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The Government of the Republic of Serbia

In the service of citizens

Government takes measures to mitigate effects of global financial crisis

Belgrade, 15 November 2008

Serbian Prime Minister Mirko Cvetkovic said today that the government is making every effort to mitigate the effects of the global financial crisis and to protect Serbia from these effects completely, adding that the budget for the next year will not be restrictive to such a degree that the public will have to make sacrifices.

Author: Tanjug

In an interview to the Tanjug news agency, Cvetkovic explained that the crisis will certainly not be anything like the 1990’s crisis in Serbia, rather a temporary economic slowdown.

He said that the budget for the next year will be stabilization and development oriented because the government does not want to give up its development strategy, adding that Serbia is not in a situation which would stop it from implementing the strategy.

However, it is necessary to economize at all levels, said the Prime Minister specifying that economies are planned in areas where the expenses are largest and where economisation can lead to significant decrease in expenditure, as well as in areas where cutting expenses may not be of a macroeconomic significance but could serve as an example or model to be followed.

For instance, Cvetkovic said, the government recently adopted a recommendation to determine the maximum salaries of executives in state companies and public agencies which will send out constructive signals.

These are not major cuts, but the government is thus signaling that economies are necessary, he explained, adding that the government will soon reduce the salaries of directors and deputy directors in state companies and move on to measures such as restrictions on the use of official vehicles.

Speaking about pensions, the Prime Minister said that the decision on an irregular 10% increase made earlier will be respected next year, and together with the regular increase, pensions will increase by 15%.

He said that salaries paid from the budget will be increased according to the increase in living expenses and on the whole the maximum increase will be 8%. Cvetkovic said that the government will sign four protocols with trade union representatives on increasing salaries for employees in health, culture, public administration and education, as it did each year in the past.

He said that we must examine the reason why many employees are being laid off, is it because of fear of the global financial crisis or because the employers have no interest in retaining their employees.

We must see if they have a right to do so or not, said Cvetkovic, also mentioning the economic logic that says if an employee is bringing in profit for the employer then there can be no reason for their dismissal.

While resolving the issue of the status of employees in a company, the law must be respected and all the circumstances surrounding this matter will be examined through proper inspection, he said.

The Prime Minister said that he held a meeting with the trade union Nezavisnost and the independent trade union of Serbia on November 14 and he was told by trade union representatives that there are companies where downsizing has already taken place or has been announced and it was also noticed that partly these are companies which are in difficulties.

Speaking about subsidies and other expenses, he said that the government will try to include all subsidized companies in economisation measures and spoke of the mining company Resavica and the Serbian railways, Zeleznice Srbije, where monthly subsidies from the budget are equal to the total earnings of the employees, a situation that has not changed for years.

Cvetkovic said that companies like these will have to start earning money as soon as possible.

He said that he does not wish the public to mistakenly think that Serbia has made an arrangement with the IMF because Serbia needed funds.

The Serbian government believes that the presence of the IMF is necessary because of the global financial crisis and because of the measures that the government is taking to minimize the effects of the crisis on the Serbian economy, explained the Prime Minister.

The IMF is not the one setting conditions, we are, considering the fact that we are challenged by a financial crisis we are obliged to respond suitably and this response consists of a series of measures we are implementing, said Cvetkovic, adding that the budget guidelines are a result of joint work by the government and the IMF, which played an advisory role.

Our plan is to observe the situation as it develops and take measures accordingly and because of this the advice and support of the IMF is very important for us, said Cvetkovic.

He said that the $520 million arrangement reached with the IMF can be used only for covering foreign exchange reserves and may not be used for paying salaries, pensions or infrastructure construction.

The IMF has the task strictly to help with state reserves. If these funds are drawn, although I think they will not be, they will be used for strengthening the country’s foreign currency reserves, explained the Prime Minister, adding that this is important because of the value of the currency and high deficits in current payments.

This arrangement puts certain funds at our disposal that we can but do not necessarily have to use, said Cvetkovic.