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EU warns member candidate Serbia to fix central bank anomaly

30 August 2012, 14:31 CET
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(BRUSSELS) - The European Commission warned Serbia on Thursday that it cannot expect to progress towards EU membership unless it revokes a newly-passed law curtailing the independence of its central bank.

The decision has already contributed to credit rating giants Standards & Poor's and Fitch downgrading Belgrade on international money markets, and the

European Union's enlargement commissioner Stefan Fuele criticised the move after talks with Suzana Grubjesic, Serbian deputy premier for European integration.

"One of those issues that we discussed today was certain elements of the amendment to the law of the central bank, which limits the independance of the central bank and thus goes against the alignment with EU acquis," Fuele said, referring to legal standards across the union.

"Serbia wants to join the EU," Fuele said in a press briefing. "I presume it was the choice of Serbia to join the EU," he added.

"I expressed the hope that after due reflection, Serbia's authorities will take measures to put the law, the legislation and the institution itself [in line with] the goal they want to achieve."

The Commission has form in this area: just last month it formally closed infringement proceedings launched in January over the independence of EU member Hungary's central bank, after the Hungarian parliament adopted legal amendments to the central bank statute demanded by the EU.

Serbia won EU candidate status in March after improving relations with Kosovo, which unilaterally proclaimed independence from Serbia in 2008 -- before electing late last month former allies of late strongman Slobodan Milosevic who ruled the country during the bloody 1990s wars in the Balkans.

Serbia's government has said it wants to restart talks with the International Monetary Fund which in February froze a one billion-euro stand-by loan because Serbia did not keep to figures agreed for the 2012 budget.

But the central bank law was cited as a factor by the ratings agencies.

As Fitch said when announcing the downgrade on August 16: "Rather than focusing on correcting a rising fiscal deficit and public debt ratio, the new government has amended the central bank law in a manner which has dented investor confidence and might complicate the agreement of a new IMF deal."

The disputed legislation increased parliamentary control over Serbia's central bank. The parliament elected a new central bank governor at the start of August after the previous governor resigned in protest.

Replacement Jorgovanka Tabakovic, an economist with the ruling Serbian Progressive party (SNS), said she would not be forced into "printing money" or "carelessly using state foreign currency reserves."


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