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Yugoslavia: EU Makes No New Aid Commitments

Officials in Belgrade were disappointed this week when the European Union and the Group of Seven concluded meetings without any new aid commitments for Yugoslavia. But senior officials from Europe's development institutions say upcoming donor conferences, combined with pledges from individual nations, will help Yugoslavia in the short and long terms.

Prague, 16 November 2000 (RFE/RL) -- Yugoslavia's government had hoped to win hundreds of millions of dollars in fresh aid commitments from the seven leading industrial countries (G-7) and the EU. But no additional funds are earmarked for Belgrade after sessions this week in Paris, Strasbourg, and Brussels.

In Strasbourg, where Yugoslav President Vojislav Kostunica made his debut appearance yesterday at the European Parliament, diplomats say privately Belgrade could receive aid worth up to $1.7 billion through the end of 2006 as part of an EU effort to rebuild the Balkans.

But much of that aid would be conditional upon continued democratic and economic reforms. And in their public statements, chief administrators of the EU's developmental agencies are not saying how much Belgrade may receive in the long run.

In Belgrade, Yugoslav Interior Minister Zoran Zivkovic told potential donors visiting the country this week that Belgrade needs more than just nice words from the West. Zivkovic said Yugoslavia urgently needs the delivery of promised aid. He said "10,000 German marks delivered now is more important than 100,000 marks arriving next March."

EU Monetary Affairs Commissioner Pedro Solbes says a Paris meeting of G-7 finance ministers on Tuesday (Nov. 14) confirmed that there is a coherent strategy on southeast Europe for both the short term and the long term.

But Solbes said Yugoslavia will have to stand on its own two feet after this winter. In the long term, Solbes says officials in Brussels think Yugoslavia must be treated like any other country. That means Belgrade must turn to major global finance bodies like the World Bank and the International Monetary Fund for funding needs.

One positive note for Belgrade this week was an announcement by the IMF and the European Bank for Reconstruction and Development (EBRD) confirming that Yugoslavia can expect speedy integration into those institutions -- even as soon as the end of this year.

EBRD chief economist Willem Buiter, however, tells RFE/RL that any reconstruction aid would not favor Yugoslavia more than the other countries in the Balkans, all of which are looking to international lenders for assistance. He says the EBRD considers future projects in Yugoslavia as part of a wider regional program aimed at eventual EU membership for all southeastern European states.

"There is a general need, both from a political and economic point of view, to make sure we don't replace after 10 years the Iron Curtain in Europe with a 'Brussels lace curtain' between the ins and the outs of the EU. It is important, especially for an institution like ours, that we make sure that those who remain outside the European Union (after the first wave of eastward expansion) are not cut off from some of the benefits of European integration."

Yugoslav membership in the World Bank will be more complicated for Belgrade than EBRD and IMF membership. Belgrade must first resolve the issue of how to repay $1.7 billion in debts it already owed to the World Bank.

World Bank Managing Director Sven Sandstrom says Yugoslavia is not likely to see any of that debt written off during upcoming accession talks. Sandstrom says membership negotiations will focus only on a timetable for debt repayment.

Yugoslavia has defaulted on almost all of its total $14 billion external debt. Hard currency reserves in the Central Bank last month stood at a reported $385 million.

In this context, debt-restructuring deals with the Paris Club of government creditors and the London Club of private creditors are another important form of financial assistance for Belgrade. Banking analysts say they expect both the Paris Club and London Club to eventually write off part of Yugoslavia's debts. The negotiations are likely to be similar to the lengthy talks many other former Eastern Bloc states already completed during the last 10 years -- with creditors writing off 40 to 50 percent of the debts in order to rekindle some form of repayment.

In the short term, Balkan Stability Pact coordinator Bodo Hombach says Belgrade should not be disappointed with developments this week. Hombach says plans are in place to help Yugoslavia finance its short-term humanitarian needs as well as long-term reconstruction projects.

The EU already has committed about $180 million in humanitarian aid to Yugoslavia for the coming winter. Those funds would help pay for heating oil, electricity, food and medicines. Hombach says he expects that aid to be dispersed by the end of this year.

Additional aid for the coming winter is expected in the form of donations from private foreign firms and individual governments.

At a Balkan Stability Pact meeting in Belgrade this week, donors made non-binding promises for an additional $240 million worth of aid. Germany has pledged about $50 million -- including deliveries of electricity valued at about $17 million. Municipalities in Austria say they will deliver 50 public transport buses and 18 garbage trucks to the Belgrade city administration.

Other promises have been made by the United States, Japan, Sweden, and Norway. It is up to the individual donors to deliver upon their promises.

Meanwhile, more will be known about long-term reconstruction aid after a donor's conference for Yugoslavia that is expected to take place on December 12. Hombach described that conference as a preliminary "coordinating" meeting. He said a major donor's conference would take place sometime next year.

Hombach has refused to make any public predictions on how much aid he expects those conferences to generate.

One long-term pledge that already has been made public is from Athens. Greek Finance Minister Yannos Papandoniou says Greece expects to invest $250 million in Yugoslavia during the next five years -- mostly to help improve the transport and communications networks.