Economic adviser to the Serbian Prime Minister Jurij Bajec said Tuesday that raising pensions and public sector salaries more than is planned by the 2011 budget would lead the country into economic instability.

Bajec warned that any bigger deviation from the agreed pension and salary hikes would accelerate the growth of prices and the exchange rate, and expressed belief the government will not allow it.

"People are asking for more money, but I think we need to fight for more stable prices and what the state can do in this regard," Bajec said and added that the government conceding to the unions' demands would lead the country into an inflation spiral where everyone would come out on the losing end.

"I believe the government will be steadfast on this issue," Bajec said.

The state cannot redistribute the money from agriculture subsidies, infrastructure or other public investments, or from social security payments that go to 500,000 to 600,000 people in the country, Bajec said and reminded that Serbia's debt has exceeded 40 percent of its GDP, which makes more borrowing inadvisable.

"The state is in danger of spending more and more of its income, which comes from the tax payers - the Serbian people, on repaying this debt," Bajec explained in a statement to reporters during a break at a presentation of the Macroeconomic Analysis and Trends bulletin, published by the Economics Institute.

Bajec warned that agreeing to salary raises of 10, 20, 30 or 40 percent would mean saying goodbye to a balanced budget.