09 July 2008

Questions Hang Over Socialists’ Return to Power

By Eric Jansson
Published by BIRN's Balkan Insight

Even as Serbia’s parliament voted to thrust the Socialist Party of Serbia (SPS) back into the offices of government, the trial of Mihalj Kertes, a central Socialist figure in the nexus of state and criminal interests that held the SPS in power through the 1990s, continued at the Special Court for Organised Crime.

The contrasting fates of the SPS and Mihalj Kertes – the party restored to power, the individual on trial – says much about the state of Serbia less than eight years after the fall of Slobodan Milosevic and his SPS from power in the October 5 putsch of 2000.

The message is not necessarily a coherent one.

On one hand, Serbian President Boris Tadic and his coalition of liberalisers, populists and technocrats, “For a European Serbia”, claim the SPS, a party they condemned in the starkest terms until recently, now has changed in ways that make it a suitable partner in government.

On the other hand, the trial of Kertes and senior gangland personalities for their roles in an alleged cigarette smuggling ring, in which the Milosevic-era customs chief has pled innocent, is predicated upon a very different view of the SPS and the 1990s. Essential to the political success of Tadic and his anti-Milosevic partners since 2000, this view holds that the SPS’s record is characterised by gross abuses of state power and criminal usurpation of state institutions.

The thread linking Tadic’s newly positive view of the SPS to his pro-European movement’s long-damning view of the party’s record in government – and indeed the continued advancement of that view through state institutions such as the Special Court – is not easy to see.

But the question of whether these two views can be reconciled seems certain to hang heavily over Serbia and, in particular, its next governing coalition – at least during its initial period in office.

Since 2000, the SPS has spent eight years in the political wilderness. Following Milosevic’s death in 2006, the party’s new leader, Ivica Dacic, now elected first deputy prime minister and interior minister, started moving the party’s public image out of Milosevic’s shadow.

Although as the party’s spokesman during the Milosevic era he is closely tied to the SPS of the old regime, Dacic’s makeover has basically succeeded.

For instance, association in the popular imagination between the SPS and criminal figures linked personally with Milosevic has arguably faded, although public knowledge of their roles within the party has actually grown. Kertes, for instance, in a separate trial last year, told the Special Court that, as customs chief, he had authorised payments from Customs Administration accounts directly to the SPS.

The party’s ambiguous transition has triggered a public debate over its new nature, even within institutions of government.

Verica Barac, president of Serbia’s Anti-Corruption Council, a state institution founded in 2001 at the behest of Zoran Djindjic, Tadic’s predecessor at the helm of the Democratic Party, told the daily Blic that the SPS remains “unreformed”.

The election of a government pairing Tadic’s pro-European bloc with the SPS represents “the defeat of what we expected would happen after October 5”, Barac said.

Yet even some of Serbia’s most pro-Western, liberal voices acknowledge that the SPS has changed in some ways. “The question is how much,” says Dejan Anastasijevic, a Belgrade journalist whose pro-Western views consistently challenge the prevailing wisdom in Serbia.

“Dacic and most of his crew are pragmatic young apparatchiks rather than war criminals or ideologues. Most of the hard-core gang dropped off with Milorad Vucelic [the party’s vice president under Milosevic], who is now trying to start his own ‘Real SPS’. On the minus side, they never formally condemned anything that Milosevic did, and there are still some pretty nasty characters lurking in the shadows,” says Anastasijevic

For such individuals, whose powerful backstage influence within the SPS has long been essential to the party’s success, the alliance with Tadic may be as uncomfortable as it is for liberal Serbs who remain sceptical of Milosevic’s former party. Both groups suffered the political equivalent of whiplash when learning of the planned marriage of these old rivals.

Borka Vucic, a long-time Milosevic associate and SPS supporter who ran Serbian offshore banking operations in Cyprus during the 1990s, when international sanctions acutely complicated the country’s finances and trade, is among those deeply frustrated by the composition of the new government.

“I remember that Dacic never had any idea for collaboration with Mr Tadic, never. How it has happened in a very short period of time I really cannot understand… It is not natural to have such integration,” she says.

