The Balkans: Building Upon Peace.

The problems of the post-war economic development of the Balkans and their integration into the European economy are issues of great importance to peace and security in Europe. Rebuilding Kosovo is just the first step towards restoring stability in the Balkans. The real challenge is to revitalize the economies of the whole region, providing for economic security, employment, rising incomes and a social safety net, which are essential for peace and democracy. These goals can be achieved only if there is a sustained commitment of all involved, at the local, regional and international levels. Otherwise, Europe will preserve an environment in which threats to the security of Europe as a whole will continue to recur.

The paramount economic issues arising from the consequences of the war are first of all related to the repair of the damage and the reconstruction of economies directly involved n the conflict The exodus of hundreds of thousands of refugees from Kosovo to neighbouring countries, apart from being a humanitarian catastrophe, has imposed a heavy burden on affected countries and the international community. However, these are not the only economic consequences of the Kosovo conflict which have to be dealt with. It is also the miserable state of most of the south-east European transition economies before the conflict started which adds a daunting dimension to the post-war tasks of recovery and reconstruction.

The seven countries of the Balkans, though they vary considerably in many respects, together constitute the poorest region of Europe. In terms of gross domestic product per head, they lag behind the more advanced countries with economies in transition of central Europe. This distance had been increasing during the 1990s. These are countries where the painful process of transition from central planning to market economy has proved extremely difficult due to many factors: highly unfavourable starting conditions; the lack of experience in institutional development; and multiple external shocks. The situation before the conflict itself was thus a major factor of the crisis.

The negative impact of the Kosovo conflict is not confined to war-related economic damage in the Balkans. It has affected many European countries, in particular those with economies in transition, generating a serious macroeconomic impact comprising a severe balance-of-payments shock, a loss of aggregate output, increased unemployment and a deterioration of fiscal balances. Countries which have received most of the refugees have borne considerable extra direct and indirect costs.

The loss of the Yugoslav market has been in itself a serious blow for some countries, while for most of the neighbouring countries the disruption of transport routes has probably been the most serious source of dislocation, resulting in sizeable losses.

It has become evident that a new approach is needed to revitalize and rehabilitate the region, allowing these countries to embark on a path of sustained growth and stability, and to ensure their eventual integration into the European economy. If the major challenge is to set the whole region on a sustained path of economic growth, given the scale of structural problems in the region and the need to address them promptly, an unprecedented commitment will be needed to raise the indispensable financial and technical resources for a long-term assistance for development effort for these countries. There is no doubt that a successful implementation of a concerted regional effort will require much closer cooperation among the south-east European countries themselves. There is no doubt either that in any reconstruction and development programme for south-east Europe, Yugoslavia must play a role. It is a large economy in the region, strategically located on the main transport routes, an important market for neighbour ing countries and a key transit country. If left aside, it will inevitably generate political and social tensions throughout the region.

The international community has undertaken numerous concerted actions aimed at developing and implementing a shared strategy for stability and growth in the region, as well as fostering reconciliation, democracy and respect for human rights. The United Nations Economic Commission for Europe (ECE) has joined the international community in its efforts aimed at reconstruction and development of the whole region. ECE has been doing this in the fields of transport, energy, trade facilitation, economic analysis and enterprise development in the framework of the Southeast European Cooperative Initiative, through its cooperation with the Central European Initiative and the Black Sea Economic Cooperation. The framework of the Stability Pact for South Eastern Europe, whose first summit meeting took place in Sarajevo on 30 July, opens new possibilities to efficiently use the considerable amount of ECE expertise inmost vital areas of the reconstruction.

The people of the region long for peace, stability and prosperity. The international community must reach out and help them make these dreams come true. After Kosovo, nothing is the same. We do not know yet how to take fully into account the new situation. What we do know is that stabilization and peace in south-east Europe means stabilization and peace for Europe.