A New Episode of the Same Cartoon

The cat and mouse game between the state and the owners of old foreign currency accounts continues. The latest episode of the cartoon has been transferred from the federal government to Serbia and Montenegro, along with a draft law on so-called old foreign currency savings.

The federal government has kept the main solutions proposed by a team of Economics Institute experts headed by Mila Korugic-Milosevic. The draft law is much stricter towards account owners than what the experts advocated. The first step, the same as the experts’ proposal, is the elimination of small accounts (up to 100 DEM) which would be paid out in dinars. That requires about 59 million DEM in dinars. After putting things down on paper, the federal government decided not to agree to pay inter-banking interest (FIBOR) on the blocked accounts. That interest rate would be flexible and would change with every change of the interest rates between the banks in Frankfurt. The idea that won out is that account owners will get interest at an annual rate of 2%.

Experts said that account owners with up to 5,000 DEM should be paid 100 DEM a month up to the year 2001 (a total of 758 million DEM), but federal government staff felt that owners with up to 1,000 DEM in their accounts should get only 50 DEM a month (a total requirement of 457 million DEM).

All the other debts of the state towards its citizens would be covered by foreign currency state bonds with a fixed rate of 2% a year, payable in the year 2010. The key thing with regard to those bonds is what people will be able to buy with them. The experts said property purchases with those bonds should get a 10% discount, but the federal government, while keeping the possibility of purchasing property, refused the discount.

The Yugoslav National Bank (NBJ) and federation will cover 5% each of the blocked foreign currency savings from their income, 10% will be covered by business banks, and the rest from the income and property of the republics (Montenegro’s share of that stands at about 270 million DEM of the overall six billion DEM debt).

Technically that’s what could happen, but the main question is whether the state really does want to solve the problem. If it does, why didn’t it accept the study drawn up by CES-Mekon a few years ago?

The current expert solution was signed by the Economics Institute but included experts from other consultancies and provided nothing new.

All that raises suspicions that the issue is being raised only as an election game, and that impression is strengthened by announcements that this law will be adopted after the elections in Serbia.

The account owners, who don’t seem to be aware of the realistic abilities of the state, often play into the hands of the authorities. Representatives of two account owner organizations are persistently refusing the idea of state bonds to replace the accounts. They don't seem to realize that there is no money, and their demands to allow the population to pay their bills from the old accounts are pitiful and could create a budget deficit which would be covered by the population.

Experts warned that the account owners organizations should accept the bonds and pressure the republics into allowing them to buy everything that is owned by the republics with them. Serbia has taken over the former Yugoslavia’s main party headquarters, which is worth huge amounts of money, as office space. If the building was bought with the bonds, their value would rocket and they could be sold for cash. That is also the only way the state can get money it needs.