WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

Why are there early elections in Serbia? This is for two reasons. One is that provincial elections had to be held anyway, so the probability of the ruling party, the Serbian Progressive Party (SNS), taking over the province of Vojvodina, where the opposition parties are in the government, increases with the simultaneously held general elections. But it works the other way around too: the prospect of winning in Vojvodina is an incentive to vote to return the ruling party to power nationally. The other reason is that in two years' time, when the regular elections were supposed to be held, SNS’s chances to win the re-election would have gone down significantly. Why?

Labour market reforms only

Primarily because of the policy choices the government made in the last two years or so. The current government coalition took over after the elections in 2012, but renewed their mandate in the early elections in March of 2014. They started to govern in earnest only after this 2014 election, when also the leader of the SNS, Aleksandar Vučić, took over the Prime Ministership from the minority Socialist Party. The government made the decision to rein in the runaway fiscal spending by cutting wages in the public sector (by about 10 percent) and pensions (by less than 10 percent on average). In addition, the labour law was changed to make firing and hiring easier. Other structural changes, i.e. financial consolidation of the loss-making public and state enterprises and the introduction of measures in support of the clean-up of the private corporate balance sheets, which are responsible, to an important extent, for the non-performing loans in the banking sector – these measures were left for later. Put differently, privatisations, bankruptcies, and the cut in subsidies were left for later.

Two years later, the time for these delayed polices never came, because the cuts in incomes and changes in the labour law proved to be highly unpopular, so the political risk to going further with the reforms proved to be too high. In addition, due in part to measures taken, and due in part to massive floods, the economy went back into recession in 2014 (that was the third one since 2008). More importantly, the subsequent recovery was very weak, less than 1 percent growth, in the post-flood year of 2015. That was clearly due to the fiscal consolidation measures.

Thus, with the forecasted quite tepid growth of around 1 percent, or not above 2 percent in any case, in the medium run, it would have been very difficult to introduce many if any changes in the remaining two years of the current mandate, and the results in the regular elections would have been much worse in 2018 than they are expected to be in the early elections now.

Nationalism is not the issue

In these early elections, SNS will also capitalise on regional and foreign policy choices they made early in their mandate, but followed through during the last four years. Though the perception in the outside world is that nationalism is the overwhelming commitment of the Serbian public, the majority of the people are not in fact ready to take on the obligations that the continuation of nationalistic policies would entail. The government, trailing the public in that, chose to extend a de facto recognition to Kosovo  as a neighbouring state (with the Brussels Agreements) and to withdraw any ambitions to support Serbian secessionism in Bosnia and Hercegovina (it opposed the planned referendum there), but shied away from making these changes formal. It, however, visibly distanced itself from Serbian nationalists in Montenegro, and thus contributed to the preservation of political stability there. In this new regional policy, it is not the government that is leading, it is in fact providing face-saving policies to the public which is mostly not interested in nationalistic ends in any case, but is happy with the postponement of the formalisation of these changes in the inherited regional policies.

Neither Russia, nor NATO gain notable support

Similarly, the policy of neutrality is not to be understood as one of equidistance with the USA, EU and Russia or as a veiled way to conduct a pro-Russian foreign policy. The perception shared by many foreign observers that Serbs are pro-Russian, or that Serbia is Little Russia, is basically a mirage. Serbs do not speak Russian, and the languages are close, but not enough to support easy communication, and economic interests are not strong, though Serbian dependence on Russian oil and gas is high. But, the use of this leverage by the Russian government in the case of Gazprom’s takeover of NIS (Serbia's national oil company) and its control of Srbijagas (the national gas company) is not popular at all. On the other side, NATO is not popular either, because of the bombing campaign in 1999, so the policy of neutrality is to be seen, at least as implemented by the current and mostly the previous government after 2010, a way to be pro-EU and keep close relations with the USA without providing too much ammunition to the nationalistic opposition. It also proved helpful with the decision not to join the EU led sanctions on Russia, which would have hurt Serbian economic interests, and risked similar attempts at street protests as have been happening in Montenegro, though the Serbian foreign policy stance on the Ukrainian issue is not pro-Russian.

The government's long term strategy

The aim of the leadership of SNS to call for early elections is, however, not to get four more years, but rather to ensure that it will be in power in the next eight years. The aim is to get the new four-year mandate, make progress on policy changes in such a way to further strengthen its political influence, get as close as possible to finishing the negotiations on membership with the EU, and then win the regular elections in 2020. How realistic is that political strategy?

One problem is that unlike this time around, in four years there will be new opposition leaders to deal with. In this election, most of the politicians that are on the way out, who have been around practically during the last ten or even twenty years, will be making their last stand – with SNS having much the best chance because its leadership has been able to turn their coats over and present themselves as the country’s modernising and progressive future. But that will be over with these elections. In the next four years, a new set of political contenders will emerge. Their chances will increase if the government continues to rely on high-handed rhetoric and authoritarian appeals and even moves. And most important will be the sluggish economic recovery, which is probable given the huge imbalances that the Serbian economy is saddled with and all the governance problems that the government is not necessarily committed to dealing effectively with.

Labour market policy missing on the agenda

But the main problem is the one common to most of the Balkans – lack of jobs and low entrepreneurial prospects. Not only in Serbia, for most people looking for jobs – the relevant labour market is the world. People have mostly given up on politics as a means to change the prospects for employment and entrepreneurship. That is the reason why politics is mostly not about employment, but about rent-seeking and also the reason why the parties are still competing on issues that are very low on the list of main concerns of the public, such as independence of Kosovo or nationalistic interests in the region. The public debate and even the competition for votes is mostly not about employment and development because most of the feasible choices that people face are individual and social, the latter in the sense of the cultivation of social relations, often with the diaspora, to help each other.

So, the ruling party, SNS, will win these elections and thus will not have to face defeat in the regular election, if they were to have been held in two years' time. But it will have a hard time securing re-election in four years when it will not have too much to show for itself, and will have to defend the benefits and privileges of its prolonged stay in power, and will face a new generation of political contenders. This is on the assumption that democracy will work in Serbia, which is a hopeful thought.