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The Balkans in Europe's Future

Anförande vid Robert Bosch Stiftung i Berlin, Tyskland

When talking about the Balkans, it is always tempting to talk about history.

You could dwell on the division of the Roman Empire in the 4th century or the split between the Eastern and Western branches of Christianity approximately seven centuries later along roughly the same geographical dividing line as we see today.

Or you could spend some time on the advance of the Ottoman Empire into the area - the battle of Kosovo Polje in 1389 always to be mentioned - or its gradual retreat and eventual demise - the Berlin Congress of 1878 certainly not to be forgotten.

Or you could jump to the first and the last decade of the last century that were both dominated by the various Balkan wars - the first and the second Balkan wars, and that third Balkan war that quickly developed into the first world war, and then in the final decade of the century the various wars of Yugoslav succession that stretched from 1991 to 2001.

I will spare you all of this - but I can't avoid mentioning some critically important aspects of this history.

This is a part of Europe that has been ruled or dominated by more or less multinational empires for longer periods than any other part of our continent.

A thousand years or so of the Roman and Byzantine Empires - Rome and Constantinople. Half a millennium or so of the Ottoman Empire - Istanbul. Centuries in some cases of the Habsburg Empire - Vienna.

And these many centuries left a mosaic of peoples, cultures, traditions and nationalities that was rather unique even in those long lost days when much of our Europe was more multinational than is the case today.

To set up nation states in this area according to the fashion that we started to develop in Europe a couple of centuries ago was accordingly a task that was extremely difficult. In his 14 points towards the end of the First World War President Wilson promised national self-determination to more or less all of Europe - but even he had to make an exception when confronted with the mosaic of large parts of the Balkans.

It was then we got the various Yugoslavias - three or four or more depending on how you interpret the last decade or so.

Whether or not these various Yugoslavias were a good idea is something we had better leave to the historians of the future, but it already became clear some time ago that they were not sustainable in an age where the urge for national self-determination and the setting up of nation states were everywhere present.

The wars of Yugoslav secession were wars to define the territories of the new states that would emerge out of the debris of the collapsing old socialist Yugoslav system.

There might well have been schemes for a Greater Croatia or a Greater Albania at various times - or a Greater Bulgaria if we move towards the South - but during these years it was the Serb issue that was at the core, with a substantial number of Serbs living outside the borders of the Republic of Serbia in the old Yugoslav system.

Years ago, when I was asked to try to coordinate the peacebuilding operation in Bosnia immediately after the war, one of the most frequent questions I was confronted with at various international gatherings was whether we had a reliable exit strategy from our operations there.

You might remember that the original plan was that everything should be sorted out and done with within a year.

My answer then was that we should not think of exit strategies for us from the Balkans but instead of entry strategies for the Balkans - into the structures of European integration. Over time, there was no other way in which the various divisions of the region could be overcome.

The region was still busy erecting new borders and barriers - but we had to try to fast-track it into the more modern European concept of taking down barriers and reducing the importance of borders. We had to rush the region from the approach of the 19th century to the possibilities of the 21st century.

But that - as we have all learnt -is much easier said than done.

Partly - that should be said - because of us, the other Europeans, not from the Balkans.

There is talk of enlargement fatigue, of Balkan fatigue and of general political fatigue. We speak about the Europe of results-fine, but we also need a Europe of greater visions.

Partly it is because of the region itself.

It is a sad fact that we are still not at that inflection point in its long-term development when we can say with certainty that the forces of integration are stronger than the forces of disintegration.

The process of European integration has undoubtedly made progress during the last few years. Croatia is negotiating for membership. FYROM Macedonia has been given candidate status for membership. Albania and Montenegro have signed SAA agreements. Serbia and Bosnia have initialled the same type of agreements. There is a more or less functioning free trade area.

This is all progress - although somewhat patchy, and without a perspective for the region as a whole that is so essential.

There is economic growth of around 5 per cent in most of the region, but the process of reform is uneven, the burden of past structures still rather heavy and the region not yet attracting or mobilising the investment that would be needed to put it on a more stable growth path.

