Currency Crisis Takes Toll on Serb Spirits : Economics: With the dinar virtually worthless, food lines grow as rations become scarce. Observers say dictatorship and deprivation lie ahead.

When the wheels of a delivery van screeched to a halt on the Avenue of Serbian Heroes, droopy eyes blinked open and hearts began to race in the stuffy, tranquilized offices of Belgrade’s Economics Institute.

Mail clerks and lettered intellectuals alike dropped what they were doing to rush out onto the sidewalk. Anxious that their biggest investment of the year not suffer in the unloading, they fretted as the van’s driver pushed out their special orders of poultry and each employee’s monthly ration of staples they call their “Bush.”

This would have been a familiar scene five years ago in Moscow or Bucharest, where Communist-era deprivation made the curbside sale of vital foodstuffs a crowd-drawing event. But here in Belgrade, where the average worker lived as well as many in Western Europe until two years ago, food lines, ration cards and charity are further affronts to the already wounded pride of the Serbian nation.

The bottom has fallen out of the Yugoslav economy over the last two weeks, sending mind-boggling hyper-inflation into an unchartable upward spiral and launching the stoic and long-suffering Serbs on an unusual spree of panic buying.

Over the past week, prices have jumped 350% as the government mint cranked out reams of new money to pay farmers for the wheat they have raised. In just one hour last week, between noon and 1 p.m. Wednesday, the German mark--the only monetary frame of reference here--soared against the virtually worthless dinar from 2.5 million to 3.5 million.

“Accountants and cashiers have no way of doing their calculations. There are too many zeros,” complained Belgrade economist Miroljub Labus, predicting that the government will soon have to replace a currency whose largest bill, a 5-million dinar note, is now worth less than $1.

The economy has been stretched and battered by Belgrade’s bank-rolling of two years of war and by the harsh U.N. sanctions imposed 14 months ago to pressure the nationalist leadership to stop fomenting conflict in the Balkans.

But only in the past few weeks has the inflation last calculated at more than 10 billion percent a year shaken the foundation of what is left of the national economy.

In Serbia’s fertile northern province of Vojvodina, private bakers have shuttered their shops for the rest of the summer in protest of government-imposed price controls for bread. And many farmers in the province are refusing to sell freshly harvested wheat for the worthless dinars being printed by the state.

The result is a widespread shortage of the “people’s bread,” the low-quality loaves turned out by state bakeries each morning and sold out to desperate pensioners before most people’s workday begins.

“My family never used to eat much bread. We thought that was for peasants,” said Vidosava Djordjevic, a retired, 67-year-old publishing executive, exuding contempt for her degraded lifestyle. “Now I find we eat more and more of it as we get poorer and poorer. Sometimes it fills up our stomachs when there is nothing else left.”

Throughout Serbia and Montenegro, the last two republics left in the Yugoslav federation, conditions have eroded to recall the darkest days of the Communist era, when the masses subsisted on starchy diets and tempers were kept in check by menacing police.

Economists and opposition figures warn that Serbs are now irreversibly hurtling toward a kind of dictatorship and deprivation those alive today have never faced.

Of Yugoslavia’s 10 million people, “60% to 70% live below the poverty line,” Labus said, adding that “a basket of (family food) goods costs $60, but the average salary is half of that.”

Prices have remained on a level with much of the rest of Europe, while wages have tumbled to one-tenth of their prewar average, forcing many Serbs, especially those on fixed incomes, to subsist on bread and handouts.

But with the latest currency crisis, even bread and other basics could soon disappear as state bakeries run out of flour and private companies refuse to operate at a loss.

Jurij Bajec, an economist who resigned from the Serbian leadership two years ago in protest of President Slobodan Milosevic’s devastating disregard for fiscal policy, predicts that Yugoslavs are facing a new era of impoverishment and repression.

“When people have to wait in line for two or three hours a day just to get basic items, they lose this potential energy that could result in riots,” Bajec said. “The whole system is . . . forced back into a lost Balkan state, a closed society where everyone is trying to survive day to day with a more and more authoritarian regime.”

Enterprises such as the once-respected Economics Institute where he works have already organized buying collectives to cut costs and the need for scarce gas.

He pointed to his colleagues’ excitement over the delivery of “Bush” as evidence that the downtrodden are capitulating rather than confronting those who are the cause of their woes.

(When Belgraders speak of “Bush,” they are talking about flour, oil and sugar--rationed vital commodities whose first letters in Serbo-Croatian are “b,” “u” and “sh.”)

Although many are losing their sense of humor amid the mounting hardships, most still chuckle at the coincidence of the initials with the name of the U.S. President in power at the time their economic isolation was imposed.

“Probably the next step will be to organize factory kitchens, which is normal if you cannot provide workers with salaries that cover the cost of feeding themselves,” Bajec said.

Farmers this summer are charging exorbitant prices for their fruits, vegetables and meat in anticipation of winter food shortages, forcing the government either to accept that those in the cities may go hungry or to intervene with further wage and price freezes that would discourage food producers from offering their produce on the public market.

“Then you have a repeat of the Romanian economy,” Bajec said of the latter option. “Fixed prices, fixed incomes and nothing in the shops.”

As winter approaches and schools are closed because there is no fuel to heat them, parents in urban areas are likely to send their children to live with relatives in the country, where home-grown food is still available and the houses, unlike apartments, can be heated with chopped wood.

While the outward migration from city to village might ensure the Serbs’ survival, it threatens to throw this formerly prosperous, industrialized country back to an agrarian existence from which it would take decades to emerge.

The economic portrait of Yugoslavia is already so bleak that most Western analysts say they cannot understand how much of society continues to function. The economy shrank by 30% last year, and an equally devastating contraction is forecast for this year as more than half of the country’s industries have been idled and most of the rest are coughing along at less than half speed for want of fuel and spare parts.

“It defies gravity,” one Western diplomat with an advanced degree in economics said of the Serbian economy. “I’m growing old prematurely predicting the collapse. But it has to happen some day.”

Only 1.4 million people are still at work, and many of those are in fields such as teaching or medicine that cost the government money to run but produce nothing commercially tangible. While the unemployment figure is officially listed as 800,000, an equal number of industrial workers are on indefinite paid leave as a consequence of Milosevic’s promise more than a year ago that no Serb would lose his or her job because of the sanctions.

Added to the jobless burden are 1.2 million pensioners and at least 600,000 refugees from war-ravaged areas of Croatia and Bosnia-Herzegovina.

“For every working person, you have two dependent on the system,” said Bajec, warning that money-printing is proving a poisonous treatment for the country’s economic ills.

More than half of the registered refugees are already dependent on foreign food aid provided by the Office of the U.N. High Commissioner for Refugees, which is suffering its own shortages because of donor fatigue among contributing nations.

With war continuing to rage in Bosnia and new conflicts threatened in Serbia’s provinces of Kosovo and Vojvodina, economists and opposition leaders see no end to their international isolation and the mounting social chaos that Serbs suffer in their pariah state.