Courtesy Reuters

A European "New Deal" for the Balkans

GREAT EXPECTATIONS

The NATO campaign in Kosovo has been hailed as a decisive turnaround in Western policy toward southeastern Europe. With Yugoslav security forces out of Kosovo and the inauguration of the European Union's Stability Pact at the Sarajevo summit of July 30, committing the EU to eventual acceptance of the area's states as members, Western publics are being told that the path has been laid for resolving the decade-long crisis in the Balkans. But nothing could be further from the truth.

The basis for long-term stability and non-nationalist politics in southeastern Europe lies in its economies, and here the picture is bleak. Croatia, once celebrated for its macroeconomic reform, is on the brink of a financial nosedive with 20 percent unemployment. The recent enthusiasm for Romanian economic reforms has given way to doomsday scenarios. In Albania and Macedonia, the economic effects of the Kosovo crisis have interrupted serious progress on recovery and reform and now threaten plummeting growth rates and political instability. A sharp decline in foreign aid for Bosnia will hit well before the reforms needed to create jobs are complete. And the great expectations for the EU's Stability Pact remain blocked at the region's center by the apparent durability of Slobodan Milosevic's regime. Without a solid foundation for jobs, growth, and improved social welfare, the region could settle into a stalemate of chaos and Western crisis management for years to come -- as locals already gloomily predict.

Beyond immediate humanitarian relief and reconstruction aid, the international community's current answer to this problem is conditionality: reform yourself, and then we'll talk. Reform is indeed vital. But the origins of the Yugoslav crisis lie in the collapse of reform efforts precipitated by the immediate post-Cold War political, economic, and security vacuum. As long as the West continues to view the crisis in terms of endemic nationalist conflict and ethnic hatred, rather than in terms of its own (remediable) policy failures, progress on reform will not be made.

The Balkans have reached a

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