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Caretaker governing erodes investor confidence, central banker says

The fact that Serbia still has a caretaker government has been eroding its already low credibility among foreign investors, the central bank head Radovan Jelasic warned in an interview released Friday.

„If to all other challenges, related to negotiations with EU and Kosovo, we add the unresolved issue of the government, it's only certain that we're not increasing the attractiveness of Serbia for foreign investors,” Jelasic told the Novi Sad-based daily Dnevnik. He was referring to the stalled government coalition talks which have left Serbia in the hands of a caretaker cabinet more than three months since January 21 elections. Unless Serbian parties forge a parliamentary majority and a new government by mid-may, they would force new elections, which would again be unlikely to produce a decisive winner, but are likely to further boost anti-European nationalists. Meanwhile, talks on bringing Serbia closer to EU membership - frozen a year ago over Belgrade's reluctance to arrest war crime suspects - remain in limbo.

Jelasic said that Serbia's investment rating of BB- was the weakest in the region, while its economic growth rate of 6.6% „barely maintained the gap” to neighboring countries. „To catch up, we must grow much more rapidly, at a rate of up to 10 per cent,” said the reformist central bank governor, whose fate also hinges on backdoor political haggling. „We need to immediately continue determined, deep structural reforms for that,” he added. Also aggravating the situation are murky privatization deals, Jelasic said. He was referring to the recent 400-million-dollar sale of a mining complex which had to be scrapped when the buyer failed to produce the money even in „injury time” and a chaotic privatization of a tourist operator which may raise a flurry of lawsuits. „All that echoes in the business world and it's certain that we'll have considerable damage from all that,” he said.

However, Serbian leaders remain obsessed with the breakaway province Kosovo, in which the Albanian majority has been making headway toward international recognition of independence. Kostunica, as well as most other leaders, rarely speak about anything other than Kosovo, in which Serbia has not exercised any authority since NATO ousted its security forces to end the repression of Albanians in mid-1999. (