Re-exam Serbia's EU commitment

Jun 2, 2010

OPINION by Vojin Joksimovich | A re-examination of the Serbia's commitment to the EU, as well as to the IMF, is more than prudent if not imperative then a blind adherance to Serbia's EU membership.

After his meeting with the Republika Srpska Prime Minister Milorad Dodik in Laktasi, near Banja Luka, Tanjug reported that the Serbian President Boris Tadic reiterated his commitment for Serbia to join the EU as soon as possible. Even the birds know that for a long time President Tadic has been saying that there is a no alternative for Serbia but to join the EU. This disturbing statement, regarding the future of Serbia, is not only factually flawed but even philosophically nonsensical as only the death has no alternative. Putting all the eggs into one basket has hardly ever been a good strategic decision. Recent global financial meltdown of historical proportions including the debt crisis, initially affecting most the Mediterranean countries (now called Club Med), will probably adversely impact the entire EU and the euro-zone in particular. It necessitates a wakeup call which should reach Tadic's office as well. A re-examination of the Serbian commitment to the EU, as well as to the IMF, is more than prudent if not imperative. If it doesn't happen soon it is not inappropriate to pose a question if Tadic is serious about the future of his country. There are viable alternatives for Serbia probably more promising than joining the EU, e.g. an association with the BRIC countries (Brazil, Russia, India, and China). The BRIC countries have much more economic potential than the moribund EU. Besides, unlike the EU, with 22 out of 27 recognitions of Kosovo, the BRIC countries have been supporting the Serbian position with regard to the illegal Kosovo unilateral declaration of independence.

EU Sovereign Debt Calamity

The magnitude of this crisis is best illustrated with the statement of the European Central Bank (ECB) President Jean-Claude Trichet who said that this was the worst European economic crisis since WWII and perhaps even WWI. Greece for all intents and purposes went bankrupt. The interest rate on the Greek bonds shot up to 38%. The stave a collapse, but after a long procrastination which exasperated the crisis, the EU leaders, primarily Germany and France, hastily arranged a EUR 110 billion ($185 billion) a bailout package for Greece but not without participation of the International Monetary Fund (IMF). The size of this package was three times the amount officials initially estimated. This bailout is more of a bailout of primarily French and German banks rather than a bailout of Greece. The French, and to a lesser extent the German banks had flooded the Greece with cheap credits for a decade and now hold at least EUR100 billion in Greek government bonds. The Greek bondholders have not been asked to miss a single interest payment, reschedule a cent of debt, suffer any write-downs, or any other messy measure to address the sovereign debt subject with empty coffers. The lenders are extracting their pound of flesh. The Greek government has to slash its public deficit by implementing draconian and unpopular package of new taxes and reducing the wages of public employees and pensioners. The birthplace of democracy was in flames: rioters attacked banks, businesses and government buildings.

This bailout package has, however, failed to convince the markets throughout the world resulting in substantial losses on the worldwide stock exchanges and threatening to delay the U.S. fragile economic recovery. Concerned that a Greek default might imperil the euro and in order to calm the markets, the EU leaders in conjunction with the IMF conceived yet another large-scale intervention in the form of establishment of so called EUR 750 billion stabilization fund (about 1 trillion dollars). The participants in this emergency fund are: euro-zone governments to the tune of EUR 440 billion, 60 billion from the EU members, and 250 billion from the IMF. If Serbia was an EU member, it would have to contribute to the 60 billion portion of the fund. The U.S. Federal Reserve issued a blank check to give any money wanted. Even this EU-IMF bailout failed initially to calm the markets resulting in the global selloff in stocks. The crisis is still unfolding and at this point in time nobody seems to know how this crisis might end. There are assertions that the trillion dollar fund provides a temporary relief only until larger obligations of Spain and Italy come into question. Some have suggested that unless Germany assumes responsibility for the Club Med debts, something its voters will not permit, the Euro is dead. Even the IMF wizards who were last year urging more "stimulus" spending have made a 180 degrees turn and started frantically advocating tax increases and spending cuts, i.e. more austerity, rather than tax cuts or other pro-growth mechanisms. However, what is certain is that austerity measures will be impoverishing the working class and the pensioners not only in Greece but in Portugal, Spain, and Italy as well as probably in other EU countries.

