EU to Tell Serbia to Resolve State Companies, End Incentives

The European Union will tell membership candidate Serbia next week to cut the state’s role in the economy by ridding itself of hundreds of government-owned companies and to eliminate subsidies to foreign investors.

Economy and finance ministers of the 28-member bloc will call on Serbia to shrink its budget deficit and spend more on investment, Johannes Hahn, EU Enlargement Commissioner, said in Belgrade on Thursday. At a May 12 meeting, they’ll welcome “encouraging results” Serbia has achieved in its fiscal efforts with the support of the International Monetary Fund, he said.

“One of the main reasons why generating savings is so difficult in Serbia is the excessive influence of the state in the economy,” Hahn said, pointing to a “huge number” of state-owned enterprises that drain the state budget. Selling or restructuring unprofitable companies “is a key priority that the ECOFIN Council will underline next week,” along with a policy of supporting large foreign investments with subsidies that he said put “a lid on growth and competitiveness.”

Serbia is trying to deal with more than 500 state-owned companies, many of them unprofitable, and overhaul other parts of the economy to revive growth and meet Premier Aleksandar Vucic’s goal of joining the EU in 2020. While he wants to open one of the 35 membership negotiating chapters in 2015, the process can’t progress until the country fully mends ties with the breakaway Kosovo province.

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