In Yugoslavia, the IMF has become the steadfast financial bureaucracy
of the Western
military alliance, working hand in glove with NATO and
the US State Department.
ECONOMIC TERRORISM
by
Michel Chossudovsky
Professor of Economics, University of Ottawa
The International Monetary Fund (IMF) is known to bully developing
countries, imposing
strong doses of "deadly economic medicine" while
saddling governments with spiraling external debts. In complicity with
Washington, the
IMF often meddles in cabinet appointments in debtor
countries. In Korea in the turmoil of the 1997 Asian crisis, the
Finance Minister
--sacked for allegedly "hindering negotiations" with the IMF--
was replaced by a former IMF official.1 In Turkey, also in the wake of
an IMF-style
financial meltdown (March 2001), the Minister of Economy
was substituted by a Vice-President of the World Bank. 2
But what has occurred in Yugoslavia sets a new record in the abusive
practices of the
Washington-based international financial bureaucracy:
the arrest of a head of State of a debtor nation --demanded by its main
creditors-- has
become "a pre-condition" for the holding of loan
negotiations.
While the 31st of March 2001 was Washington's deadline date for the
arrest of President
Slobodan Milosevic by the DOS government,
another ultimatum was set for transferring the former head of State to
the jurisdiction
of the NATO-sponsored Hague Tribunal (ICTY). In the
words of Secretary of State Colin Powell:
"the US administration's support for an international donors'
conference where
Yugoslavia is hoping for up to $1 billion to help rebuild would
depend on continued progress in full cooperation with the [Hague]
tribunal."3
A State Department spokesman further clarified "that the United States
has the power to
stop the conference from going ahead in the early
summer if Washington is not satisfied."4 Meanwhile, the Hague Tribunal
has threatened
to take the matter before the UN Security Council, if
President Milosevic is not rapidly transferred to its jurisdiction. 5
WITHHOLDING FINANCIAL "AID"
Very timely� At the height of the Yugoslav presidential elections
(September 2000),
"enabling legislation" was rushed through the US
House of Representatives. Washington had forewarned Kostunica --
pursuant to an Act of
Congress (HR 1064)-- that unless his government
fully complied to US diktats, financial "aid" would be withheld. The
IMF and the World
Bank had also been duly notified by their largest
shareholder, namely the US government, that:
"the US Secretary of the Treasury [would] withhold from payment of the
United States
share of any increase in the paid-in capital of [the IMF
and World Bank] an amount equal to the amount of the loan or other
assistance [to
Yugoslavia].6
Meanwhile, Washington had demanded the setting up of an office of the
Hague Tribunal
(ICTY) in Belgrade as well as modifications to the
legal statutes of Yugoslavia. The latter --to be rubber-stamped by the
Parliament--
would place the ICTY Tribunal above the jurisdiction of
Yugoslavia's national legal system. It would also allow the ICTY to
order on NATO's
behest, the arrest of thousands of people on trumped up
charges.
RELEASING KLA TERRORISTS
US officials had also intimated that the prompt release of KLA "freedom
fighters"
serving jail terms in Serbia was to be regarded as an
"additional pre-condition" for the granting of financial assistance:
"State Department officials later told UPI that among other steps the
United
States was looking for, were Yugoslav President Vojislav Kostunica to
begin
returning Albanians captured during the 1999 Kosovo conflict to Kosovo
and for
an acceptance of the war crimes tribunal's jurisdiction inside Serbia
where
numerous indicted suspects still enjoy immunity."7
An "Amnesty Law" was rushed through the Yugoslav parliament barely a
month before
Washington's March 31st deadline.8 While the
victims of the war are persecuted and indicted as war criminals, the
Kostunica regime
--on Washington's instructions-- has released Kosovo
Liberation Army (KLA) criminals (linked to the drug mafias) who
committed atrocities in
Kosovo.
Meanwhile, these criminals have rejoined the ranks of the KLA, now
involved in a new
wave of terrorist assaults in southern Serbia and in
neighboring Macedonia. The evidence amply confirms that these terrorist
attacks are
supported and financed by Washington.9
"ECONOMIC NORMALIZATION"
Without further scrutiny, the Western media touts the holding of a
donors' conference
as "a necessary step" towards "economic
normalization" and the "reintegration" of Yugoslavia into the "family
of nations".
Public opinion is led to believe that the "donors" will "help"
Yugoslavia rebuild. The term "donor" is a misnomer. In fact the donors'
conference is a
meeting of bankers and creditors mainly from the
countries which bombed Yugoslavia. Their intent is to not only to
collect money from
Yugoslavia, but also to gain full control and ownership of
the Yugoslav economy.
