The results of Serbia's 2012 elections, which saw the incumbent pro-European administration ousted from power by considerably more nationalistic candidates with ties to Serbia's wartime leadership, were greeted with dismay in many countries. But rather than reverting to the bellicose rhetoric of the 1990s, as some had feared, Serbia's new leaders are deploying a strategy of pragmatism in tackling the country's most enduring issues.
Boris Tadic and his Democratic Party (DS) were replaced by Tomislav Nikolic, a former extreme nationalist, who was sworn in as president in June, and Ivica Dacic, the former spokesman of Slobodan Milosevic, who became prime minister in July.
During its first six months the new administration has pursued the same foreign policy as the last government: it has continued Serbia's bid to become a member of the European Union; Nikolic, though expressing his love of Russia, has not embarked on an overtly pro-Russian foreign policy; meanwhile, Aleksandar Vucic, Serbia's defence minister, has actually been consolidating ties with the United States and its military.
However, the new government faces considerable challenges if it is to make meaningful progress in dealing with long-standing issues and avoid a double-dip recession. To this end, key ministers have been allotted responsibility for Serbia's most enduring issues: Dacic has been charged with looking after the EU-sponsored dialogue with Kosovo, Vucic's main brief is anti-corruption, and Mladjan Dinkic, of the United Regions of Serbia coalition, is in charge of the economy.
Kosovo
The European Union began in 2011 a dialogue that aims to normalise relations between Serbia and Kosovo, and significant early progress was made. Although Serbia has no intention of officially recognising Kosovo's independence, its priority is to find a workable modus vivendi, which it needs in order to move forward with its EU membership plans. It hopes to get the green light to begin full accession talks in June or December.
Upon coming to power, Nikolic said he wanted the bilateral dialogue to focus more on finding a workable and permanent political arrangement between the two nations rather than on technical issues, significant though they may be, such as border management. The surprise is that, not only has this happened, with four meetings so far between Dacic and his opposite number Hashim Thaci, the prime minister of Kosovo, but also that the two clearly get on and are able to do business together. (Thaci is widely believed in Serbia, where he is a much-reviled figure, to have been behind an alleged plot in 1999 to kidnap Serbs and murder them in order to sell their organs - something he has always denied.) In a further sign of progress there are plans for Nikolic to meet Ahtifete Jahjaga, the president of Kosovo, on 6 February in Brussels.
Dacic argues that only this government, with its nationalist credentials, has the ability to strike a lasting deal with the ethnic Albanian leadership of Kosovo. In January the Serbian parliament passed a resolution that outlined Belgrade's aims for the talks, which include - as an opening gambit - seeking autonomy for Serbs who reside within Kosovo.
A week later, in an attempt to demonstrate his tough stance before preparing to make concessions in talks with Thaci, Dacic followed through on a threat to remove a monument to guerrillas killed fighting Serbian security forces in the predominantly ethnic Albanian Presevo Valley region of south Serbia in a rebellion which ended in 2001. The memorial had been built in front of Presevo's town hall. Angry Kosovars then responded by smashing dozens of Serbian gravestones in Kosovo.
Dacic's personal preference would probably be to partition Kosovo, which would mean keeping the Serbian-inhabited north and even giving Kosovo part of the Presevo Valley in exchange. However, this is not on the table at the moment, as Western policymakers worry that this would fuel separatist demands by Serbs in Bosnia and Albanians in Macedonia.
Tackling corruption
One key EU demand is that Serbia, like all the western Balkan nations, cracks down on organised crime and corruption. Dacic's cooperation on Kosovo then is motivated both by national and personal interest. While helping to move Serbia forward, Dacic is hoping to prove himself an indispensable interlocutor in the eyes of the EU and the US, which might come to his defence were he to fall under pressure to quit. Dacic was interior minister in the last government (a post he retains), but many in that government are believed to have prospered to an unusual degree.
One reason for his prudence is that Vucic, now in control of the security services, is making great and popular strides in advancing the anti-corruption agenda. Several important figures from the previous administration are now under investigation, and on 12 December Serbia's best-known tycoon Miroslav Miskovic and his son were arrested on suspicion of fraud. Vucic claimed that at least 20 politicians had been on Miskovic's payroll.
Near neighbours
Maintaining good neighbourly relations is another key element of Serbia's EU integration project. Under Tadic, relations with Bosnia and Croatia improved significantly, but there have been setbacks since the change of government in Serbia.
