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Yugoslavia: Kostunica Faces Big Task In Fixing The Economy

Vojislav Kostunica, who formally took office as Yugoslav president this weekend, has many tasks ahead of him if he is to fulfill his pledge to bring Serbia back into the community of nations. RFE/RL's Alexandra Poolos, in Belgrade, reports that one of the biggest challenges facing the government will be repairing the economy, which is suffering from years of corrupt misrule.

Belgrade, 10 October 2000 (RFE/RL) -- At a parking lot on the outskirts of Belgrade, loud music plays and cars from a nearby highway screech past.

For vendors who gather here daily to sell their wares, it's not a particularly busy day.

They are a mixed crowd: war refugees from Croatia, Bosnia-Herzegovina, and Kosovo, single mothers, blue-collar workers. But all share a common fate: they lost their jobs and livelihoods under Yugoslav President Slobodan Milosevic's 13 years of misrule.

Ivicha is a refugee from western Slavonia in Croatia. He used to work in an insurance company there, but after war broke out in the early 1990s, Ivicha was forced to take his family to Serbia where he found work in a private firm. Ivicha, who still does not have Serbian citizenship, says he quit that job because the salary was low and irregular.

"I've been selling merchandise on the street for four years now. I'm married and have two kids. We rent an apartment. My wife is unemployed, but I earn enough to survive."

Getting by in Serbia has become a skill in itself. Because of the problems of supply and distribution, goods from abroad typically cost much more in Serbia than in far richer countries in western Europe. A pair of fashionable jeans in a Belgrade shop sells for 4,000 dinars -- that's about $100 -- or twice the average monthly wage.

While some Serbs in the capital city seem well-off, the evidence of extreme poverty is unavoidable. On busy streets, young children sleep alone on pieces of dirty cardboard, sheltered from the cold autumn evening by only their torn sweaters and patched jeans.

The standard of living during Milosevic's rule plummeted as a result of both bad economic policy and international sanctions imposed to punish Milosevic for stirring up four wars in the Balkans. The jobless rate is estimated at around 50 percent, and the economy was said to have contracted some 30 percent last year.

A leading Serbian economist says the international community must lift sanctions immediately and give Belgrade at least $500 million in aid if democracy is to survive in Yugoslavia.

Mladjan Dinkic, head of the G17 Plus economic think-tank, spoke this weekend at a press conference in Belgrade.

He says the economy has been crippled by more than a decade of economic misrule, hyperinflation and last year's NATO bombing, which he says caused $4 billion in damage. Dinkic says the international community must move fast:

"Lifting the sanctions is the first pre-condition. The second pre-condition is quick donations for the first months of the new government because this old Milosevic government destroyed the economy and the legal system of the country. Our first estimate before elections was $500 million for the first year of the new government."

Dinkic is widely expected to be appointed head of the central bank. He says Milosevic's government ruined the economy by gearing it to the black market and other illegal activities.

But he says the new government has begun to exert its control. His think-tank now oversees the country's currency reserves, which may hold as much as $500 million. This admittedly won't go far in paying off the country's estimated external debts of $13 billion.

But he says that by being in charge of the reserves, his group was already able to stop money from being taken by Milosevic:

"We received information that people employed in Milosevic's political establishment intended to take a huge amount of foreign currency out of the country or to make some other machinations. On Friday, we stopped withdrawal of around $23 million from the national bank. A part was supposed to be withdrawn in cash and part was supposed to be sold through accounts at the official rate."

The Serbian dinar is commonly valued in terms of German marks. The so-called "official" rate set by Milosevic's government was 6 dinars for one mark. The street rate is about 40 dinars for one mark.

This weekend, the G17 Plus set the new "official" rate at 22 dinars for a mark. Dinkic says strengthening the dinar in this way will help stabilize the economy.

Already the international community has said it will lift sanctions and channel aid from the Balkan Stability Pact toward Serbia.

The European Union announced yesterday it would lift two key sanctions right away: an oil embargo and a flight ban against Yugoslavia's national carrier.

The United States and Canada said they plan to follow the EU's lead in lifting some sanctions against Yugoslavia.

But Dinkic says this is not enough.

He says Serbia will need a long-term plan of its own, bolstered by financial commitments from the international community. Milosevic may be technically gone from power but the roots of his rule will last for a long time.