Meanwhile, national laws have been revised to facilitate sweeping
privatization.
Serbia's large industrial complexes and public utilities are to
be restructured and auctioned off to foreign capital. In other words,
rather than
"helping Yugoslavia", the donor conference --organized in
close consultation with Washington and NATO headquarters in Brussels--
would set the
stage for the transformation of Yugoslavia into a
colony of the Western military alliance.
Yugoslavia's external debt is in excess of $14 billion of which $5
billion are owed to
the Paris Club (i.e. largely to the governments of NATO
countries) and $3 billion to the London Club. The latter is a syndicate
of private
banks, which in the case of Yugoslavia includes some 400
creditor institutions. The largest part of Yugoslavia's commercial
debt, however, is
held by some 16 (mainly) American and European banks
which are members of an "International Coordinating Committee" (ICC)
headed by America's
Citigroup and Germany's giant WestDeutsche
Landesbank. Other big players in the ICC include J. P. Morgan-Chase and
Merrill Lynch.
The ICC --which operates discretely behind the scenes-- ultimately call
the shots
regarding debt negotiations, privatization and
macro-economic therapy. In turn, the IMF bureaucracy acting on behalf
of both the
commercial and official creditors has called for "a
restructuring of FRY's external debt on appropriate terms" underscoring
the fact that
fresh money can only be approved "following the
regularization of arrears." 10 What this means is that Belgrade would
be obliged to
recognize these debts in full as a condition for the
negotiation of fresh loans as well as settle pending succession issues
regarding the
division of the external debt of the FRY with the
"successor republics."
FICTICIOUS MONEY
While token "reconstruction" loans are envisaged, vast amounts of money
and resources
will be taken out of Yugoslavia. In fact, most of the
promised "reconstruction" money is totally fictitious.
A $208 million 'bridge loan" granted by Switzerland and Norway (January
2001 was used to
reimburse the IMF. In turn, the IMF had granted
$151 million to Belgrade in the form of a so-called "post-conflict
assistance" loan. But
this "aid" was tagged to reimburse Switzerland and
Norway, which had coughed up the money to settle IMF arrears in the
first place:
"The [IMF] Board approved a loan [of] �US$151 million under the IMF's
policy on
emergency post-conflict assistance in support of a
program to stabilize the FRY's economy and help rebuild administrative
capacities. Of
this amount, the [Belgrade] authorities will draw�
US$130 million to repay the bridge loans they received [from
Switzerland and Norway] to
eliminate arrears with the IMF."11
The illusion is conveyed that "money is coming in" and that "the IMF is
helping
Yugoslavia." In fact, what remains after the IMF "has
reimbursed itself" is a meager influx of 21 million dollars. And
broadly the same
fictitious money arrangement has been put in place by the
World Bank, which has ordered that $1.7 billion in arrears "be cleared"
before the
granting of fresh loans.
In this regard, Belgrade will be granted a so-called "loan of
consolidation" from the
World Bank to reimburse the $1,7 billion debt it owes to
the World Bank. Little or no money will actually enter the country. In
the words of
Central Bank governor Mladan Dinkic:
"[this] will pave the way for Yugoslavia's return to the World Bank.
`In the first three
years, we will receive the so-called AIDA status, which the
World Bank gives to the poorest countries� [this] is the most favorable
arrangement
possible, with a longer grace-period and minimum
interest, which will allow our economy to pay off the [$1.7 billion]
debt and create
conditions for receiving new loans".12
More generally, the "reconstruction" money will line the pockets of
international
creditors and multinational corporations (with trinkets for
DOS cronies) while putting the entire Yugoslav economy on the auction
block. Assets will
be sold at rock-bottom prices under IMF-World
Bank supervision. The meager proceeds of forced privatization --in
which only foreign
"investors" will be allowed to bid-- will then be used to
pay back the creditors, who happen to be the same people who are buying
up Yugoslavia's
assets.
And who will appraise the "book value" of Yugoslavia's industrial
assets and supervise
the auction of State property? The large European
and US merchant banks and accounting firms, which also happen to be
acting on behalf of
their corporate clients involved in bidding.
DEADLY ECONOMIC MEDICINE
Fictitious reconstruction money, however, is only granted on condition
Yugoslavia
implements economic "shock therapy." The
donor-sponsored program is predicated on "destruction" rather
than "reconstruction".
Under the disguise of "economic normalization", the
IMF, the World Bank and the London-based European Bank for
Reconstruction and
Development (EBRD) have been given the mandate to
dismantle through bankruptcy and forced privatization what has not yet
been destroyed by
the bombers.
