COMMENT: EIB sweetners enough to convince Serbia about EU?

By Simon Warburton | 31 January 2011

It seems Europe is doing everything possible to sweeten the accession of Serbia to its 27-strong political club - but the population may be having second thoughts.

The news that Fiat and its Serbian joint venture partners have secured a loan of up to EUR500m (US$686m) from the European Investment Bank (EIB) is the latest in a long line of financial support that has seen the Luxembourg bankers provide a staggering EUR6.1bn in cash to the Western Balkans in the past ten years.

Serbia has clearly endured much following the catastrophic Balkan wars of the 1990s - along with its neighbours - not the least of which was the NATO action some years back that pitted some western powers against the government in Belgrade.

But although Serbia is starting to come in from the cold - and today's announcement certainly cements that feeling even more - are its people ready to embrace the EU club that some might argue is starting to become unwieldy at nearly 30 members?

The director of the Serbian government's EU Integration Office Milica Delevic, recently noted a poll last month showed popular support for the country's EU membership had dropped to 57%. This she argued was "not surprising," given a similar trend in neighbouring countries that enjoy even closer ties to Brussels.

But there's an even more interesting observation in the report that notes a "major reservoir" of support comes in the form of 78% of Serbia's citizens who believe reforms should be implemented and that "they are not only a condition for European integration, but for the overall progress of the country."

That sounds like having your EU cake without actually having to sign up to Brussels but the EU - and the EIB - are putting out the flags for Serbian membership not the least of which are automotive loans.

Fiat and its Srbija Automobili Doo colleagues in the joint venture have clearly tapped into a generous fund to develop four and seven-door vehicle production at the Zastava plant at Kragujevac.

It is not exactly clear what the status of the loan to Fiat's joint venture is - standard practice is ask national governments to underwrite such deals - but information from the EIB says that for Candidate Countries and Potential Candidate Countries, the bank will offer lending without a State guarantee.

If Serbia falls into that category, then the EIB must be pretty confident it will get its money back - with interest - from the Fiat JV loan.

But although the automobile industry is clearly benefiting from EU largesse to Serbia - it could be its citizens - some with sharp memories of a few years ago - may be adopting a more cautious approach to becoming part of the club.