VZCZCXRO3554
PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHBW #0380/01 1201737
ZNR UUUUU ZZH
P 301737Z APR 09
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC PRIORITY 1241
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHEHNS/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/HQ USEUCOM VAIHINGEN GE

UNCLAS SECTION 01 OF 02 BELGRADE 000380 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: PGOV PREL SR
SUBJECT: SERBIA: MUNICIPAL GOVERNMENTS FEELING POLITICAL, ECONOMIC 
PRESSURE 
 
REF: BELGRADE 352 
 
Summary 
------- 
 
¶1.  (SBU) A recent series of changes in local government highlight 
the fragility of narrowly divided local governing coalitions, as 
well as efforts by the Socialist Party of Serbia (SPS) and 
Democratic Party (DS) to exploit these divisions for political gain. 
 Changes in governments in Kraljevo, Leskovac, and Nova Varos - as 
well as ongoing coalition instability in Cacak and Priboj - are due 
less to economic pressures than political opportunism. 
Municipalities with stable coalition majorities are feeling pressure 
from the economic crisis as they face growing unemployment and 
expected cuts in financial support from Belgrade.  The opinions of 
local leaders are mixed on the prospects for a resurgence of the 
Serbian Radical Party (SRS), the Serbian Progressive Party (SNS), 
and other nationalist parties.  The worsening fiscal position of 
municipalities at a minimum will undermine unity and efficacy of 
local government.  End Summary. 
 
Coalition Instability in Medium-Sized Cities 
--------------------------------------------- 
 
¶2.   (SBU) In addition to the widely-reported gridlock in the local 
governments in the Zemun and Vozdovac districts of Belgrade 
(septel), several medium-sized cities have experienced political 
instability over the past several months.  In the medium-sized 
central Serbian city of Kraljevo, following months of a local 
assembly blockade led by DS deputies, the Serbian Radical Party 
(SRS)-Democratic Party of Serbia (DSS)-Nova Serbia (NS)-Socialist 
Party (SPS)-United Pensioners Party (PUPS) coalition fell in late 
February when SPS-PUPS and DSS left to form a DS-led coalition.  In 
the medium-sized southern Serbian city of Leskovac, a parliamentary 
blockade yielded similar results on March 19 when the SPS left an 
SRS-led coalition to form a new government with DS, G17 Plus and the 
NS.  In the small Sandzak city of Nova Varos, a DS councilor in 
early March split with his party and temporarily sided with the SRS 
to form a governing coalition; when the councilor was replaced in 
late March, the DS-led governing coalition returned to power. 
 
¶3.  (SBU) Other medium-sized cities have experienced coalition 
instability that has not led to changes in their governing 
coalition.  In the central Serbian city of Krusevac, the SRS-DSS-SPS 
coalition nearly unraveled in mid-March when SRS councilors were 
implicated in misuse of public funds.  In nearby Cacak, the work of 
the local assembly was blocked as governing coalition SPS members 
negotiated for fifteen days with the DS opposition before deciding 
not to jump ship.  SPS representatives in Cacak told us on March 20 
that they were currently not interested in leaving the governing 
coalition, but conspicuously left the door open in the future.  (The 
SPS holds nine votes in the governing coalition with a majority of 3 
votes.) In late March, local press reported that the Cacak DS 
committee opened negotiations with the NS (which holds the 
mayorship) to discuss replacing the SRS and DSS with DS and SPO in 
the governing coalition.  SPS and DS leadership in Cacak told us 
that mismanagement of public companies was a key motivation for 
replacing the local government. 
 
Thin Margins Tempt SPS and DS 
----------------------------- 
 
¶4.  (SBU) The SPS and DS have taken advantage of slim majorities to 
weaken or destabilize local governing coalitions that they do not 
control.  In Kraljevo, the four SPS-PUPS councilors left the 
governing NS-SRS-DSS coalition to join DS and a local Kraljevo party 
to form a governing coalition with a majority of one vote.  In 
Leskovac, the SPS and DSS left the governing coalition with a 
majority of two votes to join with DS and G17 Plus to form a 
majority coalition by four votes. 
 
¶5.  (SBU) In the medium-sized city of Priboj, located in Serbia's 
Sandzak region, local SPS head Svetomir Gordic told us that he was 
actively seeking to replace the governing coalition and was awaiting 
a response from Belgrade.  The head of the local DS council, Milenko 
Milicevic, told us his party supported the idea.  (The SPS-PUPS 
coalition in Priboj with its four votes would not suffice to give a 
prospective DS-led coalition a majority.) 
 
