Serbia could be affected by a public debt crisis as early as this year if it does not take appropriate measures, as the debt keeps growing and will exceed 55 percent of the GDP at the end of the year, the Fiscal Council warned Wednesday.

Council representatives said the budget deficit was also rising and would go north of six percent of the GDP by the end of 2012.

Serbia needs to borrow another EUR 2.5 billion by the end of the year to finance its budget deficit and pay the principal on old loans.

If it wants to avoid a public debt crisis, the new government will immediately have to implement severe measures to curb the budget deficit for this and next year.

Short-term measures include freezing salaries and pensions, tax reform, including raising VAT to 22 percent, and further spending cuts.

Serbia's unsustainable public finances are the main reason for the dinar's continuing slide against the euro, Chairman of the Fiscal Council Pavle Petrovic said on Wednesday.

The exchange rate is just “a high fever” that is a result of unsustainable public finances like “an inflammation”, Petrovic said at a press conference.

In this situation, the National Bank of Serbia cannot do much, except the thing that it is already doing - intervening in the foreign exchange market and imposing pressure so as to ensure a speedier fiscal consolidation, Petrovic noted.

At today's meeting, the Fiscal Council considered a document entitled “Proposal of measures for fiscal consolidation from 2012 -2016” which contains emergency measures aimed at avoiding the debt crisis, as well as mid-term measures such as reforms of the tax and pension systems and public companies.