European Union and the Geography of Animosity and Cooperation in the Balkans
Stabilization, normalization and development in the Balkans depend on the fact that Balkan states have weak political will and weak inclination for regional cooperation. Thus, they depend on foreign influences to function, both internally and regionally. Increasingly, the key external factor is the European Union (EU). This is more the outcome of economic integration rather than the consequence of its foreign policy or policy of enlargement. Only recently the EU seems to have recognized that it needs to pursue a pro-active strategy because of the political weaknesses in the Balkan states and in the region as a whole. This pro-active strategy is not without risks because of the rather weak capacity of the EU in foreign and security areas. That strategy basically boils down to the process of negotiations with the aim of closer integration and finally of membership. Clearly, if EU were to decide to speed up the process of Balkan enlargement and intensify negotiations that would contribute decisively to stabilization, normalization and development of the Balkan states and of the Balkan region.
Balkan economies tend to grow strongly with increased security and political stability and regional normalization. The resolution of Kosovo crisis in 1999, the democratization of Croatia in early and Serbia in late 2000, the resolution of the Macedonian crisis in 2001, and the independence of Montenegro in 2006 have all contributed positively to growth and development of the particular countries and of the region as a whole. Similar positive effects should be expected with the resolution of the Kosovo status and political stabilization of Serbia . With the improvement of security, economic cooperation improves. Given this strong influence of security risks and political stability, it is important to be clear about the geography of animosity and cooperation in the Balkans.
A distinction is drawn in this note between security and political risks as their political and economic consequences are quite different. Former emanate from animosity or enmity while the latter are the consequence of the characteristics of the constitutional set up or of the political system. Security risks are about the probability of the use of violence to achieve political, social or economic aims, while political risks are an indicator of the efficiency of public governance or of the political process. The lower the risks the better are the prospects for cooperation. The opposite is also true: increased cooperation tends to decrease security and political risks. This is also true of regional cooperation, which anyway depends very much on cooperation with the European Union.
Two types of risks
The geography of animosity in the Balkans is about the areas where there are significant security risks, both between states and within states. When it comes to international security risks, there is only one deep animosity or enmity left, that between Kosovo and Serbia . This is because they are conflicting over territory. There is also only one significant internal, civil animosity left, the one within Serbia . As the world has been reminded recently, after Kosovo declared independence in February 2008, civil strife within Serbia and violent conflicts in the northern part of Kosovo are still possible. It is probably only the international presence, military and civilian, in Kosovo that is standing in the way of a violent confrontation within Kosovo and between Kosovo and Serbia . However, the international presence does not provide for internal stability of Serbia itself, where political confrontation between the “patriots” and the “traitors” is heating up and is probably going to be responsible for continuing political instability and non-negligible possibility of civil strife.
Political risks, unlike security risks, are much more geographically spread. Political instability is fuelled by constitutional problems ( Bosnia and Herzegovina ), slow democratization ( Bosnia and Herzegovina, Macedonia, Serbia and Montenegro), and social dissatisfaction that supports populist parties, which combine ethnic and economic nationalism with social demagoguery. Still, these political conflicts are resolvable without recourse to violence, though they are not without social and economic consequences. In general, it can be argued that political risks are increasingly an issue of the success of the process of democratization and of establishment of rule of law. They tend to be resolved easier if there are clearer prospects for EU integration, which is another indication of the positive influence that the EU can have on the region, if it gets its act together.
The remaining political risks and political instabilities, for whatever reason, influence economic policies that constrain economic growth and moreover worsen macroeconomic imbalances, both internal, i.e., in the labor market as low employment and high unemployment persist (the unemployment rates range between 20 and 40%, Croatia being an exception with just over 10%), and external, that is in the trade (above 20% of GDP as a rule) and current account balances (close to 10% or more of GDP, Macedonia being an exception with close to balance). These imbalances are not necessarily unsustainable as long as high growth, now averaging between 5 and 6 per cent per year, continues. If growth slows down, however, because of growing security risks or greater political or social instability, Balkan economies would face serious challenges.
Thus, political risks translate into persistent economic risks due to inadequate economic policies and slow institutional reforms.
The influence of Serbia
Given the geography of animosity, the key source of instability is still Serbia . If Serbia failed to stabilize politically even after the most recent relative success of the pro-EU parties in the May 11, 2008 general election, security risks will persist, but the bulk of the costs will fall on Serbia itself. Serious internal conflicts are possible if the stand-off is not resolved in a democratic way, that is in yet another round of early elections.
Economic costs are going to be significant if the electoral results are disregarded and an anti-EU coalition is formed. Serbian economy, which is already under serious pressure due to growing security and political risks, would slow down significantly and could very well experience even a serious recession. To put it simply, Serbia needs about 5 billion euro per year to finance its current account deficit (that is based on the current account deficit in 2007), that is imports and thus consumption, until its economy recovers and if foreign financing becomes unavailable or costly, consumption and investments will suffer with growth disappearing or even turning negative. That would have significant consequences for social stability, because of the already high rate of unemployment and general feeling that the lot of the majority of the population has not been improving since the start of the democratization and economic reforms in the year 2000.
The consequences of Serbian political and economic instability would not necessarily be dramatic for the Balkan region, especially if Serbia continues to support regional economic cooperation as it has done even since the Kosovo declaration of Kosovo independence on February 17 this year. There are indications that trade and other economic relations with Kosovo have been affected negatively, but that hurts mostly Serbia itself and not very much anybody else. However, if political animosities spill over into lack of regional cooperation, the negative effects will certainly spread. To assess these effects, the geography of cooperation is needs to be described.