EU to become Fiscal Union?

Trichet has started urging tighter euro-zone coordination. In an interview with German Der Spiegel he said: "Europe needs a quantum leap in how it collectively manages public finances." German Chancellor Angela Merkel is also pushing for tightening of zone's fiscal rules. She advocates real enforcement and penalties behind limits on debt and budget deficits including suspension of voting rights. For a good reason euro-zone governments have long resisted stronger oversights of their budgets by the EU executive arm, the EU Commission in Brussels. While such a fiscal union might impose some discipline on national governments, control of budgets and taxes by the EU Commission amounts to a total loss of national sovereignty, which puts a nation on the road to self-destruction and oblivion. The EU Commission demanded from Bulgaria, Slovakia and Lithuania to shutdown Russian-built nuclear power plants, despite their good operating and safety records as a pre-condition for joining the EU. There was no evaluation on the basis of own merits. Simply these plants didn't satisfy the EU standards. This sticks in my mind as yet another loss of national sovereignty and I was somewhat surprised that the countries in question swallowed the unreasonable EU demand. All three countries have opted to build new nuclear power plants thus enabling the vendors from EU countries, France in particular, to make profits at the expense of future member countries.

Greece will still restructure/default?

Martin Feldstein, professor of Economics at Harvard University and economic adviser to presidents Reagan, Bush and Obama believes that Greece will have to default due in large part to the membership in the European Monetary Union. "In the end, Greece, the eurozone's other members, and Greece's creditors will have to accept that the country is insolvent and cannot service its existing debt. At that point, Greece will default." Feldman argues that "if Greece had remained outside the eurozone and retained drachma, the large increased supply of Greek bonds would cause the drachma to decline and the interest rate on the bonds to rise. But, because Greek euro bonds were regarded as a close substitute for other countries' euro bonds, the interest rate on Greek bonds did not rise as Greece increased its borrowing—until the market began to fear a possible default." This restructuring, essentially a default, would renegotiate the debt with bondholders causing bondholders to take a loss. Restructuring may not take a place for a year or two. The ECB announced that eurozone banks face EUR 195 billion in write-downs this year and the next due to an economic outlook which is clouded with uncertainty. Great Britain did not join the eurozone and is now very pleased they didn't. Presumably, President Tadic and his followers have been dreaming of joining the eurozone as Slovenia did.

IMF

The IMF launched its operations in 1947. The quota subscriptions of 182 member countries are the principal source of financing… It has largely performed as a rubber stamp for the U.S. Treasury, the major finance ministries of Europe and Japan, and the IMF senior staff. Since the onslaught of debt crisis in 1980s, the IMF has assumed a central role in fixing the economies of sick countries including Former Yugoslavia. IMF sponsored the dinar devaluation which resulted in abrupt price hikes and a dramatic compression of earnings. Susan Woodward, in her brilliant book Balkan Tragedy, blamed the IMF for "the lack of recognition and accommodation for the socially polarizing and politically disintegrating consequences" of the IMF program and approach to westernization. "The austerities of policies of demand-repression led to conditions that could not easily foster a political culture of tolerance and compromise." The Yugoslav economy was running on the credit bubble during Tito's rule, while the Greek economy was running on the euro-zone induced credit bubble.

