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07/20/99:

 

Source: Financial Times

Macedonia is 'on the brink of crisis'


The government says the international community has failed to fulfil promises made at the height of the Kosovo conflict,
writes Joe Cook

Macedonia is on the brink of an economic crisis that could trigger conflict between the country's Slavic majority and large Albanian minority, say government leaders and diplomats.
The government of the former Yugoslav republic blames its desperate economic plight on what it perceives as the international community's failure to deliver on promises of financial assistance made at the height of the Kosovo crisis.
At an international donor's conference in Paris in May, Macedonia was promised $252m in credits and grants to help offset the economic impact of the Kosovo crisis. However, Ljubco Georgievski, the prime minister, says the country has so far received only $6m from the US and E12m ($12.1m) from the European Union.
"If we do not receive serious assistance by September we'll have a serious crisis," he said. "And we should not underestimate the possibility that a social disaster would displace ethnic tolerance."
Although western diplomats and international organisations in Skopje take umbrage at the government's daily reminders of the west's unfulfilled promises of aid, privately they are deeply concerned about Macedonia's stability.
"The international community has to release aid before the autumn to stop social unrest," said a western diplomat. "If we let this place become destabilised we'll have a real mess on our hands."
Macedonia's small and fragile economy took a battering during the Kosovo crisis as more than 300,000 Albanian Kosovar refugees - equal to 15 per cent of Macedonia's population - streamed south across the border and the country's main trade route through Yugoslavia was cut.
Yugoslavia was Macedonia's second biggest export market after the European Union, accounting for 18 per cent of exports. This trade has stopped. Transport costs have risen by an estimated 30 per cent as goods destined for the EU are re-routed through Bulgaria and Romania.
Mr Georgievski says that Macedonia's losses directly attributable to the war are $430m, excluding refugee-related costs.
The collapse in business activity has led to increased insolvency. Unpaid corporate debts have risen by 50 per cent and the number of blocked bank accounts by more than 40 per cent, according to a recent assessment of the national economy by the Organisation for Security and Co-operation in Europe (OSCE). Worse, an estimated 40 per cent shortfall in revenue collection has left public finances close to exhaustion.
Mr Georgievski's government, formed last December, came to power promising reform, growth and job creation. It signed an agreement with the International Monetary Fund which included the planned closure of 12 huge loss-making state enterprises that together employ some 50,000 people. However, the Kosovo crisis has slowed the reform process and made the government hesitant to close factories.
Unemployment has risen from 34.5 per cent in 1998 to 40 per cent of the workforce, or about 320,000 people - 70 per cent of whom are aged between 15 and 24. On top of this, trade unions report that some 40,000 people are on "forced leave" and that 120,000 workers have not been paid for two months.
"In the Balkans, the scapegoat is always the minority within," says Madeleine Hagg-Liljestrom, an economist with the OSCE in Skopje. "Our fear is that when autumn comes there will be problems."
Ethnic Albanians account for 23 per cent of Macedonia's 1.9m people. Although Mr Georgievski's coalition includes an ethnic Albanian party and tries to promote a policy of ethnic inclusion, Albanians find it difficult to gain access to higher education, are under-represented in the state administration and are generally disliked and mistrusted by Macedonian Slavs.
There are some bright spots. In June, at the height of the crisis, Hellenic Petroleum of Greece agreed to acquire a 54 per cent stake in the OKTA oil refinery in a deal worth $184m. And in September Brussels is due to open negotiations with Macedonia on the EU's new Stability and Association Agreement. Mr Georgievski describes this as a "political satisfaction for our role in the Balkans that I think we deserve".
Nevertheless, the country needs an infusion of money, fast. "We are not asking for mercy, just for help," said Martin Trenevski, minister for emigration. "And if help doesn't come we'll have a domino effect: economic crisis followed by social crisis followed by ethnic crisis."

 

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