Serbia Tells EU to Shove Central Bank Independence

It was not so long ago that I offered to help improve Serbia's chances of EU accession by going on a Soldier of Fortune-inspired "Ratko Hunt 2010." Just when you thought that Serbia's path to EU membership has been smoothed out by the capture (or death) of the "Big Three" war criminals Slobodan Milosevic, Radovan Karadzic and finally Ratko Mladic, the Serbs go ahead and throw a curveball. Or, for a more appropriate sporting analogy, hit a moonball into the heart of Europe.

Alike any number of former Soviet satellites, Serbia finds itself in economic trouble nowadays. Apparently, the current left-leaning leadership has been keen on pump-priming measures. However, the European Union has warned Serbia against diluting central bank independence (CBI). Whether you take it as a sign that Serbia values EU membership less in this age of PIIGS slaughter or something else, it is happening:

Serbia's Socialist-led government stepped up control over the central bank in the struggling ex-Yugoslav republic on Saturday, ignoring IMF criticism and a warning that the move would hurt its bid to join the European Union. Parliament adopted amendments to the law on the National Bank of Serbia, as the government seeks to harness the bank to a promise of more expansive fiscal policies to halt a slide into recession and rein in unemployment of 25 percent.

Central bank governor Dejan Soskic, who since 2010 had steered a restrictive monetary course in the face of an increasingly bleak economic outlook, had already quit on Thursday. The law creates a powerful, parliament-appointed supervisory body represented on the bank's executive board and gives the assembly responsibility for appointing its entire top management...

Jorgovanka Tabakovic, a lawmaker and senior member of the co-ruling Serbian Progressive Party, is widely tipped to replace Soskic, a move certain to shake investor confidence in the bank's independence even further. It will also deepen doubts in the West over the new government's commitment to the largely reformist, pro-EU path Serbia has taken since the ouster of late Serb strongman Slobodan Milosevic in 2000...

The EU, which made Serbia an official candidate for membership in March under the previous Democrat-led government, said it would be a "step back" for the accession bid.

At the same time, Serbia has hurt its chances of obtaining additional IMF emergency funding this way:

The International Monetary Fund, which Serbia plans to tap for new funding, had warned before the law was adopted that it would mark a "major weakening" of the bank's autonomy...The IMF, in a letter to Soskic before he resigned, cautioned that the law would have "considerable implications" for a 1 billion euro loan program which the Fund froze in February over Serbia's rising debt but which the new government says it wants to renegotiate.

If this story of a left-leaning party defying the powers-that-be sounds like troubled Hungary--both the recipient of IMF emergency funding and a resident of the EU doghouse over violating CBI--you're correct. The big difference here is that Serbia is in a worse spot insofar as Hungary is already a member of the EU. There is trouble all over the continent: a spectre is haunting Europe...