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* Legislation raises retirement age for women
* Liberalises labour market to attract investors
* Serbia trying to rein in budget deficit
By Aleksandar Vasovic and Ivana Sekularac
BELGRADE, July 18 The Serbian Parliament adopted the first in a raft of reforms intended to cut spending and attract investors, with measures that liberalise the labour market and raise the retirement age for women.
The government is now expected to move quickly to push through legislation on bankruptcy and privatisation. That will provide a basis for restructuring dozens of loss-making state-run companies.
Serbia is trying to cap a consolidated budget deficit expected to reach 8.5 percent of national output, before it begins loan talks with the International Monetary Fund later this year.
The coalition government is wrestling with how to rein in spending. Lazar Krstic resigned as finance minister on Saturday, saying he did not have the support to make the kind of radical cuts he says Serbia needs to steady its finances.
His replacement, Dusan Vujovic, has advocated a milder cut of 10 percent to pensions and public-sector wages, aimed at reducing the deficit by around 1.4 billion euros ($1.9 billion) over the next three years.
Successive governments since the fall of late Serbian strongman Slobodan Milosevic in 2000 have avoided tackling a bloated and costly public sector.
Prime Minister Aleksandar Vucic, armed with a popular mandate unprecedented since Milosevic's reign in the 1990s, says Serbia can no longer afford to wait.
Investors, however, remain uncertain as to whether he will hold his ground. He faces a potential backlash in a country where the average wage is 280 euros per month and every fifth worker is jobless. Several thousand trade unionists protested on Thursday.
"To have a functioning free-market economy requires the flexibility to fire a bad worker," Nikola Altiparmakov, a member of the Fiscal Council of economic advisors, told state television. "The current law is so rigid and it did not allow that. It is one, but not the only, pre-condition for achieving economic growth and a higher employment rate in the coming years."
The changes cut the costs to employers of hiring and firing and gradually raise the retirement age for women from 60 to 65.
Unionists, however, rallied in central Belgrade on Thursday carrying banners that read, "We want work, not slavery" and "No free workforce".
"It was the state that brought us to starvation, it was the state that allowed thieves to privatise firms, it was the state that failed to restart production and now the workers have to pay the price," said Dejan Petrovic, a 48-year-old metalworker. ($1 = 0.7389 Euros) (Editing by Matt Robinson, Larry King)