EU enlargement
A warm welcome to Bulgaria & Romania
When Christos met Gazi
A quarterly review on European integration SE Europe & the SE Mediterranean
Q1/2007 - issue 4
On the new Balkan identity
Editor’s note There are now three European Union member states in our neighborhood. The accession of Bulgaria and Romania on January 1, 2007 sets new rules for regional unity, security and collaboration for development. As a foreword, there follows a commentary by the editor in chief of Kathimerini English Edition, Nikos Konstandaras.
Our neighborhood is changing On January 1, 2007, Greece’s place in the broader region will change radically. In the biggest single development in the Balkans since the collapse of communism in 1989, Bulgaria and Romania will become members of the European Union. This opens a new era of opportunity but also difficult challenges for Greece. The future of our country will depend on how ready we are to grab this opportunity and how capable we are of moving away from the fixations of the past. The situation in the Middle East is going from bad to worse. And while this always presents the danger of greater instability in the region it also means that Greece, as an island of stability, could focus on being useful to the protagonists of the disputes and, in so doing, further its own interests. Indicative of how volatile things are is how Lebanon, which was returning to its old role as a beacon for investments, collapsed into ruin and instability over one summer. The tourists and capital that Lebanon was attracting have now turned in great numbers toward the emirates of the Persian Gulf. But this region too cannot guarantee stability, despite the untold billions of petrodollars that it is attracting. There is always the possibility that the seemingly unspoken agreement between the leadership of these states and the radical Islamists could fall apart. What would happen if the troubles spilled over into the Gulf states? Greece, without having to stretch itself, could attract capital and visitors from the Gulf. But to do this it must first manage to offer specific projects to investors, and the assurance that things will get done. Today, foreign and Greek investments alike are continually bogged down in confusion, driven only by the false promises of a state that cannot even manage its waste disposal. Next door, our traditional rival and great competitor for tourism and investments, Turkey, has one foot on the threshold of the European Union while Islamists and the guardians of its secular tradition wage battle for the nation’s soul. Greece’s modern history has been written against a backdrop of conflict between Turkey’s pro-Western modernizers and hardline nationalists, never more so than today. Turkey’s progress toward the European Union has caused such confusion in its leadership that the battle lines between who is pro-Europe and who is not are completely interwoven. It will take great effort for the Turks to plot their country’s future. This battle will be decisive for the future of Greek-Turkish relations and for the very nature of the two countries. It is worth reappraising today’s priorities and seeing if they are the best ones on which to base our future. This applies both to Greece and Turkey. With Bulgaria and Romania joining the European Union, the hinterland in which Greeks had excelled in the past is opening up to an unprecedented level. The opportunities for peaceful coexistence and commercial development have never been better. But Greece will have to deal with the cheaper wages and the greater appetite for work that these new members of the EU will show. On December 14, 2006, Serbia, Montenegro and Bosnia signed onto NATO’s Partnership for Peace program, which is the alliance’s waiting room. If we consider that seven years ago NATO was bombing Serbia, we can see how much the region is changing. Furthermore, the former communist countries have shown that they are keen to gain the favor of the United States, as neophytes, while Greece’s traditional friendship with the USA is indeed old and tested (and testy) but is an advantage that belongs to the past now. The greatest challenge for Greeks is that they will no longer enjoy the unparalleled advantage of being the only country in the region that was a member both of the European Union and NATO. This has massive political significance for Greece and the other countries in the region. It is not clear whether the Greek leadership has assimilated this dramatic loss of influence in its planning. From now on, Greece’s position will depend not on its membership of alliances, nor its special relationships with other countries, but on what it will achieve as a country in a completely different and fluid world. It is an interesting, exhilarating era. As long as we can rise to the challenge.
This commentary first appeared in Kathimerini English Edition on December 18, 2006.
cover story EU enlargement
A warm welcome to Bulgaria & Romania A quarterly review on the Greek presence in S.E. Europe & the S.E. Mediterranean
The Bridge. is published quarterly by BusinessOnMedia Contact: 118 Kremou Street, Kallithea, 17675 Athens, Greece tel: +30-210.953.3362 fax: +30-210.953.3096 www.bridge-mag.com e-mail: bridge@avk.gr Publisher: Stavroula Sourila Publishing and Business Development Director: Kostas Tsaoussis Executive Consultant: Alexia Konachou Editor in Chief: Vassiliki Nicoloulia Editorial Team: Constantinos Angelopoulos Alexandra Fiada Antonis Kamaras Natassa Mastorakou Dimitris Nellas Dimitris Pappas Peggy Papakosta Simos Ververidis Internet Edition Manager Achilleas Toubas Proof-reading: Deborah Ellis Creative Director: Victor Dimas
Stability and new opportunities 50-51 Meglena Shtilianova Kuneva Expectations and challenges 52-53 Leonard Orban
Advertising Executive Manager: Lina Adamopoulou Montage-Printing: Kathimerini SA The Bridge. quarterly review is also distributed along with the International Herald Tribune (IHT) and Kathimerini English Edition newspapers in Greece, Cyprus and Albania. The content of the magazine does not involve the reporting or the editorial departments of the IHT.
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The unbearable lightness of Europeanization 54-56 by Alina Mungiu-Pippidi The story of accession: The myth and its true dimensions 65-66 by Antoinette Primatarova
Dimitris Maziotis and Konstantinos Kapopoulos On Turkey’s EU hopes and rising nationalism
Common Foreign and Security Policy: An ever-diluting Union? 67-69 by Theodore George Tsakiris Bulgaria, beyond 2007 70-71 by Dr Dimitar Bechev
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Romania: past, present and future 72-73 by Sorin Moisa The economic role of Greece during the accession period 76-79 by George Kasimatis Labor emigration: What can be expected 80-83 By Dr Eugenia Markova
Artwork team: Dimitris Stergiou Dimitris Papadimitriou Vangelis Nikas Marketing and Communications Director: Pinelopi Katagi
Dr Wolfgang Schultheiss The priorities of the German Presidency
Georges Prevelakis Convergence of geopolitical tensions
Letters to the editor As of our next issue, we shall be publishing letters expressing readers’ opinions on articles printed in The bridge. Please include your name and address and keep in mind that letters may be edited for reasons of clarity or space. Please address letters to the Editor at: The bridge, 118 Kremou St, Kallithea, 17675, Athens, Greece. e-mail: bridge@avk.gr
themes 28 - 30
© The Bridge.. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Bridge.. Where opinion is expressed it is that of the authors and does not necessarily coincide with the editorial views of the publisher of The Bridge.. All information in this magazine is verified to the best of the authors’ and the publisher’s ability. However, The Bridge. does not accept responsibility for any loss arising from reliance on it.
dialogue
When Christos met Gazi
The day after... Middle East - Lebanon Chance for a change? 99 By Dr Dimitrios Triantaphyllou The Second Lebanon War 100-103 By Dr Anat Lapidot-Firilla
culture 21 - 26
How to avoid a rerun 104-107 By Yezid Sayigh
Dr George Vassiliou History lessons
themes The case of Kosovo
themes 110
Takis S. Pappas New and old populism in Eastern Europe
themes 108 - 109
Book reviews
Do not lose the momentum 32-35 By Joachim Ruecker Negotiated compromise vs chaos and instability 38-40 By Dusan T. Batakovic The future status of KosovĂ”: The view from Pristina 41-43 By Agim Ceku The challenges ahead 46-48 By Ruby Gropas
market Financing the energy sector 86-91 By Helen Kavvadia
Costas Cartalis The Lisbon Strategy: Reviewing the priorities
6 challenges in regional banking market 92-95 By Michael Loufir 111 - 113 market view 96 - 98 and more...
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contents
The priorities of the German Presidency On January 1, 2007 Germany assumed the EU Council Presidency. Our agenda includes important issues such as the future of the European Constitution, Energy Policy, the Lisbon program for economic efficiency and a higher level of research activities, strengthening the internal market, combating organized crime and illegal immigration by closer police cooperation, a European Neighborhood Policy vis-a-vis our Eastern neighbors, and strengthening the Common Foreign and Security Policy. Here, particular interest is directed to the Balkan region. The status of Kosovo The most pressing issue is Kosovo’s future status. For years this unresolved question has been a strongly destabilizing factor. Any settlement of this vexed issue should come swiftly, without delay, after the election of the Serbian Parliament scheduled for January 21. In order to enhance stability throughout the region, a solution must be one that both Belgrade and Pristina can live with. This rules out any either/or solution: What is needed is a deal that requires give and take from both sides. There will have to be comprehensive safeguards for minorities but also guaranteed respect for the popular will. We entirely support President Martti Ahtisaari and the UN Office of the Special
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By Dr Wolfgang Schultheiss
Envoy for Kosovo (UNOSEK) in their endeavors to find a solution, which, with some goodwill and flexibility, will be objectively acceptable to Belgrade and Pristina alike. Whatever the details of Kosovo’s future status will be, there is one point on which the international community as well as the decision makers in Belgrade and Pristina fully agree: Even once the status issue is settled, an international civilian and military presence in Kosovo will still be needed for a considerable time to come. The Stability Pact Another topic of the current discussions is the transformation of the Stability Pact into a regionally owned structure in which the Southeastern Europe Cooperation Process (SEECP) will play a major role. The Regional Table in Belgrade made the key decision to formulate a road map, which was an important first step toward this transformation. Now the establishment of the Regional Cooperation Council is at the center of our attention. The German government will continue to support the Stability Pact in its transformation efforts. The main endeavors, however, have to come from the countries of the region themselves. The key to the future role of the Stability Pact is the concept of regional owner-
ship. The countries of the region must recognize that regional cooperation is their own responsibility and act accordingly. There are encouraging signs. The entry into force on July 1, 2006 of the treaty establishing the Energy Community, which was signed in Athens, gives a major boost to regional cooperation in Southeastern Europe and thereby will contribute to greater stability in the region. Bulgaria & Romania The start of our presidency coincides with the entry of Bulgaria and Romania into the EU family. Following their accession, the EU now includes 27 member states with a total population of 485 million people. This is an encouraging beginning, and I hope that we can pursue this success during our presidency. Dr Wolfgang Schultheiss is serving as ambassador of the Federal Republic of Germany in Greece. He presented his credentials to President Karolos Papoulias on September 8, 2005. German EU Council Presidency website: www.eu2007.de German Embassy in Athens website: www.athen.diplo.de
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Comparative advantages and extroversion Southeastern Europe represents an emerging market of great potential, especially given that most countries’ economies are now growing within the stable European structure. Greece, which recognizes the defining role of extroverted growth and has served as a beacon of peace and prosperity in its neighborhood, is currently playing a leading role in a broad region that extends from the Balkans to the Black Sea and the Caucasus. Extroverted growth in terms of systematic penetration of neighboring markets requires that one holds the keys that open the doors to target markets. One of these keys can be found in the field of modern communications and marketing and is the following: a strong master brand that reflects, in a cohesive and integrated way, positive perceptions about one’s comparative advantages and carries these perceptions over to specific products and services. Of course our country is by default in an advantageous position when it comes to foreign publics’ perceptions: Its ancient heritage and natural beauty translate into international awareness as well as admiration. In recent years, however, we have focused on enriching Greece’s public image — which in the past
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one-sidedly emphasized the country’s historical and natural wealth — with attributes that refer to the sum of Greece’s comparative advantages. Specifically, it was during mediagenerating events of international caliber, such as the 2004 Athens Olympic Games, that we meticulously presented Greece as an energy hub, a leading global power in the maritime sector, and a modern gateway to a broad market of 160 million people across Southeastern Europe — a status that it has earned by capitalizing on its unique infrastructure, extensive financial services and investment presence, geography, and, of course, its constructive foreign policy. ‘Wonderful Greece’ In fact, there is no doubt that we are currently able to reap the fruits of the above: We are employing the bridges and webs of trust that we have created in our neighborhood to penetrate the promising markets of Southeastern Europe. After all, in a constructive and long-sighted approach to foreign relations over time, Greece has chosen to refer any pending issues with other states to international bodies such as the United Nations and has always acted on the principles of good-neighborly relations. Building extensively on the experience of the United Kingdom, Ireland, Spain and Malta and following months of close cooperation with different bodies and organizations, Greece’s national master brand gradually took form and shape: It is a ‘Wonderful Greece.’ The logo ‘Wonderful Greece’ is widely used in the national campaign of the Ministry of Tourism and various communication projects of the Hellenic Foreign Trade Board, while it has also been adopted by the City of Athens. At the same time, it also em-
By Dr Panos Leivadas
braces an increasing number of important exports, with virgin olive oil being the primary example. After all, its name on any one product carries with it the added value of the extra recognition and admiration that Greece has recently earned through impressive accomplishments in the fields of all its comparative advantages. At the same time, the credibility of the logo itself is also reinforced by the value of the product on which it appears; and, last but not least, the brand awareness of ‘Wonderful Greece’ is also greatly enhanced in the process. The strategic orientation In conclusion, engaging the world in its own path of growth and always in the spirit of peace, stability and cooperation, Greece has penetrated Southeastern Europe with its products and services. In terms of communications, the state uses specific tools and vehicles — with the Greek national master brand being the primary vehicle — to actively support the strategic orientation of extroversion toward our neighborhood. In doing so, it shows the way for the private sector to seize the opportunities presented in the global environment and to send another strong and loud message of progress and prosperity. Dr Panos Leivadas is general secretary of the Greek General Secretariat of Information, in charge of the country’s communication strategy and image abroad, and a member of the team responsible for the communication of government policies. General Secretariat of Information website: www.minpress.gr
On Turkey’s EU hopes and rising nationalism In line with an earlier recommendation by the executive European Commission, EU foreign ministers agreed in Brussels on December 11, 2006 to suspend Turkey’s membership talks in eight of the 35 chapters (policy areas) candidates must complete prior to accession. This move was a form of punishment for Ankara’s refusal to open its ports and airports to EU member Cyprus, despite an additional customs union protocol previously signed by Ankara. The Commission’s recommendations initially met with a harsh response from the Turkish authorities. Then sobriety prevailed, especially after the Greek Cypriots showed disappointment, wanting the EU to reprimand Turkey even more severely for not fulfilling its contractual obligations to implement the Ankara Protocol without preconditions. A more-or-less similar position has been adopted by two of the Union’s backbone states — France and Germany. Austria, the Netherlands, Denmark and of course Greece also adopted such a stand. Britain, Sweden, Spain, the Baltic states, and to a certain extent Italy are on the other side of the dividing fence. The whole issue spells a dangerously growing rift within the EU. With such a speedy turn of developments, it could have been predicted that, at the end of the day, the Commission’s recommendations would serve as a compromise in order to reach a consensus, and that is what happened.
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By Dimitris Maziotis and Konstantinos Kapopoulos
The consensus Germany, which has just taken over the EU Presidency from Finland, pledged to seek an agreement to lift the EU trade embargo on the northern, occupied part of Cyprus, as had been promised by the bloc in 2004. The German foreign minister, Frank-Walter Steinmeier, also said that Berlin would ‘encourage’ a resumption of the United Nations talks to unify the island. Moreover, EU Enlargement Commissioner Olli Rehn welcomed the compromise, asserting that it sent a double signal to Turkey that accession obligations had to be fulfilled but that the EU was serious about keeping membership talks with its Muslim neighbor on track. ‘This decision strikes the right balance,’ Rehn said. ‘It is a very carefully calibrated decision.’
Ankara’s loss of momentum The conclusions could have been worse, said many diplomats. But Turkish Prime Minister Recep Tayyip Erdogan and Foreign Minister Abdullah Gul did not see it that way. The decision was greeted by the government leader as ‘unfair treatment of Turkey.’ ‘This decision fails to reflect the level that Turkish-EU relations have reached. In addition, it also contradicts the objective of full membership that we have determined together with the EU,’ the Turkish prime minister stressed. That said, both Erdogan and Gul emphasized that they will redouble efforts to meet EU reform demands, saying
these are important for Turkey in any event. ‘Whatever the EU says, the reform process in Turkey will continue,’ Gul said. Indeed, a political party with explicit Islamist roots, the Justice and Development Party (AKP) has established itself as a vigorous supporter of EU-related reforms following its victory in the elections of November 2002. The AKP has been an important driving force in Turkey’s recent Europeanization process. However, the recent evidence suggests that the golden years of the AKP government’s Westernization, namely 2002 and 2003, might well be impossible to revive, with the party losing some of its early reformist zeal over the course of 2005 and 2006. A critical question to pose is whether this loss of momentum is a temporary phenomenon which is likely to be reversed if the party re-establishes its electoral dominance in the forthcoming elections of late 2007. What is also clear, however, is that Turkey’s path to EU membership involves serious obstacles which go well beyond the
AKP’s short-term electoral concerns. Another interesting question to ask is whether the momentum of Europeanization in Turkey can be maintained in an environment where currently none of the major political parties are fully or deeply committed to the European project itself, where public support for EU membership is declining, and lukewarm signals sent from the EU are helping to tilt the delicate balance even further away from liberal reformers toward defensive and inward-oriented nationalists.
The opposition The opposition’s response to the EU’s decision was fierce. Main opposition Republican People’s Party (CHP) leader Deniz Baykal blamed the government’s policies for the current deadlock in relations between Turkey and the European Union. Baykal sharply criticized the government’s lastminute proposal to open one port and one airport to traffic from Cyprus in a bid to avert a serious crisis in its entry talks ahead of the key summit of EU leaders. The CHP has ironically established itself as one of the strongest elements of the defensive nationalist bloc in recent years and is clearly trying to extend its electoral base by capitalizing on the rising nationalist and Euroskeptic mood in the country. In sharp contrast to a party which locates itself on the center left of the political spectrum, the CHP leadership does not display any enthusiasm for democratization reforms. It is fair to say,
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for example, that the most vocal opposition to the proposed abolition of Article 301 of the penal code originated from the CHP. Whether this strategy will bring electoral success to Baykal in the 2007 elections is rather doubtful, given that the CHP faces intense competition from several conservative parties which employ a similar discourse and target the same constituencies, according to Ziya Onis, professor of international relations at Koc University in Istanbul.
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Turkish nationalism Several factors have contributed to rising nationalistic sentiments in Turkey. Negative developments in Europe itself have exercised an unfavorable impact on Turkish politics. The fact that Turkish membership had emerged as a major issue of contestation in France and also in countries like Austria during the European Parliament elections of June 2004 created the image in the average Turkish mindset that EU membership was not a credible objective. A typical line of thinking was that although accession negotiations had been formally opened, a sufficient number of obstacles would be created on the way to make sure that Turkish membership aspirations would be diverted to an inferior track of ‘privileged partnership.’ It is important to emphasize that rising Euroskepticism is a phenomenon that tends to affect most countries engaged in the process of accession negotiations, as that was also the case for the new Central and Eastern European members of the EU which encountered such a phenomenon during their transition process to full membership. At the same time, Turkey’s situation is different to that of its Central and Eastern European counterparts in the sense that there is a fierce debate going on in the EU
about Turkish membership as part of Europe’s future self-definition, a debate which was virtually absent in the context of the new members of the EU. This kind of debate, in turn, has helped to create a domestic backlash in Turkey, which renders the task of reformist elements far more difficult than any other candidate previously. The election result A newly elected AKP government in 2007 is likely to reactivate and accelerate the Europeanization process. At the same time, there exist structural limits to the AKP’s reformism. There is clearly a need for a new kind of approach by political parties in Turkey, with a much deeper degree of commitment to Europeanization and reform than any of the existing political parties. Whether such a party will actually emerge is hard to predict at this point, although one could argue that it will be very difficult in the foreseeable future, given the dominance of the AKP and the peculiarities of the Turkish electoral system with its high 10 percent electoral threshold that makes entry to the parliament very tough for any party other than the AKP and CHP. Dimitris Maziotis and Konstantinos Kapopoulos are research fellows at the Hellenic Center for European Studies (EKEM). EKEM website: www.ekem.gr
Slovenia & the euro Slovenia is the small Alpine country bordering Italy, Austria, Croatia, Hungary and the Adriatic Sea that on January 1, 2007 became the first of the European Union’s 10 new members of May 2004 to join the eurozone. Slovenia enjoys political stability, high levels of human capital, a relatively highvalue-added economy and has a diverse export base. Its sustained robust economic performance amid political stability has resulted in income per capita levels (2005) on a purchasing power parity basis (80 percent of the EU-25 average) similar to that in Greece (82 percent of the EU-25 average). Following independence in 1991, the country began a fast transformation toward becoming a modern market economy. Two years after independence, Slovenia had to cope with a serious recession resulting from the collapse of the former Yugoslav market. However, growth in the services sector started to pick up before the end of 1992 and growth of industrial production followed in the second half of 1993. Since then the economy has experienced positive growth. In 1996 it reached the level of gross domestic product achieved before independence (1990 level). The relatively quick recovery reflected the strength of the private sector and its ability to deepen the pre-independence export orientation to Western markets.
By Gonzalo Caprirolo
Slovenia chose a gradual and consensual approach to transition, which has delivered a dynamic and competitive economy. The economic transformation process has been underlined by the country’s membership in the European Union and the broad macroeconomic stability since independence underpinned by low government deficits and debt, a prudent wage policy and tight monetary policy. An open economy Slovenia is a small open economy and as such is vulnerable to capital inflows. Thus it was clear that becoming a member of the euro area was an overriding priority. The process of monetary integration began with the change in the policy framework of the central bank in 2001 and then was enhanced and formally launched in 2003 in a common program aimed at joining ERM II and monetary union between the government and the central bank. The policies pursued since then have allowed Slovenia to meet — in June 2006 — the relevant criteria for becoming the first new EU member to join the Monetary Union after the 2004 enlargement. On July 11 last year the con-
vergence exchange rate was set at the same level as the central parity, which reflects Slovenia’s broad internal and external balances and sound competitive position. The overall policy mix also delivered sustainable low rates of inflation, which was the key policy challenge in the process leading to monetary integration. Slovenia adopted the euro on January 1, 2007 under a ‘big bang’ scenario in which euro banknotes and coins were introduced at the same time as the introduction of the euro as the national currency. There will be a dual circulation period of 14 days. The policy challenge ahead is to preserve the competitiveness of the economy and enhance its response capacity to changes in economic circumstances.
Gonzalo Caprirolo is chief economist at the Ministry of Finance in Slovenia. Slovenian Ministry of Finance website: www.gov.si/mf/angl/index.htm
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Strong growth through The COSMOTE Group operates in five SE European countries, namely Greece, Albania, Bulgaria, FYROM and Romania. The Group has almost 10 million customers and is engaged in a market of 46 million people, being the provider with the widest regional presence. COSMOTE - Greece COSMOTE launched operations in 1998, five years after its competitors, and in a record time of three-and-a-half years conquered the leading position in the Greek mobile market. Eight years on, COSMOTE today has reached over 5 million customers. ñ COSMOTE has the biggest and most advanced telecoms network in the country, offering almost 100% nationwide coverage on the Greek mainland, while covering almost in full Greece’s territorial waters. ñ COSMOTE has a strong commercial network comprising approximately 2,000 POS throughout Greece, a network to be significantly enhanced following the acquisition of GERMANOS, one of the largest telecommunications retailers in Europe. ñ COSMOTE is a pioneer in commercial offerings customized to different and varied customer needs. ñ Despite the Greek market’s maturity, COSMOTE enjoys strong growth from higher usage through its commercial policies. ñ The company heavily invests in the data services sector (1st in Greece to launch HSDPA, 1st worldwide, after NTT DoCoMo, to launch i-mode 3G services).
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commercial policies
AMC - Albania AMC, operating since 1996, was the sole mobile telecommunications company in the country until February 2001. AMC has been a subsidiary of COSMOTE since August 2000. ñ With an impressively dynamic track record at all levels, AMC today holds the leading position in the Albanian market. ñ The company posts profitability levels among the highest in the sector in Europe (9M-06 EBITDA margin: 59.5%). ñ The company has an advanced telecommunications network, covering 98.34% of the population and 83.35% of the country’s territory.
GLOBUL - Bulgaria GLOBUL began commercial operations in September 2001, as a 100%-owned subsidiary of OTE. At the beginning of 2003, COSMOTE took management control of GLOBUL. In August 2005, COSMOTE acquired 100% of GLOBUL shares from OTE. ñ Posting excellent operational and financial performance as well as impressive subscriber growth rates, GLOBUL had almost 2.9 million customers by the end of September 2006. ñ The company has developed a state-of-theart telecommunications network, covering 99.6% of the population and 97% of the Bulgarian territory. During November and December 2005, GLOBUL invested a total of 16 million euros in network infrastructure. ñ GLOBUL applies competitive pricing policies and strong commercial offerings customized to different segments. Recently the company launched i-mode and its first 3G services. ñ The company has developed a vast and flexible distribution network of over 670 POS across Bulgaria.
The diversified profile of COSMOTE’s operations in SE Europe and their promising outlook, reasserted by strong performance in all its operations, has prepared the ground for the Group’s profitable growth over the coming years.
PUBLI
COSMOFON - FYROM COSMOFON, in FYROM, launched commercial operations in June 2003, under COSMOTE’s management, and in August 2005 became a member of the COSMOTE Group. ñ As a COSMOTE subsidiary, COSMOFON has recorded rapid growth in terms of revenues and subscribers. ñ COSMOFON offers attractive product offerings; the company’s commercial strategy is well adapted to local — mostly prepaid — market trends. ñ The company is continuously expanding its retail network. ñ COSMOFON has developed a strong telecommunications network, covering 99% of the population and more than 97% of the country’s territory.
COSMOTE Romania COSMOTE Romania (formerly COSMOROM) was founded by ROMTELECOM in January 1999 and launched commercial operations in May 2000. In July 2005, COSMOTE acquired a 70% capital stake in COSMOROM. In December 2005, under a new brand name and identity, COSMOTE Romania was launched, with the aim of making mobile telephony accessible to all. ñ The company has enjoyed a successful start in its 11 months of operations, achieving impressive subscriber additions (9M-06: almost 670,000 customers). ñ COSMOTE Romania has significantly expanded its telecommunications network, which currently provides almost 92% population coverage, while having the capacity to serve 20 million people across the country. ñ Despite its recent establishment, COSMOTE Romania boasts a wide commercial network, comprising 540 POS. ñ Applying a flat and simple tariff policy, COSMOTE Romania offers the most attractive tariff plans in the country, while providing postpaid customers with the lowest monthly charges and free airtime promotions.
The Lisbon Strategy: In a shared response to the challenges posed by globalization and an aging population, all member states of the European Union agreed to make their labor markets more flexible, to stimulate innovation, to encourage entrepreneurship, to spend more on research and development, to promote energy security and to do their share in completing the single market. The European Commission enthusiastically calculated that the reforms could increase the EU’s annual economic growth rate by up to 0.75 percent over the next decade, bringing it in line with US economic growth. Today the overall picture is mixed at best. The most encouraging news is that employment in the EU has gone up from 62.5 percent in 1999 to 64.3 percent in 2003. Seven member states of the EU-15 are on track to reach the goal of 70 percent
By Costas Cartalis
employment by 2010. There has also been a notable increase in the use of information and computer technologies in schools, administration and trade. Energy intensity overall has been improved, although much has yet to be done for Europe to achieve ‘energy security.’ However, the overall performance of the European economy has been disappointing. European growth is less than half of that in the US, India and China. There is no doubt that Europe must do more to bring the Lisbon Agenda forward. Reviewing the priorities Irrespective of the recent agreement on the EU budgetary perspectives 2007-2013, the European Union should fundamentally review its priorities: Research: The new budgetary priority for the EU: Community spending on R&D is limited today to 0.04 percent of the European GDP, while the synergies and effects of critical mass are evident. A European Agency for Science and Research, to be based upon the model of the American National Science Foundation, would contribute to streamlining and maximizing the efforts carried out
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throughout the Union. Finally, financial incentives to private research should be increased: They should include, among others, encouragement for the development of public-private partnerships and tax credit systems for corporate R&D investments. Higher education: A joint EU member states effort: It is up to the member states to provide a massive effort to catch up in this field. But the Union should also set up a collective target, with an objective of 50 percent of the European population with higher education qualifications. The EU should monitor the implementation of this target. In addition, it should finance the set-up of a network of European centers of excellence capable of competing with the best universities worldwide.
