February 11, 2010 / 6:32 PM / 10 years ago

Bosnia region "faces collapse" over veterans' demands: PM

SARAJEVO (Reuters) - Unless war veterans accept laws toughening the criteria to receive state benefit payments, Bosnia’s Muslim-Croat region will face economic collapse, its prime minister warned on Thursday.

Bosnian riot police scuffle with former soldiers outside the parliament during a protest in Sarajevo, October 2, 2009. REUTERS/Danilo Krstanovic

Loans by the International Monetary Fund and the World Bank, which are already planned in the 2010 budgets of Bosnia’s two regions, may be lost if the Muslim-Croat federation fails to pass the disputed legislation by end of this month.

“By rejecting the reform laws, we can expect economic collapse and a disastrous situation for all,” Federation Prime Minister Mustafa Mujezinovic said in reaction to parliament’s refusal to discuss the laws in an emergency procedure for fear of triggering veterans’ protests.

“We shall have to make overall cuts, primarily cuts of wages of police, administration and all other budget beneficiaries,” Mujezinovic told a news conference called together with the finance and veterans’ rights ministers.

Diplomats and experts worry that instability in Bosnia could slow the entire region’s path toward European Union membership.

The World Bank set a February 26 deadline for the region to pass laws better targeting cash transfers to the most needy, to release its $126 million loan for budget support and social sector reform.

The IMF also made conditional the release of the second installment of its 1.2 billion-euro ($1.66 billion) standby loan for Bosnia on the adoption of the laws and other conditions.

If the federation parliament fails to pass the laws, the political situation in Bosnia may deteriorate since the country’s other region, the Serb Republic, will also lose funds even though it has met the lenders’ terms.

“This is the matter of the survival of the state,” Mujezinovic warned. “One region has fulfilled the conditions, the other has not.”

Both regions face financial strain because of the global economic crisis and badly need foreign cash.

The influential veterans’ groups strongly oppose the laws they fear will reduce benefits and could cause social unrest in a year of presidential and parliamentary elections.

“We have never had a more radical situation with veterans,” said Zahid Crnkic, the minister for veterans’ rights who is often accused of being a traitor by fellow wartime soldiers. “I suppose it is because of the forthcoming elections.”

Finance Minister Vjekoslav Bevanda said without international lending, the federation budget would have to be cut by 335 million Bosnian marka ($235 million). He added that the European Bank for Reconstruction and Development may also suspend its planned programs in Bosnia.

Serb Republic Prime Minister Milorad Dodik has warned of political troubles if his region loses the money because of the federation. “If the IMF standby deal is blocked, we shall have a dramatic situation here in Bosnia. It will cause political problems,” Dodik told state television.

Editing by Adam Tanner and Robin Pomeroy

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