Vucic’s apparent bewilderment at the SPS’s new choice of allies is informed by a unique take on the institutional transitions initiated in Serbia after Milosevic’s political downfall.

Long a senior figure in the state-dominated Yugoslav banking community, Vucic saw her position undercut after the October 5 putsch, when the young economist Mladjan Dinkic stormed into the central bank as a reform-minded governor.

Dinkic accused the evicted regime of systemic, criminal abuses of power. He spoke of “missing billions” in state funds he alleged had been channelled through Cyprus, some of it by Kertes.

At the height of the dispute over missing money, Dinkic spoke openly of the Milosevic regime as a criminal enterprise. Vucic likewise used the word “criminal” to describe Dinkic’s governance of the banking system.

Since then, little satisfaction has been felt on either side of the dispute, which gradually fell quiet with the exception of related revelations in trials like those involving Kertes.

Yet Vucic has not fundamentally changed her view. “No evidence” exists of sanctions busting or state plunder during the 1990s, she says, adding that Dinkic stopped looking for such evidence when he left the central bank in 2003 and “became a politician”.

“We have some evidence about criminality during the war, but we have much more evidence of criminality on the so-called democratic side. The volume is very big,” Vucic says.

The new alliance between Tadic’s bloc and the SPS, and Vucic’s reaction to it, is a reminder of how deep the disputes between these rivals, now allies, remain.

Having submerged such sharp disputes in order to form a government together, can the SPS and its former foes actually make common cause together?

“You would be amazed the differences that can be ignored if a person's lust for political and financial power are strong enough,” says James Lyon, Belgrade-based senior advisor for the International Crisis Group.

05 July 2008

An independent spirit

By Eric Jansson
Published by Financial Times,
28 June 2008

What made the Soviet Union fall apart? Some say guns, others butter. Others credit Ronald Reagan, Mikhail Gorbachev or Pope John Paul II. No doubt these all played their parts. But a more rewarding case can be made that it was the little-known Republic of Uzupis that did it in the end.

Like most epic historical claims, the case for Uzupis's role in defeating the Soviet empire is a circuitous one. One should avoid noting, for instance, that this leafy 168-acre neighbourhood in Vilnius possessed neither statehood nor the accoutrements of it in that fateful year, 1991. Likewise, disregard the fact that Uzupis' independence, declared in 1997, remains a source of laughter in the Lithuanian capital today.

Facts do not matter here. The real power of this colourful neighbourhood - which does in fact refer to itself as a republic, Uzupio Respublika - is not rooted in the mock independence it celebrates every year on "Uzupis Day", April 1. Its power derives from a certain spirit of life.

To its residents, Uzupis's independence is really about the independence of the soul. The neighbourhood's president, prime minister and "army" of a dozen men do exist - but only ceremonially. With humour they have succeeded in capturing the gleefully antiauthoritarian community spirit that, once mature in the hearts of millions, can render powerless even a superpower.

In many people's experience, this was the dynamic that shattered Soviet totalitarianism. Today it makes Uzupis one of the most freedom-loving urban quarters anywhere east of the Baltic and west of Vladivostok. It also makes it a magnet for new residents.

"First there were artists. Now you have members of the elite moving in. At the same time you still have junkies and drunks. And then you have the middle class - dentists and so on. Two years ago there was one dental clinic; today there are five or six," says Alistair Day-Stirrat, Lithuania director for Someplace Else, a London-based specialist in emerging property markets.

Like many Vilnius residents who keep an eye on real estate, Day-Stirrat, whose fiancée happens to be an Uzupis dentist, confesses a passion for the neighbourhood. Locals like to describe it - independent, artistic, hilly and heavily in demand - as the budding "Montmartre of Vilnius".

Because Uzupis borders Vilnius's dazzling Old Town and shares some of its architectural heritage, once Lithuania's post-Soviet property renovation and investment boom got rolling in earnest the neighbourhood was sure to change.

The early bohemian invasion of the 1990s gave the area its independence movement and proposed a graceful new aesthetic with installations such as the Uzupis Angel, a winged, horn-blowing figure perched on a plinth who has watched over the neighbourhood since 2001.