In November, two Croatian generals who had been convicted of war crimes against Serbs were acquitted on appeal by the United Nations International Criminal Tribunal for the former Yugoslavia. This proved a bitter blow for Serbia as it means that the court has convicted no Croats of crimes against Serbs in Croatia during the 1990s.
The decision fuelled a popular belief in Serbia that the tribunal is a kangaroo court whose main aim has only been to punish Serbs, and not those that Serbs believe were guilty of crimes against them. Later in November, Ramush Haradinaj, a former Kosovo prime minister who had been charged with the murders of Serbs and others, was also released on appeal.
The acquittal of the Croatian generals was greeted with euphoric triumphalism in Croatia, where it was interpreted as meaning that the national war of independence in the 1990s was now deemed to be without 'original sin'. Dacic objected to the verdict and the celebrations, but cautioned against letting 'too much ice build up' in what he said was a cold war between the two countries. Zoran Milanovic, the Croatian prime minister, appeared to agree and his visit to Belgrade in January signalled an attempt to reset relations.
Both have good reason to want to do this. Croatia is set to join the EU on 1 July and its leaders see a strategic advantage in accelerating the accession of the other western Balkan countries. Serbia, for its part, does not want its progress to be held up by a hostile neighbour, just as Slovenia slowed up Croatia's accession and Greece has stopped that of Macedonia. In fact, there are fears in the region that Slovenia's government might collapse, in the wake of corruption allegations concerning Prime Minister Janez Jansa, before its parliament can ratify Croatia's accession treaty.
Visa regime
A further test for Serbia's relations with the EU concerns the highly popular regime, established in 2009, under which Serbs are permitted to travel to Europe's 26-member Schengen zone without the need for a visa. Legal mechanisms are being prepared by the EU to enable the visa-free regime to be easily suspended. The problem has been that mostly poor Serbian Roma have been travelling to countries that take months, rather than weeks, to process their applications for asylum. While they wait, they live off benefits designed for genuine asylum seekers who, unlike them, might have a realistic chance of having their applications accepted.
The four main target countries for the Roma are Germany, Sweden, Belgium and Luxembourg. From January to October 2012, 10,412 Serbian citizens applied for asylum in Germany alone, making them the largest single nationality to do so. Some 95% were estimated to be Roma and their chances of being granted asylum are almost nil.
While ministers in the countries affected have demanded that Serbia clamp down on criminal trafficking networks, no crime has actually been committed. It is not illegal to take a bus to Germany and ask for asylum. It would, however, be illegal for Serbia to stop its citizens from travelling. The reason that many other countries with Balkan links, for example Austria, are far less affected by this problem is that they deal with applicants from 'safe countries of origin' extremely swiftly. Those countries that take longer to process applications have become magnets for people who can live better off their benefits for a few months than they can by staying at home.
But instead of changing the way they handle asylum applicants from these safe countries of origin, there is a high risk that interior ministers from the destination countries will insist that visas are re-imposed for Serbs. The result would engender massive bitterness against both the EU and the Roma population.
One way to deter Serbian Roma from applying to other countries for asylum would be to improve their economic conditions, but this has proved hard enough within EU countries like the Czech and Slovak republics, Romania and Bulgaria, let alone the poorer Balkans countries outside the EU.
Time to deliver
In common with much of the rest of the region, Serbia is facing a double-dip recession. Modest recovery of 1.6% of GDP in 2011 is believed to have been cancelled out by a 2% contraction in 2012, though growth of 2% is expected in 2013. Unemployment is at 22.4%, and the economy is highly dependent on the fortunes of the eurozone. Foreign investment in Serbia plummeted in 2012. One bright spot, however, is a projected expansion of production during 2013 at the Fiat car plant in central Serbia. Work has also begun on the South Stream pipeline which will bring Russian gas to Western Europe via Serbia, as well as a gas connection with Bulgaria, which is set to pass through areas of Serbia whose homes and industry have never had access to gas, hopefully enabling a renaissance of some industry there.
By the time of the next election, Nikolic, Dacic, Vucic and Dinkic will need to have delivered results not just on corruption and Kosovo, but also in terms of jobs, education and health. Despite discussions of a possible early general election sometime in 2013, the DS is not in a position to mount a serious challenge to their leadership. Tadic has been deposed as party leader and replaced by Dragan Djilas, the popular mayor of Belgrade. He wants to remain mayor but he can only do so with the support of Dacic's party, with which he is in coalition at the local level. Thus it is hard for him to be the government's greatest critic at the same time.
Serbia occupies a key place in the geopolitics of the Balkans. Almost 14 years after the end of the Yugoslav wars, moving the country forward remains a slow and painful task.