Balkans will radicalize unless Europe helps them

Mostar, Bosnia and Hercegovina (jaime.silva, CC BY-NC-ND)

The Balkans were once rightly called the "soft underbelly of Europe" now are being explored by capital from China. 

 

The Balkans is a region which also includes Bulgaria, Romania and even Greece, but the term is more often used mainly for the countries of the former Yugoslavia (with the exception of Slovenia), additionally including Albania. Together they form the so-called Western Balkans. And it is to them that other Europeans should pay more attention.

Chronic diseases

The recent elections in Serbia were won by a candidate supporting fast accession to the EU. All the countries of the region, much like the participants of the Euromaidan in Kiev, dream of European integration, because they associate the EU with prosperity, social security and a higher standard of living, which they have no chance of obtaining without EU support.

All the key dilemmas of the region have recently been demonstrated very clearly in a broad survey of the local communities and companies conducted at the initiative of Brussels: ”The Balkan Barometer 2015”. The average level of satisfaction with the socio-economic situation in the region barely reaches 30 per cent. It is the lowest in the still unstable Bosnia and Herzegovina – at the level of approximately 25 per cent, and slightly higher in Serbia and Croatia – which recently joined the EU – where it barely exceeds 27 per cent.

A bit higher levels of optimism have recently been recorded in Macedonia and Montenegro. Macedonia enjoys the fact that because of the great migration wave it has found itself in the center of attention of the entire public opinion across Europe. Macedonian citizens believe that after the country’s submission to the decisions of Brussels, the closing of borders with Greece and the halting of the migration wave, EU funding will follow.

Montenegro, in turn, is a tiny – only 622,000 residents – but also peculiar entity which, even though it does not belong to the euro zone, has been using the euro as its own currency for many years, just like the neighboring Kosovo. Montenegro is thus counting on greater integration, as well as closer ties with the nearby Italy, situated on the other side of the sea.

The two most important and chronic challenges of the region are high unemployment rate and high level of corruption, associated with more or less organized crime. In the aforementioned survey, the first two issues were confirmed, tellingly, by as many as 64 and 58 per cent of the respondents, respectively.

In 2015, the unemployment rate reached 17.5 per cent in Albania (and a long-term forecast predicts 15.65 per cent in 2020), 18.3 per cent in Montenegro, 17.9 per cent in Serbia, as much as 25.5 per cent in Macedonia (the rate has dropped a little recently) and approximately 35 per cent in Kosovo. Even the EU Member States from the region are not free of it. In January 2016, the unemployment rate in Croatia reached 18.5 per cent, and in Greece 24.4 per cent. The most worrying, however, is the huge unemployment rate among young people under 24 years of age, exceeding 50 per cent in most countries of the region. This clearly indicates that we are dealing with a powder keg.

In the context of the incoming wave of immigrants from Syria and the Middle East, the chances of emigration have recently decreased. Few people now remember that exactly a year ago, the so-called Balkan migration path was opened – not by the inhabitants of Syria or Iraq, but by people from Kosovo and Albania. Today, they are being sent from the EU Member States back to their country, which only aggravates the tensions existing there.

Corruption is less of a concern for the Montenegrins and Macedonians, whereas the Serbs, Albanians and Kosovars (most of whom are Albanians) worry about it the most. According to Transparency International’s reputable Corruption Perceptions Index (CPI), in 2015 the situation in this regard deteriorated the most in Macedonia. According to the latest report, the CPI amounted to: 42 in Macedonia (in the ‘very clean’ Denmark, which ranked 1st on the list – 91, in Poland – 62), 40 in Serbia, 38 in Bosnia and Herzegovina, 36 in Albania and 33 in Kosovo, respectively.

Pessimism of the inhabitants

Such conditions have persisted for a long time. We are dealing with a durable tendency which has lasted since the breakup of Yugoslavia, and there are no chances for a positive change on the horizon. That is also due to the fact that the economic situation of the region is another reason for concern.

According to the aforementioned Barometer, as many as 56 per cent of the inhabitants of BiH and 55 per cent of the inhabitants of Kosovo are dissatisfied with the economic situation in their country. The level of satisfaction in this respect reaches 2 per cent only in Montenegro and Macedonia.