In this process, political terror and "economic terror" go hand in
hand. The evidence
amply confirms that the IMF-World Bank's lethal
economic reforms imposed in more than 150 developing countries have led
to the
impoverishment of millions of people. In a cruel irony,
bitter economic medicine and token financial assistance are presented
as "the rewards"
for transferring President Milosevic to the
jurisdiction of the Hague Tribunal.
While the present IMF program is a "continuation" of the deadly
economic reforms first
imposed on federal Yugoslavia in the 1980s (and
then on its "successor republics"), it promises to be far more
devastating.13
The Group of 17 economists (G-17) --which controls the Ministry of
Finance and
Yugoslavia's Central Bank (NBJ)-- are in permanent liaison
with the IMF, the World Bank and the US Treasury. A "letter of Intent"
outlining in
detail the economic therapy to be imposed on Yugoslavia
by the DOS government had in fact been drawn up in secret negotiations
with the
creditors before the September 2000 presidential
elections. Mladjan Dinkic --who now holds the position of Governor of
the National Bank
of Yugoslavia (NBJ) (Central Bank)-- had stated
that one of the first things they would do under a Kostunica presidency
would be to
implement economic "shock therapy":
"Immediately after taking the office, the new government shall abolish
all types of
subsidies� This measure must be implemented without
regrets or hesitation, since it will be difficult if not impossible to
apply later, in
view of the fact that in the meantime strong lobbies may appear
and do their best to block such measures... This initial step in
economic liberalization
must be undertaken as a "shock therapy" as its radical
nature does not leave space for gradualism of any kind."14
The G-17 does not hide the fact that one of its main objectives
consists in breaking
social resistance to the economic restructuring program:
"Any future democratic regime is likely to face substantial public
resistance to
privatization and the socio-economic reforms that will
accompany it. In the short term, the insolvency and restructuring of
Serbian enterprises
is likely to generate unemployment or wage cuts for
many employees� The servicing of debts and fiscal adjustments are
likely to require cuts
in public expenditure and the introduction of
potentially unpopular new taxes and levies. The purchase of Serbian
firms by wealthy
domestic and foreign investors may also generate
resentment, especially as it will represent a radical break with the
former Yugoslav
tradition of workers' or "social" ownership. Nationalist and
anti-reformist groups are likely to mobilize popular resistance by
exploiting these
problems. This form of political opposition would limit the
scope for introducing effective economic reform and privatization."15.
FREEZING WAGES
The IMF program --put into full swing in the wake of the September 2000
elections--
calls for the adoption of "prudent macroeconomic
policies and bold structural reforms", In IMF lingo, "bold" invariably
means the
application of "shock treatment" while "prudent" means
carefully designed and uncompromising austerity measures.16. Upon
assuming office, the
Kostunica government --under IMF instructions--
has deregulated the prices of basic consumer goods and frozen the wages
of working
people.17 A new Labor Law setting the minimum
wage at 35 percent of the average wage was rubber-stamped by the
Yugoslav parliament. In
other words, with rising prices coupled with the
deindexation of wages ordered by the IMF, the new legislation allows
the real minimum
wage to slide to abysmally low levels.18
Credit has been frozen to local businesses and farmers. Interest rates
have already
skyrocketed. With the end of the economic sanctions,
the IMF has also demanded that import barriers be removed to facilitate
the dumping of
surplus commodities on the domestic market
leading to the bankruptcy of domestic producers. In turn, energy prices
are to be
totally deregulated prior to the privatization of public
utilities, State oil refineries, coal mining and electricity.
In turn, drastic cuts in the social security and pension funds of the
Republic of Serbia
are envisaged, which would virtually lead to their
collapse (See IMF Program, op cit). The restructuring of social
programs is a carbon
copy of that imposed in neighboring Bulgaria, where
pensions paid out to senior citizens plummeted in 1997 to $3 as month.19
ENGINEERING THE COLLAPSE OF THE DINAR
The most lethal component of the IMF program, however, is the so-
called "managed float"
of the exchange rate which --according to IMF
Deputy Managing Director Stanley Fischer-- is implemented "to better
reflect market
conditions". 20
Yugoslavia's central bank foreign exchange reserves are of the order of
$500 million,
the external debt is in excess of $14 billion. Under
agreement with the IMF, money (in the form of "precautionary loan")
would be granted to
replenish the foreign exchange reserves of the
Central Bank with a view to supporting the dinar. Moreover following
the Brazilian
pattern, the dinar would also be artificially propped up by
extensive government borrowing from private banking institutions at
exorbitant interest
rates thereby fuelling the internal public debt. 21
In the absence of exchange controls restricting capital flight, central
bank foreign
exchange reserves would eventually be depleted. In other
words, when the "borrowed reserves" are no longer there to prop up the
currency, the
dinar collapses. In the logic of the "managed float", the
dollars borrowed under an IMF precautionary fund arrangement, would be
reappropriated by
international creditors and speculators once the
dinar slides, leading to a further expansion of Yugoslavia's external
debt.