Still, vast room for improvement remains and a new wave of wealthy newcomers is moving in to make it happen. On a walk through Uzupis starting at the neighbourhood's main western entrance - a bridge crossing the Vilnele River, complete with welcome sign to "the republic" - one sees evidence of both progress and the work that remains to be done.

Just across the bridge artists' workshops and galleries project their influences on to the street. Local businesses such as the café, tattooist and hairdresser advertise their community spirit by displaying the ubiquitous "UZ" sticker along with the republican symbol; a hand with a circle in the palm that recalls the ancient talisman for warding off the "evil eye".

Up cobbled Uzupio Street renovation has reached almost all the buildings, with fresh facades slapped on to pre-modern townhouses and double-glazing almost everywhere. Yet poke into the odd courtyard or down a side street and one comes across scenes of dilapidation - crumbling facades, broken sheds and rotting boards.

In a neighbourhood that has a bit of money, as Uzupis now does, the kind of structural deterioration seen here lends it character. But eventually it needs cleaning up, too. This would be happening faster if Uzupis's history were different, says Augustas Jagusinskis, a valuer for Centro Kubas, one of Vilnius's leading estate agencies.

"In Soviet times Uzupis was a very unprestigious area. The situation had to change and the market is doing its job. The main problem with the speed of development now is old residents. Either they don't want to sell or they ask millions for a house with just three or four apartments in it. They are just sitting on barrels full of money," says Jagusinskis.

The way in for wealthy newcomers is often by purchasing flats in brand new apartment buildings rather than buying them to renovate individually. Developers seize on every opportunity to purchase several neighbouring plots at a time and then build. Strong demand ensures that although Lithuania's property boom began topping out in late 2007, in early 2008 developers were still selling flats before building them.

Most developments of this kind have sprung up lately in the eastern half of the area. A hodgepodge of wooden houses in varied states of repair interspersed by sleekly modern townhouses and garden plots, this part of the neighbourhood lies between the steep slopes of Gediminas' Grave park (Gediminas was a reputed founder of Vilnius) and the small, half-idle industrial block on Polocko Street.

At the height of Lithuania's property boom, during the past three years, people who bought houses and flats here count themselves lucky. Gerardas Jurkonis, an economist who purchased a fourth-floor open-plan flat in a new project, says that between the time he bought it for 5,000 litas (€1,400) per sq metre and the moment he was given the key, its market value had more than doubled. "I would still advise others to buy here, even though the boom is over. Prices may go down in the suburbs, especially for Soviet-built apartments, but not here or in the Old Town," he says.

He praises Uzupis as a place for families that, in spite of its appearance as a quiet community, is central and well connected to the rest of the city by transport links. The greatest of these is busy Olandu Street, which runs along the neighbourhood's eastern edge. Patches of forest prevent the traffic from disturbing the community.

The area's largest new residential development, Kriviu Namai, scheduled for completion this summer, rises near the eastern border, on Kriviu Street. Built by YIT Bustas, a Lithuanian subsidiary of the Finnish construction company YIT Group, its 23 flats are expected to be sold out before landscaping on the grounds is finished in August, says Tomas Jarasunas, site project manager.

Technically, this marks a slowdown. YIT Bustas' previous project in Uzupis, 36 flats also on Kriviu Street, sold out in just six months, well before construction work was finished. Kriviu Namai is selling well but more slowly and more expensively at prices from 8,000 litas to 1,500 litas per sq meter.

Catching the jitters in a slowing market, YIT Bustas recently halted work on several projects. But Jarasunas says it is important to keep pressing forward.

One potential risk stemming from Uzupis's emergence as upscale residential district is wholesale gentrification. It still feels a long way away from its first chain café but prices in the area of Uzupis nearest the river and Old Town are already nearing parity with Vilnius's historic centre.

"What costs 7,800 litas here might cost 8,000 litas in the Old Town; not a big difference," says Kristina Leknickaite, Lithuanian commercial director for Arco Real Estate.

Few new bohemians will be moving in under these conditions. On the other hand, moving from the area Leknickaite describes to eastern areas of Uzupis, prices typically fall by about 40 per cent.

The party is not over yet.