Tebe Interesno

Hopefully there will be new floods in Serbia in the fall.

The only ones who pray like this and cheer for the floods are public sector employees. The reason for this “prayer” is based on statements of the prime minister and ministers of industry and finance that, although it was announced as one of the “certain” reforms, there will be no salary cuts for public employees until October.

All right, maybe new floods are not necessary in order to avoid salary cuts. Drought, cancelation of Ceca’s concert in Novi Sad or Novak Djokovic not winning Wimbledon tournament might be enough for our prime minister to have the government pass the resolution postponing until the far and distant future urgent and necessary decision to cut salaries in the public sector, as part of the so called urgent and necessary fiscal consolidation. Anything to avoid suffering of the people.

Since the moment new government was formed, everyone and anyone has insisted on that balancing of income and expenses of the state (that’s what fiscal consolidation is) – starting from the European Commission (“European Union requests Serbia to speed up fiscal consolidation measures”) and International Monetary Fund and World Bank (“The government must act swiftly and strongly, because structural reforms and fiscal consolidation are urgent”), to the prime minister, Fiscal Council of Serbia and all leading national economists.

“The new government must rein in the budget deficit by urgent fiscal consolidation and it is good that the cut of public sector salaries by a percentage has been announced, because it will contribute to the savings,” said Aleksandar Vlahovic, president of the Association of Economists of Serbia, at the end of April.

And then came the floods in Obrenovac and its surroundings, so they (the floods) emerged as a convenient excuse why the suffering and flooded people shouldn’t have to suffer additionally because of fiscal consolidation and therefore should be freed of reducing public sector salaries.

Our Prime Minister said the other day that the government “is thinking that, due to the floods, fiscal consolidation measures should be postponed until the fall. This would mean that at this time we do not touch salaries and pensions, “explained the Prime Minister, adding that the intent was to reduce the salaries now, and the pensions in October.

Our Prime Minister also said that “people look forward to it, but he doesn’t, because he knows the state of the public finances” and that therefore “all reforms should be carried out as soon as possible.”

It’s just that the Prime Minister didn’t explain what floods have to do with reducing public servants’ salaries.

Although it hasn’t been officially confirmed, it turns out that the public employees are biggest victims of floods and should therefore be “cut some slack” while tremendously important task of reducing public salaries announced within the urgent fiscal consolidation should be postponed (other tasks: fight against the informal economy, better tax collection…).

That is why one can only speculate whether the Prime Minister meant to say that after the floods “people”, or more accurately, “part of the people” suffer and that their (the people’s) state is here to help them (the people) when it is hard.

That does sound good.

After all, the minister of economy said that “we already have painful enough measures to implement, which affect the mood of the people.” This should mean that a reduction of salaries in the public sector would probably erode ratings of the Prime Minister, the Government and the ruling party.

But how can something that people are looking forward to be good for the country if it gives the prime minister the chills because he knows “the state of the public finances”?

Everyone knows the state of public finances.

It is desperate.

So why is the prime minister cutting some slack to the people?

In the conclusion of a recently published article “Economic reforms in Serbia and the role of politicians”, professor Dragan Djuricin said, “My vision of the role of politicians in the economic future of Serbia is related to finding a lasting solution to the threat of bankruptcy.”

Earlier in the same article, Professor Djuricin wrote: “Bankruptcy can not be avoided without anti-crisis program… Along with the previous reforms, the process of fiscal consolidation should be continued. The first steps in the right direction are establishing fiscal discipline and introducing ‘black’ economy into legal channels. Also, austerity measures are necessary. In order to apply the principle of ‘hard budget constraints’ – expenditures equal revenues – we have to work more and earn less. ”

In order to give the people something to be happy about after the floods, our government has invented a softer and slower version of the fiscal consolidation. “Harder” version is postponed until the end of the year. And the revision of the budget is postponed until the end of July.

Although we believed that the fiscal consolidation is a done deal, it remains a “major challenge” for the government, as was predicted by the European Commission in the spring edition of “European economic outlook.”

Why is fiscal consolidation important?

Instead of a theory, practical answer/lesson was offered the other day (June 10) at the 15th Brussels Economic Forum, by Valdis Dombrovskis, Member of the European Parliament and the Prime Minister of Latvia until recently. He explained that strong fiscal consolidation that had brought financial stability and economic growth had a large and crucial role in rapid recovery of the Baltic states from the crisis. This timely fiscal consolidation has made Latvia into a country with the highest growth in the European Union in the years of the greatest economic crisis and shown that changes can be achieved quickly. But, in order to implement this painful process of adjustment, the will and determination of the Prime Minister and the Government are necessary. And, of course, support of the voters.

Greece is an opposite example, where politicians, out of fear of negative consequences for their ratings and concern for the happiness of the people, constantly delayed fiscal consolidation. And that is why they are paying such a high price today.

“By postponing fiscal consolidation its needed extent increases and the return of financial stability and economic growth are delayed,” said Dombrovskis.

During the last five years, Serbia has always had some “floods” that caused the politicians to postpone fiscal consolidation. Therefore, the state of public finances is getting worse and worse.

And the bankruptcy is getting closer and more certain.

Translated by Marijana Simic

Peščanik.net, 20.06.2014.