The extent of regional cooperation
There are essentially two main trade routes within the Balkans. One is between Croatia and Bosnia and Herzegovina and the other is that which centers on Serbia , which is serving as the hub for trade with Bosnia and Herzegovina, Macedonia, Montenegro and Kosovo. Other intra-regional trade is small, except for that between Macedonia and Kosovo. If Greece, Austria and Slovenia are added to the wider region, and more recently Hungary, then their trade with some of the countries of the region has to be seen as important and their investments even more so.
Serbia is especially dependent on exports to the region and to investments from the wider region. It stands to lose a lot if it curtails regional cooperation due to political animosities. For this reason, there has been no attempt to withdraw from the region and this should not be expected even if the process of European Union integration stalls due to the opposition in the Serbian parliament which is still dominated by the nationalist parties. Of course, if economic situation deteriorates, the some countries will lose an important economic partner and Serbia may even decide to introduce protectionist measures. In addition, if populist and bellicose parties were to gain power in Serbia again, that would economically isolate Serbia and would make the whole region less attractive for business and political cooperation.
While political instability in Serbia is having negative effects on that country and some of its neighbors, the resolution of Kosovo status should in principle have a positive effect due to increased investments there, but also because of the changed image of the region as a whole. So far foreign investments have not materialized because the process has not been smooth and stability is yet to be achieved. Also, there are still significant security risks in and around Kosovo. Once this last remaining security risk is removed, overall regional risk will decline and Balkan economies will benefit.
The remaining causes of political instabilities as well as problems with economic development can best be addressed through the process of integration into the NATO and the European Union. This is clearly true for Bosnia and Herzegovina , though it has not received all that much attention lately. It is especially in the case of this country that the distinction between security and political risks can prove to be the most useful. Unlike the conflict between Serbia and Kosovo, the constitutional problems within Bosnia and Herzegovina generate political, but not serious security risks. Though commentators are often linking these two risky areas, the types of risks they experience are quite different. And so are the solutions: in Bosnia and Herzegovina, it is the process of constitution building, so the two state like entities there need to find a constitutional framework that they could live with, while in the case of Serbia it is an issue of control over territory, which is a different risk generator altogether.
Similarly, the problems within Macedonia and between Macedonia and Greece are those of democratization of Macedonia and of negotiations between the two states over the name of Macedonia , or rather over how this name can be used in international relations. These are political risks, which can have significant economic consequences, mainly for Macedonia , but do not generate the type of animosity that can bring in grave security risks. They, however, can have negative consequences for bilateral and regional cooperation, of course.
The influence of the EU
The fact that a country becomes more cooperative once it is in the EU points to another important characteristic of the Balkan geography of cooperation. Regional cooperation is not very developed and certainly does not have strong influence on the politics of the countries in the Balkans. Therefore, it is the cooperation with the EU that enhances regional normalization and cooperation. Regional cooperation is one of the conditions for EU membership, but the more important determinant is the asymmetry in economic dependence on the EU and on regional cooperation. Trade and most other economic relations with the EU are much more important for every country in the Balkans then regional cooperation. Even in the case of the countries like Serbia that trades a lot in the region, it is the EU that is potentially the main source of growth and development.
In addition, constitutional and problems with democratization can be solved only in the “wider context” as Jean Monnet argued for Europe as a whole. This has proved true for the other Balkan countries now member states of the European Union – Greece , Bulgaria and Romania – and these countries should be expected to be exceptionally supportive of these integrative processes that should substitute geography of animosity with that of cooperation. So far, their membership in the EU or their expectation to join the EU has led them to stay out of most of the Balkan animosities and problems, though their positive contribution could have been larger. The same goes for the countries like Croatia that hopes to join EU in the near future. Its policy towards the Balkan region has improved noticeably after it has become candidate country for EU membership.
The key role, however, is that of the EU itself. Unfortunately, it has not been able to do too much so far due to security and political risks in the Balkans. And the EU is not equipped to deal with these types of issues except through the process of integration. So far, the EU has followed the strategy that security and political problems need to be solved before the process of EU integration can start. It is now changing its strategy towards greater involvement and increased activism. It is not clear so far whether it will succeed in that due to lack of unity within the EU.
This lack of unity on security and foreign policy has served EU well in some fundamental sense because it has immobilized foreign policy excesses of its member states and their possible generalization if those were to become excesses of the EU itself. But, it has also made it impossible for the EU to be more than an anchor for its neighbors and future member states. Also, it has led to the policy stance that pushes costs on others and thus is self-defeating. Nowhere is that more obvious than in the Balkans.
One way to remedy this disconnection between strategy and implementation is to speed up the process of integration of the Balkans with the EU. The EU has been moving in that direction and it could move faster. Clearly, the will for EU integration will have to be firmly established in the Balkan countries themselves. But once that is the case, and the public seems ready now to support that practically everywhere, then the EU should start the process of negotiations for full membership with all the countries. That is the best instrument to influence the developments in the countries and in the region.
If the last remaining security risk is removed, the Balkans should forge ahead in its integration with the European Union, if the EU proves ready for that, and that will enlarge the geography of cooperation in that region too.
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Lecture held on the Ljubljana Agenda for new phase of the Stabilization and Association Process to the European Union.