Reviewing the priorities Transport infrastructure: Despite the fact that transport infrastructure is crucial for the achievement of the single market, the related spending represents only 1 percent of the EU budget today. As already proposed 20 years ago when Jacques Delors was the president of the Commission, the issuance of Eurobonds to finance Europe’s ‘missing links’ should now be implemented. Environment: Europe is probably the region with the greatest environmental awareness. Its efforts are, however, still far from adequate. Sustainable development can no longer make do simply with ex post remedial action: There is a need for a move over to an ex ante management approach. For example, emissions of carbon dioxide have triggered a process of global warming: Even with a drastic reduction in CO2 emissions, climate change will continue in the long term. To this end, the introduction of a prevention principle in EU environmental policies is required. This principle should involve drawing up an ‘EU program for environmental convergence’ with the objective of enhancing the emergence of a genuine model of sustainable development. The program would be backed by indicators enabling the analysis of long-term changes and should be supported by adequate financial and legislative instruments to secure its full implementation.
Energy: Energy security is the most pressing challenge of the 21st century for the European Union. Shrinking global supplies and rising demand require urgent action to diversify supplies and transit routes and invest more in energy efficiency. The energy sector is becoming global, with a strong interdependence between producers, transporters and consumers. Diversification is part of the approach — for producers, transporters and consumers. It is imperative for members of the European Union to provide leadership to address the challenge of maintaining sufficient supply while sustaining economic growth and environmental stewardship. Energy conservation and efficiency should be fully developed as tools to improve collective energy security. In addition, the European Union should gradually put trust in policies which will allow independence from oil. The example of Sweden, which has declared its goal to be oil independent by the year 2020, is in the correct direction.
To relaunch citizens’ Europe To make Europe work while simultaneously promoting the emergence of an empowering and protective Europe, there is a need to strengthen the Union with pro-growth competences and also to take a number of concrete steps toward a sustainable welfare Europe for the 21st century. Those are the first two pillars of our joint proposals to relaunch citizens’ Europe. The third pillar is related to democracy building: to foster the emergence of a common feeling of European belonging which will then pave the way to the development of a European ‘democratic space.’ Costas Cartalis is associate professor at the University of Athens and president of the Institute of Strategic and Development Studies (ISTAME) — Andreas Papandreou. This article is based on a number of ISTAME policy papers. ISTAME website: www.istame.gr
frontlines
Priivatization and infrastructure industries The emerging international experience of restructuring, deregulation and privatization of infrastructure industries regarding the unique circumstances of Southeastern European countries was the main theme of a two-day workshop held in Athens on December 18 and 19, 2006. The conference on ‘Structuring Regulatory Frameworks for Dynamic and Competitive Southeastern European Markets’ was organized by the Greek Ministry of Economy and Finance in collaboration with the World Bank. Prominent economists from the World Bank and the Organization for Economic Cooperation and Development (OECD), as well as academics and managers from the United States, the United Kingdom and Southeastern Europe, presented an in-depth analysis on the following topics: Promises and perils of the new infrastructure model; Principles that should guide future efforts to restructure, regulate and expand infrastructure in SEE; Challenges of designing effective and practical regulatory regimes that provide the needed incentives; Public policies that enhance cross-border trade in infrastructural services, and Regionalization of infrastructure regulatory policies in SEE.
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Effective regulation According to Ioannis Kessides, lead economist in the World Bank’s Development Research Group and author of the study ‘Reforming Infrastructure — Privatization, Regulation and Competition,’ effective regulation is the most critical enabling condition for getting infrastructure reform right. However, the fact that privatization has low credibility in many developing and transitional countries is not due to dissatisfaction with privatized utilities and their ownership structure, but rather because of the weakness of the institutions charged with regulating them. Therefore, as stressed by Giorgos Alogoskoufis, Greece’s minister of finance, the lessons learned from World Bank experience could prove very useful to policy makers in SEE contemplating similar reforms. The new approach For the World Bank, developing infrastructure is definitely a high priority, since there are 1.1 billion people on this planet who lack access to safe drinking water, 2.4 billion without adequate sanitation, and 1.4 billion with no access to electricity. Although the past two decades witnessed far-reaching reforms in the field of infrastructure — restructuring, privatizing and establishing a new approach to regulation in order to try to attract private financing in infrastructure and accelerate the development of sectors like transport, energy and telecommunications — the lessons learned were often quite controversial. Therefore, one must always keep in mind the initial situation, the status quo and
the state of infrastructure delivery when it was mostly executed by state-owned companies — because they were often inefficient, employing practices such as underpricing. This made them totally unable to finance the expansion of their infrastructure. However, today there is no universal reform model, since the result of a reform depends very much on the sector. Things are different in telecommunications, in water or in sanitation. The final result also depends very much on the country and the social environment. Within that framework, the important conclusion is that, in general, reforms enhance performance quite significantly in the field of infrastructure. Furthermore, according to Kessides’s study, effective regulation is the most critical condition for reform to protect the interests of both private investors and consumers, since this is the only way to attract private funds toward infrastructure and at the same time to get social support for these reforms. Also, privatization must come only after restructuring and introducing competition. There is little point in privatizing pure monopolies. Privatizing for privatization’s sake is not an objective per se. Privatization will work only when there is a competitive structure behind the scenes, and then the benefits will be substantial.
When Christos met Gazi What could be the conclusion of a cordial discussion on the subject of Balkan identity between two Balkan men of letters? Gazi Kapllani and Christos Homenidis, the former from Albania and the latter from Greece, met each other in Athens where they both now live. Avoiding any formalities, the two writers cut to the chase of the subject. They question each other freely on matters of the Balkan past, present and future based on their own personal experiences. Analyzing problems and adversities from a Balkan point of view, Christos and Gazi conclude that ‘in order to be creative’ it is unnecessary for the people of the region to go hungry or to slaughter each other.
GAZMEND KAPLLANI
CHRISTOS HOMENIDIS
H: Gazi, do you accept the concept of ‘Balkanity’? K: There is certainly a Balkan ‘womb’ that is common to all. H: Could you describe it to me by enumerating some of its features? K: A Greek scholar once said that all of us — the people of the Balkans — are the bastard offspring of the Byzantine Empire. H: And who are the legitimate offspring?
K: There are no legitimate offspring. We are all bastards — that is to say, in the positive meaning of the word, that we are multicolored, variegated and variform — and we all grew up side by side within the empire that was the heir to the Byzantine one: the Ottoman Empire. We rose up as nations after the collapse of the Ottoman Empire. H: Didn’t something similar happen in the Middle East, with the various peoples living in the region? K: The difference lies, I believe, in the fact that the relations the Middle East had with the West during that critical period were
very superficial. The Balkans, in contrast, never ceased looking also toward Europe. It may be that for the Christian populations the Mother Church was in Constantinople and not in Rome, but the West had always had a strong presence on the Balkan peninsula, as well as in the areas around the Danube, and even as far as Ukraine, where Odessa was the most Westernized center... Certainly the nationalism that has developed in the Balkans is quite different from the Western type of nationalism. As John Plamenatz — a Montenegrin who taught at Oxford — pointed out, the people of the West became integrated through centurieslong processes, and national consciences developed gradually, along with their bureaucratic infrastructures. Meanwhile, we in
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I met Christos Homenidis after a telephone call. He had read my book and wanted to meet me. I thought it was an un-Balkan gesture. Particularly in the Balkans, we rarely acknowledge the merits of the other or have the curiosity to meet him. Especially when we are established writers, enjoying widespread public recognition, as Homenidis does. It is probably due to this ‘Balkan syndrome’ that Balkan men of letters are often confined to their own ghetto, to their own provinciality, and that the people of the Balkans are often consumed by their own spitefulness and ignorance. What I like about Christos is that he has not been afflicted by the Balkan syndrome — even though I consider him very much a man of the Balkans. He is a very spontaneous, outgoing person who likes the company of friends and who, naturally, likes drinking. Christos and I were born in different countries. We grew up speaking different languages. We have lived under different regimes. Nowadays we live in the same city. It is thanks to the collapse of the border barriers and to the osmosis between Greeks and Albanians — something one could not have envisaged even in one’s wildest dreams 15 years ago. And we have in common many ideas on matters related to the subject of identity. When one looks into it, one realizes that identity is not simply a matter of roots, blood, origins, or birthplaces. It is above all a matter of values. And, depending on the values we embrace, we fashion our identity, our circle of friends, our country. Gazmend Kapllani
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the Balkans had our national revolutions first and then started wondering what it means to be a nation. And the state was, more often than not, non-existent. I personally subscribe to the theory which maintains that the state is the one that creates the nation and not vice versa. This is why we have lived, ever since the 19th century, in a vortex; we have lived and continue to live through earth-shattering events without having a tradition to rely upon… H: The lack of tradition — that is to say, of handed-down institutions — could also mean freedom… K: Unfortunately, not in the Balkans. In the Balkans the demand for integrated populations was expressed, even quite recently, through violence: ethnic cleansing, forced population exchanges… Dreadful things…
Rigas Feraios H: Do you believe that another course, more peaceful, multinational and multicultural, like the one envisioned by Greek War of Independence hero Rigas Feraios, could have been followed? K: No. The ‘nation’ concept — as an integrated, ‘clean’ entity — has been the major, most burning issue of modern times. The rise of nations caused the dismemberment not only of the Ottoman Empire but also of the Austro-Hungarian one. Obviously, the forging of nations was an historical necessity. If you think of it, the only multinational country in the area was Yugoslavia, which proved to be terribly fragile… H: It was the only state that comprised Christians, Muslims and Jews, Southerners and Northerners, Eastern-minded and Western-mannered people. Do you regret its passing? K: I consider the dismemberment of Yugoslavia a major tragedy. But, of course, history goes on. We mourn Yugoslavia, but on the other hand we are glad that the ice has been broken between Greeks and Turks,
that Albanians and Greeks are now mingling… Do you, Christos, believe in the possibility of creating a common Balkan state? The national identity question H: I must tell you that whenever I find myself in conversation with Greeks who feel inordinately proud of their ‘unadulterated Greekness,’ I love making them mad by reminding them that several of the revered heroes of the 1821 Greek Revolution — such as Markos Botsaris, Kitsos Tzavellas and Andreas Miaoulis — were Albanian-speaking warriors. And, furthermore, that Theodoros Kolokotronis himself wished for a bilingual country, with both Greek and Albanian inhabitants. From the time the modern Greek state was founded in 1830 to today, the conflict between the concepts of an open-minded, extrovert, cosmopolitan Greece and a small yet honorable, racially and religiously ‘clean and proper’ Greece has never ceased. It goes without saying that I side with the former and not with the latter, and that any kind of multiculturalism fascinates me.
K: This kind of conflict, you know, may be observed in almost any nation. National identity is in danger of deviating from its proper course and being reduced to a vicious circle, to a racial ideology culminating in fascism and Nazism. Yet, on the other hand, we should not forget that a nation is born during a highly ecumenical conjuncture. This is where its integral contradiction lies: The French Revolution was the revolution of the conscientious Frenchmen. At the same time though, it was during the French Revolution that the suggestion to abolish the word ‘foreigner’ was first uttered. H: Do you mean that anyone embracing the ‘Freedom-Equality-Fraternity’ triptych would have been French? K: Exactly. Isn’t it amazing?
Albanian by origin and Greek by choice, Gazmend Kapllani, an Albano-Greek, or Greco-Albanian, is the living refutation of all the stereotypes of the economic immigrants residing in Greece, a refutation of each and every facile and sweeping generalization used to describe them — whether in racist or ‘progressive’ terms — the real aim of which is not getting to know these people better but to box and label them, to contain them within a specific framework — to the great relief of the natives. Gazmend Kapllani however is neither a second-rate citizen nor the touchstone of our humanism. He did not come to Greece in order to subsist on the tear-soaked bitter bread the downtrodden alien worker usually consumes, but in order to be educated, to prosper and to have a good time. He does not feel uprooted; he is not subject to mal-du-pays blues — on the contrary, he believes, as a genuine cosmopolitan man, that ‘home is where the heart is.’ His effortless manner in social intercourse — a result of intellectual and moral selfconfidence — was his chief characteristic, I am sure, even when he was working as a kiosk vendor in the Athenian neighborhood of Kallithea, long before he had completed his doctorate and acquired thousands of loyal readers as a columnist and writer. The passion to know and be known, to travel and to transcend all kinds of borders, is something that has possessed him since childhood, along with a repugnance for anything that is picturesque or provincial. Personally, I, who was born and bred and still live in the Greek capital’s Kypseli district, who all my life have followed a pretty straight course, feel at times a certain envy of the adventurous course taken by Gazmend Kapllani. Infinitely greater than this envy, though, is the sense of how close I feel to this man. Is it perhaps because we are about the same age? Is it because we both spend our lives observing and writing? Or is it maybe because we have both learned how to swim inside the same Balkan womb? Christos Homenidis
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Reason and instinct H: Just think for a moment that in Greece there are still certain eminent men of letters who adhere to the theory that the French Revolution was a mistake and an historical misadventure. And they even go so far as to be glad that we Greeks, being Eastern, were ‘fortunate’ enough never to experience the Renaissance. And thus, uncontaminated by Reason, we have retained our purity. And it is in the same light that these people regard the Balkan hinterland. K: And the irony is that the precepts of these gentlemen do not have their origins in the Balkans but in the West. And more specifically in the German Romantic movement, which praised the purportedly pure, the irrational, the instinctive, and which brought about — among other things — Hitler. The leaders in the Yugoslavian
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tragedy were imbued with similar ideas. What was Radovan Karadzic proclaiming? That this is the Balkans, this is not the West — and therefore different principles apply! They went as far as to proclaim that there is a ‘Balkan DNA,’ which precludes a Westerntype approach to development for the Balkan people! Apart from being outrageous, this preoccupation with ‘Balkan supremacy’ is also bigoted: How else could one explain the fact that in the Balkans the most neglected studies are the Balkan ones? The people of the Balkans talk of unity on the one hand, while on the other they maximize even their tiniest differences! They lay claim to the same heroes, to the same saints, and at the same time they refute
their similarities! I was participating once in a pan-Balkan journalists’ forum in Kavala and was watching them fight over my last name: ‘Kapllani,’ the Turk was saying, ‘is Turkish!’ ‘No!’ the Serb argued, ‘It is Serbian!’ ‘Certainly not!’ the Greek insisted, ‘It is Greek!’ Kapllani in fact is a Balkan name. H: And it means ‘tiger cub.’ K: Exactly. Balkan nationalism, though, imposes a difference where there is none. As Plamenatz pointed out, the Frenchman does not have to draw attention to the difference between him and the Englishman. No one is contesting it. Meanwhile, here in the Balkans, we are all mixed up with everybody else… An ‘open’ national identity H: In these postmodern times, could not the fact that so many eclectic relationships between us have been forged be used to our advantage?
K: I absolutely agree. And this is precisely the aspect that should be promoted. Not in order to abolish national identity, as the coalition of the black and red nationalists proclaims, but in order to promote an ‘open’ national identity, within the new European conditions. The European prospect all Balkan countries are facing nowadays — each in its turn — gives us a unique historical opportunity to get over past complexes for the benefit of a common future. I do not mean by this that we should cancel out history, that we should be afflicted by amnesia regarding all those things that once involved us in bloody conflict. I mean that we should simply deal with it somewhat transcendently. For the sake of our children. Do you know what Ernest Renan, one of the greatest analyzers of the concept of ‘nation,’ once said? ‘Without an element of oblivion, one cannot build together with his neighbor anything worth building.’
H: But what is considered to be the Balkan fabric that is common to all? Which are the myths we have in common? This is what I have been asking since the start of our conversation… K: Let us start with the simplest and most obvious things: with the fact that we have lived for thousands of years side by side, in a similar landscape, plying similar trades and crafts; that we share more or less the same kind of music, identical folk tales — for example, your Bridge of Arta in our tradition is called Rozafat Castle — that in our languages we have borrowed and counter-borrowed a great number of words. My mother in Gjirokaster knew hundreds of Greek words. And, despite being a Muslim, as a child she liked to go and pray in the Christian Orthodox church, preferring its icon-painted walls to the plain walls of the mosque. And at that time no one would think of prevent-
ing her from doing so… This is another precious heirloom. The Balkan Islam, which feels related to the ‘Christian West’ and which favors the secular state, this is the Islam of the Bektashi and of tolerance — a model of tolerance for all religions, including, of course, Christianity. The Balkan Islam, which under present conditions could become the symbol for an alternative Islam. One regrets that the West allowed this desirable version of the Muslim religion to drown in its own blood in Bosnia… The Balkan identity H: We use the same words, yet there is no common Balkan language to bring us together…
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K: The Balkan identity is a pluralistic one. It is not a mono-semantic one. H: And, anyway, we can also trace the Balkan element through experience. Films by Emir Kusturica and Theo Angelopoulos, for example, could be called Balkan cinema. K: Certainly. H: Do we have their counterpart in literature? Can we speak of the ‘Balkan novel’? K: Orhan Pamuk is a Balkan writer. So is Ivo Andric. Pamuk rarely writes without any references to the Ottoman, Balkan past. The same applies to Ismail Kadare. In a European novel, the lord of the manor would have been a count. In the Balkans, the lord of the manor is a pasha. H: So does this mean that the Balkan novel is a novel that draws its subjects from the Balkans? Is it not possible to speak of a Balkan literary style, as we do of a Chinese or an African literary style?
K: I’ve told you before; I consider the Balkans part of Europe — a part that squints a bit toward the East. A road to prosperity H: Well, Gazi, do you know what I would call a really characteristic feature which is to the great advantage of the Balkan writer, the Balkan artist, the Balkan thinker? The fact that, because of his history, he is extremely familiar with contradiction. Contradiction is a very fascinating situation and, as far as I’m concerned, an eminently productive one. A man without contradictions is a bore. And contradiction has been greatly cultivated in the Balkans — not only around us, but also within us. I believe that inside us a dozen different ‘ourselves’ coexist, constantly squabbling with each other.
K: I do not believe that this is an exclusively Balkan feature. But this contradiction, this double standard of looking at things, certainly applies also to the Balkans. And at times it turns out to be a terrible defect and at others an especially fortuitous merit. By existing and coexisting within your contradictions, you can indeed go very far — as long as you combine your contradictions with tolerance, reconciliation and pluralism. I will never tire of repeating: The only road the Balkans can take is the road of peace, of development, of prosperity. The people of the Balkans do not have to go hungry or to slaughter each other in order to be creative. The precepts held dear by the hot-headed and those who maintain ‘this is the Balkans: neither easy nor merry’ are not conducive to the making of the artist. Such precepts produce generals, bigoted journalists, frontier guards, ethnic cleansing, poverty, conspiracy seekers and all kinds of jerk-offs. They definitely do not produce artists.
Culture, development, quality of life
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ENERGY:
A long-term strategy The contractor METKA, a Group subsidiary, managed to complete the project within the anticipated limits of time and cost, which demonstrates the company’s know-how and its ability to complete projects of this size and complexity.
duction of carbon dioxide by 1.5 million tons per year, contributing also to the national goal not to increase local CO2 production over 25 percent compared to the 1990 levels.
Thermal energy production The company, exploiting the vantage position of Aluminium of Greece’s plant in Viotia, secured a license for a new independent gas-fired power production station, with a nominal capacity of 412 MW. The total works (energy, industrial, and environmental) of the Group in Aghios Niko-
Energy co-production As already mentioned, the construction of a coproduction station of 340 MW at the Aghios Nikolaos plant is now in its final stage. This belongs to an investment program of 200 million euros. The station is expected to be concluded during the first trimester of 2007 and efforts are also being made for a timely construction of the necessary natural gas pipeline.
The main competitive advantages of the Group Mytilineos Group is positioned strategically and flexibly in the energy sector. Flexibility is necessary in an as yet indefinite business environment, while its strategic placement is proven by breadth and spherical activities, such as: Energy production from renewable sources The Group is already implementing an investment program of 100 million euros for the development of wind parks, the first of which is already operative at Sidirokastro in the prefecture of Serres with a total power capacity of 17 MW. Meanwhile, a business plan is being worked out concerning a combined development of the wind potential on the islands of Milos, Kimolos, Polyegos and Serifos (of approx. 800 MW capacity) and its final interconnection with the already interconnected system in Lavrion. Construction of energy projects An example is the construction of the EPC energy station in Lavrion, in the outskirts of Athens.
laos in the prefecture of Viotia comprise the largest private investment in Greece for the period 2005-2007, and have the following wider benefits: ■ They contribute significantly to the development of the area and the creation of new jobs. ■ They reinforce the country’s southern electrical network, greatly reducing the possibility of a blackout in Athens. ■ They create the country’s third center of accumulated electric power after Ptolemaida and Lavrion. ■ They substitute 300 MW of lignite production, with a potential contribution to a re-
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The Group’s potential in electric power, after the recent acquistions Further to the conclusion of the recent company acquisitions and agreements, the Group reinforced significantly its potential and development prospects in the energy sector, since: ■ The Group’s total power production permits from thermal and renewable energy sources increased to 1,500 MW, a significant precedent for the Group in view of the progressive deregulation of the Greek electric energy market. The Group’s portfolio was enriched with projects in various development phases, of a total capacity of 289 MW (211 MW in wind parks and 78 MW in hydroelectric units), thus surpassing a total of 440 MW from renewable sources. The capability to develop power projects from renewable energy sources was reinforced, since it adds significant know-how to the development and construction of hydroelectric power production units.
PUBLI
Mytilineos Group SA was founded in 1990 and evolved from a family metallurgical business which was established in 1908. Today Mytilineos is one of the biggest industrial groups in Greece, with a consolidated turnover which surpassed 740 million euros in 2005, and retains more than 4,000 employees in Greece and abroad. It is involved in significant international activity and holds a leading position in the energy, metallurgy & mining, technical EPC (engineering, procurement and construction) projects, and defense industry sectors. For the Group, the energy issue is a conscious and strategic choice. This is proven by the fact that it already has acquired permission to produce electricity from thermal and renewable energy sources with a total power capacity of 1,500 megawatts (MW).
Convergence of During the Cold War, the Balkans, an issue that had greatly occupied international public opinion in the past, was relegated to the back burner. The reasons are well known: Within the geopolitical framework of a balance of terror that had been imposed on both sides of the Iron Curtain, even a whiff of dispute about borders or territories in this sensitive area could have had terrifying repercussions. By eliminating the terror of a nuclear confrontation, the end of the Cold War also dispensed with its by-products, that is to say, the balance of power and the stability thus created. So the Balkans were destabilized anew, with the result that they came back into the limelight and remained there from 1989 to 1999, a full decade. After the Kosovo war, in the aftermath of the Dayton agreements, the general view was that the main problems had for the most part been resolved and that it only remained to iron out a few details for the Balkans to become properly ‘Europeanized.’
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By Georges Prevelakis
However, the dramatic developments after 9/11 (war against terrorism, Afghanistan, Iraq) have pushed the Balkans once more far out of the international limelight. The destabilizing factors Yet the prevalence of such a false sense of security is quite disorientating, since the problems dogging the Balkans remain unresolved. Disputes fraught with danger will manifest themselves in the years to come, and the Balkan question will once more develop into an issue of great importance to international relations, and to Europe in particular. This forecast is based on the concurrent appearance of various developments that relate, directly or indirectly, to the Balkans and to Europe.
Kosovo The main destabilizing factor is the unresolved territorial issues in the former Yugoslavia, with Kosovo playing a key role in future developments. If and when it comes to pass, the independence of Kosovo will open the proverbial Pandora’s box, since it will be construed as a reward for the forceful pursuance of the minority’s claims and it will weaken the position of the moderate elements within the Albanian minority — and even within others. The repercussions will not be long in appearing in regions with a strong Albanian presence, as well as in other cases, notably in Bosnia, where the Serbian population will probably use the Kosovar precedent to ask for self-determination. And it is anyway well known that Russia is eagerly awaiting Kosovo’s independence in order to foster a whole series of similar territorial issues in those areas of the former USSR that harbor large Russian minorities. Yet a refusal by the international community to recognize Kosovo’s independence would also have a destabilizing effect, since it
geopolitical tensions would be construed as scorning the Albanian element and it would also prolong the ever-worsening economic and social conditions in the area. Until now, diplomacy, at its most procrastinatory, has been employed, but now even this method has reached the end of its tether. Turkey & the EU As things stand now, the extremely probable rejection of the Turkish application to join the EU presents yet another threat of leading up to a new period of tension within the Balkans, which would reverse whatever benefits have accrued during the Greek-Turkish rapprochement over the past decade. The entry of Bulgaria and Romania into the EU, in conjunction with the already established Greek membership, would create an extended European-Turkish border in the area of the Balkans, the Aegean Sea and the Black Sea, which could possibly become an area of friction. Bulgaria & Romania The entry of Bulgaria and Romania into the EU certainly presents a positive prospect, which would have a stabilizing effect not only within these countries but also in their immediate vicinity. It is possible though that, in the short term, it could create tension and unrest. The only other Balkan country that is a member of the EU is
Greece. Within the first 15 years of its joining, Greece was a constant problem for Europe, initially over economic issues and then over geopolitical ones. Conditions in Bulgaria and Romania are now much more problematic than those prevalent in Greece in 1981: Leaving aside their economies, which are in a far sorrier state than the Greek economy was a quarter of a century ago, their main problems are that the organized crime networks and the public sector’s corruption have flourished to such a degree that they pose a threat both to their own societies and to Europe itself. A dangerous conjuncture These factors of insecurity and instability, that is to say, the realization of a deadlock as regards territorial issues, the reactions ensuing from a possible rejection of the Turkish candidacy, and the difficulties that will accompany the Romanian and Bulgarian accessions to the EU, are concurrent — expected to happen during the same period in the coming years. This convergence
of potentially dangerous factors aggravates the initial risk of each, thus creating a network of problems that sooner or later the international community will be called upon to face. Furthermore, this dangerous conjuncture in the Balkans is making its appearance in a geopolitical environment which is also evolving in a negative way. The hypothesis that the American presence and influence are going to be seriously curtailed at an international level — perhaps within the coming months — seems to be constantly gaining ground. The series of recent debacles suffered by the US (its inability to prevail against Iran and North Korea, the stalemate in the Middle East question, and the apparent avowal that the Western powers have been defeated in Afghanistan and Iraq) herald a phase of withdrawal and relative isolationism of the country, which, from the American point of view, could perhaps prove useful to its economy, as well as to the preparation for the next presidential election. Were this hypothesis to become a certainty, then the Balkans would find them-
themes
selves in a relative geopolitical void, between the waning — yet still important — American influence, the rising Russian aspirations — which are strongly backed by the energy factor — and a European involvement fraught with internal contradictions. EU & the Balkans These parameters do not bode well for the future, yet it is unlikely that we will witness once more a period of violence similar to that of 1989-1999. However, it is imperative that all concerned, both in the immediate vicinity (such as Greece) and further afield (such as the USA and the European Union), should realize that, contrary to common belief, the problems not only have remained as unresolved as ever but are likely to be revived, taking on a new, unexpected aspect. As long as some kind of creative potential, which would offer the younger generation and the active members of the population of the Balkan countries in question hope for a better future, does not develop, the instability, the organized crime and the cor-
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ruption of the public sector will remain rampant, creating a situation which in a few years’ time will be totally irreversible. It is difficult to imagine a positive prospect that could be realized without having all the Balkan countries join the EU. Unfortunately, the notorious enlargement fatigue precludes this option for the time being. And there are further negative phenomena in Europe which lead to a quite pessimistic view as to whether the European Union possesses the short-term ability to face the Balkan challenge. The rising xenophobia, which manifests itself every so often through various forms of rejection toward Turkey, bodes ill for the future. Europe, however, does not have the advantage the US does of being far away from the Balkans. While the Americans have the option of withdrawing to their continent, relegating to the native populations the solving of the problems they themselves have left behind, the Europeans possess no such safe haven. Sooner or later they will have to apply themselves in earnest to the Balkan question. The sooner they realize this need, the lower the cost of the necessary interventions will be and so much more human misery will be avoided.
