FRY FACING A NEW ECONOMIC CRISIS

After the News that the Outer Wall of Sanctions Stays

Retaining of the outer wall of sanctions has threatened the planned economic development and confronted the country with a new economic crisis. The first signs became evident in November already, when salaries dropped below 200 German marks. Economic experts predict a new surge of inflation which will reach at least 30 per cent in 1998. That is why a new strain in the relations between advocates of reform and followers of the regime is felt.

AIM Belgrade, 11 December, 1997

Prolonged outer wall of sanctions imposed on Yugoslavia to last during the 1998, as decided a few days ago by American president Bill Clinton, was received by the Yugoslav public with great surprise, since it had been prepared for a different course of development, in fact that next year Yugoslavia would be received in all relevant international organizations. Even the federal government, in recent presentation of the economic development of the country for next year, made it clear that it counts on its ambitious program, according to which the annual social product should go up by 10 per cent, being supported by foreign financial aid. In order to make such support possible it was necessary that Yugoslavia first regulate its relation with the International Monetary Fund, the World Bank and the World Trade Organization.

Indeed, the federal government has tried on several occasions in contacts with the mentioned institutions to regulate controversial issues, but the effect was equal to knocking on wrong doors, because it was demanded from the Yugoslav regime to previously meet the conditions set by the international community, and these are primarily the resolution of the status of Kosovo, cooperativeness with the Hague tribunal, that is, extradition of three indicted officers of the former Yugoslav People's Army (JNA) for committed war crimes, manifesting more tolerance in the process of succession of former SFRY, meeting demands from the report of Gonzales's commission (round table with the opposition, at which election rules would be established).

The list of demands is not long, but for the current regime, personified by the president of Yugoslavia Slobodan Milosevic, they are exceptionally hard. By meeting the set demands Milosevic would actually create all the conditions necessary for him to abandon power, which is the goal of the international community since it is convinced that the Yugoslav president is an unreliable political interlocutor who easily gives promises, but "forgets" to keep them. That is why Milosevic, like Sadam Hussein, is written off as an acceptable representative of Yugoslavia and the spectre of demands the international community expects him to meet is constantly broadened.

On the other hand, Milosevic's regime is ready, for the sake of preserving power it won ten years ago, to sacrifice its subjects explaining it as defence of independence of the country. Results of such policy are paid for by the population with the drastic fall of the standard of living, drop of the level of health protection, school education, city transportation and other public services. In short, many years are lost for many generations, and poor prospects of economic development anticipate that such destiny will not bypass future generations either.

Prolonged outer wall of sanctions is a reliable sign that relations of the Yugoslav regime with the international community have deteriorated. There can be two possible explanations for such developments. One lies in the possibility that the international community has lost patience to get empty promises from Milosevic, and decided to warn him in this way that he must meet obligations he undertakes. The second reason concerns Milosevic himself, who having returned from China, feels that his position is reinforced. His propaganda persistently diverted the attention of the public from the fact that Milosevic had arrived in China before Yeltsin returned to Moscow from Peking, and that immediately afterwards, the Chinese president met with Clinton in the USA.

Such comparisons give pleasure to the Yugoslav leader who loves playing the role of a big statesman. Clinton's move, however, quickly returned him to reality, because it led Yugoslavia in bad straits. With the Chinese and Russian aid which Milosevic and federal prime minister got, it is not possible to accomplish the planned level of economic development. In the federal government where there are two opposed factions, they are aware that nothing can be accomplished of the economic projection for 1988. This was confirmed by prime minister Kontic in his talks with entrepreneurs, who pointed out to them that the growth of 10 per cent was realistic only with foreign financial aid.

Vice prime minister in his cabinet and also an economist with a recognized reputation, Danko Djunic, belongs among those government officials who were the first to realize that without changes of political relations towards the international community conditions cannot be created for accelerated economic development. Being a minister who does not belong to any political party, it is easy for Djunic to use his head, but it is not improbable that he will be eliminated from the government for it. His position is very interesting. His minister's post is in danger because he publicly expressed the stand that Yugoslavia must change its foreign policy, and this also implies the change in internal affairs, and that elections for president of Montenegro must be recognized. He is the first official who has supported the newly elected Montenegrin president Milo Djukanovic and immediately after this statement went to pay him a visit.

At this moment these two badly need each other, because they are the exposed figures of the reformist faction. Many assess that Djunic's days in the cabinet are numbered, but there are also those who believe that he will not be an easy prey. The latest poll among entrepreneurs showed that majority of them are inclined towards Djunic's way of thinking. They too think that Yugoslavia should change its hardcore stand towards the international community and manifest a greater sense for resolving controversial issues, because the price of stubbornness is higher than that of making certain concessions. Djunic also proved to be an acceptable interlocutor with representatives of international institutions so that his elimination from the government would be a suicidal step of the current regime, because this move would shut the door to contacts with the world.

Based on Djunic's destiny in the government it is possible to assess in what direction intentions of the regime will go. If the vice prime minister remains at his post, it means that the position of Kosta Mihajlovic, head of the Yugoslav delegation in negotiations about succession, is shaking, since he openly demanded that Djunic be removed from the government, because he allegedly undermined the negotiating positions of his country in the talks with the other republics of former SFRY.

Ministers - members of certain political parties, like Borislav Vukovic, minister of foreign trade and member of the Yugoslav United Left (JUL), have no courage to act like Djunic, although in the talks with representatives of the international community, they were also told that Yugoslavia could not count on support if it refused to meet the set requirements. To the news that the sanctions remain, Vukovic reacted by claiming that nothing would change in the economy of the country, because Yugoslavia had not received any aid so far anyway.

Economic experts, however, reached the conclusion that sources for maintenance of economic development would be exhausted in the next two or three years and that after that total collapse of Yugoslav economy could be expected. Under the condition that the ambience of economic development improve, and this is possible only with foreign financial support, Yugoslavia can count on annual growth of the social product of five per cent. At this rate, it could reach the level of 1990 only in about 15 years. It would then reach 45 per cent of the development level achieved in 1979 when, in economic terms, it had reached a climax and when the data confirmed that it did not lag behind the medium developed European states.

Nevertheless, comparisons with that year are not realistic, because it also marked the largest annual foreign loan, when former Yugoslav republics, independently one from the other, took loans amounting to the total of 20 billion dollars. The decline started a few years later when time came for returning loans, and Yugoslav economy had nowhere to find the money for it because all the loans were simply spent. In that 1979, the Yugoslavs acted like drunken millionaires and were the most desirable European buyers, because they never asked what something cost.

Things have changed to such an extent that about one million people are unemployed nowadays, and only last September, the average salaries exceeded 200 German marks, but already in November, due to a "chain reaction" of rise in prices caused by the increased price of petrol, the salaries dropped down to the value of just 180 German marks.

Ratomir Petkovic

(AIM)