26 August 2018

Ideas matter – and few ideas mattered more in the Balkans in recent decades than the notion that different ethnic groups cannot live together in the long term, and that therefore it is inevitable that one day they need to be separated.

There are many policy makers today who appear to have forgotten the 1980s, and how such ideas – developed by intellectuals, turned into movies and novels by artists, picked up by politicians – prepared the ground for a decade of war, for millions of displaced and for more than 120,000 dead.

But there is no excuse to forget this recent past. This is why ESI will remind those who care about stability in the Balkans about the real reason peace took hold in the Balkans in recent years: a battle of ideas that was won at huge effort and cost.

Two ideas in particular were defeated.

The first: force is justified as a tool of politics to defend ethnic (tribal) group interests. Criminals can become legitimate national heros if they use their weapons in the name of their tribe.  And the second: it is not natural for people of different ethnicities, religions, identities to live together. You are only ever save if you are in control. You can never be save as a minority.

In 2004 it looked for a moment as if these ideas would stage a breakthrough in Kosovo. During two days, Kosovo Serbs were viciously attacked by Kosovo Albanian nationalists.  And immediately following these two days, leaders in Belgrade argued that this meant that coexistence had become impossible.

As we argued at the time, this logic clearly implied that coexistence was also impossible in Bosnia – where worse atrocities happened for years – and in parts of Macedonia (where fighting had erupted in 2001). It was impossible also in Croatia, and logically everywhere in the Balkans where minorities lived. And minorities lived everywhere: in Serbia, in Montenegro, in Kosovo.

And so we published a report in 2004 which we hoped had some impact on the debate: “The Lausanne Principle”. There we argued that the temptation of “simple” solutions to minority issues – by exchanging either territory of people – is deadly. We pointed to the example of the original Lausanne treaty – and what it meant for generations of Greeks in Turkey. We noted that the whole European (and US) strategy after the 1990s was based on the opposite idea: that Balkan nations were held to the standard of how they treated minorities, and that by showing that minorities were not only save but could live decent lives as equal citizens Balkan nations could prove that they were ready to join the rest of the EU.

Today tribal thinking is raising its ugly head also inside the EU. But this is not a reason to export this toxic idea to the Balkans. It is in particular a huge threat when it comes to the future of Kosovo – and a total betrayal of Kosovo Serbs, who did NOT flee their homes in 1999, nor in 2004. And who would now be told that unless they lived in or moved to Serbia they had no future.

We strongly believe that for this reason it is not a matter only for Pristina and Belgrade to settle their relations. Some things the EU should make clear are not compatible with European principles.  For instance, any exchange of people against their will or under pressure would be totally unacceptable. And so should any exchange of territory based on ethnic principles.

Here is what we wrote in 2004 (excerpts):

On the violence in March that year 

Five years into the international administration of Kosovo, two violent days in March 2004 have sorely tested the international commitment to a multiethnic Kosovo. Directed against Kosovo’s minorities and against the international mission itself, the violence has left many wondering whether UNMIK has the capacity to achieve its objectives in the face of open resistance.

This is a dangerous moment for international policy in the region. The urgent priority for the Kosovo mission and the incoming Special Representative of the Secretary General is to reaffirm the international commitment to multiethnic society, at both the diplomatic and the practical level.

This paper argues that the policies needed in response to the March riots must be based on the practical needs of Serbs living in Kosovo today. The paper finds that the current reality of Kosovo Serbs differs from the common perception in important ways. There are still nearly 130,000 Serbs living in Kosovo today, representing two-thirds of the pre-war Serb population. Of these, two-thirds (75,000) are living south of the River Ibar in Albanian-majority areas. Almost all of the urban Serbs have left, with North Mitrovica now the last remaining urban outpost. However, most of the rural Serbs have never left their homes. The reality of Kosovo Serbs today is small communities of subsistence farmers scattered widely across Kosovo.

Against this background, the paper argues that the Serbian government’s plan for creating autonomous Serb enclaves in Kosovo is dangerously flawed. Kosovo Serbs cannot be separated into enclaves without mass displacement of both Serbs and Albanians, increasing hostility and further compromising the security of Serbs. Any attempt to implement this vision leads inevitably towards renewed violence. If, as seems likely, the Belgrade plan is a tactical ploy aimed at securing the partition of Kosovo, it amounts to a betrayal of a large majority of Kosovo Serbs.

The paper argues that a sustainable solution for Kosovo cannot be based upon the Lausanne principle: the negotiated exchange of territory and population common in post-conflict settlements in the Balkans in the early 20th century. Serb communities in Kosovo will only be viable if the territory remains unified and Serbs are able to participate as full citizens in multiethnic institutions. The stakes are extremely high, both for Kosovo Serbs and for the international community, whose entire strategy in the region over the past decade has been based on a commitment to multiethnic society.

The essence of the ‘Standards before Status’ approach is that Kosovo’s institutions of self-government must take responsibility for ensuring that minority communities can live in Kosovo in safety and dignity. The paper proposes three practical measures for making this Standard a reality:

  1. a redoubling of efforts on return and repossession of property, with a view to completing the process by the end of 2005;
  2. ensuring that multiethnic security structures in Kosovo are strengthened, properly equipped and placed under the political responsibility of the elected Kosovo government, through a ministry of public security;
  3. carefully targeted reform of local government structures to ensure that Kosovo Serbs receive adequate public services in the places and circumstances in which they now live.

In addition, the paper argues that a renewed effort to overcome the division of Mitrovica would be the most positive response to the March riots, removing Kosovo’s most dangerous flashpoint and opening up possibilities for negotiated solutions on a range of highly contentious issues.

A fundamental precondition, however, is that the international community explicitly rule out any solution for Kosovo based on territorial bargains or the expulsion of minority populations. Whatever its final status, Kosovo must remain whole and undivided, providing a safe home for all of its traditional communities. The Contact Group and the European Union should serve notice that any partition scheme will be vetoed in the Security Council. They should also serve notice that an ethnically cleansed Kosovo will never be seen as fit for sovereignty. Let it be made clear to everyone concerned that the anti-Lausanne consensus that guides policy in Europe today is too solid to be shaken by an angry mob.

On Partition

The obstacles to implementing the Belgrade plan [of ethnic enclaves throughout Kosovo] are so great that it is difficult to avoid the conclusion that it is merely a negotiating ploy – a maximalist position designed to secure a tactical advantage. If so, what is the agenda that underlies it? The terms of the plan itself suggest an answer.

There is only one area of Kosovo where the proposal could be implemented without violent upheavals – the relatively compact Serb-majority area north of the Ibar. As the plan itself notes, being “close to central Serbia”, the north of Kosovo is safer and easier to defend than the Kosovo interior. Creating an autonomous province in Northern Kosovo would involve undoing some of UNMIK’s recent policy successes, particularly the establishment of a multiethnic court and Kosovo Police Service in North Mitrovica. However, many of the institutions required for an independent administration already exist.

There are those, both among the political class in Belgrade and in the international press, who believe that the complex institutional mechanisms required for “autonomy within autonomy” are impractical, and would rather see a simpler solution: the partition of Kosovo into a fully independent, Albanian south, and a northern part that would remain within Serbia. They believe that this is an outcome on which both sides might agree – the Kosovo government in order to secure independence for most of Kosovo, and the Serbian government as a face-saving compromise.

As one commentator in the Serbian daily Kurir put it: “We should either tell the remaining Kosovo Serbs that they cannot survive there and that they should move to central Serbia, or we should try to divide what still might be divided, thus at least a part of Kosovo really to be part of Serbia.” Cedomir Antic, a historian and member of the liberal group G17 Plus, proposed drawing a “green line” as in Cyprus. He suggests a Security Council resolution to divide the province according to the census data from 1991. Antic erroneously assumes that if “the Serbian canton includes the northern part of Kosovo plus the part around Gracanica,” then “90 percent of Serbs would enter the entity.”

There are also commentators on the international side who consider partition an unavoidable, if not desirable, outcome. As Ian Traynor put it in The Guardian: “The Serbian elite is not so dismayed to see Kosovo Serbs driven out of their villages. It thinks this will reinforce the case for partition. Albanians too may ultimately back a partition that maximises territory and entrenches an independent Kosovo. With a few exceptions they want Kosovo ethnically pure. In the middle stands the NATO-led international administration, which for five years has been pushing a multi-ethnic, multicultural Kosovo that neither side wants.”

Those opposed to partition have pointed to the dangers for Presevo or Macedonia, if the international community acquiesces in further border changes. In fact, the most immediate danger is to the many Serbs (up to 75,000) living in the Albanian-majority south. If the international community were to accept partition, caving in to demands for territorial separation from extremists on both sides, it would leave itself in an extremely weak position to protect the minorities left in the south. This is precisely the scenario that would lead to an intensification of mob violence in Kosovo and the expulsion of the remaining Serbs.

