YUGOSLAVIA 25 YEARS ON: At peace, but prosperity elusive

YUGOSLAVIA 25 YEARS ON: At peace, but prosperity elusive
Around 140,000 people are estimated to have been killed in the Yugoslav wars, with many more being victims of ethnic cleansing, rape and other war crimes.
By Clare Nuttall in Bucharest June 23, 2016

25 years ago, festering resentments within Yugoslavia finally pushed the federation to breaking point. Croatia and Slovenia were the first republics to declare their independence, on June 25, 1991, the decisive moves that would precipitate the disintegration of the short-lived federation and a decade of Europe’s bloodiest conflict since World War II.

A quarter of a century on, the region is at peace and moving, albeit slowly, towards EU membership – an incentive that has been an important factor in encouraging the former Yugoslavian republics to behave like “normal” nations in their relations with each other.

Critically, there is no realistic expectation of a new outbreak of conflict, a measure of how far the region has come in the last two and a half decades. But the wounds of the past are still raw, as seen in the continued use of nationalist rhetoric by politicians of all stripes, and the mostly minor, yet frequent security incidents. Trials of those accused of genocide and other war crimes are still ongoing, and as long as this remains the case, the post-war reconciliation progress cannot be said to be over.

The extreme destructiveness of the series of Balkan wars in the 1990s spanned almost every aspect of public and private life. Around 140,000 people are estimated to have been killed, with many more being victims of ethnic cleansing, rape and other war crimes. A generation grew up in an atmosphere of fear and hatred fuelled by nationalist rhetoric, that to a lesser extent continues to today.

“The risk of large-scale ethnic conflict is largely gone. Ethnic tensions are obviously still there, but they are not sufficient for all-out conflict. This issue has been successfully resolved, at least for the medium term,” says Cvete Koneska, an analyst at Control Risks. “However, things can still flare up on a small scale, and politicians continue to play the patriotic card especially during elections. This will continue as long as it suits their political purposes.”

In another positive sign, the region remained largely calm in recent months despite two critical verdicts from the war crimes tribunal in The Hague and a general election in Serbia.

In the most important ruling in any European war crimes case since the Nuremberg trials, former Bosnian Serb leader Radovan Karadzic was found guilty of genocide and nine other charges, and sentenced to 40 years in prison. The verdict brought back painful memories of Srebrenica, where around 8,000 Muslim men and boys were killed in Europe's worst atrocity since World War II. In a separate verdict, Serbian nationalist politician Vojislav Seselj was acquitted of all charges. Seselj’s far-right Serbian Radical Party re-entered the parliament after the April 24 general election.

“In the short term, the [Radovan Karadzic] verdict will cement existing divisions in views of the past and the war, but in the long term it establishes a framework of how Bosnia’s war history will be written,” Roland Kostic, director of research (Holocaust and Genocide Studies) at Uppsala University’s Hugo Valentin Centre, says in an interview with bne IntelliNews. “However, dealing with the past is only one aspect of post-war reconciliation. Other issues such as economic prosperity, and dealing with high unemployment and a weak welfare system are also important.”

Wasted resources

In the economic sphere, with the exception of Slovenia, which broke away early and relatively cleanly, the wars were also a massive setback. Whole industries collapsed with the outbreak of war. The breakup of Yugoslavia meant companies lost their markets and their supply chains were severed. Over-staffed and inefficient enterprises were no longer able to compete in the new market economy, and repeated privatisation attempts failed.

The decade lost to war was a huge setback for a region that now lags the rest of Europe and has the continent’s highest unemployment rates. The incomplete transition in all the countries in the region makes the problem worse. Issues such as public administration reform and privatisation tackled in Central and Eastern Europe in the early 1990s are still on the agenda of Western Balkan governments today.

Economic forecasts are relatively bright, in most cases showing economies growing at above the EU average. The International Monetary Fund’s (IMF) long-term growth forecasts for the Western Balkans countries that are not yet EU members are around 4%, well above their EU counterparts, indicating confidence that the convergence effect will continue.

