June 14 (Bloomberg) -- Serbian politicians must reach a compromise in talks to form a new government after inconclusive elections last month, said former president and Democratic Party leader Boris Tadic.
Tadic’s party, which placed second on May 6, agreed with the third-place Socialists to form a coalition that would control 111 of the legislature’s 250 seats. The former head of state has been holding talks to find a third partner to give the group a majority before an end-August deadline to create an administration. If a government isn’t approved by the that time, fresh elections will be held.
The talks “are tough because it’s difficult to establish a majority in a parliament that has 46 parties,” Tadic told reporters in Belgrade today. “People need to make a compromise and that’s tough.”
Serbia needs to form a government quickly to ease concern over its fiscal outlook as the economy teeters on the brink of recession, according to Fitch Ratings. The country’s three-member Fiscal Council, which monitors budget performance, warned on May 30 about a looming debt crisis after the budget gap rose to 7 percent to 8 percent of gross domestic product and public debt approached 50 percent of GDP.
A new government also needs to resume talks with the International Monetary Fund over a suspended $1.3 billion precautionary loan arrangement earlier this year when it became clear the country would slip on agreed fiscal targets that include keeping a full-year gap under 4.25 percent of GDP.
The Socialists oppose Serbia’s recognition of Kosovo, the breakaway province which unilaterally declared independence in 2008. Their leader Ivica Dacic said June 11 his party would turn to Nikolic’s Progressives if talks with the Democrats fail.
The Socialists, once led by former strongman Slobodan Milosevic, are looking for a broader coalition to include the Liberal Democratic Party, which calls on Serbia to recognize the reality of Kosovo’s independence, and the United Regions of Serbia, a group led by Mladjan Dinkic, who has held the posts of the economy minister, finance minister and central bank governor since Milosevic’s fall in 2000.
Tadic’s Democratic Party, which dominated the previous government, removed Dinkic in February 2011 following his criticism that the Cabinet led by Prime Minister Mirko Cvetkovic was no longer following his authority.
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