Dušan Nikezić – Economy in the shadow of politics

Criticism must be grounded, but criticism in itself must not be the goal

Photo: Jovan Marković

At a time of great geopolitical changes and economic crises, it is a real challenge to find a solution that will effectively solve the problem the country is facing. Is there a strategy and a long-term plan for getting out of the current crisis and which path should Serbia take? These are the topics we discussed with Dušan Nikezić, economist and vice president of the Freedom and Justice Party, who is also one of the best experts to talk about economic conditions in the country and abroad.

We are in the midst of a major global energy and economic crisis. Is the war in Ukraine the main reason for the crisis or is it just an excuse, while the real reasons lie elsewhere?

The war in Ukraine did not cause, but probably accelerated the inflationary crisis, which had to appear due to the imbalances caused by the excessive printing of money, which was pumped into the world’s leading economies, as well as Serbia, for years. Look at Switzerland, where annual inflation is 2.8%. This can be an indicator of the impact of “imported inflation” since Switzerland did not print money. Everything else is a consequence of internal economic policy.

Moreover, the economic crisis in Serbia really has nothing to do with the war in Ukraine. Logically, the EU faced a shortage of energy and food due to the interruption of gas and grain supplies from Russia and Ukraine, while in Serbia, it happened due to the business and financial collapse of the Electric Power Industry of Serbia (EPS) and a decade-long neglect of agricultural production.

Is neoliberal capitalism experiencing its peak that indicates an imminent change in the global social system?

I think that neoliberal capitalism has already passed its peak since the economic crisis of 2008. The biggest objective complaint is that it has been proven to deepen inequality in society. The unprecedented economic success of China, which has achieved fantastic rates of economic growth for decades and is well on its way to becoming the world’s leading economy, even though it has an arrangement that is far from neoliberal capitalism, deals a strong blow to advocates of neoliberal capitalism. That’s why I believe that it will be replaced by a new, hopefully, more humane, social and economic system, which will pay more attention to the redistribution of wealth, job security and investment in education, health care, culture, the environment and social protection.

The key changes must be systemic because only systemic changes can take Serbia out of the vicious cycle of poverty

As a trade unionist, how do you see the position of workers today, both in Serbia and in the world? Is socially responsible business just a myth and a story for PR campaigns, or does it really exist?

I cannot boast that I am a trade unionist, but I do carefully follow the negative changes in the position of workers, especially workers in Serbia, who, according to Eurostat, work the longest hours of the 31 observed European countries, but have the lowest wages.

I believe that the workers’ standard and position are of great importance for the future of our country, which is perhaps best seen from the official data which show that in the last 10 years, as many as 397,000 Serbian citizens received their first residence permit in EU countries alone.

Serbia is emptying out and dying, and labour rights are one of the key reasons why we insist on the implementation of EU standards in Serbia, since, in addition to higher wages and living standard, these standards would also result in a visible increase in labour rights. That is why we, in the Freedom and Justice Party, supported our colleagues from the Sloga Trade Union, who prepared a new and modern Labour Law, based on European standards, which will ensure accelerated economic growth, while guaranteeing decent wages and workers’ rights.

You are one of the very few and very serious critics of the current political regime in Serbia. Your criticism is quite sharp, well-grounded and very offensive to the government. How would you initiate change if you had the chance? What is the first move you would make?

Criticism must be grounded, but criticism in itself must not be the goal. That’s why the Party of Freedom and Justice tries to provide concrete solutions to the problems we present every time.

So, for example, back in June of last year, we warned about the negative consequences of inflation and demanded the implementation of a tax on extra profits, which would tax undeserved, excessive earnings, primarily generated by energy and mining companies. Furthermore, we requested that relevant inspections determine the price structure for 100 basic foodstuffs and limit retail margins, in order to reduce inflationary pressure on citizens.

