April 7 (Bloomberg) -- Aleksandar Vucic, whose Serbian Progressive Party won last month’s elections, began talks with other parliamentary groups to form a new cabinet that will stabilize public finances and overhaul the economy.
The Progressives won 158 seats in the 250-member parliament on March 16, giving Vucic the right to form the new government. His first meeting with the Alliance of Vojvodina Hungarians, the biggest ethnic minority party to have entered parliament, started at 11 a.m., his party said today. He will meet with outgoing Prime Minister Ivica Dacic and his Socialists tomorrow.
The Progressives offered the Hungarian party to join them in the government as they want to work with them to “transform Serbia to a healthy, normal and decent European country,” Vucic told reporters in Belgrade today. He also plans to talk with the New Democratic Party of former President Boris Tadic, “which doesn’t mean that we will be entering coalitions,” he said on April 5.
Vucic pledged to embrace painful austerity measures endorsed by the International Monetary Fund and lead Serbia into the European Union two decades after the bloody Balkan civil wars. Serbia needs to narrow its budget gap, planned at 7.1 percent of economic output this year and reduce spending by around 400 million euros ($549 million) for a new IMF loan.
He will present his program to lawmakers on April 24 or 25, a week after the new parliament is constituted. His party’s leadership will decide on the cabinet ministers next weekend. Vucic will ask the new parliament to adopt laws on bankruptcy, asset sales, insurance, construction permits and a new labor code by mid-July to improve the business climate and meet IMF and World Bank funding conditions.
“Talks will be tough and we want to reach an agreement,” Vucic said. “Revising the 2014 budget is not a priority.” It could be revised around “mid-year,” he added.
The new cabinet will have as many as 19 members, down from 21, and will focus on new jobs in private businesses as the government seeks to downsize the 780,000-people strong public sector, which combines administration, schools, hospitals, police and state-owned companies.
“In less than a year you will be able to see the light at the end of the tunnel and in two years people will start living better,” Vucic said.
The yield on Serbia’s 10-year Eurobond maturing in 2021 rose 3 basis points, or 0.03 percentage point, to 5.378 percent by 3:12 p.m. in Belgrade today and the dinar traded around 0.16 percent stronger at 115.39 per euro, data compiled by Bloomberg show.
Instead of cutting pensions, where a 10 percent reduction would save 303 million euros a year, Vucic will try to sell or close 153 unprofitable companies that drain almost 750 million euros a year from the budget. The government will revise per diems for administration and state-company workers that cost around 42 million euros a year and cut the 150 million-euro cost of chauffeured cars.
Vucic said Serbia will try to boost state coffers by seeking a full share in profit from stakes in companies including Naftna Industrija Srbije, or NIS, majority owned by Russia’s Gazprom Neft OAO, where the state holds a 29 percent stake.
Vucic will have “wholehearted” and “active” support of the National Bank of Serbia, led by his senior party colleague Jorgovanka Tabakovic, who pledged to keep the dinar stable and foreign-currency reserves high, according to Tanjug report today.
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