Robust economic cooperation between Western Balkan countries almost erases past grievances against each other and provides the foundation for reconciliation, democratic development and prosperity in the region.
Variables at play
Economically, the Western Balkans (WB) are experiencing the most prosperous and longest period of economic growth since the individual countries gained sovereignty. The common denominator and driving force of these three options is the defragmentation of the Balkan countries aspiring to the EU, on the one hand, and the prevention of a “balkanization” of the EU itself. This is the development trajectory that transcends the Balkans’ current situation with the EU, and it is the prospect of the peninsula’s non-EU countries eventually joining the Union.
If the current situation remains as it is – the Balkans are fragmented by the blockages to the prospect of EU membership currently exercised by better-off neighbors like Bulgaria (in reality vis-à-vis North Macedonia). North and, in fact, Albania, since autumn 2020) and Croatia (towards the prospect of Serbia and de facto Montenegro joining the EU, since spring 2016) — the long-term probability is that the region will remain “balkanized” by counterproductive animosities stemming from past conflicts and nationalisms. visions.
Defragmentation is a sine qua non condition, first for the current Balkan members of the EU (i.e. Bulgaria and Croatia), for the skeptics of EU enlargement and finally for the aspiring countries themselves; furthermore, this can actually happen through economic cooperation within the Balkans and between the region and the EU, driven by the very gravity of the common market.
The two effective vetoes by Bulgaria and Croatia initially referred to the lack of respect for historical “truths” on the part of North Macedonia and Serbia, then the arguments evolved (partially disguised as rhetoric) into allegations of violations of human rights and the rule of law. In other words, focusing on economics can solve many of these problems by first reorienting political thinking toward the future, helping to solve real problems in human rights and Rule of law. This reorientation therefore debalkanizes political attitudes.
How Variables Affect Defragmentation
Disagreements within the World Bank exist, political inclinations towards external powers are well known and certain regional contexts and pretensions present obvious political risks (e.g. conflict between Serbia and the Republic of Kosovo or the disintegration of agreements post-Dayton territories). Yet none of the main political actors on the ground envisage economic isolation from the EU and almost none of them question their country’s European perspective, identity and/or membership in the EU. EU.
The possible accession of the Western Balkans to the EU does not constitute an economic challenge: to a large extent the World Bank is already part of the EU, in terms of micro-sectoral economic exchanges, banking sectors and FDI (but not in terms of GDP levels). per capita or income convergence, etc.). The World Bank is a de facto part of the EU common market.
The possible fragmentation and isolation of the Balkans is risky not only for the countries themselves but also for the EU: without a clear enlargement and accession program (as policy and de facto), the Union would evolve into a new situation with stronger centrifugal political tendencies. On the other hand, full membership in the WB corresponds to both centralizing and confederative visions of the future of Europe.
Credibility of defragmentation
World Bank countries are growing faster than the Western European and EU average. The path to prosperity for the WB was opened in 2001 by the EU’s unilateral trade liberalization (which allowed the World Bank to increase its exports to the Union fivefold and better integrate its own economies), and politically, countries seem less risky than other countries. members of the Eurasian Economic Union. 65 cents of every euro of income in the Balkans results from economic integration with the EU, and this is true for at least 25 percent of fixed capital formation.
The World Bank represents a kind of “integrated economic union”: foreign ownership of banks overlaps with the payment system, the main trading partners are from the common European space, the Balkan countries and Moldova now constitute CEFTA , the markets are almost unified and there is a practically common audience. supply; Shared civil society initiatives and structures are also common, but not universal.
According to numerous international comparisons (The Good Country Index, Index for Economic Freedom, Global Terrorism Index, Doing Business, Rule of Law Index, Global Heath Security Index, World Electoral Freedom Index, suicide and homicide rates and global governance indicators ), the Balkans tend to be close to the group of best performing countries, just a notch below (but not always) the new EU member states and significantly better than countries that might be politically popular with the public of each Balkan country.
The economic influence of neighboring geopolitical “powers”, such as Turkey or Russia, is limited to a certain sectoral dominance (e.g. Serbia’s oil production and supply (but not the entire electricity sector) and real estate ownership in Montenegro) and up to 3 percentage stake in the banks of Republika Srpska. Unlike economic presence, political influence can be significant.
If the economic impact of the EU as a center of gravity is a dominant factor in all Balkan economies and their European integration is a natural locus of political influence, the political impact of the Union is not not up to its economic and commercial presence.
Hypotheses
The central assumption is that economic cooperation between the Balkan countries and the EU is already a proven way to overcome political tensions between some EU members and the Western Balkan countries. Added to this is the understanding that the EU has the means to tame the piecemeal vetoes of Bulgaria and Croatia currently applied to North Macedonia and Serbia respectively. It is in the interests of the public, businesses and major political parties on both sides of the Balkan standoff over EU membership that the issues raised are circumvented through mutually beneficial projects and cooperation.
The second assumption is that centrifugal and/or centralizing political trends within the EU will remain “in limbo” and that none of these trends will dominate for a period longer than the period of Balkan membership in the EU. EU.
Balkan optimism about EU membership in the foreseeable future is fading. This is what the opinion polls of the Balkan Barometer show. Pessimism is universally prevalent in the countries of the former Yugoslavia, but not so much in the case of Albania and Kosovo. The assumption is that this mindset can and will be reversed relatively quickly if and when one or two countries enter the final stages of accession negotiations.
Last but not least, developments related to the situation within or in relation to “rival powers” – for example political developments on the periphery and among the neighbors of the Russian Federation, Chinese loans to the government of Montenegro and the economic instability. of Turkey – should limit the political popularity of anti-EU and anti-NATO sentiments.
Implications if realized
The main result would be a reinforcement of the positive economic developments of the last 20 years. Territorial conflicts (associated with the recognition of Kosovo’s independence) and disagreements over the past will take a back seat, postponing issues that await better times to be resolved.
Reducing the fragmentation of the Balkans will also benefit neighboring countries. For example, in terms of export volumes, over the last 10-11 years, North Macedonia has been more important in terms of revenues of the Bulgarian economy than the Russian Federation and almost as important as Hungary or Czechia. All Balkan countries are very important for the Italian banking sector, because they provide stability and arbitrage. The benefits of investing in the future of the new EU members from the Balkans will be enhanced by the expected political and economic predictability.
Over the past 12 or 13 years, Western Balkan countries have benefited from recessions and capital flight from Greece, Turkey and the Russian Federation. Possible negative developments in the main EU economies (inflation, public debt, non-performing loans, energy prices, etc.) would not have a negative effect on the prospects of doing business with the WB, quite the contrary: because of the comparative advantages of the WB. region (e.g. lower prices and labor costs, productivity gains and better access to markets and pan-European initiatives), the already politically connected economies of the peninsula will open up opportunities for offshoring.
The EU’s economic realities and political integration will eventually resolve existing human rights and rule of law problems, and the Western Balkans would host elements of all of these difficult scenarios.
Reported by Krassen Stanchev.
Thanks to Visegrad International Fund and the National Fund for Democracy for their support