It is not likely that the international community will openly acquiesce in the partition of Kosovo, nor even that the Serbian government will officially advocate abandoning the Serbs living in the south of Kosovo. The real danger is that persistent talk of territorial solutions, along the lines of the Belgrade plan, will set in motion a chain of events that will make this outcome inevitable.

Dangerous ideas

At the turn of the 19th century, when the nations of South Eastern Europe were emerging from a crumbling Ottoman empire, state-building was often accompanied by the brutal expulsion of ethnic and religious minorities. When the Great Powers sat together to redraw the map of the region following major conflicts, they considered forcible population exchange to be a legitimate technique for solving “minority questions”. In 1913, the treaty that followed the Second Balkan War included a Protocol on the exchange of population. In 1919, Greece and Bulgaria approved a Convention Respecting the Reciprocal Emigration of their Racial Minorities. In 1934, 100,000 Muslims were resettled from (Romanian) Dobrudja to Turkey. It was a brutal approach: solving minority problems by eliminating the minorities themselves.

The most infamous of these agreements was the 1923 Treaty of Lausanne, which ended the Greek-Turkish war in Asia Minor. At Lausanne, the Greek and Turkish governments and the Great Powers stated as the very first article of the treaty the principle of preventive exchange of population:

“As from the 1st May, 1923, there shall take place a compulsory exchange of Turkish nationals of the Greek Orthodox religion established in Turkish territory, and of Greek nationals of the Muslim religion established in Greek territory.”

The result was the forced displacement of almost 1.5 million people, destroying communities that had existed since ancient times. While many had already been displaced by conflict, there were still over 200,000 Greeks in Anatolia and more than 354,000 Turks in Greece. Many of these were “prosperous and satisfied, feeling secure and having no desire to abandon their homes.” As the Greek prime minister noted at the time, “both the Greek and the Turkish population involved… are protesting against this procedure… and display their dissatisfaction by all the means at their disposal.” With the principal of territorial separation accepted at the international level, however, there was nowhere to appeal, and the expulsions continued to their bitter conclusion.

In the first half of the 1990s, the shadow of Lausanne loomed large as Europe’s democratic governments met once again to decide the fate of South Eastern Europe. During interminable negotiations on the Bosnian war, the leaders of the warring parties sought to reinforce their territorial claims by expelling minority populations. As one Bosnian observed at the time, “The maps of a divided Bosnia-Herzegovina passed around at international conferences have become more of a continuing cause for the tragedy that has befallen us than a solution.” The international community faced a choice between acquiescing in a territorial solution based on ethnic cleansing, or finding a way to reverse the ‘facts on the ground’ which had emerged from the conflict.

The year 1995, with the horror of the Srebrenica massacre and the signing of the Dayton Agreement, marked both the nadir and a turning point in the international approach to the region. The peace agreement could not immediately reverse the injustices of the war. However, it did create the framework of a multiethnic state, and the promise that those expelled from their homes would be able to choose whether or not to return. Annex 7 of the Dayton Agreement contains a provision that is the exact opposite of Article 1 of the Treaty of Lausanne: “All refugees and displaced persons have the right freely to return to their homes of origin. They shall have the right to have restored to them property of which they were deprived in the course of hostilities.”

In the immediate post-war environment in Bosnia and Herzegovina, with the perpetrators of ethnic cleansing still firmly in power, the prospects of reintegrating the communities seemed remote. During 1996, continuing displacement far outnumbered minority returns. In 1998, reconstructed houses were still being torched by angry mobs incited by shadowy figures. Many believed that the idea of restoring a multiethnic Bosnia was a dangerous illusion that would only bring further violence. They argued that the only ‘realistic’ path to security was the partition of the country.

Yet the international response was remarkable. With every violent attack on returnees, the international determination to restore a multiethnic Bosnia and Herzegovina was strengthened. SFOR took a more vigorous approach to supporting return. International reconstruction programmes were made faster and more flexible. In 1999, an enormous international campaign was launched to implement the property laws that enabled displaced persons to recover homes they had lost during the war. By 2000, the tide had turned. Bosniacs and Croats were returning to homes across Central Bosnia, breaking down the armed enclaves left over from the war. By 2002, Bosniacs were returning in significant numbers across Republika Srpska. By 2004, over 200,000 families (around a million people) had recovered possession of their properties. With the success of the return movement, the vicious ideology of Milosevic, Karadzic and Tudjman was thoroughly discredited. Today, as international troops and police are steadily reduced, it is local, multiethnic police forces which provide security for minorities across Bosnia and Herzegovina.

It appeared that the international community had finally developed a principled and effective answer to the vicious logic of ethnic separation. In Kosovo in 1999 and in the Presevo valley in southern Serbia in 2000, the international community responded decisively. When an armed uprising in Macedonia in 2001 threatened to escalate into civil war, there was an immediate intervention to preserve multiethnic society. Each time, the settlement was founded on the conviction that different ethnic communities are able to live together. There were always some who believed that multiethnicity was naïve, utopian or dangerous, and that partition was the only route to stability. They were, however, disregarded. Not only was ethnic cleansing condemned as abhorrent, but systematic programmes to restore property rights and freedom of movement were developed to reverse the new realities created through violence. The very idea that stability could be achieved through exchange of populations was decisively rejected on both moral and pragmatic grounds. Since Srebrenica, international policy in the Balkans has been based on an anti-Lausanne consensus.

There are those who believe that acquiescing in the partition of Kosovo would be a simpler and more pragmatic solution than continuing to defend multiethnic society. Yet the Belgrade plan or any suggestion of partition are premised on a mass resettlement of population – a miniature version of the population exchanges agreed between Turkey and Greece in Lausanne. They are neither simple nor pragmatic. Forcible expulsions (whether officially sanctioned or carried out by an angry mob) would raise tensions to an impossible degree. The people in question – rural communities of subsistence farmers – have shown throughout the past decade that they are deeply attached to their traditional homes and lands, and would only leave under direct threat of violence. As one student of earlier Balkan population exchanges noted:

“The attachment of the individual to the soil where he was born is so deeply rooted that only the fear of an imminent peril to his life may force him to emigrate… On the basis of past experience, one is forced to conclude that the transfer of populations is intimately connected with the prevalence of extensive political upheavals.”

Any territorial exchange could only be accomplished through upheavals more extensive than any Kosovo has seen to date. A solution built upon further ethnic cleansing would be a dramatic failure for one of the most substantial post-conflict interventions ever undertaken, and a huge loss in credibility for the multilateral institutions – the United Nations, NATO, the OSCE and the EU – which are responsible.

It is a measure of the crisis of confidence on the international side that Serbian proposals for ethnic separation were greeted as “a good basis for resuming dialogue” by former Special Representative of the Secretary-General, Harri Holkeri. No longer confident in its ability to defend multiethnic society, the international community is once again flirting with the Lausanne principle. This is a dangerous moment for international policy in the region. Rearticulating a commitment to a multiethnic Kosovo is the most pressing priority for the new SRSG and the wider international community.

Needed: an Anti-Lausanne Consensus

In 1955, a rumour, subsequently proved untrue, spread through Istanbul that Ataturk’s birthplace in Thessaloniki had been vandalised by Greek nationalists. The result was serious rioting in the remaining multiethnic areas of the city, leading to numerous deaths and hundreds of looted and destroyed houses. As one Greek eyewitness noted at the time:

“It lasted less than twenty-four hours… Everyone shut themselves into their houses. Some were injured. They [the mob] destroyed the priest’s house. They tried to set fire to the church, but it would not burn… They did more damage in other places. We (the Greeks) were their main targets. But they also attacked Armenian and Jewish houses, probably without realising. We were afraid they would attack again. That was when people gradually began to emigrate.”

This and many similar episodes were the inevitable product of the Lausanne principle: the process of expulsion of ethnic groups – Greeks from Turkey; Turks from the Balkans – continued over subsequent decades until it reached its inevitable, tragic conclusion. By the 1960s, the idea of ethnic separation had spread to Cyprus, with predictable results. The spirit of Lausanne proved extremely difficult to put back into the bottle.

Will the riots of March 2004, also started by an unsubstantiated rumour and resulting in senseless destruction, set in motion a similar process in Kosovo? Any student of South East European history would find plenty of reasons to be pessimistic. After all, today there are no Greeks in Varna or Istanbul; no Turks in Belgrade or Thessaloniki; no Bulgarians or Circassians in Northern Dobrudja; no Germans in the Vojvodina. Once population transfers became accepted as a legitimate solution to ethnic conflict, it virtually ensured that this was the way in which all ethnic conflicts would end up being resolved.

