There is not enough public awareness in this country about the depth of the world’s financial collapse. At first the government and the officials said – this doesn’t concern us; we are a safe island that will not be affected at all. Some were so enthusiastic to say that it will even benefit us. So we have come full circle back to Milosevic’s credo that the sanctions are a good opportunity for us. Only in the last couple of days, the officials and the government have been saying that the world crisis will have a significant effect on us. This sort of sticking your heads in the sand is simply incredible. The only thing that failed to hit Serbia was a meteorite, and people here still expect the world crisis to miss us. The only law in effect in Serbia is Murphy’s Law – everything that can possibly go wrong will go wrong here. At least this has been the case so far.
We are living in some sort of hibernation. It could be called an anti-communist communism – our superficiality, our arrogance, our rejection of reality and rational argument. Six months in power is all it takes for formerly decent people to change. A politician who stays in power for two or three years can’t even recognize himself – he starts referring to himself in the third person. I’m afraid that politicians will blame the world economic crisis for everything that goes wrong and claim that we are powerless. There was a complete decoupling of the financial sector from the real economy. A virtual financial world and virtual financial services were created, and it ended in catastrophe. Someone privatized the profit and simply left. This did not occur by accident – the Central Bank and the Federal Reserve took part in it, as well as the American state, which in so doing, has undermined the cornerstone on which it was built. What could happen, if things take a turn for the worse, is for America to lose its strongest weapon, apart from the F16, which is the reserve currency, and that would mark the end of its dollar-based domination. But no one is asking who took the money. They are asking whether the state has got to regulate. That way the world could end up in a situation that is even worse – spending huge amounts of money in vain and without any kind of accountability. Therefore, it’s time for someone to say that the world’s regulatory institutions are responsible for this crisis, because the people employed there were given power and huge salaries with no accountability.
Four months before the crisis broke out all the rating agencies valued highly the assets of the banks that went bust. The Securities and Exchange Commission did not react, the state did not react, the Federal Reserve did not react. And behind all that lies the fact that someone had pro futuro – in advance – spent some amount of money and created a financial hole. No one knows how deep that hole is. A bottomless pit was created, and no matter how much is now poured into it, all that can be heard is water splashing somewhere deep down and the situation is not improving. Whether 2, 3 or 13 billion dollars are needed, whether the whole American GDP is needed to cover this hole, we don’t know. The system of postponing debt and redistributing wealth is taking place and what we need now is for Europe and America to find a way out of this and to determine whose responsibility that is. This is the context we find ourselves in – one minute in has nothing to do with us and the next it does.
The Serbian government has started taking certain steps, some of which are good, albeit belated. Serbia is the last country in the region whose prime minister had raised the minimum guarantee for individuals’ bank deposits. That’s good. But what happened after that? No law was passed to guarantee this promise. The government has to act promptly. Another problem is the stability of our financial system. I don’t want to spread panic, but the governor of the Central Bank claims that there is an outflow of capital. We have domestic banks with foreign names, but they are not independent from their head offices. They were founded with foreign capital which cannot be withdrawn easily, but got their capital and are drawing loans from their headquarters. If there is a problem in their headquarters, foreign banks will not spare a bank in Lithuania or in Serbia. Now the withdrawal of that capital which is putting pressure on the dinar has begun. I want to stress that these are not exchange operations or inner transactions.
Then there is the question of the dinar’s exchange rate. Who are we protecting here? Telekom was sold for a billion and a half, Robne kuće Beograd for 300 million and this is how a plethora of Euros was created in the country. But what is central to the exchange rate is the balance of payments, and it is in a deep unbalance and it is threatening to break the rate of exchange. The governor says that his main goal is fighting inflation. This may be what the law says, but it cannot be realized with this sort of fiscal policy, by spending money from the budget. In that sense, it is fake money which wasn’t created by production, but which came from privatization, debt reprogramming and new loans. The prices did not go down when the Euro dropped from 86 to 77 dinars, but they are sure to go up if the Euro rises from 77 to 87 dinars. Exchange rate policies cannot stop inflation. The Minister of Finance hands the money out, the Governor of the Central Bank withdraws it, both are spending it and they claim the losses of the Central Bank have nothing to do with the rate of exchange. Well, if the Central Bank is a state bank – who is covering the loss? The budget of the Republic of Serbia is covering it.
Let’s go back to the problem of the money pouring out of the country. Let’s imagine the following scenario: someone got the money into the country, turned it into dinars, bought securities on the domestic market which were 25%, made 25% and on top of that, the Governor of the Central Bank treated him to 10% by depreciation. This is a 35% profit. I keep saying this all the time – it is best to do business with the Serbian state. The capital outflow should be made public, so we can decide what to do. I don’t want to spread panic – I just want them to react faster and put things into order.
Now let’s discuss the problem of pensions. I don’t claim that they are high, but rather that even such low pensions cannot be financed. But they are all announcing some purchases, the police and the army for instance. Now we are to buy aircrafts for an army that lost all its wars. The only hill they conquered was Dedinje.
Translated by Ivica Pavlović
Peščanik, Radio B92, 07.11.2008.