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Serb Leaders to Discuss If Finance Chief Stays in Cabinet

Leaders of Serbia’s ruling coalition will continue discussions today whether the finance minister and his party will stay in the year-old government as part of Prime Minister Ivica Dacic’s cabinet shuffle.

“Talks are over for the day,” Milivoje Mihajlovic, a spokesman for the government, said by phone from Belgrade late yesterday, adding that talks would resume at noon today. Mihajlovic spoke after a meeting of Dacic, his deputy Aleksandar Vucic, and Finance and Economy Minister Mladjan Dinkic.

Before the meeting started, Dacic said they’d discuss “personnel changes” and “a change in the approach to finance and economic policy making,” according to Tanjug newswire. Dacic’s Socialist party agreed July 26 to make changes.

Dinkic said on July 28 that he would be willing to split his cabinet portfolio and remain finance minister while creating a separate Economy Ministry controlled by Vucic’s Serbian Progressive Party. The shuffle, including the ministry division, was triggered by Vucic’s former nationalists, who threatened early elections if their demands were not met.

“The threat of being kicked out from big brother’s house could be stabilizing for the government,” said Marko Blagojevic, the program director at the Belgrade-based Centre for Free Elections and Democracy in a phone interview. “But it doesn’t necessarily mean that they would be efficient.”

Dinkic Experience

Yields on Serbian 10-year Eurobonds maturing in 2021 rose to 6.461 percent yesterday from 4.468 percent on May 9, the lowest since the bond was sold in 2011, according to data compiled by Bloomberg.

Dinkic, who has held the posts of central bank governor, finance minister and economy minister in various governments since the ouster of former strongman Slobodan Milosevic in 2000, was forced to step down in February 2011, after questioning the authority of then-Premier Mirko Cvetkovic.

Dacic’s cabinet took office in July 2012, after the Socialists, once led by Milosevic, together with Vucic and Dinkic garnered a combined 131 seats in the 250-member parliament.

The coalition has promised to continue the Balkan country’s fiscal consolidation, resume talks with the International Monetary Fund and the World Bank and integrate faster into the European Union.

Dacic has been trying to boost the economy, which has fallen into recession twice in the past three years, leaving a quarter of the nation’s workforce without jobs.

Budget Deficit

The budget deficit is expected to top at least 6 percent of gross domestic product this year, down from 7.3 percent in 2012. The current-account deficit will reach 8.7 percent of GDP according to IMF forecasts.

Monetary policy makers are balancing the need to shore up Serbia’s $37 billion economy against fighting inflation and shielding the dinar from market turmoil. The inflation rate fell to 9.9 percent in May, dipping below 10 percent for the first time in nine months.

On July 26, Fitch ratings agency affirmed Serbia’s rating at BB- with a negative outlook, reflecting the high fiscal deficit as well as a risk of balance of payments pressures and “intensification” in the euro area crisis.

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