MILORAD PUPOVAC Ahead of the elections he is the first possible defector from the right to the left, and with the departure of the SDSS from the coalition the Sanader administration would swing firmly to the right"If Government does not change its strategy over the coming week and abandon the drastic reduction of funds earmarked for reconstruction, the Independent Democratic Serbian Party (SDSS) will vote against the proposal put forward by Finance Minister Ivan Suker. It is for us unacceptable that savings be made at the expense of the most vulnerable part of the population, returnees and refugees, while every kuna that could hurt the HDZ-HSS coalition is being saved. Voting on the budget is the foundation of every governing coalition, and if the SDSS will not back the announced budget rebalance, I think that I do not have to tell you what that means as regards our remaining in this administration," Milorad Pupovac told Nacional Monday.

A few hours before that, at a session of Parliament's ethnic minorities committee, Pupovac slammed the policy Ivo Sanader's Government was leading, and repeated that Croatia was sinking into a crisis, while in the ruling coalition some are only trying to profit on the coming local elections. With that the best-known Serbian politician in Croatia, twice in the same day, not only criticised the Government, but also announced the possible departure of the SDSS from the ranks of the coalition. The immediate cause are Sanader's budget cuts, in the process of which he has cut about 500 million kuna off the ethnic minorities budget line, which would lead to a significant reduction of economic activity in the already impoverished Lika and Dalmatia regions.

If the three Serbian MP's cease to support the HDZ-HSS-HSLS coalition, there will still not be a crisis of government, because Sanader would hold on to a parliamentary majority, but Pupovac feels that it would result in significant political changes in Croatia. "It is clear to us that this Government will survive, they have besides told us on several occasions that there are reserve votes that can be activated. The thing is that a departure of the SDSS would mean a firm swing to the political right for this administration, and that is not good," says Milorad Pupovac.

Overshadowed by the latest falling out in the ruling coalition, there has for some time now been a slow distancing of the SDSS from the HDZ and Sanader. Over the past few months Milorad Pupovac and Zoran Milanovic has intensified their contacts and have hammered out the details of cooperation between the SDP and the SDSS at the local elections slated for 17 May at almost regular weekly meetings.

The reasons for the rapprochement are two-pronged: Pupovac's SDSS finds itself in a quite complex situation, and has been in it for longer than a year, ever since the Government led by Ivo Sanader recognised the independence of Kosovo, and both Milorad Pupovac and Vojislav Stanimirovic have been critical of the administration. In March of 2008 there had been word of a SDSS departure from the ranks of the coalition, but the conviction prevailed that it would lead to a reduction in state aid for Serbian returnees. That is why Pupovac continued to support Sanader, but after the announced budget rebalance their relationship has hit its lowest point.

And, after the elections for Parliament in 2007 there were changes in the Serbian political scene in Croatia. First the Serbian National Party practically disappeared, and then its leader Milan Dukic passed away, and then there was the political revival of Veljko Dzakula, the president of the Serbian Democratic Forum. Dzakula is a harsh critic of the SDSS, accusing its leading figures of being corrupt, of currying favour with the administration and of ignoring the lot of the "common" Serb.

Even in normal circumstances a part of the Serbian community lends itself to this brand of criticism, and with Government's budget rebalance reducing grants to returnees, Pupovac has objectively found himself in a precarious situation. There is a danger that the SDF could defeat the SDSS in some areas at the upcoming local elections, which would mean that some Serbian voters oppose the policy being led by Milorad Pupovac and the SDSS's staying on in the ruling coalition. This is why Pupovac has radicalised his relationship towards Sanader's administration and why he has announced that he does not wish to support the budget rebalance, and the frequent contacts with the SDP are part of the pressure he is putting on Government.

But the SDP is quite sceptical of the sincerity of Serbian politicians – in spite of the fact that Milanovic gives a very positive opinion of Pupovac in private – and in short, they feel that the SDSS is calculating. The real test of cooperation between the parties was to have been Vukovar, where public opinion pools gives the SDP's candidate Zeljko Sabo the best chance of winning the mayorship. A week ago Zoran Milanovic made Pupovac a direct coalition offer in which the SDSS would get the posts of deputy mayor and president of city council. There was no answer and the Social Democratic Party reads this behaviour as evidence of the duplicity in the SDSS's policies, where it coerces the HDZ and Government, but will not renounce them on the ground.

