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Serbia adopts central bank law despite EU, IMF criticism

August 5, 2012

BELGRADE: Lawmakers in Serbia adopted a law yesterday stepping up parliamentary control over the central bank, despite stiff criticism from the European Union and International Monetary Fund that it threatens the bank’s independence.

Central bank governor Dejan Soskic has already resigned over the law, which the EU said would mark a “step back” for Serbia in its bid to join the bloc.

It is the first law adopted under Serbia’s new Socialist-led government, which is being watched closely by the West for any sign of drift from the pro-EU path set by reformers who ousted late strongman Slobodan Milosevic in 2000 but who are now in opposition.

The law creates a powerful, parliament-appointed supervisory body represented on the bank’s executive board and gives the assembly responsibility for appointing its entire top management.

The ruling coalition under Socialist Prime Minister Ivica Dacic has pledged to pursue expansive fiscal policies to halt Serbia’s slide into recession, and says the central bank should work for the same aim.

Under Soskic, who resigned on Thursday, the bank stuck to a tight monetary policy, despite the economy contracting in the first two quarters of the year. At 10.25 percent, Serbia has the highest official interest rates in central and eastern Europe.

Writing in the Serbian daily Politika on Saturday, US Ambassador Mary Burce Warlick said the pressure put on Soskic and the proposed changes to the law “represent a failure of the rule of law and raise serious questions about the respect for independent institutions.”

Ruling coalition lawmaker Jorgovanka Tabakovic, a member of the nationalist Serbian Progressive Party and an economist by education, is widely tipped to take over as governor of the central bank.



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