BELGRADE (Serbia), December 31 (SeeNews) – The year 2008 was one of battles lost and won for Serbia: it started with the trauma of Kosovo’s secession and agreement on the controversial sale of the country’s oil monopoly NIS to Russian gas giant Gazprom, which analysts said was influenced adversely by Serbia's political weakness and need for a powerful friend.
Spring brought snap elections, the signing of a still inactive trade agreement with the European Union and yet another weak but pro-Western coalition government taking office. Summer saw the arrest of Bosnian Serb wartime leader Radovan Karadzic as well as world and Olympic triumphs in tennis and swimming.
The Balkan country scored an economic plus with the signing of a major deal with Italian automotive giant Fiat in the autumn but endured a volatile local currency and plunging share prices in Belgrade due first to political turbulence then because of the global financial crisis.
The year is closing with the wrapping up of year-long negotiations on the sale of NIS to Gazprom and the endorsement of a 2009 budget backed by the International Monetary Fund.
The ethnically divided, U.N.-run Serbian province of Kosovo declared independence from Serbia on February 17. Kosovo, predominantly populated with ethnic Albanians, had been under U.N. administration since 1999 following NATO bombing that expelled Serb forces to end what Western powers said was repression of civilians in fighting an ethnic Albanian rebel insurgency. Kosovo’s Serbs make up less than 10% of the population.
Serbia, backed by its historic ally Russia, said it would never recognise the breakaway.
The independence and its correlation with Serbia’s future path to the EU caused a rift in Serbia’s governing coalition, which led to a collapse of the government in March and the calling of snap elections.
In January, Serbia agreed to sell 51% of state-owned NIS to Russia’s Gazprom for 400 million euro ($561 million) in cash and 500 million euro in investment as part of a key energy deal. The agreement also includes the construction and management of the Serbian section of the multi-billion euro South Stream pipeline, a joint project of Gazprom and Italy's Eni.
The deal was finally wrapped up in December after almost a year of turbulent negotiations. Analysts in Serbia said that the political weakness of their country and its need for support on its breakaway province of Kosovo were factors when the deal was negotiated and as a result too low a price for NIS was agreed. Russia, a staunch Serbian ally, has been a fierce opponent of Kosovo’s independence, before and after it was declared in February.
The Serbian arm of international audit and consultancy firm Deloitte said in September it had estimated the market price of NIS at 2.2 billion euro.
Serbia and the European Union in April signed a Stabilisation and Association Agreement (SAA), a potential gateway to full membership of the bloc. The operation of the Interim Agreement on trade, which was signed together with the SAA and which would lead to completely liberalised trade between the Balkan country and the bloc, was, however, put on hold on condition that Serbia achieves full cooperation with the U.N. war crimes tribunal in The Hague.
Many saw the signing of the deal as an attempt by the EU to boost support for the pro-democratic parties in Serbia on the eve of the country’s elections. The signing took place twelve days before the vote.
The May 11 poll left Serbia divided between the pro-Western Democratic Party of President Boris Tadic and the rival Radical Party. The vote was seen as a referendum on whether Serbia would embrace a future in the European Union or withdraw to its nationalist past after the country’s government collapsed in March following the proclamation of independence by the southern province of Kosovo.
With both parties failing to secure a majority, it fell on the Socialist Party of late Yugoslav strongman Slobodan Milosevic to play wildcard and form the coalition cabinet led by Tadic.
A new pro-European government stepped into office on July 8. It put as top priority EU integration, leaving behind, though not giving up, the diplomatic fight for the return of the lost Kosovo.
Most wanted war criminal Radovan Karadzic was arrested in July after 12 years in hiding. Karadzic, who at the time of his arrest was living in a Belgrade suburb and working as a new age healer, is currently standing trial on charges of genocide and crimes against non-Serb civilians in Bosnia committed during the 1992-95 war there.
However, his arrest failed to satisfy Belgium and the Netherlands who voted against activating the EU trade deal with Serbia in September as Karadzic’s army commander Ratko Mladic remains at large.
Serbia's Jelena Jankovic was named world champion for 2008 by the International Tennis Federation after she won four WTA titles and held the top ranking for a total of 12 weeks.
Jankovic and swimmer Milorad Cavic were honored at a ceremony organised by the Serbian Olympic Committee in Belgrade. Cavic won two gold and two silver medals this year, including a second place finish at the Beijing Olympics. The greatest swimmer of all-time, Michael Phelps, took the Olympic gold from Cavic.
Serbia and Italy's Fiat signed in September two deals worth a combined 1.18 billion euro for joint production at the plants of Serbian car and truck maker Zastava in the central town of Kragujevac.
Serbia announced in October it will raise the guarantee for depositors in local banks to 50,000 euro from 3,000 euro and will scrap capital gains tax in a bid to ease the impact on the country's economy of the global financial crisis.
Prime Minister Mirko Cvetkovic said in October he expected Serbia’s economic growth to slow to 4.0% in 2009 from some 7.0% growth in 2008 as a result of the crisis.
Serbia signed a $520 million precautionary deal with the International Monetary Fund in November and the two sides have agreed on a 2009 budget gap equivalent to 1.5% of the country’s gross domestic product.
November marked the end of an era for the car maker and former communist giant Zastava in Kragujevac before Fiat takes over production there under a strategic cooperation agreement with the Serbian government.
Serbia’s volatile dinar hit record highs and lows against the euro during 2008, reacting to Kosovo’s independence, government collapse, snap election results and mirroring developments in the deepening economic crisis. Serbia’s central bank, NBS, has tempered the more extreme oscillations by selling and buying euro.
In December NBS said it would double to 40% the share of mandatory reserves on foreign currency deposits that commercial banks must maintain in dinars - a move aimed at lending support to the battered dinar, which had been losing ground since the summer. The announcement resulted in sharp appreciation of the dinar after months of heavy losses and the bank had to start buying euro from the market to slow the advance.
On December 31, NBS indicative dinar/euro rate was set at 89.54, indicating the dinar has weakened some 13% from a year earlier.
It was an appalling year for the Serbian stock market with the benchmark index finishing almost 76% below its start-year point on December 31. Price and turnover plunges were influenced by internal political turbulence during the first half of the year and the world financial crisis during the second half.