When it comes to hopes for the future, only 20 per cent of the surveyed residents of the region expect their own financial situation to improve soon, and only 18 per cent believe that the improvement will also apply to their country. On the other hand, as many as 46 per cent of the respondents expect a deterioration in the economic situation of their country, and 32 per cent – in their own finances.

Unfortunately, during the past year nothing significant changed since the IMF’s major report on the economic situation in the Western Balkans entitled ”The Western Balkans: 15 Years of Economic Transition”. Although the report expressed the opinion, or rather the hope that the next 15 years should be better than the previous 15, we have not seen the countries of the region entering on a path of faster growth, or decisive action being taken against the chronic ailments.

Indeed, looking at the IMF projections for some time now, we should be seeing constant higher economic growth in the region, at the level of 3 or even 4 per cent, with the exception of Serbia and Croatia, which are struggling with serious difficulties. Data for 2015 seem to confirm these forecasts – the GDP growth was 3.3 per cent in Albania, 3.7 per cent in Bosnia and Herzegovina (but is now falling quickly, in month-on-month terms), 3.4 per cent in Kosovo, while in Croatia and Serbia it fluctuated around zero.

These results cannot, however, be regarded as satisfactory, because the growth trends are commonly seen as fragile as the foundations of growth are weak.

A rather closed region

Foreign direct investment (FDI) still has not materialized on the scale that was expected. According to studies of the Balkan Economic Forum, seated in Athens, the activity of foreign capital in the region – except for Turkey – has decreased after the 2008 crisis. By far the strongest links with foreign capital (e.g. Russian), reaching above 20 per cent of the GDP, are recorded in Montenegro, while in other countries they are weak. This can be documented on the example of Macedonia, which saw a drop in FDI from EUR506m in 2007 to EUR337m in 2011, barely EUR107m in the following year and EUR270m in 2013.

Serbia has recently attracted the interest of companies such as Siemens and Microsoft in the high-tech industry, US Steel in the heavy industry and the French company Lafarge in the construction industry. These are still, however, mostly declarations rather than concrete investments. One launched project is a Chinese investment – the construction of a high-speed railway connecting Belgrade with Budapest. China is a new and important economic player in the region. It has recently bought the remaining part of the Greek port in Piraeus. The other one also involves Chinese investment – takeover of Serbia’s only steel mill, Železara Smederevo. 

When at the beginning of the second decade of this century the average standard of living in the region increased to 28-29 per cent of the average standard of living in the EU, from only 17 per cent recorded 20 years earlier (according to GDP and the purchasing power parity – PPP), it seemed that the Balkans were catching up with the rest of Europe. However, after 2012 this trend has stopped, which unfortunately proves that what actually happened then was not so much economic development as the post-war rising from the rubble – both literally and figuratively.

Lack of investments which could significantly energize the economy means the region remains as poor as before. And as dangerous as before. This will not be changed by the opening of local branches of large chains such as Coca Cola or McDonalds, which are, indeed, providing jobs (rather few) and changing the grey landscape to some extent.

Hardly anyone expects change to occur. Only 26 per cent of all the respondents believe that their government acts in accordance with the laws and regulations, and in BiH as many as 84 per cent of the surveyed people believe that the authorities are breaking the law. Almost none of the respondents believes in transparency in the activities of the administration, and even fewer people believe in their integrity. Hence the yearning for Europe and normalcy. The studies of the public opinion in the region show that people want to trade and cooperate with the outside world. They are open, but usually devoid of illusions, and even hope.

It is clear what needs to be done: it is necessary to strengthen integration (both regional and with the EU), boost investment and create new jobs, which are so desperately needed, and also provide more opportunities for small and medium-sized enterprises. Knowing is not the same as doing and being able, though.

The Western Balkans are a region which is economically weak and neglected, and in addition poorly governed. And all that in the middle of Europe, which is rather indifferent to what is really happening there. Meanwhile it is certain that without closer integration projects, and without pressure from the more affluent Europe, no country in the region will be able to come out of this dire situation on their own. It is just that the EU and Western Europe – busy with itself and with the Middle Eastern migrants ‒ fails to present such proposals. If this does not change, the inhabitants of the region will soon start basing their plans on Chinese capital instead.

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