At the same time, however, poverty levels in the region remain high, as does unemployment, and emigration continues at a rapid rate, indicating a lack of confidence in the future, especially among young people. This can partly be blamed on the economic crisis that hit the region in 2009. An IMF report points out that the growth path in these countries has been “W shaped”, with the initial recovery from war and the breakup of Yugoslavia followed by a second dip as the global financial crisis blew across the region.

But external factors do not tell the whole story. There was undoubtedly huge progress in the immediate post war years as countries embraced market reforms, allowed their nascent private sectors to grow and opened up to international trade. As a result, many were “unrecognisable” from their position at the turn of the century after this “major economic transformation”.

However, the IMF report points out that the reform path in the Western Balkans was “particularly uneven”. In addition, “the process of reform began to stall in the mid-2000s, in the face of vested interests and as reform fatigue set in, and remains incomplete.” Nor has the region wholly rebounded post-crisis. “Growth in the post-crisis period in the Western Balkan countries has been lacklustre. The external environment has been weak, but it is the incomplete reform process that is holding back convergence to income levels of richer European Union countries,” the report says.

In sharp contrast to the “big bang” transitions in countries such as Poland, 25 years after independence even the most advanced economies of the former Yugoslavia – Croatia and Slovenia – are still struggling to privatise major state-owned enterprises. “Embarking anew on deep structural reform is a key policy priority for the region,” concludes the IMF.

Jobless and hopeless

As governments across the region are aware, deep structural reforms are not without their costs, in particular further increases in unemployment, which is already at extremely high levels, especially in Bosnia & Herzegovina, Kosovo and Macedonia. Poverty has also increased across the region since the start of the crisis. 

According to a 2014 Eurostat report, Kosovo had the highest unemployment rate, 35.3%, across all the countries trying to join the EU, closely followed by Macedonia (28%) and Bosnia (27.6%). Even more worryingly, there are stratospheric levels of youth unemployment – over 60% of people under 25 were unemployed in both Bosnia and Kosovo – and the tens of thousands of under-occupied, frustrated youths undoubtedly contribute to political and ethnic unrest in these countries. “Populations are slowly waking up to the fact that corrupt politicians and non-working institutions are making their lives miserable, not another ethnic group,” comments Koneska.

Before the mass migration of refugees and economic migrants from outside Europe became the continent’s top security and humanitarian issue, one of the main source regions of migration to the EU was the Balkans. In early 2015, Hungary, the most popular entry point to the EU, reported a spike in migration, with a large number of those coming from the former Yugolsavia, in particular Kosovo. An estimated 100,000 people left Kosovo for the EU between mid-2014 and February 2015.

Germany has now designated Kosovo and other Balkan states safe countries of origin, restricting the options for would-be economic migrants. However, a 2015 study by the Friedrich Ebert Stiflung foundation found that around half of all young people in Bosnia, Kosovo and Macedonia would like to emigrate, with the average across the Southeast Europe region at 45.5%.

The Sarajevo-based Regional Cooperation Council, which includes all the former Yugoslavian countries, was launched to speed up Euro-Atlantic integration. “This is partly a political job –  all countries in the region are budding democracies – but recently the focus has been on the economy, because every opinion poll from the region shows the biggest worries are jobs, unemployment and financial security,” says RCC spokesperson Nenad Sebek. “Sadly, for a young person of 19 the biggest ambition is to emigrate, because these are societies without many opportunities.”

The RCC grew out of the success of the stability pact for Southeast Europe, founded in 1999 after the Kosovo war to boost post-war reconciliation and reconstruction efforts, and help drag the region out of the cycle of violence.

It is an important example of a pan-regional integration initiative, though there are an increasing number of cross-border cooperation efforts. Regional integration would benefit the small, fragmented states enormously, but the process is slow, held back by continuing political conflicts as well as the region’s cumbersome bureaucracies.

This is despite strong cultural similarities between most of the former Yugoslavian states, and their decades as a single nation. Like the countries of the former Soviet Union, citizens of former Yugoslavian countries still view neighbouring states as a “near abroad” – less foreign than countries outside the former federation. Languages in several countries – most notably Bosnia, Croatia, Montenegro and Serbia – are virtually identical to the old Serbo-Croat language, even though they now have different names. Television channels, newspapers and other media are consumed across the region dubbed the “Yugosphere” by The Economist journalist Tim Judah in 2009.

