In politics and policies, Serbia increasingly resembles the Milosevic-era without Milosevic. Its reaction to the catastrophic mid-March 2004 near collapse of the UN mission in Kosovo (UNMIK), the strong showing by ultra-nationalists in the 28 December 2003 parliamentary elections and the subsequent two-months of squabbling before democratic parties could form a minority government that depends for survival on the support of Milosevic's old party all are signs that more trouble lies ahead. In 2004 Serbia can anticipate continued political instability, increasingly strained relations with the West and further economic decline. The spasm of ethnic cleansing of Serbs by Albanians in Kosovo has raised the prospect of Kosovo partition, strengthened the nationalist right wing and increased anti-Western sentiment. Instability and economic weakness could hasten moves by Montenegro towards independence, while Kosovo tensions could spill over into the Presevo valley, Sandzak and even Vojvodina.

These prospects should prompt the international community to re-evaluate its policies towards Serbia. The results should include: no longer assuming that Serbia is a factor of regional stability; relying less on the "carrot" of European integration and insisting less on the Serbia-Montenegro union; and making more use of a stricter aid conditionality. If there is a bright side, it is that the ongoing -- and likely to worsen -- economic slide gives the international community greater leverage over the Serbian government if it is prepared to use it.

Serbia's new government could prove short-lived. It has serious internal differences, and its minority status reduces the chances that it can take the tough decisions necessary to turn the economy around, especially if it does not get major outside help. Nonetheless, its initial actions (and those of the parliament) hint that it could prove more stable and last longer than anyone expects. The Kosovo unrest has been a unifying factor, however temporary. But such stability as there may be will come through lowest common denominator politics, which in Belgrade today is anti-Western populism. Although Prime Minister Kostunica has stated that Serbia has no alternative to Europe, it does not appear that he considers cooperation with The Hague Tribunal a priority.

In spite of the government's pronouncements, Serbia's path towards a wider European future may be rocky. Events in Kosovo have reduced the appeal of European institutions to the country and damaged UN, EU, U.S. and NATO credibility. Parties that are either opposed to or ambivalent about European integration control 71 per cent of the parliament. The ultra-nationalist SRS has one third of the seats in every committee. Anti-reform forces within the "democratic" bloc appear intent on forestalling or rolling back many key Djindjic-era measures, while the SRS is pushing for a return to the past. The economy and Kosovo place tremendous pressure on the government, and the SRS is most likely to benefit in the upcoming presidential and municipal elections from any dissatisfaction.

To become a stable state, Serbia must undergo two transitions. The first is from the Milosevic-era criminalised state to a more normal society. The second is the classic Eastern European transition from a socialist command economy to a democratic market economy. Until there is significant progress in the first transition, the second will not happen. It is this failure to cleanse Serbia of the Milosevic legacy -- particularly in the security services -- that has led to the resurgence of the extreme right and cessation of reforms. International assistance should be redirected to target the first transition. Unfortunately, the new government has indicated that it is more interested in removing traces of Djindjic than Milosevic.

 It is increasingly apparent that 5 October 2000, the day on which Milosevic stepped down, was less revolutionary than it seemed at the time. Many of Serbia's democrats accepted the Milosevic-era myth that all the country's problems were caused by a decade of wars and international sanctions and the NATO bombing campaign of 1999. With these "causes" removed, many democrats showed little enthusiasm for reforms and, in many instances, actively blocked them. As a result Serbia failed to make a clean break with the Milosevic heritage. With the December 2003 elections, the past has partially returned to endanger the scant progress made to date, both domestically and in Serbia's relations with its neighbours.

Milosevic-era structures and personnel are still relatively intact in the judiciary, police, army and other key institutions. Serbia's media and judiciary are less independent today than two years ago. The myriad intelligence services still appear out of control and engage primarily in spying on domestic political opponents. It is nearly as difficult to do business in Serbia in 2004 as it was under Milosevic, a fact confirmed by the scant foreign investment. The only institutions that appear to function with any efficiency are the army and the National Bank. In the meantime, the lack of a final status resolution for Kosovo will continue to overshadow domestic politics and warp normal political dialogue.

ICG will shortly publish a separate report on the March 2004 events in Kosovo and their implications for the future of Kosovo and international policies in the wider region. 

Belgrade/Brussels, 26 March 2004