Yet looking back over the decade since the fall of Srebrenica and the Dayton Peace Agreement, there is also cause for optimism. The international commitment to the right to return, not just as a legal principle but also as a practical reality, has offered a genuine alternative to the Lausanne principle. As a direct consequence, despite the horrific violence of the 1990s, today there are Croats in Travnik, Bosniacs who have reconstructed mosques in Prijedor, large Serb communities in Drvar, Macedonians and Albanians living shoulder to shoulder in Tetovo, Albanians and Serbs side by side in Bujanovac. None of these were easy successes. There was no shortage of violent challenges to multiethnicity: arson of Bosniac houses across Republika Srpska in 1996; riots in Brcko in 1997 which drove out the international officials; murder of Croats in Central Bosnia in 1998; riots against Serb returnees in Drvar in 1998; the destruction of mosques and churches in Presevo and Western Macedonia in more recent times. The violence showed how high the stakes are. Yet none of these events shook the international conviction that a stable Balkans could not be based on the Lausanne principle. By holding its line against territorial solutions, the international community has succeeded in stabilising large parts of the region.

Has the international community’s commitment to multiethnicity been destroyed by the March riots, leading to a gradual acquiescence in the partition of Kosovo? Or will it lead to a strengthened international commitment to multiethnic institutions and a non-negotiable right to return? Much will depend on the response of the international community in the coming period, and the lessons which UNMIK draws from its experience. Much will also depend on the political choices made by politicians in Belgrade and Pristina.

While most of South Eastern Europe is looking forward to joining a Europe which is very different from that of the Lausanne era, the logic of ethnic separatism continues to find adherents in parts of the former Yugoslavia. Giving in to them at this late stage would not only be a betrayal of minority communities across the region, it would also compromise the basic values on which today’s European Union is constructed.

To ensure that the destructive spirit of Lausanne stays in the bottle, three things are required. Efforts to support return and property repossession need to be redoubled. Multiethnic law enforcement institutions need to be strengthened, properly equipped and made politically accountable. Institutions able to deliver effective public services to Kosovo’s minorities in the places and circumstances in which they now live need to be designed and established.

A fundamental precondition for all this to happen, however, is that the international community must explicitly rule out a solution for Kosovo based on territorial bargains or the expulsion of minority populations. Whatever its final status, Kosovo must remain whole and undivided, providing a safe home for all of its traditional communities. The Contact Group and the European Union should serve notice that any partition scheme will be vetoed in the Security Council. They should also serve notice that an ethnically cleansed Kosovo will never be seen as fit for sovereignty. Let it be made clear to everyone concerned that the anti-Lausanne consensus that guides policy in Europe today is too solid to be shaken by an angry mob.

 

Filed under: Balkans,Kosovo,Serbia — Gerald @ 7:10 pm

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New perspectives on EU enlargement (25 August 2018)

Speakers: 

Johannes Hahn, European Commissioner for European Neighbourhood Policy & Enlargement Negotiations, Brussels

Alexander van der Bellen, Federal President, Republic of Austria, Vienna

Borut Pahor, President, Slovenia, Ljubljana

Hashim Thaci, President, Kosovo, Prishtina

Aleksandar Vucic, President, Serbia, Belgrade

Adnan Cerimagic, Analyst, ESI – European Stability Initiative, Sarajevo

Tena Prelec, Research Associate, London School of Economics and Political Science, London; PHD candidate, University of Sussex

Florian Eder, Managing Editor, Politico, Brussels, Chair          

Adnan Cerimagic, speech

Dear Alpbach community. Dear friends.

Thank you very much for an opportunity to to talk to you this evening. It is so great to be back here after eight years.

Let me introduce myself. I think it is the easiest way for me to convey a message that I would like you to leave this room with.

I was born in 1986 in a small town in northern Bosnia-Herzegovina called Doboj. Today, Doboj is in Republika Srpska, one of the two Bosnian-Herzegovinian entities.

I was five years old when the war broke out in former Yugoslavia. I was six when fighting began in Bosnia. Together with my mother and my brother I spent the war as a refugee in Croatia. My father remained in Bosnia and fought in the war.

We were lucky because we all survived. When the war ended in 1995 I was 9. Throughout my primary and secondary school education there was peace in Bosnia. Ther was peace also when I went abroad to study, first in Austria and then in Belgium. There was peace also in 2013 when I returned to Bosnia to live and work there. There is still peace also today in Bosnia.

But I remember very vividely February 1996, when together with my family we went to Doboj for the first time. It was city of horror where Bosniaks and Croats were expelled, all minarets and mosques destroyed and many houses damaged. We did not even dare to say our Muslim names out loud on the streets. For months and years after the war I had nightmares about Doboj.

But since then Bosnia has changed dramatically. The number of foreign soldiers keeping the peace went from 60,000 in 1996 to just less than a thousand today, mostly Austrian soldiers. Since 2006 there is a joint army and conscription has been abolished. I am part of generation of young Bosnians and Herzegovinians that where never forced to use a gun.

But today I stand before you and tell you this story because I am genuinely worried. And I will tell you why.

I do not remember the time before the war but I read a lot about how Doboj turned into a nightmare. I read a lot of Yugoslav intellectuals and politicians talking about borders, injustice and ethnic rights. They were all making a simple but destructive argument:

You are only safe IF your own ethnic group is in control.

You are only safe WHEN and WHERE your own ethnic group is in control.

This idea destroyed Yugoslavia and Doboj. It destroyed families, it has led to mass expulsions and genocide in Srebrenica. It turned borders into frontlines, created new borders drawn in human blood.

But ideas can change. And they did in Bosnia. Doboj is a good example.

Half of the pre-war non-Serb population returned to live there today: almost 20,000 of them. Mosques and minarets had been rebuilt.

The Doboj of my nightmare is today an ordinary city, where Bosniaks and Croats do not fear their Serb mayor. They even vote for him repeatedly. And they all face same challenges: poor health and educational system, too few jobs to compete for.

And this is why I am worried. Today’s Doboj was possible because international community had a clear policy:

NO MORE CHANGES OF BORDERS ALONG ETHNIC LINES.

Serbs should be safe in Central Bosnia, as much as Croats in Banja Luka. Bosniaks in Doboj or Srebrenica. Macedonians should be safe in Tetovo, as much as Bosniaks in Novi Pazar, Albanians in Presevo, or Serbs in Gracanica and Mitrovica.

Some ideas seem innocent at first, but as they grow up they can become monstrous.  The idea that you are only safe if, when and where your own ethnic group is in control is such idea.

This is why I plead to Balkan leaders, in particular those sitting at this panel today, not to go down this road, again. I also plead to European leaders, in particular those sitting at this panel and those in audience, to state clearly they would oppose it if the Balkan leaders decided to take that road.

The task for our generation is to turn all Balkan borders into European borders: like those between between Tyrol and South Tyrol. In order to do that we will have to do a lot: build institutions based on rule of law, allow freedom of media and do a lot more. It is time.

Thank you very much.

PS: The video is here: https://www.facebook.com/forumalpbach/videos/574682706268252/

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Filed under: Austria,Balkans,Enlargement,Kosovo,Serbia — Gerald @ 4:32 pm
20 February 2016

Paris morning

Rays of sunlight on the morning of the European Council 

A Friday that starts with a sunrise like this, above the the roofs of Paris, has to go well. And it did.

First, an ESI newsletter went out early in the morning, to be done just as these rays of sun lit up the sky. There was then a lot of positive response during the day, including from important institutions and media.

Next I learned that the internal debate in the EU and in Brussels is shifting away from focusing on relocation towards focusing on resettlement (as we had argued for weeks, sometimes feeling like Don Quijote taking on windmills.) One small step in this (right) direction that is being discussed would be to allow countries to chose whether to accept refugees from Greece or from Turkey directly. The logical next step would be to suspend the focus on relocation altogether. And to do instead what everyone claims is the priority: focus on the EU’s external border in the Aegean.

Third, Greece reminded the rest of Europe today that it is still in the EU, can veto decisions and assert its interests, and that closing Balkan borders to trap people in Greece would trigger a strong and justified reaction. While relocation is not a solution for Greece but a trap desguised as “help”, attempts to close the Balkan route and turn Greece into a huge refugee camp would be an openly unfriendly act. It would undermine hope of working with Greece in the Eurocrisis, and paralyze EU decision making. No serious leader in the EU can want this. One wonders: what were the Hungarians, Slovenes and Austrians thinking … that Greece would just sit and watch as they build a fence?

Fourth, as the idea of “closing” the Balkan route is being looked at more seriously, it is becoming clear to anyone that it is a red herring. Macedonia will not allow itself to be turned into the glacis of Central Europe. It will not do Slovenia the favour and build the wall that Slovenia – the open door to the Schengen zone – does not want to build itself for good reason.

Finally, the leading Turkish expert on refugee issues – now a scholar at Brookings in DC – Kemal Kirisci has published a new paper on the crisis for the EPC. Kemal strongly backs the Samsom plan and the ESI proposals, as the best way forward for Turkey, as well as for the EU. This is very encouraging news, as we head to Istanbul and Ankara for presentations next week. Reading his paper is a great way to end this day:

http://www.epc.eu/…/pub_6324_europe_s_refugee-migrant_crisi…

An ESI presentation will take place in Ankara next week at Tepav: http://www.esiweb.org/index.php?lang=en&id=154&news_ID=677

If only Greece, Turkey and Germany come together around a credible strategy, this might actually work – and now there are another few days until the Brussels meeting between the EU and Turkey in March to achieve this.

