Südosteuropa 57 (2009), H . 2/3, S . 305-328 DEMOCRACY AND MARKET ECONOMY GORDANA BRUSIS Serbia: Reforms under Stress Abstract. This article investigates the quality of democracy, market economy and political management in Serbia, based upon the situation in 2007-2009 . It is argued that Serbia has made impressive progress in democratic and economic reforms since the end of the Milošević regime . The government and all major political actors opposed Kosovo’s declaration of inde- pendence in February 2008, but have respected international law and largely used diplomatic means to promote their position . The global economic crisis has exacerbated existing social divisions and is likely to weaken the societal basis of support for liberal, pro-European parties in the future . These developments have increased the stress under which the ruling political elites have to implement adjustment and reform measures while ensuring the acceptance of reforms in society . Gordana Brusis is a freelance author specializing in Southeast and East European affairs . She obtained a post-doctoral degree in Slavonic Studies from the University of Zagreb and has worked for the Ethnodoc project of the Südost-Institut, Regensburg . Introduction In the period between 2007 and early 2009, Serbia’s democratic and economic development was shaped by numerous significant events: the independence of Kosovo, two parliamentary elections, presidential, local and provincial elec- tions, the signing of a Stabilization and Association Agreement (SAA) with the European Union, and the shock of the global economic and financial crisis . By taking stock of the situation in early 2009 and the preceding two years, the present article investigates the quality of democracy, market economy and political management in Serbia . This article is based on ambitious concepts of “constitutional democracy”, “sustainable market economy” and “strategic man- agement” that have been defined and operationalizedto guide a biannual global expert survey of democracy and market economy conducted by the Bertelsmann Foundation 1. The questions in this survey pertaining to democracy not only refer 1 Cf . Martin Brusis’s contribution to this issue; ertelsmannB Stiftung (ed .), Transformation Index 2010 . Gütersloh 2009, available at <http://www .bertelsmann-transformation-index . de/11 .0 .html>, 14 December 2009 . 306 Gordana Brusis to free and fair elections, but also to the freedom of the media, the rule of law, the institutional, representative and cultural consolidation of democracy, and the state framework of democratic rule . The quality of the market economy is assessed by a set of questions that cover welfare, fairness, environmental and education policies, in addition to the functioning of free markets and property rights . Finally, the questions on strategic management seek to evaluate whether and how political elites are able to develop state capacity, build broad societal support, use external advice, and cooperate with neighbors and in international organizations . The present article argues that Serbia has made impressive progress in adopt- ing democratic and economic reforms since the end of the Milošević regime . Two parliamentary elections, on 21 January 2007 and 11 May 2008, as well as the presidential elections on 3 February 2008 have strengthened the pro-European political forces . Since July 2008, the government led by the “For a European Serbia” alliance has initiated numerous legislative changes and reforms that have contributed to the consolidation of democracy and market economy . How- ever, Kosovo’s process of independence still burdens democratic and political processes in Serbia . The country’s ongoing reformshave come under additional stress due to the global economic crisis that has caused outflows of capital, a sharp decline in foreign trade and a massive depreciation of the Serbian dinar . History and Characteristics of Transformation Serbia’s transition to democracy and a market economy has been fraught with statehood conflicts that led to the disintegration of the former Yugoslavia and caused a series of wars . The toleration and emergence of political plural- ism in the Socialist Federative Republic of Yugoslavia and its six constituent republics brought political elites into power who instrumentalized nationalist ideologies and stereotypes to advance their nation-state projects .2 Led by Slo- bodan Milošević, Serbia’s state socialist party won the first democratic elections in 1990 and sought to retain its political power by re-establishing a centralized federation and blocking economic reform . Irreconcilable aims and nationalist mobilization in Serbia and other Yugoslav republics led to the collapse of the federation and the emergence of Bosnia and Herzegovina, Croatia, Macedonia and Slovenia as independent states . In Bosnia and Herzegovina, Croatia and Slovenia, wars of varied duration and intensity began when the Yugoslav Na- tional Army intervened in the conflicts between the republics’ new leaderships and their ethnic Serb communities . 