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Serbia's New Prime Minister Makes Visit to Washington - 2003-07-24

Serbia's prime minister, Zoran Zivkovic, who succeeded the slain Zoran Djindjic in March, is in Washington this week talking to U.S. political and economic officials. The visit comes at a time of transition at the Serbian central bank whose leader, a potential rival of the prime minister, was ousted last week.

So far, Mr. Zivkovic has been successful in defusing what could have been a difficult situation at the Serbian National Bank. Last week he won parliamentary approval for a new central bank statute that in effect ousted a political rival, Mladjan Dinkic, from the job. The measure forbids the head of the central bank from being actively involved in politics.

Mr. Dinkic is the deputy chief of the Group of 17 Plus, an economic research organization which recently became a political party. Mr. Dinkic has often disagreed with the ruling coalition, resisting calls for a weaker currency and criticizing as unworkable the new looser Serbian federation with Montenegro.

Monetary experts both in and out of Serbia fault Mr. Dinkic for politicizing the central bank, even though they give him high marks for bringing down inflation over the past two and a half years and winning public confidence for the dinar. Magazine editor Damjan Krnjevic Miskovic, a close observer in Washington of post-Milosevic Serbia, defends Mr. Dinkic, saying he was ousted for purely political reasons.

"The problem is that not only is Dinkic gone but all of his top guys have resigned [from the central bank] in unison after he was sacked for what they thought were political reasons. These are the most qualified people in the country to be running monetary and fiscal policy," he said.

Mr. Dinkic has been replaced by the minister of energy, Kori Udovicki, who has an advanced degree from Yale University and was an economist at the International Monetary Fund before returning to Serbia.

This is a tough time for the Serbian economy. The assassination of Prime Minister Djindjic four months ago jolted rising investor confidence and necessarily turned the reformist government's attention away from economic matters. The untested Mr. Zivkovic, the former mayor of Serbia's second city, Nis, has won high marks for cracking down on organized crime and corruption. He has been skillful in managing his government's fractious and disparate multi-party coalition.

Serbia's economy has been growing at a three to four percent annual rate since 2001. However, because of mismanagement, sanctions and destruction from NATO's 1999 bombing campaign, Serbia's economy is still only half the size it was in 1989. Much smaller, neighboring Croatia has overtaken its former partner in gross domestic product and even Bulgaria's economy is today significantly larger than Serbia's.