Prospects of Serbia's new government remain vague over two weeks after vote.

By bne IntelliNews May 24, 2012
Ivica Dacic, the leader of Serbia's Socialist Party (SPS) that emerged as a kingmaker following the May 6 elections, said the country is still far from receiving a new cabinet since the two leading parties have not yet revealed their strategies, news agency Tanjug reported. Opposition Serbia Progressive Party (SNS) won the elections, gaining 73 seats in the 250-seated parliament, while the ruling Democratic Party (DS) came second with 67 seats and SPS third with 44. Dacic, an interior minister in the incumbent government, said SPS is ready to take part in a strategic partnership, respecting the election results, but needs to see first what are the intentions of its potential partners. The party has already reached an initial agreement to form the new cabinet with DS. Yet, their agreement was brought under doubt by analysts and the public this week after DS leader Boris Tadic lost the presidential elections to SPS leader Tomislav Nikolic on Sunday. SPS, however, reaffirmed it is sticking to its accord with DS. The two parties are partners in the outgoing coalition cabinet as well. Dacic said on Wednesday, May 23, that the impression that it is up to SPS to give a start on the new cabinet negotiations is wrong. Quite on the opposite, he added, it is DS and SNS that should initial the talks. According to Dacic, SPS is still open to negotiations with DS but DS should first nominate a PM candidate and settle on how it would like to form a parliament majority. SNS, on the other hand, has not expressed any desire on the formation of the new majority yet. Dacic stressed that DS should first decide whether Tadic will be its PM candidate or not, whether it would be in power or in opposition, and if in power - would it go alone or together with SNS since "this is what some foreign embassies are pressing for". According to Dacic, there is pressure from some countries that Serbia's two biggest parties agree to jointly form the new government. "If they [SNS and DS] wish so, we are ready to go into opposition," he said. Dacic added that he has not yet held any talks on the formation of the new government with neither of the two biggest parties. IntelliNews Comment: A government comprising both SNS and DS seems highly unlikely at present since the two parties have been fierce opponents and stated they would not collaborate at such a level. Analysts believe that the likeliest option is cabinet between DS and SPS plus smaller parties. Yet, nearly three weeks following the vote, politicians give no implications they have started final, if any, negotiations on the government formation, while the quick inauguration of new parliament and cabinet is vital for Serbia. The new governance will have to fight widening budget spending and deficit and try to reach a deal with the IMF in order to unfreeze the country's EUR 1bn bail-out agreement blocked in February due to fiscal slippage. The government will have to rebalance this year's budget to bring it in line with new GDP forecasts of close to zero growth (versus 1.5% growth in the current budget bill) and cut spending, as well as probably hike VAT rate and embark on an unpopular pension reform. The Serbian economy already shrank by 1.3% on the year in the first quarter of 2012, which was its first annual decline since the first quarter of 2010.

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