In 1990s IMF intervened in two financial meltdowns: Mexico and East Asia. After signing of the Dayton Accords it refused to readmit Yugoslavia, then Serbia and Montenegro. Yugoslavia had to repay a pre-sanction debt of $100 million. After NATO planes demolished the Serbian infrastructure and removal of Milosevic from power, the Serbian post-Milosevic leaders were "rewarded" with the IMF loans, which enabled the IMF to essentially manage the Serbian economy. In the process, the Serbian economy has been essentially destroyed. The Serbian economy has no competitive export-oriented economy and is not attractive enough for direct foreign investments. However, the Tadic administration continues to be addicted to these loans. The IMF's cure for the ailing Serbian economy is likely to follow IMF's Spanish cure: "radical overhaul" of labor laws, a "bold" reform of its government pension system. At this writing Serbia is negotiating austerity measures that would allow the IMF to release additional EUR 380 million. In 2008, faced with a shortfall in revenues, IMF sold a part of its gold reserves. At the 2009 G-20 London meeting, it was decided that the IMF would require additional resources to the tune of $500 billion. Where is all this money going to come from?

In addition to Serbia, other Eastern European countries have become addicted to the IMF loans: Hungary ($11.6) billion), Romania ($12.5 billion), Ukraine $16.4). Hence, the sheep mentality prevails. Nonetheless, Serbia should attempt to get out of this Faustian deal. A way out of these IMF debts is to find somebody to buy them like China, Russia, or a combination of BRIC countries. If the worst comes to the worst a default might be an option.

EU demands on Serbia

The EU is not in a position to seriously consider expansion of the Union until it satisfactorily resolves the exiting fiscal crisis. It has been reported that Germany now opposes the EU expansion to include the Western Balkans. Hence, the Serbian government expectations will have to be pushed back anyhow. While the euro-calamity briefly summarized above may or may not result in any additional demands on Serbia, the existing demands should have already been deemed unacceptable to Serbia. The Srebrenica declaration by the Serbian government is a case in point followed by the Kosovo independence resolution.

In early January Tadic announced that the Serbian Parliament would pass a resolution condemning so called "genocide" in Srebrenica, which we all know did not happen. Now massive amount of literature has been amassed providing enough facts about what happened in Srebrenica and "genocide" continue to exist only in the literature of western apologists for dismemberment of Yugoslavia and their legal servants in the Hague inquisition. I was somewhat surprised by this development and suspected that it was cooked in Washington, Brussels and Strasbourg. In mid-March Slovenian Jelko Kacin, the European Parliament deputy with responsibility for Serbia, revealed that in December 2009 Tadic was presented with a done deal. Nebojsa Malic pointed out that the Turkish newspaper Zaman has claimed that the Turkish foreign minister Ahmet Davutoglu was also privy to the resolution text before Tadic. Tadic barely mastered a majority of 127 votes in the 250-person Serbian legislature. However, the term "genocide" was dropped making so called Bosniaks and some in Washington and Brussels unhappy. This is yet another example that whatever the Serbian government does, irrespective whether Milosevic, Kostunica, Djindjic or Tadic are in power, is never is enough to satisfy Washington/Brussels totalitarianism.

In succumbing to the Washington/Brussels pressure Tadic, while labeling the vote as patriotic, has damaged the Serbian national interests despite a presumable intent to advance only the EU membership status by appeasing the Dutch. While the resolution did not use the term "genocide," it acknowledges involvement of the Serbian government in the massacre of some 7-8,000 Muslims despite the fact that the Serbian government never commissioned own study to establish own Srebrenica ID card. Therefore the Hague Tribunal fabricated casualty numbers become the "truth." In other words it acknowledges the Hague fraud as the truth with conceivable legal consequences. Stefan Karaganovic, a Serbian-American with a U.S. law degree, made an important point that the Hague Srebrenica indictment would not have succeeded in any American court and that it would have been thrown out. The Hague Tribunal case has entirely favored the standpoint of the prosecution, which in turn was based mostly on falsehoods and distorted interpretation of a few meager facts. The most likely outcome of this irresponsibility of the Tadic's coalition will be a multimillion dollar law suit to be filed by the Croat-Muslim Federation.