Since, however, it is highly unlikely that they will arrive at such a realization solely on the urgings and warnings pronounced by experts or by journalists, it stands to reason to consider the possibility that the Balkans will once more be facing grave difficulties. In all likelihood, these difficulties will create the prerequisites for a European awakening, which, in turn, will hopefully foster the development of a creative and decisive approach toward the Europeanization of the Balkans. It is just possible that, in the future, the situation in the Balkans will get better — after it has deteriorated even further.
Georges Prevelakis is a professor of geopolitics, Sorbonne University (Paris 1).
The case of Kosovo
Do not lose the Joachim Ruecker interviewed by Vassiliki Nicoloulia
The countdown for the final status resolution of Kosovo has already started. Do you think that a solution acceptable to both sides is feasible, when on the one hand Prime Minister Agim Ceku declares that the only solution is an independent state, while on the other Serbia insists on maintaining its sovereignty and territorial integrity? Joachim Ruecker, the special representative of the UN secretary-general in Kosovo (SRSG), was appointed head of the United Nations Interim Administration Mission in Kosovo (UNMIK) by Kofi Annan as of September 1, 2006. Previously he had served as deputy special representative and head of the Economic Reconstruction component in UNMIK. A German career diplomat with an in-depth knowledge of the region’s difficulties, Ruecker believes that the problem of the status of Kosovo is the ‘last piece of the Balkans puzzle,’ which must be solved in order ‘to ensure that Kosovo and the region as a whole can realize their European future.’ Within that framework, he welcomes Special Envoy Martti Ahtisaari’s decision to present his proposal on Kosovo’s status without delay after the parliamentary elections in Serbia on January 21, since he considers of utmost importance the need ‘not to lose the momentum and to keep the status process on track.’ Ruecker also stresses that ‘the security situation in Kosovo has consistently improved over the past more than two years and particularly so with respect to violent crimes against Kosovo Serbs.’ However, he points out that ‘fostering tolerance among Kosovo’s ethnicities and building structures for durable stability and economic development are processes that will not end soon in Kosovo any more than they are complete in other parts of Southeastern Europe.
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It is bearing in mind the differing positions of Pristina and Belgrade that the UN has initiated the political process to resolve the status of Kosovo under the aegis of the secretary-general’s Special Envoy Martti Ahtisaari. UNMIK’s role, pursuant to UN Security Council Resolution 1244, is to facilitate that process, but UNMIK is not a direct participant in it. Therefore, it is not appropriate for me to comment on the outcome of the status process, which is for those directing the process to delineate. UNMIK fully supports the special envoy’s work and I am confident that Mr Ahtisaari and the Contact Group will see this process through to an early conclusion, as is clearly their intention. The Pristina delegation has engaged very constructively in the status talks and substantial progress has been made on the
momentum ground in Kosovo during this period in terms of implementation of the Standards for Kosovo, particularly with respect to addressing issues concerning the minority communities and maintaining a safe and secure environment despite the politically volatile situation on account of the status process. UNMIK will continue to work with the Kosovo institutions to firm up the foundations for a democratic, multiethnic and prosperous Kosovo. It is my judgment that the status quo is not sustainable in Kosovo and therefore it is imperative that the status of Kosovo is settled as soon as possible. We must solve this last piece of the Balkans puzzle to ensure that Kosovo and the region as a whole can realize their European future. Ultimately, that is what matters most for the people of Kosovo and its neighbors. They need to get on with their lives and cannot be left hanging in a state of political limbo any longer. It is the compelling logic of this imperative that should ultimately help tide over the differences that currently exist between the parties.
The EU and stability in SEE Could the issue of Kosovo once again destabilize Southeastern Europe?
As special representative of the UN secretary-general in Kosovo (SRSG), you are in close cooperation with all the political leaders of the region. Do you think that the leaders of the Albanian community might unilaterally declare the independence of Kosovo? As the famous Mark Twain said, predictions are difficult, especially about the future. There is no gain in speculating about possibilities outside the road map of the status process to which Kosovo’s political leaders have shown their unflinching commitment.
Early resolution of Kosovo’s status will certainly be a stabilizing factor for Southeastern Europe. It is time the region turned a new page in its history, away from the violence and destruction of the recent past and looking forward to the European perspective set for the entire region at the Summit of Thessaloniki in 2003, a perspective that Kosovo shares with its neighbors. Fostering tolerance among Kosovo’s ethnicities and building structures for durable stability and economic development are processes that will not end soon in Kosovo any more than they are complete in other parts of Southeastern Europe. But all these activities are increasingly self-sustaining in Kosovo, and there is every reason to expect that the resolution of Kosovo’s status will unshackle it from the trappings of the past and reinforce the positive trends within Kosovo and in the region.
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According to Daniel Serwer, vice president of the United States Institute of Peace, any delay for the final status resolution increases the likelihood that Albanian extremists will attack Serbs in Kosovo. In such a case, how do you comment on the fact that Martti Ahtisaari, the special envoy of the United Nations, has already declared that he will reveal his proposals after January 21, i.e. after the parliamentary elections in Serbia? Will the acts of violence against the Kosovo Serbs, which have never ceased, escalate? I welcome Special Envoy Ahtisaari’s decision to present his proposal on Kosovo’s status without delay after the parliamentary elections in Serbia. There are many compelling reasons to come to clarity on Kosovo’s status as soon as possible. It is therefore important not to lose the momentum and to keep the status process on track. I challenge the premise of your question regarding the security of Kosovo Serbs. The security situation in Kosovo has consistently improved over the past more than two years and particularly so with respect to violent crimes against Kosovo Serbs. The very few isolated criminal incidents that we have witnessed have mostly not been of an interethnic nature as the prima facie evidence indicates. There have indeed been political statements from Belgrade leaders alleging ethnic motives for any crimes that involve
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Kosovo Serb victims, but these statements have not been based on facts. Regarding the possibility of future violence, again I am not in the business of soothsaying, but based on the recent trends I am confident that the people of Kosovo will continue their adherence to democratic and peaceful means as they have done in so many challenging circumstances in the recent past, contrary to international speculations of possible public disorder. The international presence How do you envisage the future international presence in Kosovo after the status resolution? There will be continued international civilian and military presence in post-status Kosovo. Whereas the precise dimensions and nature of this presence will be decided in the status resolution, the intention is to have the future international presence as lean as possible and as robust as necessary. NATO and the EU have already stated their commitment to
future engagement in Kosovo. An EU Planning Team has been working in Kosovo since June to prepare the groundwork for the EU’s foreseen role in the rule of law sector and a Preparation Team for the future International Civilian Office is also up and running. UNMIK is working with international and local partners on detailed planning for smooth and efficient transition of UNMIK’s responsibilities to the institutions, whether international or local, that emerge from the status process. At the same time we are continuing to help build capacity within the Kosovo institutions so that they are ready to take the responsibilities that flow their way as a result of the status settlement. The economy Since 2004, Kosovo’s economy has in fact been shrinking, despite the continuing international presence according to the IMF (IMF, ‘Gearing Policies,’ 2004, p5). Furthermore, the ongoing corruption, the 11,000 expected claims for property returns and the general economic climate do not serve the economic growth of the region. Within that economic and social framework, can Kosovo survive as a multiethnic independent state? It is not right that Kosovo’s economy has been shrinking. The IMF has estimated an average growth rate of a bit lower than 2 percent since 2003 and for the year 2006 a growth rate of almost 5 percent. In particu-
lar, it is important to note that Kosovo has this growth rate despite a significantly declining donor sector, which means the growth rate of the private sector has not only been sufficient to compensate for the loss of donor funds, but has made an additional contribution to the growth of Kosovo’s GDP. Resolving the estimated 11,000 property claims will be crucial for securing a multiethnic society, promoting returns and sustainable livelihoods in Kosovo, and for creating an environment conducive to economic development by attracting investments, both international and local. Resolving the property disputes will make it possible to increase the tax revenue by introducing a property tax. We have therefore framed special laws and established the Kosovo Property Agency to resolve property claims resulting from the conflict of 1998-99. This agency has already received 5,000 claims that are being processed expeditiously. The fight against corruption has now begun to bear fruit in Kosovo. Specialized legal and institutional tools have been established and sufficient bulwarks against corruption have been created within Kosovo’s administrative structures at every level, in-
cluding the establishment of a Kosovo AntiCorruption Agency. Publicly owned enterprises have been incorporated into joint stock companies and their management structures have been changed to diminish the scope for fraud and mismanagement. Mechanisms of internal oversight, external audits and corporate governance established within these bodies ensure accountability and responsibility in their functioning. Indeed, profound challenges remain for Kosovo’s economic development. But a lot of reforms have been under way, including a successful privatization process, so that we can expect an increasing growth rate in the coming years. Integrated in the regional market, Kosovo has very good chances to develop a sustainable economy. A clear status will only contribute to further developing the economy. Besides, there is no reason to expect that after status Kosovo would be deprived of international assistance that the other parts of the Balkans are getting. All countries in the region benefit from significant EU, American and other economic and security assistance, all participate in a net-
work of regional and international mutual support organizations, and all share a European perspective behind which the EU puts not just political, but also material capital. In that sense, Kosovo’s challenge would be no different than that facing the region as a whole.
Joachim Ruecker is a German career diplomat and has previously served as commissioner for finance and head of the Budget and Finance Division at the Federal Foreign Office in Berlin. He has also held various postings in the Federal Foreign Office in Bonn and German embassies abroad, including Dar es Salaam, Detroit (Consulate-General) and Vienna. Ruecker was also the ambassador and deputy high representative for administration and finance in the Office of the High Representative in Sarajevo and the mayor of the city of Sindelfingen, Germany. He has a doctoral degree in international economics and has previously served as a foreign policy adviser to the Social Democratic parliamentary group in the German Bundestag. United Nations Interim Administration Mission in Kosovo (UNMIK) webpage: www.unmikonline.org
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Participating in the Balkan development
STOMANA INDUSTRY SA, with an active presence of more than 50 years in the Balkans and the international steel markets, is a leading company in Bulgaria. In June 2001, SIDENOR SA acquired the majority of the STOMANA INDUSTRY SA shares and subsequently realized a large investment program for the modernization of the plant and the total restructuring of the company. Since 2001, as a part of SIDENOR Group, STOMANA INDUSTRY SA continuously has been investing in new technologies, in order to produce high added-value products and to ensure optimum customer service. The company’s established position in the global market, combined with the wide sales network of SIDENOR SA throughout Europe, ensure the future development of STOMANA INDUSTRY SA in the years to come.
STOMANA INDUSTRY SA produces and sells a wide range of steel hot-rolled products, such as: steel plates, both of standard, shipbuilding, and pressure vessel qualities; merchant bars mainly used for metal structures (rounds, flats, UPN and equal angles); special profiles (boron flats, THN, ploughshare blades and railway joints); grinding balls; semi-finished products (billets, blooms and slabs). The first phase of a new investment for the production of concrete reinforcing steel bars, is scheduled for 2007. The new manufacturing unit will have, at its final stage, a production capacity of approximately 800,000 tons and will supply the developing markets of Bulgaria, Romania and the Western Balkans. Moreover, through TEPROSTEEL SA, STOMANA INDUSTRY SA produces and sells a wide range of quality, high-accuracy steels, for special applications. The company’s products meet the quality requirements of strict international standards such as EN, DIN, ASTM, JIS, BS, Lloyd’s Register and Germanischer Lloyd. STOMANA INDUSTRY SA applies a Quality Assurance System, certified according to EN ISO 9001:2000, as well as an Environmental Management System certified according to EN ISO 14001:2004.
SOFIA MED SA, a company active in the production and processing of copper and copper alloy products, is a subsidiary of HALCOR SA and is based in Sofia, Bulgaria. SOFIA MED thus benefits from the accumulated experience and worldwide presence of its parent company. Today, the company has established its position in the European market as one of the major manufacturers of copper and brass products such as strips, sheets, discs and profiles. The company employs 460 specialized tech-
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nical and administrative personnel. The plant which is situated in Sofia comprises three manufacturing departments — casting shop, rolling and extrusion, while the facilities occupy an area of 250,000 sqm. Through investments and constant development, SOFIA MED SA aims at offering high-quality products, so that it may fully and continually respond to the requirements of the international markets, where it is active and to which it exports 90% of its production.
ICME ECAB SA has over 50 years experience in the Romanian and international cables markets. It was incorporated in 1949 and since 1999 HELLENIC CABLES SA has been its major shareholder. The company is located in Bucharest, on land of 270,000 square meters and a covered area of 70,000 sqm, and employs approximately 500 persons. ICME ECAB SA is the leading cable manufac-
turer in Romania and its products are sold in the Romanian and international markets under the registered trade mark CABLEL®. The company distributes its products to the home market from its facilities in Bucharest and its warehouses in Cluj, Bacau and Timisoara. On the international market, it distributes its products through the HELLENIC CABLES network. The company operates certified Quality and Environmental Management Systems in accordance with ISO 9001:2001 and ISO 14001 respectively. The company manufactures all kinds of power, telephone and data cables, including ACSR conductors. The company holds quality certificates such as IMQ, VDE, LCIE, ELOT, UL and ABS. ICME ECAB SA is an approved provider to major public utilities such as EON and RAILTRACK. The company invests in its human resources through continual training of its personnel and by creating a safer working environment. In 2005, the advanced SAP R/3 ERP system became fully operational, contributing to the improvement of organizational processes and upgrading of collaboration with third partners. In the coming years, the company aims to further enhance its position on the domestic market, in neighboring countries (Bulgaria, Hungary, Serbia, Moldova, the Czech Republic and Slovakia) and other countries. In the first three quarters of 2006, the sales turnover of the company amounted to approximately 71 million euros (90% growth compared to 2005’s first three quarters), profits before income tax amounted to 6 million euros (100% increase compared to 2005’s first three quarters) and EBITDA to 8 million euros (100% increase compared to 2005’s first three quarters). ICME ECAB SA investments continued in 2006 and reached approximately 2.2 million euros (first three quarters). Total investments in the company, have reached 27 million euros approximately since 2000, with the participation of the IFC.
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ETEM is a leading Greek aluminium extruder, founded in 1971, and belongs to the largest metals group of the Balkans, VIOHALCO. A substantial exporter worldwide, ETEM’s products are certified to the strictest international standards. During the past 30 years, ETEM has held a leading role in the domestic aluminium industry. ETEM first introduced aluminium in construction in Greece and developed quality standards for architectural systems as we know them today. The second revolution was brought about with the introduction of composite aluminium panels (etalbond) in architecture. In addition to being the only manufacturer of composite panels in Greece, ETEM is one of the few in Europe. ETEM also produces aluminium industrial profiles, including solid bars in round, hexagonal, flat and square form for automotive and maritime applications. Among others, ETEM is an official supplier of the German BMW Group for the new 3 Series. ETEM’s industrial and commercial activity has successfully expanded in Southeastern Europe. Steelmet is the largest manufacturer of extruded and architectural aluminium systems in Bulgaria. For more than 10 years, the company has been the leader in credit sales programs. This enabled the company to become a reliable partner and a significant factor of economic activity in Bulgaria.
Steelmet’s activity as a commercial company started in 1994, while the construction of a brand-new aluminium profiles manufacturing plant commenced in 1998. This plant still constitutes one of the biggest greenfield investments in the country, in the order of US$16 million. Initially, production comprised two extrusion lines of a yearly capacity of 7,000 tons. At present, as a result of the investment program, the plant’s capacity exceeds 15,000 tons, effected by four modern extrusion presses. Steelmet also manufactures products for the automobile industry, for construction applications, heavy industry, electrical machinery, insulated architectural aluminium profiles, sliding and opening windows, exhibition systems, panels, custom-made systems for hundreds of small and medium-size Bulgarian companies, active in many fields, even the provision of services to the advertising industry. ETEM Systems Ukraine, ETEM Systems SRL in Romania and ETEM Systems S.C.G.DOO. in Serbia are commercial companies that successfully meet the requirements of their local markets.
Negotiated compromise The southern province of Serbia — Kosovo and Metohija — is known for its turbulent past and centuries-long ethnic and religious strife. The distance between the two main ethnic communities — Serbs and Albanians — is probably the greatest not only within Serbia, but in the Western Balkans as a whole. The language barrier that separates them was additionally strengthened by religious differences, the continual tradition of bitter, centuries-old ethnic rivalry, conflicting political agendas and opposing views on history in Serbia’s southern province. No separate Kosovo identity, as often claimed, was ever established, nor is there any real chance of that happening in the future: Both of the main communities have remained solely Albanian or Serb, while Kosovo has become an enduring symbol of deep divisions. In addition, the absence of a democratic culture and the tradition of resolving problems by violence, enhanced during the interethnic armed conflicts of 1998-99 and followed by the fateful NATO bombing, comprise a longterm burden that will be difficult to surmount in the decades to come. Since the arrival of the NATO-led Kosovo Force (KFOR) and the United Nations Interim Administration Mission in Kosovo (UNMIK) in June 1999, the situation in Kosovo and Metohija, at least as far as the Serbian community in the province is con-
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By Dusan T. Batakovic
cerned, resembles more of a conflict situation than a post-conflict one. According to United Nations High Commissioner for Refugees (UNHCR) statistics, within UN-administered Kosovo and Metohija, 257,000 non-Albanians were registered as internally displaced persons (IDPs) in November 1999. Of these 257,000, 207,000 were Serbs, the rest being Roma, Bosniaks, Croats, Goranis (Serb-speaking Muslim Slavs), Ashkalis (Albanian-speaking Roma) and so on. In an attempt to erase all traces of the Serbian historical and cultural presence in Kosovo and Metohija, Albanian extremists have destroyed or seriously damaged more that 140 Serbian Orthodox churches since June 1999, while the largest wave of ethnically motivated violence against the Serb community, orchestrated by the same extremist groups and tacitly approved by provisional institutions, materialized in the March 2004 pogroms.
Ethnic cleansing The Albanian-dominated Provisional Institutions of Self-Government (PISG) in Kosovo and Metohija treat the non-Albanian population as ethnic minorities, although the Serbs are, as elsewhere in Serbia, a constituent nation, not a minority. The motivation behind the Kosovo Albanians’ treating the Serb community as a minority is the result of ethnic cleansing. This ethnic cleansing against Kosovo Serbs was organized and implemented in several waves after June 1999, following the arrival of the international community. The result is that the percentage of Serbs in Kosovo and Metohija has dropped from 18 to roughly 10 percent, or even less, today. The number of remaining Serbs in the north of Kosovo (in several Serb-majority municipalities) and within several isolated and variously sized KFOR-guarded enclaves scattered throughout the province is around 146,000. Hence, roughly 60 percent of the
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Serbian population has been expelled from Kosovo and Metohija during the last seven years; most of them still live as IDPs in central Serbia. The actual number of registered displaced and expelled persons is 212,781 in Serbia, and 29,500 in Montenegro. All of the province’s cities, with the exception of the northern part of Kosovska Mitrovica, were ethnically cleansed of Serbs in 1999, and remain so today. There are practically no Serbs living in large cities such as Pristina, Prizren, Urosevac or Pec. In Pristina, there were about 40,000 Serbs prior to 1999, while today there are less than a hundred of them, living in a single building under appalling conditions and constantly guarded by KFOR. Conditions in the various Serb enclaves with respect to personal security and freedom of movement are still precarious. There is rampant unemployment (up to 93 percent) and extreme poverty,
while the living standards in general remain far below the norm in the region and the province itself. The number of returnees, despite many written agreements with UNMIK and frequent promises by both UNMIK and the Albanian-dominated provisional institutions, is still insignificant. So far, only 5.5 percent of the total number of internally displaced Serbs and other non-Albanians have returned to the UN-administered province seven-and-a-half years after June 1999. The non-Albanians in Kosovo are still
under the strong, continual and highly discriminating pressure of extremist Albanians, deprived of basic security, individual and collective rights, legal protection and the right to maintain and further develop their cultural identity, as stressed not only by UN Security Council Resolution 1244, but by the eight standards set by the international community to improve the rule of law, interethnic tolerance and democracy and provide for the province’s sustainable development. Thus, the region of Kosovo and Metohija is still very far from providing the basic standards needed for a modern and civilized society able to function according to the most fundamental European values. Despite all these facts, Kosovo Albanians (roughly 1.2 million) are determined to present their case as a success story, which would lead inevitably to the independence of Kosovo, i.e. the creation of another Albanian state in the Balkans. Nevertheless,
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the pro-Albanian lobbies, via the US and Europe and funded by money of very dubious, often criminal sources, crowded out the cruel truth that Kosovo Albanians, supported by the Albanian communities of the region, have become, according to the Western sources, a dangerous, uncontrolled nerve center for the criminalization of Europe, and a core region of long-term instability in the Western Balkans. A negotiated solution All these facts fully verify the demand of Belgrade that only a negotiated solution with Pristina concerning the future status of the province, reached through a UN-sponsored mediation, can avoid a dangerous, ethnically based domino effect, prevent the actual chaos in Kosovo and provide long-term stability in the region. The negotiations in Vienna, under the auspices of the UN and its representative Martti Ahtisaari, held during 2006, proved to be unsuccessful, despite the compromise offered by Belgrade for a sus-
tainable autonomy, due to the ultimate Albanian demand for independence. All the efforts of the Belgrade negotiating team (representing not only Kosovo Serbs, but the displaced Roma and Gorani communities as well) in Vienna to reach agreement on so-called ‘status-neutral issues’ (concerning the establishment of new Serb, Roma or Gorani municipalities and the enlargement of existing ones), the new competencies for these municipalities (concerning autonomy in cultural, educational, health, social security and other related areas), internationally guaranteed protection of Serb religious and cultural sites and the right of Belgrade to support and fund sustainable development of the Serb and non-Albanian communities were de facto rejected by the Kosovo Albanian delegation, who insisted primarily on status, offering unsustainable solutions or adjourning the solution of these vital questions until the post-status period.
Democratic Serbia Nevertheless, the Belgrade negotiating team remains fully committed to the negotiated and sustainable compromise that will eventually emerge in a new round of Vienna talks, after Ahtisaari presents his preliminary views on the future status early in 2007 and after the recommendations by the UN Security Council that will follow. In spite of the latent instability in Kosovo and Metohija (with Albanian extremists threatening even UNMIK and KFOR with outbursts of violence if their demands are rejected), it is important to stress that a democratic Serbia, which recently joined NATO’s Partnership for Peace program, is due to the country’s strategic, economic and political potentials, a key state in the Western Balkans, and the main guarantor of long-term stability in the region.
Dusan T. Batakovic is ambassador at large, counselor to the president of Serbia and a member of the Belgrade negotiating team. Serbian government website: www.serbia.sr.gov.yu/
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The future status of KosovÔ:
The view from Pristina By Agim Ceku
Greece is the leading European power in our part of the world, and an influential voice in decisions about it. I want to hear your ideas and opinions, so I shall be brief. I want to describe the work that we have done in Kosovo, with the international community, to build a multiethnic Kosovo. And I want to give you a picture of our future. To explain that independence is the only workable solution for Kosovo. To explain how an independent Kosovo will be a positive force. I am here in Athens to explain our position, and to ask for the support of Greece in finally solving the problems of this region. We are in the last kilometer of a marathon, something that Athens will understand, of course. Some people are getting tired, some people are not sure if we can finish. But now is the time for one final, extra effort. We have the opportunity, now, to build a lasting peace. Kosovo is ready. That’s why we believe that the time is right for status to be decided. The European Union, the United Nations, the Organization for Security and Cooperation in Europe (OSCE), my government, and the people of Kosovo, we have all worked to build a Kosovo that is ready. A Kosovo that works. I head a multiethnic coalition government. I answer to a multiethnic, multi-party assembly, chosen in free elections. In recent years Speech delivered to the Hellenic Foundation for European and Foreign Policy (ELIAMEP), Athens, November 15, 2006
the government has taken on more responsibility from the United Nations Interim Administration Mission in Kosovo (UNMIK). This year we have established the ministries of Justice and Internal Affairs. We have our own police service, one that reflects the balance of our people. A multiethnic Kosovo In fact, there is a higher percentage of Serbs in the police force than in the population. We have the proper institutions of a free society, a judiciary, an ombudsman and lively and independent media. Kosovo looks like a working state. Kosovo, in practice, is a working state. I emphasize multiethnic. Let me be clear: The Kosovo that I want, the Kosovo that I am arguing for, the Kosovo that exists, is not just an Albanian Kosovo; it is a Serb Kosovo, and a Gorani Kosovo, and an Ashkali Kosovo, a free Kosovo for all of our citizens. We are not just promising a
multiethnic Kosovo. We are guaranteeing a multiethnic Kosovo, with structures and rules that protect and promote the position of our minorities. We have already implemented most of the international standards, which shows that we match European principles. This issue is also at the heart of our negotiations with President Ahtisaari1. This is a package to guarantee the shape of Kosovo. A package that will reassure all of our citizens that they have a home in Kosovo, a future in Kosovo. Under our proposals to President Ahtisaari, 82 percent of Kosovo’s Serbs will live in municipalities where they are a majority. Our decentralization proposals — we call it asymmetric decentralization — give them special rights over their own education, policing, healthcare and administration. These issues — independence, multiethnicity — are not idealism, although I believe strongly in both of them. They are practical questions which are essential for stability. I want Kosovo to work, to function, because I want Kosovo and this region to have long-term stability. A Kosovo that is not practical will not last. And if Kosovo’s status remains uncertain, it will slow down 1. Former President of Finland Martti Ahtisaari is the special envoy of the United Nations.
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the region. A working, stable Kosovo cannot exclude the rights and participation of all citizens. A working, stable Kosovo cannot be based on an impossible relationship with Belgrade and cannot be based on an attempt to turn the clock back. A working, stable Kosovo cannot overlook the wishes of the great majority of the people of Kosovo (and let’s remember that Montenegro has just won independence with only a 55 percent vote). This is why we seek independence. The issue of independence It is the best way — the only way — to end the oppression and the tension and the uncertainty. It is the only way to get the investment that we need. It is the only way to give the people of Kosovo — all of them — the clarity to start to build for the future,
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in a normal state. Independence is the only way to guarantee stability. Independence is stability. But we must be realistic, and we must recognize the damage that is being done by the current lack of clarity. No one benefits from the current situation. Our people do not know what state they are in; they do not have a voice in the world; they do not know where their future is. Uncertainty is increasing worry and increasing tension. To delay is to delay investment and to delay security. Delay helps no one, least of all Kosovo’s Serbs. We ask for Kosovo to be treated as a unique case on its own merits, and we believe that a logical assessment of this case will lead to the right answer. We urge status quickly, because our people must be given their voice in the world and the chance to move forward. We urge independence, because it is the solution that will bring stability. Stability & the economy I believe this is true for our region as well. Our first challenges will, of course, be inter-
nal. Reconciliation and integration will take time and effort. We have to work to stabilize our economy, and then to develop our economic potential: We have our lignite reserves and we have our young and dynamic population, with a population growth rate that will be important for the EU’s attempt to sustain its growing economy. Privatization is already happening: At the moment we are tendering the biggest energy project in the region, and opening our telecom market to foreign investment. Our banking sector is privatized and free to foreign investors, as is the food industry. Kosovo’s potential is also in trade.