But it is, also, an open question as to how much thought is being given in the SDP to bringing down the Sanader administration and bringing about early elections for Parliament. Judging by what a top party official, and two influential MP's, have told us, the answer is: not much. In a way, Milanovic has begun to copy the old strategy of Ivica Racan, which boiled down to waiting for the HDZ to cave in on its own accord, and to rack up victories at the local level in the meantime. Roughly put, Milanovic also wants to win the big cities and the regions that are the financial leaders of the country, while at the national level he would only participate in the political elimination only under the condition that Ivo Sanader's partners began to abandon him, and the HSS plays a key role here, still firmly aligned with the HDZ. A few months ago Milanovic tried to set up a meeting with Josip Friscic, which the HSS president rejected, just as he has rejected the possibility that the two parties collaborate, except in some less important cities and counties.

"I am certain that we will win in Zagreb, Rijeka, Koprivnica, the Primorje, Medimurje and Zagorje regions, and we have a good shot at winning in Vukovar, Velika Gorica, Sisak County, Zadar and Sibenik. But we need to be realistic, even in the event of this outcome, the chances of ousting the Government is minimal. The HDZ will laud itself on winning in a multitude of municipalities no one has heard of, and in a couple of impoverished cities and counties, and their current partner will not easily desert them. The Croatian Peasant's Party (HSS) is sticking with Sanader, and as long as that is the situation, this Government will hold on to a parliamentary majority, even if the SDSS abandons them, something I still very much doubt will happen," says Nacional's source in the top ranks of the Social Democratic Party.

In order to attract Serbian politicians in the future, Milanovic has explicitly promised that, of the SDP were to win power, it would change the law and give ethnic minorities the right to cast two votes at the elections. In this they have been led by pragmatic motives, since the strongest opposition party believes that ethnic minority voters would in that case vote for them, and that is about 50,000 extra votes.

But the dominant feeling in the SDP now is that taking power in the economically worst times since World War II would be bad for the party. "It would be harder for us to lead the country now than it was for BESIDES PUPOVAC, GOVERNMENT has several major problems, these being maintaining economic stability through the sale of bonds and the peak tourist seasonRacan when he came to power in 2000. He had to fight various para-intelligence groups, and if Milanovic were to become prime minister, he would have to resolve almost irresolvable economic problems. In the five years they have been in power the HDZ has sold off all valuable state property, awarded a multitude of privileges to various social groups and, in a word, bankrupted Croatia. The situation is such that now we Social Democrats also have to beg Sanader to sell bonds, and then if the peak tourism season succeeds. The situation is so desperate that one has to think above all about how to survive, and only then about the ouster of this bad government," feels a leading SDP member.

But at the HDZ they were quite unperturbed by the announcements of collaboration between the SDP and the SDSS. Sanader currently has much bigger problems than, as the dominant feeling in the ruling party is, sporadic and still undefined discussions between Pupovac and Milanovic. "Whatever it is they are doing, we will overwhelm them at the local elections," says a high-ranking HDZ official, which was also his only commentary on the possible departure of the leading Serbian party from the ruling coalition.

There is a simple answer to why the HDZ is for the moment not overly agitated by reports of the questionable future of the Sanader administration. Above all, the foreign policy situation has improved and Croatia will become a NATO member in a few days, and there is growing pressure on Slovenia within the European Union demanding that it unblock the negotiations. And while these are not historic successes, this is at least some new and positive news that the current administration can attribute to itself.

Next up are the local elections, which will probably not bring about dramatic political change. The SDP could win several of the larger cities and several counties, unaligned figures such as Zeljko Kerum will emerge in some places, but the HDZ will win in most counties and municipalities. And even if these are for the most part the most impoverished regions, Sanader will again declare himself the winner of the elections. Even in the event of defeat in Zagreb, Split and Rijeka, the HDZ will, with the help of media spin-doctors claim that it is more important to win in 10-15 of the poorer counties and in 200 municipalities.

At the financial level, Sanader plans in late April to sell bonds from which he expects an influx of 800,000,000 euro, and then to earn from the peak tourist season, which should suffice to fill this year's national budget. It all boils down to maintaining some kind of macroeconomic stability, at least until the presidential elections, slated for early 2010, with the hope that next year will be marked by the end of the recession at the global level, and therefore also in Croatia.

At this moment this is the strategy Sanader has come up with, just as a victory at the local elections and very gradually attracting parties that presently back the Government is Zoran Milanovic's initiative. Pupovac and the SDSS have found themselves somewhere in between, as the first possible defectors from the right to the left.