2 Cf . for example Holm Sundhaussen, Experiment Jugoslawien . Von der Staatsgründung bis zum Staatszerfall . Mannheim et al . 1993 . Serbia 307 Facilitated by the wars and nationalist mobilization, Serbia’s president Milošević was able to establish an authoritarian system in the remaining parts of Yugoslavia that allowed him to remain in power until 2000 . His regime was based on clientelist networks in the state administration, police, military and a state-dominated economy, which allowed him to control the electronic media, to skillfully falsify elections and to effectively fragment and isolate the political opposition .3 Responding to its deepening integration and legitimation crises, the regime increased political repression in Serbia proper and the violent military repression of ethnic Albanians in Kosovo; the country then slid into a full-scale war . NATO air strikes forced the regime to abandon its control over Kosovo and contributed to the demise of Milošević . However, the democratic breakthrough in October 2000 was driven primarily by the united opposition and student protest movements as well as the electorate’s growing discontent with the economic and social situation . The Democratic Opposition of Serbia (Demokratska opozicija Srbije, DOS), a coalition of 18 liberal, social democratic and moderate nationalist parties, won the federal parliamentary and presidential elections as well as the Serbian local and parliamentary elections of 2000 . The opposition leaders Vojislav Koštunica and Zoran Đinđić became federal president and prime minister, respectively . Once the governing coalition had achieved its main aim, the overthrow of the Milošević regime, internal tensions grew over fundamental policy choices . The heterogeneity of the coalition and the assassination of Prime Minister Đinđić in March 2003 limited the government’s capacity to sustain its initially-dynamic policy of economic and political reform . The breakup of the governing coalition necessitated elections in December 2003 that led to the formation of a four-party coalition government headed by Koštunica . The state framework of Serbia has changed several times since the dissolution of communist Yugoslavia . Between 1992 and 2003, Serbia and Montenegro, the two remaining republics of the former Yugoslavia, constituted republics within the Federal Republic of Yugoslavia . In 2003, Serbia and Montenegro replaced this state with a more loosely integrated state union mediated by the European Union . Following a referendum in May 2006, Montenegro became an indepen- dent state and the state union was dissolved . As a consequence of its military defeat in the Kosovo war, Serbia had to accept a UN-led interim administration in Kosovo . This administration has exercised political authority over the territory since 1999, based upon Resolu- tion No . 1244/1999 of the UN Security Council . Serbia’s government and major 3 Cf . for example Thomas Bremer / Nebojša Popov / Heinz-Günther Stobbe (eds .), Serbiens Weg in den Krieg . Kollektive Erinnerung, nationaleFormierung und ideologische Aufrüstung . Berlin 1998; Leonard Cohen, Serpent in the Bosom . The Rise and Fall of Slobodan Milošević . Boulder 2001 . 308 Gordana Brusis political actors interpret this resolution as legally assigning Kosovo to Serbia as the successor state of the state union with Montenegro . Most Kosovo Albanians refused to be citizens of Serbia due to their experience of violent repression and expulsion under the Milošević regime . On 17 February 2008, Kosovo declared its independence, which was subsequently recognized by the major Western states, but opposed by Serbia . Democracy Stateness The Republic of Serbia has the monopoly on the use of force over its terri- tory, except for its formerly autonomous province of Kosovo and Metohija (in the following: Kosovo), the status of which is disputed . Serbia opposed the Kosovar parliament’s declaration of independence in 2008 and sustained its claim on Kosovo . By December 2009, 64 states had recognized Kosovo as an independent state, while the UN Security Council could not agree to recognize Kosovo’s independence . Thus, the status of Kosovo continues to be defined by Resolution No . 1244/1999, which had established a UN mission to exercise political authority over Kosovo . Organized crime is still prominent in Serbia, but its threat to public order and safety has been reduced due to improvements in police organization and capacities