Serbia would have to give up Kosovo to join EU

As mentioned above, Bulgaria, Lithuania and Slovakia had to give up cheap electricity that would have been generated by Russian built nuclear power plants with good safety records. In addition to the cost of replacement power they had to commit cost of the plant decommissioning with some help from the EU. The likelihood that Serbia could join the EU without recognition of the Republic of Kosovo is next to zero. This is, however, what Tadic and the followers have been telling the Serbian people. On many occasions, young Serbian foreign minister Vuk Jeremic told the rest of the world that Kosovo to Serbia is more important than the EU. On March 4 in Budapest he said that it was "slightly more important" presumably getting closer to the position of the Tadic's coalition. At the same time he was responding to the warning of the western quintet (U.S., UK, Germany, France and Italy), issued in February, to cool down the Kosovo rhetoric. The note was addressed exclusively to Jeremic and not to Tadic. The quintet was concerned that Serbia would be trying to convene a special session of the UN General Assembly the day after issuance of the legal opinion of the International Court of Justice (ICJ) regarding legality of Kosovo's unilateral declaration of independence. Belgrade offered an explanation that Tadic had to be protected from the Serbian nationalists.

What is cooking in Washington and Brussels?

Philip Gordon, Assistant Secretary of State for European Affairs, told reporters in May: "Serbia's path to the EU will only be completed when it resolves its differences with Kosovo. The EU has been quite clear…that they are not going to be too keen to incorporate border disputes, non-recognitions and ambiguous relationships." Incidentally, the EU did that when it accepted Cyprus as a member. Gordon is another holdover from the Clinton administration. He has worked closely with Ivo Daalder, Obama's pick for the U.S. NATO Ambassador. Daalder is known to the Serbian-American community, as Stella Jatras pointed out, for his response to Prof. Alex Dragnich's question: "How can NATO bomb a sovereign country without the approval of the U.S. Congress." Daalder's answer was: "Because we can." Gordon doesn't believe that the Turkish troops in Cyprus constitute an occupation.

According to Obrad Kesic, Washington has been working for two months to develop a Kosovo recognition plan which will request from Belgrade to go along in abolishing UN Resolution #1244, the resolution which guarantees Serbia's integrity, in exchange for speeding up Serbia's EU entry and access to the EU funds.

Meanwhile Doris Pak, a German member of the European Parliament whose job is to implement the German policies vis-à-vis Serbia, is preparing a resolution which will call on Serbia to take a "pragmatic" attitude towards Kosovo and to stop blocking Kosovo's entry into international organizations. It is expected that the resolution will be voted on in June with the discussion in July. The resolution also calls for the EU members to take a uniform position.

Nikolas Gvozdev, a professor of National Security Studies at the Naval War College, has written a common sense, but well documented, article Unfreezing Kosovo. In it he advocates that Washington should encourage negotiations open to idea of territorial adjustment. Gvozdev uses precedents: after WWI independent Armenia and Poland were recognized before the boundaries were established. In order to address the delicate subject of Serbian Orthodox Church treasures, Gvozdev is using the agreement between Italy and the Vatican in 1929. At the May 17 UN Security Council meeting the triumvirate of the U.S., UK and France argued that the Kosovo independence was irreversible and that a territorial adjustment is unacceptable. The ambassadors of Russia, China, Brazil and Mexico reiterated their support for the UN 1244, while Vuk Jeremic reiterated the Serbian offer to negotiate with no preconditions.

Another pogrom after ICJ ruling?

The ICJ ruling is expected this summer. The judges representing those countries that have recognized Kosovo independence will in all likelihood introduce ambiguities in the ruling, subject to interpretation, but they cannot ignore the UN Charter and the UN Resolution #1244. While there will be all sorts of spins, the ruling is likely to favor the Serbian position and thus alienate the Albanian leadership. Judging by the past, Thaci and the company will threaten with violence including a Pogrom #2 (Pogrom #1 in which the Albanian mobs attacked Serbian and Roma communities as well as the Serbian churches, took place in 2004). KFOR did not adequately protect the Serbs and other minorities, Roma in particular, in 2004. How would it able to do a better job in 2010/2011 when NATO currently mulls cutting the force to 2000. Needless to say that Hashim Thaci welcomed NATO plans to reduce troops. I am not aware of any contingency preparation for this scenario by the Belgrade government such as a military agreement with Russia.

Tags: Vojin Joksimovich