Banker Weekly English/Financial Information Agency/May 18, 2007

REARRANGEMENT OF THE BALKANS DOMINO WAVE OF POLITICAL CRISES IN SOUTHEAST EUROPE

the correct formula for rearrangement of the Balkans political and economic domino. The first tile of the new regional configuration was laid in Zagreb in the beginning of May. Croatia's capital then hosted a meeting of state and government heads of another local initiative - the South East European Cooperation Process (SEECP). And although the discussion in Zagreb remained somewhat aside from media attention, it stands all chances to remain in history. At least it will be remembered by the officially announced transformation (in fact liquidation) of the Southeast Europe Stability Pact, launched in 1999. As the BANKER weekly has already written the failed structure will be replaced by a special Council for Cooperation, including representatives of SEECP countries, the administration of Kosovo and the EU. The council will be chaired by Croatia's diplomat Hido Biscevic and his headquarters will be in Zagreb. Watched by the EC President Jose Manuel Barroso and the EU Enlargement Commissioner Oli Rehn, the leaders of states from the region agreed that the regional council should start operating effectively by February 2008 at the latest. It is expected to stir up the large infrastructural projects in the region which have been frozen in expectation of fresh investments, to help speed up liberalization of mutual trade and the application in practice of the Energy Community Treaty, signed in Athens in the autumn of 2005. It could be by chance, but several days after the Zagreb agreement the Bulgarian PM Sergey Stanishev turned the first sod of Danube Bridge 2 at Vidin-Calafat. In fact, that ceremony showed both populism and the lack of a "speed track" which the Balkans countries have been looking for more than a decade now. The European perspective for the Western Balkans (within the framework of the so-called Thessaloniki process) bravely advertised in the spring of 2003, seems more than illusionary today. Analysts of foreign policy do not dare to specify the term for the next, sixth EU enlargement. In that situation the recently demonstrated EU activity for deepening regional cooperation on the Balkans seems quite explainable as an acceptable alternative to EU membership. A successive move in that direction was made by Brussels on Monday (May 14). Then the foreign ministers of EU member countries approved the recently launched new initiative of the EC for encouraging cooperation in the Black Sea region that will become a part of the general policy of good neighbourship. However, these symbolic gestures cannot conceal the still unsettled essential problems in the relations between the countries from the region and the community. Among them are the settlement of the dilemma about the status of the riotous Serbian province Kosovo, the approval of a new constitution of Bosnia and Herzegovina, and the achievement of lasting stabilization in Macedonia. Among the pending issues is the slowly progressing ratification of the treaty of December 1996 for CEFTA's reformation and enlargement. As it is known, it should lay the basis of a mini common market in Southeast Europe. Nevertheless, three years after launching the process of stabilization and association of countries from Western Balkans, just a small part of them have signed agreements for setting a zone for free trade with the community. It is yet to be clarified how successfully the candidates will manage to absorb the earmarked billions of euro from the common budget of the new pre-accession IPA programme. A small break-through could be only expected regarding the elimination (rather alleviation) of the visa regime. That is quite a painful issue for the citizens from the region on the background of the freely travelling Bulgarians and Romanians. In the beginning of April 2007 the EC technically concluded the negotiations for the signing of a visa agreement and an agreement for readmission of criminals with Macedonia, Albania, Bosnia and Herzegovina. Negotiations with Serbia are to be finalized as well. The final documents will be most probably signed by the end of this year. Their enforcement doesn't mean that the people living in the Balkans won't have to queue for visas in front of EU embassies. But they will pay EUR35 instead of the current fee of EUR60. Moreover, businessmen and students will be granted additional preferences. It's more unpleasant for countries in the region that while bright European horizons drift away quicker and quicker, one by one they become victims of serious political crises. It's sufficient to point out what has been happening in recent months regarding the hard election of a government in Serbia and a president in Turkey. Thus, for instance, commissioners in Brussels accepted with a sigh of relief the end of the saga for the formation of the new Cabinet in Belgrade on May 12. Then the three pro-European factions - Premier Vojislav Kostunica's Democratic Party of Serbia, President Boris Tadic's Democratic Party, and the G-17 Group reached a coalition agreement. With their support for the new government they blocked the way to power of the ultranationalist Radical Party of Tomislav Nikolic that won the elections in January. On that occasion EU Commission Oli Rehn said; "I congratulate the leaders of the democratic formations in Serbia who staked on the country's European future instead of returning to the ghost of the nationalistic past." And according to his colleague Javier Solana, "It depends on Serbia alone how quickly it will walk the road to its EU membership". Facing an unprecedented constitutional crisis regarding the election of the new Head of State, the Turkish Parliament approved recently a package of constitutional amendments, allowing the country's president to be directly chosen by the people. The reform was proposed by the ruling Justice and Development Party. The formation of Macedonia's incumbent coalition Cabinet, headed by Nikola Gruevski, representative of the VMRO-DPMNE party was also difficult. Thus, the Democratic Party of Albanians, the New Social Democratic Party, Party for Democratic Prosperity, and the Democratic Union for Integration are also represented in Macedonia's Government. And the Basescu-Taricanu conflict in Romania showed that even EU membership is not a sufficient guarantee sometimes for the problem-free political development if a country is in the Balkans. Thus, on May 19, instead of MEP elections, Romanians voted in a referendum "for" or "against" the forceful suspension of Premier Trayan Basescu, voted by the Romanian Parliament on April 19, 2007. According to forecasts in the local press, the Head of State will return triumphantly. Thus, the political crisis in Romania might well deepen. And if the domino's effect is started in that unfavourable direction, it would be reasonable to ask which country in the region will follow suit. And there is no lack of preconditions that might be Bulgaria. BANKER