Serbia and Greece: Some Parallels

Serbia and Greece: Some Parallels

As the new Greek government tries to free itself from the debt yoke being thrust on the Greeks by external creditors and, above all, the International Monetary Fund, the government circles of another Balkan country, Serbia, are dominated by a different mood altogether. Among Serbian politicians, officials and experts, there seems to be an understanding of the malignancy of the well-established practice of cooperating with the IMF; after all, this ‘cooperation’ is more reminiscent of a one-way road to the detriment of the Serbians. Fulfilling the IMF’s demands, however, remains an axiom for Belgrade that must not be reviewed under any circumstances.

Serbians are supposed to accept the fact that until the end of 2017 at least, there is no point expecting a rise in pensions and salaries. The reason for this is the terms of Serbia’s agreement with the IMF, which tie the government’s hands in solving their own social problems and do not even allow the income of its citizens to be brought in line with inflation. Moreover, the issue of reviewing agreements with the International Monetary Fund (following the example of Alexis Tsipras’s government in Greece, say) is not being addressed by the expert community or by government circles. 

The socio-economic situation in Serbia does not look so bad as to force Aleksandar Vučić’s government into agreeing to freeze all pension and salary increases. According to preliminary estimates, Serbia’s public revenue in the first quarter of this year could turn out to be higher than expected by 5-10 billion dinar. However, the agreement with the IMF is put together in such a way that any additional budgetary income must automatically go towards paying off its external debt, which is to say it must all go to those same external creditors.

If we continue to compare the priorities of the Greek and Serbian governments, a comparison that is not the most favourable to Belgrade, then there is one more thing that should be acknowledged. Alexis Tsipras’s cabinet is having to act in the critical conditions created by previous governments. Even in this situation, however, the Greek authorities are looking for opportunities and, most importantly, are showing a determination to review the existing practice of interaction with the European Commission, the European Central Bank and the IMF. Moreover, Greece has a much larger external debt hanging over it (just the loans from the ‘troika’ alone over the last few years amount to around €250 billion). In Serbia, the continuity of the current policy can be traced back to at least 2008, and in all that time the country has been walking into the same trap: Belgrade regards the IMF and other international financial institutions as almost the only source of economic development and, by virtue of this alone, accepts the virtual servitude in which Serbia has found itself.

Obviously it would be wrong to insist too much on the parallels between the cabinets of Aleksandar Vučić and Alexis Tsipras. The Serbians and the Greeks have different mentalities and their responsibility to their voters is evidently not the same. However, certain regional parallels do suggest themselves nevertheless. At the end of the 1980s, a country emerged in the Balkans that rapidly paid off its external debt to Western financial institutions despite social losses and the impoverishment of the population. I am referring to Romania during the time of Nicolae Ceaușescu. What took place a little later in that country and what happened to its leader is well-known...

In terms of modern-day Serbia, however, the country has real opportunities for financial recovery and they lie beyond the framework of relations with the IMF. The opportunities I am referring to include diversifying the country’s foreign and foreign economic policies, making more effort to participate in the investment projects of foreign companies, and implementing existing agreements, including with Russia, which has something to offer its Serbian partners without shackling Belgrade to onerous conditions.

It seems it is this strategy that has been chosen by the Greek government. Without officially declaring its intention to tear up its agreements with the International Monetary Fund and leave the eurozone, Athens is manoeuvring with some success in an effort to resolve its external debt problem. Representatives of the Greek authorities have said: «We are a left-wing government. If we have to choose between a default to the IMF or a default to our own people, it is a no-brainer.» This is in keeping with the mood that currently prevails in Serbia.

The strength and unity of external creditors should not be overestimated. In an interview with the Parisian newspaper Le Figaro, French political analyst Coralie Delaume said: «The size of debts and budget deficits are the only things that Europe worries about today... The European Monetary Union is getting weaker by the day. Stupefied Europeans no longer understand what awaits them... From an economic and political standpoint, the European Union is a spherical fiasco in a vacuum: No matter which side you look at it from, your gaze is met with catastrophe...»