Abstract: Political stability goes together with economic stability. What is more, both are preconditions that must be fulfilled in order to provide fertile ground for economic growth and development in the future. Consistently, we think that the European Union is the only rational future road to political and economic development for Serbia and Montenegro. On the assumption that Serbia and Montenegro sincerely wants to join the European Union and to become a reliable ally of the international community, this study is pointing out two tasks that have to be accomplished at the very beginning in order to achieve this goal. The first is to face myths about the Serbs as “sinless Celestial people,” Serbian historical justice and self–victimization, and international conspiracy aimed to destroy the Serbian nation. The second is to create and activate as soon as possible political mechanisms that will provide undisturbed and smooth cooperation with the International Tribunal in The Hague. 

Key words: political stability, economic stability, myths, delusions, cooperation, European Union, international community, Serbia and Montenegro

Introduction

The European Union (EU) is the only rational future road to political and economic development for Serbia and Montenegro. At the same time, it is also a powerful guarantee of peace and stability in the region. Serbia and Montenegro is very far from the European integration processes at this moment. In order to make the process of accession faster and easier and at the same time to prevent eventual wars in the near and distant future, this study has the aim of revealing two extraordinary delusions on the part of Serbian people and present day national leaders. First is that Slobodan Milosevic (along with his former close political and military collaborators) ^[1] was a politician occupied with the welfare and the future of his country. Second is that Serbia and Montenegro is enjoying international credibility and trust at the moment that enables the present government to constantly delay fulfilling its obligations towards the International Tribunal in The Hague.  

A short historical background

After the devastating WWII, enormous efforts have been made by the Western countries to institutionalize world peace and secure harmonized economic development worldwide through international political and financial institutions. The most prominent ones are the United Nations, the World Bank, the International Monetary Fund, the Organization for Economic Cooperation and Development, the General Agreement on Tariffs and Trade and, later, the World Trade Organization. ^[2] Spontaneously, as time passed and war wounds started healing, nations realized that the ideals of peace and sustainable economic development were about to be carried out in the most efficient way by intensification of the world integration process. However, integration processes where largely slowed down after the biggest threat in history to the existence of humankind took place – the Cold War. The Cold War was a classical example of ideological clashes between the extreme political and economic elite movements in both Western and Eastern blocs.

After those years living on the edge of a third world war, the Iron Curtain finally fell down in 1989 when communist systems collapsed. The end of the war threat and the achievement of peaceful consensus worldwide opened new opportunities for acceleration of the integration processes. ^[3] At the same time in 1991, seemingly unexpectedly, so soon after the Cold War period had ended multiethnic conflicts in the territory of former Yugoslavia began. The conflicts escalated into violence and destruction where many innocent people were killed, tortured, imprisoned and left without homes and property. Terrible atrocities were committed. In order to punish war criminals, provide justice for war victims and prevent eventual new conflicts in the future, in 1993 the United Nations Security Council established the International Tribunal in The Hague. Cooperation with the International Tribunal is compulsory for all countries that took part in the wars. In other words, cooperation is a precondition for approval of financial loans and donations and for accession of Serbia and Montenegro to all political, military and financial international institutions including the European Union. ^[4]

Serbian virtual reality

Political stability goes together with economic stability. What is more, both are preconditions that must be fulfilled in order to provide fertile ground for economic growth and development in the future. ^[5] Aware of this fact, Deputies of the House of the Republics of the Federal Parliament on 11 April 2002 passed the Law on Cooperation with The Hague Tribunal. ^[6] This law contains a provision about extradition of citizens of Serbia and Montenegro charged with committing war crimes. ^[7] During the pragmatic Serbian government under the leadership of assassinated Prime Minister Zoran Djindjic, ^[8] the Law was enforced and cooperation with The Hague was not without difficulties but was satisfactory.