In fact, this policy is largely instrumental in triggering
hyperinflation. The national
currency would become totally worthless. In other words,
prices would go sky high following the collapse of the national
currency. In turn, wages
would be frozen on IMF instructions as part of an
"anti-inflationary program" and the standard of living would plummet to
even lower
levels. And Yugoslavs are already impoverished with two
thirds of the population (according to UN sources acknowledged in the
IMF report) with
per capita incomes below 2 dollars a day.
It�s the same financial scam that the IMF applied in Korea, Indonesia,
Russia, Brazil
and more recently Turkey.22 In this process, various
speculative instruments (including "short selling" of currencies) were
applied by
international banks and financial institutions to trigger the
collapse of national currencies. In Korea, debts spiraled in the wake
of the currency
crisis. As a result, the entire economy was put on the
auction block and several of Korea's powerful conglomerates were taken
over by American
capital at ridiculously low prices.
In Russia, the ruble became totally worthless following the
implementation of an IMF
program. The float of the ruble applied in 1992 under
IMF advice was conducive in less than a year to a one hundred fold
(9900%) increase in
consumer prices. Nominal earnings increased ten
fold (900%), the collapse in real wages in 1992 was of the order of 86
percent. In
subsequent years, real earnings continued to plummet
precipitating the descent of the Russian people into extreme poverty.23
More generally, the IMF program creates a framework for collecting as
well as enlarging
the debt through the manipulation of currency
markets. It is worth mentioning, in this regard, that barely a few
weeks before the
arrest of President Milosevic, Turkey was subjected
--following the destabilization of its currency-- to the most brutal
economic reforms
leading virtually over night to the collapse of the standard
of living. Under IMF ministrations, interest rates in Turkey had shot
up to a modest
550%.
WAR DAMAGES
The IMF has acknowledged in its report that the damage caused by NATO
bombings is of the
order of 40 billion dollars.24 This figure does
not take into account the losses in Yugoslavia's GDP resulting from
years of economic
sanctions, nor does it account for the loss of human
life and limb, the human suffering inflicted on an entire population,
the toxic
radiation from depleted uranium and the environmental
devastation amply documented by Yugoslav and international sources. 25
Ironically, this
study on war damages was coordinated by G-17
Mladjan Dinkic and Miroslav Labus who now hold key positions in the DOS
government.
Since his appointment to the position of central
bank governor, Dinkic has not said a word about "war damages" in his
discussions with
Western creditors. 26
LUCRATIVE RECONSTRUCTION CONTRACTS
No "compensation" for war damages let alone debt relief has been
contemplated. In a
cruel twist, a large part of the fresh loans --which
Yugoslavia will eventually have to reimburse-- will be used to rebuild
what was
destroyed by the bombers. Moreover, under the World
Bank-EBRD system of international tender, these loans are in fact
tagged to finance
lucrative contracts with construction companies from
NATO countries:
"the big winners [are the Western] telecommunications companies,
construction firms,
banks and shipping concerns who can rebuild the
Danube River bridges, power plants and refineries destroyed by NATO
airstrikes. � While
European companies, already busy with Balkan
projects, have a home-court advantage, U.S. companies such as
infrastructure specialists
Brown & Root [a subsidiary of Vice President
Dick Cheney's company Halliburton Oil], AES and General Electric could
get a piece of
the action." 27
And what will these companies do? They will sub-contract will local
firms and/or hire
Yugoslav engineers and workers at wages below one
hundred dollars a month. In other words, the borrowed money promised to
Belgrade for
"reconstruction" will go straight back into the pockets
of Western banks and MNCs. In turn, the so-called "prioritization of
expenditures"
imposed by the IMF means that the State (i.e. Yugoslavia's
own money) would be footing the bill for clearing the Danube and
rebuilding the bridges,
essentially "subsidizing" the interests of foreign
capital. Moreover, IMF "conditionalities" --which require drastic cuts
in social
expenditures-- would prevent the government from allocating its
budget to rebuilding schools and hospitals hit during the bombing
campaign.
