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South East Europe at the crossroads: facing future challenges together.

South East Europe is standing at a turning point, again.

This time, it is the dire straits for this part of Europe. This time, the question is simple, direct and difficult: how to finish peace at times of economic crisis?

And, it is really all about finishing peace in the Balkans. For the sake of the countries and the peoples of this part of Europe, but also for the sake of completing the biggest project in the modern history of Europe--building of a united and free Europe. Looking back at the history of this project and how it was developing over the last century, it is evident that after the reconciliation of Europe's West after the Second World War and after the reconciliation between Europe's West and East after the fall of the Berlin Wall it is now up to the present generation of political leaders to add the last "missing link", the post-Yugoslavian area, into the European mainstream.

Difficult as it is due to the undercurrent of many residual and unresolved issues in the region, the current financial crisis and economic recession certainly make this task even more challenging. Due to the inevitable spill-over effects and adverse consequences of the crisis in terms of slowdown of economies and consequent social repercussions, it can easily be argued that no region in Europe has faced such unfavourable conditions for the post-war stabilization and recovery in modern history of our continent.

Difficult and challenging it certainly is, but there is no alternative to moving the region forward even against the backdrop of the crisis.

In fact, there may be an option for South East Europe to prove that the crisis can truly be turned into an opportunity.

In particular, as the region is genuinely striving to advance further on its European and Euro-Atlantic accession path--today, in a comparatively short period of time since the years of wars, tensions and mistrust, all Western Balkan and South East European countries are institutionally, to a various degree, linked with the European Union. This is extremely notable and worthwhile as it enables a new spirit of openness and cooperation to flow throughout the region thus creating a durable platform for regional cooperation, but also a consolidated ground to jointly respond to the current crisis where and when necessary.

While the macroeconomic impact of the crisis is immediate, the social impact acts with a lag. Therefore there is still scope for action before the situation deteriorates. Social policy should shift towards cushioning the impact of the crisis on the poor and vulnerable. Social programmes need to be better targeted in order to direct limited budget resources to those most in need. Long-term reforms need to be balanced with short-term measures aimed at preventing job losses and sustaining household incomes, such as flexicurity arrangements and greater opportunities for temporary work. Inclusive labor market programmes that enable rapid labor market reentry for the unemployed (on-the-job training, intensive public work programmes for the unemployed, support for Small and Medium Size Enterprises) and a temporary increase in social assistance spending, unemployment benefits and low pensions could help such segments of the population stay above poverty line and support aggregate consumption when demand has declined. It is also important to concentrate on improving implementation capacity which remains a major challenge. The RCC has placed high on its list of priorities the area of social development and enhancing social dialogue in the coming years.

Current obstacles to growth and stability in SEE make it clear that outside assistance is helpful and necessary in supporting cooperation among neighboring countries and between government and the private sector in each country. That is why the RCC encourages the EU and international community to engage in the region and support donor involvement and coordination. The Western Balkans Investment Framework, which brings together all available grant making and lending capacities in order to support major regional infrastructure projects represents the best crisis response as well as post-crisis set of mechanisms that could boost investment and competitiveness in the region and open a new phase in its structural adjustments.

Crisis impact cannot be confronted solely at the individual state level. It should be complemented with regional responses and mechanisms as well. The Regional Cooperation Council (RCC) will support all efforts of the South East European countries to build regional approach in addressing these issues in the period of crisis and in building a post-crisis platform.

But, at the same time, the region is still shadowed by a set of unresolved bilateral and status issues or challenges related to self-sustainability of some countries.

Against this complex and twofold backdrop of positive trends and burdening issues, adverse spill-over effects of the current economic recession and financial crisis in the world and in Europe could make it even more difficult to continue the process of building a durable stability and security architecture in this part of Europe.

Thus, components of a current state of play in the region lead to a simple but significant conclusion that no effort, on the part of the countries of the region, but also on the part of the Union and international community, should be spared in order to preserve and consolidate the achieved level of stability and security in the region in the light of economic and social effects of the crisis, so as to preserve and reinvigorate the EU enlargement agenda of each of the aspiring countries in South East Europe.

This is of paramount importance--to make the best possible within the worsening environment, to consolidate what has been achieved in terms of political stability and cooperation in the region, to seek ways and means of responding to the crisis effects in the manner that will be the most productive for the region and for each and every national economy, thus preserving the reform drive and dynamics related to the EU accession.