Many of the economic links that spanned pre-war Yugoslavia were never re-established. Among the fragmented new states, trading developed with the greatest intensity across borders where they divided people from the same ethnic group – for example between Albania and Kosovo, or Serbia and Bosnia’s Republika Srpska.

That being said, there are still a handful of regional giants, spanning the region and increasingly expanding further afield, among them Slovenian white goods manufacturer Gorenje, and from Croatia retailer Agrokor (which acquired its Slovenian counterpart Mercator in 2014), consumer goods company Atlantic Group and food processing and pharma company Podravka. “Only a few big companies from former Yugoslavia that were known across the region – some of the Croatian food companies for example – managed to survive. Consumers knew their brands and the quality of their products,” says Jelena Vapa-Tankosic, associate professor at the Faculty of Economics in Novi Sad, Serbia. However, these are the exceptions. “Other companies have had to start from scratch. They are trying, but still we cannot say there is a major increase in regional companies.”

Private equity firm Mid Europa Partners created a regional cable company through its acquisitions of Telemach and SBB, and is looking to replicate this process after it bought Serbia-based Danube Foods Group in 2015, the firm’s director, Andrej Babache told bne IntelliNews shortly after the deal was announced. “We understand that the region is composed of relatively small countries that have shared a long history, but which have sometimes subtle differences in language, taste and culture,” he said, outlining some of the challenges of building up a regional player.

Governments and businesses in countries across the region are very aware of the contribution regional cooperation can make to economic growth in sectors from agriculture to tourism. This can even help to build bridges between historically antagonistic people – as shown by the cooperation between the Serbian and Kosovan chambers of commerce, which encouraged Serbian producers to attend an agricultural fair in Pristina in 2015.

The RCC’s SE2020 initiative aims to promote regional cooperation in the economic field where it can make a difference. “For example, populations of individual countries are small, so we have launched the ‘One region, one economy’ slogan to present a regional market of 18mn to the world. We also want to create open markets for labour and finance in the region,” says the RCC’s Sebek.

There has also been a strong impetus for cooperation from outside the region. UN agencies played an enormous role in security and post-war reconciliation, especially in Bosnia and Kosovo. The prospect of EU accession has also been a critical incentive for countries to make economic reforms, tackle corruption and organised crime, and maintain peaceful relations within the region.

The entry of countries from the region into the Central Europe Free Trade Agreement (CEFTA) has helped to encourage trade. CEFTA was originally signed between the Visegrad countries of Central Europe back in 1992, but its original members left as they joined the EU and the bloc has gradually migrated south; its current members are the ex-Yugoslavian countries except EU members Croatia and Slovenia, plus Albania and Moldova.

Data from the first half of 2015 shows that the share of CEFTA in exports from countries in the bloc decreased between 2010 and 2015, while the share of Germany and Italy – which also account for a large share of total exports – increased. Intra-CEFTA exports accounted for 17% of total exports. Meanwhile, the share of imports from fellow CEFTA countries remained relatively flat, at just 10% of total imports.

The EU has encouraged cooperation in the energy sphere through the Energy Community, which like CEFTA comprises aspiring EU members. The community is pushing for the creation of a regional electricity market, which requires both the construction of new transmission infrastructure and the removal of administrative barriers. Similarly, the EU and other international organisations such as the World Bank are involved in funding some of the major transport corridors across the region.

There is an understanding that it is better for the region itself to promote cooperation. While the Stability Pact was run from Brussels, its successor the RCC is based in Sarajevo. “By 2007, significant progress had been made and there was a feeling it was time for the region to take ownership,” Sebek tells bne IntelliNews.

A rotting carrot

The prospect of EU – and to a lesser extent Nato – membership remains the main “carrot” for the region, though arguably less so than a decade or even five years ago. The stalling of the EU accession process, especially for Bosnia and one-time frontrunner Macedonia, has damped enthusiasm among countries that see membership as an increasingly far-off prospect. It is still a long-range goal for most, despite German Chancellor Angela Merkel’s launch of the Berlin process in 2014 that was an attempt to revitalise the flagging integration process.