And now we are coming up towards the need to try to deal with the question of the status of Kosovo.

I will not go into all the political issues involved in this decision, nor try to discuss how they can be addressed from the point of view of international law in the absence of a decision by the UN Security Council.

I have two concerns that we need to address.

The first is the obvious one of state-building in Kosovo. Taking a decision on status might be the easiest part of the process ahead of us - creating a truly stable, sovereign and viable state over the years to come a somewhat more demanding one.

The second is the need to avoid major setbacks in the crucially important process of regional and European integration as a result of the political turmoil that decisions on the status of Kosovo could to be associated with.

If we were to fail in creating a stable state in Kosovo, and at the same time see new barriers blocking the necessary economic and political integration of the region with the rest of Europe, I fear that we will see economic, FNsocial and eventually also serious political tensions building up in the years to come.

But if we were to succeed with both of these tasks, the future - after a rocky period - might well look considerably brighter.

And for all the attention that is given to somewhat less central issues these days - like the dates of various decisions - I would urge those really concerned with the future of the region to focus on these two issues.

If you ask those living in Kosovo, we know that practically everyone of Albanian nationality wants independence. But if you ask them what is there most pressing concern - and this is what UNDP regularly does - you find that economic and social issues are even more important, and that a large majority takes a rather dim view of prospects in these regards.

The economy is very weak.

Unemployment is around 40 per cent - with the share of the people in the labour force being low. Approximately a third of the population is 15 years or younger, and more than 30 000 new job seekers are entering the labour market every year. Very little is actually being produced - exports only cover approximately 6 per cent of imports, a uniquely low figure - and Kosovo is highly dependent on declining remittances from abroad and somewhat uncertain aid flows from us.

And when it comes to issues like the judicial system, corruption and education the latest assessment of the European Commission makes for rather grim reading.

This certainly does not mean that there is no hope - but it does means that in these aspects, too, we have achieved less during the UNMIK years than many had hoped, and that Kosovo is facing a huge challenge in the years ahead.

Today, there are expectations that the achievement of independence of some sort - will also bring rapid improvement in the economic and socialsituation.

The expectations are there, and if these are not meet, there is a risk that some years down the road we will be faced with a new period of political instability in the country.

At the very worst, we could even be faced with a failed state.

There are numerous things we can and must do to avert this danger, but I see little prospect of lifting Kosovo in the coming years without making it fully part of a region fully committed to integration with itself and with the European Union.

It istrade that will bring investments, and it is investments that will bring jobs, and it is jobs that will bring the prospects of a better future - and thus also of political stability.

And this brings me to my second major concern at this moment in time - to make it possible for the process of regional and European integration to move forward.

A recent study by Vladimir Gligorov at the Vienna Institute for International Economic Studies - "Costs and Benefits of Kosovo's Future Status"- highlights the importance of this for Serbia, for Kosovo and for the region as a whole.

If there were to be a harmonious development of the relations in the region - including between Serbia and Kosovo - the study believes Kosovo's potential growth rate could be close to 7 to 8 per cent a year in the medium run while Serbia could sustain a convergence growth rate above 5 per cent a year. Both would benefit from a "peace dividend" as trade would expand faster in the region and its attractiveness to FDI would also increase.

That's the good scenario.

The less good is of course new barriers to trade - primarily between Serbia and Kosovo - and the stalling of efforts to facilitate regional integration in various ways.

Quantifying the costs of such a more adverse scenario is difficult, but in the worst scenarios it could well wipe out most of the growth that would otherwise have occurred.

For Kosovo the consequences would obviously be severe, but since the IMF believes that current macroeconomic developments in Serbia are unsustainable, its economy is ill placed to risk macroeconomic stability as a consequence of political overreaction to an undesirable outcome of the Kosovo issue.

The way Serbia goes will be important not only for Serbia itself but for a large part of the wider region. With its central location, and the weight of its economy - more than 10 times the size of the economy of Kosovo - its attitude towards further integration will be of critical importance.

