YUGOSLAVIA / FEDERATION AT RISK : Nationalism-Based Infighting Imperiling Economic Gains

Apprehension is growing among economists and Western diplomats that Yugoslavia’s economic reform program, which has achieved at least limited success in beating back inflation and stabilizing the currency, may be running up against the brick wall of Yugoslav nationalism.

The reform plan introduced by federal Prime Minister Ante Markovic, elected in 1989, has been praised by Yugoslavs for its success in curbing inflation, which exceeded 2,600% a year when he took over. It is now running at about 37%. Also, he halted an accelerating slide in the value of the currency, the dinar, by pegging it to the German mark.

But Markovic’s ambitious program, which included legal changes to provide the basis for a market economy, with private, state and mixed ownership, is foundering amid competing nationalist interests.

“It’s out of Markovic’s hands now,” a Western economist said. “Its success depends on the Yugoslav republics’ getting together and not slitting each other’s throats.”

Strong nationalistic tendencies have erupted throughout Eastern Europe in the aftermath of last year’s revolution against Communist rule.

Yugoslavia is having an especially difficult time with its nationality problems. Its federation of six republics and two more or less autonomous regions is an uneasy alliance at best, checkered by a bitter history. And now, in the key republic of Serbia, the nationalist issue is being used as a device for socialists to cling to power, a reversal of the pattern in the rest of Eastern Europe.

Two of Yugoslavia’s most progessive republics, Slovenia and Croatia, have elected non-Communist centrist governments, pledging accelerated economic reforms, human rights and new constitutions that would give their republics increased autonomy from the federal government in Belgrade. In particular, Slovenia and Croatia hope to reduce the obstructionist influence of Serbia in the federation.

The Serbs, the largest national grouping (about 22% of the total Yugoslav population), are resisting any diminution of federal authority, seeing it as a reduction of their power in the federation.

The Slovenes and Croats, in turn, are openly discussing either independence or a looser confederation, and both view Serbia as the primary villain in the present turmoil.

Serbia is likely to hold elections later this year. But, although the Socialist Party of Serbia seems to be losing popularity, its leading figure, Serbian President Slobodan Milosevic, continues to command a wide following, based primarily on his appeal to nationalist sympathies.

Increasingly, labor unrest in Serbia has taken on political overtones, with strikes turning into anti-Markovic demonstrations or nationalist attacks against ethnic Albanians of the Kosovo region. Kosovo has been under Serbian administrative control since last spring, when the Serbian government abolished the autonomy granted to the province in 1974.

The festering unrest in Kosovo, with its allegations of human rights violations by the Serbian government, has tried the patience of other republics, particularly Slovenia and Croatia, which have withdrawn their contingents from the federal peacekeeping forces in the region.

Milosevic’s once well-tended image as a Communist reformer has faded. His critics contend that he has relied on nationalist issues to deflect attention from his failure to improve the economy or introduce significant reforms. The unrest has now spread to a Serbian enclave in Croatia.

“Milosevic was completely unaware that communism was on the way out,” said Vladimir Gligorov, a leader of the opposition Serbian Democratic Party. “He depended on the Communist Party, and then the party disintegrated around him, so he is left with the nationalist issue.”