Partly, this has happened as the EU border has approached; it now divides the former Yugoslavia, with Croatia and Slovenia on the inside. “The EU now is not the EU of 10 or 15 years ago,” says Koneska. “It made an important contribution to kick-starting regional cooperation after the war, but since then its influence has declined gradually as it expanded. The reality is that in Croatia things did not change overnight after EU accession, and this was seen across the border in Bosnia and Serbia.”

While EU integration is bringing some countries together – notably through the normalisation process for Serbia and Kosovo – more recently it has pushed others apart, as shown by the recent spat between Serbia and Croatia. Zagreb threatened to block Serbia’s path towards EU membership unless it receives several concessions, including forcing Serbia to abolish its local jurisdiction in war crimes for all members of former Yugoslavia. “The fact that Croatia has raised contentious issues at an early stage of the accession negotiations indicates that it will use the EU enlargement policy to force its neighbours to make concessions,” warns an April 13 report from the Centre for Eastern Studies (OSW).

Meanwhile for Macedonia, whose accession progress has been stalled indefinitely by the “name dispute” with Greece, membership is becoming nothing but a mirage on the far horizon, making Brussels’ influence dwindle. This has been highlighted in the ongoing political crisis in Macedonia, where both the ruling parties and the opposition have been increasingly willing to defy the EU-brokered Przino agreement signed in 2015. In what may be a demonstration of Skopje’s dwindling hope of progress towards the EU, Macedonia fell on recent indices of democratisation, media freedom and corruption.

The current situation does not pose the kind of threat to Macedonia’s very existence that erupted during the inter-ethnic conflict of 2000 and 2001. However, with the June 5 general election cancelled after all parties except the ruling VMRP-DPNME said they would boycott the poll, there is no obvious solution to the crisis.

By contrast, the situation in Bosnia is relatively calm, but of all the countries in the former Yugoslavia it is the most fragile. This was confirmed by Bosnia’s position on in the “warning” category on the 2015 Fragile States Index, well above the next ranked country Serbia. After steady improvements in stability in recent years, there was a sudden upturn in 2014-2115.

Bosnia remains held together by the structures put in place under the 1995 Dayton Agreement, which ended the Bosnian war by dividing Bosnia into two largely autonomous entities – the Muslim-Croat Federation and Republika Srpska. The agreement resulted in a complex separation of powers between national, entity and local level that have remained in place ever since.

However, there have recently been moves to question the continued adherence to the Dayton accord. Republika Srpska President Milorad Dodik called in 2015 for a referendum on the authority of the state-level judiciary, though later backed down following international pressure. Bosniak and Croat politicians are also reportedly frustrated by the cumbersome political and administrative processes and would like a more centralised state – something Republika Srpska vehemently opposes.

There are also new threats emerging. 2015 saw several of the former Yugoslavian states –  Macedonia, Serbia, Croatia and Slovenia – become part of the main Western Balkans migration route. Hundreds of thousands of refugees and migrants travelled the route by train, bus, taxi and on foot on their way to Germany and northern Europe, putting social and financial strain on those countries and bringing back memories of the Balkan wars and the displacement of people.

Countries along the route also have serious problems with human trafficking, smuggling of arms and drugs (they are on the main heroin route from Afghanistan to Europe). And in another worrying development there are numerous reports of youths form the region being recruited to fight with Islamic State in the Middle East.

However, these are normal problems faced by normal states, which in a sense is an indicator of just how far the region has come in the last 25 years. It could also help to push the states together in an area which has been the last to see cooperation, security, because of the legacy of war.

The post-war reconciliation effort may not be over, but it is progressing. Most economies in the region still lag far behind those of Central Europe, but they are growing. Politicians in Bosnia are questioning the status quo, but with rhetoric rather than guns. Most of the ties –  economic, political, human – from before the war have been severed, but new cross-border and regional links are being forged. And citizens might be demonstrating across the region, but not against their ethnic neighbours, but against their despised, corrupt politicians. Above all, this region that 25 years ago was on the brink of war, is now at peace.

This article is the last in a series marking the 25th anniversary of the split of Yugoslavia on June 25.