Serbia Anno Domini 2009

You need to be idealist in order to be disappointed. Add one to that tally. In my naivety I thought that something is decided in elections. Sure you choose people who you think best support ideas and values you have – but expecting system to change as result of elections – that is naïve.

Democratic Party elite choose for certainty of ideology over promise of reform. They analyzed the game and concluded that the best option for Democratic Party would be to move to the right. This way they will be able to incorporate “moderate nationalists” majority. Key question is what is purpose of existence of country like Serbia? Consensus is that purpose is to serve “national” interests. Definition of nation in this part of Europe is ethnic group with same language and religion. In some other parts of world nationality means citizenship, here it means ethnic identity. Sovereignty here means right of ethnic group to choose its leaders whereas somewhere else it might mean right of citizens to choose their government.

On symbolic level this dialectic argument is expressed though maxim “Kosovo is Serbia”. To think differently is heresy. Serbian constitution states this and to say anything else is treason. Interesting question is who has unalienable right to choose its government in Kosovo? In other words who has sovereignty over Kosovo? For uninitiated that might be citizens of Kosovo. They overwhelmingly do not want to surrender any of it to Serbia. But this debate is not to be had here. Kosovo Albanians are nonentities who do not deserve any consideration.

Sadly, you will find mirror image on other side although I can say much less about it as I did not have firsthand experience living in Kosovo.

This is where reform efforts (under maxim “joining EU”) hit the rocks. It is much easier to chase windmills then to do things that matter to citizens, for example deal with corruption in Serbia . It is much easier to draw troops for yet another confrontation with “the world” than to see how you can improve economic freedom being 109^th county in the world . And how about being last country (with Ukraine) in Europe by internet usage.

Personally, I don’t have any idealism left in my tanks. I always thought the easiest way to change the country is to cross the border. I’m thinking of Canada this time. 

Sigh of relief

Searching “sigh of relief” on Google will as first item bring you a BBC story from 4^th of June 1999 about Milosevic capitulating during NATO bombing offensive.

This time sigh of relief was due to official announcement that Democrats and Socialists are negotiating about forming government in Serbia. This comes 40 days after elections of 11^th of June.

I was bit more optimistic in post of 19^th of May about prospect of having pro-European government in Serbia. I had information from Belgrade inner circles that deal between Democrats and ex-Milosevic Socialist was made even before elections but at one moment it did not look so certain, at least from perspective of outside observer. I got dizzy from holding my breath – I did not want to jinx it with another post.

This was a tough game of chess played between nationalists and pro-Europeans. Variations of this game have been played since 1804 and First Serbian Uprising with common elements such as involvement of big powers (Ottoman Empire, Austro-Hungarian Empire, France, Germany, UK, Russia, USA, NATO) and assassinations of political leaders (1817 Karađorđe , 1868 Mihajlo Obrenović , 1903 Alexander Obrenovic , 1934 Alexander Karađorđević , 2000 Ivan Stambolić, 2003 Zoran Đinđić) . It also involves idea of Greater Serbia. It now looks like idea of having all Serbs in a single state has been replaced with having all Serbs in EU.

This time it was played between pro-European Boris Tadić Serbian president and nationalist Vojislav Koštunica Serbian prime minister.

Opening move was Kosovo declaration of independence on 17^th Feb 2008. This was followed by protests in Belgrade organized by nationalists on 21^st February that included burning of the USA embassy. As I predicted earlier Koštunica’s appetite for destruction in wake of Kosovo independence was not approved by Tadić.

Koštunica’s next move will be his first mistake. At this point of time he could form government with right wing Serbian Radical Party (81 seats + 47 Koštunica’s = 128 > 125 required). Although shrewd he had grand visions of his role in Serbian history. He resigns on 8^th March 2008 and calls for early elections on 11^th May 2008. At this point of time he thinks that he will ride the wave of Serbian anxiety caused by Kosovo independence.

At the same time Tadić is already negotiating with Socialists. Polls show that Koštunica DSS with Radical party should get about 120 seats in parliament, just 6 seats short of required 126 to form government. Tadić task is not an easy one, he needs to bring everyone else together including party headed by Liberal Čedomir Jovanović who arrested Slobodan Milošević and Socialists whose founder was Milošević.

Then comes pivotal moment in election campaign, EU decides to allow Serbia to sign Stabilization and Association Agreement on 29th April. This plays into hand of pro European Tadić. Koštunica was in favour of confronting EU regarding Kosovo independence rather than signing any kind agreements with them (even though teams under him as prime minister worked hard on this one for 2.5 years). Tadić further capitalizes signing of the agreement by announcing heads of agreement with FIAT to start production of 200,000 cars per annum in Serbia. Reaction of nationalists is uncontrolled - they call Tadić traitor, Judas, posters calling for his assassination show up in Belgrade streets.

