KOSOVO: NORTHERN MUNICIPALITIES SUBMIT FY 2007

C O N F I D E N T I A L PRISTINA 000229

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR EUR/SCE
AID FOR EE/ECA, EE/DGSR
NSC FOR BRAUN
TREASURY FOR EUROPE AND EURASIA

E.O. 12958: DECL: 03/23/2017
TAGS: ECON EFIN PREL YI
SUBJECT: KOSOVO: NORTHERN MUNICIPALITIES SUBMIT FY 2007
BUDGETS TO PISG AFTER THREE MONTH DELAY

REF: (A) 06 PRISTINA 598 (B) 06 PRISTINA 575 (C) 06

PRISTINA 518

Classified By: TINA KAIDANOW FOR REASONS 1.4(B) AND (D)


1. (C) Summary. Despite having publicly cut economic and
political ties with the central government in Pristina,
Kosovo's northern Serb-majority municipalities - Zubin Potok,
Leposavic and Zvecan - recently submitted their FY 2007
budgets to the Kosovo Ministry of Finance and Economy (MFE).
Although there submissions were 2-3 months past the deadline,
the MFE quickly reviewed and approved their budgets. MFE
officials believe the reasons for the delay were pressure
from Belgrade and internal political tension among Serbs who
are torn between following directives from Serbia, but also
need their salaries and basic public services to survive.
End Summary.

ALL NORTHERN MUNICIPALITIES FINALLY SUBMIT FY 2007 BUDGETS TO
PISG


2. (C) Although Kosovo's three northern Serb-majority
municipalities publicly cut all ties with the central
government in Pristina in 2006 (reftels A-C),they
nonetheless quietly submitted their 2007 municipal budget
requests to the PISG. Zubin Potok submitted its budget in
early February, followed by Leposavic on March 8, and finally
Zvecan on March 20. All three missed the final deadline in
December 2006 for the budget promulgation regulation
established by UNMIK. MFE officials highlighted that the
PISG wanted all municipalities to submit their budgets by the
end of November, noting that they need time to review and
approve budgetary requests in order to get the money to the
municipal governments in a timely manner.

MFE REACTS QUICKLY TO APPROVE BUDGETS


3. (C) Minister of Finance and Economy Haki Shatri has
responded quickly by approving the budgets as soon as the
ministry received them. MFE officials said the Minister
understands the potentially negative economic and political
ramifications of delay on this issue. For nearly three
months, teachers, nurses, police and other civil servants did
not receive their Kosovo salaries, and there were no reliable
Kosovo Consolidated Budget-financed public services available
due to this lack of funding (Note: Kosovo Serb public sector
employees in northern Kosovo have continued to receive their
salaries from Belgrade for their work in Serbian-funded
parallel schools, medical facilities and social services End
Note). One MFE official privately noted that Kosovar
Albanians in the North also pressured the ministry to act
quickly because they do not receive salaries from Belgrade
and depend on the municipal funds from the central government
to pay them.

4, (C) While MFE officials expressed satisfaction that the
budgets were submitted, they also complained that they are
trying to run a competent, professional ministry and believe
the northern municipalities were given too much leeway to
violate the rules and procedures established for all
municipal governments. They noted that the northern
municipal assemblies, with the exception of Zvecan, did not
vote on their budget submissions. In addition, the
presidents of the municipalities, who are Kosovo Serbs, did
not sign the budget submissions, but instead authorized
Kosovo Albanian representatives to do so. The MFE and UNMIK
recognized the signatures.

PRESSURE FROM BELGRADE AND INTERNAL K-SERB POLITICS DELAY
TIMELY BUDGET SUBMISSIONS


5. (C) MFE officials noted that in their private
conversations with Kosovo Serb municipal officials during the
budget submission impasse, the reasons for the delay were
pressure from Belgrade not to cooperate with PISG

institutions and internal political tension among K-Serbs
torn between following Serbia but wanting their salaries and
basic public services to survive. According to MFE
officials, Kosovo Serbs are feeling more pressure to resist
participating with PISG institutions given the ongoing
developments in the Kosovo final status negotiations.


6. (C) Comment: It is a relief that the northern
municipalities finally submitted their budgets to the MFE,
and an interesting sign that multi-ethnic cooperation can
continue, even with Serb hardliners, if it remains largely
under the radar. The reliance on Kosovo Albanian signatures
indicates an unusual compromise which allows Serb leaders to
save face while still obtaining money and resources from the
Kosovo Consolidated Budget. Complaints from Kosovo ministry
officials regarding too much leeway given to the northern
municipalities were predictable, but the MFE's demonstration
of flexibility is a good start to what will be a recurring
need for patience, creativity and understanding in finding
ways to implement the Ahtisaari provisions together with the
Serb community in Kosovo. End Comment.


7. (SBU) USOP approves this message for release in its
entirety to UN Special Envoy Ahtisaari.
KAIDANOW