Filed under: Balkans,Border revolution,Migration,Refugees,Turkey — Gerald @ 1:34 am
26 October 2015

AFTER THE EU-BALKAN SUMMMIT (25 October)

Another refugee summit in Brussels, and another dishearteningly confused set of conclusions. Which most likely leave everything more or less as it is.

ON THE POSITIVE SIDE: ASPIRATION

“Refugees need to be treated in a humane manner along the length of the Western Balkans route to avoid a humanitarian tragedy in Europe.”

That was the promise made by Juncker before the conference. If this would be realised, it would obviously be a very good thing: “Increasing the capacity to provide temporary shelter, food, health, water and sanitation to all in need.” A worthy aspiration.

REALITY CHECKS

How realistic are these commitments, though? It is the end of October. Some conclusions suggest that additional resources may not be available soon:

“Working with International Financial Institutions such as the European Investment Bank, the European Bank for Reconstruction and Development and the Development Bank of the Council of Europe which are ready to support financially efforts of the countries willing to make use of these resources”

Slovenia noted that 60,000 people arrived there in recent days. What does the summit do to help Slovenia, concretely, in the coming weeks? Or Croatia? Or Greece?

Is there a working group to determine where capacities for temporary shelter are most needed? In Slovenia? in Croatia? In Serbia? in Macedonia?

DREAMING AND REST

It would help to know where temporary shelters are needed, or exist now; or how many new ones have to be found. Perhaps this is known, but it is not stated in the conclusions:

“Greece to increase reception capacity to 30,000 places by the end of the year, and to support UNHCR to provide rent subsidies and host family programmes for at least 20,000 more – a pre-condition to make the emergency relocation scheme work; Financial support for Greece and UNHCR is expected”

Note; this does not say how many such places Greece has now. So it is not clear what “increasing” capacity to 30,000 means in terms of additional capacity. Which makes budgeting and raising funding for it tricky. Or assessing the meaning of this commitment.

Note also: this would be sufficient for the number of refugees who will arrive between today, Monday, and next Friday. By the end of the year, these refugees would unlikely still be in Greece.

Plus: these are still rest stations. Nobody will stay in any of these shelters one day longer than necessary. “Host families” for rest stations?

READMISSION DREAMING

From here on the conclusions become ever less realistic:

“Working with the European Commission and Frontex to step up practical cooperation on readmission with third countries and intensifying cooperation in particular with Afghanistan, Bangladesh and Pakistan; Commission to work to implement existing readmission agreements fully and start work on new readmission agreements with relevant countries;”

Anybody who has examined the difficulties of readmitting even rejected Balkan asylum seekers from Germany to Western Balkans countries – which do not oppose taking back their citizens – knows that expecting to do this, on a large scale, with Pakistan or Afghanistan is not a plan, but closer to day dreaming.

BORDER DREAMING

This is the least serious part of the conclusions.

“- Finalising and implementing the EU-Turkey Action Plan;
– Making full use of the potential of the EU-Turkey readmission agreement and the visa liberalisation roadmap;”

Turkey was not even invited to this summit. The EU-Turkey Action Plan is empty of content. “Making full use of the visa liberalisation roadmap” means what concretely? We have to wait for another summit.

“- Upscaling the Poseidon Sea Joint Operation in Greece;
– Reinforcing Frontex support at the border between Bulgaria and Turkey;”
What is this supposed to achieve? How will it make any difference?
“- Strengthening border cooperation between Greece and the former Yugoslav Republic of Macedonia, with increased UNHCR engagement;
– Greece and the former Yugoslav Republic of Macedonia and Albania will strengthen the management of the external land border, with Frontex to support registration in Greece;”

Is the aim to slow down people leaving Greece … and has Greece agreed to this? Where would those who are made to stay longer stay in Greece?

Or is the idea to register everyone in Greece … and people then move on? What difference would this make?

“- Working together with Frontex to monitor border crossings and support registration and fingerprinting at the Croatian-Serbian border crossing points;
– Deploying in Slovenia 400 police officers and essential equipment within a week, through bilateral support;
– Strengthening the Frontex Western Balkans Risk Analysis Network with intensified reporting from all participants;”

So there will be more Frontex and more reporting, everywhere! But Frontex is essentially just other European border guards, not magicians or super-heroes. And this seems to assume that the problem in Slovenia or Croatia is a lack of people.

“14. Reconfirming the principle of refusing entry to third country nationals who do not confirm a wish to apply for international protection (in line with international and EU refugee law and subject to prior non-refoulement and proportionality checks);”

How many of those who reach the EU’s borders do NOT wish to apply for international protection? ANYBODY?

Finally, there is this:

“Under the current circumstances, we will discourage the movement of refugees or migrants to the border of another country of the region. A policy of waving through refugees without informing a neighbouring country is not acceptable. This should apply to all countries along the route.”

This either means a dramatic change which will likely cause the humanitarian tragedy Juncker wanted to avoid or it means that waving through refugees should happen “while informing a neighbouring country” a little better. Most likely – and fortunately – it is the second.

CONCLUSION

If this is what the countries most concerned by this crisis come up with as their operational conclusions we know that there is no plan. It was another summit without a serious discussion. Another missed opportunity.

Filed under: Balkans,Border revolution,Europe,Greece,Migration,Refugees — Gerald @ 2:07 pm
4 July 2015

europa

Getting to Yes – on the brink in Greece

“People only accept change in necessity and see necessity only in crisis.”
(Jean Monnet)

Dear friends,

This weekend Greeks vote in a referendum whose outcome could have dramatic consequences for their country. Polls show that the result is on a knife-edge. Every vote counts. The stakes for Greece could not be higher.

 

Please find the full ESI newsletter on the Greek Referendum here: 

ON THE BRINK – THE VOTE TODAY 

nai-thumb-large

 

Please Stay with us – facebook campaign

More here

boutaris

More reading:

ESI Paper: The good news from Greece – Can Thessaloniki point the way? – January 2015

Reuters on the Greek Referendum, quoting ESI

Rumeli Observer: After Syriza fails … the Greek speech Europe needs to hear (June 2015)

Rumeli Observer: Cosmopolitan visionary – Boutaris and Thessaloniki (12 October 2014)

Ricardo Hausmann, “Austerity is not Greece’s Problem”, Project Syndicate, 3 March 2015:

“The truth is that the recession in Greece has little to do with an excessive debt burden. Until 2014, the country did not pay, in net terms, a single euro in interest: it borrowed enough from official sources at subsidized rates to pay 100% of its interest bill and then some. This situation supposedly changed a bit in 2014, the first year that the country made a small contribution to its interest bill, having run a primary surplus of barely 0.8% of GDP (or 0.5% of its debt of 170% of GDP).

To watch “One Step Ahead” (on the 2010 Thessaloniki elections) go here.

 

Filed under: Balkans,Europe,Greece — Gerald @ 6:36 pm
29 April 2015

NERP
NERP, not NERD

“NERP” sounds like “NERD”: may this contrast – or this photo – help you remember this particular acronym. NERP stands for National Economic Reform Programme. Last year the European Commission asked all Western Balkan governments to produce one NERP a year. (Proposed on page 8 here). The 2015 Kosovo NERP report is in fact different from the nerdish, impenetrable language of many economic analyses published on the Balkans in recent years. It deserves to be read widely.

The 2015 Kosovo NERP is 129 pages.  Probably few people intend to read it in full. This would be a pity, as it provides a good foundation for a serious debate. In fact, the report hides its radical implications with its  first sentence:

“Kosovo has been one of the very few countries in Europe and the region of South Eastern Europe that had positive growth rates in every single year in the period since the 2008 outbreak of the global financial crisis.”

This is not wrong, but it is misleading, as the analysis itself quickly makes clear. While everyone  knows that Kosovo is poor, exports little, attracts little foreign investment and creates few jobs the NERP tell a far more disturbing story.

Kosovo’s problem in six figures

The 2015 Kosovo NERP contains many numbers, but some that are particularly telling. Between them, these six numbers tell you (almost) everything you need to know about Kosovo’s economy.

(1)   EXPORTS

            305 million Euros – the total value of goods Kosovo exported in 2013

An annual export number of 305 million Euro is abysmally low. For comparison: Estonia exported goods worth 12.3 billion Euros in 2013. Estonia has a much smaller population than Kosovo.[1] It is also worrying that in 2013 two thirds of these exports were “base metal and mineral products.” This means there are barely 100 million Euro of other exports (food, vegetables, plastics) that produce added value. Kosovo extracts minerals from the earth and sells them – but it produces very little.

