bne IntelliNews -

Kosovo’s two largest parliamentary parties have struck a coalition deal, putting an end to a six-month political vacuum following the June 2014 elections. The agreement will mean that the  Democratic Party of Kosovo (PDK) will remain in power alongside the Democratic League of Kosovo (LDK), whose leader Isa Mustafa is set to become Kosovo’s new prime minister.

At a session on December 8, MPs approved Kadri Veseli as parliament speaker, by a majority of 71 votes to 42, opening the way for the parliament to approve a new government, which is expected to take place later today.

Under the agreement between the PDK and LDK, Mustafa will replace long-standing PM Hashim Thaci of the PDK. With the combined seats of the PDK and LDK, and backing from 20 MPs representing minorities, the new government will have a stable majority in parliament, and Mustafa’s election by MPs is expected to go ahead without a hitch.

In an address to the parliament on December 8, Mustafa told MPs that he would offer a stable government, with a focus on economic development and promotion of foreign investment. He also said he would work to promote the rule of law, and to continue the dialogue with Serbia.

The peaceful handover of power from Thaci to Mustafa is a highly important step for Kosovo, which has yet to have a transition of power since independence. Before the PDK-LDK deal was struck, it seemed that Kosovo might have to head for another round of elections to resolve the crisis. There were also fears that the vacuum could add to political unrest in Europe’s youngest state.

Mustafa, who served as Kosovo’s finance minister in exile during the 1990s, later becoming mayor of the capital Pristina, gets the top spot in the new government after the LDK refused to support a third term for Thaci.

However, the concessions the LDK has made to the PDK are not clear. Thaci is expected to become both deputy prime minister and foreign minister. There are rumours in the Kosovan press that Thaci will also get support from his coalition partner for a bid to replace Atifete Jahjaga as president when her term expires in 2016.

The deal will keep Thaci, who has clung determinedly to power since the June election, at the heart of Kosovan politics. Despite taking 30.38% of the vote on June 8 to the LDK’s 25.24%, the DPK was unable to find coalition partners until it struck a provisional deal with the LDK in late November.

Instead of giving way to the coalition of opposition parties that sought to take power, Thaci mounted a constitutional battle, insisting on the DPK’s right, as the largest party in the parliament, to nominate the candidate for speaker. However, with four opposition parties ranged against him, it proved impossible to get his choice passed by the parliament. On July 17, the parliament voted Mustafa, the opposition nominee, in as speaker, but the following day the DPK appealed to the country's constitutional court, claiming that his appointment was “unconstitutional and unlawful”. This appeal was backed by the court.

The first signs that the lengthy deadlock was nearly over came in November, when a deal, brokered by the US, was announced between the DPK and LDK.

Until then, Mustafa’s LDK had planned to form a government with the Alliance for the Future of Kosovo (AAK) and Initiative for Kosovo (Nisma), later bringing on board the nationalist Vetëvendosje party, which allowed the parties to secure a majority in parliament. However, Thaci’s determined campaign to prevent the four-strong coalition from taking power led to Mustafa eventually breaking with his former allies to join the DPK.

The formation of a new coalition brings to an end the lengthy deadlock, which had a damaging effect on the economy, with many companies reportedly putting off investment decisions until they could be sure of a more stable political environment.

The British Ambassador to Kosovo, Ian Cliff, told students in Pristina on November 5 that the political crisis had created “major problems” in an already challenging business environment, Albeu reported. By early December, there were indications of a 6% drop in custom duties and a decrease in tax collection. Finance Minister Besim Beqaj blamed the decline on a combination of the political situation and the fall in foreign investment.

Kosovo remains one of the poorest countries in Europe, with high levels of corruption and organised crime - the latest Corruption Perceptions Index released by Transparency International in December puts Kosovo on a par with Albania in 110th place out of 175 countries, the lowest in Europe aside from Belarus, Russia and Ukraine. The average monthly salary is just €350, and an estimated 34% of the population lives below the poverty line on under €45 a month, according to the World Bank. Unemployment is 45%, with youth unemployment as high as 70%.