Kosovo and SEE We are in an important position in the region and in Europe. We are already building the regional relationships to develop this. This is a crucial point, and this is why I talked about the regional benefit of Kosovo’s independence. My vision of Kosovo is as a partner in this region and in the wider Europe. The status of Kosovo does not cause new problems — it solves, at last, the old problems. We want to build a working, sustainable relationship with Serbia, as with all of our neighbors. Kosovo is a necessary part of a functioning network of economy and security in Southeastern Europe. Our status is now a big obstacle and a big opportunity in the region’s path toward Europe. Finish the puzzle, and you unlock the potential of this region: for political stability; for dynamic trade between the Aegean and the rest of the continent; for European progress. Kosovo will only do well in partnership with our neighbors in the region. And the region will only do well with a final and stable status for Kosovo.
Future status The president of ELIAMEP asked me to give the view from Pristina on the future status of Kosovo. Well, let me give you all my view, my vision, of the future Kosovo. Kosovo will be a clearly defined, stable, working independent state. Kosovo will be a multiethnic state, with all of our institutions reflecting our diversity. With investment from strategic partners, Kosovo will first stabilize its economy and energy situation, and then develop the export potential of its energy, its agriculture and its growing labor force. Political stability and economic stability will help bring the communities of Kosovo closer together. Kosovo will have the strong relationships that it should have with its neighbors. Kosovo will work. Let me also offer a vision for our region. An end to disagreements over borders and the struggles of minorities; the beginning of a mature cooperation between recognized states. An end to the economic stag-
nation; the beginning of the realization of the potential of this resource-rich, strategically placed part of the world. An end to antipathy; the beginning of partnership. An end to Ottoman chaos; the beginning of European collaboration. At Thessaloniki in 2003, Greece, the cradle of European civilization, led the EU in offering a European future to the Western Balkans, recently escaped from barbarism. This remains an inspiration for us, as it does for our neighbors. We need hard work now to sustain it, in the face of new doubts. I ask Greece today, please maintain your role as the inspiration and the mentor for our region. Help us finally achieve stability. Work with us to develop our economy. Show us the way toward Europe. By doing so, you will give the whole region a future.
Agim Ceku is the prime minister of the Provisional Institutions of the Self-Government of Kosovo. ELIAMEP website: www.eliamep.gr
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Excellence in business OTEGLOBE constitutes the OTE Group’s dynamic response to the evolving telecommunications environment. It forms the vehicle by which the OTE Group addresses the international wholesale market, in a dynamic and flexible manner, by meeting individual telecommunications needs through the provision of comprehensive, state-of-the-art solutions. OTEGlobe’s Service Portfolio includes: ñ International Voice Traffic ñ Infrastructure Services (Int’l Managed Clear Channel, Voice Trunking) ñ Data Services (Int’l Managed ATM, Int’l Managed Frame Relay) ñ IP Services (Int’l Managed MPLS VPN, Internet Transit for Carriers, VOIP wholesale, GRX) ñ Value-added services which complement the aforementioned solutions, as well as hosting and outsourcing services. OTEGlobe’s customer base comprises large corporations and telecom service providers such as: 1. Internet Service Providers 2. Mobile and Fixed Telephony Companies 3. Application Service Providers 4. Telecom Service Providers 5. Multinational Companies The current telecommunications environment is characterized by rapid technological
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advancements, development of new applications, and new transaction methods. Success depends entirely on the degree to which an enterprise can adapt to the new situation. OTEGlobe has developed and manages the International Data/IP/MPLS MSP network on behalf of the OTE Group. MSP is a single international network platform for the provisioning of fully managed international Data, Voice, IP MPLS and Video international services, aiming at serving and fully satisfying the network needs of both carriers and multinational companies. The OTE Group makes itself present at the most strategic Voice, Data and IP telecommunication exchange points in the world. In the international voice wholesale market, OTEGlobe offers a wide range of products such as TDM Voice, Voice Trunking services and VoπP Voice. Due to the quality characteristics of our infrastructure we satisfy and guarantee high-quality service offerings at competitive cost structures to our partners/customers. Through the provisioning of cost-effective services such as Circuit Emulation and Voice
Trunking Services, its role is enhanced to that of an important international network infrastructure. During the present state of the network deployment, OTEGlobe services are offered in 14 strategic locations worldwide. Additionally, OTEGlobe manages the OTE Group’s international infrastructure such as the GWEN network which interconnects Greece with Western Europe through Italy. Using state-of-the-art DWDM and SDH technologies as well as backbone nodes in all major Western European cities, it is capable of delivering full end-to-end connectivity at high speeds providing all types of SDH services from E1 up to STM-16 and wavelengths up to 10 Gbps, with superb quality and performance characteristics. This European infrastructure is complemented with stakes in other submarine cables such as SMW-3, TAT14, BSFOCS, as well as access to Trans-border fiber-optic networks to all neighboring countries.
Looking ahead, OTEGlobe aims to become the leading regional gateway and the largest telecommunication hub of SE Europe and the Midde East in order to contribute its own ‘part,’ along with other OTE Group subsidiaries, in increasing OTE’s shareholder value.
Abbreviations: 1. ATM: Asynchronous Transfer Mode 2. MPLS: Multi Protocol Label Switch 3. VPN: Virtual Private Network 4. VoIP: Voice over Internet Protocol 5. GRX: GPRS Roaming Exchange 6. MSP: Multi-Service Platform 7. DWDM: Dense Wavelength Division Multiplexing 8. BSFOCS: Black Sea Fiber-Optic Cable System 9. SDH: Synchronous Digital Hierarchy 10. GWEN: Greece West Europe Network 11. TAT-14: TrAnsatlanTic cable system 14 12. SMW-3: South East Asia Middle East Western Europe 3 13. NGN: Next Generation Network
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Considering the rapid economic development of the neighboring Balkan countries, and Turkey, as well as the OTE Group’s presence through its major subsidiaries in the area and the proliferating customer needs, OTEGlobe is planning to develop an alternative fully integrated backbone network, as well as seriously considering the challenges, needs and opportunities lying ahead in the coming NGN environment which will interconnect all these countries, through a transBalkan route, to Western Europe.
d a e h a s e g n e l l a The ch The year 2006 had been heralded as the year during which Kosovo’s status would be defined. Indeed, the United Nations-brokered talks between the Serbian and Kosovar delegations that began in February 2006 in Vienna and focused on Kosovo’s future status have been concluded. However, in view of recent developments, patience is called for and 2007 seems to be the crucial year for the region. All efforts were made to avoid delays in settling Kosovo and much ink has been spilt over the associated risks of delay for Kosovo, Serbia and the region as a whole. However, the constitutional process and the forthcoming parliamentary elections in Serbia on January 21, 2007 offered little in the way of an alternative, and UN Envoy Martti Ahtisaari agreed to delay presentation of his proposal until after the Serbian elections. To envisage what lies ahead for Kosovo and the wider region, it is relevant to consider where things stand at present and what the next challenges will be. The negotiations How were the negotiations concluded? With Ahtisaari declaring that the two sides were ‘as far apart as possible.’ Since February, the two delegations have met at different political levels yet failed to reach a negotiated settlement on Kosovo’s future status. Discussions initially focused on ‘technical is-
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By Ruby Gropas
sues’ in order to get the two delegations accustomed to talking to one another before tackling the more sensitive issues on the agenda. Negotiations concentrated on the protection of cultural and religious sites, financial aspects of servicing Serbia’s and Kosovo’s debts, government decentralization and municipal borders. Negotiations also focused on minority rights, the return of displaced persons (in particular ethnic Serbs, Roma, etc), the matter of approximately 3,000 missing persons and, probably the most sensitive of all, the future of the divided northern city of Mitrovica. But the negotiations did not lead to the negotiated settlement that the Contact Group had hoped for. This is hardly surprising, given the rather predefined scope for negotiation and the implicit assumption that if Serbs and Kosovars could not agree, then Ahtisaari would propose a package to the UN Security Council that would eventually lead to a conditional independence for Kosovo. A self-fulfilling prophecy, it seems.
Ahtisaari’s proposal Ahtisaari will present his proposal to Belgrade and Pristina simultaneously, probably in February 2007 after the Serb elections. This is what the Vienna talks have been culminating toward and what the Kosovo leadership has been waiting for. Yet at the same time, ‘this will probably be the most important “non-event” of this status process that essentially started in 1999,’ as one EU official described it. Few surprises can be expected as the bulk of the proposal seems to be more or less ready; however, the devil is in the detail and a lot of the technical and practical details that will be included in this proposal (mainly regarding municipalities, minority rights clauses, and Mitrovica) will determine how workable its implementation will be and how functional everyday life will be in Kosovo in the future. Prior to that, the Ahtisaari proposal will have to face the UN Security Council (UNSC). Discussions are currently concentrating on
when the right timing will be to discuss Kosovo in the UNSC and all seem to agree that the UK tenure in March 2007 will facilitate the discussions. So more time is being added, while the region is being expected to carry on with business as usual. In the meantime, three major challenges will have to be addressed. Russia’s position The first of these challenges involves Russia’s position. So far, this has not been aligned with that of the other five members of the Contact Group and the question remains open as to Russia’s ultimate objective: Does it wish to create another frozen conflict, thereby retaining some presence in the Balkans? Or is its interest functional? For example, does it wish to trade its consent for specific economic interests in the region? Or does it wish to trade its consent for another
issue in its own immediate neighborhood (in Georgia, for instance)? Russia’s approval, or at the very least its acquiescence, is required for the UNSC to adopt a new resolution, however narrow that may be. All efforts will be geared toward this. The adoption of a new resolution to replace the existing UN Resolution 1244 is essential for the status matter to move forward and it is basically the next big step. Resolution 1244 reaffirms the sovereignty and territorial integrity of the Federal Republic of Yugoslavia (and consequently present-day Serbia). Therefore, its revision is an absolute precondition before any country can proceed with recognizing Kosovo as an independent state. Essentially this ties the hands of the UNSC members, given that recognizing Kosovo with the current resolution in place would be tantamount to a flagrant violation of international law. Thus, the first challenge involves securing Russia’s acceptance to adopt a new resolution that would endorse Ahtisaari’s proposal and thereby leave the scope open for individual countries to recognize Kosovo.
The transition period The second challenge involves managing the transition period that will follow after Ahtisaari presents his proposal. Kosovo, for its part, is likely to have the double task of undertaking the institutional changes that will be outlined in the Ahtisaari report in order to secure the new UN resolution while at the same time managing the situation on the ground to ensure that no violence breaks out between ethnic Serbs and ethnic Albanians. This will have to be accomplished in a context of general frustration with status and recognition dragging their feet and patience wearing thin. Nonetheless, any incidence of violence could have significant far-reaching consequences on a number of fronts. First, it will influence the international community’s perception of whether and to what extent the political elites in Kosovo are able to manage a multiethnic reality in an independent entity. Second, it will play into the hands of those in favor of a partition scenario who will certainly mobilize both in northern Kosovo and in Serbia. Third, it might dangerously shake the apparent calm that has recently characterized the ethnic Albanian population in the neighboring Former Yugoslav Republic of Macedonia (FYROM).
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Successfully managing the transition period also entails keeping Serbia in the fold. Here, the role of the EU in actively and substantially supporting the democratic forces will be crucial. Active and substantial support involves more along the lines of the recent NATO decision to proceed with Serbia’s inclusion in the Partnership for Peace program. Belgrade’s integration in the transatlantic security structures is important not only for symbolic reasons. It is not just a matter of making the ‘loss of Kosovo’ easier to digest or offering the democratic forces buffers against the populist charms of more radical nationalists. It is also about integrating this region with the rest of Europe politically and economically, and for this Serbia is key both for the region’s overall security (given the influence it may have on developments in Bosnia-Herzegovina) and for the development of a common economic space that will contribute to encouraging foreign investment, regional trade, growth and employment across the region.
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The EU’s position The third challenge involves achieving a united EU position on relations with Serbia and on the matter of recognizing Kosovo’s independence after the UNSC resolution. This will be necessary for the success of the EU’s mission to Kosovo, particularly as any future status for Kosovo will only be accepted against its longer-term EU membership perspective. It will also be necessary for the region’s wider stability, for the EU’s credibility across the region, and for its capacity to address the current challenges it is confronted with. Dividing lines, divided cities, and enclaves of social and economic exclusion remain very much part of Europe’s reality today. These are the challenges that undermine human security in Europe and that the EU is being called to address. Political rhetoric condemns these realities that apparently have no place on a continent that has undertaken spectacular initiatives at transforming old enemies into partners and at reuniting parts of Europe that had antagonized one another ideologically, militarily, politically and economically.
‘Lessons learned’ At the same time, there has been much talk of the ‘time of Europe’ in recent years. Since the early 1990s, the EU has had to react to and manage numerous crises across the Balkans. It is in part irrelevant to discuss whether it met the expectations raised, because if there has been one buzz phrase that may have been repeated more than ‘standards before status’ across Europe these past years, it has certainly been ‘lessons learned.’ If there is one lesson learned over the past decade, that is the value and impact of common EU positions. The EU must present a common and clear position on Ahtisaari’s proposal and on the ensuing UN Security Council decision. A unanimous position is required if it is to be a credible security provider in the Balkans, to successfully fulfill its role in Kosovo, and to support Serbia’s transition.
Dr Ruby Gropas (PhD) is a political scientist and research fellow with the Hellenic Foundation for European and Foreign Policy (ELIAMEP), Athens, Greece. ELIAMEP website: www.eliamep.gr
Bulgaria and Romania are the newest members of the European Union. Their accession comprises a first step to gradually closing the geographical and political vacuum that the Union presented for decades in Southeast Europe. Well-known politicians, academics and senior European Union officials were asked to express their views, their expectations, as well as their fears for this new Europe beyond 2007. The cover story of The bridge attempts to examine this historical post-communist era in the Balkans not only at the economic and political level, but also at the level of social structures and challenges. Therefore, this issue highlights not only the impact of the accession on the Common Foreign and Security Policy of the Union, or the economic role of Greece and Greek enterprises, but it also examines topics such as migration, the social and political transformations of Bulgaria and Romania, as well as the problems that must be addressed in the years to come.
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Stability and new Meglena Shtilianova Kuneva, Bulgaria’s first European commissioner, is entrusted with the Union’s consumer protection portfolio. Kuneva, a multifarious personality, is not only a prominent politician in her country, since she has served as minister for European affairs and chief negotiator for Bulgaria’s accession to the Union, but she has also worked in journalism and as an academic, specializing in environmental law and human rights. In her interview with The bridge, Kuneva underlines that the accession of Bulgaria ‘will bring not only increased stability’ to the region of Southeastern Europe, ‘but also enhanced political values to the Union — values related to freedom, to human rights and also values relating to a strong market economy, so that Europe can become even more competitive than before.’ Kuneva characterizes Greece’s role as ‘constructive and absolutely helpful’ and Greeks as ‘real Europeans,’ since ‘they understand the profound importance of being a member of the Union.’ Furthermore, she points out that the Thessaloniki Summit in 2003, during the Greek Presidency of the Union, ‘sent a very clear and positive signal about the future of the whole region.’ Finally, Kuneva believes ‘that there will be no miracles after January 1, 2007, but… there will be more opportunities’ and ‘it will be Bulgaria’s responsibility to make the utmost of them.’
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Meglena Shtilianova Kuneva interviewed by Vassiliki Nicoloulia
Bulgaria and Romania will become full members of the European Union on January 1, 2007. From a political point of view, what will the impact of your country’s accession be, not only for the Union, but also for the broader area of Southeastern Europe? Enlargement is one of the most important political projects of the European Union. I believe that if this fifth enlargement proves to be a success story — and I have no doubt that it will — then the spillover effects on the whole region will be very significant. I am convinced that, as the cradle of European culture, this region will bring not only increased stability, but also enhanced political values to the Union — values related to freedom, to human rights and also values relating to a strong market economy, so that Europe can become even more competitive than before.
opportunities What are the expectations of your government and your people as regards Bulgaria’s accession?
What was the role of Greece as regards your country’s accession? Greece was always constructive and absolutely helpful. I remember with great pleasure and gratitude the Greek Presidency in 2003, during which not only Bulgaria but the whole region achieved a lot through the Thessaloniki agenda. This work sent a very clear and positive signal about the future of the whole region — and when the region is doing well, then the impact on Bulgaria is extremely positive. Greek support is not only, I believe, because Greece is Bulgaria’s only immediate neighbor which is part of the European Union so far. It is also, I think, more fundamentally because the Greeks are real Europeans and they understand the profound importance of being a member of the Union.
Regional cooperation Do you think that this cooperation will continue in the future for the benefit of the rest of the countries of SEE? Is there the necessary common ground to form a non-formal regional alliance within the Union? We have a proverb in Bulgaria, and I would be surprised if this is not the same in Greece, that neighbors are more important in your life than relatives. We are neighbors and will continue to be, and there are so many areas where we share the same needs and the same hopes. On a very practical level, our cooperation is essential because it is so simple to understand why, physically, a road should continue after the border. But this essential cooperation is also built on a shared cultural common ground as well as a common understanding of the political future of the Union. Cultural corridors are very important for all sides and I believe that if we do not support each other, we will not achieve a single success.
We know that there will be no miracles after January 1, 2007, but we believe there will be more opportunities. And, finally, life is about opportunities, not about promises; it is up to Bulgaria to make a success story in the Union. What is very important is to understand that discipline is crucial in the European Union, both for the EU to survive and for Bulgaria to be a success story in the Union. This discipline is a characteristic that we must develop in ourselves as the foundation for a very stable and successful future. More broadly, our expectations are for more stability and for a new opportunity to enjoy and fully benefit from the experiences of other European countries — this can really enrich our nation. Equally, we know that certain policies, like the cohesion policies, will be very important; but it will be Bulgaria’s responsibility to make the utmost of them. In the end, I believe that Bulgaria’s success will really depend on our ‘mental preparation’ and our attitude towards being part of the Union. European commissioners’ website: http://ec.europa.eu/commission_barroso/index_el.htm
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Expectations and Expectations and Leonard Orban interviewed by Vassiliki Nicoloulia
Bulgaria and Romania will become full members of the European Union on January 1, 2007. From a political point of view, what will the impact of your country’s accession be, not only for the Union, but also for the broader area of Southeastern Europe? Leonard Orban is Romania’s first European commissioner in charge of the multilingualism portfolio in a Union which on January 1, 2007 expanded to a total of 27 members. He is also the man who, as secretary of state, coordinated the accession of his country to the European Union. Orban believes that Romania ‘has a strategic economic, political and security position’ and therefore ‘can decisively contribute to the European policies.’ Furthermore, as a full member of the EU, Bucharest will be able to enhance and expand the traditional relations between the states of Southeast Europe by helping to develop common projects ‘related to energy and transport corridors, interconnection of power grids, environmental protection, or fighting organized crime.’ He also recognizes Greece as a very important partner during the accession negotiations and a strong supporter of Romania’s accession to the European Union, plus the significant Greek investments in the field of telecommunications in his country. Finally, Orban is ‘optimistic that the government, public authorities, citizens or companies will be able to make the most of Romania’s accession to the EU, to fully reap its benefits.’
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My firm belief is that Romania’s accession to the European Union is very important in terms of the security and prosperity of this region. I believe that EU accession will also work as an example and an impetus for our neighbors, especially Western Balkan countries, to accelerate their internal reforms in order to become EU members. Most of the recent economic progress in Romania stems from implementing the acquis communautaire and the reforms its implementation entails. This can be also an example for the countries with a clear membership perspective or countries included in the European Neighborhood Policy to go through the necessary, but sometimes painful, social and economic reforms. Romania has a strategic economic, political and security position. Thus, Romania can decisively contribute to the European policies concerning migration, the Com-
challenges challenges mon Foreign and Security Policy, the European Neighborhood Policy, the Environment or the Energy Policy. The experience already gained in relation to the Western Balkans or Moldova can give Romania the ability to develop its EU accession into a win-win situation both for Romania and for Southeastern Europe. Greek support What was Greece’s role as regards Romania’s EU accession? Greece was a very important partner during the accession negotiations and a strong supporter of Romania’s accession to the European Union. As you know, I was very much involved in accession negotiations, at the highest level. During the Greek Presidency, in the first semester of 2003, Romania managed to close three difficult negotiation chapters: free movement of goods, free movement of capital, and taxation. Romanian experts held several meetings with their Greek counterparts, in order to gain the most experience possible on how to get the best results in accession negotiations, how to deal with implementing the acquis in difficult fields, how to use EU funds effectively, etc. It is worth mentioning the important econom1. The Greek telecommunications company acquired a 35 percent stake in Romtelecom in 1998, which it raised to 54 percent in 2003, thus becoming the majority shareholder.
ic cooperation, including the privatization of Romtelecom with the Greek company OTE1. Therefore, one could say that Romania and Greece had very strong ties during Romania’s accession to the EU, and I am sure these ties will continue.
Do you think that this cooperation will continue in the future for the benefit of the rest of the countries of Southeast Europe? Is there the common ground to form a nonformal regional alliance within the Union? I consider the EU accession as a very good opportunity to strengthen and expand the traditional relations between our countries. We need to develop common projects, leading to the general growth of this region. I firmly believe this could be a good opportunity to develop several projects related to energy and transport corridors, interconnection of power grids, environmental protection, fighting organized crime, etc.
Euro-realism What are the expectations of your government and your people as regards EU accession? First of all, I would say Romanians no longer see the European Union as a Santa Claus figure. I think Romanians are more Euro-realists than used to be the case. Now, the Eurooptimism and trust in the European Union has decreased to 64-68 percent from 80 percent a few years ago, but the Euro-realism has increased. Also, one should stress that Romanians are more eager to find information concerning the effects of EU accession on their daily lives. As for the government, I think everybody is aware that the EU accession is a challenge. Firstly, Romania has to implement EU policies in a timely and complete manner. Secondly, there is the challenge to actively and promptly participate in the decision-making process at community level. The third challenge is ensuring a high absorption rate of EU funds. Fourthly, there is communicating with Romanian citizens, companies, and all the stakeholders with regard to the changes entailed by implementing the acquis. But I am optimistic that the government, public authorities, citizens and companies will be able to make the most of Romania’s accession to the EU, to fully reap its benefits. European commissioners’ website: http://ec.europa.eu/commission_barroso/index_el.htm
interview
The unbearable lightness of Europeanization European Union accession day for Romania and Bulgaria on January 1 was anticipated with mixed feelings in Nicolae Ceausescu’s spoiled home town of Scornicesti, Oltenia. Its artificial communist industry was dismantled years ago and its vast fields lie neglected by most of the inhabitants, who are no longer ‘peasants’ but have yet to become really ‘urban.’ The only thing that keeps the town going is the women putting in hard graft for small textile manufacturers, sharing what was once Ceausescu’s pride, the roofed stadium, modeled after the Roman arena in Verona. Rumor has it that the EU will close down their irregular sweatshops, leaving everybody jobless. At the opposite extreme, Europe holds no secrets for the people in the Moldovan villages of Neamt county. All members of the younger generation already work there, and when they return they spend all their money building three-story houses with the floors covered in imported tiles. New neighborhoods are springing up named after the European cities where the homeowners work, such as Rome, Munich and Madrid. However, as they do not pay any income tax at home, the village cannot afford sanitation yet and the wooden toilets in the garden continue to serve their purpose. There is, to paraphrase Czech novelist Milan Kundera, an unbearable lightness to the EU accession of former communist
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By Alina Mungiu-Pippidi
European states: Only after they get there does it become obvious how much more is still needed for the inhabitants to experience a quality of life similar to that of the ‘old’ Europeans. People here yearned for a ‘return to Europe’ throughout communist rule and since its fall they have undertaken brave reforms to be accepted into the European Union. The expectation was that Europe would miraculously cure all their ills inflicted by historical underdevelopment and communism’s perverse social engineering. When this was slow to happen, people would start raising barricades on Budapest’s main bridge to the west to attract attention to their subjective misery.
Politics & intellectuals Romania and Bulgaria, having now crossed the threshold of the European Union, are the last to be experiencing this ambiguity. They feel astonishingly gloomy about how well they actually fare. Only 16 years ago, their people were bankrupt and hungry, with empty shelves in the stores, no passports and a redoubtable Communist secret service spying on their private lives. These days nobody starves anymore, the two countries are managing unemployment reasonably well, attracting more and more foreign investment every day, and what remains of the secret service files is being opened to the public. However, the citizens express their distrust in their parliaments in polls; they see their politicians as worse predators than criminals and believe that elections can only change governments, and not bring any substantial improvement to their lives. The management of the economy by national governments has gradually improved, but politics throughout the region remains con-
fusing and fragmented. Former Communists are strong and shameless. New democrats are often corrupt and incompetent. Transition has hurt the intellectuals’ self-esteem, so they are rediscovering their Christian roots and campaigning to display religious icons in public schools. Millions commute to Western Europe for short-term jobs that no sensible European would accept: picking strawberries in Spain, waiting on tables in Belgium or pouring concrete for Italy’s contractors. Doctors, who are still paid less than bodyguards in their home countries, work as nurses, while teachers babysit. Back home, pensions are greatly devalued and young people no longer have children. EU accession offers no immediate cure for such transition ills.
