S&P: Serbia outlook still negative

Standard & Poor's said that Serbia's arrest of wanted war criminal suspect Radovan Karadzic and his expected transfer to the UN War Crimes Tribunal in The Hague are two key steps toward cementing the country's path to E.U. accession.

The action signifies a notable reduction in political risk, particularly if it were followed up with the successful arrest of Ratko Mladic, the remaining high profile war criminal suspect still at large, the agency said.

The outlook on the sovereign rating of the Republic of Serbia (BB-/negative/B) remains on negative, however, due to the pro-cyclical fiscal policies of the new coalition government, which are likely to reinforce economic overheating, the agency noted.

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