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Serbia’s Vucic Poised to Lead Cabinet With EU, IMF Vows

Serb Deputy Prime Minister Aleksandar Vucic
Serb Deputy Prime Minister Aleksandar Vucic speaks during an electoral rally in Belgrade. Photographer: Andrej Isakovic/AFP via Getty Images

March 16 (Bloomberg) -- Serbians will head to the polls today in early elections designed to install Deputy Prime Minister Aleksandar Vucic as the head of a government vowing to spur the economy and win European Union membership by 2020.

Vucic’s Progressive Party, which forced a ballot two years earlier than scheduled, leads the campaign with 44.6 percent, compared with 13.8 percent for Premier Ivica Dacic’s Socialist Party, according to a March 10-11 poll by Belgrade-based Faktor Plus. The survey has a margin of error of 3 percentage points.

Vucic, who said in 1995 that his country would kill 100 Muslims for every Serb who died, wants to return to parliament with a majority of lawmakers behind him. He is now pledging to embrace painful austerity measures endorsed by the International Monetary Fund and embark on talks to make Serbia the third former Yugoslav republic to join the EU two decades after the bloody Balkan civil wars.

“We’ve been looking forward to these elections as a positive event for Serbia,” Abbas Ameli-Renani, a strategist at Royal Bank of Scotland Group Plc, said by e-mail on March 14. “The new government should enjoy greater flexibility in adopting corrective economic measures, which may not necessarily be popular.”

Polling stations will open across the country of 7.2 million people at 7 a.m. and close at 8 p.m., with preliminary results expected later in the evening. Final official election results will be announced by March 20, according to the Election Commission.

Milosevic Association

Vucic, once a prominent member of the Radical Party led by Vojislav Seselj, who is now awaiting a Hague verdict on charges of war crimes and crimes against humanity, is trying to shake off associations with his past relations with former strongman Slobodan Milosevic and his cronies.

He supports membership in the EU, a turnaround from the years when he and political allies resisted EU demands to give up suspected war criminals, renounce claims on Kosovo, a former province that declared independence, and bring the judiciary into line with EU norms.

Yields on the 2021 dollar bond rose 3 basis points, or 0.03 percentage point, to 5.57 percent by 2:44 p.m. on March 14 in Belgrade, data compiled by Bloomberg show.

The elections are “all very much positive for Serbian credit,” said Ameli-Renani. “In my view, all the positive news is already priced at this stage and I don’t expect any further relative tightening of Serbian yields on the back of a positive election outcome.”

Junior Partners

The election is a “battle for junior coalition partners” to join Vucic in his plan to overhaul the economy and narrow the fiscal gap, Dragoslav Velickovic and Benoit Anne, analysts at Societe Generale SA in Belgrade and London, said in a March 14 note. While their “baseline scenario is bullish for Serbia,” the only question remains about “the pace of reforms, as ideological differences are fading.”

Riding a wave of a growing western-leaning electorate would give Vucic’s party the strongest lock on power by a single party since the communist days, critics point out. The Progressive Party’s founder is President Tomislav Nikolic, while a senior party official, Jorgovanka Tabakovic, is the central bank governor.

Transparency Ranking

Supporters also say Vucic is committed to fighting corruption that has left Serbia behind all its ex-Yugoslav partners and neighboring EU members Romania and Hungary in Berlin-based Transparency International’s 2013 corruption perception rankings.

Dragoljub Jovicevic, a 54-year-old lawyer from Belgrade, said he is casting his vote for Vucic and the Progressives because they will be “decisive” in dealing with rampant graft.

“First things first,” Jovicevic said as he sipped coffee at a Coffee Factory overlooking Belgrade’s St. Sava cathedral. “I know corruption won’t disappear overnight, but someone needs to start doing that or we’re doomed.”

While Vucic has promised to form a cabinet with broad support to tackle unpopular measures, “we are more likely to end up with a narrow coalition,” said Naz Masraff, an analyst at political-risk assessor Eurasia Group in London, in a March 4 note. Vucic has yet to prove his commitment to reform is genuine, Masraff said.

The Progressives have “talked the talk of economic reforms” but “done little to walk the walk,” Masraff said.

Public Debt

Serbia’s new government will inherit an economy that the central bank expects to grow 1 percent this year. It will need to further narrow the fiscal gap and cut public debt by 2016 to meet commitments to the IMF, which suspended a loan in 2012.

Vucic has promised billions of dollars worth of investments from the United Arab Emirates over the past year to create jobs in an economy which has the same number of active workers and pensioners and where one in four is out of work.

The government needs to focus on pension-system and labor-market reforms, an overhaul of failing state-owned enterprises and the cleanup of public finances, said Otilia Dhand, an analyst at political risk evaluator Teneo Intelligence, said in a March 10 note on Serbia.

“The main challenge for the new government will be to overhaul and kick-start Serbia’s ailing economy,” Dhand said.

To contact the reporters on this story: Gordana Filipovic in Belgrade at; Misha Savic in Belgrade at

To contact the editors responsible for this story: James M. Gomez at Michael Winfrey

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