VZCZCXYZ0004
RR RUEHWEB

DE RUEHBW #0838 2231400
ZNR UUUUU ZZH
R 111359Z AUG 09 ZDS
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC0000
INFO RUCPDOC/USDOC WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHBW/AMEMBASSY BELGRADE
RUEHC/DEPT OF LABOR WASHINGTON DC

UNCLAS BELGRADE 000838 
 
C O R R E C T E D COPY (WORD WRAP AROUND) 
 
SENSITIVE 
SIPDIS 
USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SSAVICH 
 
E.O. 12958: N/A 
TAGS: ECON ELAB EFIN SR
SUBJECT: SERBIA: DIFFICULT FALL APPROACHING AS LABOR PROTESTS GROW 
 
REF: BELGRADE 433 
 
Summary 
------- 
 
¶1. (SBU) The worsening economic situation in Serbia has resulted 
in a growing number of labor protests in which workers are 
resorting to more radical tactics in an effort to have their 
claims addressed by the government.   At the heart of these 
protests are workers frustrated with failed privatizations of 
state firms, corrupt and ineffective performance of trade unions, 
and the government's lack of a coherent and effective response to 
the economic crisis.  Despite officials' public optimism, labor 
strikes look set to increase this fall as the economy continues 
to deteriorate.  End Summary. 
 
Growing Discontent 
------------------ 
 
¶2. (U) Serbia has experienced an upswing in labor unrest and 
strikes over the past several months as the economy has worsened. 
Official figures from the Republic Statistical Office report that 
unemployment rose from 14% in April 2008 to 16.4% in April 2009. 
Estimates based on media reports from late June suggest that 
approximately 20,000-30,000 workers were on strike throughout 
Serbia.  The Labor Ministry confirmed that workers from 39 
privatized companies were on strike, protesting unpaid wages and 
other unmet worker demands. 
 
¶3. (SBU) Some of these strikes have adopted increasingly extreme 
tactics in order to attract attention to their cause.  The first 
of these protests began in Kragujevac on April 22 in which twelve 
workers of the Partizan Leather Company held an 18-day hunger 
strike.  The second occurred in Novi Pazar in late April when a 
worker of the Raska Textile Company cut off and ate the tip of 
his own finger in protest of unpaid wages and benefits (reftel). 
The third and most recent protest began June 22-23 and occurred 
again July 8.  Workers from the Zastava Elektro factory in 
Kragujevac and the GIK First of May construction company in 
Lapovo laid down on railway tracks blocking routes for a total of 
three days between the cities of Belgrade and Nis and 
international connections to Bulgari a and Turkey.  The protesters 
demanded wages for the last eight months and that the factories 
resume production which had ceased since privatization.  The tem 
porary stoppage in railway traffic worsened the financial loses 
that the state-owned Serbian Railway company was already 
experiencing. 
 
Privatizations Gone Bad 
----------------------- 
 
¶4.  (SBU) Many protesting workers are responding to failed 
privatizations of state-owned firms.  Labor Ministry Assistant 
Minister Radmila Bukumiric-Katic told us on July 20 that the 
government had cancelled 450 of 2,500 privatizations because the 
new owners did not fulfill contractual obligations. 
Bukumiric-Katic said that many of the new firms' owners had never 
intended to continue production at the facilities and instead were 
hoping to liquidate the companies and fire their employees. 
However, Bukumiric-Katic said even privatizations made in good 
faith failed due to the new owners' inability to pay wages, 
pensions, insurance, and promised investments as the economic 
crisis deepened.  In a July 17 meeting, Nezavisnost trade union 
President Branislav Canak alleged that the Privatization Agency 
had failed to financially vet new owners to make sure they were 
capable of maintaining the businesses' operations.  He said that 
the government had not cared who bought the companies as long as 
the sale pumped immediate funds into the government budget. 
 