(2)   IMPORTS

            2.3 billion Euros – the total value of goods Kosovo imported in 2013

This is very high compared to Kosovo’s exports. So how is the gap financed? How do Kosovo importers obtain these 2.3 billion Euros to import goods? One must assume that they obtain much of this from Kosovars who earn this money abroad.

(3)   REVENUES

The level of imports is directly linked to the third number:

1.3 billion Euros – total revenues (income) of the Kosovo government in 2013. No less than 871 million of this comes from border taxes on imports

This means that the state – 70 percent of its total revenues – depend on imports taxed at the border (customs, excises, and VAT on imported goods).

To maintain the current level of public spending, imports need to remain at least as high as they are now. If less money is transferred to Kosovo by Kosovars abroad, for whatever reason, government revenues will contract quickly. Even if government revenues and spending are in balance (with a low government deficit), and even if the debt of Kosovo’s government is relatively low as a share of GDP, the structure of public finances is very fragile.

(4)   EMPLOYMENT

The fact that Kosovo produces few goods, which people outside of Kosovo (low exports) or inside Kosovo want to buy translates into tragically low numbers of jobs. Here is the fourth number:

220,000 people – registered as employed in 2013

There is sometimes confusion in public debates about “employment.” They frequently get mixed up with debates on the distinction between the official and unofficial (grey) economy. In fact it is simple: there are two ways to measure how many people work, which always give different results as the meaning of “employed” is different in each case.

The first way is to look at registered jobs. These are jobs which are known to public authorities and which are taxed. The second way is to do a representative survey of the labour force, based on samples. In the Kosovo Labour Force Survey (LFS), or any other such survey elsewhere, this is how “employment” is defined:

“People aged 15-64 years who during the reference week performed some work for wage or salary, or profit or family gain, in cash or in kind or were temporarily absent from their jobs.” (LFS 2013, page 7)

This includes anyone in the family of that age who works “for family gain” on their small plot of land, milks the cow, looks after vegetables during the reference week, even if nothing is then sold for cash. In a country with a lot of subsistence farming this number is always much higher than registered employment. In Kosovo in 2013 this number was 338,000 people.

These two figures of employment allow us to estimate the size of the Kosovo private sector. There are 77,000 jobs in the public sector (paid by the state). This leaves 143,000 jobs in the registered private sector. Then there are another 118,000 people “employed” (LFS) without being registered.

Even added together, this number is shockingly low. Kosovo’s resident population of 1.8 million people divides into some 297,000 households (the average household has 6 members, still the largest households in Europe today). Even including all employment (per LFS definition), and all subsistence family farming on tiny plots, this yields barely one “employed” per household.

No wonder only slightly more than one in ten women of working age in Kosovo are “employed” (even by the LFS definition). No wonder Kosovo households have few savings: every employed person has to support five other people (dependents).

(5)   FOREIGN DIRECT INVESTMENT

All of this raises the key development question: will Kosovo businesses – existing or new ones – develop more competitive products for new markets in the coming years?

Gaining market share in export markets requires competing successfully against businesses from other countries, from the EU, the Balkans, Turkey. This requires investment, such as new machinery. New or expanding businesses in Kosovo can be either foreign (through FDI) or domestic.

Here is the fifth number:

241 million Euros – Foreign Direct Investment (FDI) in 2014

This is very low by any standards: it means that very few foreign companies show any interest in using Kosovo as a base for their production and transfer their machinery and know-how here.[2] And, as the NERP notes, FDI has been decreasing in recent years:

“Since 2007, net FDI inflows have been volatile and with an overall negative trend … the sectorial composition of FDI has shifted towards real estate and construction between 2009 and 2013.”

What the NERP does not give us is the value of all cumulative FDI (the FDI stock) in Kosovo. For comparison: in Estonia in 2014 this FDI stock is around 15.9 billion Euro. Kosovo’s total GDP is only 5.3 billion Euro.

(6)   COST OF CREDIT

The sixth number tells us what opportunities existing Kosovo entrepreneurs have if they want to develop:

10 percent – the annual interest rate on loans in November 2014 (in November 2013 it was 12 percent)

This is very high. Again, look at Estonia (European Central Bank data): loans to non-financial corporations – depending on specific conditions – carry around 3 percent annual interest at the end of 2014.

What do these six numbers tell us about the Kosovo economy?

  • Export of goods is very low; given current trends of declining FDI and high costs of borrowing for businesses in Kosovo this is unlikely to change anytime soon. The NERP projects a best case scenario in which the export of goods increases from 305 million Euro to 441 million Euro by 2017.
  • There is little structural change in the Kosovo economy compared to one decade ago. The GDP growth that has happened has been the result of households spending money (consumption) based on transfers from abroad and increases in public sector salaries (funded largely through border taxes on imports of goods, which are bought largely with money transferred from abroad).
  • The employment rate will remain very low in the foreseeable future. If new jobs are created in the next years in the private sector one might expect some subsistence farmers to turn away from non-cash production to other – regular – employment. In order to really increase employment rates and create new jobs Kosovo would need levels of investment and export growth that are simply not on the horizon for many years to come.
  • This makes public policy in many areas hard to formulate. Take the issue of skills needed for the labour market. What jobs does today’s generation of young Kosovars need to be prepared to take? What skills will they need? Unless there is a realistic job of more jobs in the foreseeable future this question is impossible to answer.

All of this is well set out in the NERP. At the same time it also underlines the main gap in the NERP analysis: the absence of any analysis of the economic impact of current and future migration flows.

While the word remittances appears many times, “migration” does not appear anywhere in the text. At the same time everything described in the NERP – the huge trade deficit, a public sector funded to 70 percent by border taxes, recent GDP growth – is the direct consequence of the migration that took place many years ago. There is no discussion of what policies – education, social and foreign policy – might make regular migration from Kosovo to the EU possible. This created the lifeline of remittances that keeps Kosovo households – and the public sector – afloat today. This is the lifeline that the EU has tried to cut since 1999, making it increasingly difficult for Kosovars to migrate to work.

This is a dangerous omission. But it is not surprising. In the current Kosovo government programme “migration” is discussed only under the heading “diaspora”, as a foreign, not an economic development issue.

“Promotion of Kosovo Diaspora and realization of objectives arising from Strategy on Diaspora and Migration 2013-2018, which is related to the preservation of national and cultural identity of Diaspora, to creation of conditions for the participation of Diaspora in the political and social life and their representation in decision-making institutions of the country, integrating them in countries where they live, as well as involvement of Diaspora in socioeconomic development of the country.

Kosovo Government Programme 2015-2018

This half sentence is not followed by any concrete policy measure.

The pressure on Kosovars to look (legally or illegally) for work and income elsewhere will grow ever stronger in coming years. How strong this pressure is already has recently become obvious to policy makers in the EU and in Kosovo.

ESI argues that the European Union, instead of simply opposing this pressure, should try to channel it in mutually beneficial ways. Illegal and irregular migration needs to be stopped, but opportunities for regular, or circular work migration need to be opened. This will also require a major effort on the part of Kosovo authorities in many policy fields, starting in education policy.

The first paragraph of the NERP euphemistically refers to “the country’s rather specific development model.” What is today specific about this model is that it is not about development in Kosovo at all. As the NERP notes, Kosovo experienced growth:

“… based on strong remittances and FDI inflows from diaspora that boost domestic demand through household consumption and investments channelled primarily into the non-tradable sector, such as real estate and services.”

This is growth dependent on wage earners in Germany, Switzerland or Austria with links to family members resident in Kosovo. The NERP refers to some risks:

“The existing growth model of the country based on large financial inflows is associated with significant risks. On the short run, the main risk factor would be a sudden fall of these inflows – caused by unfavourable economic developments in countries with the largest Kosovo diaspora – and its negative consequences for growth, public finances, and external and financial sector stability.”

But then it falls silent. It does not discuss the role of EU policies that try to prevent further migration.

Young Europeans – but not part of Europe today
Young Europeans – but not part of Europe today

The NERP is an interesting document. More will be said on this blog later on its recommendations to increase exports. But the main value of the NERP lies in showing what many prefer to forget: while migration alone is no development policy, without migration Kosovo has no medium term economic future. Simply put:

The Kosovo “growth model”

Workers abroad, with family in Kosovo  SEND Money that fuels local consumption. This funds imports. Taxation of these imports is the core of public revenues

EU member state policy

STOP Kosovars moving abroad to work illegally
CLOSE most possibilities to move to work abroad legally

Greatest risk to Kosovo “growth model”

Current EU member state policy succeeding.

In order to develop a credible migration policy, the vital importance of migration needs to be acknowledged first, including in the NERP. It is never too late.

Looking for workers with specific skills: www.make-it-in-germany.com
Looking for workers with specific skills: www.make-it-in-germany.com

Further reading:

 


[1]  Estonia: 1.3 million. Kosovo 1.8 million.

