July 15 (Bloomberg) -- Hundreds of Serbian workers protested Premier Aleksandar Vucic’s draft labor code in Belgrade, demanding he backs off on plans to streamline the ex-communist country’s bloated public sector and trim wages.
Demonstrators, carrying union banners and posters that vilified “Vucic’s Reforms” in front of the parliament building today, called for a larger voice in planned changes to fixed-term employment contracts, severance payments and industry-wide collective agreements.
Vucic’s three-month-old cabinet is under increasing public and political pressure as it balances the promises to create jobs and increase the wealth of Serbians with the need to cut spending and trim the budget. The economy is facing a third recession in five years and the unemployment rate is almost 24 percent.
“The government is rushing through parliament the labor code without proper public debate,” Ljubisav Orbovic, the president of the biggest trade union in Serbia, told reporters in Belgrade today. The plan affects “the future of every one of us and they can’t do that no matter how large a majority they have in parliament.”
As union leaders plan a larger protest for July 17, Vucic is trying to stabilize his cabinet after Finance Minister Lazar Krstic quit on July 12, saying the premier was unwilling to go along with his austerity measures. Krstic’s successor, Dusan Vujovic, said he’s willing to seek international financing to cover for easing up the pain of austerity.
Labor Minister Aleksandar Vulin urged lawmakers to vote for the plan, saying it will create new jobs, attract investments, speed up a restructuring of the economy, raise productivity and sharpen Serbia’s competitiveness.
Foreign and local employers welcomed the bill. The Fiscal Council, a three-member body appointed by parliament to oversee compliance with fiscal rules, said the labor code and a new pension law, which raises retirement age for women to 65 from 60 by 2032, will lower public spending as the government struggles to narrow the budget gap.
Serbia’s financial problems were heightened by the worst floods in a century in May. Fifty-seven people were killed and damage totaled an estimated $2 billion, or 5 percent of Serbia’s gross domestic product. The economy will contract in 2014 for the third time in five years, according to Krstic.
The law cuts wage bills for all employers through lower mandatory payments for each year of service, work in shifts and holidays while forcing companies to register all their workers, the council said. Wages will immediately fall between 5 percent and 30 percent, based on new regulations, Orbovic said.
The government is considering a 10 percent decrease in public wages and pensions later this year, Vujovic said yesterday.
Serbia has fewer than 1.7 million people actively employed and just as many pensioners. About 780,000 work in public administration and state-owned companies.
The government is running a budget gap of 8.7 percent of economic output, the highest since the fall of former strongman Slobodan Milosevic in 2000. More than half of its spending is on wages and pensions, Vucic told RTS television in a July 14 interview.
Foreign investments stood at 200 million euros ($272.3 million) in four months through April, or 8.6 percent less than the same period last year. The central bank expects full-year investments of about 1 billion euros.
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