On Sunday Serbia will elect its president for the coming years. The decision is up to the voters of Serbia, but we cannot fail to note that the contest seems to be between a more European-oriented approach and one that might seek to take the country back to some sort of nationalist bunker.

The European Union has a critically important role in facilitating the processes of regional integration and in view of the tensions we will be facing in the months to come I believe it should now seek ways to strengthen that role.

The offer this Monday by the European Union to conclude an interim agreement with Serbia on intensified political cooperation could be seen as a first step in these region-wide efforts. Whether or not this offer will be taken up remains to be seen - we might have to wait until after Sunday to see.

Another step is coming with the renewed emphasis now given to visa liberalisation for the various countries of the region. Depriving young people, in particular, of the possibility of travelling to the rest of Europe is not in our interest.

During this year we must also look seriously at the possibility of taking further substantial steps on the road to integration with the European Union.

It is my sincere hope that Croatia - following the formation of its new government - will be able to step up its pace of reform so as to make the conclusion of accession negotiations in 2009 a more realistic possibility than it looks at the moment.

Both Serbia and Bosnia have initialled SAA agreements, and signature should be possible within the next few months thus paving the way for progress towards candidate status along with Montenegro - all under the assumption that these countries are in fact interested in applying for membership of the Union.

Reforms are picking up speed in FYROM/Macedonia, and it could well be that these will be enough to give a date for the start of accession negotiations.

Within the next few years we should be able to bring all the countries of the region into or close to actual accession negotiations. But as I say this I must also state that these negotiations will have to be pursued with the individual countries according to the progress there are making on adopting and actually implementing the various provisions and reforms necessary. We must be prepared to develop instruments to help and assist them in this work, but we must also make clear that the demands of membership must be met, and that at the end of the day this is very much in their own interest.

As progress is gradually made when it comes to the accession process, we should, in parallel, seek ways of accelerating the integration of infrastructure and the promotion of inter-regional trade links, with there being a very considerable scope for expansion in both areas.

One area thatI believe merits much closer attention is the area of energy - and that is for three reasons.

The first is that we have a framework for cooperation in place in the form of the Energy Community for South Eastern Europe in force since 2006. This includes the region de facto in the various aspects of energy policy of the European Union.

The second is that energy is becoming a rather complicated issue in the region. The lack of investments over a long period, in combination with the closing down of nuclear production in Bulgaria and economic growth starting to come back means that the energy balance of the entire region soon will start to be rather problematic.

And the third is that there is a considerable potential for the expansion of climate-friendly energy in the region. Both Bosnia and Albania have great possibilities in terms of hydro power but are dependent on a functioning regional power market in order to start to expand. There are also other energy resources in the region, notably coal in both Bosnia and Kosovo, although somewhat less advantageous from the carbon emission point of view.

The European Stability Initiative (ESI) has recently published an interesting study - "A Bosnian Fortress - Return, energy and the future of Republika Srpska" - in which it describes the positive impact that energy investments are having on integration in Bosnia, with what is happening in the former Serb hard-line stronghold of Doboj as an example.

A new European initiative for energy integration in the region - in combination with other infrastructure initiatives - should be in everyone's interest, as practically all the counties of the region are going to face difficulties in this area in the years ahead. Integration in this area will then also pave the way for integration in other areas.

At present there is also a plan for a "Donor's Conference" for Kosovo. The need to augment support for its various state-building efforts is obvious, but I think we should seek ways of demonstrating that our commitment is not to one part of the region only, but that we are genuinely seeking to help the development of all parts of it.

A major European Union conference on regional integration and cooperation - with energy issues as one of its most important topics - could thus serve to bridge the gap that would otherwise be there between the short term efforts to help just Kosovo and the longer-term efforts at the integration of the entire region in the European Union.

There is little doubt that it is the European Union that is the key to the future of the region. Other more distant actors might have their exit strategies from the region, but for us the issue is one of an entry strategy for the region into our institutions of integration.

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