At this moment, although the present authorities ^[9] are to a great extent aware of the need to cooperate with the international community, they do not show the will to do so. ^[10] At the same time, putting into effect full cooperation with the international community requires existence of national consensus concerning this issue. Unfortunately, at this moment Serbia does not have agreement because about thirty percent of the electoral body, mainly supporters of the former regime and its policies, are very hostile toward international ultimatums. In other words, they are strongly opposing “delivery to the illegal International Tribunal in The Hague of Serbian heroes and patriots, like former president Slobodan Milosevic, who bravely defended their country against numerous aggressors. ^[11] ” In addition, they have been pointing out that during the wars in former Yugoslavia, the international community was biased, supporting financially, politically and militarily only the Serbs’ enemies; whereas, on the other hand, Serbia was under heavy sanctions imposed by the United Nations.

We think that there is no doubt that the international community has made some strategic mistakes that primarily resulted in a sharp drop in ordinary people’s living standards, thereby giving the Serbian oligarchy an excuse for leading such a destructive and dangerous policy. Furthermore, we think that the international community, probably unaware of the very complicated political situation in the country, is still making mistakes. More concretely, mistakes including imposing ultimatums and not practicing a more flexible approach in negotiations with current Serbian authorities concerning the arrest of persons who are accused by the International Tribunal of crimes against humanity. Nevertheless, in our view it is more important and beneficial for our country to face the tragic policy and irreversible mistakes, with all their deterrent consequences, which former Serbian authorities under the leadership of Slobodan Milosevic have committed. The main purpose of this action should not be simply to achieve eligibility for loans and financial support, but rather to condemn war crimes. In our opinion, this would be the first but at the same time the quintessential step towards European integration. 

Consistently, we strongly believe that Slobodan Milosevic (and the like) was not a political leader occupied with the welfare and the future of his country. On the contrary, the only thing he was worried about was how to seize power and later to keep it by all means. In order to dismiss the mythical delusion of part of the Serbian nation about unjustified allegations against him and his self-victimization and patriotism we will briefly turn to his style and the legacy of his ten-year reign:

● He is the primary (but not the only) one who has to be blamed for violent dissolution of the Socialist Federal Republic of Yugoslavia (SFRY); for civil war in Croatia, in Bosnia and Herzegovina, and in Kosovo; and, as a result, for the Balkan’s hell during those painful years with numerous human victims who lost their lives, families, friends, property and homes. ^[12]

● As a consequence, in 1992, the United Nations imposed very severe economic and military sanctions against the Federal Republic of (F. R.) Yugoslavia. In addition, F. R. Yugoslavia was expelled from all international political, financial and trade organizations.

● His reign was strongly based on using cruel and severe repression measures against citizens of Serbia who did not support his policies. (Some of them were imprisoned and tortured, put under surveillance and bugged.) 

● He controlled media heavily, isolated Serbia from the rest of the world and, often fiercely and mercilessly, clashed with political opponents and independent journalists using all means of repression (secret and regular police, military intelligence and paramilitary formations like the Unit for Special Operations). ^[13]

● HHJe and his clique usurped national natural resources, industrial and agricultural capacities, and old currency savings of citizens.

● We experienced two hyperinflations ^[14] in a five-year interval that had a devastating influence on the Yugoslavian economy and investments, monetary, fiscal and foreign trade stability. The drastic drop of investments (especially in industrial production) caused a systematic and rapid depreciation of the popular wealth. ^[15]

● The living standard of common people sharply decreased to the level of Third World countries. In such a way, the average monthly salary in Serbia was 752 DM (Deutsche Marks) in December 1990, 21 DM in December 1993, 87 DM in December 1999, and just 70 DM in December 2000. In December 1990, only 15% of families had an income of less than 100 DM per family member. In 1993, about 50% of families had an income of less than 100 DM per family member. ^[16] According to the 2000-2001 Report of the World Bank, in 1999 about 73% of the Serbian population had incomes less than 2 US dollars per day. ^[17]

● Recorded GDP at current prices declined from about 28.5 billion US dollars in 1990 to about 9 billion US dollars in 2000.

