Along Yugoslavia`s magnificent Adriatic Coast, normally one of Europe`s principal tourist destinations, the beaches are deserted, hotels and restaurants empty.
Around the country, thousands of businesses are bankrupt, others are months behind in meeting payrolls and even government employees are not being paid regularly.
The large flow of money that Yugoslavs working elsewhere in Europe normally send to their families back home has all but dried up because of problems in the banking system.
In short, Yugoslavia`s political crisis has aggravated an already deep economic crisis. By year`s end Yugoslavia, already a poor country, will be billions of dollars poorer than it is today.
”We are destroying everything,” said Tomislav Popovic, director of the independent Institute of Economic Sciences in Belgrade.
Popovic said at least 30 percent of Yugoslavs have fallen below the poverty line.
Unemployment is running at 26 percent, he said, and the pattern is highly uneven.
In Slovenia, the unemployment rate is only 5.5 percent but in Kosovo, which is inhabited mostly by ethnic Albanians, it is 47 percent.
Popovic and other economists said the crisis has had the most impact on tourism and investment.
Last year tourism brought in $2.7 billion, or 9 percent of Yugoslavia`s hard currency earnings. Revenues may be down by 95 percent in 1991, and tourism may not recover for years, economists said.
Foreign investment, they said, has dried up and may not come back until a long-term political solution has been found. In fact Popovic said the country has been experiencing disinvestment for about 15 years, preventing it from updating the technology it needs to become competitive in trade.
Last fall, capital flight from Yugoslavia reached $1 billion per month, one Western economist said. The government responded by closing the foreign exchange market, and remittances by an estimated 650,000 Yugoslavs working abroad stopped coming. Last year remittances totaled $9.8 billion.
Experts say economic problems are aggravated by the fact that the republics of Serbia, Croatia and Slovenia have been spending a large share of their scarce resources on arms.
Yugoslavia`s economic problems did not begin with its current political crisis.
Popovic traces the fragmentation of the economy to 1968, when widespread student riots provoked repressive measures and led to the abandonment of economic reform efforts.
”Gradually national programs became nationalistic programs, with a selfish orientation,” he said. ”All the republics wanted to have their own oil refineries, their own steel works, their own showcase projects, regardless of economic returns.”
Popovic said national lobbies blocked decision-making at the federal level.
”From 1982, we had almost a complete paralysis of the political decision-making process, and the consequences for the economy were very bad,” he said. ”In some years, our gross national product declined 20 percent.”
By 1989, inflation was running at 2,600 percent annually.
Prime Minister Ante Markovic then developed, with help from the World Bank and International Monetary Fund, a market-oriented economic reform program. He brought inflation down to 120 percent last year.
But Western economists said Markovic`s efforts were scuttled by feuding among the republics that finally led to the June 25 declarations of independence by Slovenia and Croatia.
Both republics were motivated in part by economic considerations. They are the richest of Yugoslavia`s six republics and their leaders have long argued they could achieve their full potential only if they were separated from more backward parts of the country.
Slovenia has a population of 1.9 million, out of a national population of 23.5 million, but it accounts for 18 percent of national income and 30 percent of exports.
It is more likely than Croatia to achieve independence, but adjustment problems could be immense. For, while it may outstrip other parts of Yugoslavia, it lags far behind its Western European neighbors, and it has not been immune to the economic shocks jolting the rest of the country.
About 300 Slovenian firms employing 120,000 workers were recently reported on the verge of bankruptcy. Slovenian unemployment is projected to reach 10 percent by year`s end.
Just as East Germany`s protected and technologically backward industry collapsed when Germany was unified and it was exposed to Western competition, so could Slovenia`s.
”Most Slovenian industry would be swept away in any kind of competitive environment,” one economist said.
Popovic estimated that independence would bring a drop of 30 to 50 percent in the Slovenian standard of living. He said it would take four to five years for Slovenia to adjust.
Slovenes have talked of establishing their own currency, and the Slovene bank has printed a specimen bank note. But it has insufficient reserves to establish a currency without foreign bank lending that probably would not be easy to obtain.
If Slovenia did establish its own currency, one economist said it would have to be pegged to the Austrian schilling.
”The Slovenes will have two choices,” Popovic said. ”They can learn Italian or they can learn German. Initially, they will be independent in name only.”
Independence also would bring enormous problems in disentangling Slovenia from the federal economy. There would have to be protracted negotiations about its share of federal debt and assets, and a vast array of trading arrangements would have to be renegotiated.
Slovenia could lose its access to cheap raw materials from Yugoslavia and some of its Yugoslav markets.
Dismantling the federal army would be another major problem. Among other things, the military manufactures and exports $2 billion worth of arms each year.
Prime Minister Markovic referred at a recent news conference to problems of economic separation.
”In the last 70 years we developed a certain interdependence, and it`s hard to imagine how the economy would function if one part of Yugoslavia were completely isolated from other parts,” he said.
