The economic model in the Balkans does not hold water

The President of the European Commission, Jean-Claude Juncker, is not overly popular in the Western Balkans. When he took office, he proclaimed a moratorium on EU enlargement. In his speech "On the State of the Union" in September, he nevertheless opened the door a little and announced that expansion is conceivable in 2025. For peace, it is important that "a credible prospect of membership for the countries of the Western Balkans be maintained". Serbia and Montenegro have the best chances to jump the hurdle in the mid-2020s. In contrast to Albania, Bosnia and Herzegovina, Kosovo and Macedonia, which have not even started negotiations yet. What went wrong?

A source of cheap labor

Almost 20 years after the end of the wars during the breakup of Yugoslavia, only Slovenia (2004) and Croatia (2013) became EU members. Dušan Reljić, who heads the Brussels representative office of the leading German Foundation "Science and Politics", spent half of his professional life researching the transformation processes of his former Yugoslav homeland. His conclusion is: "The previous model does not hold water". In principle, integration into the EU does not mean anything other than "gradual equalization of the economic parameters and legal structures of one country with those of other member countries". This did not work in the case of the Balkans. The region is still far behind economically. It would have to have a growth of at least 6% per year in order to reach the average level of the EU in 2040. Which is unrealistic under the circumstances: the current growth rate is barely 3%.

Reljić sees two key reasons for this misery: the failed privatization policy of the Western Balkan countries and the half-heartedly implemented economic integration into the EU, which brings with it many shortcomings and flaws. In the 1990s, companies from Yugoslav "self-management" ownership were first subsidized and then sold to politically well-connected oligarchs. They didn't invest in further progress, instead they squeezed these companies to the max, they got even richer, and the factories collapsed. Companies from the EU area, primarily from Germany and Italy, entered such a ruined industrial framework last decade, in search of cheap labor. "These auto parts manufacturers or textile factories do not bring new technologies and do not produce high-quality products. They do not make the economy more "intelligent".

Lost a quarter of the population

And since there is neither scientific research nor development, the Balkans remain only a source of cheap labor on the periphery of the EU economic space. At the same time, the countries of the region compete with each other to give more subsidies to foreign investors: they lower the profit tax and increase the sales tax. Which, according to Reljić, is nothing more than state redistribution of capital from the bottom to the top. While the purchasing power of society is stagnating, the foreign trade deficit is piling up: between 2006 and 2016 alone, it reached 97 billion euros. Public and private borrowing is a heavy mortgage for future generations. According to World Bank calculations, at current growth rates, it will take 50 years for the region to reach today's average level of well-being in the EU. Reljić believes that it is therefore quite a reasonable decision of well-educated parts of the population to move out. According to OSCE data, about 2007 people emigrated from Serbia between 2014 and 300.000, with the figure for 2014 being twice as high as for 2007. According to data from the Health Trade Union, more than 1.000 doctors and medical personnel emigrate from Serbia to To the West, primarily to Germany. From the wars of the 1990s until today, the region has lost about a quarter of its resident population.

So what can be done to stop this economic decline? Reljić says that the EU must acknowledge that the Western Balkans are already fully integrated into the European economic system - but under unfavorable conditions. Unlike their EU neighbors, these countries do not have access to European structural funds to build their transport and energy networks, nor can they participate in financial stabilization mechanisms. And this must be enabled, in order to attract those investors who make the economy more "intelligent", create greater profits and offer career prospects to the well-educated.

Area of ​​"connected courts"

Are these countries politically stable enough to implement such reforms? Reljić sees the connection in the reverse perspective: "Only in parallel with economic and social recovery can legal and political reforms be implemented." The region has always functioned as a system of connected courts. Yes, Yugoslavia as a country has failed, but as a "political space" it is still very much alive. In that system, the EU relied on authoritarian figures, such as Serbian President Aleksandar Vučić. With this, she hopes that countries that easily fall into crises, such as Macedonia, Kosovo or Bosnia, will be kept under control - which is a risky realpolitik experiment, Reljić believes. Negative influences also come from the EU itself: Greece's blockade policy towards Macedonia, Croatian criticism of Bosnian Islam as a gateway to jihadism, or Austrian support for Macedonian nationalists in the election campaign only further weakens these already fragile states. Finally, it must not be forgotten that both today's Bosnia and Herzegovina and Kosovo are products of Western interventions. However, awareness has grown in Brussels that these countries, with all their differences, should not be viewed individually and for themselves, but must be treated in a regional context.

Chinese influence

With Russia, Turkey and China in the Balkans, new players are now competing for power and influence. Western excitement about Moscow's role in the Balkans Reljić considers an exaggeration. Russia plays an economic role exclusively in the field of energy. From a military point of view, Russian power projections are unsustainable: from the Baltic to the Mediterranean Sea, the Western Balkans is separated from the Russian sphere of influence by a wall of NATO states. Reljić sees the Chinese influence as much more dynamic and significant for the future: within the "One Belt, One Road" initiative, the Balkans have become an important transit route for China on the way to rich Europe. Beijing is investing in rail links connecting Greek ports with central Europe. Mutual business is facilitated by the fact that the Western Balkans do not have to adhere to EU regulations: these days, in the vicinity of Belgrade, under Chinese leadership, the construction of an additional block of a coal-fired thermal power plant has begun. Loans (in the first phase $613 million, and later the complete renovation of the power plant for another $700 million) come from Chinese banks. The protests of environmental organizations did not influence public opinion at all. Finally, the Chinese are building an industrial park near Belgrade, which is celebrated as a valuable contribution to the reindustrialization of the country.

The EU will change in the coming years. What will be the envy of and whether and how the integration of the countries of the Western Balkans will progress. Reljić puts his hope in the Merkel/Macron tandem. The next "institutional cycle" that begins in Brussels in 2019 could also bring fresh momentum: European elections, a new Commission and a new budget. For the Balkans, it is an advantage that the accession of Turkey is removed from the agenda, which in any case has a calming effect on the opponents of enlargement. However, enlargement is and remains in the hands of each individual EU member state, as each has the right to veto it. The indifference of many EU members towards the region as well as the particular interests of certain neighboring states could easily break any integration dynamic. The Western Balkans always received great attention only when threats came from it: from conflicts and migration flows or from the threatening influence of non-European powers.

Candidates in the waiting room

Montenegro and Serbia are the closest to EU membership; Podgorica has been conducting accession negotiations with Brussels since 2012, Belgrade since 2014. At the same time, Serbia has to regulate its relations with Kosovo in a separate chapter. Albania received candidate status in 2014. When they will start negotiations depends on the progress in judicial reform. Macedonia has been a candidate since 2015, but Greece blocked it due to a "dispute over the name". In recent years, Macedonia has experienced a setback in the field of rule of law. Bosnia is a "potential candidate", with a major delay in reforms, and in February 2016, it submitted an application for membership. Since April 2016, Kosovo has taken the first integration step by signing the association agreement with the EU. But since five EU members do not recognize its statehood, it is unclear what the promised European perspective actually means for Kosovo.

Neue Zuercher Zeitung (NZZ)

Translation: Mirko VULETIĆ