ECONOMY-SERBIA: Financial Institutions Collapse As Country Faces Bankruptcy

By Vesna Peric Zimonjic Reprint | | Print |

Vesna Peric Zimonjic

BELGRADE, Jan 8 2002 (IPS) - The impact of Serbia’s communist past continued to be felt in the first week of the 2002 with the closure of four major state-owned banks.

The collapse of the financial institutions followed six months of unsuccessful efforts by the reform-oriented government and the National bank to revive the banks..

“This is the end of the political banking system,” vice- prime minister Miroljub Labus told a press conference.

Analysts say Labus was referring to the fact that the regime of former leader Slobodan Milosevic kept the banks artificially afloat despite the two rounds of strict international sanctions that destroyed Serbia’s economy.

“It’s hard to say that the banks are bankrupt … it’s the whole economy that is bankrupt and (we) have to start all over,” said Serbian Finance Minister Bozidar Djelic.

According to Labus the four banks are burdened by more than 1,25 billion United States dollars of direct debt from the Milosevic era and would need another 4,125 billion dollars to survive.

“It was an illusion that Beobanka, Beogradska Banka, Investbanka and Jugobanka were alive,” National Bank Governor Mladjan Dinkic told Radio Television of Serbia (RTS) recently. “They only had counters and tellers and no capital. In the past six months they survived by spending whatever deposits were made by clients.”

Hundreds of employees of the four banks have responded to the closures by barricading themselves in the main offices of the banks since January 1. More than 8,500 of them are about to lose their jobs but the Serbian government says it has allocated more than 25 million dollars for the retirement and re-education plans for the employees.

However the employees say they are skeptical that these plans or the money will materialise. “We don’t believe Djelic and his social programme,” said Dragica Sipka and employee of Beogradska Banka told IPS.

“Most of us here are around 50 years of age and many are single mothers. Our banks will go to the foreigners and we’ll be jobless.”

Analysts say the closure of the banks is the part of a World Bank plan to restructure the moribund Serbian economy. They say Sipka is voicing the concern of many Serbs who became suspicious of foreigners and free market economy in the decade of isolation.

Part of the official Milosevic’s propaganda, that relied on the previous four decades of communism, was that free market economy and introduction of foreign investments mean the final sale of national interest. At the same time, the propaganda presented the ruined Serbian economy as “a model of survival.”

“One of the biggest achievements was the fact that we kept the economy from the privatisation process and transition,” Milosevic’s prime minister Mirko Marjanovic said recently, describing the 90s.

In the 90s, Serbs lived thorough four wars and survived on less than 100 U.S. dollars a month, compared to almost 1,000 U.S. dollars in the 80s. However many believed that Milosovic’s policies were necessary to save the national pride.

Many thought that the fall of Milosevic’s regime in October 2000 would automatically erase the poverty of the 90s and bring back the high living standards, one analyst said.

“Serbs have at least mixed feelings on transition. On one side they want better lives, on the other, they’d like to avoid sacrifices. They want transition, but not the consequences which is why the collapse of four banks was described by the remnants of the old regime as a conspiracy against national economy,” says psychology professor Bora Kuzmanovic.

However the National Bank has released a list of companies whose economic collapse has practically led to the bankruptcy of the four banks. The first 10 on the list have been described as the “white elephants” of Milosevic’s regime. They include the national power system EPS, national airline JAT, steel mills SARTID and the car company Zastava, that was closed last July.

Economists say the list of companies is just the start of the economic meltdown of the Milosovic era and that more companies will probably close before Serbia’s economy is rejuvenated and the rebuilding process begins.