(1/2 - continua)
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of the Western
military alliance, working hand in glove with NATO and
the US State Department.
ECONOMIC TERRORISM
by
Michel Chossudovsky
Professor of Economics, University of Ottawa
The International Monetary Fund (IMF) is known to bully developing
countries, imposing
strong doses of "deadly economic medicine" while
saddling governments with spiraling external debts. In complicity with
Washington, the
IMF often meddles in cabinet appointments in debtor
countries. In Korea in the turmoil of the 1997 Asian crisis, the
Finance Minister
--sacked for allegedly "hindering negotiations" with the IMF--
was replaced by a former IMF official.1 In Turkey, also in the wake of
an IMF-style
financial meltdown (March 2001), the Minister of Economy
was substituted by a Vice-President of the World Bank. 2
But what has occurred in Yugoslavia sets a new record in the abusive
practices of the
Washington-based international financial bureaucracy:
the arrest of a head of State of a debtor nation --demanded by its main
creditors-- has
become "a pre-condition" for the holding of loan
negotiations.
While the 31st of March 2001 was Washington's deadline date for the
arrest of President
Slobodan Milosevic by the DOS government,
another ultimatum was set for transferring the former head of State to
the jurisdiction
of the NATO-sponsored Hague Tribunal (ICTY). In the
words of Secretary of State Colin Powell:
"the US administration's support for an international donors'
conference where
Yugoslavia is hoping for up to $1 billion to help rebuild would
depend on continued progress in full cooperation with the [Hague]
tribunal."3
A State Department spokesman further clarified "that the United States
has the power to
stop the conference from going ahead in the early
summer if Washington is not satisfied."4 Meanwhile, the Hague Tribunal
has threatened
to take the matter before the UN Security Council, if
President Milosevic is not rapidly transferred to its jurisdiction. 5
WITHHOLDING FINANCIAL "AID"
Very timely� At the height of the Yugoslav presidential elections
(September 2000),
"enabling legislation" was rushed through the US
House of Representatives. Washington had forewarned Kostunica --
pursuant to an Act of
Congress (HR 1064)-- that unless his government
fully complied to US diktats, financial "aid" would be withheld. The
IMF and the World
Bank had also been duly notified by their largest
shareholder, namely the US government, that:
"the US Secretary of the Treasury [would] withhold from payment of the
United States
share of any increase in the paid-in capital of [the IMF
and World Bank] an amount equal to the amount of the loan or other
assistance [to
Yugoslavia].6
Meanwhile, Washington had demanded the setting up of an office of the
Hague Tribunal
(ICTY) in Belgrade as well as modifications to the
legal statutes of Yugoslavia. The latter --to be rubber-stamped by the
Parliament--
would place the ICTY Tribunal above the jurisdiction of
Yugoslavia's national legal system. It would also allow the ICTY to
order on NATO's
behest, the arrest of thousands of people on trumped up
charges.
RELEASING KLA TERRORISTS
US officials had also intimated that the prompt release of KLA "freedom
fighters"
serving jail terms in Serbia was to be regarded as an
"additional pre-condition" for the granting of financial assistance:
"State Department officials later told UPI that among other steps the
United
States was looking for, were Yugoslav President Vojislav Kostunica to
begin
returning Albanians captured during the 1999 Kosovo conflict to Kosovo
and for
an acceptance of the war crimes tribunal's jurisdiction inside Serbia
where
numerous indicted suspects still enjoy immunity."7
An "Amnesty Law" was rushed through the Yugoslav parliament barely a
month before
Washington's March 31st deadline.8 While the
victims of the war are persecuted and indicted as war criminals, the
Kostunica regime
--on Washington's instructions-- has released Kosovo
Liberation Army (KLA) criminals (linked to the drug mafias) who
committed atrocities in
Kosovo.
Meanwhile, these criminals have rejoined the ranks of the KLA, now
involved in a new
wave of terrorist assaults in southern Serbia and in
neighboring Macedonia. The evidence amply confirms that these terrorist
attacks are
supported and financed by Washington.9
"ECONOMIC NORMALIZATION"
Without further scrutiny, the Western media touts the holding of a
donors' conference
as "a necessary step" towards "economic
normalization" and the "reintegration" of Yugoslavia into the "family
of nations".
Public opinion is led to believe that the "donors" will "help"
Yugoslavia rebuild. The term "donor" is a misnomer. In fact the donors'
conference is a
meeting of bankers and creditors mainly from the
countries which bombed Yugoslavia. Their intent is to not only to
collect money from
Yugoslavia, but also to gain full control and ownership of
the Yugoslav economy.