Municipalities Feeling Economic Strain 
---------------------------------------- 
 
¶6.  (SBU) Municipal leaders, already feeling pressure from the 
economic crisis, voiced frustration that Belgrade is not providing 
adequate support.  Zoran Jakovljevic (DS), mayor of the west-central 
 
BELGRADE 00000380  002 OF 002 
 
 
mid-sized city of Valjevo, told us that unemployment was increasing 
in Valjevo but that foreign and domestic investors (primarily 
Miroslav Miskovic's Maxi retail chain) still planned to follow 
through on investments.  Jovan Markovic (DS), mayor of the mid-sized 
western city of Uzice, said that the economic crisis had already 
reduced his city's budget by 30% and that he was preparing for 
further reductions.  The mayor of the large central Serbian city of 
Kragujevac, Veroljub Stevanovic, complained to us that Belgrade had 
reduced his city's budget by 20% over the past year while increasing 
the municipal budgets of Nis and Novi Sad.  (Stevanovic plans to 
establish a new center-right party in May, "Together for Sumadija," 
which will advocate for decentralization of financial and political 
authority in Central Serbia.)  Each of these mayors also voiced to 
us frustrations that the National Investment Plan did not adequately 
support projects they proposed that would best meet the needs of 
their cities. 
 
¶7.  (SBU) Despite growing economic pressures, many local leaders we 
met did not believe the crisis would lead to a resurgence of 
nationalist parties.  Markovic told us that he believed the SRS and 
the Serbian Progressive Party (SNS) lacked the party infrastructure 
in his region to mount a serious campaign.  Our DS and SPS 
interlocutors in Cacak conveyed a similar message, adding that 
neither the SRS nor the SNS had developed an alternative message 
that would resonate with voters in Cacak.  However, in the heart of 
their traditional constituency, SRS and SNS support remains strong. 
According to Stevanovic, both the SRS and SNS were "unreformed, 
non-western parties" that would strengthen as the economic crisis 
worsened. 
 
Economic Endowments Bring Stability 
----------------------------------- 
 
¶8.  (SBU) Despite the grim outlook in much of Serbia, local leaders 
in municipalities with natural resources and good management 
practices are confident they can thrive.  Milan Stamatovic (DSS), 
mayor of Cajetina - the west Serbian municipality that includes the 
Zlatibor tourist resort - told us that his municipality has enjoyed 
political stability since 2000 (with a large DSS majority) and that 
he expected that good cooperation with NGOs and foreign investors 
would continue despite the downturn.  Though he sought greater 
support from Belgrade to develop highways and airport access to 
Zlatibor, Stamatovic was optimistic that his administration could 
create its own opportunities by promoting education in good business 
practices, commenting that "study trips (to Europe) are more 
effective than money from Belgrade."  (This entrepreneurial attitude 
is strikingly unique among the mayors with whom we spoke.)  Mirjana 
Avakumovic (DS), mayor of the small western Serbian municipality of 
Arilje, told us that her municipality's 1200 entrepreneurs (largely 
engaged in raspberry production) were prepared to weather the 
reduction in foreign demand and that she expected only "minimal 
unemployment" in the upcoming year.  She complained that other 
municipalities received disproportionately larger shares of revenue 
transfers because of political connections, but told us that the 
economic crisis would have a minimal impact on Arilje's economic 
base of small entrepreneurs. 
 
Comment 
------- 
 
¶9. (SBU) Serbia's municipalities will face increasing economic 
pressures in the months ahead as Belgrade moves forward with plans 
to reduce transfer payments to local government (reftel).  However, 
recent upheavals in local governments have not been directly tied to 
economic issues, but rather to ambitions of the SPS and DS to 
exploit thin majorities to gain power.  To date, the evolving 
relationship between the DS and SPS on the national level does not 
appear to have had a direct connection with changes in local 
government as we have not seen indications that party leaders in 
Belgrade are driving these local maneuvers.  Although local 
governing coalitions that match the composition of the national 
government will likely benefit from connections through party 
channels, financial assistance to all municipalities will 
nonetheless become increasingly scarce.  Turmoil in local government 
has thus far been limited - afflicting only 8 of 161 municipalities 
- and the extent to which it spreads will depend on both the 
numerical ability and motivation of local opposition blocs to seek 
power amid economic challenges that have no politically popular 
solutions.  End Comment. 
 
 
MUNTER