January 20, 2014 / 4:19 PM / 4 years ago

Serbia to reconsider labor law in face of union opposition

BELGRADE (Reuters) - Serbia’s government, facing union opposition, said on Monday it would look again at draft legislation to liberalize the labor market, a move likely to further stoke concern among investors over the coalition’s commitment to reform.

Trade unions had called a one-day strike for January 23, angry at proposed changes to working hours and rules on hiring and firing.

After a meeting with union leaders, the government said in a statement that it would form a joint working group with unions and business representatives to “consider the draft labor law, after which it will enter government and parliamentary procedure.”

It gave no time frame.

The new consultations may fuel calls from some in the government for a snap parliamentary election, with the largest party - the Serbian Progressive Party (SNS) - poised to take a decision this week on whether to go to voters in mid-March.

The SNS is riding high in opinion polls and several senior party officials have said a new and stronger mandate would help accelerate the pace of reforms crucial to overhauling an economy suffocated by red tape, a bloated public sector and dozens of loss-making state firms.

With Serbia due to formally begin European Union accession talks on Tuesday, investor interest in the biggest market to emerge from the ashes of federal Yugoslavia is growing.

Economy Minister Sasa Radulovic, an SNS appointee, warned last week that early elections would be preferable to delays in adopting laws on labor, privatization and bankruptcy.

Delays have already cost Serbia a downgrade of its long-term local and foreign currency ratings by Fitch ratings agency last week from BB- to B+, nudging Serbian debt deeper into the speculative category.

Fitch cited a rise in the country’s consolidated budget deficit to 7.1 percent of output and stalled reforms.

Writing by Matt Robinson; Editing by Mike Collett-White

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