Serbian Premier Asks Lawmakers to Back Revamped Cabinet

Serbian Prime Minister Ivica Dacic asked lawmakers to approve the former Yugoslav republic’s revamped cabinet tomorrow, pledging to stoke economic growth, create jobs and bring the nation closer to European Union entry.

Dacic and Deputy Premier Aleksandar Vucic introduced the nine new members of the 13-month-old cabinet today, a month after ejecting Mladjan Dinkic, who ran a combined Finance and Economy Ministry, and his party from the government. Lawmakers yesterday approved splitting Dinkic’s former ministry in two.

Political leaders need to carry out budget cuts to win aid from the International Monetary Fund and convince Serbs who live in Kosovo to take part in local November elections as they prepare to start talks on EU membership. They also need to persuade investors after two recessions in three years left one in four workers jobless and pushed borrowing costs through the 7 percent threshold that triggered bailouts in the euro area.

“We are still facing a difficult period, a complex global situation, a struggle for a just Kosovo solution, the halt of economic decline and a fight for every single new job,” Dacic told lawmakers in Belgrade. “That’s why I ask you to support the appointment of new members of the government.”

Vucic’s poll-leading Serbian Progressive Party is pushing for spending cuts, including public wages and pensions, a plan opposed by Dacic’s Socialist Party and its Pensioners Party allies. He will promote his plans through incoming Finance Minister Lazar Krstic, a former McKinsey & Co. associate, who will attempt to sell Serbia as a safer investment.

Election Threat

The vote scheduled for tomorrow has already been delayed by more than a week after the prime minister’s party failed to agree on its own list of nominees and prompted its larger ruling partner to threaten early elections.

“November elections in Kosovo are their first test, followed by January, when we will see if Serbia opens talks with the European Union,” Predrag Simic, a political analyst in Belgrade, said by phone yesterday. “By that time they need to do something with the economy. If not, we will have elections sooner than anyone would have thought.”

The government needs 1.6 billion euros ($2.1 billion) to 1.7 billion euros to get it through the end of the year, Milojko Arsic, the chief economist at the Foundation for Advancement of Economics, said in an interview on Aug. 26.

Yields on 10-year Eurobonds maturing in 2021 rose 4 basis points, or 0.04 percentage point, this week to 7.209 percent by 11:52 a.m. in Belgrade. The dinar has weakened 0.23 percent this week to 114.5075 to the euro, according to data compiled by Bloomberg.

Foreign investors are looking for a stable government for uninterrupted progress toward EU accession and smooth market financing, “but market logic sometimes does not work when applied to Serbian politics, where big political egos play more dominant roles,” Timothy Ash, the chief emerging-markets economist at Standard Bank in London, said in a note to clients yesterday.

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