SIGNPOST: Serbia votes for parties soft on joining EU

By bne IntelliNews January 22, 2007

Nicholas Watson in Prague -

In a clear slap in the face for Brussels, the Serbian public voted Sunday overwhelmingly for parties that are soft on joining the EU and against moving the country further toward becoming a Western-style liberal democracy – a result likely to stymie economic reform, delay a resolution to the Kosovo problem and even prevent a new coalition government from actually being formed.

Initial results showed that the staunchly pro-EU parties of President Boris Tadic's Democratic Party (22.7%) and the Liberal Democratic Party (5.3%) failed to gain enough votes to outweigh the parties more hostile to the EU and in favour of taking the country toward a more paternalistic and authoritarian government like that which exists in Russia.

The ultra-nationalist Radicals (SRS) took the largest share of the vote with around 28.3%, while Prime Minister Vojislav Kostunica's right-leaning Democratic Party of Serbia (DSS) – which the EU likes to think of as pro-EU but is certainly less-so than Tadic's party – won 16.4% and the Socialist Party of Serbia took 5.6%. Fringe and ethnic parties took the rest of the vote, turnout for which was high at over 60%.

Kingmaker Kostunica

"The pro-EU and pro-Western style liberal democratic parties suffered a tremendous defeat," says Dr James Lyon, an analyst for the Crisis Group in Belgrade. "Those parties also lost Belgrade for the first time since parliamentary elections were reintroduced, which is a very bad sign."

Tomislav Nikolic, the candidate for prime minister of the Radicals, whose official leader Vojislav Seselj is on trial for war crimes at the UN tribunal in The Hague, told newswires he didn't expect President Tadic to give him the nod to form a government, meaning the president and prime minister would sit down and reform the current coalition.

However, analysts said that while EU foreign policy chief Javier Solana is right when he says the "majority voted for forces that are democratic," the idea this majority also voted for pro-European forces is a bit of stretch. Kostunica's DSS party is generally seen as occupying the middle ground between the pro-Europeans and the nationalists: the Crisis Group's Lyon calls it a "Trojan horse" for the followers and policies of the late dictator Slobodan Milosevic.

The idea of a "Greater Serbia" is still very much on the DSS' agenda; while it has dropped its territorial claims on parts of Croatia, unlike the Radicals, it still lays claim to parts of Bosnia Hercegovina it lost during the Balkan wars in the 1990s. The DSS is also vehemently opposed to the independence of the UN-administered province of Kosovo – an issue that will rear its ugly head in the coming weeks as the UN mediator Martti Ahtisaari prepares to outline his proposals for the province, expected to recommend some form of limited independence for Kosovo.

It wasn't my fault!

Few in Serbia, even those who voted for pro-EU parties, want to see Kosovo become independent. That's why some analysts believe there is a good chance that the various parties won’t be able to form any kind of coalition at all over the next 90 days because no one wants to be in power when Kosovo is given its independence.

Without a government, Serbia would be unable to establish a negotiating team to deal with the EU, putting the issue of Kosovo further on hold. New elections in Serbia would then need to be held, probably in the summer.

Of course, no working government means that sustained progress on the vital issues of economic and social reform would be tricky. Serbia had won plaudits for moving its economy forward over the past few years, which helped bring in a record $4bn in privatisations and foreign direct investment in 2006. Whether this investment will keep flowing largely depends on what happens now.

Standard & Poor's said on Monday it will monitor any possible volatility stemming from Serbia's new government to reassess the country's sovereign rating, which is 'BB-' with a positive outlook.

The ratings agency said the outcome of the elections won't have any immediate impact on the country's ratings, but warned the policy response of any eventual coalition government to current political risks will be a crucial factor to Serbia's credit-worthiness.

"If a coalition were formed that causes increased political volatility, or opts for a significant reversal from Serbia's structural reform and stabilization effort, this could pose a risk to the ratings on the sovereign," S&P said in a statement.

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