Meanwhile, national laws have been revised to facilitate sweeping
privatization.
Serbia's large industrial complexes and public utilities are to
be restructured and auctioned off to foreign capital. In other words,
rather than
"helping Yugoslavia", the donor conference --organized in
close consultation with Washington and NATO headquarters in Brussels--
would set the
stage for the transformation of Yugoslavia into a
colony of the Western military alliance.
Yugoslavia's external debt is in excess of $14 billion of which $5
billion are owed to
the Paris Club (i.e. largely to the governments of NATO
countries) and $3 billion to the London Club. The latter is a syndicate
of private
banks, which in the case of Yugoslavia includes some 400
creditor institutions. The largest part of Yugoslavia's commercial
debt, however, is
held by some 16 (mainly) American and European banks
which are members of an "International Coordinating Committee" (ICC)
headed by America's
Citigroup and Germany's giant WestDeutsche
Landesbank. Other big players in the ICC include J. P. Morgan-Chase and
Merrill Lynch.
The ICC --which operates discretely behind the scenes-- ultimately call
the shots
regarding debt negotiations, privatization and
macro-economic therapy. In turn, the IMF bureaucracy acting on behalf
of both the
commercial and official creditors has called for "a
restructuring of FRY's external debt on appropriate terms" underscoring
the fact that
fresh money can only be approved "following the
regularization of arrears." 10 What this means is that Belgrade would
be obliged to
recognize these debts in full as a condition for the
negotiation of fresh loans as well as settle pending succession issues
regarding the
division of the external debt of the FRY with the
"successor republics."
FICTICIOUS MONEY
While token "reconstruction" loans are envisaged, vast amounts of money
and resources
will be taken out of Yugoslavia. In fact, most of the
promised "reconstruction" money is totally fictitious.
A $208 million 'bridge loan" granted by Switzerland and Norway (January
2001 was used to
reimburse the IMF. In turn, the IMF had granted
$151 million to Belgrade in the form of a so-called "post-conflict
assistance" loan. But
this "aid" was tagged to reimburse Switzerland and
Norway, which had coughed up the money to settle IMF arrears in the
first place:
"The [IMF] Board approved a loan [of] �US$151 million under the IMF's
policy on
emergency post-conflict assistance in support of a
program to stabilize the FRY's economy and help rebuild administrative
capacities. Of
this amount, the [Belgrade] authorities will draw�
US$130 million to repay the bridge loans they received [from
Switzerland and Norway] to
eliminate arrears with the IMF."11
The illusion is conveyed that "money is coming in" and that "the IMF is
helping
Yugoslavia." In fact, what remains after the IMF "has
reimbursed itself" is a meager influx of 21 million dollars. And
broadly the same
fictitious money arrangement has been put in place by the
World Bank, which has ordered that $1.7 billion in arrears "be cleared"
before the
granting of fresh loans.
In this regard, Belgrade will be granted a so-called "loan of
consolidation" from the
World Bank to reimburse the $1,7 billion debt it owes to
the World Bank. Little or no money will actually enter the country. In
the words of
Central Bank governor Mladan Dinkic:
"[this] will pave the way for Yugoslavia's return to the World Bank.
`In the first three
years, we will receive the so-called AIDA status, which the
World Bank gives to the poorest countries� [this] is the most favorable
arrangement
possible, with a longer grace-period and minimum
interest, which will allow our economy to pay off the [$1.7 billion]
debt and create
conditions for receiving new loans".12
More generally, the "reconstruction" money will line the pockets of
international
creditors and multinational corporations (with trinkets for
DOS cronies) while putting the entire Yugoslav economy on the auction
block. Assets will
be sold at rock-bottom prices under IMF-World
Bank supervision. The meager proceeds of forced privatization --in
which only foreign
"investors" will be allowed to bid-- will then be used to
pay back the creditors, who happen to be the same people who are buying
up Yugoslavia's
assets.
And who will appraise the "book value" of Yugoslavia's industrial
assets and supervise
the auction of State property? The large European
and US merchant banks and accounting firms, which also happen to be
acting on behalf of
their corporate clients involved in bidding.
DEADLY ECONOMIC MEDICINE
Fictitious reconstruction money, however, is only granted on condition
Yugoslavia
implements economic "shock therapy." The
donor-sponsored program is predicated on "destruction" rather
than "reconstruction".
Under the disguise of "economic normalization", the
IMF, the World Bank and the London-based European Bank for
Reconstruction and
Development (EBRD) have been given the mandate to
dismantle through bankruptcy and forced privatization what has not yet
been destroyed by
the bombers.
