No Fanfare as New State is Born

The Federal Republic of Yugoslavia, Slobodan Milosevic's last legacy, ceased to exist this week following a decree of the federation's assembly and the adoption of a constitution for a new union between Serbia and Montenegro by their respective parliaments.

The new entity, bearing the cumbersome title of the State Community of Serbia and Montenegro, will be able to upgrade its ties to Europe, as the formation of the union is a prerequisite for joining the Council of Europe and NATO's Partnership for Peace programme.

But in spite of intense European pressure on Serbia and Montenegro to set up the new state, many local analysts and economists predict it will have a short life span.

The new state is the second consecutive union between Serbia and Montenegro. Under Milosevic, the two formed the Federal Republic of Yugoslavia in 1992, following the disintegration of the old six-republic federation that Tito's communists established after the Second World War.

After the pro-western Montenegrin leader, Milo Djukanovic, won elections in his republic in 1997, relations between Podgorica and Belgrade deteriorated. Seeking to distance itself from Milosevic's politics, Montenegro took a separatist line, with the active support of the West.

Montenegro conducted its own foreign policy independently of Belgrade, abandoned the Yugoslav currency, the dinar, and introduced its own customs.

But the fall of Milosevic in October 2000 led to a marked change in western policy. Having encouraged Montenegro's aspirations for independence, the West changed their policy once Milosevic was removed.

Increasingly worried by the implications of Montenegrin independence for Kosovo and Bosnia, the West now opposed any further border changes in the Balkans.

Under western pressure, Podgorica abandoned the goal of immediate independence and in the presence of the EU high representative for foreign policy, Javier Solana, last year signed the Belgrade Agreement, defining the terms of a new union with Serbia.

As a result of mutual rivalry and various disputes, it took Serbia, Montenegro and Yugoslav federal officials almost a year to draft the new Constitutional Charter and for the two parliaments to adopt it, following the signing of the agreement.

However, the new union has a short sell-by date, as the agreement allows either republic to organise a referendum on independence three years after the union comes into existence.

Montenegrin officials do not hide the fact that they intend to use this provision to hold a plebiscite as soon as possible. On the Serbian side, leading economists and analysts also predict the union is doomed.

Belgrade's economic experts are among the fiercest critics of the new joint state. They consider it unviable, as it will not unite the two different republican economies. They fear it will retard the whole economic reform process.

Miroslav Prokopijevic, of the Belgrade Institute for European Studies, said he feared both republics would use the new union "as a smokescreen to avoid implementing economic reforms".

Prokopijevic described the new state as a "very loose confederation, which reminds one more of a club than a union". He told IWPR there was only a low level of integration between the two states and said it had no truly federal characteristics.

The constitutional charter divides the federal state's assets of 50 billion US dollars between the two republics. The new union will have no common budget. Instead, it will be financed from the two republican budgets with Serbia picking up most of the bill.

Economic and customs laws have not been harmonised, so the two states will retain separate markets, customs and currencies. The assets of the Yugoslav army will also be divided between the two republics. The joint military force will be run by a defence council and minister, with conscripts doing their service in their respective republics.

Criticising the terms of the new union, Mladjan Dinkic, the successful governor of the Yugoslav Central Bank, told the German media in January that Solana had broken his "promise to harmonise economic relations between Serbia and Montenegro".

Dinkic complained that the EU had stood by "as Montenegro sabotaged initiatives to harmonise customs and taxes".

The federal prime minister, Miroljub Labus, was equally downbeat. After leading the talks between Yugoslav economists and international monetary institutions, he pronounced the new joint state "the biggest failure" in his life.

Labus said he had hoped it would copy the economic system of the EU, with a common market and currency at least. "We in Serbia... should admit that the talks on the redefinition of the state have ended in failure," he said on January 10.

The balance of political forces in the new state is equally unfavourable to the union's prolonged existence.

For the first two years, the two republics will appoint, rather than elect, representatives to the union's parliament. This means it will be dominated by supporters of Djukanovic and his Serbian ally, Serbia's prime minister Zoran Djindjic.

Djukanovic has built his entire political career on pro-independence rhetoric and has made it clear that Montenegro will continue on the road to statehood.

On January 7, Djukanovic said his new government in Podgorica would not be deflected by EU pressure. "We will work for the restoration of Montenegro's independence, which will become independent and internationally recognised in three years," he announced.

Both Djukanovic and Djindjic intend to divide the union's political spoils and so resolve the problems of their respective republics.

Djukanovic may let Djindjic take control of the army, whose intelligence service has so far sided with the Yugoslav president Vojislav Kostunica, Djindjic's bitter rival. The new defence minister is tipped to be Zoran Zivkovic, a member of Djindjic's Democratic Party.

In exchange, Djindjic appears willing to let Djukanovic dominate foreign economic relations, to curb the influence of his political rival, Dinkic.

Dinkic says Montenegro will use this to build a network of international economic ties, which Djukanovic can use to further Montenegrin independence.

Another weakness of the new union is that the pro-Yugoslavia forces in Montenegro are seen as politically compromised, owing to their former support for Milosevic. This has impeded their ties with EU, despite Brussels' support for the preservation of a joint state. Even Kostunica, the strongest advocate of the entity, does not enjoy complete confidence in Brussels, where he is seen as a conservative nationalist.

A final weakness in the joint state is the imbalance in size of the two republics. Serbia is 16-times larger than Montenegro, with the former contributing more than 90 per cent of the union budget.

According to Prokopijevic, such a lopsided state cannot function for long. "The bills do not add up," he said.

Zeljko Cvijanovic is editor of the Belgrade weekly Blic News.