Andrew MacDowall in Belgrade -

So Aleksandar Vucic has taken the gamble. Serbia's forceful deputy prime minister, who appears to covet the premiership, has called for early elections to be held on March 16, which means that the vote will almost certainly go ahead as his party is the largest in the coalition. While the snap poll has been widely portrayed as a move to win a mandate to continue with tough fiscal and structural reforms, whether that will indeed be the outcome is open to question.

"Serbia is in transition between the very bad and the unknown," says Milan Parivodic, a former minister and now advisor to both foreign investors and the government. "Elections always bring an element of risk, and I hope that they don't produce a government that returns to the counterproductive policies of the past. Then there is always the risk of a financial crisis - I don't believe there will be, but we can't dismiss the possibility."

Vucic is head of the Serbian Progressive Party (SNS), the largest in parliament, and on January 25 called for a "fresh full mandate" to allow Serbia to "move forward faster and better." The election bid has been expected for many months, as Vucic and the Progressives have looked to cash in on popularity linked to progress towards EU membership (formal accession negotiations began earlier in the week), renewed economic growth and a popular anti-corruption drive.

Promotion

The widespread - indeed almost universal - view about the election is that it is intended to strengthen the Progressive's position, place Vucic as prime minister and shift out the current premier, Ivica Dacic of the Socialist Party.

Vucic, a former ultra-nationalist, has been the main powerbroker in the government in the year and a half since it was formed following the last general election in May 2012. He has portrayed himself as a reformer, not only supporting Dacic's compromise deal with Kosovo last year, but making blood-and-thunder warnings that Serbia is close to bankruptcy and needs to cut the public sector workforce - the former exaggerated, the latter rather less so.

Vucic has pursued trade and investment deals with alacrity, including with the United Arab Emirates (UAE), which has offered €3bn in loans. Abu Dhabi's national airline Etihad took control of a 49% stake in Air Serbia (formerly known as JAT Airways), with full management control for five years, in a deal that is already paying dividends in improving the connectivity of Belgrade and thus its position as a regional business centre.

Serbia certainly has some strong competitive advantages for investors. It has a central location in Europe, a low cost base, preferential access to markets in the EU and beyond (including Russia), and active government incentives for major investors. Sectors with potential include manufacturing (Fiat invested €1bn here and exports as far afield as the US), ICT and agriculture.

But there is no doubt that Serbia needs economic reform, including action to tackle its fiscal problems, labour market liberalisation and restructuring of a number of burdensome state-owned companies.

Even with tax rises and some spending reductions, the World Bank expects Serbia to run a budget deficit of 6.5% this year, while public debt crept over 60% last year - significantly above the legally-mandated ceiling of 45%. The country's public administration is widely regarded as top-heavy, and to get an idea of complex structure of state-owned enterprises, the large and influential national gas company has at times relied on earnings from a chicken farm it took over in a debt-for-equity swap to offset losses from its core business. The Progressives' energy minister has proposed restructuring the gas company, seen as a Socialist fief. And while the economy is recovering, it is hardly a stellar performer: growth is generally expected to come in at 2% or below in 2013 and 2014.

But can an election really deliver a government able to push through reform, or will it just kick the can down the road like so many others before it?

Political risk

Aside from the fact that the administration is now in a state of battle engagement, and barely able to focus on governing, let alone push through belt-tightening, the lengthy process of forming a viable coalition means that it will be some time until the country has true political clarity again.

But among the analysts bne canvassed, the consensus was that an election might cause temporary problems, risks are on the upside. "I actually view the early elections as possibly the trigger for a set of positive developments in Serbia," Abbas Ameli-Renani, an emerging-markets analyst at RBS, tells bne. "Yes, we might see some fiscal loosening into election season, but I don't expect the outcome to be as uncertain as it has been in previous elections. SNS should win a comfortable majority, giving it plenty of political room for manoeuvre towards greater fiscal and structural reforms, including a deal with the [International Monetary Fund]. This time is different - early elections are positive for Serbia."

The IMF suspended a $1.3bn stand-by loan deal with Serbia in January 2012, under the previous government, over the country's rising debt and deficit. The Dacic-Vucic administration has flirted with the institution over a new deal that would, as one observer puts it, "be a belt around the belly of someone who likes to eat too much." An IMF mission is expected in Belgrade in the days before the election, but without a government in place, a new loan package will have to wait.

Two serious questions have not been posed enough: firstly, what will be the parliamentary arithmetic after the election - with whom can Vucic form his supposedly pro-reform coalition? And secondly, is Vucic really a reformer? Dacic has certainly espoused reform himself, and has arguably gone further than Vucic in building bridges with Kosovo and promoting EU membership. The Socialist vote base may be instinctively suspicious of economic reform, but so is much of the electorate. Other supposedly economically liberal parties are weakened, discredited, and/or at war with the Progressives. If the election results in a very similar Progressive-Socialist coalition but with Vucic as premier, it will just seem like an exercise in musical chairs to little practical effect other than bolstering an ego.

Some see the election as just that, and question whether Vucic really wants change. A former ultra-nationalist, he is accused by his critics of authoritarianism, even megalomania. But given his apparent efforts to take Serbia by the scruff of the neck, and economic progress where his liberal predecessors fell short, international partners and the markets are for the time being giving him the benefit of the doubt.

Ivan Kurtovic, of regional brokerage InterCapital Securities, tells bne that the election will certainly delay reform, and possibly imperil it in post-election horse-trading. "But in case one option, ready to deal with the reforms, results from the election, it could be very powerful mandate to have," he says. "Let's see."