● In 2000, Yugoslavia’s external debt amounted to over 12 billion dollars. About 4.5 billion dollars of old foreign currency savings (internal debt) should be added to this amount. ^[18]

Are these facts convincing enough to dismiss the delusion that “domestic traitors” are sending “national heroes” to The Hague? On the eve of Milosevic’s fall, we believed that the majority of the Serbian inhabitants were aware of his and his clique’s crimes, abuses, corruption and violent nature. It seems that we were wrong because today, five years later, a significant part of the nation still shows very hostile attitudes towards international institutions and politicians. Why is it so? Partly the answer derives from the second delusion, but this time, of actual present day national leaders.

The second delusion we want to deal with is that present day government seems to think that Serbia has the credibility to defy the international community by refusing to arrest persons charged with committing war crimes. To be honest this is not a delusion, this is a hallucination. We do not want to put this delicate issue in some theoretical framework, because in our opinion we need, now more than ever, pragmatism and not fairy tales. Political forbearance under the slogan “problems will be solved by themselves” or “give us some more time to do our best” is incompatible with current international or Serbian realities. Consequently, the USA imposed partial financial sanctions on Serbia and Montenegro in January, 2005. ^[19]   Is this our return to the past or the fact that members of the former regime have never lost their positions and power? It seems the truth is somewhere in between.

This game with the patience of the international community irresistibly reminds us of Milosevic’s uncompromising attitude towards international diplomatic incentives and his unwillingness to cooperate and negotiate with the international community until it became too late. Similarly nowadays, instead of managing and solving luke-warm Serbian problems, the present government makes them more serious and complicated from day to day by expressing its irresoluteness and obvious lack of interest and initiative. The features of our current foreign policy are almost the same as they used to be during the 1990s; In other words irrationality, formal legalism, arrogance, negation of international policy factors and the worst kind of political autism. So we firmly ask the present national leaders and the nation in general if they have not learned anything from the mistakes and failures made by the post-second world war communist leaders and their successors (Milosevic’s clique).

Conclusion

On the assumption that Serbia and Montenegro sincerely wants to join EU and to become a reliable ally of the international community, there are two tasks that have to be accomplished at the very beginning in order to achieve this goal. The first is to face myths about the Serbs as “sinless Celestial people,” Serbian historical justice and self-victimization, and international conspiracy aimed to destroy the Serbian nation. The main purpose of this act should be to condemn war crimes without reservations and finally to lay foundations for long term friendly relations with the international community. In our opinion it would be the first, but at the same time the quintessential, step towards European integration. The second is to create and activate as soon as possible adequate political mechanisms that will provide undisturbed and smooth cooperation with the International Tribunal in The Hague.

Appendix:
Macroeconomic and Country Risk Indicators

Desirable levels of some economic quantitative indicators that must be reached in order for a country to be eligible for nomination for accession to the European Union are listed below: ^[20]

● GDP per capita should tend toward the EU average value (about 9000 US dollars per year).

● The minimum GDP per capita should be 6000 US dollars (USD) per year.

● The current account deficit should be below 5% of annual GDP.

● Foreign Direct Investments (FDI) should be about 10% of annual GDP.

● The fiscal deficit should not be more than 3% of annual GDP.

● Public spending should not be more than 40% of annual GDP.

● Public debt should not be more than 60% of annual GDP.

● Foreign debt should not be more than 30% of annual GDP.

● The unemployment rate should not be more than 10%.

● The annual inflation rate should not be more than 5%.

● The money market interest rate should be slightly above the annual inflation rate.

Values of some economic quantitative indicators in Serbia

^a Average weighted interest rate on commercial papers issued by the National Bank of Serbia.

Sources: Bilten javnih finansija. Ministarstvo finansija, Republika Srbija, Beograd, Decembar 2004 (Public Finance Bulletin, Ministry of Finance, Republic of Serbia, Belgrade, December 2004) and Statistički Bilten, Narodna Banka Srbije, Decembar 2004 (Statistical Bulletin, National Bank of Serbia, December 2004), www.nbs.co.yu

As we can see, at the moment Serbia is rather far from reaching desirable levels of economic indicators (except for the fiscal deficit and the public debt). Consequently, as country risk rating indicators of the Coface Group ^[21] show, lack of political and economic stability results in low attractiveness of Serbia and Montenegro for foreign investors (intolerantly high investment risks).

