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Balkan Report: October 18, 2002

18 October 2002, Volume 6, Number 38

DEAD SOULS AND THE TWILIGHT ZONE IN SERBIA. The Serbian Electoral Commission has ruled that second round of Serbian presidential voting on 13 October was invalid because only 45.46 percent of the registered voters -- less than the 50 percent minimum -- took part. Yugoslav President Vojislav Kostunica won with 66.4 percent of the votes, an increase of 800,000 votes over his showing in the first round two weeks before. He reportedly placed first in Vojvodina, where he finished third in the first round. In the final nationwide tally, Kostunica received 1,991,947 votes, while Yugoslav Deputy Prime Minister Miroljub Labus won 921,094 votes.

Labus thus lost the second round by a two-to-one margin, attracting even fewer votes than he did on 29 September. He conceded defeat soon after the polls closed, adding that he now wants to take some time to reflect.

Kostunica blamed his arch-rival, Serbian Prime Minister Zoran Djindjic, for the low turnout. Kostunica accused Djindjic of leading a "silent boycott" of the poll that he knew that his ally, Labus, could not win. Kostunica said: "I want to see the end of Djindjic's regime. The political crisis has deepened."

For its part, Djindjic's Democratic Party (DP) called on Kostunica to recognize that he cannot win a majority of the electorate and to resign as Yugoslav president.

But Kostunica's Democratic Party of Serbia (DSS) said it will challenge in the courts the decision of the Serbian Election Commission that the election was invalid because fewer than 50 percent of registered voters cast their ballots. The DSS maintains that the electoral rolls are padded with the names of 630,000 dead or nonexistent people, and that more than 50 percent of the actual voters did indeed cast a ballot.

DSS leader Nebojsa Bakarac argued that "we have proof that the elections actually succeeded." It is not clear why the DSS did not raise the matter of the 630,000 "dead souls" before the election.

In any event, the Serbian presidential election must be repeated from the start by early December. If no president is elected by 5 January, when the term of incumbent Milan Milutinovic expires, the duties of the president will be carried out by Natasa Micic, the president of the parliament. She belongs to the Civic Alliance of Yugoslav Foreign Minister Goran Svilanovic, who is a close ally of Djindjic.

One observer called this nebulous legal state of affairs a "twilight zone" for Serbian politics (see "RFE/RL Balkan Report," 11 October 2000). Several observers have suggested that political uncertainty in Serbia will do nothing to help that country attract foreign investment or promote its integration into Euro-Atlantic structures.

In that vein, Hrair Balian, a spokesman for the Organization for Security and Cooperation in Europe (OSCE) monitors, criticized the nationalist-led boycott of the vote and called on the authorities to drop the 50 percent requirement in time for the next ballot. He stressed that "uncertainty is the last thing Serbia needs. Serbia needs certainty, reforms, and development." The Serbian parliament will consider removing the 50 percent clause in a session on 18 October.

But for some of the politicians, politics is the first order of business. The "Frankfurter Allgemeine Zeitung" wrote on 11 October that an invalid presidential vote might play into the hands of Djindjic, who wants to get Kostunica out of power and delay parliamentary elections, which Kostunica wants.

Other observers suggested that Labus will not run in new elections and might even strike a deal with Kostunica. This would place Labus and some of his supporters on the apparently winning bandwagon and provide Kostunica's camp with the economic expertise it lacks.

Such a political realignment would be to the detriment of Djindjic, who has seen several of his key allies endorse Kostunica in recent weeks. In any event, Djindjic and his allies will most likely have to find a new candidate to run against Kostunica.

Radical Party leader Vojislav Seselj, who came in third in the first round, hailed the outcome of the second round as a victory for himself. He had previously called for a boycott of the second round in order to force new elections.

Svilanovic suggested after the second round that it now might be best to change the electoral law to remove the 50 percent requirement, as Kostunica and now the OSCE have urged. Svilanovic also suggested that it might be wise to draft a new constitution before holding a presidential vote, although that would take several months.

Nor is it clear how any legal or constitutional changes would affect the key problem in the Serbian -- and recent Bosnian -- elections, namely voter apathy as a result of disappointment with continuing poverty and feuding politicians (see "RFE/RL Newsline," 17 September 2002). (Patrick Moore)

MACEDONIAN-ALBANIAN TALKS CONTINUE. One month after the parliamentary elections, talks continue between the winners -- the Together for Macedonia coalition and the ethnic Albanian Democratic Union for Integration (BDI). The leaderships of the BDI and the Social Democratic Union (SDSM) -- which is by far the strongest party within the coalition -- have indicated several times that the talks were approaching a conclusion. But every time, new differences cropped up among the future partners, and new rounds of consultations became necessary.

The parties reached an agreement on their common platform for the future government early on, and the subsequent delays involved haggling over cabinet posts (see "RFE/RL Balkan Report," 11 October 2002 and "RFE/RL Newsline," 11 October 2002).