Populism & society It may turn out that the region has reached the limits of what could have been done fast in terms of transforming a society. Why else, despite Hungarians living twice as well as Romanians, does the same does gloom hang over both countries? Why have the differences between the leaders and the laggards in the EU competition, which during transition seemed so important, ended up being outweighed by the similarities across East Central Europe? Why, after the European target is reached, do we see such discontent and unrest in nearly all Central European capitals feeding populism? One answer is that EU integration deprived the politics of these countries of any real substance for many years, as all governments, regardless of ideology, focused
only on this very popular objective. Once the intensely sought-after accession takes place, the anesthetic effect of the effort disappears, and the ache resurfaces. On the ‘day after EU accession,’ the veil that for so many years covered the uneven change of these societies, reflected in their improvised politics, just drops. These are countries of many political facts but very few developments indeed. Europe has worked remarkably well as an incentive for the transformation of these countries. Without the European prospect, Romania would be today like Belarus. Romania’s European perspective is accountable for the fact that Romanians ceased voting for Ion Iliescu after a third term, while the citizens of Belarus kept on voting for Alexander Lukashenko. The incentive of European integration lured even the successors of the Communist party in Central Europe and empowered the initially weak pro-European constituencies in Romania and Bulgaria. Transition may have seemed long and strenuous for Romanians, but from Ceausescu’s
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snipers and Iliescu’s vigilante miners to the signing of the Accession Treaty with the EU only 15 years have passed. However, the remarkable speed of EU integration has resulted in considerable tension between the formal EU-style institutions adopted and the informal practices of these countries’ politics and societies that are unable to evolve at such a pace. The ‘legal country’ If one compares the governance scores assigned by Freedom House’s ‘Nations in Transit’ report to these countries at the beginning compared to the end of the EU negotiations, the results show stagnation rather than progress. Most of the advancement happened before they were invited to
join. Even in areas of considerable EU investment, such as governance and reform of the judiciary, the ‘real country’ has lagged seriously behind the ‘legal country’ in recent years. East Central European constituencies tend to attribute this distance between written rules and current practices to the hypocrisy of their politicians alone, rather than acknowledging the difficulty of doing so much in such a short period of time. The task was simply enormous: Not only did markets and democracy have to be built during transition, but society as well. Away from the social uniformity and the distortions that communism inflicted on these societies, whole new social categories had to be created, from politicians and entrepreneurs to journalists and real estate agents. No ‘end of history’ This is post-communism, which often feels worse than communism itself. Times with competing value systems and daily institutional upheaval can hardly provide an environment for great life satisfaction, despite the enjoyment of freedom on a scale undreamed of during communism. Here lies the source of the unbearable lightness of
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Europeanization, in the many new institutional shapes still waiting for their proper contents to catch up. A superficial observer might get it wrong and call it a failure. It is not: It just needs more time and patient effort. Although this is not what these battered countries want to hear, EU accession is no ‘end of history.’ Alina Mungiu-Pippidi is director of the Romanian Academic Society, a think tank in Bucharest, and a consultant for Freedom House and the United Nations Development Program in the Balkans. She is also a professor of political science at the Romanian National School of Government and the editor of the Romanian Journal of Political Science. She has been a Harvard University Shorenstein fellow, a Fulbright fellow, and a Jean Monnet fellow at the European University Institute. She has published extensively in Romanian, English and French. She is the author of Deux Villages (L’Harmattan, Paris, 2004) and editor of Nationalism After Communism: Lessons Learned (CEU Press, Budapest, 2004). In 2004 she organized and led Romania’s Coalition for a Clean Parliament, which led to the elimination of nearly 100 candidate MPs on grounds of political integrity. In 2005 she was nominated by European Voice for the Europeans of the year. Romanian Academic Society website: www.sar.org.ro
The story of accession: The myth and its [true dimensions] The European Union opened the door to Bulgaria and Romania on January 1 this year. The most recent events paving the way for this accession date were: The European Commission’s Monitoring Reports from September 26; The endorsement of the Commission’s reports by the General Affairs Council on October 17; The finalization of the German ratification procedure on November 24 by the Bundestag (Germany being the last country to ratify the Accession Treaty), and The debate and the vote on the reports on Bulgaria and Romania in the European Parliament on November 30. These events and media reports on them concentrated on the safeguard clauses of the Accession Treaty (and respectively on the appropriateness of safeguard measures), on ‘a mechanism for cooperation and verification of progress’ (a tool for monitoring in Bulgaria and Romania beyond accession) and, last but not least, on ‘benchmarks’ to be used in this process. The technical exercise The framing of the last stage of Bulgaria’s and Romania’s preparations for accession continued along the lines of presenting enlargement as a complex technical exercise in which the European Commission deter-
By Antoinette Primatarova
mines and controls the agenda of the candidate countries. In the course of this technical exercise it was the carrot-and-stick game that helped to get things right. There is no doubt that the conditionality approach delivered great results in a short period of time. But in the wake of the ‘big bang’ and the new enlargement, the shortcomings of the technical conditionality approach are becoming more and more evident. Technically speaking, from the perspective of the EU-15, enlargement should be regarded as a success story. Politically, however, it has turned out to be a problem. Many citizens of the ‘old’ member states do not consider enlargement as part of the solution to the problems posed by the end of the Cold War and by globalization. Many of them instead consider enlargement a problem. Enlargement is broadly regarded as the reason behind the end of the ‘permissive consensus’ that allowed integration to develop as it did. How to make political sense of the whole process is a question that remains unanswered.
The similarities… As regards the newcomers of 2004 and 2007, the situation is both similar and different. Similar because, again, technically speaking, accession is a success story. The transition of the former communist countries to democracies with market economies and rule of law was facilitated and accelerated by the conditionality approach. Broad consensus on the ‘return to Europe’ and accession to the EU helped to hide the lack of consensus on the details of transition, to essentially depoliticize the process of preparation for accession. But politically, accession marks the end of consensus, too. This phenomenon is illustrated by the political crises of all the post-communist newcomers. Upon return to Europe the big challenge for politicians and citizens becomes how to participate in the decision shaping and decision making with regard to the future. The return-to-Europe storyline does not help to make political sense of the process of participation in the EU any longer. Thus, both the old EU and the newcomers face a similar problem: to elaborate the big political storyline that would allow citizens to make coherent sense of what is happening in the enlarged EU. So far with the similarities.
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…and the differences As regards the differences, they are an indirect consequence of the conditionality approach applied throughout the preparation process. Here I would prefer to stick to my own country, although the problem is common to most of the newcomers. Bulgaria and the EU seem to be disconnected in people’s consciousness. It is still about ‘us’ and ‘them,’ and not about Bulgaria as part of the EU. One might argue that this is a problem common to all the old member states: the democratic deficit. I have in mind a rather different phenomenon. Indeed, in Bulgaria there are citizens who consider the us-and-them divide as a challenge to the country’s sovereignty. But there are also many who regard the EU as a helpful higher authority predestined to control Bulgarian politicians. The carrot-and-stick approach is regarded by many as something targeting politicians alone, thus continued monitoring and benchmarks are not considered a cause for concern. On the contrary, such measures are seen as welcome, as an external guarantee for the continuation of reforms.
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Media & citizens As a result of the routine of concentrating on what ‘they’ want ‘us’ to do, Bulgarian media and citizens still demonstrate a lack of interest in news about the EU that does not explicitly mention the country. In the weeks leading up to January 1, we were exposed to extensive coverage of all the events paving the way toward accession and only random coverage of other EU issues. Foreign journalists are generally perplexed that Turkey’s accession to the EU remains a non-issue in Bulgaria. In stark contrast to this, Bulgarian media and politicians overreacted to a proposal by a Dutch MEP for an amendment to the November 30 report on Bulgaria that would imply the existence of a Macedonian national minority in Bulgaria. A further striking example of misbalances: the extensive coverage of the temporary UK restrictions for Bulgarian workers and the random coverage of the vote in the European Parliament on the Services Directive. Keen not to be subjected to double standards, most Bulgarians saw the UK restrictions as a challenge, but failed to see the opportunities that the Services Directive im-
plies for them. Might this sound like good news for old member states with their fears of too much liberalization? ‘What do we want to do together?’ I am confident that Bulgaria will get it right as regards the predetermined technical agenda. My real concern is how and when Bulgaria can get the European story right that would allow both politicians and citizens to switch from ‘What does the EU want us to do?’ to ‘What do we want to do together?’ The EU hopes to get the European story right in time for the European Parliament elections in 2009. Bulgaria is under pressure to get the new European story right ahead of this, since it is already facing the first elections for its MEPs in 2007.
Antoinette Primatarova is program director at the Center for Liberal Strategies, Sofia, and a former ambassador. Center for Liberal Strategies website: http://www.cls-sofia.org
Common Foreign and Security Policy:
An ever-diluting Union? When it was decided, at the end of the Belgian Presidency of the European Union back in December 2001, that a Constitutional Convention would be established to deal with the long-term challenges of European integration, many Europhiles were elated. Late 2001 was indeed an historic moment for the Union on the verge of its largest-ever expansion. The assumption of the Convention’s presidency by a senior French statesman, former President Valery Giscard D’Estaing, symbolized the seriousness attributed to the entire process where, via an open, participatory and strenuous debate, a draft Constitutional Convention would be completed by mid-2003. All 15 member states and their parliaments, including representatives from all 13 candidate member states, participated in this historic assembly that underlined the immediate need for a comprehensive and increasingly Common Foreign and Security Policy (CFSP) capable of transforming the EU’s unquestionable economic influence into political/diplomatic might. In order to provide the Union with a chance for better policy formulation and cohesiveness, the draft Constitution called for the absorption of the External Affairs Commissioner into Javier Solana’s office of High Representative for CFSP. An EU foreign minister’s (EUFM) office was to be established, which would have ended the dichotomy between the Council
By Theodore George Tsakiris
and the Commission on who would represent Europe on an international diplomatic level, since the EUFM would simultaneously serve as vice president of the European Commission. A Common EU Foreign Affairs staff was also envisaged to support his work, pooling senior diplomats and policy makers from both the European Commission and the member states’ own diplomatic service. The Iraq war From an institutional point of view, these were certainly steps in the right direction, which can still be salvaged from the current deadlock facing the Constitutional Treaty, following German plans to resuscitate the process after the French and Dutch vetoes in May and June of 2004. Nevertheless, from a real-world point of view, the ‘August’ declarations of the Constitutional Convention regarding the establishment of a truly Common EU Foreign Policy have quickly proven to be worth less than the paper on which they were written. Even before their formal accession into the Union, the overwhelming majority of the Eastern Europe newcomers instinctively sided with the UK and Jose Maria Aznar’s Spain in support of the impending US military expedition in Iraq.
Whatever the particular merits of that decision, most of these states, particularly Poland and the Baltic nations, exhibited a knee-jerk reaction vis-a-vis a US call to dissolve any effort for the formulation of a common EU response. This disunity is neither unprecedented nor necessarily reprehensible. As Czech President Vaclav Klaus shot back at Jacques Chirac’s caustic remark that ‘these states [i.e. East Europeans] lost a wonderful opportunity to remain quiet’: ‘We [East Europeans] did not join the EU to shut up!’ Politics & the institutional framework At the end of the day French voters, despite the near unanimous opposition of their political elite, were at least as vociferously opposed to the EU constitutional project as Klaus was acerbic in his response to Chirac’s comments. Despite the wellknown geopolitical reasons behind the new members’ instinctive pro-Americanism on defense/ diplomatic matters, the
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states of ‘old’ Europe, and particularly France, share at least an equal share of responsibility for the Union’s increasing dilution when it comes to CFSP’s progress. Very few of the ‘old’ 15 spend anything over 2-3 percent of their gross domestic product on defense and even fewer exhibited the necessary patience when they made the decision to spearhead the Union’s ‘big-bang’ expansion in late 2002. This expansion has not and could not have been properly digested by an international body that aspires to acquire an increasingly political/diplomatic stature, while at the same time operating as if the EU’s membership is still at 10, 12 or 15 states. The Treaty of Nice (June 2000) has proven a rather dysfunctional way of doing business in the EU and has done very little in terms of promoting a real CFSP agenda. Instead of figuring out a way of correcting the Treaty of Nice, the European Council decided to double the Union’s membership in the hope that those problems would be resolved in time by the Constitutional Treaty before the actual accession deadline of May 2004. When the Italian Presidency failed to reach a compromise consensus during the Rome Council of December 2003, everyone continued as if nothing had happened. As a consequence, the EU grew larger and larger without being able to redefine its own internal balances. Therefore it should have surprised no one that the post-May 2004 Brussels catchphrase is ‘expansion fatigue.’ More to the point, as the French and Dutch vetoes indicated, many Europeans are getting
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tired of the way the Union is being run, and with its evolvement as an ever-expanding market and an ever-diluting political union. No one wants a European superstate or supra-state. Nearly all of the EU-15 agreed that the Union will be run on an intergovernmental level. True power will continue to lie in the Council, where all states will be represented on an equal veto-holding basis, but this should not impede the formulating of winning majorities and blocking minorities as the Constitutional Treaty elaborated. Regarding any case on issues that each state considers vital to its national security, every member’s veto powers remain virtually undiminished. This co-federative ‘principle,’ which safeguards the national prerogative over defense and diplomacy, does not necessarily impede the forward integration dynamic of enhanced cooperation among those member states willing and able to constitute the nucleus of a truly distinctive CFSP. There are distinctive European interests both within and outside the continent where Washington and Brussels do not see eye to eye.
EU & USA The debacle of America’s unilateral invasion of Iraq, the deteriorating status of US-Russian relations, American indifference to climate change, and Washington’s unevenhandedness vis-a-vis the Palestinians highlight an ever-increasing tendency of EU-US geostrategic divergence. In addition to that, the question of Turkish integration into the EU is becoming an ever-growing bone of contention between most of the EU member states and the US, further dividing a house which is already too divided to make its own stand. The fact that the ‘European Consensus’ can take a stand and can actually have an impact has been clearly exhibited in EUdriven talks with both Syria and Iran that the current US administration seems to be reluctantly endorsing. The return of Democratic control to the US Congress is more likely to accelerate this process, already undertaken on a bipartisan level by the Iraq Study Group under the chairmanship of former Secretary of State James Baker.
A common Balkan bloc Apart from the Middle East, the other critical issue of a potential intra-EU confrontation between Continentals and Atlanticists is illustrated by the increasingly important role of Russian energy exports to Europe. The politicization of these exports has been primarily a post-Cold War concern, vividly underlined by the January Russian-Ukrainian spat that significantly limited the flow of gas to Gazprom’s clients in Eastern Europe. On this particular issue, the stances of Romania and Bulgaria may prove disproportionately important. As the Polish/Baltic bloc inside the Union is pushing for a much more antiRussian stand, to the annoyance of the Big Three Continentals, namely Germany, France and Italy, a common Balkan bloc could play a significant role in shaping EU policy, even though on a wider CFSP level the Atlanticist camp would be most certainly enhanced, given the prospective establishment of three US ‘lily pad’ bases in Romania and Bulgaria. Romania is also likely to push for a more active CFSP role in Moldova that will most certainly face Russia’s opposition given Moscow’s economic and political-military ‘underwriting’ of Transdniester’s de facto independence, but Bucharest has no real interest in heading the Union’s ‘antiRussian league.’
Energy security & Russia On the energy security level, the liberalization of gas and electricity markets in SE Europe, where both Sofia and Bucharest are called upon to play a leading role, would facilitate policy coordination among the Union’s southeast members. By merit of geography, Greece, Bulgaria and Romania could also enhance the Union’s diversification of gas imports via the completion of the Turkish-Greek-Italian connection and the Nabucco pipeline project. All in all, Romania and Bulgaria are given — to paraphrase Chirac — a wonderful opportunity to abstain from following Poland’s polarizing example. Despite the fact that both countries will continue to see NATO as the ultimate guarantor of their security in case of a Russian resurgence — as would nearly all EU members — they are not likely to subscribe to a Polish point of view over how to regulate CFSP in general and EU-Russian relations in particular. They may also be
less enthusiastic about the further expansion of NATO and the EU. In the former case it would mean less money for their economies and the diminishment of their newfound diplomatic advantage vis-a-vis old geopolitical rivals in the region, the characteristic examples being Romania vs Ukraine and Bulgaria vs Turkey. In the latter case, a third round of enlargement would most likely diminish the security and stability on their eastern borders, in case a Ukrainian membership was to provoke the country’s implosion. This is exactly what nearly happened back in late 2004 with the emergence of the ‘Orange Revolution’ and its recent retrenchment.
Theodore George Tsakiris is an international and energy security specialist, as well as a research fellow at the Hellenic Center for European Studies (EKEM). Hellenic Center for European Studies website: www.ekem.gr
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Bulgaria, By Dr Dimitar Bechev
Bulgaria joined the European Union on January 1, 2007, together with its northern neighbor Romania. Both countries’ roads to membership were far from easy. A plethora of political, socioeconomic and institutional problems prevented them from acceding to the Union in the first wave of eastern enlargement on May 1, 2004. Bulgaria’s progress, in particular, was hampered by the sluggish economic transformation in the 1990s as well as the weakness of state agencies in charge of implementing the EU entry criteria. Reforms in critical areas such as the judicial system and the fight against corruption often produced limited results due to internal opposition, lack of political will or institutional inertia. What is more, these domestic constraints cast doubts on the extent to which the EU actually managed to narrow the gap between the state institutions and elites, on the one side, and, on the other, the citizenry, as seen in extremely low voter turnouts in elections or the rise of populist politicians and parties. For their part, certain actors within the EU viewed the country’s preparedness for membership with skepticism, pointing at the shortcomings in the fight against organized crime and corruption. This is the reason for the monitoring in critical areas such as judicial reform, backed by the threat of excluding Sofia from the relevant EU cooperation mechanisms, a sanction foreseen by the accession treaty signed in April 2005.
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At the same time, it is hard to deny that Bulgaria has come a long way since the early 1990s. The EU accession perspective catalyzed reforms, bringing about sustained economic growth and increasing the state’s capacity to govern. While it would be inaccurate to give exclusive credit to Europe for steering the Bulgarian transition from communism, its influence was decisive in areas such as the liberalization of the economy, the modernization of state institutions and society, and, to a lesser extent, the consolidation of democracy. Thus, the profound yet uneven impact of accession on Bulgaria’s domestic arrangements leaves many open questions.
The economic gap For the average Bulgarian, typically ill-informed about the Union’s institutions and policies, EU membership is a key condition for improvement of living standards and social welfare. Bulgaria and Romania are the bloc’s poorest members and therefore look forward to the substantial transfers from the Union budget. According to the financial outlook for 2007-2013, Bulgaria is scheduled to receive close to 4.7 million euros in regional aid in the first three years after accession. The question is how this spending will help improve the economy’s competitiveness and promote convergence with the core EU in terms of productivity and structure. This is clearly bound to be a lengthy and uneven process. With the growth rates of the 2000s, it will take Bulgaria more than half a century to bridge the gap with the EU15. Experts agree that much depends on a mix of policies and reforms, including an overhaul of the education and social systems. These areas remained neglected during the accession process as they fall outside
beyond 2007 the ambit of EU competences and, therefore, membership conditionality. The EU cohesion and structural funds are also expected to be the engine for the continued modernization of the Bulgarian state but the challenge of ensuring transparent and efficient public spending remains. Public debate in Bulgaria has raised concerns about the opportunities for rent seeking by corrupt politicians and clientelistic networks provided by the mass influx of resources (as already seen in Greece and other Mediterranean member states). In addition, the low administrative capacity of the respective agencies poses the risk that huge chunks of the EU allocations — particularly in the initial years — will not reach Bulgaria. The government has recently revealed that its absorption projections for 2007 are at 20 percent of the whole earmarked amount.
The EMU Another set of questions concerns Bulgaria’s bid for full integration in EU policies and institutions, notably the Economic and Monetary Union and the Schengen zone. The accession to the eurozone is helped by the currency board arrangement. Top Bulgarian officials have indicated that they see 2009 as a possible entry date. Accession to the eurozone will be important for maintaining macroeconomic discipline and resisting the temptation of increased state spending, as seen in some new member states in Central Europe. Joining Schengen, the other EU inner sanctum, looks unrealistic in the short term, given the EU attitude to Bulgaria’s problems in the field of justice and home affairs. Yet the country’s accession to Schengen will give the European Commission leverage to continue pushing for domestic reforms.
A new chapter Bulgarian political elites now face the challenge of working out the country’s interests and partners in the internal politics of the EU, notably on critical issues such as the reform of the institutions, the liberalization of the economy, the overhaul of the Common Agricultural Policy, and the budget. All EU key debates were largely absent from Bulgaria’s public sphere during the pre-accession period, with the possible exception of the future shape of enlargement. Bulgarian politicians have talked extensively about their country’s ambitions to act as a bridge toward the Western Balkans and the Black Sea region. These pronouncements again should be taken with a grain of salt as the anti-enlargement mood within the EU narrows the options for engagement. Bulgaria’s main external priority has been to limit the damage from the undesirable side effects of accession — the negotiation of visa arrangements vis-a-vis neighboring Serbia and the Former Yugoslav Republic of Macedonia. Far from being the end of the road, EU membership opens a new chapter in Bulgaria’s painful transformation and modernization. Dr Dimitar Bechev is research fellow at the European Studies Centre, University of Oxford (SEESOX). SEESOX website: www.sant.ox.ac.uk/esc/seesox
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Romani present Having been obsessed by the subject for a decade, hardly believing it itself and puzzled with mixed feelings about what is to come, Romania finally entered the European Union on January 1, 2007. But what will accession bring with it? The bad news is that Romanians are good people who have a serious collective action problem. Politics is still messy, confused and highly personalized. Ideologies are blurred and relatively unimportant. In the space of a year, the Democratic Party, which currently makes up one part of the coalition government, has left the European Socialists to join the European People’s Party. The Liberals, also in government, are rather conservative, while the Social Democrats, in opposition, are still working out their paradigms. A combination of reform pragmatism, occasional populism, longing for modernity and some true ideological soul-searching helps explain the state of affairs.
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: Past, nd future By Sorin Moisa
Romanian politics Romania is currently run by a center-right coalition, Truth and Justice, made up of Liberals headed by PM Calin Popescu Tariceanu and Democrats mentored by President Traian Basescu. The name of the alliance goes a long way toward explaining how it was forged: to fight a Social Democratic government led by Adrian Nastase, which, while generally effective in its economic and EU accession policies, was perceived as arrogant, corrupt and mischievous. Basescu managed to articulate the campaign as a fight between good and evil and tilted the political balance in favor of the alliance as he defeated Nastase in the presidential run-off of December 2004. After two years in office, the alliance, which includes both the president and the prime minister, is conflict-ridden, with little
chance of its government surviving intact for long. Meanwhile the Social Democrats are still recovering. Romanian politics has painfully little to do with policies and administration. While education and health have been the nominal priorities of most recent governments and are key factors for the country’s competitiveness, Romania lacks a bipartisan consensus on the key principles for their development. Successive ministers from the same party have displayed conflicting ideas about fundamentals. The trend is generally reformist, but patchy work, politicization, lack of vision and a deficit of consistency characterize policy. An exception is economic policy, which, also prompted by International Monetary Fund and EU benchmarks, has generally been responsible. A solid and professional national bank has acted as a powerhouse of expertise and a further brake on unwise policy. EU accession has been good for the country as it has been the main driving force behind the political process, giving society
Factors of change The good news is that there are factors of change independent of the collective action problem sketched out above.
direction and meaning and the capacity to accept painful reforms. However, it has also served as a surrogate for a domestic political project. It gave the political class the goahead while sparing it the effort to learn and offer ‘national’ policies, priorities and debate. What should have been a means became an end in itself. Romanians vaguely thought the EU would relieve them of the pains of reality or the shortcomings of their own politicians. That will soon prove untrue, and the Romanian political class will have to offer its nation a societal project within Europe and genuine policies to mobilize it or risk losing its already wavering confidence.
—The economy. Romania’s gross domestic product has been growing at an average rate of 5 percent since 2000 and is set to keep growing at over 6 percent per annum. Business confidence is high, foreign direct investment was 4.9 billion in January to September 2006, and inflation should be 4.8 percent in 2006, 4 percent in 2007 and 3.8 percent in 2008. With significant privatization and restructuring during the past six years, a 16 percent flat tax introduced in 2005, access to EU markets and heavy foreign investment, the economy has taken off. Unemployment is at around 5 percent. Public debt is the lowest in the region, under 20 percent, leaving much scope for borrowing. The only worrying macroeconomic figure is the current account deficit, which could reach 10 percent of GDP this year. Foreign direct investment and 2.5 billion euros in annual remittances from Romanians
working abroad can easily finance the gap, but as privatization comes to an end, tighter fiscal and monetary policies may be needed to reduce consumption. Economic growth is good news for political transformation. The Romanian economy has largely declared its independence from the political process and is busy producing not only value, but also a new middle class. As this emerging category seeks political expression, it will press the political establishment and the administration to modernize further.
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Another major source for grassroots change is the estimated 2 million Romanians working abroad, especially in Italy and Spain. Together with remittances, they export new work ethics and new expectations from the political establishment back home. Interestingly, Romanians in Spain and Italy had been organizing themselves politically to take advantage of their European citizenship from January 1 onward, when they became eligible to vote in local and European elections in their countries of residence. They have become a force to be reckoned with. They vote and they influence families voting at home. —Corruption. One consequence of these developments — which have added to other local conditions like political arrogance, poverty and polarization — led to huge demand from society to tackle corruption. President Basescu and the governing Truth and Justice alliance came to power in December 2004 on a tough anti-corruption agenda. Fighting corruption was also the EU’s No. 1 political priority in Romania. Responding to all those pressures, a good and stubborn justice minister introduced serious reforms which allowed investigations against people theretofore as intangible as Zeus himself, such as former Prime Minister Nas-
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tase. While the Romanian judicial system is still far from perfect, its actions have already begun to dissolve the sense of impunity among Romania’s political class. There are signs that politicians and parties are slowly moving from the logic of resource seeking and impunity to one of office and policy seeking. —The future. Underneath the collective action problem quivers Romanians’ desire to matter, to grow economically and politically, and to acquire status at a regional and European level. The popular President Basescu is the advocate of a strong Romania internationally, with an effective administration domestically and, if he inter alia opened up his party to become a larger modernizing force, he might have some success. The opposition Social Democrats surprised everyone when they re-elected the recently replaced Foreign Minister Mircea Geoana as their leader. Geoana was reconfirmed as leader of the Social Democratic
Party on December 10, 2006. He is a modern Social Democrat — clean, sophisticated and policy-oriented. If he manages to further modernize his party and relaunch it, he will be good news for the country. As an EU member state, Romania is generally able to apply the EU acquis, though with foreseeable weaknesses, especially in agriculture. If it fails, it may lose 25 percent of EU agricultural subsidies. It will not punch at its nominal weight in the EU (where it will be the seventh voting power) and may not make optimal use of EU money before it gets its act together. However, economically it is a space of low risk, relative predictability and high profits to reap. Politically, it is a space one should watch. Sorin Moisa is a doctoral candidate in international relations, St Antony’s College, University of Oxford, and a former political adviser with the European Commission Delegation in Romania. St Antony’s College, University of Oxford website: http://www.sant.ox.ac.uk/
Bulgaria & Romania: The economic profile BULGARIA
2004
2005
GDP at constant prices Gross fixed capital formation in equipment Total employment Number of unemployed Inflation Current account balance General government net lending (+) or borrowing General government gross debt
5.7 -
5.5 -
6.0 -
6.0 -
6.2 -
2.2 12.0 4.2 -5.8 2.7
1.5 10.1 4.6 -11.3 2.4
1.2 8.9 6.5 -13.9 3.3
1.0 7.7 3.0 -13.5 1.8
0.8 7.0 3.5 -12.4 1.7
38.4
29.8
25.8
21.8
17.9
ROMANIA GDP at constant prices Gross fixed capital formation in equipment Total employment Number of unemployed Inflation Current account balance General government net lending (+) or borrowing General government gross debt
Estimates 2006 Forecasts 2007
Scenario Unchanged Policies 2008
Estimates 2006 Forecasts 2007
Scenario Unchanged Policies 2008
2004
2005
8.4 -
4.1 -
7.2 -
5.8 -
5.6 -
0.4 7.6 12.2 -12.7 -1.5
0.2 7.7 6.7 -8.7 -1.5
0.2 7.6 5.5 -10.3 -1.4
0.2 7.5 5.0 -11.8 -2.6
0.1 7.6 4.5 -13.3 -2.6
18.8
15.9
13.7
13.9
14.4
Source: European Commission, ‘Autumn Economic Forecasts 2006-2008,’ November 2006
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The economic role of Greece during the accession period By George Kasimatis
How has Greece contributed to the transformation of the economies of Bulgaria and Romania through direct and indirect investments and what are the new developments in these post-command economies, especially regarding banking and telecommunications? The collapse of the previous political regime constituted the starting point for the expansion of Greek entrepreneurship in Bulgaria and Romania. However, it must be noted that in the early years after the regime change, business activity was somewhat opportunistic and major companies were hesitant about the prospects of expanding in the local markets. A review of the investments and the transformation of these post-command
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economies shows the inexorable role of the European Union accession process in the development of Bulgaria and Romania. The progress from command to market economies is so evident today that for someone who visited Bulgaria and Romania just a couple of years ago the markets of these countries at present are incomparable with the situation at that time. The impact of the negotiations The European Commission presented the first regular report on Bulgaria’s and Romania’s progress toward accession in November 1998. The negotiation process forced them to make progress in fulfilling the Copenhagen criteria. The two countries were obliged, on the one hand, to carry out reforms and to align their legislation with the 31 acquis communautaire prerequisites,
and, on the other, to implement the Copenhagen criteria. As a result, the countries made real progress in their relevant human rights records and their market economies became more functional. Greek expansion The role of Greece in this process should not be neglected. In its capacity as the only European Union member state in the region, Greece assisted and continues to intensively support the economic and social developments of Bulgaria and Romania and their integration into the European and world economies. Analysis of the different major economic sectors proves that Greece has played an important role as a major investor. The banking and telecommunications sec-
Export/import statistics between Romania and Greece mln $/euros* 1989
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006 (Aug)
total 179.6
363.4
363.1
366.8
406.0
415.2
696.0
642.8
652.58 692.36
750.3 666.5
1068.5 862.15
849.0
626.07
export 143.2
205.0
177.4
174.9
201.4
216.7
324.1
315.7
388.05 411.73
425.9 379.5
627.6 507.35
474.7
327.35
import 36.4
158.3
185.7
191.9
204.7
198.5
371.8
327.0
264.53 280.63
324.4 286.7
440.9 354.8
374.3
298.72
balance 106.8
46.7
-8.3
-17.0
-3.3
18.2
-47.7
-11.3
123.52 131.10
101.2 92.5
186.7 152.55
100.4
28.63
*Until 2001 only in $. Between 2002-2004 in $ (1st figure) and euros (2nd). After 2004 only in euros.
tors, for example, liberalized and aligned with good operating legislation, have attracted many investments from Greece. The Greek expansion was supported also with the financial assistance granted by Greece in 2002 to Bulgaria and Romania. In the framework of its obligations as an EU member state and member of the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD), Greece has committed itself to annually allocate 0.20 percent of
its gross domestic product for supporting international development. The aim of this was, in the case of Bulgaria and Romania, together with the assistance of international organizations, financial institutions and other bilateral donors, to enhance the restructuring of the two economies and their convergence with the EU level. Within this framework, Greece supported more than 19 projects in Romania amounting to 11.7 million euros, and 14 projects in Bulgaria worth 11.9 million euros. The funding was allocat-
ed for different projects concerning medical, cultural and tourism infrastructure. At present, Greek capital invested in the Balkans exceeds 12 billion euros. The major Greek groups began to make significant investments in Bulgaria and Romania as of 2000. The large-scale investments were the result of the political stability in the two countries, along with mass decentralization and the general influx of foreign capital. In both countries, Greek investments are concentrated in the sectors of telecommunications, banking, insurance, the food industry, construction and commerce.