[2] The definition of FDI according to the World Bank: “Foreign direct investment are the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.”

Filed under: Balkans,Europe,Kosovo,Writing well — Gerald @ 8:47 pm

They are the two most memorable words for texts that are best forgotten: Gibberish and Gobbledygook.

“Gibberish or gobbledygook refer to speech or other use of language that is nonsense, or that appears to be nonsense. It may include speech sounds that are not actual words, or forms such as language games or highly specialized jargon that seems nonsensical to outsiders.” (Wikipedia)

As Glenn Seaborg explained one theory in 1980 in “Our heritage of the elements”:

“… gibberish comes from the name of the famous 8th-century Islamic alchemist Jābir ibn Hayyān, whose name was Latinized as “Geber”, thus the term “gibberish” arose as a reference to the incomprehensible technical jargon often used by Jabir and other alchemists who followed.”

Jabir ibn Hayyan alias Geber
Jabir ibn Hayyan alias Geber

There is no particular reason why texts about economic development should be either gibberish or gobbledygook. And yet, quite a lot of what was written by the European Commission on the economic development in the Balkans in recent years might qualify.

Take a look at the “EU Candidate & Potential Candidate Countries’ Economic Quarterly” published regularly by the Directorate-General for Economic and Financial Affairs (ECFIN) of the European Commission.

The report in late 2014 described trends in the “real sector” of Bosnia and Herzegovina as follows:

“The economic upturn throughout 2013 and the first quarter of 2014 came abruptly to a halt in the second quarter of 2014 mainly as a result of the heavy spring floods. Accordingly, GDP growth slipped into a negative territory by 0.5% y-o-y after expanding by 3.2% in the previous quarter. Going further, preliminary data for the third quarter released by the statistical agency indicate GDP growth to have marginally turned positive (0.6% y-o-y). Similarly, high-frequency indicators for July-October 2014 point towards a modest revival of economic activity with the country-wide industrial production up by 1% yo-y, before turning negative again in November. In particular, the mining and quarrying sector as well as the utility sector registered the largest output contraction y-o-y, -1% and 10.7%, respectively, while the manufacturing sector posted the largest output increase (4.4%). The slump of domestic demand in the second quarter of 2014 started to reverse in July September with the growth of retail sales speeding up by 2.1% y-o-y and even accelerate in October-November to 7.8% y-o-y, well above the expansion of 4.6% in 2013.”

Already at first glance this breaks the basic rule of writing well: the writer is making the reader work too hard.

At second glance, once one begins to analyse this paragraph, it turns out that its meaning is elusive … or, in plain language, this makes little sense. Read this once, twice, three times, and then ask yourself: what has been happening in the Bosnian real sector in 2014, compared to 2013? There was a flood, and the economy suffered: but what do all these quarterly variations add up to? (Note that this paragraph is all the quarterly report tells the reader about the Bosnian real sector in late 2014.)

 

Or take this analysis of “monetary developments in Kosovo” in early 2015:

“Consumer prices started declining in December 2014 (-0.5% y/y) and continued on a downward trajectory by February (-0.2% y/y). The decline in the price index was almost completely influenced by decreasing prices of transport and education. On the other hand, 65.7% of the CPI components have actually been increasing; most notably food 2.1% y/y, energy 7.4% y/y etc.”

The reader understands that 65.7 percent of the prices of the components of the Consumer Price Index (CPI) have increased (one assumes in February), and (one assumes) 34.3 percent of the prices have not. One learns that there have been (monthly) decreases in the “prices of education” in January and February 2015, though what that means is elusive. There is no explanation which costs of education are included in the Consumer Price Index. Or why any of this matters and to whom. And what the etc. at the end refers to.

The economic sections of progress reports, which the European Commission publishes every autumn to evaluate accession countries, have also been written by ECFIN. The following paragraph is from the 2013 annual report on Macedonia. It invites readers to meditate on the meaning of words and numbers:

“Fiscal discipline was relaxed in 2012, and the quality of public spending deteriorated further. The general government budget deficit reached 3.8%, thus overshooting even the revised deficit target, which the authorities had raised by 1 percentage point to 3.5% in autumn. Another budget rebalancing reduced mainly investment spending, due to severe revenue shortfalls. Total expenditure as share of GDP rose from 31% in 2011 to 34% in 2012, and is estimated to reach 35% in 2013. The primary government budget deficit rose to 3.1% of GDP in 2012, compared to 1.7% in 2011. Capital spending was almost unchanged in 2012 compared to 2011, at 12% of total expenditure, or just over 4% of GDP, projected to decline to 11.3% of total expenditure in 2013, or 3.9% of GDP. The share of social transfers in total expenditure declined slightly in 2012, to 44.7% from 45.2% a year earlier, and is projected to stay largely unchanged in 2013. As a share of GDP, social transfers increased somewhat, to 15% of GDP, up by 0.4 percentage points.”

This creates an illusion of meaning. The reader is offered fourteen facts:

General government deficit target (2012)
Revised general government deficit target (2012)
Actual general government deficit (2012)   
2.5 per cent
3.5 percent
3.8 percent
Total expenditure as share of GDP (2011)
Total expenditure as share of GDP (2012)
Total expenditure as share of GDP (2013 expected)  
31 percent
34 percent
35 percent
Primary government budget deficit (2011)
Primary government budget deficit (2012)   
1.7 percent
3.1 percent
Capital spending as share of total spending (2011)
Capital spending as share of total spending (2012)
Capital spending as share of total spending (2013)
12 percent
12 percent (4 percent of GDP)
11.3 percent (3.9 percent of GDP)
Social transfers in total expenditure (2011)
Social transfers in total expenditure (2012)
Social transfers in total expenditure (2013 projected)
45.2 percent (14.6 percent GDP)
44.7 percent (15 percent GDP)
44.7 percent

What does all of this mean? The reader learns that

  • Fiscal discipline was relaxed and that “the general government deficit grew more than expected”; (two ways to say the same thing)
  • The reason for this: a severe revenue shortfall.
  • In response to this shortfall the government REDUCED investment spending but “capital spending was unchanged.”
  • Meanwhile total government expenditure ROSE.
  • And the share of social transfers in expenditure DECLINED.

So what actually happened in Macedonia?

The government did not collect as many revenues as it had planned. It then reduced investment spending. Social transfers declined as a share of expenditure. Total government expenditure rose. What type of spending increase explains the remarkable increase (by 3 per cent of total GDP!) in government spending? On this, there is nothing. We learn that the “quality of public spending deteriorated further,” a point that is never explained.

 

The truth about markets Money
Lucid writing on economics

During such meetings I also quoted positive examples of good writing. Oxford professor and FT columnist John Kay on markets. My friend Felix Martin on money. The Dutch Central Bank, describing the “faltering Dutch economy” in its 2012 annual report (page 15). You do not need a PhD in economics to understand the annual reports by the European Central Bank either:

“The economic and financial crisis has reduced euro area potential output via two main channels: lower investment and higher structural unemployment.

First, during the most severe phase of the crisis, investment rates declined considerably, with financing conditions, such as terms and availability of credit, worsening in particular. Increased economic and political uncertainty and an unfavourable economic outlook made it more difficult to assess investment projects and lowered the expected rate of return on investments. High indebtedness of non-financial corporations in some euro area countries also made deleveraging necessary, further reducing credit demand.

Second, the crisis has also led to an increase in short to medium-term structural unemployment rates, indicated by the rise in long-term unemployment and an increase in skill mismatches. The unemployment rate of low-skilled workers has increased more than that of high-skilled workers, largely because the crisis triggered a sectoral relocation in many euro area economies, in particular a shift away from the construction sector. As it may be difficult for low-skilled workers dismissed from one sector to find jobs in other sectors, and as their human capital progressively erodes with the duration of unemployment, structural unemployment rates may remain elevated for an extended period.”

(ECB, 2014 Annual Report, page 23).

Fortunately, during 2014 awareness of the problem posed by unclear writing on economic trends has increased in many EU policy circles. There is good reason to expect that future writing by the European Commission (and ECFIN) on the economies of accession countries will be less impenetrable. (It may also be worth considering a thorough reform – or even a discontinuation – of these quarterly reports: http://ec.europa.eu/economy_finance/db_indicators/cpaceq/index_en.htm)

PS: To add one useful example when it comes to writing about economic trends in the Balkans – certainly for the economic section in the next Kosovo progress report of the European Commission – look here: 2015 Kosovo NERP.

Filed under: Balkans,Books,Bosnia,Economics,Macedonia,Stickiness,Writing well — Gerald @ 8:29 pm
27 November 2014

A crisis of trust

The ESI Roadmap Proposal for Enlargement

Belgrade presentation, November 2014

The ESI future of enlargement project is supported by ERSTE Stiftung in Vienna

 

Every year the European Commission publishes its Enlargement Strategy. The 2014 Enlargement Strategy, presented in  October, starts out on a very optimistic note with the following sentence:

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_01

This assertion raises questions, though. How does the Commission measure the credibility of enlargement policy? For whom is enlargement policy more credible today than five years ago?