The country rating issued by the Coface Group measures the average level of short-term non-payment risk associated with companies in a particular country. It reflects the extent to which a country's economic, financial, and political outlook influences financial commitments of local companies. However, international trade actors know that sound companies can operate in risky countries and unsound companies in less-risky countries and that overall risk will depend not only on a company's qualities but also on those of the country in which it operates.

Consistently, ratings are based on twofold expertise:
● macroeconomic expertise in assessing country risk based on a battery of macroeconomic financial and political indicators and
● microeconomic expertise that draws on Coface databases covering 44 million companies worldwide and 50 years’ experience with payments in trade flows it guarantees.
Coface Group ranks country ratings on seven risk levels:

A1 The steady political and economic environment has positive effects on an already good probability of payment record of companies. Very weak default.

A2 Default probability is still weak even in the case when one country's political and economic environment or the payment record of companies is not as good as in A1-rated countries.

A3  Adverse political or economic circumstances may lead to a worsening payment record that is already lower than the previous categories, although the probability of a payment default is still low.

A4 An already patchy payment record could be further worsened by a deteriorating political and economic environment. Nevertheless, the probability of a default is still acceptable.

B An unsteady political and economic environment is likely to affect further an already poor payment record.

C A very unsteady political and economic environment could deteriorate an already bad payment record.

DThe high risk profile of a country's economic and political environment will further worsen a generally very bad payment record.

Source: Coface North America Group, http://www.coface-usa.com/

In January 2005 Serbia and Montenegro was ranked in the C risk level group as along with, for instance, Ethiopia, Chad, Mozambique, Kenya, Angola, Uganda, Mauritania and Niger. For comparison, Slovenia was ranked in the A2 risk level group along with Czech Republic and Hungary. Poland was ranked A3; Croatia was A4; and Romania and Bulgaria  ranked B. ^[22]

References

Bilten javnih finansija. Ministarstvo finansija, Republika Srbija, Beograd, Decembar 2004 (Public Finance Bulletin, Ministry of Finance, Republic of Serbia, Belgrade, December 2004).

Board of Governors of the Federal Reserve System, www.federalreserve.gov 

Chomsky, N. 1999. “Profit iznad ljudi. Neoliberalizam i globalni poredak (Profit over People. Neoliberalism and Global Order).” Svetovi, Novi Sad.

Dimitrijević, B. 2002. “Best Practices of EU Accession of Select Countries in Transition.” Policy and Legal Advice Centre, Beograd.

G17 Plus, “Bela knjiga Miloševićeve vladavine (The White Book of Milosevic’s Reign).” www.g17plus.org.yu/

Nikolić, M. 2002. “The Tragedy of Yugoslavia – The Rise, the Reign and the Fall of Slobodan Milosevic.” Nomos Verlagsgesellschaft, Baden-Baden.

Radonjić, O. 2003. “A View on the War, Dissolution and Economic Collapse. The Case of Serbia and Montenegro (1990-2000).” www.epunto.ch

Statistički Bilten, Narodna Banka Srbije, Decembar 2004 (Statistical Bulletin, National Bank of Serbia, December 2004), www.nbs.co.yu

April 2005

^[1] Slobodan Milosevic is a personification of the tragic policy that was led by Serbian authorities during the 1990s. This refers to all his former political and military collaborators within the territory of ex-Yugoslavia.

^[2] Of course, there are also opposite opinions. For instance, Noam Chomsky (1999) thinks that those institutions are nothing but the tools of powerful governments to force other countries to accept diverse agreements that enable multinational corporations to dominate the world by unlimited exploitation of their resources.  

^[3] Today, world integration processes are commonly defined as the process of globalization.  Naturally, it is not easy to define the process of globalization. This is because it involves numerous aspects, where the economic one is surely the most important. Briefly, economic globalization is characterized by elimination of international trade barriers in order to promote free and fast flows of goods, services and factors of production.

