank Governor Jorgovanka Tabakovic. She was named after the Progressives won 24 percent in a 2012 election but then had to share power and give Ivica Dacic and his Socialist Party the prime minister’s post to avoid having to return to the opposition.

Unemployment Anger

Investors demanded 337 basis points, or 3.37 percentage points, of extra yield to hold Serbian dollar bonds instead of Treasuries by 9:42 a.m. in Belgrade, compared with 125 for Poland, the region’s biggest economy, according to indexes by JPMorgan Chase & Co. Yields on Serbia’s Eurobonds maturing in 2021 rose 3 basis points, or 0.03 percentage point, to 6.151 percent, after gaining 31 basis points in two days by the end of last week’s trading, data compiled by Bloomberg show. The dinar shed 0.54 percent to trade at 116.0560 per euro.

The elections would come amid simmering discontent among workers and occasional street protests. Unemployment is languishing at almost a quarter of the workforce.

In measures aimed at clinching $250 million in World Bank budget support, the government has cut public sector wages and is planning to sell or turn around hundreds of state-owned companies that cost the Balkan state $750 million a year.

Following two recessions in the last three years, the central bank sees the economy expanding 1.5 percent this year, after an estimated 2.4 percent in 2013.

Budget Plans

Serbia’s new government will need to narrow the planned 2014 budget shortfall to 6.5 percent of economic output from an original target of 7.1 percent of gross domestic product to qualify for the World Bank’s budget support loan.

Finance Minister Lazar Krstic said the full-year 2013 deficit came at 179 billion dinars ($2.1 billion) or 20 billion dinars less than planned, according to a statement posted on his ministry’s website. The ministry has not published the budget statistics for 2013. The full-year consolidated deficit target for last year was 178 billion dinars.

The Washington-based World Bank also wants Serbia to adopt laws on asset sales and bankruptcy.

The government is also trying to secure 3 billion euros ($4.1 billion) in loans from the United Arab Emirates, included in the 2014 budget as the main source of deficit financing.

An IMF agreement would assure investors of the government’s commitment to implement tough measures that could leave tens of thousands out of work.

Snap elections would temporarily stall “economic reforms but the expected overwhelming victory of the pro-reform SNS would improve the outlook for their eventual implementation once the party would take office,” Otilia Dhand, an analyst at political risk evaluator Teneo Intelligence, said in a Jan. 23 e-mail. “An electoral victory would provide Vucic with a strong mandate to implement difficult economic reforms and remove the necessity to compromise with other parties.”

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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