Here is a reality check. Eurobarometer surveys in 2008 and 2013 show growing opposition to enlargement in every single EU member state: old and new, rich and poor, those hit hard by the global economic crisis in 2008 and those relatively unscathed.

Enlargement has never been less popular in the EU than now. The 2013 Eurobarometer survey shows that an absolute majority of EU citizens oppose further enlargement (52 per cent). Opposition is stronger among euro area respondents (60 per cent). This table shows the significant lack of support for enlargement:

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_04

What is even more striking is the overarching TREND in the past five years: a dramatic drop in support across the EU. .

The fall in support for enlargement is sharpest in traditionally pro-enlargement countries such as Italy (where opposition to enlargement increased by 22 percentage points) or Spain (21). Post-2004 EU members, who initially were less sceptical, are rapidly catching up with pre-2004 members. The changes in Cyprus, the Czech Republic and Slovakia are dramatic.

Here opposition to enlargement has increased most since 2008:

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_05

What about the second claim in the opening sentence: that the European Commission has enhanced the TRANSFORMATIVE power of enlargement policy?

Here is a second reality check. Every year the European Commission assesses progress and the state of alignment with EU rules and norms (the acquis) in its annual Progress Reports. It examines for all accession countries whether the alignment in each policy area is “advanced”, “moderate” or at an “early stage.”

Here is what the Commission found in 2013:

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_06

 And here is what the European Commission found for 2014:

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_07

Comparing these two tables, based on the European Commissions’ own assessment of progress, on the TRANSFORMATIVE impact of the enlargement process, we see the following:

First: there is very little change anywhere.

Second: in the case of Macedonia the Commission finds regression (from 9 to 8 “advanced” chapters).

Third: in the case of Serbia – which also opened accession talks in January  – the Commission finds no change at all!

Either the EU process is not actually transformative or the current way in which the European Commission measures transformation in its progress reports is inadequate. Or both. Regardless, the most important documents written by the European Commission to show transformative impact of the enlargement process do not support the sunny view of the Strategy paper.

There is a second striking sentence in the 2014 Enlargement Strategy:

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_02This is a standard claim, made by EU member states and by the European Commission. On 7 June 2014 the German chancellor, Angela Merkel, made a video podcast on Western Balkan enlargement in which she asserted: “There are very clear criteria for the steps needed to move closer to the EU. In the end it is up to each country whether they pass through this process rapidly or not.” The message: “the process is fair. It depends on merit. It depends on you.”

Is this claim convincing?

Look again at the 2014 assessment by the Commission. Macedonia, which became an EU candidate in 2005, is ahead of all other Balkan countries when it comes to its alignment with the acquis according to the European Commission. And yet it is behind Montenegro, Serbia and Albania when it comes to accession. Clearly this is NOT about merit.

Is Macedonia an exceptional case? Hardly. As bilateral vetoes have proliferated, the political nature of every single step in this process has become ever more obvious.

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_01

In fact, the problem of merit and fairness goes very deep.  Today the accession process is like a stairways with more than 70 steps: to obtain candidate statue, to open accession talks, to open (34 or 35) chapters, to close chapters; then ratification and finally accession. (Note: one could count many more small steps, including the adoption of screening reports, etc …)

For each step up thes estairways there are 28 gatekeepers, EU member states, which have to agree to EACH step taken. And these 28 decide on the basis of political criteria, not merit. Whether Turkey opens Chapter 23, or when and whether Albania, Serbia or Montenegro are allowed to open a chapter, or Macedonia starts accession talks, are all political decisions.

This image captures accession today: a stairways that may well appear to be a stairway to nowhere, given the many veto points and the huge potential for obstruction.

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_01

There is one more striking fact about this stairways that renders the current debate on accession puzzling.

Half of these stairs are linked to the “opening of chapters”.  In fact, much of the political debate on enlargement today is focused on chapters: how many get opened, and when.  But few people – including experts or journalists – ever ask themselves: what is the POINT of “opening a chapter”? What does it mean? What does it do?

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_01

 Take the case of Turkey, the most advanced country in its talks, having started in 2005, as an illustration. In 2014 Turkey had 14 open and 18 closed chapters (we leave two chapters, where the Commission provides no assessment of alignment, out of this table here – chapters 23 and 34).

As the following table – based on the Commission’s own assessments in its progress report – shows, there is no causal or other link between the alignment (state of progress) in a sector and whether a chapter is open or closed. This means: whether a country has many or few open chapters is no indicator of where it is in terms of its preparedness for EU accession.

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_01

What is no less surprising: opening chapters is not only not a yardstick of progress; it is also not an incentive to make more progress in the future. This is what the European Commission found in Turkey in 2013: there was MORE progress in closed than in open chapters in Turkey during the year.

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_01

This raises a basic question: why is it so important to open chapters? Having many open chapters does not indicate progress towards meeeting EU standards. Having many open chapters also does not make future progress more likely.

A recent study of EU-Turkey relations made the following  strong recommendation:

“In the light of the above it is stated that opening the chapters Energy (15), Judiciary and Fundamental Rights (23), Justice, Freedoms and Security (24) and Foreign, Security and Defense Policies (31) would facilitate Turkey’s drawing a robust road map under the EU umbrella at a time when the country faces three successive elections.”

This is the conventional wisdom, repeated in conference after conference, article after article. However, it is not explained HOW opening a chapter is crucial for either the EU or for Turkey; why a Turkish citizen, or a sceptical EU member state parliamentarian, should consider this significant.

In summer 2013 there was a heated debate in Turkey and in the EU whether to open a new chapter after many year in which none were opened: Chapter 22 (regional policy). There were many statements by politicians about how important this would be. Egemen Bagis, Turkey’s chief negotiator, explained in April 2013:

“Since no new chapter has been opened, I have kindly asked our prime minister to slow down everything until a new chapter is opened. I thank him for having done that. Now the process for the opening of the regional policies chapter has begun.”

Foreign minister Ahmet Davutoglu stated:

“No postponement or review of the decision to open it is possible. As we said before during the reform follow-up group meeting, we want not only the chapter 22 to open but also the chapters 23 and 24.”

The German government, on the other hand, insisted on delaying the opening until after summer 2013. In the end chapter 22 was formally opened in the autumn.  Leaders – and international media – spoke about this as if something significant had happened (Die Welt:  “Accession talks gain new momentum”)

In fact, following a meeting – the so-called Intergovernmental Conference – when it was declared that Chapter 22 was now “open”, nothing else happened. There was no additional meeting. There was no additional funding. There was no additional impetus for reform. The “opening” was political theater, for one day. It had no link to merit, criteria, or progress. Ultimately it made no difference.

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We can now  easily understand how all these dynamics create a deeply frustrating and dysfunctional process.

In the face of growing public opposition, many EU leaders have given up defending enlargement policy. Seen from Brussels, Berlin, Paris or The Hague, the current group of candidates are problematic. They are poorer, have weaker institutions and are more politically polarised than any previous group of applicants. This has created a vicious cycle. As enlargement loses popularity in EU member states, EU leaders try to reassure their voters that the process is stricter than ever. Yet as the hurdles to be jumped appear more and more arbitrary, candidate countries find it harder to take difficult decisions in pursuit of a goal that is increasingly distant and uncertain. The stairways approach makes vetoes extremely easy. And the public debate is focused on whether chapters are open or closed, not on whether reforms are taking place.

This is not enlargement “fatigue”, suggesting a temporary state of exhaustion. It is a chronic ailment, which is getting worse.

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And at the heart of this frustration are the annual Progress Reports. As ESI found, discussing these in many European capitals during the past year, few people, even EU foreign ministry officials, read these carefully. The reports are not doing a convincing job measuring progress. They do not allow for comparisons between countries in any operationally meaningful detail. They do not educate the public about what needs to happen. Above all they do not make real transformation – if it happens – visible also to sceptics. It is as if everyone – reformers in candidate countries, publics, policy makers in the EU – is proceeding through thick fog.

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Such a proces increases frustrations. We have called this the Godot effect. It is today most pronounced in Macedonia and Turkey. However, unless the process change we may anticipate that something similar could soon happen in Montenegro, Serbia and Albania, as cynicism increases. In Bosnia and Kosovo, there is today frustration, cynicism and apathy before any EU accession process has even begun. Bosnia has not yet applied for accession. Kosovo is not even able to apply.

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 So what is to be done? In order to answer this question let us imagine a very different approach to defining and assessing progress; one that is strict, fair and transparent. A process as follows:

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To imagine such a process is not to daydream. For this is how the Commission has acted for years in the context of visa liberalisation.

