VZCZCXYZ0016
RR RUEHWEB

DE RUEHBW #0208/01 0711104
ZNR UUUUU ZZH
R 121104Z MAR 09
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 1047
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC

UNCLAS BELGRADE 000208 
 
SENSITIVE 
SIPDIS 
USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SSAVICH 
 
E.O. 12958: N/A 
TAGS: ECON ELAB EFIN SR
SUBJECT: SERBIA: COLLECTIVE BARGAINING AGREEMENT WOES 
 
Reftel: 08 Belgrade 886 
 
Summary 
------- 
 
¶1. (U) After intense negotiations and threat of worker protest, on 
February 11, the government, labor unions, and employers' union 
decided to postpone doling out $1.7 to $2.6 billion in allowances to 
workers during the economic crisis.  In November, the three parties 
signed annexes to Serbia's new collective bargaining agreement (CBA) 
that obligated all employers (including the government) to give 
every worker meal and vacation allowances.  Less than a month later, 
Serbia's largest employers' union and the government withdrew their 
signatures.  Publicly they cited financial hardship for their 
withdrawal, but in conversations with the Embassy they insisted that 
all parties, including the labor unions, agreed to sign the annexes 
to fulfill President Tadic's parliamentary elections political 
promise with the understanding the annexes would never be 
implemented.  When the labor unions reneged on this alleged 
agreement, debate ensued.  All parties finally agreed not to 
withdraw from the CBA, but to postpone allowances payments for the 
first half of 2009 and to revisit the issue later in the year. 
However, it is unlikely the CBA annexes will be resurrected and 
implemented in 2009 or even in 2010 given Serbia's negative economic 
prognosis.  End Summary. 
 
The Players 
----------- 
 
¶2. (SBU) The Social Economic Council which consists of members from 
the government, Serbia's two largest labor unions the Confederation 
of Autonomous Trade Unions of Serbia (CATUS) and Nezavisnost, and 
the Serbian Association of Employers (UPS) negotiated the CBA and 
its annexes.  The lead interlocutor from the government was Labor 
and Social Affairs Minister Rasim Ljajic (SDP), however, the 
controversial negotiations eventually included participation from 
President Boris Tadic (DS), PM Mirko Cvetkovic (DS), DPM Bozidar 
Djelic (DS), DPM and Economy Minister Mladjan Dinkic (G17 Plus), 
Finance Minister Dijana Dragutinovic (DS), and NBS Governor Radovan 
Jelasic (G17 Plus).  UPS is Serbia's largest employers' union of 
private companies.  UPS claims to represent 146,000 of the 300,000 
private companies in Serbia, of which, 95% are small and medium 
sized businesses.  In a January 9 public meeting, smaller unions, 
foreign investors, and Serbian business leaders including tycoon 
Miroslav Miskovic of Delta Holding weighed in on the debate.  [Note: 
Although Serbia's largest exporter U.S. Steel attended the January 9 
meeting, the company's President Richard Veitch told the Ambassador 
that it did not participate in the CBA negotiations.  End Note] 
 
¶3. (U) Serbia's two largest labor unions were key players in the 
negotiations.  The unions have distinctly different histories and 
interests and while their influence has waned, the unions remain 
capable of organizing strikes and street demonstrations.  CATUS is 
Serbia's largest labor union, representing an estimated 450,000 to 
600,000 workers primarily from state-owned companies. (There are 
approximately 2.8 million actively employed persons in Serbia's 
workforce.)  CATUS is an old vestige of Serbia's socialist era made 
up of state-affiliated trade unions.  During the nineties, CATUS and 
its leaders supported the Slobodan Milosevic regime and were 
rewarded with privileges for their loyalty.  CATUS has been vocal in 
its opposition to privatization.  Nezavisnost is the opposite of 
CATUS, representing about 200,000 workers mainly from the private 
sector.  Nezavisnost was a staunch opponent to the Milosevic regime. 
 Although Nezavisnost is officially non-political, its membership 
leans toward the more open-market progressive DS camp. 
 
Finally an Agreement 
-------------------- 
 
¶4. (U) In April 2008, just before parliamentary elections, the 
government, Serbia's two largest labor unions, and the largest 
employers' union (a confederation of mostly small and medium size 
business owners) signed a general collective bargaining agreement 
(CBA) that applied to all public and private sector workers.  The 
agreement set minimum standards for workers' rights including 
provisions for work hours, vacation and leave, workplace safety, 
salary and allowances, and voluntary and involuntary dismissal. 
During the negotiations, the parties also agreed to sign CBA annexes 
that would obligate all employers in Serbia (including the 
government) to give every employee meal and vacation allowances.  As 
with the pension hike promised to win votes for and form the "For a 
European Serbia" coalition government, President Tadic made a 
political promise to workers and the Serbian Socialist Party (SPS) 
to sign the CBA annexes (reftel).  In an act of support for Tadic's 
coalition, the employers' union also agreed to sign. 
 
¶5. (U) All three sides signed the annexes in November 2008; however, 
in December the government and employers' union withdrew their 
signatures from the entire CBA, citing financial hardship amid the 
current economic crisis.  The withdrawal ignited intensive 
negotiations and threats of massive worker protests.  Calm was 
restored on January 30 when the parties agreed not to cancel the 
original CBA or its annexes, but to postpone implementation of the 
annexes for the first half of 2009 and reexamine the issue later. 
In the meantime, more traditional industry specific CBAs would be 
negotiated. 
 