^[4] However, cooperation is only a precondition. Another issue is the quality of the investments undertaken (naturally these investments are covered by foreign sources) in order to reach institutional and legislative standards necessary to enter the European Union. 

^[5] For further discussion on quantitative economic indicators of convergence towards the European Union and the current position of Serbia and Montenegro, see the Appendix.

^[6] The Law was adopted under strong political and financial pressure exerted by the United States and Europe.

^[7] We must point out that the Law has a few controversial loopholes. For instance, the Law applies only to the individuals against whom indictments had already been issued. But full cooperation requires extradition of individuals charged with committing war crimes no matter when indictments are issued.

^[8] The reformist political leader of the Democratic Party, Zoran Djindjic, was assassinated in March 2003 in action named “Stop The Hague.” Some soldiers of the paramilitary formation Unit for Special Operations, several secret police agents and the members of the criminal organization, Zemun clan, are charged with committing this terrible crime.   

^[9] The coalition government of the Democratic Party of Serbia (Prime Minister Vojislav Kostunica), G17 Plus, the Serbian Renewal Movement, New Serbia and the Socialistic Party of Serbia ( Milosevic’s political party).

^[10] The present government's foreign policy strategy is based on the concept of “two-way cooperation with the International Tribunal” and “voluntary surrender of individuals charged with committing war crimes.” 

^[11] The Croats, the Bosnian-Muslims, the Albanians and the NATO countries.

^[12] In essence, the civil war was the battle for redistribution of power, territory and resources between new authoritarian rulers that came to power mainly by inflaming national and confessional hatred. Milosevic, no doubt, had heavy influence on the drastic rise of tensions in the region by practicing his uncompromising style and intolerance. However, he was not alone. He initiated conflicts to which the Croatian, the Bosnian-Muslim and the Albanian leaderships reacted mercilessly and furiously.

^[13] A few of them were killed. The most prominent were former Serbian communist leader Ivan Stambolic (killed in autumn, 2000) and independent journalist Slavko Curuvija (killed in spring, 1999, during the NATO air raids).

^[14] Among other things, accumulated bad loans of well-connected banks and enterprises (so-called “political favorites”) were heavily financed through monetary expansion. In 1992, yearly inflation was 8993%, while in 1994 yearly inflation reached a 15-digit number, 116 trillion percent. Only in January, monthly inflation reached 313 million percent.

^[15] The average rate of investment in F. R. Yugoslavia was -20.1% in 1990; -12% in 1994; -3.7% in 1995; -5.7% in 1996; 0.8% in 1997; and -2.2% in 1998. Source: G17 Plus, “Bela knjiga Miloševićeve vladavine (The White Book of Milosevic’s Reign).” www.g17plus.org.yu/

^[16] The 1 DM ranged from 0.47 to 0.7 of one US dollar during the 1990s. Source: Board of Governors of the Federal Reserve System, www.federalreserve.gov

^[17] At the same time, the percent of the population with incomes less than 2 US dollars per day was 77.8 in Bangladesh, 84.6 in Rwanda, 2 in Slovenia, 2 in Slovakia, 2 in Czech Republic, 4 in Hungary, and 10.5 in Poland. Source: Nikolić, M. 2002. “The Tragedy of Yugoslavia – The Rise, the Reign and the Fall of Slobodan Milosevic.” Nomos Verlagsgesellschaft, Baden-Baden.

^[18] For more details, see Radonjić, O. 2003. “A View on the War, Dissolution and Economic Collapse. The Case of Serbia and Montenegro (1990-2000).” www.epunto.ch

^[19] In our opinion, if persons charged with committing war crimes were true heroes and patriots they would surrender immediately in order to avoid threats to their country.

^[20] Desirable levels of economic quantitative indicators are not theoretically precisely defined. They represent opinions of numerous world economic experts for macroeconomics and transition. For example, see Dimitrijević, B. 2002. “Best Practices of EU Accession of Select Countries in Transition.” Policy and Legal Advice Centre, Belgrade.

^[21] Coface North America Group is a well-known credit insurance and country risk rating company.

^[22] For more details see http://www.coface-usa.com