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Export/import statistics between Bulgaria and Greece Exports (mln euros) Year 1995 Greece 249.3
1996 261.4
1997 361.8
1998 330.2
1999 322.2
2000 409.6
2001 501.2
2002 557.9
2003 691.4
2004 794.0
2005 891.2
Imports (mln euros) Year 1995 Greece 146.6
1996 144.4
1997 174.3
1998 257.9
1999 289.6
2000 345.4
2001 460.6
2002 507.9
2003 639.2
2004 667.7
2005 735.0
Foreign direct flows from Greece to Bulgaria (mln euros) Year 1996 1997 1998 1999 2000 Greece 2.7 4.6 22.7 2.3 105.8
2001 262.3
2002 240.1
2003 198.9
2004 203.5
2005 208,7
Investments With regard to Romania, according to estimates of the Greek authorities and the Hellenic-Romanian Business Council, the total amount of Greek investments (including those made through subsidiaries of Greek companies in Cyprus, Luxemburg, Ireland, Switzerland and the Netherlands) exceeds 2 billion euros, representing over 40 percent of the Greek investments in Southeastern Europe. With regard to Bulgaria, Greek companies rank among the largest and most important trading partners. According to pro-
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visional data from the National Statistics Service and the Bulgarian National Bank, Greek investments in Bulgaria for 2005 amounted to 208.7 million euros and up to July 2006, 141.1 million. If one compares the 2.7 million euros in investments in 1996 and the 105.8 million in 2000, one can appreciate the importance of the stabilization process witnessed in Bulgaria, thanks to the assistance of the International Monetary Fund (IMF) and the start of the EU accession negotiations. Greece exports some 800 different products to Bulgaria, while importing 580 products from that country. Main exports from Greece to Bulgaria include electrical appliances and supplies, aluminium, boilers, cars, fuel, cotton, fruit, steel products and tobacco. In Bulgaria there is the Greek-Bulgarian Chamber of Commerce and Industry, which promotes bilateral relations between the two countries. The Chamber is composed of economic, business and social organizations and supports the strengthening of relations between the two countries.
Banking A large part of the banking system in Bulgaria and Romania is privatized. Since the early 1990s both countries have opened their banking markets to foreign entities. About 40 banks are established in Romania, of which six are foreign. The largest Greek bank active in Romania is Alpha Bank, followed by Banc Post-Eurobank and National Bank of Greece, which bought Banca Romaneasca. Piraeus Bank is also represented in Romania with about 30 branches. The Greek banks register more than 10 percent of the Romanian banking system’s total assets. In Bulgaria, Greek banks operate and control around 33 percent of total banking business. In 2005 Piraeus Bank completed its acquisitions of Eurobank in Bulgaria. It
operates a network of 66 branches and holds a combined loan market of 4.2 percent. National Bank of Greece, with its subsidiary United Bulgarian Bank AD, the Eurobank-Bulgarian Post Bank and Emporiki Bank (Bulgaria) are also represented. The gradual privatization of banking in Romania and Bulgaria over the past few years has obviously had positive results and the contribution of the Greek banks during the two countries’ stabilization processes has been extremely beneficial. The banks provided significant resources and, through their subsidiaries, supported the economic stabilization and reforms on the road to accession.
Telecommunications Investments in the telecommunications sector also show the increasing and leading role of Greece. Among the major Greek investors in this sector is the Hellenic Telecommunications Organization (OTE). In Romania, the OTEROM subsidiary of OTE acquired a 35 percent share in Romtelecom in November 1998. In Bulgaria, OTE GloBul won an auction for Bulgaria’s second mobile phone license. Nowadays, GloBul is the second-biggest mobile operator in Bulgaria and is focusing on a competitive commercial strategy. It invested more than 66 million euros in 2004. The potential The Europeanization of Bulgaria and Romania is creating a zone of peace and stability along and beyond northern and eastern borders and assures a more conducive environment for achieving prosperity and development.
An overall analysis of the achievements and investments of Greece, a strong supporter of the Bulgarian and Romanian economies during their transformation processes, shows the great potential that the three countries have in SE Europe. Furthermore, we should underline the crossborder infrastructure in the region alongside the mutual economic relations and exchanges. The development of the electricity networks and the gas and oil pipelines will boost efforts for the prosperity of the region. This year, now that Bulgaria and Romania have become full members of the EU, with 53 members in the European Parliament (35 Romanian and 18 Bulgarian) and two commissioners in the executive body of the Union, will witness the increased widening of Greece’s future economic possibilities in this region. The transnational cooperation and business collaboration in all sectors will work for stability and regional cooperation in this part of the continent.
George Kasimatis is director of the Office of the European Parliament in Greece. European Parliament website: www.europarl.europa.eu
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Labor emigration: What can be expected Bulgaria and Romania finally joined the EU on January 1, but under strict restrictions, even though they had achieved sufficient progress. One of these restrictions is the possible ban on free access to the labor markets of the other EU countries. The UK and Ireland reversed their initial open-door policies that made them attractive destinations for the citizens of the eight states in Central and Eastern Europe which joined the EU in 2004, and declared that they would limit immigration from the two countries when they joined the bloc in 2007. Germany, Austria, the Netherlands, Spain, Denmark and Belgium have approved similar measures on restricting labor immigration from Bulgaria and Romania. France has agreed to the gradual opening of its labor market to workers from the two new member states. Italy may consider different conditions for access to its labor market for Romanians and Bulgarians: The former will be able to work there freely if Bucharest is willing to cooperate on combating organized crime; different measures may be adopted for Bulgarians. Hungary also announced it would only partially open
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By Dr Eugenia Markova
its labor market to Romanians. It has become clear that Greece, one of the traditionally preferred migration destinations for Bulgarians and to a lesser degree for Romanians, will also introduce restrictions for access to its labor market. The moratorium period is set at two years. However, neighboring countries’ nationals have been entering Greece to work since the beginning of the 1990s, via predominantly illegal channels. Emigration patterns The socialist period in both countries was characterized by a ban on the free movement of citizens. Emigration was predominantly of a political and ethnic nature. The supply of labor was regulated by bilateral agreements, either with Warsaw Pact
countries or with countries that had policies sympathetic to the Communist regime. Permanent emigration was only allowed to ethnic minorities. In November 1989, the Communist regime fell from power in Bulgaria. The Romanian Revolution followed a month later. The first post-communist emigration wave from Bulgaria occurred in 1989, which was also estimated to be the biggest. Some 218,000 people left the country and the main destination was Turkey. The largest wave of massive emigration from Romania was registered in the period 1990-1992, when, according to official statistics, some 172,238 people left the country. The outflow comprised mainly ethnic Germans (49 percent) while Ro-
manians represented the second-largest group; the immediate post-1989 emigration from Romania also included ethnic migrants leaving for Hungary and Israel. After 1992 emigration from Romania decreased significantly in intensity, and since 1994 it has changed its ethnic character with the outflows consisting mainly of Romanians leaving the country for economic reasons. Bulgaria has experienced similar developments: Since 1991, emigration has lowered in intensity and has been predominantly of an economic nature. In the second half of the 1990s, emigration from both countries to Western Europe started falling, mainly because of restrictive immigration regimes. Seasonal migration Recent years have witnessed a growing tendency toward temporary and seasonal migration rather than permanent settlement. This phenomenon intensified especially after the two countries were removed from the Schengen blacklist and their citizens were allowed a three-month visa-free stay in the countries of the Schengen area. Visa restrictions for Bulgarians were lifted in April
2001 and for Romanians a year later. Preferred migration destinations are determined by geographic proximity, linguistic accessibility and the presence of existing migrant networks. Germany and Austria, together with Spain and Italy, are key destinations for both Romanian and Bulgarian migrants. Bulgarians also gravitate to the Netherlands, the UK and Turkey. Among the favored countries for Romanians are also Hungary, France, the UK and Portugal. The USA and Canada remain important destinations for permanent emigration from both countries. Greece has been a preferred destination for Bulgarians almost continuously and at a steady pace since the liberalization of passport regulations in 1989. Romanians have been choosing Greece to a lesser degree and at a decreasing rate since the second half of the 1990s.
Greece as a destination The post-communist emigration of Bulgarians to Greece started almost immediately after the regime changed in November 1989. It began as seasonal migration from the border regions of the country. People were taking up work on farms and in hotel and catering businesses in northern Greece. According to unofficial data from the Bulgarian Interior Ministry, some 33,000 Bulgarian citizens emigrated to Greece in 1990 as seasonal farm workers. In the following years Bulgarian migration to Greece gradually increased, peaking in 1994-95 and responding to dramatically deteriorating economic conditions at home: a rapid increase in unemployment and a drop in real wages. A pattern of individual migration emerged: Most Bulgarians were coming alone, without other family members. This is explained by the insecurity of residence in Greece, prompted by the lack of legal routes of entry into the Greek labor mar-
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ket. Women were the prevailing arrivals as they were easily absorbed into the informal economy, as domestic workers and/or caring for the elderly and children. In the 1990s, Bulgarians were securing their stays in Greece either by legal entry on individual or group tourist visas and then overstaying their visas, or by illegal entry, often using the smuggling routes over the Belasitsa Mountains. The latter channel of entry into Greece was widely used by Romanians as well. Sadly, many migrants have died on the treacherous snowy mountain slopes in their attempts to cross the border. Romanians followed similar patterns of access to the Greek labor market, entering its second unregistered tier and working in construction, agriculture, hotels, catering and the care sector. However, a number of people from both countries have also been involved in crimi-
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nal activities in Greece, such as human trafficking for prostitution and pickpocketing. Minors and disabled people have also resorted to begging. The first regularization program in Greece in 1998 registered 25,168 Bulgarians and 16,954 Romanians applying for legal status. Survey evidence suggests that immigrants from both countries experienced job mobility due to legalization that led to improvement in their social status. The most visible changes in migrants’ legal status were in the reduction of people working in agriculture and women working as au pairs — 24 hours at their employers’ disposal — and in the slight increase in the number of self-employed immigrants. Eight years after the first legalization, the number of residence permits granted to nationals of Bulgaria and Romania has reached 46,114 and 26,462 respectively.
Migration following accession Most EU countries decided to slam the door on workers from Romania and Bulgaria because of governments’ fears that the nationals of the poorest two accession countries would flood their labor markets in despair right after they joined the EU on January 1, 2007. This hysteria, especially in the UK, recalled the early 1990s, when the Berlin Wall was demolished and the former socialist countries’ nationals were free to move. Europe was concerned that they were going to invade the West. It did not happen. Some 15 years later, once again, the main issue is how many Bulgarians and Romanians will decide to seek work in another EU country now they have joined the bloc and all travel restrictions have been lifted. Analysis based on statistical surveys in 2001 and 2003 estimated Bulgaria’s emigration potential at about 15 percent of the country’s working-age population. The most attractive destinations for potential emigrants, in order of importance, were Germany, the
USA, Spain and Greece. The latest representative opinion poll in Romania, in 2004, registered 12 percent of the respondents intending to emigrate for work; of this figure, only 5 percent were actively seeking employment abroad. Intentions, however, have never been reliable indicators. Key variables in determining migration flows are the income differentials between the home and the host country, geographical proximity and the existence of migrant communities in the destination country. Therefore it is not surprising that Greece, up until January 1 the only EU member state bordering Bulgaria, has been receiving large numbers of Bulgarian and fewer Romanian immigrants. Among EU countries, Greece has experienced the consequences of restrictive access policies to its labor market most clearly; namely the growing wave of undocument-
ed immigrants into the country in the 1990s. And, surprisingly, the country decided to adopt such policies once again. Since the adoption of consecutive regularization programs for undocumented migrants, evidence suggests these do not offer solutions to illegality in Greece; on the contrary, more people have been coming into the country since 1998, when the first regularization program was applied, because of expectations for future legalization. Experience elsewhere, and in Greece in particular, has shown that restrictive labor market policies create greater opportunities for illegal work, semi-compliance (e.g. legal stay and illegal work), the development of more sophisticated smuggling and trafficking networks, flourishing of semi-legal/illegal recruitment agencies and an increased number of lawyers involved in ‘solving’ issues of illegality, contributing to more exploitation of immigrants. Restrictive policies usually push illegal immigrants deeper into the underground economy, working for much less than market prices, thus resulting in the further erosion of local wages and more unpaid taxes. Illegality also poses further questions on the issue of workers’ health and safety. Bulgarians and Romanians will continue to come to work in Greece, regardless of the restrictive labor market policies, for the rea-
sons they have been coming for more than a decade. Namely because there will be vacancies unfilled by locals or legal foreigners, mainly in agriculture and domestic services, because Greece is close, it is in the neighborhood and it is relatively cheap to travel to, and as a result of the strong networks developed over the years. It has been almost 16 years since Romanians and Bulgarians in particular have been coming to seek work in Greece and then going back, and the restrictive labor market policies have never managed to stop them. Why should we expect this to happen now?
Dr Eugenia Markova is a Greek Ministry of Economics and Finance senior research fellow in the political economy of Greece and Southeastern Europe at the Hellenic Observatory, European Institute, London School of Economics and Political Science. European Institute, London School of Economics website: www.lse.ac.uk/collections/europeanInstitute/
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Financing the energy sector By Helen Kavvadia
The European Investment Bank (EIB) is a leading source of bank finance for the Trans-European Transport, Energy and Communication Networks (TENs). From the initiation of the policy in 1993 until December 2005, loans amounting to some 70 billion euros were signed for TENTransport and 9 billion euros for TEN-Energy. The promotion of clean transport and energy infrastructure also contributes to the EIB’s long-term corporate objective of environmental protection and improvement. The policy of expanding the Trans-European Transport, Energy and Communication Networks is based on the need to provide freedom of movement for goods, people, energy and information to underpin the fundamental developmental and integration aims of the European Union. But the concept of building these axes and corridors reaches well beyond the borders of the current EU member states into the neighboring countries of Central and Eastern Europe and the southern rim of the Mediterranean.
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complete TEN-Transport Network by 2020 in the order of 600 billion euros, of which 225 billion euros would go toward the 30 Priority Projects, while the latest estimates are already considerably higher. TEN policy The fundamental objectives of the TEN policy remain: High-quality infrastructure supporting the links between the EU member states and connecting the EU and the countries of the European Neighborhood area. Interconnection and interoperability of existing national networks. Improved access from the national networks, permeating the benefits of the Trans-European Networks over the whole EU territory. To date, the TEN concept is most actively pursued in the area of transport (TEN-T). European transport policy aims to build an integrated network of backbone transport infrastructure, transforming the networks built under national considerations into an efficient and sustainable Europe-wide infrastructure system. In 2003, the Van Miert Group estimated the cost of building the
TEN-Energy program Apart from the TEN-telecommunications, where the TEN strategy seeks to accelerate the rollout of high-speed, broadband communications in all parts of the Union, the second big area of the TEN strategy lies in the energy sector, even if the investment program is not as articulate as that for transport. In essence, the program consists of building a comprehensive network of electricity and gas transmission networks and energy importation structures; the priority projects comprise six electricity transmission lines and cross-border interconnectors and three large-scale gas importation pipelines, cer-
tainly a subject that has gained geopolitical importance since the TEN-Energy program was formulated. The EU strategy for the energy market rests on: Tackling the problems of energy efficiency. Strengthening links with the energy networks in European Partner Countries. Facilitating the growth of an internal EU energy market. Acting as a catalyst for the provision of renewable energy sources. Trans-European Energy Networks (TEN-E) are a top priority in the EU’s energy policy because of their seminal role in the creation of the internal energy market as well as the diversification and security of energy supplies in the Union. Supporting the construction of large-capacity gas importation links as currently being discussed will bring about a measured diversification of energy resources for the Union, but above all will contribute to an increase in the security of supply by offering alternative transport routes. Some of these energy TENs also promote the development of regions lagging behind economical-
ly. The Commission’s priority list of energy TENs comprises both electricity and natural gas transportation axes. All projects contributing to these axes, ranging from small cross-border power links to transcontinental gas pipelines, are eligible for EIB finance. Financing Given the advanced deregulation of the sector and predominant private ownership of the operators, the financing issues of the TEN-E strategy are quite different from what we face in TEN-T despite the huge sums of equity and debt that have to be raised. In 2005, the EIB lent close to 900 million
euros for energy TENs. This compares to 1.3 billion euros in 2004. Such fluctuations are to be expected because TEN projects are few and of a large scale, with long preparation and implementation lead times. One of the energy TENs financed in 2005 was the liquefied natural gas (LNG) terminal on the Isle of Grain in Kent (UK). The Bank’s 177.3-million-euro loan is helping to provide a cost-effective solution to supplying natural gas to the UK market at a time when it faces increasing demand and declining indigenous reserves. LNG facilities ensure import diversification and contribute to gas-on-gas competition. The transport costs of LNG have come down in recent years which, combined with increasing regional market imbalances, is leading to the creation of a worldwide LNG market. In 2005, the EIB carried out a major review of its involvement in the energy sector. The recent increase in oil prices, which have reached their third-highest historical peak, has led to a higher prioritization of energy issues on the European Union’s policy agenda. The object of the review was to define orientations for the Bank’s opera-
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new member states of Eastern Europe. The Bank is developing a pipeline of such operations to create, over the medium term, a portfolio of infrastructure funds that collectively invest in quasi-equity on the broadest geographic basis throughout the EU.
tions in the energy sector in order to reflect the new priorities. The promotion of competition and development of energy TENs, reducing the risks linked to increased energy dependence on supplies coming from outside the European Union, and cooperation with partner and neighboring countries, all figure high on the agenda. Private sector support Many TENs operations involve conventional long-term lending with very long maturities and appropriate grace periods on the repayment of principal. However, as the Bank wishes to be a catalyst for private sector investment in TENs, it has also introduced new financial instruments to address risk issues. The EIB’s Structured Finance Facility, for example, makes it possible to finance private, public or semi-public special-purpose vehicles, particularly in cross-border PPP projects, on a risk-sharing basis. Under the Structured Finance Facility, the
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EIB for the first time participated in infrastructure funds in 2005. This has extended the range of products that the Bank offers in support of high-priority operations to include infrastructure funds investing in projects that meet the EIB’s eligibility requirements. Publicprivate partnership (PPP) projects are a particular focus. Thus, the Bank invested 50 million euros in the Emerging Europe Convergence Fund, which concentrates its activities in the
PPP expertise Through PPPs, the private sector is making a significant and increasing contribution to the development and delivery of public infrastructure. As a consequence, many national and regional public authorities are seeking a better understanding of PPPs. In 2005, the EIB helped prepare, with the European Commission, the establishment of a European PPP Expertise Center (EPEC) designed to share the experience of public bodies throughout the EU on best practice for PPP development. EPEC’s advisory role will serve to disseminate experiences across Europe more efficiently and provide practical PPP implementation assistance. The Bank’s catalytic role in boosting private sector involvement in TENs led it to sup-
port public-private partnerships with loans worth 772 million euros in 2005. EIB lending in 2005 In 2005, the European Investment Bank lent a total of 47.4 billion euros (2004: 43.2 billion) for projects furthering the European Union’s political objectives. Financing in the EU 25 member states totaled 42.3 billion euros of which 5.8 billion went toward the 10 new member states. A total of 5.1 billion euros was made available in non-EU countries, of which 2.0 billion was for the acceding countries (Bulgaria, Romania) and accession countries (Croatia, Turkey). In 2005 the European Investment Fund (EIF) — the EIB Group’s specialized venture capital arm and guarantee provider — invested 368 million euros in venture capital funds, bringing its aggregate portfolio to 3.1 billion euros, and provided a total of 1.7 billion in guarantees for small and mediumsized enterprises’ (SME) portfolios of financial intermediaries. To fund its lending, the EIB raised an aggregate amount of 49.8 billion euros on the international capital markets through 330 bond issues in 15 currencies.
As of December 31, 2005, the EIB’s outstanding lending amounted to 294.2 billion euros and outstanding debt to 248.3 billion. In the context of the European Union’s development and cooperation policies, the EIB finances projects around the world: in Africa, the Caribbean and the Pacific, in South Africa, in Asia and Latin America, in Southeast Europe and in Russia. Loans for projects in these countries amounted to almost 3 billion euros in 2005. In 2005, the EIB provided a total of some 895 million euros for projects in Greece, mainly for transport and energy.
Romania & Bulgaria EIB loans in this part of Southeast Europe amounted to 979 million euros in 2005, the bulk of it going to Romania, which received 949 million. Most of the lending in Romania was channeled into transport infrastructure: the rehabilitation and new construction of parts of Trans-European Networks as well as the repair of roads damaged by heavy floods in 2004 and 2005. A total of 66 million euros went to the national healthcare sector for investments providing better services for patients requiring maternity and neonatal care, and to upgrade emergency medical care and rural primary healthcare. The project was cofinanced with the World Bank. Another 12.6 million euros served to improve water supply services in small and medium-sized towns, resulting in cost savings and the reduction of leakage through the replacement of network pipes and old pumps and installation of water consumption meters. Some 20 million euros
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financed small and medium-sized investments in Romania, and 30 million in Bulgaria. Croatia & Turkey The EIB lent 60 million euros for the construction of a ring road in Split, Croatia, in 2005. In Turkey EIB lending amounted to 930 million euros. The private sector played an important role, but the largest loan, of 450 million euros, went to the construction of the Bosporus railway tunnel, a project that also has symbolic importance, as the tunnel will unite the European and Asian rail networks across the Bosporus strait. The tunnel will connect two railway lines on Pan-European Transport Corridor IV, which presently terminate on either side of the Bosporus. It will also reduce air and noise pollution in metropolitan Istanbul by enabling a major shift from road to rail, alleviating congestion on the road network. Western Balkans Total lending in the Western Balkans reached 399 million euros. Lending in Bosnia and Herzegovina ran to 211 million, while 35 million was advanced in Albania. Projects in Serbia and Montenegro amounted to 153 million euros. EIB lending takes place in close cooperation with other donors, such as the European Commission, the European Agency for Reconstruction and the World Bank.
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Greece: The energy sector The EIB financed earlier in 2006 the Greece-Turkey natural gas pipeline interconnection and the expansion of uptake and throughput of the Revithoussa terminal for liquefied natural gas. The EIB provided in February 2006 a total of 45 million euros for the Public Gas Corporation of Greece SA (DEPA), in charge of the high-pressure gas transmission system, for enhancing the country’s natural gas supplies: 22 million euros is for the construction and
operation of an 85-kilometer-long gas transmission pipeline that will link the Greek and Turkish national gas systems between Komotini in Greece and Kipi at the Greek/Turkish border. The purpose is to import natural gas from Caspian and Middle East sources through Turkey, in order to satisfy growing demand, improve the supply security to the country, and to provide capacity for the potential future transit of gas to neighboring
countries. In this sense the project offers potential benefits to the wider European market, given the possibility to make further pipeline connections in the future between Greece and Italy, or Greece and other Southeast European countries. The project is, therefore, by decision of the European Parliament and the European Council, classified as a priority Trans-European Networks Energy project of European interest (priority axis Natural Gas Caspian/Middle East/EU). 23 million euros is for expanding the liquefied natural gas terminal on the island of Revithoussa, near Athens. It mainly comprises the implementation of pumps and vaporizers to enhance the receiving and send-out capacity of the Revithoussa terminal, while the terminal’s overall storage volume does not change. The project will double the LNG receiving capacity to 7,250 m3/h, as well as the peak send-out rate to 1,250 m3/h of LNG. LNG is currently supplied to the terminal from Algeria. Operation for both projects, seen as strategic moves for the development of the gas network in Greece, is scheduled for the second half of 2007. Environmental Impact Assessment (EIA) studies foresee no adverse implications to the environment. The large-scale use of natural gas as a
source of energy is relatively new to Greece. Construction of the basic infrastructure commenced in 1992 and the main highpressure network was completed gradually during 1996-2000 at a total cost of around 1.6 billion euros, for which the EIB contributed some 207 million. Initial gas sales began in 1997. Natural gas is currently imported 2/3 from Russia across the Greek-Bulgarian border and 1/3 LNG from Algeria. Within Greece, the current basic transmission and distribution system comprises the main pipeline, which begins at the Greek-Bulgarian border and extends to Attica in the south of Greece and Komotini in the northeast. Established in 1988 with the purpose of introducing natural gas into the Greek energy market, DEPA has a monopoly position for the importation, transport and sale of natural gas to power producers and other large consumers, gas supply companies and users of natural gas as transportation fuel. It has three Greek subsidiary companies formed for the
purpose of gas distribution in the areas of Attica, Thessaloniki and Thessaly. Sixty-five percent of its capital of 990 million euros is held directly by the Greek state and 35 percent by Hellenic Petroleum, which is itself 27 percent-controlled by the Greek state. Demand for gas in Greece has been growing strongly at an average rate estimated at over 14 percent since 2003, and is likely to exceed 3 Gm3 in 2005. Growth has been due to increasing market penetration, particularly in power generation and industry. In 2004, approximately 67 percent of gas consumption went to the power generation sector, 21 percent to the industrial and large commercial sector, and 12 percent to the distribution companies.
Helen Kavvadia is senior communications officer at the European Investment Bank. European Investment Bank website: www.eib.org
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6in regional challenges banking market All of the countries covered by NBG Emerging Markets face very similar challenges as regards their macro-cum-banking environment. First, the successful implementation of ambitious reform efforts, with Egypt being an exception as it is at the beginning of their reform phase, are experiencing robust output growth.