Reaction of voters was tectonic - all polls were wrong! Tadić's coalition for European Serbia (ZES is Serbian acronym) wins 102 seats against combined nationalists 108 seats (20 seats loss compared to previous elections). Situation is much better than Tadić expected - he could bring in Socialists without need to have their arch-enemies Liberals in the government.

Now 40 day tango starts. Socialists fear rebellion amongst their membership if they announce deal with Democrats too soon. On other side it is useful to start negotiating with nationalists as this might bring stakes up with democrats. All this time we knew that this was the game but at times we could not be quite sure.

Tadić meanwhile makes deals with smaller parties in Socialist's coalition that ensure 125-125 tie in case Socialists decide to support nationalists.

Masks finally fell down today and Socialists announced that they will start negotiations with Democrats. This comes with huge sigh of relief - it looks like Serbia and Balkans closely managed to avoid another train smash. After UN report that Balkans is now one of the safest areas in Europe (157 murders in Serbia per year or 2 per 100,000 compared to 21,500 in South Africa or 50 per 100,000) I am also hoping that this region will also become politically boring.

Poison pill

I made some predictions in January about where Serbia was heading. There are few new factors since January:

• It looks like exchange rate can be supported for some time by increasing percent of reserves held in local currency. Exchange rate is established in regulated daily inter bank trading and hence ability to control it. Serbia has thousands of Forex offices that were used to transform one black market activity into regulated one. I'm not sure if this equates to real market and whether any currency speculation can take place. Foreign reserves are at level 10 Bn EUR, hence there is some scope to support exchange rate in next 12 months. This means that eventual Radical government will have some grace period before temperature starts to rise.
• Radical Party and DSS (Democratic Party of Serbia vs. now enemy Democratic Party- sounds like Palestine People's Front vs. Peoples Liberation Front from Life Of Brian) had 128 seats in previous parliament and now they have 108. This means that they lost majority (126 is a majority) and they need unreformed Socialist Party of Serbia (SPS) to form coalition. SPS might decide that their long term goals are better satisfied in coalition with Democratic Party. and hence support pro-EU block.
  
• Serbia signed Stabilization and Association Agreement with EU on 29th April. Nationalists threatened that they will annul the agreement. This is the poison pill left by pro-EU block. If nationalists go ahead with annulling they will see macroeconomic stability being hurt very quickly. This will in turn get destroy their populist support base. If they do not annul the agreement (which is most likely) they will be proven hypocrites and this will not hurt them as much.
  
• Socialist murmur about cost of social justice (increasing government pensions, new collective agreements etc.) and it is quite obvious that growth and investments will increase faster if country decisively pushes ahead with EU integration. I found amazing that nobody mentions progressive tax rates as solution (14% flat tax rate was introduced in 2003).
  

All in all, exhausting times are ahead.

There are strong interests of unreformed secret service BIA and tycoons to keep Koštunica in power.

At this point of time I see chances of pro-EU vs. nationalist government as 50%/50%.

Kids

I realized that all my recent blogs were about politics. My frustration is understandable, I left Bosnia when I was 20, in the middle of the war. I don’t think events here are leading to a war but as my friend wisely said: “Who gets burned by milk, blows into yoghurt”.

My younger daughter, Iva, now speaks fluent Serbian. Odd noun declination gets in the way from time to time but that is not a big issue. She will start primary school in September although she is 2 months younger than standard age cutoff. She was tested by her grandmother (clinical psychologist for kids) and scored quite well so we are hoping that she will be able to keep a pace with other kids.

Many parents are complaining on first grade curriculum being too demanding.

On 2006 PISA testing Serbia scored badly (40th out of 57 see and for more detail). What hurts is that former Yugoslav republic scored much better (Slovenia around 10th and Croatia around 25th).

My experience of schooling system here was that it doesn’t cater for individual needs of the students and that only strongest survive. This is especially reflected in math’s education and number of people I know claim that they are not good in math’s. This most likely means that they were left behind at some point of time and there was no one that would pay attention to their needs. With literacy nobody complains that they are illiterate but you would be shocked to see how badly worst 20% fare.

In some way, school is preparing them for life here. Some will join elite, most will be left behind.

On other hand, university education tends to be mindless memorizing drill with added difficulty of arbitrary subjective criteria of the examiners (most of the exams are oral).

All in all, their school is quite good. Kids tend to be from affluent families, class sizes are small (families with kids can’t afford to live here) and they have whole day tuition with 2 teachers.

This year, both Marina and Iva will go to week of summer school. It will be interesting experience for them being without parents and other family. Those experiences were quite frustrating for me, as I recall. My kids go on proving to me that they are not me and that I should let them have their own life.

