BETWEEN RECESSION AND FEAR OF INFLATION

Increase of social strain

Return of Governor Avramovic on the public scene is rather a sign that the actual leaders of economic policy have reached a blind alley, than a sign of forthcoming changes

AIM, Belgrade, July 3, 1995 The return of Dr Dragoslav Avramovic, Governor of the National Bank of Yugoslavia and savior of the dinar, to the public scene, and publication of general outlines of his March document titled "Economic Growth, Social Justice and Financial Efficiency of the Economy - Program for 1995-1997" (some hundred pages of text) have brought nothing new to the current economic policy and philosophy. Although there is a certain amount of ideological heresy (the question of the exchange rate and interest rates as prices of foreign currency and capital, salaries as expenditures of production), it was obviously assessed by the leadership of actual power that, at this moment characterized by the newly increased social tensions, it was necessary to put this personality into circulation again, since for two years he has been a synonym of sound money among the people. Although, one should stress, even Avramovic's credibility has seriously been damaged.

It is, for instance, quite questionable whether anyone can still believe the Governor's statement that the dinar has not been threatened, because, allegedly, no money will be issued for purchase of wheat from the peasants and overhaul of power plants. Since on that same day (June 29), Prime Minister of Serbia, Mirko Marjanovic publicized that the state would buy up 1,850,000 ton of market surplus of wheat at 28 paras per kilo, a simple calculus points out that about 500 million dinars must be provided for this purpose. When the sum of about 400 million dinars expected to be provided by the state for overhaul of power plants is added, it turns out that almost a billion dinars are necessary for "extraordinry state expenditures", and the entire mass of money in the FR of Yugoslavia is now 2.4 billion dinars. Can anyone believe Governor Avramovic that such a blow of state expenditures will not be assisted by the mint? Because it is almost impossible to believe that all that money can be made by levying some new taxes on the impoverished economy and the impoverished population.

Besides the peasants who are disappointed by Marjanovic's price for the wheat because they asked for twice as much (about 56 paras per kilo), the workers manifest an even higher dissatisfaction. Social tension is obviously growing at a very high rate, when even the official trade union of Serbia expressed a protest because the purchasing power of the employed dropped by 20 per cent since December last year. In such a situation, the leadership of the Trade Union assessed (on June 26) that the decision of the Government of Serbia to increase the pension contribution from 22 to 25 per cent was unacceptable. Finally, the dramatic data that out of the 1.7 million of the employed about 800 thousand are still on forced leave were made public, that out of those who are working, 80 thousand are on minimum wages (about 50 German marks a month), that 20 thousand received no wages at all in the past several months, that 420 thousand children in Serbia have not received children's allowances for three months.

Even the official Trade Union of the FR of Yugoslavia suddenly, probably pressed by its membership, came out with a series of indicators about the critical situation among the employed in state and parastate branches of the economy. The president of this organization loyal to the state leadership for years, Dragan Radulovic, called the attention of the public that a series of strikes are in preparation and that "these will not be politically stained strikes, but strikes of dispair and helplessness". He also revealed that every third Yugoslav works in an enterprise with losses, that the losses are already on the level of one fourth of the social product of the country. Radulovic says that in May as much as 2.3 average incomes of the employed were necessary to meet the fundamental needs of individual households.

The Government of Serbia still has not tried to come out with a comprehensive response to new pressure of those socially endangered. The Republican Minister of Finance, Dusan Vlatkovic, told the union workers that the Government was not going to give up the strict monetary policy and that it was not ready to give in. He also said that since 1992, the social product per capita in Serbia was reduced from 3000 to 1000 dollars, "and that we have mostly maintained all the institutions we have had, so inevitably everybody must have lower salaries". The competent Republican Minister for pensions, Dr Jovan Radic, stated on the occasion that the average salary in December was 285 dinars, and in May it was 294 dinars, so "if we would now, nervously, pressured by the trade union, increase the salaries, it would inevitably lead to inflation".

Altogether, in a situation "between recession and fear of inflation", as Governor Avramovic himself described it, it would not be realistic to expect that the authorities will manage to resist the pressure of the employed and the peasants to loosen monetary restrictions, with inflation of about 6 per cent a month in the first half of the year. Therefore, it is more likely to expect a return of super-inflation than a confrontation with the realistic economic disbalance and a challenge of changing the economic system, as recommended by Yugoslav economists.

Dimitrije Boarov