VZCZCXRO2829
OO RUEHIK
DE RUEHVJ #0181 0560822
ZNR UUUUU ZZH
O 250822Z FEB 10
FM AMEMBASSY SARAJEVO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1452
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE

UNCLAS SARAJEVO 000181 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EUR/SCE AND EEB/IFD 
TREASURY FOR OASIA JEFF BAKER AND PETER MAIER 
 
E.O. 12958: N/A 
TAGS: PGOV EFIN ECON SOCI BK
SUBJECT: BOSNIA: SOCIAL BENEFITS REFORM PASSES FEDERATION 
HOUSE OF REPRESENTATIVES 
 
REF: SARAJEVO 171 
 
¶1. (U) Summary: In an extraordinary session February 24, the 
Federation House of Representatives speedily passed a set of 
amendments to reform the system of social benefits.  If also 
passed in the House of Peoples, the legislation is expected 
to fulfill requirements for release of budget-support funds 
from the World Bank and IMF.  It is unclear at this point 
whether the legislation as passed will conform to World Bank 
and IMF requirements, but expectations are high that a 
financial and political crisis has been averted.  End summary. 
 
¶2. (U) Recognizing the urgency to pass the social benefits 
reform, leaders of the four parties in the Federation 
government coalition (Party of Democratic Action - SDA, Party 
of Bosnia and Herzegovina - SBiH, Croat Democratic Union - 
HDZ, and HDZ-1990) had hammered out an agreement with 
veterans' organizations over the previous two days that 
enabled passage of the legislation.  As a concession to 
veterans, the package included additional hastily-drafted 
laws a) to accept pay cuts for members of Parliament and 
appointed officials, and b) to apply an indexing system and 
means-testing to other budget users, matching cuts for their 
programs with any that the veterans have to undergo.  A 
handful of veterans' leaders attended the parliamentary 
session, demonstrating their acceptance of the package, and 
ensuring that the members of Parliament would swallow their 
pay cuts.  Members of the four parties all voted for the 
package, while members of the opposition SDP voted against 
it, but without significant comment.  One additional piece of 
legislation, which would have applied a 10 percent wage cut 
to all Federation employees, was stricken from the agenda at 
the outset, in response to massive trade union demonstrations 
the previous day.  The bill cutting only parliamentarians' 
and executive appointees' wages took its place. 
 
¶3. (SBU) The seven bills that make up the package are on the 
agenda for an extraordinary session of the upper chamber, the 
House of Peoples, on February 25.  Given the solidarity of 
the leading parties and the compliance of the veterans groups 
in the House of Representatives, barring some surprise 
development overnight, we do not expect problems.  World Bank 
and IMF officials have said that they will want to review the 
additional legislation before drawing final conclusions. 
 
¶4. (U) As another key provision of the package, the 
legislation requires that no future legislation will be 
considered without an analysis by the Federation government 
of its budget impact.  This will help prevent future cases of 
unfunded programs that got the Federation into the fiscal 
situation that it is now in. 
 
¶5. (SBU) Comment: The session was unusual for its rare show 
of unity among the four leading parties, and its speed.  At 
the eleventh hour, the Bosniak political parties SDA and SBiH 
stepped back from the brink, faced with the stark consequence 
of losing hundreds of millions of dollars of international 
financial support if they continued to pander to their 
constituencies of war veterans.  While encouraging, it took a 
long time and a lot of urging from the international 
community for them to get there. 
ENGLISH