For the first time in 12 years, since President Aleksandar Vučić's party has been in power in Serbia, official measures approved in Brussels are sending a clear warning to Serbian authorities: there'll be no more EU funding unless allegations of election fraud are thoroughly investigated.
ADVERTISEMENTGoverned for more than a decade by a national-populist regime, Serbia finds itself at a critical juncture: it's navigating the challenges of economic stability and democratic erosion while relying heavily on trade with the European Union, as well as its pre-accession funds from the bloc.
This reliance shows just how important EU-Serbia relations are, both economically and politically. However, the erosion of democratic norms and accusations of election tampering pose threats to this relationship, aggravating the western Balkan country's vulnerabilities.
The tipping point for overt allegations of creeping authoritarianism in Serbia resulted from the 17 December local election in Belgrade.
The sheer scale of apparent irregularities, such as mass voter migration from other parts of Serbia and neighbouring countries, sparked opposition protests and attracted the withering eye of the European Parliament (EP) and OSCE Office for Democratic Institutions and Human Rights alike.
The European Parliament passed a resolution on 8 February calling for the suspension of EU funding to Serbia if national authorities fail to implement its electoral recommendations and if it's revealed that Serbian authorities committed electoral fraud.
The OSCE report was vaguer than the EP resolution but concluded, among other things, that Serbia's campaign resolutions "fall short of ensuring a level playing field and lack effective enforcement mechanisms, contrary to previous OSCE recommendations".
International institutions are not the only ones who have been critical of the Belgrade government lately.
The most recent Freedom House report ranks Serbia's political rights score at 18 out of a possible 40, placing it among the partly free, hybrid regimes category, with a downward tendency towards authoritarianism.
The score also marks a considerable drop even when comparing it to Serbia's score of 29 back in 2017, when the same regime was in power.
The report elicited criticism from President Aleksandar Vučić during his appearance on the national broadcaster RTS on 2 March, dismissing Serbia's poor Freedom House ranking because "the report was written by Nikola Burazer".
Burazer, a Serbian political scientist and executive editor of news outlet European Western Balkans, denied Vučić's claims that he wrote this particular report.
"They [the Serbian authorities] want to discredit Freedom House through an 'easy target' such as myself," he said.
While Serbian politicians often disregard recommendations outlined in foreign reports, the European Parliament resolution which demands an actual investigation into electoral irregularities and concrete sanctions if Serbia fails to comply with these demands could be cause for concern.
"Serbia did not fulfil its commitments to free and fair elections," the EP said in a press release on the motion being passed.
"If the findings of investigation indicate that the Serbian authorities were directly involved in the voter fraud, MEPs call for EU funding to be suspended on the basis of severe breaches of the rule of law in connection with Serbia’s elections," the parliament said in the motion's conclusion.
Serbia's economy needs the EU
Serbia's economic ties with the EU are substantial, so it's critical for Belgrade to maintain good relations and progress on its way to joining the bloc.
These ties emphasise the risks Serbia faces if it chooses a path of direct conflict with the EU on the question of organising free and fair elections.
According to Eurostat data, in 2021, the EU accounted for approximately 60% of Serbia's total trade in goods, underlining its pivotal role as Serbia's largest trading partner.
ADVERTISEMENTSerbia exported goods worth €11.2 billion to the EU but imported €21.8 billion, resulting in a trade deficit. This shows how much Serbia's economy relies on the EU market.
Moreover, the EU serves as a key source of foreign direct investment (FDI) for Serbia. Over the years, EU companies have invested significantly in Serbia, driving economic growth, job creation, and technology transfer.
Access to EU markets and investment opportunities has been instrumental in fostering Serbia's economic development and integration into global value chains.
However, in recent years, the Serbian government has been trying to position itself to receive substantial FDI from China, which in last year's tally rose to second place right after the EU.
This is part of the Serbian regime's strategy to present itself as having a strong hand, to try and show decision-makers in Brussels that it has some sort of tangible alternative to the EU.
ADVERTISEMENTBefore China, Russia played this role, both politically and through opaque energy and transport infrastructure investments.
However, the potential disruption of trade relations with the EU due to political tensions or democratic backsliding could have dire consequences for Serbia's economy.
Tariff barriers, regulatory hurdles, and reduced market access would impede Serbia's export-oriented industries, particularly manufacturing and agriculture. Furthermore, diminished investor confidence and capital flight could exacerbate economic instability, currency depreciation, and inflationary pressures.
What's more, EU membership offers Serbia access to crucial financial assistance, technical support, and capacity-building programmes: pre-accession funds, such as the Instrument for Pre-Accession Assistance (IPA), facilitate socio-economic development, infrastructure upgrades, and institution-building initiatives.
Enhanced cooperation with EU agencies and institutions meanwhile fosters policy convergence, regulatory harmonisation, and alignment with European standards.
ADVERTISEMENTIf the EU slashed funds for Serbia, it wouldn't have an immediate economic effect but would contribute to the erosion of the current political system, making it more authoritarian, according to Danica Popović, a professor from the Faculty of Economics at the University of Belgrade.
"Those two things [the spheres of economics and politics] are always connected, which would mean that foreign investors will start looking for a more suitable location for their investments," she said. "In other words, Serbia would be set on a path of shutting itself off from the world."
If that happened, Serbia would face higher interest rates for borrowing on the international market, which would further encumber the large public debt already burdening the country, Popović added.
In essence, Serbia's future prosperity and democratic resilience are intricately linked to its relationship with the EU.
While Brussels has taken a more aloof approach in past Serbian elections, it's now got the populist regime in Belgrade and its undemocratic tendencies in its sights.
ADVERTISEMENTFaced with stiff pressure both from international factors and internal opposition, the Serbian government made a last-minute decision to hold new elections in Belgrade at a currently unknown date, still refusing to admit to election fraud or investigate it and claiming that the majority in Belgrade city council is out of reach for the ruling party.
While the EU and the Serbian opposition might consider this a victory, in reality, it's just a first step toward reclaiming Serbia's democracy and ensuring the country's economic future.
