April 1 (Bloomberg) -- Ljubica Mladic, a 76-year-old pensioner, says Serbia should join the European Union. Ljubica Rovic, an unemployed wallpaper hanger, says it shouldn’t. Mladic favors capital from abroad; Rovic wants foreign banks to leave.
The two women, who were window-shopping in Belgrade’s three-year-old Usce shopping mall, agree on one thing: The former Yugoslav republic is floundering.
“Everything has changed for the worse,” complained Mladic after peering at a well-stocked Ecco shoe display. Rovic, 62, agreed. “I know it’s impossible to make everyone happy, but can’t they at least please 75 percent of us?”
Ten years after Slobodan Milosevic’s March 31 arrest for war crimes, citizens are still waiting for authorities to make good on promises to create jobs, stamp out corruption and build trust in the Balkan nation’s institutions. No cabinet since Milosevic’s ouster has lasted four years, the government is struggling to sell state assets, borrowing costs are the highest in Europe and entry into the 27-nation bloc is years away.
Serbia’s long-term credit rating, raised by Standard & Poor’s Ratings Service on March 16 to BB, is still two levels below investment grade and lower than those of Romania, Russia, Azerbaijan and Croatia. A March 30 government-bond sale planned for 20 billion dinars ($27.5 million) attracted bids for only 2.7 billion dinars, pushing yields above 14 percent for the longest maturities.
Gross domestic product per capita was $5,260 last year, according to the IMF, compared with $13,527 in Croatia, a former Yugoslavia partner that will join the EU as early as next year, and $38,600 in Germany.
The 12.25 percent main interest rate is Europe’s highest and last month’s 19.2 percent jobless rate tops the 9.9 percent euro-region average and every EU nation except Spain.
Prime Minister Mirko Cvetkovic, who faces elections next year, is struggling to persuade voters they are better off a decade after Milosevic, said Svetlana Logar, a research analyst at Belgrade-based pollster Ipsos Strategic Marketing.
“Citizens are most afraid of uncertainty and have reached a high level of distrust,” said Logar. “People are unhappy because of a sense of injustice.”
That sense of injustice has prompted about 3,000 people to sign up on the social-networking website of Facebook Inc. to protest on April 4 in one of Belgrade’s main squares, the venue of many opposition protests in the past.
“Enough’s enough! Day by day, we are sinking deeper and deeper and it’s clear to everyone that life in Serbia has become unbearable,” the invitation for the protest said. “This situation can’t be changed in elections where we choose between those who are in power or those who had been in power, those who are accountable to their financiers and not their people.”
Investors and overseas analysts are more optimistic, saluting the government’s commitment to slash spending and stick to the terms of a 3 billion-euro ($4.2 billion) bailout loan. The economy, devastated during the 1990s Balkan wars that led to the breakup of Yugoslavia, may expand 3 percent this year, double the pace of neighboring Romania and Croatia, according to the International Monetary Fund.
The dinar has strengthened 1.9 percent against the euro this year, driven by high yields on government debt and the perception that the central bank is serious about fighting inflation and keeping the currency stable.
“Belgrade is actually looking pretty good,” said Timothy Ash, head of emerging-market research at RBS in London, in a phone interview. “They have kept the IMF on board. Investors like that, but the cost of doing this is very heavy.”
Still, the “painful” effects of austerity measures over the past decade have kept Serbia behind other countries in the region, Ash said.
Public mistrust of government harkens back to Milosevic, a banker-turned head of state who incited Serbian nationalism during his tenure as president of Yugoslavia and, after dissolution, Serbia between 1989 and 2000.
He was indicted in 1999 by the International Criminal Tribunal for the Former Yugoslavia for alleged crimes against humanity during Serbia’s attack that year on the breakaway province of Kosovo. He lost power a year later amid massive street protests, surrendered to authorities on March 31, 2001, and died during his trial in The Hague in 2006.
The nation is still dogged by the shadow of the 1990s Balkan wars, the bloodiest in Europe since World War II, and concerns about corruption. Serbia is rated 78th by Transparency International on that issue, behind Bulgaria and Romania and former Yugoslav partners Croatia and Slovenia.
The government also has had trouble selling its property. Cvetkovic on March 29 gave Telekom Austria AG, the sole bidder in a field of seven prospective buyers for phone company Telekom Srbija AD, 14 days to improve its bid or see it canceled. Thousands of phone company workers protested on March 19, saying Cvetkovic’s price was too low. The Austrian company said the cost was too steep.
The government failed to sell copper miner and smelter RTB Bor three times after Cuprom SA of Romania and Austria’s A-Tec Industries AG dropped their bids. It also scrapped sale plans for JAT Airlines in 2007 and 2008 over the price.
“Investment in Serbia is not attractive,” said Vladimir Gligorov, an economist at the Vienna Institute for International Economic Studies. “There’s the assessment that Serbia won’t restore macroeconomic stability and convincing economic growth relatively soon.”
To boost investor interest, Cvetkovic, 60, is forging ahead with plans to join the EU, even though popular support for membership slipped to a record-low 57 percent in December from 72 percent seven years ago, according to a survey by the government’s European Integration Office of 1,030 respondents between Dec. 17 and Dec. 23. Another 18 percent would vote against membership, the highest in the survey’s history. The poll had a margin of error of plus or minus 3.31 percent.
EU Enlargement Commissioner Stefan Fule declined to give any timeframe for Serbia on March 27, other than saying the “ball is in Serbia’s hands” to improve the judicial system and fight organized crime before starting talks in December. Serbia also needs to arrest two remaining war crimes fugitives, Ratko Mladic and Goran Hadzic.
Outside the shopping center across the river from downtown Belgrade, Ljiljana Zivkovic, 59, said she is disappointed in the government’s progress toward the EU and isn’t moved by such visible signs of economic progress as the red-and-white mall.
“We used to be a lot better off,” she said, glancing at her friend Rovic. “If elections were held tomorrow, I would not know who to vote for.”