August 27, 2012
After decades of severe economic and political challenges, all countries in the former-Yugoslavia region are now heading for EU accession. The most advanced, Croatia, is set to become the EU’s 28th member by mid-2013.
For the others the road could still be long given domestic difficulties and the enlargement fatigue of some EU members. Serbia’s success in securing EU candidate status at the start of the year has been overshadowed by recent disputes about a change to the central bank law, trying to reduce its independence. This was a damaging move given the country’s large external debt burden and current account deficit and drew highly negative responses from the EU, the IMF, the rating agencies and the markets. There are signs that Serbian policymakers have understood this: the central bank hiked the policy rate in an effort to calm investors, while the government pledged to cut the fiscal deficit to 4% of GDP in 2013 from 7% in 2012. Still, the previously hoped-for start of accession negotiations with the EU in early 2013 looks now unrealistic.
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