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Investor in Serbia pulls out after bill tops €1bn By Neil MacDonald in Belgrade Published: May 2 2009 03:00 | Last updated: May 2 2009 03:00 Vinci Construction, a French group with big contracts for highway bridges, has decided to pull out of Serbia and lay off 3,000 workers because of unpaid bills by the government. The move makes Vinci the first big foreign investor to withdraw from Serbia since the "democratic revolution" against Slobodan Milosevic, then the Yugoslav president, more than eight years ago. The group's local subsidiary, Inter-most, filed for bankruptcy at a Belgrade court on April 24, citing "construction works for public institutions" as the main reason. Government debts to the company amount to about €1bn ($1.3bn, £900m) for work already done, independent analysts said. As with other contractors, the lack of new business added to Inter-most's woes. "We have concluded that Inter-most is not able to overcome the current economic crisis," company officials said on Thursday. Serbia, in spite of its continuing political problems with the European Union, achieved several years of strong growth until the onset of the global crisis late last year. But foreign investors have this year postponed about €800m worth of new investments in the largest former Yugoslav republic, the country's foreign investors' council said. The result has been a widening fiscal gap for the Balkan country of 8m people. Serbia looks forward to relief from the International Monetary Fund, expected to approve €3bn worth of standby credit within a few weeks, depending on reforms to ensure macroeconomic stability. But the government must first walk the difficult line between fiscal belt tightening and most people's reluctance to give up any social welfare benefits. Parliament narrowly passed budget revisions last week to reduce the year's planned expenditure by 28.9bn dinar (€304m, $403m, £270m) and limit the deficit to 70.5bn dinar or 2.3 per cent of gross domestic product. The government has cancelled a proposed income tax increase, opting instead to focus on cuts at state-owned companies or its own ministries to meet the IMF's loan conditions. Yet proposals to reduce the size of government have strained the broad pro-EU coalition that won elections last year. http://www.ft.com/cms/s/0/4e06d662-36b1-11de-af40-00144feabdc0.html
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