February 22, 2010 / 3:29 PM / 7 years ago

Yugoslav war vets bring Bosnia to financial brink

4 Min Read

SARAJEVO (Reuters) - Paying benefits to veterans of the wars that broke up former Yugoslavia hits budgets of all the breakaway states, but none harder than Bosnia, where the problem could cause financial collapse, experts and official say.

Croatia is relatively rich and pays substantial money to its half million veterans of the 1990s wars, Serbia does not pay out to the many who were paramilitaries and Kosovo's war veterans wield considerable political clout.

In all of the countries, veterans' groups are influential and have been closely linked to wartime political elites who awarded them with state payments in return for political support.

But unless a regional parliament in Bosnia passes laws on Tuesday toughening criteria for veterans' payments, it will lose badly needed budget support loans from the World Bank and the International Monetary Fund and likely face financial collapse.

"The future of the fiscal system is uncertain," Marco Mantovanelli, head of the World Bank mission in Bosnia, said.

"Without proposed reforms, there is no fiscal sustainability in sight, particularly in the Federation of Bosnia-Herzegovina."

Bosnia's two regions, the Muslim-Croat federation and the Serb Republic carved from the opposing sides in the war, would have to slash their budgets and, in turn, face social unrest.

The situation is especially risky in the Muslim-Croat federation because about 40 percent of the budget goes for cash payments mainly to war-related categories such as veterans and families of fallen soldiers and the disabled.

Veterans are threatening radical measures if reforms are introduced, but without the IMF and the World Bank cash, state wages and pensions will be cut by about 20 percent, which would likely prompt union and pensioner protests.

"This will be the crisis year, we shall have less money to distribute and more protests to come," Federation Finance Minister Vjekoslav Bevanda said.

Influential Groups

In Croatia, a country of 4.4 million people, about 4.3 percent of Gross Domestic Product goes for welfare benefits -- the highest percentage in Eastern Europe, the World Bank says.

This includes some 501,000 veterans, the War Veterans Ministry said, but Croatia is better able to foot the bill.

"Croatia is richer and more stable than other Balkan countries and its veterans have been pacified with big benefits," an analyst at a major local bank said.

The analyst, who did not want to be named, said the government should cut down the numbers eligible, even though this would take "political will and guts."

The influence of veterans in the European Union candidate state has waned since the last decade when they staged mass protests in support of Croatian generals who had been indicted by the United Nations war crimes tribunal in The Hague.

In Serbia and its ex province of Kosovo, the state pays benefits only to those disabled in fighting and to families of fallen soldiers and civilians, but not to war veterans.

"We don't have such pressure from war veterans as their numbers are considerably smaller compared to neighboring countries," Miro Cavaljuga, Serbia's deputy minister for social affairs, said.

Serbia has fewer veterans to pay because volunteers, such as those who served in paramilitary groups, are not eligible.

In Kosovo, where four out of five prime ministers fought in the war, the impact of around 25,000 veterans is strong as all political parties want their support.

Additional reporting by Zoran Radosavljevic in Zagreb, Aleksandar Vasovic in Belgrade and Fatos Bytyci in Pristina; Editing by Adam Tanner and Michael Roddy

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