Speculation -- often fueled by deliberate leaks by party officials -- filled the newspapers. The bottom line is that the BDI wants more -- and more important -- ministerial posts than the SDSM is willing to grant its junior coalition partner. Speculation has also been fueled by the fact that the talks take place behind closed doors, as Guner Ismail, the director of the bimonthly "Forum," told RFE/RL's Macedonian broadcasters.

The BDI seems to have given up hope of taking over one of the power ministries, namely the Defense Ministry or the Interior Ministry. After what was described by Macedonian-language media as a "marathon session," the BDI leadership decided on 13 October to claim the Foreign Ministry for itself. However, the Social Democrats are reluctant to agree.

But which ministries might the SDSM be willing to give to the BDI? Quoting sources from inside the respective political parties, "Dnevnik" reported on 15 October that the BDI has shown interest in the Justice Ministry, the Ministry for Education and Science, and the Transportation and Communications Ministry. The state-run information agency quoted the Albanian-language daily "Flaka," which wrote that the BDI will most likely get the Ministry for Local Self-Government as well.

In addition to rumors regarding the future BDI-led ministries, some of the media have reported that the ethnic Albanian Party for Democratic Prosperity (PPD) might join the coalition. PPD Chairman Abdurrahman Aliti recently gave up his seat in the parliament. According to the media reports, Aliti might have done so because he wants to join the government instead (see "RFE/RL Newsline," 9 October 2002). (The PPD was part of the SDSM's previous governing coalition that lost the 1998 elections. It is now a relatively minor party.)

But BDI negotiator Agron Buxhaku dismissed such ideas. "The media so far have set up three governments and given 12 ministries to the BDI. We have a gentleman's agreement not to make public any details about the negotiations as long as [the talks] continue," "Dnevnik" quoted Buxhaku as saying.

Another topic of media speculation has been the names of possible cabinet members. The SDSM has repeatedly made clear that there will be no place in the government for former guerrillas (see "RFE/RL Newsline," 17 and 18 September 2002). It is expected that SDSM leader Branko Crvenkovski, the future prime minister, will join the talks as soon as specific nominations are being discussed. But regardless of the precise composition of the new government, it is clear that its first priority will be to launch the new Anticorruption Commission (see "RFE/RL Newsline," 16 October 2002). (Ulrich Buechsenschuetz,

ELECTRICITY FOR THE BALKANS. Erhard Busek, who heads the EU-led Stability Pact for South Eastern Europe, has welcomed a first step toward the creation of a liberalized electricity market in the region.

Speaking in Tirana on 14 October, Busek said that an eight-country agreement -- involving Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Greece, Romania, Macedonia, and Yugoslavia -- will eventually help bring the region's electricity legislation in line with EU standards.

He noted that "with the South East Electricity Regulatory Forum initiative, the European Commission, in close cooperation with the Stability Pact, has proposed a coherent vision regarding the development of a competitive regional electricity market. In mid-November, ministers [will meet] and a memorandum of understanding will be signed. [Then the work will begin] in every country of the region in close cooperation with the European Union."

The memorandum, to be signed in Athens on 15 November, will obligate governments to transform their production and transmission entities into legally independent units. Stability Pact officials have praised the Regional Electricity Market project as a step toward lowering costs and improving service, as well as toward reducing the need for future industry investments.

Busek argued: "By opening up the various economies, a common market of 55 million consumers will become reality next year. If [we look at this in light of] economic development elsewhere in Europe, we all know that free trade is in many ways just as important as infrastructure developments."

Last month, Busek praised Stability Pact governments for having advanced toward target goals for 2002. Busek cited progress on refugees, cross-border cooperation, control of small arms and light weapons, and combating organized crime. He said the remaining two goals -- pushing ahead with the electricity market and free trade -- have shown overall progress but that much work remains to be done.

Albanian President Alfred Moisiu said that the international presence in the Balkans has increased regional awareness about the importance of working together to lay the groundwork for future cooperation: "The region in its entirety now appears much more attractive and productive than any one of our countries alone. A region of interethnic wars, conflicts, and great clashes is becoming an area where exchanges, bilateral projects, and the quick pace of cooperation remind me of the time of the Marshall Plan after World War II."

The Stability Pact is a clearing house for projects and does not fund any on its own. One of its main tasks is to focus on regional infrastructure needs. These include: constructing roads, railways, ports, waterways, and airports; developing the energy sector; assisting with water and environmental management; and facilitating cross-border trade. To date, some 46 projects have been financed by the Stability Pact, at a total cost of some $3.4 billion. (Alban Bala)

SLOVENIA ANTICIPATES END OF THE TOLAR. In the heady days of summer 1991, after the Yugoslav Army's withdrawal from Slovenia but before international recognition, my cousin Vinko boasted that Slovenia would have the most beautiful currency in the world. Various proposals for naming the new currency were made, including "lipa" (linden), but in the end the "tolar" won out. The name derives from the 16th-century "thaler" minted in St. Joachimsthal (now Jachymov in the Czech Republic), which is also the origin of the word "dollar."