In this crucial area ALL countries in the Balkans were given precise visa roadmaps with dozens of benchmarks. These roadmaps set out clearly what the Commission expected. They listed all individual criteria. There were no short cuts. And these roadmps, based on the acquis, were essentially the same for all countries, and thus progress easily compared.

The Commission then organised a serious monitoring and assessment effort. This involved experts from the Commission and from member states.  Based on their findings detailed progress assessments were issued.

The whole process was developed by the Directorate General for Home Affairs together with the Directorate General for Enlargement. And it worked. It inspired many reforms. It made it possible to see where real reforms happened … and when they did not. Above all it convinced even sceptical EU interior ministers that when the Commission did find progress they could trust it.

 

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In fact, in October 2014, while DG enlargement published its regular progress reports, another part of the Commission also published a detailed document on progress made in the field of visa liberalisation by Turkey. It offers a clear, readable, strict and fair description of where Turkey stands. Each benchmark is assessed, using the following categories:

 

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The result of such a strict, fair, and meritocratic process in the case of the Western Balkans was to inspire civil servants. It was also clear to them what needed to be done. All countries were assessed based on the same criteria. It was possible to make transformations visible; even in special grade reports, that ESI issued at the time, based on the Commission experts’ assessments:

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We can compare the thoroughness of this process with the current assessment of progress in key chapters in the Progress Reports.  Let us take just one subject, Chapter 18 (Statistics).

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Look at the current assessment of progress in the field of statistics in Turkey, which has been in this process the longest. In 2014 the European Commission published just four short paragraphs, about half a page, on this chapter in the Turkey progress report.  A reader does not understand from this how far Turkey has come, what remains to be done to reach EU standards, or in what specific areas most efforts are still needed. Nor can one see how Turkey compares to other candidates.

This is surprising for many reasons:

1. The recent experience with Greece. Following the discovery of just how unreliable key statistics provided by the National Statistical Service of Greece (NSSG) had been before 2010, a new statistical agency, ELSTAT, was created. This was a priority for reform for the EU!

One might expect the EU to be just as keen to see all Balkan countries reach EU standards for all their key statistics, as soon as possible, and well before actually joining the EU, in order to be able to develop a credible track record.

2. The importance given to “economic governance” in the accession process. Without reliable economic statistics, from GDP per capita to employment, from the FDI stock to exports, discussions of economic governance in progress reports are of little use; and any evidence-based policy making on the part of governments is very hard.

3. One objective of the annual progress reports is to assess whether a country is a “functioning market economy” or FU-MAR-E. How can this be done without comparable and solid numbers and statistics?

The sooner all accession countries reach EU standards in the field of statistics the better. Now imagine a scenario where the European Commission draws up a roadmap for Chapter 18, gives it to every country, and thus spells out what all the key benchmarks for a future EU member are … and then assesses the state of affairs against these benchmarks every year with the help of experts, in order to produce a document on statistics that is similar to the recent October report the Commission produced for the Council and the European Parliament on visa liberalisation.

 

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The current EU accession process has not halted the erosion of trust in the policy since 2008. It has not led to measurable transformative impact in key policy areas. The visa roadmap process, on the other hand, has inspired and encouraged change. It has also – crucially – made this change visible and credible to sceptical outsiders.

 

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Given these experiences ESI proposes to the European Commission to put the idea of chapter roadmaps to the test as soon as possible.

We propose that DG enlargement develops four pilot roadmaps, and then assess progress in these four fields similar to the way the Commission has done with visa roadmaps; for all accession countries,  already in the 2015 Progress Reports: Statistics (fundamental for economic governance), Procurement (central to progress in the rule of law and the fight against corruption), food safety (key to attract FDI in a vital sector) and Financial Control.

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Giving such chapter roadmaps to all seven countries, and assessing them by reference to these benchmarks in 2015, would mark a small but very important improvement in the current process of writing progress reports.

One additional effect would be similar to the regional competition we have seen in the field of visa liberalisation. Or to the debates on public policy triggered by the Paris-based OECD with its regular publication of results of its PISA tests in the field of education.

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Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_01

ESI has recently presented these ideas in many capitals. Here are five of the most frequently asked questions concerning this  CHAPTER ROADMAP PROPOSAL

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The first question often posed concerns incentives. In the case of visa roadmaps, we hear, there was a clear “reward” at the end of the road: visa liberalisation. This was popular with the broader public. Would elites and civil servants in accession countries be equally motivated to carry out reforms in fields such as Statistics or Procurement, without a similar tangible reward?

We believe that this question puts the issue of incentives upside down.

When elected governments say that they want their countries to join the EU as a matter of national interest – and embark on a many-years-long process that requires work, focus, human resources, and that remains uncertain until the very end – they state that they have an intrinsic motivation to carry out reforms. The notion that the EU should “bribe” governments to incentivise them to carry out reforms on this path is wrong. Governments that need to be bribed in such a blunt manner should never apply, and simply risk being exposed as uninterested in the EU accession process. Then it depends on publics and voters who they will react.

The EU acccession process is more similar to a young football player being offered a place at La Masia, the famous football school of FC Barcelona; or to a budding entrepreneur admitted to Harvard Business School.

People do not get paid to submit themselves to rigorous training at these institutions of excellence. Instead they have to work hard. If they do not have intrinsic motivation this will become apparent very quickly, but in a fair manner.

However, no one would think that a young footballer might just as well practice all by himself in the street, rather than benefit from the training system of La Masia; or that a great business school has nothing to offer to those who come prepared to work hard. What such centers offer is excellent coaching by experts, precise feedback, a system of instruction that will make those who take part better at what they say they want to do in the future.

Of course there are also more specific rewards: prestige and certificates to validate progress. In the case of chapter roadmaps more FDI – if investors believe that institutions and rules are becoming more predictable.  One can even imagine more donor aid for those who perform best. But the real reward is for leaders – and civil servants, who do most of the extra work and are not paid more for it – to feel that what they do is taking their countries forward; that is makes sense for their country and for them professionally. For this incentives must be intrinsic.

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Can such chapter roadmaps be done for every chapter? No. We believe that they cannot be done for some chapters where there is no clear acquis (Chapter 23 or Chapter 30).

But this does not mean it cannot or should not be done for most chapters.

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Does such a roadmap-approach encourage superficial reforms? Not if the roadmap – like visa roadmaps – is done well, and measures not just laws but institutions and performance. Then it becomes a very good tool also to assess progress over time and track records.

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Is this a dramatic change in enlargement policy?

No. Member state do not lose their veto. They still have to agree – unanimously – to give candidate status, to open accession talks, to open chapters, to close chapters. However in the meantime the Commission helps these students get better … and provides member states with more information and feedback to assess how accession countries do.

Such an approach allows the European Commission to do better what it is already doing and already has a mandate for:  assess annual progress according to the Copenhagen criteria in all countries in a strict and fair manner, provide feedback, and encourage reform.

Such a change puts the substance of actual reform back at the heart of the accession process. This is  win-win situation for everyone.

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Not everything will be in such roadmaps. Some reforms only make sense just before accession. The aquis changes, so it also makes sense to adapt roadmaps every two years. It is always possible for member states to insist on additional reforms as preconditions for them allowing a chapter to be closed (or even opened, though this can both happen at the same time later; Croatia actually opened and closed a number of chapters all in the final year of its talks).

These chapter roadmaps would likely capture 95 percent of reforms needed in key areas.  This would be a flexible tool (fishery benchmarks might be of different importance in landlocked Macedonia than in Turkey), but in the end the idea is that the acquis is the same for all future members, as they are all heading for the same horizon.

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The past five years have seen a steady erosion of trust in enlargement across the EU and in many accession countries.

Turkey has been negotiating since 2005 and has not yet opened even half its chapters.

Macedonia is a candidate since 2005 and has not yet been given a date even to open talks.

Albania became a candidate this year, but has been warned already that it could be years away from opening accession talks.

Bosnia and Herzegovina concluded its negotiations on the Stabilisation and Association Agreement in 2008 without seeing the agreement enter into force.

To an increasing number of people in accession countries the current process appears to be a stairway to nowhere. And yet, reforms in all these countries are in the interests of their citizens. They are also in the interests of the EU. As the new Commission reassesses how it can best promote reforms, we believe it should seriously look at what has worked in recent years.

We believe that improving the work that goes into the progress reports does not constitute a change in enlargement policy, and that therefore the European Commission can act on its own to improve what it is already doing. However, such a change does alter the way the Commission works. It is a real challenge, and it makes sense to implement it gradually, testing it along the way. It remains to be seen whether the new European Commission is able to carry out such reforms.

For the sake of all Europeans, we can only hope it is.

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Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_01

 

 

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Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_01

 

 

Belgrade - ESI Roadmap Proposal - Nov 2014 - Gerald Knaus_Seite_01

Earlier presentation:

See also:

Filed under: Albania,Balkans,Bosnia,Enlargement,Europe,Macedonia,Turkey,Visa — Gerald @ 7:19 pm
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