We are expecting our 3rd daughter, Matija, to be born somewhere at end of July – beginning of August. Jelena is finding pregnancy surprising her with its whims. She has high blood pressure which is reason for some concern. On other hand, she has capable obstetrician who delivered Iva and this gives us reassurance.

I saw Marina and Iva growing to become amazing kids and I am excited watching third one on this journey.

I guess you doubt yourself less as a parent when you have another one. You do become aware of your own imperfections and hope they, in the end, will turn out OK.

So, there is lot to look forward to and enjoy. You do tend to forget this in the daily grind.

Yet another elections in Serbia

It is hardly news that there are new elections in Serbia (Dog bites a man) . This time it is parliamentary elections on 11th May.

Uncertainty is exhausting and as a consequence you become insensitive to outcomes. Radical government looks quite likely this time and it doesn’t look anyone is too phased. Rumor has it that Radical leader Tomislav Nikolic, two times Prime Minister and most likely post election coalition partner in crime Vojislav Kostunica met with key tycoons (Miroslav Miskovic and others). This is to ensure smooth transition to new reality – Serbia paddling back from EU led by party whose chief Vojislav Seselj is indicted for war crimes in Hague.

I’m sure tycoons would not mind, their initial wealth was created in murky 90ies waters of war and isolation.

Previously I used to be mad at pōpulum for making idiotic choices. Now I feel sorry for their addiction to collective social nationalist ideology. 45 year communist rule, followed by 11 years of Slobodan Milosevic and 8 years of corrupted, power hungry “democrats” is not much of a training ground for rational decision making at ballot box.
Serbia desperately needs effective left party. It is certainly not Milosevic’s Socialist Party of Serbia . Democratic Party does little to appease masses in need of at least symbolic social justice. Instead vote of underprivileged goes to Radicals and Socialists. Sure, this society is in need of liberal economy, but can you please stop protecting only interests of local big capital if you want to carry that Social Democrats badge.

It is strange relationship you have towards people in power in Serbia. You voluntarily surrender levers of your life control and feel how everything hinges on next election result. This is of course would be nonsense in normal country (life goes on) but these guys have pretty amazing record (see page 2. of this report and notice 1989-1993 period).

Anyway, I decided to start a my business blog with subjects too dull for readers of this blog.

Rollercoaster – are we getting close to the top?

Living in Serbia does remind me of rollercoaster ride. If you feel you are going up be certain that you are heading for hair-raising drop at some point of time.
This time occasion is Serbian presidential elections. Runoff between Boris Tadić and Tomislav Nikolić will be held on 3rd Feb 2008.

Most likely outcome is:

Irrespectively of the election result, it appears that Serbia is turning away from accession to EU. This change will be more dramatic if Radical Tomislav Nikolić is elected for president. Kosovo Declaration of independence will follow elections shortly. Serbian government will activate agreed secret plan that has been prepared for this occasion (from diplomatic and legal activity, to sending troops to Serbian held parts of Kosovo). Most of the EU countries will recognize Kosovo independence. Serbian prime minister will insist on steps that will be too much for Tadić’s Democratic Party .
What happened in last 7 years is that Serbia become much more dependent on investment and funding from outside. Exchange rate will be the first indicator to watch. Central bank will intervene with foreign reserves but it would be difficult to offset annual investment and loans flow of 3.5 bn USD that pushed demand for local currency. Interest rates will follow and this will lead to higher borrower delinquency. New investments will be first temporarily then indefinitely put on hold.

With Radical president and government Serbia will become EU pariah once again. In times of conflict with outside enemy rulers tend to get even more support so the Radicals might get another turn. Milošević managed 11 years in office.

So it could be year 2018. All Serbia’s neighbors are in EU and NATO. Hundreds of thousands left Serbia for greener pastures.

Friend of mine suggested that history accelerates. This could compress the Kosovo crisis in couple of years perhaps?

I don’t think I want to give it another go if Radicals run government in Serbia. In my case this will be a trigger to apply for Canadian permanent residence. We are expecting 3rd and it makes sense to spend here few more years but, as it looks at the moment , this might not be an end of the jouney…

Pro-EU government at last

I spoke to soon - coalition agreement between “democratic” or “pro-European” parties was reached yesterday (Friday) virtually in last possible moment as the government has to be elected by Tuesday, 15th May midnight as it takes about 2 days to call the Parliament session and elect the government. I must admit this comes as great relief as I don't believe either government with Radicals or new elections would be desirable outcome.

Belgrade stock exchange had about 16% of its value wiped beginning of this week at peek of the crisis (about 1 bn EUR) and virtually all of it has been regained on Friday morning before official news was floated about coalition agreement. It will be interesting to see who made money on this move when information about buyers (normally 3 days after the trade) gets published.