In this process, political terror and "economic terror" go hand in
hand. The evidence
amply confirms that the IMF-World Bank's lethal
economic reforms imposed in more than 150 developing countries have led
to the
impoverishment of millions of people. In a cruel irony,
bitter economic medicine and token financial assistance are presented
as "the rewards"
for transferring President Milosevic to the
jurisdiction of the Hague Tribunal.
While the present IMF program is a "continuation" of the deadly
economic reforms first
imposed on federal Yugoslavia in the 1980s (and
then on its "successor republics"), it promises to be far more
devastating.13
The Group of 17 economists (G-17) --which controls the Ministry of
Finance and
Yugoslavia's Central Bank (NBJ)-- are in permanent liaison
with the IMF, the World Bank and the US Treasury. A "letter of Intent"
outlining in
detail the economic therapy to be imposed on Yugoslavia
by the DOS government had in fact been drawn up in secret negotiations
with the
creditors before the September 2000 presidential
elections. Mladjan Dinkic --who now holds the position of Governor of
the National Bank
of Yugoslavia (NBJ) (Central Bank)-- had stated
that one of the first things they would do under a Kostunica presidency
would be to
implement economic "shock therapy":
"Immediately after taking the office, the new government shall abolish
all types of
subsidies� This measure must be implemented without
regrets or hesitation, since it will be difficult if not impossible to
apply later, in
view of the fact that in the meantime strong lobbies may appear
and do their best to block such measures... This initial step in
economic liberalization
must be undertaken as a "shock therapy" as its radical
nature does not leave space for gradualism of any kind."14
The G-17 does not hide the fact that one of its main objectives
consists in breaking
social resistance to the economic restructuring program:
"Any future democratic regime is likely to face substantial public
resistance to
privatization and the socio-economic reforms that will
accompany it. In the short term, the insolvency and restructuring of
Serbian enterprises
is likely to generate unemployment or wage cuts for
many employees� The servicing of debts and fiscal adjustments are
likely to require cuts
in public expenditure and the introduction of
potentially unpopular new taxes and levies. The purchase of Serbian
firms by wealthy
domestic and foreign investors may also generate
resentment, especially as it will represent a radical break with the
former Yugoslav
tradition of workers' or "social" ownership. Nationalist and
anti-reformist groups are likely to mobilize popular resistance by
exploiting these
problems. This form of political opposition would limit the
scope for introducing effective economic reform and privatization."15.
FREEZING WAGES
The IMF program --put into full swing in the wake of the September 2000
elections--
calls for the adoption of "prudent macroeconomic
policies and bold structural reforms", In IMF lingo, "bold" invariably
means the
application of "shock treatment" while "prudent" means
carefully designed and uncompromising austerity measures.16. Upon
assuming office, the
Kostunica government --under IMF instructions--
has deregulated the prices of basic consumer goods and frozen the wages
of working
people.17 A new Labor Law setting the minimum
wage at 35 percent of the average wage was rubber-stamped by the
Yugoslav parliament. In
other words, with rising prices coupled with the
deindexation of wages ordered by the IMF, the new legislation allows
the real minimum
wage to slide to abysmally low levels.18
Credit has been frozen to local businesses and farmers. Interest rates
have already
skyrocketed. With the end of the economic sanctions,
the IMF has also demanded that import barriers be removed to facilitate
the dumping of
surplus commodities on the domestic market
leading to the bankruptcy of domestic producers. In turn, energy prices
are to be
totally deregulated prior to the privatization of public
utilities, State oil refineries, coal mining and electricity.
In turn, drastic cuts in the social security and pension funds of the
Republic of Serbia
are envisaged, which would virtually lead to their
collapse (See IMF Program, op cit). The restructuring of social
programs is a carbon
copy of that imposed in neighboring Bulgaria, where
pensions paid out to senior citizens plummeted in 1997 to $3 as month.19
ENGINEERING THE COLLAPSE OF THE DINAR
The most lethal component of the IMF program, however, is the so-
called "managed float"
of the exchange rate which --according to IMF
Deputy Managing Director Stanley Fischer-- is implemented "to better
reflect market
conditions". 20
Yugoslavia's central bank foreign exchange reserves are of the order of
$500 million,
the external debt is in excess of $14 billion. Under
agreement with the IMF, money (in the form of "precautionary loan")
would be granted to
replenish the foreign exchange reserves of the
Central Bank with a view to supporting the dinar. Moreover following
the Brazilian
pattern, the dinar would also be artificially propped up by
extensive government borrowing from private banking institutions at
exorbitant interest
rates thereby fuelling the internal public debt. 21
In the absence of exchange controls restricting capital flight, central
bank foreign
exchange reserves would eventually be depleted. In other
words, when the "borrowed reserves" are no longer there to prop up the
currency, the
dinar collapses. In the logic of the "managed float", the
dollars borrowed under an IMF precautionary fund arrangement, would be
reappropriated by
international creditors and speculators once the
dinar slides, leading to a further expansion of Yugoslavia's external
debt.