Trade Unions Not Helping Workers 
-------------------------------- 
 
¶5.  (SBU) The increasingly disruptive protests also reflect the 
decreasing influence and credibility of Serbian trade unions. 
With little faith in trade unions' ability to effect change, 
desperate workers have opted to organize themselves and deal 
directly with employers and the government.  On July 13, Jovan 
Protic, Serbia's Coordinator for the International Labor Office 
(ILO), told us trade unions had not done their job to hold 
companies responsible for unfulfilled contractual agreements and 
had not promoted workers' interests.  Protic said that even when 
privatizations were successful and new owners fulfilled contracts 
and restructured firms, unions failed to organize and advise 
workers on how to invest their severance pay or to obtain new 
training. Protic accused the unions of being racked with 
corruption and consumed with the self-interested priorities of 
their bloated bureaucracies. 
 
¶6. (SBU) Despite criticism from the ILO, government, and even 
other unions, Serbia's largest union, Confederation of Autonomous 
Trade Unions of Serbia (CATUS) refused to admit any responsibility 
for the current labor unrest.  CATUS President Ljubislav Orbovic 
told us on June 30 that CATUS found it increasingly hard to 
control protests despite its best efforts to maintain communication 
with the government, assist in negotiations, and file lawsuits on 
workers' behalf.  He attributed the increasing difficulty to the 
growing number of strikes, and not to the unions' loss of 
credibility among workers.  In late June, Orbovic announced his 
organization's support for anyone who was compelled to strike. 
 
Government's Response Could Be Too Little Too Late 
------ ------------------------------------------- 
 
¶7.  (SBU) The government has been slow to respond to labor disputes, 
fueling further protests.  While officials publicly express optimism 
that the situation will not worsen this autumn, some, including 
Bukumiric-Katic, are certain the situation will deteriorate because, 
"people are fed up and poor, especially in Southern Serbia." 
Only recently Labor and Social Policy Minister Rasim Ljajic drafted 
a comprehensive government plan designed to prevent the further 
radicalization of protests and to help the most vulnerable 
populations affected by the economic crisis.  Although it has not 
been officially approved, the government has started implementing 
some measures from the plan.  On July 23 the government approved 
the establishment of a working group to deal with labor problems; 
however, the group has not yet met.  The following week the 
government approved a one time lump sum payment of $76 to help 
those employees most at risk who have not been paid and are the 
sole providers for their families. 
 
Calls for Increased Police Action 
--------------------------------- 
 
¶8.  (SBU) In addition, the plan calls for police to take measures 
to ensure public peace and order.  According to the proposal, the 
police would allow workers to strike only in places prescribed by 
law, with consideration for the free flow of public transport, as 
well as the protection of people and property.  Note: By law, 
public demonstrations require police notification, and the police 
may refuse permission for events if public safety would be 
threatened. 
End Note. 
 
International Firms Feeling the Pain 
------------------------------------ 
 
¶9.  (SBU) International and domestic companies have been forced to 
cut jobs in order to adapt to market conditions.  U.S. Steel 
recently cut 206 jobs in Serbia; while British American Tobacco 
(BAT) cut 166 and Philip Morris cut 330 positions.  In July the 
parliament approved changes to the current labor law that would 
enable employers to send employees on limitless forced or paid 
vacation instead of the current 45-day limit during tough economic 
times.  Bukumiric-Katic told us that many foreign companies asked 
for this measure in order to retain skilled workers through the 
crisis.  Note: U.S. Steel was a leading proponent of liberalizing 
the leave provisions.  End Note.  On the other hand, Canak told us 
that this practice was the government's way to ensure that angry 
workers stayed home and out of the streets where they might 
organize massive protests. 
 
COMMENT 
------- 
 
¶10.  (SBU) Serbia will likely face increased protests in September 
when people return from vacation, the weather cools, and the effects 
of the economic crisis cut even deeper.  Since union advocacy and 
conventional strikes have failed to produce results, workers will 
continue to find more dramatic means of voicing their demands. 
The degree to which the protests and their extreme tactics will 
increase will depend on the government's willingness and ability to 
implement actions to assuage the protesters and to mitigate 
unemployment.  This will be difficult to accomplish without further 
adding to the growing public deficit.  Continuing labor unrest in 
Serbia would further jeopardize an already tenuous coalition 
government and could deter future foreign investment.  End Comment. 
BRUSH