By Matt Robinson
BELGRADE (Reuters) - Ruling coalition lawmaker Jorgovanka Tabakovic is in line to take over as governor of the Serbian central bank, according to comments from a cabinet minister, after former governor Dejan Soskic quit citing threats to the bank's independence.
Soskic resigned on Thursday as lawmakers debated a draft law that would step up parliament control over the bank, a prospect that has drawn stern criticism from the European Union - which Serbia wants to join - and the International Monetary Fund.
Serbian media reports have for weeks been touting Tabakovic, a senior member of the nationalist Serbian Progressive Party, as the government's pick for the post of governor as it tries to promote an expansive fiscal policy to halt the country's slide into recession.
In a report on the state news agency Tanjug, Construction Minister Velimir Ilic told reporters in Belgrade: "She has a lot of experience, she knows what the problems are. She's taking on a big responsibility and I expect she'll do it well."
Tabakovic, an economist by profession, has neither confirmed nor denied the reports. "Weave, weaver of the wind," she replied this week when asked about the speculation.
Parliament is due to vote on Saturday on the draft law, which would create a powerful, parliament-appointed supervisory body represented on the central bank's executive board and set a 90-day deadline for the appointment - by parliament - of a new governor and senior bank staff.
The IMF warned the law would mark a "major weakening" of the bank's autonomy. The EU said it would be a "step back" for Serbia's bid to join the 27-member bloc after becoming an official candidate for membership in March.
TEST OF NEW GOVT
The bank saga has emerged as the first major test of the Socialist-led government's commitment to the pro-EU path set by reformers who came to power with the ouster of late strongman Slobodan Milosevic in 2000.
The new ruling coalition, which took power last week, marks the return of a socialist-nationalist alliance last in government at the tail end of Milosevic's disastrous 13-year rule, when Serbia was mired in war and hyperinflation.
Faced with a storm of criticism, coalition lawmakers said they would drop one element of the draft which would have let the central bank buy securities issued by the government or other public entities on the secondary market - amounting to the indirect monetary financing of the public sector.
Soskic has kept monetary policy restrictive despite an economic contraction in the first two quarters of the year, putting him at odds with a government that says it wants to stimulate business and rein in unemployment now at 25 percent.
At 10.25 percent, Serbia has the highest official interest rates in central and eastern Europe.
In a letter to Soskic, released by the central bank after his resignation, the IMF cautioned that adoption of the law would have "considerable implications" for Serbia's macroeconomic stability and its 1 billion euro (784.26 million pounds) loan program, which the Fund froze in February over rising debt.
The government says it wants to negotiate a new deal.
Serbia's budget deficit stands at over 7 percent of output. Public debt is almost 55 percent, far higher than levels recommended by the IMF for similar emerging economies.
(Writing by Matt Robinson)