In fact, this policy is largely instrumental in triggering
hyperinflation. The national
currency would become totally worthless. In other words,
prices would go sky high following the collapse of the national
currency. In turn, wages
would be frozen on IMF instructions as part of an
"anti-inflationary program" and the standard of living would plummet to
even lower
levels. And Yugoslavs are already impoverished with two
thirds of the population (according to UN sources acknowledged in the
IMF report) with
per capita incomes below 2 dollars a day.
It�s the same financial scam that the IMF applied in Korea, Indonesia,
Russia, Brazil
and more recently Turkey.22 In this process, various
speculative instruments (including "short selling" of currencies) were
applied by
international banks and financial institutions to trigger the
collapse of national currencies. In Korea, debts spiraled in the wake
of the currency
crisis. As a result, the entire economy was put on the
auction block and several of Korea's powerful conglomerates were taken
over by American
capital at ridiculously low prices.
In Russia, the ruble became totally worthless following the
implementation of an IMF
program. The float of the ruble applied in 1992 under
IMF advice was conducive in less than a year to a one hundred fold
(9900%) increase in
consumer prices. Nominal earnings increased ten
fold (900%), the collapse in real wages in 1992 was of the order of 86
percent. In
subsequent years, real earnings continued to plummet
precipitating the descent of the Russian people into extreme poverty.23
More generally, the IMF program creates a framework for collecting as
well as enlarging
the debt through the manipulation of currency
markets. It is worth mentioning, in this regard, that barely a few
weeks before the
arrest of President Milosevic, Turkey was subjected
--following the destabilization of its currency-- to the most brutal
economic reforms
leading virtually over night to the collapse of the standard
of living. Under IMF ministrations, interest rates in Turkey had shot
up to a modest
550%.
WAR DAMAGES
The IMF has acknowledged in its report that the damage caused by NATO
bombings is of the
order of 40 billion dollars.24 This figure does
not take into account the losses in Yugoslavia's GDP resulting from
years of economic
sanctions, nor does it account for the loss of human
life and limb, the human suffering inflicted on an entire population,
the toxic
radiation from depleted uranium and the environmental
devastation amply documented by Yugoslav and international sources. 25
Ironically, this
study on war damages was coordinated by G-17
Mladjan Dinkic and Miroslav Labus who now hold key positions in the DOS
government.
Since his appointment to the position of central
bank governor, Dinkic has not said a word about "war damages" in his
discussions with
Western creditors. 26
LUCRATIVE RECONSTRUCTION CONTRACTS
No "compensation" for war damages let alone debt relief has been
contemplated. In a
cruel twist, a large part of the fresh loans --which
Yugoslavia will eventually have to reimburse-- will be used to rebuild
what was
destroyed by the bombers. Moreover, under the World
Bank-EBRD system of international tender, these loans are in fact
tagged to finance
lucrative contracts with construction companies from
NATO countries:
"the big winners [are the Western] telecommunications companies,
construction firms,
banks and shipping concerns who can rebuild the
Danube River bridges, power plants and refineries destroyed by NATO
airstrikes. � While
European companies, already busy with Balkan
projects, have a home-court advantage, U.S. companies such as
infrastructure specialists
Brown & Root [a subsidiary of Vice President
Dick Cheney's company Halliburton Oil], AES and General Electric could
get a piece of
the action." 27
And what will these companies do? They will sub-contract will local
firms and/or hire
Yugoslav engineers and workers at wages below one
hundred dollars a month. In other words, the borrowed money promised to
Belgrade for
"reconstruction" will go straight back into the pockets
of Western banks and MNCs. In turn, the so-called "prioritization of
expenditures"
imposed by the IMF means that the State (i.e. Yugoslavia's
own money) would be footing the bill for clearing the Danube and
rebuilding the bridges,
essentially "subsidizing" the interests of foreign
capital. Moreover, IMF "conditionalities" --which require drastic cuts
in social
expenditures-- would prevent the government from allocating its
budget to rebuilding schools and hospitals hit during the bombing
campaign.
(1/2 - continua)
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