Real GDP growth (%) Albania Bulgaria Cyprus Egypt ** FYROM Romania Serbia Turkey
2004
2005
2006F
5.5 5.5 3.8 5.0 4.0 4.1 6.3 7.4
5.2 5.8 3.7 5.8 4.2 6.2 6.1 5.8
5.9 5.6 3.9 6.1 4.3 5.8 5.9 6.1
F: NBG Forecasts, ** Fiscal year ending June 30, 2006
By Michael Loufir
Current account balance (% of GDP) Albania Bulgaria Cyprus Egypt ** FYROM Romania Serbia Turkey
2004 -5.4 -5.8 -5.7 4.3 -9.2 -8.4 -15.4 -5.2
2005 -6.7 -11.3 -5.8 3.1 -2.7 -8.7 -9.3 -6.2
2006F -7.4 -14.0 -5.6 1.6 -3.8 -9.5 -9.8 -6.6
F: NBG Forecasts, ** Fiscal year ending June 30, 2006
Share in assets of foreign to total banks* (%) Albania Bulgaria Cyprus Egypt** FYROM Romania Serbia Turkey
2003 48.1 80.8 12.7 --46.9 50.6 38.4 2.9
2004 --78.6 12.6 --47.3 53.6 55.6 3.4
2005 --79.4 12.7 --49.4 54.7 66.0 5.2
* Weighted average for three or four largest banks ** Fiscal year ending June 30, 2006
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Second, the much-improved economic climate, in combination with renewed confidence in a restructured and mostly foreignowned banking system, has resulted in a very rapid credit expansion, especially in the little-penetrated retail sector. In Bulgaria, Romania and Serbia, the authorities have felt the need to impose constraints on credit as the current account deficits in those countries have reached levels near 10 percent of GDP, though admittedly these external gaps are, for the most part, covered by FDI. Only in Bulgaria do these constraints appear to have been effective — the country with a penetration level some 70 percent higher than in the other two countries.
Private sector lending growth (%) Albania Bulgaria Cyprus Egypt ** FYROM Romania Serbia Turkey
2004 37.0 49.1 7.5 4.5 25.5 40.7 56.9 54.4
2005 74.9 35.3 6.8 3.6 20.8 50.7 52.6 53.5
2006* 59.9 23.6 16.9 8.6 27.6 59.3 57.3 57.1
* June 2006, ** Fiscal year ending June 30, 2006
Private sector lending/GDP (%) Albania Bulgaria Cyprus Egypt ** FYROM Romania Serbia Turkey
2004 9.0 34.5 124.0 53.4 21.8 14.5 18.9 18.4
2005 14.6 42.5 123.7 48.2 25.1 18.8 23.4 24.7
2006* 17.5 43.1 133.2 47.1 27.6 22.5 25.1 29.1
LC deposits / Total deposits (%) Albania Bulgaria Cyprus Egypt ** FYROM Romania Serbia Turkey
2004 68.8 52.3 62.5 67.8 44.7 60.1 31.4 52.1
2005 65.2 52.9 54.9 72.4 43.5 67.8 29.7 60.6
* June 2006 ** Fiscal year ending June 30, 2006
2006* 64.0 50.7 54.4 71.6 --68.9 27.9 60.7
Third, confidence in the banking system, as expressed in the share of local currency deposits to total sector deposits, has increased in most countries, though this ratio rarely exceeds 60-70 percent; however, with loan growth experiencing an even faster expansion, liquidity shortages are appearing in several countries (Bulgaria, Romania, Serbia and Turkey), putting banks with large market shares in local currency deposits at a comparative advantage. An exception to this trend is Serbia, where ‘euroization’ of the economy continues, with the local currency share of deposits falling below 30 percent in June 2006.
* June 2006, ** Fiscal year ending June 30, 2006
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Fourth, the aggressive entry of foreign banks into these markets has increased competition significantly, resulting in a sharp compression in spreads, especially notable in Romania and Turkey, albeit from high levels, but also in Bulgaria and Cyprus. However, the net interest margin (NIM) has been much less affected due to the improved asset mix, with loans, especially retail loans, replacing securities on balance sheets. Indeed, the NIM has only declined in Romania and Turkey, but again from relatively high levels, and remaining above those in other countries of the region.
LC loans/LC deposits (%) Albania Bulgaria Cyprus Egypt ** FYROM Romania Serbia Turkey
2004 5.6 96.3 95.7 76.1 126.4 45.1 178.8 70.0
2005 11.6 99.9 92.8 65.6 123.3 54.0 205.0 84.1
* June 2006, ** Fiscal year ending June 30, 2006
2006* 15.5 106.4 95.6 63.6 --71.0 233.3 92.3
Local currency lending-deposit interest rate spread (%) Albania Bulgaria Cyprus Egypt ** FYROM Romania Serbia Turkey
2004 4.3 6.2 3.7 5.4 6.0 14.5 11.2 15.4
2005 7.7 5.2 3.3 5.6 5.7 13.0 10.7 9.6
2006* 7.3 5.1 3.1 5.3 6.8 9.7 11.5 ---
* June 2006 ** Fiscal year ending June 30, 2006
Net interest margin* (%) Albania Bulgaria Cyprus Egypt** FYROM Romania Serbia Turkey
2003 3.2 5.1 2.6 1.3 4.3 6.7 5.3 8.2
2004 3.3 6.2 2.8 1.5 4.4 7.4 4.7 7.9
2005 3.7 6.4 2.7 1.7 4.9 5.5 4.8 6.7
* Weighted average for three or four largest banks ** Fiscal year ending June 30, 2006
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Fifth, the rapid loan growth and the higher loan penetration rates are leading to higher provisions, albeit from relatively low levels in most countries. Only in the countries with a heavy stock of non-performing loans (NPLs) remaining from financial crises are provision levels high (e.g. the Former Yugoslav Republic of Macedonia [FYROM] and Serbia).
Provisions / Average total loans* (%) Albania Bulgaria Cyprus Egypt** FYROM Romania Serbia Turkey
2003 ----2.0 3.1 2.6 0.8 2.6 1.5
2004 0.3 0.8 1.6 2.5 2.8 1.7 4.2 3.1
2005 0.8 1.4 1.3 3.1 3.8 1.4 5.8 3.2
* Weighted average for three or four largest banks ** Fiscal year ending June 30, 2006
Return on average equity (%) Albania Bulgaria Cyprus Egypt ** FYROM Romania Serbia Turkey
2003 19.5 15.0 -5.8 8.9 2.3 17.6 -1.5 16.0
2004 21.3 16.8 4.3 9.8 6.2 18.0 -5.4 15.8
** Fiscal year ending June 30, 2006
2005 22.4 18.9 9.5 10.7 8.8 14.9 6.5 12.4
Sixth, this benign environment has led to significant increases in bank profitability in all of these countries, Romania being the only exception, but again from a relatively high level (please note that the results in Turkey are biased by the large but exceptional provisions of one bank, without which sector return on equity [ROE] would have exceeded 20 percent, among the highest in the region). This trend should continue in the coming years as the asset mix continues to improve, reverse currency substitution shifts lending to high-spread local currency lending, and spread compression slows. Profits will also be supported by the low cost base in these countries.
Cost to income ratio* (%) Albania Bulgaria Cyprus Egypt** FYROM Romania Serbia Turkey
2003 43.0 52.2 68.0 38.7 63.6 68.7 51.2 54.6
2004 49.8 50.0 63.9 34.3 61.6 59.3 55.6 50.0
2005 53.8 43.3 59.4 34.2 57.9 61.2 55.3 48.6
* Weighted average for three or four largest banks ** Fiscal year ending June 30, 2006 Dr Michael Loufir is head of Emerging Markets Research, National Bank of Greece SA. This article is republished from the Southeastern Europe and Mediterranean Emerging Market Economies Bulletin, National Bank of Greece SA, September 2006. National Bank of Greece website: www.nbg.gr Southeastern Europe and Mediterranean Emerging Market Economies Bulletin website: www.nbg.gr/publications/bulletin.html
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Compiled by Dimitris Pappas
Real estate boost in Bucharest and Sofia What with shopping malls, skyscrapers, residential complexes and luxury hotels mushrooming, Bucharest and Sofia are witnessing a spate of construction fever. Billions of euros have been invested in real estate projects over the last five years. The residential real estate market has recorded an unprecedented boom, with investors coming from the European Union, Asia and elsewhere, and almost daily announcements of new residential projects. For example, one district of Bucharest is expected to host projects with a total cost of over 2 billion euros in the next three years alone. Investment in new building construction in Romania in 2006 has increased by 17.7 percent year-on-year. In Bucharest, the real estate commercial market has registered important moves in 2006. Another three malls will soon be added to the list of leisure facilities in the Romanian capital, alongside the three malls already in operation. A mall is set to appear in the Baneasa Investments complex, in the north of the city, another, Sun Plaza, in the Berceni neighborhood, and the most recent project, Liberty Centre, an investment of 70 million euros by the Northern Irish company Mivan, will open in 2008. Mivan has allotted 750 million euros for investment not only in commercial but also residential projects over the next three years. The Greek company Omilos will develop a real estate project in Iasi which will include a commercial complex and a mall (an invest-
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ment of 100 million euros). Omilos, together with another Greek firm, Epsilon, will invest 140 million euros in the coming years for the construction of two shopping centers in Craiova and lasi. Another project is the Craiova Mall (80 million euros), which will be developed by a Greek investors’ consortium including the companies Elmec and Alesonor. Lamda Olympic Srl has developed the Lake View Condominium, an investment valued at 20 million euros. Other Greek companies participating in this real estate boom include Iliotomi and Aegek-Rom Construct. Like Bucharest, Sofia is luring hundreds of real estate investors from all over the world. In the period January-September 2006, 35 percent of the direct foreign investments were plowed into the real estate sector (21.4 percent toward manufacturing industry, 12.7 percent in the bank sector, 12.6 percent in trade and 9 percent in the construction field). Greek businesses are increasingly turning to the real estate sector, realizing the potential for investment. EuroCapital Real Estate is building a shopping mall on Evropa Boulevard (40 million euros) and a new office and hotel building near Sofia Airport. This area is a magnet for real estate enterprises, such as Tishman International Companies, which will build the biggest real estate project in Bulgaria, Sofia Airport Center, at an estimated cost of 200 million euros. The consortium formed by Greece’s GEK Group and Lamda Development plans to invest 5 million euros in Sofia. GEK and Lamda are also working on stand-alone projects in Bulgaria. Earlier this year, GEK announced it would build a hotel and a motel in Vidin. The company also plans to build a hotel complex in the Borovets ski resort and a shopping and office center in Sofia. For its part, Lamda is joining equity fund Global Finance to develop a 70-million-euro, 70,000-square-meter office center in Sofia. Lamda, along with the Global Emerging Property Fund, set up by Global Finance, will develop a 70-million-euro business and commercial complex development of 70,000 sqm in Sofia, according to AFX. The fund’s near-term intentions are to invest some 450 million euros in business property developments in Romania, Serbia and Bulgaria. Sources: www.businessromania.com www.discovereasterneurope.com
market view Ceyhan: An energy hub The Turkish oil hub of Ceyhan on the Mediterranean coast is turning into a magnet for international companies seeking to construct oil refineries and petrochemical plants. Firms from Europe, the USA, the Commonwealth of Independent States (an alliance of former Soviet republics) and Central Asia are displaying a keen interest in strengthening their position in the coastal city where the pipelines from Kirkuk and Baku (the world’s second-longest pipeline at 1,750 kilometers) terminate. Last month the State Oil Company of Azerbaijan (SOCAR) and Turkey’s Turcas agreed to set up a joint venture for oil exploration, refining and marketing. SOCAR & Turcas Enerji AS will build a refinery in Ceyhan and sell natural gas that will be pumped from Azerbaijan’s Shah Deniz region to Turkey. According to the deal, SOCAR & Turcas Enerji AS will provide for the participation of Turcas in conducting exploratory work and producing gas in the Caspian fields. The venture will also build a $1 billion oil refinery in Ceyhan with a capacity of up to 20 million tons of oil annually. The refinery is scheduled for completion in 2010. SOCAR will hold a 51 percent stake in the joint-venture exploration and refinery business and the rest will be held by Turcas, which will also hold a 51 percent stake in the company’s natural gas business. ‘Our goal is to set up a refinery in Ceyhan within four to five years with a 10-million-ton capacity at the start which could later rise to 20 million tons. The company would have capital of $50-100 million and might be looking for oil and gas exploration projects in Azerbaijan,’ said Turcas Chairman Erdal Aksoy when he signed the protocol with SOCAR’s president, Rovnag Abdullayev. Abdullayev said SOCAR would have 80 percent of an expected 900,000 barrels per day of Caspian oil exported via the pipeline to Ceyhan. ‘The only company that will have oil at Ceyhan by the time refineries have been built will be SOCAR,’ Abdullayev said. ‘So the (Turcas-SOCAR) refinery project has a clear advantage over other projects.’ These are not the only companies looking to invest in Ceyhan. Turkey’s Petrol Ofisi and Austria’s OMV are among those with plans for plants there. Others include a consortium consisting of Turkey’s Calik,
Italian ENI and Indian Oil Corp, as well as Turkey’s Tekfen group with a foreign partner, and also Oil India Ltd. Indian Oil has already applied to Turkey’s Energy Market Regulatory Authority with the aim of setting up a 15-million-ton, $6 billion grassroots refinery. Apart from Indian Oil, Kazakhstan’s state-owned oil company KazMunayGas expressed an interest in the project and invited Oil India to construct a refinery in Turkey. Under the proposed plan, the $4.9 billion refinery will have a capacity of 15 million tons and include a petrochemical complex. The Kazakh oil company KazMunayGas is not only interested in refinery construction, but is negotiating with a consortium of Italy’s ENI and Calik Group of Turkey for a ‘significant’ stake in the $1.5 billion oil pipeline from Turkey’s northern Black Sea city of Samsun to Ceyhan. Indian Oil has already bought a 12.5 percent stake in a pipeline project. The 550-kilometer Samsun-Ceyhan pipeline will carry up to 1.5 million barrels of crude per day, primarily from Kazakhstan, and will reduce the tanker movements through the Bosporus strait by almost 50 percent. Sources: www.azer.com/aiweb/categories / www.inform.com/ceyhan
market view The end of a monopoly From January 2007, T-Post, Bulgaria’s first private postal operator, will provide a universal postal service after having obtained the necessary licence from the national telecom regulator authority last November. T-Post is owned by Bulgarian express-delivery company Tip Top Courier. The company has developed a three-stage five-year plan for the deployment of a post office network throughout the country, franchising some of the outlets. Initially, Tip Top Courier will process the postal packages through its network of express-delivery offices. T-Post intends to have outlets in all population centers with more than 800 residents by 2012. The first stage, including the opening of its first post office in Sofia, will cost 7 million levs (approx 3.5 million euros). Financing will come from its own resources and bank loans. The second and third stages of the project will require similar investment figures. By 2009, when the monopoly of Bulgarian Posts is set to be lifted, the company will be allowed to dispatch packages weighing less than 50 grams. This segment generates 50 percent of total postal service revenues. The T-Post tariff will be a little higher than that of Bulgarian Posts. Mailing charges will not be determined by the weight of the consignment but by the speed of delivery. Another local express-delivery company, Speedy, has also been applying for a universal postal service licence. So has Austria’s postal authority, which has already said that it plans to expand to Bulgaria through the acquisition of a local company. The telecom regulator estimates the domestic postal market at 125 million levs (63.8 million euros) in 2005, up 24 percent year-on-year.
A modern airport
for Tirana
Mother Teresa International Airport, Albania’s only international airport, is in the process of being modernized. New terminals and an access road will be ready by next spring. The key project is the new passenger terminal, designed to be able to handle up to a million passengers a year. The terminals and the road connecting the Albanian capital with the airport are being constructed by an international consortium. Tirana’s international airport is the most important transportation hub in Albania. In 2005, it was used by 785,000 passengers, 22 percent more than in the previous year. Since April 23, 2005, operational responsibility for the management of the airport has been in the hands of the newly established airport company Tirana Airport Partners SHPK (TAP). This consists of Hochtief, Deutsche Investitions und Entwicklungsgesellschaft, and the Albanian American Enterprise Fund. TAP will run the airport for the next 20 years. ‘The modern airport will help to change the poor image that Albania has in other countries, and attract more visitors,’ Prime Minister Sali Berisha said while inspecting the works. ‘The new terminal sets standards for Albania and is thus making its own special contribution to the way the capital city is changing,’ declared a TAP statement. In recent years, Albania has drawn the attention of a number of international carriers. These include Greece’s Olympic Airlines, Italy’s Alitalia, Austrian Airlines, Serbia’s JAT, British Airways and Bulgaria’s Hemus Air, which all have scheduled flights to Tirana.
Sources: http://news.dnevnik.bg / www.sofiaecho.com Sources: www.hochtief.de / www.tirana-airport.com
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Chanc The summer 2006 crisis in Lebanon was to a great extent a mirror image of where things stand today in the Middle East — at an impasse as well as in a phase of re-evaluation by all of the region’s political forces. In other words, the entire region of the Middle East is in flux, with Israelis debating the lessons of the latest conflict, including the effectiveness of unilateral disengagements, while the Palestinians are unable to date to find a modus vivendi between their two major political groupings — Hamas and Fatah. The Hamas-Fatah gridlock implies a delay in serious direct talks between Israel and the Palestinian Authority. Likewise in Lebanon, Hezbollah is still coming to terms with its miscalculation of not anticipating the intensity of Israel’s reaction to the abduction of two of its soldiers in July and its place and role within an increasingly Western-leaning Lebanon. Israel, on the other hand, whose actions in Lebanon were prompted by its desire not to be seen as weak following its disengagement from the Gaza Strip and the removal of all Jewish settlers, is coming to terms with the negative effect of its disproportionate use of force in Lebanon, which sidelines a major change in policy — a desire to make concessions in order to end all conflict with its neighbors. The convergence of analysis The contributions of Yezid Sayigh and Anat Lapidot-Firilla that follow assess the state of affairs in the Middle East today following the Lebanon war. There is significant convergence in their analyses, in particular with regard to Hezbollah’s overreach and Israel’s execution of the war, thereby raising doubts about the coherence of its strategy. A quick conclusion would be that the hostility be-
e for a c
? e g n ha By Dr Dimitrios Triantaphyllou
tween Arabs and Israelis is so imbedded that changes in policy by all sides in order to settle differences do not yet necessarily possess the requisite support or the basic maturity by the Arab and Israeli constituencies. Does all of the above present more of the same for the region or a glimmer of hope that change is in the offing? I would posit that the Lebanon war has reinforced the sentiment of major capitals worldwide that a resolution of the differences between Palestinians and Israelis is needed and that a two-state solution is imperative. Whether this is possible under the current US administration remains to be seen but the process of dialogue has to restart soon. On the other hand, the Lebanon conflict has enhanced the European Union’s role and potential as a credible mediator despite the fact that few in Europe have caught on to this. EU efforts to bring an end to the violence and to contribute to UN Security Council Resolution 1701 have been instrumental. The EU has also impressed in terms of its willingness to provide the backbone of the enhanced United Nations Interim Force in Lebanon (UNIFIL). As Javier Solana, the EU’s foreign policy chief, has stressed, ‘without Europe yesterday, no expanded UNIFIL, and without UNIFIL, no hope for a more lasting peace.’ The EU’s actions in Lebanon have enhanced its regional status and could provide for a more proactive role toward the resolution of the Israeli-Palestinian conflict. If anything, the Lebanon war has awakened Arabs, Israelis and the international
community to the stakes at play in the wider Middle East. Once the somber reassessment of the current situation is over, hopefully all stakeholders will seize the opportunity to sit down together to bring about the necessary changes to resolve the longstanding conflicts in the region. After November The November midterm elections imply that the USA finds itself in the midst of a gradual policy swing away from the ideological imperatives of the neo-conservatives and the neo-liberals for remaking the Middle East along Western democratic principles. Recent developments such as the issuance of the Iraq Study Group report, the assassination of Pierre Gemayel in November and the current attempts by Hezbollah to overthrow the Lebanese government suggest a power vacuum in the making as the influence of the USA is on the wane. Only a realignment of US foreign policy priorities to a more multilateral approach, which would give its allies and the UN a greater input in the future shape of the Middle East, could relaunch the peace process and provide for new ways of dealing with Syria and Iran, the Palestinian gridlock, and all other pending issues. Dr Dimitrios Triantaphyllou is directorgeneral of the International Center for Black Sea Studies (ICBSS), Athens, and assistant professor of international relations at the University of the Aegean. ICBSS website: www.icbss.gr University of the Aegean website: www.aegean.gr
dialogue
The Second On July 12, 2006, Hezbollah guerrillas initiated an operation into Israeli territory aiming to capture Israel Defense Forces (IDF) soldiers and hold them as hostages. The attack began with diversionary rocket attacks along many parts of Israel’s northern border, and culminated in a well-staged ambush against a patrol of reservists. As a result of the attack, eight Israeli soldiers were killed and two were abducted. The attack came less than three weeks after a raid into Israel by a coalition of Islamist militants from the Gaza Strip resulted in the killing of two soldiers and the abduction of another. Both Israel and Hezbollah saw a link between the two operations. From Israel’s point of view, a forceful reaction was dictated by the political and strategic circumstances of the situation: Neither Israel’s defenses nor its government could appear to show weakness against what was perceived to be a concerted effort by a radical Islamic axis to carry out attacks inside its sovereign territory with the specific aim of kidnapping Israelis. It should be emphasized that the Israeli public has been conditioned for decades to equate the absence of a forceful response to such provocation with weakness. Hezbollah claimed that it was acting in response to Israel’s illegal imprisonment of Lebanese citizens. Hamas, which had This article was written for The bridge at the end of September 2006.
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By Dr Anat Lapidot-Firilla
shown increasing willingness to adopt the tactics of Hezbollah, particularly since the withdrawal of IDF troops from southern Lebanon in May 2000 (generally credited to Hezbollah’s guerrilla campaign), also said it acted in order to free Palestinians held in Israel’s prisons. On the face of it, there is logic to this approach: In the past Israel had agreed to exchange disproportionate numbers of Lebanese and Palestinian prisoners — many with rich records of terrorist activity — for the corpses of Israelis. The domestic political pressures In reality, the Hezbollah and Hamas raids inside Israel were motivated by domestic political pressures, in Lebanon and the Palestinian Authority respectively. Increasingly, Hezbollah and Hamas have become drawn
into the centers of political power in their respective settings, a reality that has forced them to face the types of pressures that other, more mainstream parties normally confront. The transformation of Hezbollah and Hamas from guerrilla organizations into political parties is a difficult one for them, because it requires that they relinquish their most successful political tool, namely the armed struggle against Israel. The Hezbollah raid came amid concerns in the group that the central government of Lebanon was becoming increasingly assertive and capable of potentially challenging the group — the only one in Lebanon that still openly retains its arms. Indeed, since the murder of former Prime Minister Rafik Hariri, suspected to have been ordered by Syria, the central government of Lebanon had enjoyed unprecedented international support in its efforts to gain greater sovereignty over the country. International pressure and courageous outbursts of Lebanese patriotism resulted in the Syrian decision to withdraw its troops from Lebanon. Lebanon, Syria & Iran The growing independence of Lebanon, its clear leaning toward the West, and the
Lebanon War growing pressure by other ethnic groups (Sunni, Maronite and Druze) on Shi’a Hezbollah to relinquish its paramilitary activities and participate in a shared defense structure under the Lebanese Army, constituted a direct challenge to both Syria and Iran. Hezbollah is a strategic asset for Syria and Iran and since the Israeli withdrawal from southern Lebanon in 2000 had been systematically armed by Damascus and Tehran with missiles. Hezbollah and its missile arsenal were meant to serve as a deterrent against Israel on behalf of both Iran and Syria. Israel was willing to accept the arming of Hezbollah with strategic weapons, so long as calm was preserved along the border — to a greater or lesser extent. Indeed, at least twice before, Hezbollah had carried out attacks against IDF soldiers — in October 2000 and in 2005 at the border village of Ghajar. Israel’s response to both attacks was restrained. Hezbollah’s Hassan Nasrallah has publicly acknowledged that he did not expect Israel’s response to the July 12 raid to be of such magnitude. A leader who prides himself on his understanding of Israel, Nasrallah erred in his reading of the Israeli political scene. This failure was catastrophic for Lebanon.
The borders of Israel What had changed in Israel was that since the pullout from southern Lebanon, the general public had come to regard a withdrawal to internationally recognized borders — and in the case of the occupied territories, to borders that would be determined by international agreement — as a prerequisite for peace and as an incentive for the Lebanese and Palestinians to end the violence. The withdrawal from southern Lebanon to the Blue Line, delineating the border, had been acknowledged and approved by the United Nations. The disengagement
from the Gaza Strip and the pullout of all Jewish settlers enjoyed the approval of most Israelis. In March 2006, a new government came into being in great part because of its promise to pull out from most of the West Bank — with or without agreement. However imperfect these moves may have been, for the majority of the Israeli public and its leadership, it signaled a major change: a wish to make concessions, motivated by a desire to bring about an end to the conflict with its neighbors. In Israel there were plenty of harbingers of the disaster that would follow such a policy. They opposed unilateral withdrawals because they regarded it as a policy encouraging at best only the militants such as Hamas and Hezbollah, and at worse the entire Arab and Muslim world, by showing that Israel was weak and that violence is effective. The two raids and continued rocket attacks from areas evacuated by Israel of its own accord served as proof to the skeptics in Israel that they were right: If you give the Arabs an inch, they will take a mile. On July 12, it was hard to find many Israelis who did not agree and the support for a massive response to the Hezbollah attack was nearly unanimous
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among the Jewish citizens. Even today the public debate in Israel is not about the legitimacy of the operation in Lebanon but about the way it was executed by the military and the failure to adequately care for nearly 1.5 million citizens in the north that were exposed to Hezbollah’s rockets. Legitimacy & proportionality The two issues of legitimacy and proportionality deserve to be treated as one in discussing the recent conflict in Lebanon — and they touch greatly on how the war was perceived, particularly on another front: the PR or media war. In short, while initially there was general condemnation of Hezbollah’s attack, even in significant parts of the Arab world, as the conflict dragged on a growing anti-Israel front emerged. Indeed, at first Israel held the moral ground, then that standing became equal with Hezbollah, and toward the end — and in subsequent reports by aid and human rights agencies
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— Israel was dubbed a ‘war criminal’ which responded in a disproportionate manner to the attacks it suffered. It is a mistake to equate Israel with Hezbollah. Israel is a sovereign state and a member of the United Nations and has the right to defend its borders and its citizens. On the other hand, Hezbollah’s legitimacy is limited to it being a political movement in Lebanon, with representatives in its central government. What Hezbollah did on July 12 was a putsch against the Lebanese government: Nasrallah unilaterally hijacked Lebanese foreign and defense policies for the benefit of Hezbollah and to the detriment of the Lebanese people. Israel’s response is almost secondary to this basic fact.
Hezbollah’s claims Hezbollah has claimed the right to attack Israel because of what it perceives to be the continued occupation of Lebanese territory (e.g. Shebaa Farms — a claim disputed by the UN and Syria, which considers the territory its own), and the holding of Lebanese prisoners (such as Samir Kuntar, a convicted killer of children in a 1979 raid on Nahariya). The organization has even claimed to have the political approval of the Lebanese government in its fight against Israel. It has also justified its refusal to abide by Security Council Resolution 1559, which calls for the relinquishing of arms by militias in Lebanon, arguing that it is the protector of Lebanon against Israeli aggression. These are very problematic arguments because they challenge the right of Lebanon and its central government to decide on foreign and defense policies of the country, exercise sovereignty over all its territory, and to assert control over all armed forces in the country. It is even more troubling because Hezbollah has nurtured and broadened its power base in Lebanon on a combined platform of Iranian-inspired Shi’a radicalism and violence directed against Israel. Israel’s pullout and confirmation by the UN of the Blue Line in 2004 exposed Hezbollah’s true character: a
heavily armed Shi’a group that is seeking to usurp the fragile balance of Lebanese politics with generous support from Iran. What then is Israel supposed to do when it is forcefully pulled back into the quagmire of Lebanese domestic politics? Nasrallah believed Israel’s response would be limited, and would lead to indirect negotiations on a prisoner exchange. Indeed, he was quick to call for a ceasefire soon after Israel began its retaliatory offensive. The fact that Israel refused to respond along these lines and continued its onslaught came to be seen as disproportionate.