Now We Sign It, Now We Don't 
---------------------------- 
 
¶6. (SBU) Onlookers were perplexed by the government's and UPS's 
decision to back out of the entire CBA only weeks after signing the 
CBA annexes.  CATUS President Ljubisav Orbovic told us on February 5 
that he believed the government, at the time, did not think the 
crisis would hit Serbia hard and would, in fact, benefit Serbia. 
This tracked with the overly optimistic message the government, 
specifically Minister Dinkic, had been sending.  Orbovic said CATUS 
was willing to freeze implementation of the annexes last year, but 
the government did not offer that option earlier.  Although 
Nezavisnost also pushed for the CBA annexes, in a meeting with us on 
February 6, Nezavisnost Labor Union President Branislav Canak 
admitted he was surprised the government and UPS signed them because 
he doubted they could afford the estimated $1.7 to $2.6 billion 
annual cost.  Neither labor union, however, would accept the 
government's proposal to negotiate a new CBA and demanded temporary 
postponement of implementation of the annexes. 
 
¶7. (SBU) The government and UPS both claimed they and the labor 
unions agreed to sign the CBA annexes with the intention of never 
implementing them.  On February 27, the Economic Advisor to the 
Prime Minister Jurij Bajec and Ministry of Labor and Social Issues 
State Secretary Snezana Lakicevic-Stojicic told us that as early as 
September 2008 all parties were aware that the CBA annexes were not 
financially feasible for private employers or the government given 
the deepening crisis.  In fact, a clause was built into the annexes 
that, according to Bajec, gave the government and UPS an "exit 
strategy" from implementing them.  Bajec and UPS Secretary General 
Bogdan Savic accused the labor union leaders of reneging on the 
"gentlemen's agreement" and pushing to implement the annexes to 
shore up their waning popularity within the unions. 
 
Accusations of Blackmail 
------------------------ 
 
¶8. (SBU) In meetings with us, both International Labor Organization 
Representative to Serbia Jovan Protic and Canak alleged that the 
government blackmailed Nezavisnost and CATUS during the CBA annex 
negotiations.  According to Protic and Canak, the government 
threatened to have Nezavisnost's eligibility to be a part of the CBA 
negotiations reviewed.  Skeptics believe that Nezavisnost's 
membership, estimated at 200,000, does not meet the legal threshold 
to qualify it for participation in the Social Economic Council.  To 
qualify, a labor union's membership must be at least 10% (about 
280,000 workers) of Serbia's active work force.  Canak also alleged 
that CATUS had an unpaid debt to the Government incurred during the 
Milosevic era. 
 
¶9. (SBU) Bajec maintained, however, that the government persuaded 
labor unions that the country's focus should be on job retention 
during the current crisis and not on increasing allowances that 
neither the government nor employers could afford.  He told us 
frankly that the annexes would not be implemented in 2009. 
 
Harsh Criticism and Low Confidence in the Government 
--------------------------------------------- ------- 
 
¶10. (SBU) Orbovic said CATUS once had a good working relationship 
with the government, but now CATUS questioned cooperation within the 
Social Economic Council.  He added that the government's 
contradictory actions during the CBA negotiations cast doubt on the 
administration's ability to govern the country during the crisis. 
Canak echoed the sentiment and added that the government's stimulus 
package had no real framework.  Canak called the government "more 
exclusive, closed, and pro-monopoly than any socialist government in 
the past," and doubted the government's ability to integrate with 
the EU. 
 
Realistic Unions during the Crisis 
----------------------------------- 
 
¶11. (SBU) Both labor union leaders appear to understand the severity 
of the current crisis and admitted that protests would be 
counterproductive for the country during the crisis.  However, Canak 
warned that massive layoffs in state-owned companies could lead to 
social unrest.  When asked how flexible CATUS would be in finding 
solutions to maintain jobs amid the crisis, Orbovic said CATUS was 
"ready to talk about and share the burden of economic crisis," but 
added that flexible labor solutions should be "time limited."  On 
March 6, U.S. Steel announced it would institute a four-day work 
week with employees receiving 60% of their daily pay for the fifth, 
non-work day.  The same day the government issued a statement that 
it was preparing a package that would introduce the option for all 
employers to switch to a four-day work week and would increase paid 
vacation from 45 to 90 days funded with government subsidies. 
 
More Bad News 
------------- 
 
¶12. (SBU) Protic reminded us in a meeting on February 4 that in the 
near future, the economic crisis would not be the only reason for 
job losses in Serbia.  The two year ban on laying-off redundant 
workers from socially- and state-owned companies privatized through 
auctions and the five year ban for those privatized through tenders 
were beginning to expire. 
 
COMMENT 
------- 
 
¶13. (SBU) Realistically the CBA annexes will not go into effect in 
2009 or even 2010 given the negative economic prognosis for the 
country.  The CBA annexes may simply be forgotten and replaced with 
the proposed industry specific agreements which would be more in 
line with most European countries' practice.  In addition, the IMF 
will likely play a role in any discussion about payment of worker 
allowances as it would mean a significant increase in government 
spending.  Labor union leaders seem to be fairly confident that 
labor unrest will not erupt into significant protest in the near 
future.  However, as the financial crisis deepens and companies have 
to make tough expense cutting decisions, workers may take to the 
streets.  If the government can convince workers and unions to 
accept creative job retention solutions such as reduced workweeks, 
then the country could avert unrest.  Much depends on the Serbian 
leadership's ability and will to educate the average worker that 
there is no easy and quick solution the government can implement to 
get Serbia out of the current crisis and that everyone will have to 
sacrifice.  End Comment. 
 
MUNTER