Sofia view: Montenegro on the EU doorstep

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Believe it or not there are countries still wishing to join the EU, at a time international financiers are certainly not betting on its health. Croatia is set to enter on 1 July 2013; Iceland is currently negotiating its accession; and the countries of the Western Balkans are still queuing up to join. If you have to put your money which ex-Yugoslav country will follow Croatia then Montenegro is surely the safest bet. Yesterday, during a meeting in Luxembourg, the EU’s foreign ministers decided to open accession talks with the Balkan republic (a decision likely to be rubber-stamped at the forthcoming summit on 28-9 June). Reflecting the spirit of jubilation, Prime Minister Igor Lukšić said this coming Friday, when talks will be officially launched, would be “Montenegro’s greatest day”.His country could well make it in by the end of the decade if talks move according to the timetable.

It won’t be an easy ride. EU member states would need plenty of reassurance that Montenegro would clamp down on corruption and organised crime. For example (the otherwise pro-enlargement) Sweden has lately been very critical, with Carl Bildt expressing doubts whether Podgorica had met all the benchmarks – in particular Chapters 23 and 24 ("Judiciary and fundamental rights" and "Justice, freedom and security"). In all fairness, the EU’s record in promoting reform is patchy. Membership motivated Croatia to clean up its act and even sentence Ivo Sanader, an ex-prime minister, on corruption charges.  But elsewhere, notably in 2007 members Romania and Bulgaria, there is widespread scepticism, both internally and in Brussels, as to the effectiveness of the endless stream of anti-graft laws and strategies adopted under the auspices of the EU.  And it is hard to see a Montenegrin Sanader coming. Since the end of Yugoslavia Montenegro has been ruled by the same political force: the Democratic Party of Socialists, heir to the local chapter of the League of Yugoslav Communists.

But Montenegro has lots of advantages over its ex-Yugoslav peers. Since 1998 the government has followed a consistently pro-Western course. A friendly divorce from elder brother Serbia in 2006 speeded up, as expected, integration into the EU. Other strong points include a small size, even by Balkan standards; the accommodation of minority communities such as Bosnians and Albanians; and the lack of open territorial issues with neighbours (the demarcation of border with Croatia at the Prevlaka peninsula notwithstanding). As of 2012, Montenegro looks more like a miniature version of Bulgaria or Romania, in comparison to the other EU candidates, Serbia and Macedonia. Rule of law is a more urgent concern than the usual headaches concerning borders and ethnic balances (as important as they are).

Yet the key question is whether Europe is still a source of stability for the Western Balkans, as it has been since the end of the Kosovo war.  Montenegro, which boomed before the global crisis struck in 2008, is a case in point. Indeed the EU’s decision comes a few days after Standard and Poor’s downgraded the Balkan republic’s sovereign credit rating to BB-, quoting problems in the effort to stabilise government debt, weak growth, and diminishing external flows to the banking system. Markets are not impressed by the EU’s upbeat assessment. In fact, some of the issues are connected to Montenegro’s exposure to the EU. The local economy is dependent on FDI (11.9% of GDP in 2011, according to the IMF), with annual inflows halved after 2009. The Western-owned banking system is not extending credit, as in much of the region. Exports are stagnant as the metal industry is in a bad shape (Montenegro adopted unilaterally the euro in 2002 so monetary policy cannot fix that).Tourism seems to be the only growth sector at present.  Montenegro is on the edge of recession, with GDP set to rise by only 0.5% in 2012. The government is struggling to rein it public debt of 47% of GDP, as well as a soaring deficit. After two years of modest recovery the euro zone crisis is now being felt acutely across Europe’s marches.

The challenges faced by Montenegro are a thought-provoking reminder of how well the Europeanisation of the Balkans has fared. As ECFR’s forthcoming brief looking at enlargement in a time of Eurocrisis (which I am busy writing) argues, the regions’ preoccupations mirror those of the EU. Montenegro is not exceptional. Serbia’s incoming government has to implement the tough belt-tightening measures required by the Stand-By Agreement signed with the IMF in 2009. The regional frontrunner Croatia is heading for recession in 2012 with the economy projected to shrink by 0.2%. Slow or negative growth resulting in growing unemployment dilutes EU’s famed transformative power as it increases the costs of reform on the path to membership. Thus far the region has remained stable, averting a Greek scenario. But as the Economist Intelligence Unit put it in a recent analytical piece, this stability might prove deceptive. If the euro zone plunges into recession there will be little hope left for the Western Balkan periphery.

The truth is that all countries after Montenegro will be much more difficult to integrate due to widely acknowledged political constraints. It is hard to see another Western Balkan country making rapid progress on the accession track, although Serbia has built considerable momentum. For a long time economics provided a welcome cure to the pathologies of local politics. Hopefully it will stay like that. Or else the EU itself will prove to be enlargement policy’s most formidable enemy.

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