However, the key changes must be systemic, because only systemic changes can take Serbia out of the vicious cycle of poverty. Otherwise, we will shut down due to the dramatic outflow of the working-age population. Education must become the most important infrastructure project, we must significantly increase wages and improve working conditions in health care, reduce acute environmental pollution and implement an economic patriotism programme, which in practice means investing in science and developing domestic technology instead of foreign factories with manual labour, as well as support economic branches in which we have natural predispositions, such as food, energy and IT. These are all essential reforms. They are long-term and they must start immediately. Most importantly, there is enough money in the state budget, because the room for savings is huge and is measured in billions of euros annually.

Photo: Jovan Marković

You’ve been commenting a lot on EPS lately. How do you view the announced transformation of EPS? Would appointing professional management in the company be a sufficient solution or is some kind of privatization still necessary?

The business and financial collapse of EPS is both the image and opportunity of this political regime, since the bad example of EPS is a reflection of many things – from incompetent party leadership, siphoning money through corrupt practices and party-instructed employment to consciously leaving the market to foreigners, neglecting domestic investments, excessive borrowing, capillary votes of workers and oversight by the line ministry and the Government. All of this contributed to the fact that the once most powerful Serbian company became the biggest problem and that Serbian taxpayers are going to pay over 3 billion euros to have the company rehabilitated. That’s why the EPS must be a serious warning to us, because the way the EPS is run today, that’s how the current political structures run the country.

Education must become the most important infrastructure project

Everything could have been avoided if we had a responsible government and professional management. That’s why I firmly believe that the solution lies in the adoption of the National Energy Strategy, in which EPS plays a key development role, with the engagement of professional management, who will implement such a strategy professionally and responsibly. We do not need privatization, and this is confirmed by numerous examples of successful state-owned energy companies from around the world.

Interest rates on both retail and corporate loans are on the rise, which makes loans more expensive and further lowers the purchasing power of citizens and investments in the economy. What is actually happening? Are the banks using this kerfuffle caused by the economic crisis to make an extra profit or is the rise of Euribor just a reaction to the increased risk?

The growth of Euribor is a response to high inflation, which is again a product of excessive money printing, both in the EU and in Serbia.

Experience has shown us that banks are always the fastest, and that’s why I’m confident that they won’t miss the opportunity to increase their earnings even in the current kerfuffle, as you call it, which we already see in action through an unfounded increase in bank fees or a proposal for extended loan repayment terms, which further increases earnings of banks.

What about public finances? Government calls every criticism that the public debt is significant a lie. Well, is it so difficult to determine whether public debt is high or not? Aren’t there clear indicators that will not be considered controversial?

Let’s just look at the facts. In the last four months alone, the state borrowed over 5 billion euros from the UAE, the IMF and new Eurobonds, while Serbia’s public debt will exceed 35 billion euros this year. This means an increase of 20 billion euros or 133 percent in the last ten years. The share of public debt in Serbia’s GDP is higher than the average of 21 Central and Eastern European countries, and currently, only five CEE countries have a higher share of public debt (in the national GDP) than Serbia.

We can also see how serious the state of public finances is by the fact that, apart from Serbia, only Azerbaijan, Armenia, Moldova and North Macedonia have a financial arrangement with the IMF.

All of this is alarming data, especially if we add to the public debt the collapse of the energy sector, the slowdown in the manufacturing industry and the dramatic decline in agriculture and construction in the past year.

Despite justified criticism of the current government, there is certainly something that the state cannot influence and for which it is not to blame. What are the real problems that our country is facing that come from outside, and what well-intentioned advice would you give to those in power?

The state cannot have too much influence on the coming economic recession, which will certainly have an impact on Serbia, as an export-oriented country.

The recession will hit the economy the hardest, which is already reeling from reduced demand and a significant increase in interest rates. That is why the state must not be an additional generator of illiquidity in the economy, as this is the case today, since the state is late in settling over the 800 million euros worth of its financial obligations, while in the case of EPS and Telecom Serbia that amount stands at over 500 million euros.

That’s why I would advise the government to immediately settle all public sector’s liabilities towards the business sector, as well as to reallocate budget funds from unnecessary public procurements and administrative costs to concrete support for the domestic economy and investment in new technologies.

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