Unilateral withdrawal & peace Expecting a proportionate Israeli response assumes that Hezbollah and Israel are equals. They are not. It also assumes that war is an orderly affair. This suggests that we have learned nothing in more than six decades of asymmetrical warfare between states and guerrilla groups. The fact that an average of 200 rockets rained on northern Israel for days on end, indiscriminately aiming for civilians, does not imply that Israel was entitled to fire only 200 rounds against Hezbollah. Second, Hezbollah, in the tradition of guerrilla groups, built its power base among villagers in southern Lebanon either by intimidation or through sympathy
for its cause. The Lebanese government failed to protect those civilians the minute it allowed a continued Hezbollah ‘state within a state’ to exist in the south. The demand of Lebanon and many others in the international arena that Israel should not fire back at Hezbollah’s sources of fire because they were situated in population centers resembles the moral logic of someone who kills both his parents and then asks for consideration from the court because he is an orphan. Third, there is a very problematic underlying message in the demand that Israel respond proportionately: It essentially says that Israel, unlike other sovereign states, has no right to make the rules. Hezbollah hijacks Lebanon, carries out an act of aggression against a sovereign state, yet Israel is told that it must show restraint, measure its response, even accept a ceasefire when Nasrallah says so. For Israel, if there is one lesson of this experience, it is that a unilateral withdrawal will not result in peace or calm — in great part because hostility toward Israel has been a time-tested method of domestic political survival in the Arab world. Dr Anat Lapidot-Firilla is a researcher at the Center for Strategic and Policy Studies at the School of Public Policy in the Hebrew University of Jerusalem, and a research fellow at the Harry S. Truman Institute for the Advancement of Peace.
dialogue
How to avoid a rerun The immediate cause of the war that broke out across the Lebanese-Israeli border on July 12 may be said to be a serious miscalculation by Hezbollah, which, by the subsequent admission of its leader Sheikh Hassan Nasrallah, failed to anticipate the extent and intensity of Israel’s response to the abduction of two of its soldiers. Its miscalculation stemmed from several factors. First, Hezbollah believed that Israel was heavily engaged in Gaza, where it had been conducting military operations to retrieve a soldier abducted on June 28, and would not open a second front in Lebanon. Second, Hezbollah had been flexing its military and political muscle in Lebanon over the preceding year — during which it held several mass rallies of 500,000 people or more, and paraded combat units — and entertained an exaggerated sense of its ability to deter Israeli attack. Finally, it overestimated the practical significance of the genuine admiration it enjoys outside Lebanon — even among Sunni Muslims in other Arab countries, despite being a Shi’a Muslim movement — and overreached in seeing itself as the extension of a region-wide trend led by the rise of Shi’a power in Iraq, the prospect of a potentially nuclear-capable Iran, and the significant increase of Iranian influence in Damascus since the Syrian pullout from Lebanon in April 2005. It was inevitable that Hezbollah would pay a price for its miscalculation. In the first This article was written for The bridge at the end of September 2006.
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By Yezid Sayigh
instance it was compelled to accept a ceasefire proposal drafted by Lebanese Prime Minister Fouad Siniora, which called for implementation of key terms of the Taif Agreement that ended the Lebanese civil war in 1989, namely deployment of the Lebanese Army along the southern border with Israel and the disarmament of all militias. This became the basis for UN Security Council Resolution 1701 and the deployment of an expanded UN Interim Force in Lebanon (UNIFIL) with a stronger peacekeeping mandate. Second, Hezbollah faced deep unhappiness within Lebanon for having precipitated the war, including within its core Shi’a constituency, and was compelled to acknowledge its miscalculation openly in an effort to head off growing criticism. Even during the hostilities, its awareness of the potential backlash prompted it to delegate authority to negotiate a ceasefire and pris-
oner exchange to Speaker of the House Nabih Berri, its former rival for Shi’a representation and present electoral ally, and to the Lebanese government. That said, Hezbollah has worked continuously since the end of the 34-day war to restore its status quo ante, certainly with regard to the special political status that allowed it alone among all Lebanese parties to retain its militia and military capability. It won an early success when the Lebanese government dropped the demand for disarmament and required only that Hezbollah combatants and arms in the south become ‘invisible,’ an interpretation that Israel, along with the international community, tacitly accepted in the interest of securing a ceasefire. Hezbollah worked in parallel to repair the political damage done to its standing among the Shi’a, and was rewarded with an almost unprecedented turnout of some 800,000 for its ‘victory’ rally in Beirut, at which Nasrallah not only reaffirmed the party’s right to bear arms and continue ‘resistance’ to Israel, but also boasted that it held 20,000 rockets, more than it was estimated to possess at the beginning of the war. Hezbollah appears to have abandoned serious hope of winning over other sectors of the Lebanese public, however, which ex-
plains its focus both on achieving ideological hegemony among the Shi’a and on cementing its alliance with Syria and Iran. It has also raised the tone of its longstanding opposition to the government, while remaining a member of it in order to retain what amounts to a virtual stranglehold over major policy areas, including economic and social affairs, administrative reform, and security. This relative hardening of position probably reflects an effort by the Hezbollah leadership to contain internal questioning about the heavy price paid for provoking the Israeli attack. At the same time it heightens sectarian tensions in the country, which have already been on the rise since the assassination of former Prime Minister Rafik Hariri in February 2005. Civil war remains a remote possibility in a country exhausted by conflict, but sharpening competition ahead of the presidential election scheduled for September 2007 will polarize domestic politics and set the stage for a resumption of covert action — bombings and assassinations — by Syrian, Israeli and other intelligence agencies. The Lebanese government is too weak, and the national army too dependent on Shi’a rank and file (especially in the south), to weather a showdown with Hezbollah. Prime Minister Siniora gave graphic evidence of this following the Israeli air strike that killed dozens of civilians in the southern
town of Qana on July 30, by rejecting ‘any discussion other than an immediate and unconditional ceasefire’ ahead of a planned visit by US Secretary of State Condoleezza Rice, prompting her to cancel it. Even if deployed, the international force would not be able to intervene effectively to assist in the disarmament of Hezbollah, certainly not without risking a breakdown of government and army. Siniora and the March 14 bloc, which the US seeks to bolster, will finally emerge somewhat stronger, but the ramshackle nature of their coalition and tough domestic challenges facing them — especially financing debt estimated at $40 billion, privatization, and shedding jobs in the hugely bloated public sector — mean they cannot be free of the need to placate Hezbollah (or Speaker Berri). So Hezbollah
will see some diminishing of its influence but otherwise retain key political assets and sufficient military capability in one form or another to protect them, while claiming credit for bringing about a diplomatic process leading to resolution of the Shebaa Farms dispute. Israel: Lack of a strategy, lack of a policy If Hezbollah provoked the hostilities, it was the Israeli government that turned the initial confrontation into a war. Israel started under ideal conditions — international understanding, shared even by several Arab governments, and unanimous support among the Israeli public — and ended with a reasonable UN ceasefire resolution that, principally, mandated an arms embargo against Hezbollah and the deployment of UN and Lebanese troops along the common border. Yet the outcome has left Israel, and especially its Prime Minister Ehud Olmert and his governing Kadima-Labor coalition, in a deep dilemma. First and foremost, Israel has clearly failed to achieve the most important objec-
dialogue
tives for which it went to war. Leaving aside the more bombastic initial vows to destroy Hezbollah or at least disarm it completely, the fact is that Hezbollah remains very much a military, as well as political, force in Lebanon and maintains not only an armed presence in the south, but also much of its rocket arsenal. This is hardly good news for those in the Israeli political and security establishment who argued that a severe response to Hezbollah’s provocation was essential in order to restore Israeli deterrence: The speed and severity of Israel’s response have not been lost on Hezbollah or on Lebanese and Arab audiences generally, but more significant was its patent inability to coerce Hezbollah into ceasing fire unilaterally or abandoning its key military assets in order to obtain a ceasefire. Quite the reverse: What will count most is that a minor military actor such as Hezbollah was able to inflict extensive economic cost and the flight of around 30 percent of its northern population on Israel. Israel therefore faces the prospect of renewed fighting at a future stage within the next one to two years, unless, that is, it finally agrees to engage in a diplomatic process leading, among other things, to a return of the Shebaa Farms claimed by Lebanon. Second, more than anything else, the Israeli government’s headlong rush into war
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on July 12 revealed its lack of a coherent political strategy. This was demonstrated by Olmert’s decision, only hours after the abduction of the two soldiers, to eschew diplomacy and authorize a military campaign, without taking the time to define clear and attainable operational objectives nor formulate an integrated approach combining diplomatic and military means. It is apparent that Israel is now settling back into diplomatic inaction, a state of ‘no war, no peace’ on the Lebanese front, rather than seizing the opportunity to rethink its entire political strategy toward its northern neighbor. This is due in no small measure to its realization that dealing with the Lebanese file necessarily means addressing Syrian demands for the return of the remaining parts of the Golan Heights, occupied in June 1967. And this is something that all but a few Israeli officials — Labor leader Amir Peretz and the leftist Yahad Party — and a large part of the Israeli public refuse to countenance. The real problem, therefore, is that Olmert and his government have no strategy for attaining a stable endgame with Syria, nor indeed with the Palestinians, the other
principal neighbor with whom relations of conflict persist. Syrian President Bashar alAssad is more immediately concerned with avoiding the international inquiry into the Hariri assassination than with regaining the Golan Heights, and may not demand attention in the short term. But the Palestinians are concerned that Olmert has little more than a vague ‘convergence plan’ and clearly no longer has sufficient domestic support for Israeli withdrawals in the West Bank, let alone resumption of a formal peace process with a Palestinian Authority led by Hamas, or even by a Hamas-Fatah unity government. Yet this is the more urgent challenge. Regional implications The US administration, echoed by British Prime Minister Tony Blair, has already identified solution of the Palestinian-Israeli conflict as essential to stabilizing the Israeli-Lebanese front. This is welcome to key Arab governments, notably in Saudi Arabia and Egypt but also in Jordan and Iraq, which have been severely discomfited by their
need to maintain good relations with Washington while seeking to limit the impact on their public opinion of Lebanon’s subjection to Israeli military might with open US support. At the same time, the war in Lebanon has already exacerbated Sunni-Shi’a sectarian rivalry and fueled anti-US sentiment in the wider region, posing a threat to domestic stability in particular of Iraq and Saudi Arabia, along with Syria. The recent call to jihad against Israel by al-Qaeda’s secondin-command Ayman al-Zawahiri shows how Sunni-Shi’a rivalry may translate into intensified competition to confront the US and its allies. The US can do much to forestall this trend, especially by following through on its rhetoric about finding genuine political solutions to the Lebanese and Palestinian conflicts. However, there is little evidence that the US is any readier now than it has been in the past five years to invest the political capital needed to relaunch a credible peace process. Hope therefore comes from an unexpected quarter: the EU, which has made a major commitment of troops to UNIFIL, and in so doing revealed a newfound willingness to be proactive in the Middle East. This is a welcome development and offers significant opportunities, but also poses real risks. On the positive side, EU success in stabilizing
the security situation in Lebanon will enhance its diplomatic role elsewhere in the region. This is especially important given the loss of EU credibility and influence since it joined the US-sponsored Quartet and adopted its ‘Road Map to Middle East Peace’ in 2002-2003: The US used the Quartet to neutralize the EU and paid little attention to the road map. However, there are also risks. Not least is that of disappointed expectations if Europe’s assertiveness over Lebanon is not translated into bolder diplomacy in the Israeli-Palestinian conflict. The obstacles are obvious: not only the bias of the US administration and its manifest lack of interest in investing serious political capital in relaunching the Israeli-Palestinian peace process, but also the growing possibility, indeed almost the reality, of civil war in Iraq, which will inevitably divert EU attention and resources and diminish the impact of any gains or credit it acquires as a result of its role in Lebanon. The other main risk is that UNIFIL may find itself a target as one or other Lebanese actors — or Syrian agents — probe its resolve or threaten a resumption of ‘resistance’ against Israel as a means of gaining
leverage in the domestic contest ahead of the Lebanese presidential election. EU hopes of developing a major strategic and diplomatic role in the Middle East could not survive such a blow: The consequence would be a lack of willingness among the European public to support greater EU diplomatic activism, constraining the EU in developing its diplomatic initiative elsewhere in the region, particularly its declared intention of reviving the Palestinian-Israeli peace process. To avoid such an outcome, the EU needs at the first instance to initiate diplomatic exploration with Israel, Syria, and Lebanon about the future of the Shebaa Farms and Golan Heights. With a sharp political battle looming in Lebanon, in which Syria will unavoidably intervene both politically and covertly, the EU has limited time in which to make the effort and protect its broader political investment in the region.
Yezid Sayigh is professor of Middle East studies at King’s College London. He is a former Palestinian adviser and negotiator, and the author of Armed Struggle and the Search for State: The Palestinian National Movement, 1949-1993 (Oxford University Press, 1997).
dialogue
New and old
populism By Takis S. Pappas
For many, the specter of new populism is haunting Eastern Europe. Almost everywhere you look in the region, populist leaders, whether of a rightist or leftist hue, seem to be on the rise. With the legacies of Romania’s Ion Iliescu and Slovakia’s Vladimir Meciar still alive, a new generation of neo-populists has come to power in many countries on the back of promises to root out corruption and purify their nations. In Romania, Corneliu Vadim Tudor, leader of the ultra-nationalist Greater Romania Party, enjoyed recent political success with antiminority, anti-liberal and anti-Western rhetoric. In Poland, the governing Law and Justice Party, together with its populist allies SelfDefense and the League of Polish Families, stands firmly against former communists, liberals and foreigners. Jaroslaw Kaczynski, the prime minister and leader of the coali-
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tion government, likes to portray the situation in Poland as a bridge table at which the players are businesspeople, bureaucrats, politicians and crooks whose main interest is to exploit the people. He, in tandem with his twin brother Lech, the president of the country, promises to put an end to the game and cleanse Polish politics. In Slovakia Robert Fico’s left-wing Smer party, allied with Jan Slota’s right-wing Slovak National Party and Vladimir Meciar’s Movement for a Democratic Slovakia, developed a common platform of anti-liberal policies. Populism & democracy Of what does this new populism consist? And how serious a threat to democracy is it? Populism is an extremely vague and hardto-pin-down term which refers to both a certain set of ideas about the social elite and a mass social movement. In the realm of ideas, populism is based upon the principle that virtue resides in the ordinary people who form the overwhelming majority in society and are the guardians of deeply held, traditional values. Such a direct appeal to the people gives rise to widespread emotional feelings and collective enthusiasm. Populist movements, by stressing morality rather than clear political programs, bring together people from different socioeco-
nomic classes and often political enemies, ranging from traditional politicians and intellectual elites to big corporations and domestic minorities. The major fear about this new populism stems from Eastern Europe having a long tradition of populism. During the early decades of the past century, populist movements flourished in many countries of the region emphasizing xenophobia, anti-modernism and idealizing the peasantry, while at the same time advocating morality and the values of popular culture. But here end the similarities.
in Eastern Europe New populism New populism is different from old populism in four respects: the international environment, the social composition of electorates, the type of enemy, and the nature of populist leadership. Old populism arose, and became successful, in pre-capitalist and pre-democratic political settings. It developed in homogenous, predominantly agrarian societies at a time when democracy was in steep decline. In such environments, old populism set the small producer and shopkeeper against domestic rulers and foreign powers alike, making aggressive advances by generating rising expectations. In several countries this old populism was led by charismatic leaders able to build mass radical movements over which they exercised firm personal authority. The contemporary variant of populism is developing in conditions where both capital-
ism and democracy have become dominant. In today’s socially heterogeneous societies, populism, without being openly anti-capitalist or anti-democratic, addresses diverse social groups that feel threatened by key functions of capitalism (e.g. the free movement of labor across borders) and democracy (e.g. the protection of minorities). New populism is a local product and not in the same league as the supranational forces of European liberalism, international capitalism and globalized ideas with which it has to contend. Modern populist leaders are outgunned, unable to exercise charismatic authority and develop mass populist movements.
Mere demagogues Although widespread in contemporary Eastern Europe, new populism does not threaten democracy. In addition to the hostile international environment, new populism has to contend domestically with strong reformist forces. To the extent that living standards in Eastern Europe will continue catching up fast with the EU average, social support for populism will be hard to marshal and even harder to maintain. Populist leaders, far from being able to exercise charismatic authority, are merely demagogues exploiting diverse disadvantaged groups for temporary political gain. Without any real opportunities to develop sturdy roots, the new populism is bound to remain at the level of political discourse and sloganeering rather than grow into enduring political movements.
Takis S. Pappas teaches comparative politics in the Department of Balkan, Slavic and Oriental Studies, University of Macedonia, Greece. University of Macedonia website: www.uom.gr
themes
History lessons History lessons
On October 23, 2006, we celebrated the 50th anniversary of the Hungarian Revolution, one of the most influential events regarding the developments of the last decades. I am proud that as a young student in Hungary I took part in those dramatic events of 1956. I recall when we gathered 50 years ago — thousands of mainly young people outside the Parliament in the beautiful and impressive Kossuth Square — to demonstrate, to express our desire, our demand for a new beginning. Democracy & slogans My mind goes back to that day, a Thursday, when we saw the tanks arriving to disperse us. But we stayed there, steady, without fear, ready for anything that could have happened. The tanks approached us and then the miracle happened: Instead of shooting, they joined us. Young men climbed on the tanks and all together — soldiers and demonstrators — sent the message for a new beginning: ‘No more slogans, no more empty promises, but an honest government working for the people, with the people.’ For me, a young student then, and all those who lived through them, those days of the summer and autumn of 1956 are unforgettable. A whole nation rose up and its
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voice was heard loudly and clearly in all of Europe and around the whole world. ‘Enough is enough. We want freedom. We want real democracy.’ And, believe me, we were smiling, we were optimistic, we were convinced that we could indeed change the world, we could create a better future. A good university Many years later, when I was president of the Republic of Cyprus, in a discussion with former Prime Minister and leading intellectual Andras Hegedus, which was published by the 1956 Institute, I told him a true story: A friend asked me how it was that I, a newcomer to politics, was successful as a president and avoided making any serious mistakes. I answered, smiling, ‘Because I studied at a very good university: the University of the Hungarian Revolution.’ What we learned The revolution taught us many things, but above all that a leader should always try to listen to his people, to understand what they want and what they feel and never, ever to permit a gap to develop between him and the nation. Furthermore, he should never try to impose his will by force. The Hungarian Revolution was the beginning of the end for the Stalinist way of
By Dr George Vassiliou
running a country. Thousands and thousands of honest intellectuals in Europe and around the world saw their illusions shattered. The world realized that the only valid, relevant ideology is humanism: the need to care about your neighbors in this world, to value human life and human dignity, to promote peace and development. The cost We also learned that there is a high cost for postponing decisions and their implementation. You have to be courageous and do what has to be done. Never wait for a better tomorrow, because tomorrow the cost will be higher. As the old adage says, tomorrow never comes. Today, we live in a free, democratic, united Europe, but we must not forget that we owe a lot to the people of Hungary, to the revolution. We must all express our gratitude and say a great thank you. Thank you for signaling the end of the Cold War and the division of Europe. Thank you for teaching all of us how to serve our people. Dr George Vassiliou is former president of the Republic of Cyprus (1988-1993).
book reviews
Compiled by Alexandra Ioannidou
The post-communist average citizen In his book about civil societies in post-communist Europe, professor of government and politics at the University of Maryland Marc Morje Howard presents an interesting picture of Eastern Europe’s new democracies through the prism of their citizens’ participation in voluntary organizations. Based on an ingenious, comparative empirical study, Howard verifies the lack of broad participation in civil society organizations in post-communist Europe. After an introduction to prior bibliography on the subject and to the different methodological tools as far as the conducting of the research is concerned, Howard comments on the results of his survey that he conducted in Russia and Germany in 1999, combining them with the information about citizens’ participation in various organizations and associations compiled by the World Values Survey from 1995 to 1997. He reports the results of the WVS for 31 countries and then introduces and discusses the most important finding of his study: Civil society (measured as the number of organizational memberships per person) is by far the strongest in older democracies, weaker in post-authoritarian states and conspicuously the weakest in post-communist states. A further finding of Howard’s study is that there is a tremendous difference in the rates of participation in civil society between the ‘West’ and the ‘East.’ He leads this finding as to the East back to three main reasons: the former mistrust of communist organizations, combined with the persistence of friendship networks and the disappointment with post-communism. He then argues that ‘citizens with higher levels of mistrust in communist organizations tend to be less active in voluntary organizations today, that people whose friendship networks have persisted in the postcommunist period are less likely to join organizations today, and that the more disappointed people are with post-communist development, the less likely they are to participate.’ The above results are supported and confirmed by in-depth interviews with 30 Russians and 30 East Germans. Concluding his research-presentation, Howard emphasizes the most crucial question: What kind of democracies are emerging in the post-communist part of Europe? If one presupposes active participation in civil society organizations for a really functioning modern democracy, since the level of participation in post-communist countries is very low, are we to conclude that democracy’s prospects are dim? Howard actually denies that weakness of civil society necessarily correlates with a weak or unstable democracy. Still, civic participation should be increased. Howard expresses hope that through the generational change and very good, organized, concerted education the situation could change. He also believes that, combined with the ‘improvement in the overall economy,’ participation in various civil society organizations could increase.
Marc Morje Howard, The Weakness of Civil Society in PostCommunist Europe. Cambridge University Press, Cambridge, 2003.
Alexandra Ioannidou is lecturer at the Balkan, Slavic and Oriental Studies Department, University of Macedonia, Thessaloniki, Greece. University of Macedonia website: www.uom.gr
The Balkan inferno
Misha Glenny, The Balkans, 18041999: Nationalism, War and the Great Powers. Granta Books, London, 2003.
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In his classic history of the Balkans, first published in 1999, Misha Glenny, in a survey of two centuries, looks back into the history of the Balkan countries, making it easier for his readers to understand the last decades’ mostly terrible events in the region. Glenny’s book offers readers who have never dealt with the Balkans as a whole an overview of the events from the beginning of the 19th century, detaching the focus from each Balkan country separately and facilitating the comprehension of the specific characteristics of the region as a whole. Although he pays more attention to wars and political conflicts, which he describes in a chronological manner, Glenny also deals with individual stories, thus illuminating better the impact of history on the lives of people. The use of biographical data and archive materials makes his book attractive to readers, regardless of their sporadic, non-systematic, journalistic presentation. The uprisings against the Ottoman occupation signify for most Balkan countries the beginning of their modern history, and for Glenny the beginning of his survey. At the same time, he particularly stresses the influence of Russia’s and Turkey’s antagonism on the region, especially on the Danubian principalities.
The First Balkan War is justly described as an ‘inferno.’ Glenny chooses to focus on the Macedonian conflict in 1912, on Thrace and the siege of Skutari by the Montenegrins. The Second Balkan War signified ‘Bulgaria’s catastrophe.’ Glenny refrains from getting into detail about the Balkan wars. The period between 1878 and 1914 is actually covered by two parallel chapters — the first focusing on the Ottoman Empire and the Macedonian Question and the second on the Austro-Hungarian Empire and the complex Slav politics. In doing so, the author maintains and strengthens a methodological separation between the Northern and Southern Balkans, depending on which great power the respective areas were influenced by. Glenny presents Serbia’s and Bulgaria’s entanglement in this war as a ‘Golgotha.’ ∞round 1923, Glenny positions the ‘red dawn’ in Bulgaria, as well as the first conflicts in the ‘impossible state’ of Yugoslavia, mirrored in the dispute about the constitution. Zogu’s role in Albania and Mussolini’s Balkan adventure in Albania, the impact of the Great Depression of 1929 on the area and political radicalization, the Ustasha in Croatia, Tsar Boris of Bulgaria and Carol II of Romania are all taken into consideration in Glenny’s description of the beginning of World War Two in the region. In describing WWII violence in the Balkans, Glenny deals extensively with the genocide of the Jews in the area, covering each country separately. Communism in the Balkans is treated in a rather simplified way which more or less equalizes communism with Stalinism (Glenny excludes here the case of Yugoslavia) in the characteristically titled chapter ‘Prisons of History.’ Overall, Misha Glenny’s book about the Balkan history of the last two centuries is written in a very vivid and appealing way for the reader. It certainly gives an overview of all Balkan countries and can help anyone to comprehend the most recent conflicts and problems of the area. Unknown or lesser-known terms, names, personalities and events are explained in a fascinating narrative.
book reviews The great powers and SEE
Tom Gallagher, Outcast Europe: The Balkans, 1789-1989, From the Ottomans to Milosevic. Routledge, London, 2001
The same period is covered by another interesting book: The first part of a trilogy about the Balkans by Tom Gallagher (the other two: The Balkans after the Cold War: From Tyranny to Tragedy, Routledge, London, 2003; and The Balkans in the New Millenium: In the Shadow of War and Peace, Routledge, London, 2005) constitutes an illuminating account of the conflicts in the area as well as of the relations of Southeast European countries with the great powers in the 19th and 20th centuries, i.e. from the emergence of nationalism to the retreat of communism in 1989. Gallagher’s main argument is that the proximity of
the Balkans to the great powers is the main reason for instability. Britain, Russia, Austria-Hungary, France and finally the USA have all harbored ambitions and interests in the region. ‘A Greece truly independent is an absurdity,’ stated the British diplomat Sir Edmund Lyons in 1841, for example. The author writes clearly, utilizing a wide range of secondary sources. Special attention is paid to the role of Britain in Balkan affairs and to Romanian history, in which Tom Gallagher specializes.
The human rights regime In one review about Misha Glenny’s and Tom Gallagher’s books, John Cox rightly poses a crucial question about the future of the Balkans: ‘If so many of the Balkans’ problems have been created or exacerbated by outside actors, especially the West, how confident can we be of the ability and commitment of the EU, NATO, and other international bodies to contribute to get things right this time?’ Janne Haaland Matlary, professor at the University of Oslo’s Department of Political Science and former state secretary for foreign affairs in Norway, explores in her book the perspectives of the human rights intervention through international organizations, the Council of Europe, the OSCE and the EU. Western states and international organizations increasingly intervene in other states to restore democ-
racy and human rights. Such intervention is problematic as it challenges state sovereignty and imposes Western notions of governance. Traditionally, the international community has been averse to meddling in the domestic affairs of others for such reasons. Matlary concentrates on the international organizations because she believes that the direct role of states constitutes hard power intervention. However, international organizations are also intergovernmental bodies with the state power in active actors’ roles. Matlary proposes the hypothesis that states are motivated by various types of interests, based on security and economic factors as well as values. She knows that the value motivation cannot be expected to be dominant, but insists that one should not
shut down such motivations, as the mainstream international relations theories of neo-realism and neo-liberalism do. In her attempt to find a balance between economic and valuebased interests, she suggests the interest-based regime theory, with the addition of value-based interests. The trend toward legalization and institutionalization of human rights and human security strengthens the regime and regime powers. The human rights regime and its impact should therefore be studied much more as being at the forefront of a general development in international politics. Matlary dedicates her book to ‘the victims and survivors of the Balkan tragedy — that human rights be theirs.’
Janne Haaland Matlary, Intervention for Human Rights in Europe. Palgrave, New York, 2002.
4 The Rio -Antirio Bridge Western Greece