Economic Perspectives of the Western Balkans

The economic situation in the Western Balkans can be best described with the term “cumulative crisis”. Unfavorable economic consequences of the wars and the disruption of international economic relations in the nineties were aggravated by the problems of transition and reform after the turn of the millennium. This already difficult situation was further exacerbated by the international economic and political crisis in recent years. In order to manage the region’s multiple economic challenges, the solutions offered by international institutions are mostly based on budget consolidation and structural reforms. Austerity measures may be coupled with the privatization of currently profitable firms through the involvement of foreign capital in order to increase budget revenues and because of the scarcity of domestic capital. Based on recent developments across several countries, it is realistic to expect that these measures will significantly increase the risk of hostile attitudes against foreign investors and owners unless the living standard of households improves according to expectations. The same disappointment may easily prompt hostility against the European Union or the democratic transformation resulting in increasing resistance against the current economic and political model. (Click on the picture.)