bne IntelliNews -

The Bosnian Federation ruling coalition has collapsed after the Democratic Front (DF) withdrew its support for the government of Prime Minister Fadil Novlic.

The crisis within the Bosnian Federation’s government could also have negative consequences for the national government under pro-EU Prime Minister Denis Zvizdic, which was approved on March 31, almost six months after the October 2014 elections. The government of the Bosnian Federation was approved on the same day.

The crisis was sparked by Novalic's decision to propose to the government a change in the procedure for appointing managers of state-controlled companies, without informing the respective ministers, DF said in an official statement. According to the new rule, approved at the government session on June 4, the management of state-controlled companies will be appointed by the government, instead of the respective minister. Currently, the most attractive companies – those operating in the energy sector -  are under the control of the energy ministry, headed by Reuf Bajrovic of the DF.

In its statement, DF says the decision of Novalic is illegal and the party will take all necessary steps to prevent it, including taking legal action against the PM.

According to local daily Dnevni List, Zeljko Komsic, leader of DF, said that the coalition is dead, but the ministers from his party will not resign. “The coalition is dead and, as far as I am concerned, there is no parliamentary majority in the federation,” Dnevni List quoted Komsic as saying. He called on Novalic to launch a procedure to replace the ministers from DF.

Dragan Covic, leader of the hardline Croatian Democratic Union of Bosnia and Herzegovina (HDZ BiH), also confirmed that the ruling coalition had collapsed, daily Dnevni Avaz reported. On the other hand, Bakir Izetbegovic, leader of the third party in the coalition - the Party of Democratic Action (SDA), said that, as long as the ministers from the DF do not resign, the government will be functioning normally. Izetbegovic added that, in such case, SDA and HDZ BiH will not need to seek a new party to form a coalition with.

In May, the federation’s government was near collapse because of a lack of agreement between the ministers from the three parties in the ruling coalition over the management of state-owned aluminium smelter Aluminij, the energy company Elektroprivreda HZ HB and the telecommunications company HT Mostar.

HDZ BiH’s cabinet members left the government session on May 14 as the cabinet cancelled the discussion on the future of Aluminij, which is under HDZ control, but might face bankruptcy over unpaid debts.

According to Novalic, the problem is that the companies which HDZ BiH wants to control are under the management of the energy ministry, led by Reuf Bajrovic of the DF. Novalic added that Bajrovic had offered to discuss the situation at Aluminij but then withdrew this topic from the agenda. Before that, HDZ BiH’s ministers left another session as Novalic removed from the government agenda a discussion on the situation at Hrvatski Telekom.

On May 19, the leaders of the three parties met and reached an agreement over the management of the state-owned companies. According to the agreement, achieved by the leaders of the three parties, the federation’s government will discuss at its next session the change of management of five or six state-controlled firms which have negative financial results. At the same time, financial police will investigate these companies, as required by the DF.

Then, on May 22, the government decided to change the management of Aluminij and Elektroprivreda HZ HB, appointing temporary management in the two companies for three months, which should be replaced by permanent managers appointed by the shareholders of Aluminij and Elektroprivreda HZ HB.

DF ministers did not back the management changes, approved on May 22, as the party representatives had insisted that they will not discuss the management of Aluminij and Elektroprivreda HB HZ until financial police enter and investigate what caused their poor financial situation. As of December 2014, Aluminij’s debts stood at BAM213.8mn (€109.3mn), including BAM120.8mn liabilities to Elektroprivreda HZ HB and BAM67.3mn to financial institutions. Elektroprivreda HZ HB’s debts totalled BAM190mn as of end-June 2014.