Admittedly, the first post-Yugoslav currency was hardly eye-catching -- 10 monochrome payment notes of uniform design, ranging from the green one-tolar bill to the purple 5,000-tolar note. These first tolars, issued between October 1991 and May 1992, were withdrawn from circulation by February 1994.

The 10 banknotes in circulation today bear the portraits of cultural figures ranging from the 16th-century Protestant leader Primoz Trubar to the 20th-century architect Joze Plecnik. Their bright colors and images stand in marked contrast to the somber communist-era Yugoslav banknotes, which featured generic youths, miners, peasants, and President Tito. Complex geometric designs cascade across the bills, which are printed on Slovenian paper by the English firm Thomas de la Rue and Company, Ltd.

The Bank of Slovenia marked the 10th anniversary of Slovenia's first currency with great fanfare on 8 October 2001. Commemorative coins and banknotes appeared, and a special ceremony marked the event, attended by President Milan Kucan. "The tolar has seen 10 years of success, representing the highest principles the entire time," said Kucan. "Along with Slovenia's central bank, it is one of the most trusted things in the country."

At the time of the 10th anniversary, however, Kucan already anticipated that the tolar would be a short-lived currency, destined to disappear with Slovenia's eventual adoption of the euro. This year, on the 11th anniversary of the tolar, Slovenian National Bank Governor Mitja Gaspari expressed the hope that euro will replace the tolar within five years (see "RFE/RL Newsline," 9 October 2002).

The anticipated demise of the tolar has aroused few, if any, misgivings in Slovenia. As much as a currency is a symbol of national identity and sovereignty, the tolar has never acquired a place in Slovenian hearts like the franc for the French or the pound for the British. Beyond the short history of the tolar, Slovenians have long been accustomed to thinking in terms of other currencies. At the end of the Yugoslav era, savings were hoarded in hard currencies such as the German mark or U.S. dollar, and private financial arrangements were generally negotiated in marks, as was the case throughout former Yugoslavia.

This practice continues today, with major dealings generally quoted in euros and recalculated into tolars. Although Slovenia's currency never approached a crisis resembling Yugoslavia's hyperinflation in 1990s -- when highway tollbooths refused to accept Yugoslav currency from tourists, and a 10 billion-dinar note appeared -- the feeling persists that Western currency is the proper medium for serious financial deals.

Nonetheless, the tolar and its management have been a true success story. The tolar was the first Eastern European currency with full domestic convertibility on current-account transactions, followed by the Czech crown in October 1995.

The tolar was introduced in 1991 at a one-to-one exchange rate with the overvalued and rapidly crumbling Yugoslav dinar in order to simplify exchange. The new currency both insulated the Slovenian economy from developments in the rest of Yugoslavia and accelerated its transition to a free market system.

The new currency faced challenging conditions. Slovenia inherited a 200 percent annual inflation rate from Yugoslavia, and Ljubljana had no international monetary reserves -- these were all held in Belgrade. Against the advice of foreign financial advisors, the new Bank of Slovenia opted for a floating exchange rate, allowing the market to determine the tolar's value.

Floating rates generally perform poorly in developing countries because of instability and weak monetary authorities, leading to severe inflation. Financial advisors recommended a fixed exchange rate as an anchor for macroeconomic stability. However, Slovenia persisted and inflation gradually fell. Despite subsequent International Monetary Fund criticism of Slovenia's decision, the Czech and Asian financial crises of 1997-98 eventually vindicated the decision to opt for more flexible exchange rates.

In its first two years, the tolar fell in value from 28 to 113 per U.S. dollar, whereas the subsequent nine years saw its value fall by only half, to 232 per U.S. dollar. This compares favorably to other Yugoslav successor currencies. For example, the Croatian kuna, introduced in 1994 at a 1:1,000 rate against the Croatian dinar (which in turn was at par with the Yugoslav dinar in December 1991), today trades at 7.5 per U.S. dollar -- equivalent to 7,500 at the non-rebased rate.

Until it achieves actual EU membership, Slovenia cannot formally join the European Monetary System, but Ljubljana informally shadows the monetary policy of the EMS. Although there is bound to be some nostalgia for the tolar after adoption of the euro, most Slovenes appear ready to consign the currency to a transitional stage in the country's history. (Donald F. Reindl,

QUOTATION OF THE WEEK: "We've long believed...that Turkey's future is in Europe. It's in the strategic interest of the United States...that Turkey and the European Union build the closest possible relationship." -- State Department spokesman Richard Boucher. Quoted by Reuters in Washington on 9 October.