Serb Dinar Plummets Amidst Crisis
07 February 2008 Belgrade _ Serbia's national currency, the dinar, plummeted against the euro on Thursday, amidst an ongoing government crisis and despite central bank efforts to contain the financial turbulence. At the end of trading on the currency market, the euro was selling for 84 dinars, as opposed to 81 dinars on Wednesday, dealers said. “Thers is virtually no trading,” a dealer said, speaking on condition of anonymity. The drop came only a day after the central bank raised its key benchmark interest rate to 10.75% in a bid to contain core inflation, whic strips out volatile food and fuel prices, and keep it within the 2008 target range of 3%-6%. Goran Nikolic an analyst with Serbia’s Chamber of Commerce said that “this exchange rate drop indicates a looming economic crisis,” and warned that “investors and traders are fearing that proponents of the isolationist policy could take over.” His words were taken as an apparent reference to nationalist parties, both within and outside government, that oppose closer European integration if the EU goes ahead with the deployment of a police and justice mission in Kosovo. Central Bank Governor Radovan Jelasic has repeatedly said that the bank could use its foreign currency reserves of some €10 billion to preserve the dinar’s exchange rate and contain inflation. Serbia is facing financial turmoil because of a deadlock within the government and the parliament. Prime Minister Vojislav Kostunica, his government allies and the opposition Radicals are all opposed to the signing of a cooperation agreement with the EU, just ahead of the expected despatch of the new EU mission that is likely to consolidate Kosovo’s forthcoming independence from Serbia. President Boris Tadic and the pro-European majority in the government want to go ahead with the deal. Financial analyst Miroslav Zdravkovic of the Belgrade’s Institute for Economics, told Balkan Insight that “tycoons and bankers are making major speculative deals right now, trying to capitalize on political instability,” and predicted that “someone will be making huge money on margins after the exchange rate stabilizes on Friday or Monday.” PRINT THIS ARTICLE <javascript:void(0)> Copyright BalkanInsight.com 2008
