Reactions are mixed to new Serbian finance minister

27/08/2013

Analysts say Lazar Krstic, a 29-year-old Yale University graduate, must learn to navigate the Serbian political landscape.

By Harriet Salem for Southeast European Times in Belgrade -- 27/08/13

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Analysts say Serbia's new finance minister will face challenging tasks. [File photo]

The recent appointment of technocrat Lazar Krstic, associate at New York's McKinsey & Co., as Serbia’s new finance minister has drawn mixed reactions.

A 29-year-old Yale University graduate, Krstic is a financial expert with an impressive academic and professional record. But some analysts say his youth and lack of political experience raise questions about whether he is adequately equipped to handle the rough-and-tumble of Serbian politics.

Certainly Krstic will find challenges. Early last year the International Monetary Fund (IMF) froze a standby loan agreement with Serbia after debt and deficit levels exceeded targets set under the previous government.

With public debt at 65 percent of gross domestic product -- higher than IMF guidelines for other similar emerging economies -- and recent warnings from the government’s fiscal advisory body that the country risks missing its revised budget deficit target of 4.7 percent, reviving Serbia’s beleaguered economy will be no small task.

Speaking to Serbia Radio and Television last week, Krstic said he has a five-year "vision" for the Serbian economy, but did not give details.

There is widespread consensus that renegotiating an IMF agreement will be high on the agenda. Sinisa Mali, an economic advisor to Deputy Prime Minister Aleksander Vucic, told Reuters on August 20th that in September after parliament approves Krstic's appointment, "I believe … we could formally approach the IMF."

Securing a new loan deal will mean committing to a stringent programme of economic reform.

"Krstic needs to … free up resources to more dynamic parts of the economy," said Andrew Roberts, managing director of Eastern Europe Economics, a regional finance and business consultancy. "This means dealing with the pension time bomb … laying people off in the bloated and inefficient public sector and restructuring what have essentially been zombie firms for a number of years."

Yet, according to Roberts, the problem faced by Krstic is less about what to do than finding the maneuvering space to do it.

"There is a lot of agreement between economists about what needs to happen in Serbia," he told SETimes. "The main problem has been a lack of political will to implement unpopular measures."

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Lazar Krstic was educated at Yale University in the US. [linkedin.com/Lazar-Krstic]

Krstic's appointment comes after a tumultuous period for Serbia's precarious coalition government. Earlier this month a snap election was narrowly avoided when bickering factions reached an 11th-hour cabinet reshuffle deal.

While the dismissal of Finance Minister Mladjan Dinkic constituted a major concession to Prime Minister Ivica Dacic, who threatened to bring down the government if Dinkic remained, Krstic's appointment was a victory for the increasingly powerful Vucic, who has been vocal about his desire to appoint foreign technocrats to the cabinet.

Despite Krstic's technical non-party member status, the Serbian Progressive Party (SNS) has made clear it backed the appointment. In an interview on August 17th with Serbian newspaper Kurir, talking about the road ahead for Krstic, Vucic said, "I will help you, I will stand by you in difficult times, I will say decisions were made by both of us to divert the flak from you to me."

"This is the SNS effectively tying their name to the finance ministry," Roberts told SETimes. "Krstic will have to learn fast how to operate in this kind of environment … In Serbia backroom deal making and nepotism are still rife."

Vucic said he will back the programme of tough economic reforms, but Roberts is skeptical that this will be carried though in practice.

"In the past we have seen Vucic taking a populist stance, rejecting unpopular measures that might put the economy back on track. For example Dinkic's proposed tax on countryside properties over 50,000 euros," Roberts said. "Anything that might lose him votes and he is the first person to say no."

Dusan Petrovac, president of the Young European Federalists Serbia, is also unsure that the new appointment signals real change.

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"I am afraid that his appointment to the minister of finance is little more than the ruling coalition's responsibility escape. … I do not think that Mr. Krstic will be a significant player in Serbian politics, but rather someone who will act in accordance with the demands of today's most powerful party in Serbia."

However, not everyone is pessimistic.

"We are on a crossroads, Serbia must take action now or remain in the dark," Milan Jankovic, president of Belgrade Chamber of Commerce, told SETimes. "This appointment of an expert is a strong political message. I believe with the support of politicians Krstic will take the right steps forward for Serbia's economy."

What challenges will Lazar Krstic face in his new role as Serbia's finance minister? Share your thoughts in the comments section.

This content was commissioned for SETimes.com.
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