Indeed, South East Europe again stands at the crossroads--this time, with the general shifts in the international agenda, with a stream of new challenges within the Union--from the Lisbon Treaty to the new European Parliament and the change of guard in the European Commission, to name just a few most outstanding ones--the choice for South East Europe is a choice between devising political tools to move forward or, in other case, allowing for the prolonged standoff, status quo and stagnation, with the crisis effects ominously looming over the region. It is a choice of historical repercussions. It is a choice that will shape the future of nations and citizens of this part of Europe for generations ahead. It is a choice between the future and the past.

In political terms, it is a choice of working together to move each of the aspiring countries forward and jointly finding a way to respond to the crisis effects, or allowing for South East Europe, and Western Balkans in particular, to remain outside of the European mainstream for a period to come.

Political commitments of the governments of the region, general attitude of the citizens of our part of Europe and, of course, the economic and business interests at the time of crisis, should prompt the search for additional tools to continue to move this part of Europe further on, despite the unfavourable, or sometimes even discouraging present general environment.

That would imply at least three key notions to be recognized and implemented in the region.

First, the notion of added urgency- against the backdrop of such deep and overwhelming changes in the world today, in the light of unforeseen institutional crisis of the world political and economic structures, and in the light of current and long term preoccupations of the European Union itself, it is more than evident that this part of the continent will have to deal with the remaining issues with added urgency, in a manner that will avoid inertia, inaction or mutual conditionality, and thus open perspective instead of inviting too costly and dangerous stagnation.

Second, the notion of greater self-responsibility--focus and energy of the international community are shifting and to a great degree may be moving away from the region, at least in terms of direct sustained engagement, thus calling for political leaderships in the region to take upon themselves more of the weight and more of the will to continue with the necessary reforms and to resolve the remaining open issues.

Thirdly, the notion of bold and big solutions--when seeking how best to respond to the current crisis and at the same time give stimulus to continue with the necessary reforms.

From any angle, it seems like a high noon for South East Europe.

This is where the notion of turning the crisis into an opportunity may come in.

This is also a time to seek Foreign Direct Investments (FDI) through large regional infrastructure projects which stand to improve transportation, power supply, use of water resources, tourism infrastructure, etc., while also having large employment generation potential. To this end, governments of the region need to urgently improve their public-private partnership enabling environment and develop administrative capacity to implement such arrangements. In this respect, there is a strong need for support from the EU and international community in terms of capacity building and transfer of knowledge as well as direct investment.

However, the context for the South East European reforms is getting difficult. Every source of regional development finance--remittances, export and commodity demand, assistance and capital flows--are now being affected. Furthermore, international financial and economic crisis provoked growing protectionism, raising demands for institutional reforms (in particular more prudent banking supervision) and for crisis related fiscal policies. This is the new landscape for investment reforms in South East Europe.

Against this backdrop, the Regional Cooperation Council is strongly in favour of stimulating the countries of South East Europe to engage around a new, bold and innovative strategic platform that would promote large-scale regional developmental projects in the most important priority areas for all national economies in the region.

The initiative has been endorsed by the South-East European Cooperation Process (SEECP) Summit meeting on 5 June, in Chisinau, Moldova, reaffirming the commitment of the region to furthering regional cooperation as one of the elements in its social and economic development.

For evident reasons of infrastructural disadvantages and needs in the region, these projects would in particular cover the priority areas shared by all the countries in the region, namely energy and transportation, although they may diversify in other sectors, such as environment, IT, developing regional clusters, building human capital initiatives, etc.

The driving force behind the initiative is the preservation of dynamism of national economies in the region through a kind of "Balkans New Deal" projects that would also provide for a prompt answer to adverse social aspects of the current crisis effects in the region, engage Small and Medium Size Enterprises and avert other negative social consequences in the already troubled societies.

The added value of the initiative is the fact that these projects of a large trans-regional scale would also provide an impetus for the necessary EU related reforms, since their realization and putting into practice would necessitate accelerated reforms and practical compliance with many segments of the acquis communautaire, thus serving as an additional charger to the reforms needed on the EU path of the aspiring countries in South East Europe.

The time has come for bold, brave and big ideas in South East Europe. The current crisis can be turned into an opportunity to catch up for the time lost over the decades. The history must not be missed again and the future must be made attainable.


Hido Biscevic, Secretary General, Regional Cooperation Council.
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Author:Biscevic, Hido
Publication:Crossroads Foreign Policy Journal
Geographic Code:4E
Date:Jun 1, 2009
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