Ethnic tension in Macedonia


Kosovo’s president Fatmir Seydiu was the only head of state that was not invited to George Ivanov’s official inauguration on May 12th this year. This fact provoked a strong discontent in the Albanian parties in Macedonia and Menduh Tachi’s oppositional Democratic Party of Albanians (DPA) boycotted the ceremony. Hence on May 13th, Kosovo’s head of state received an invitation from his Macedonian colleague, which was confirmed the same day, for a one-day visit to the country. However, later on, Kosovo’s head of state cancelled his visit, which was supposed to take place on May 28th, 2009. The reason for his cancellation was that Macedonia changed his visa status from citing official visit to work visit with no state ceremonies. A few days after the scandal, Tachi requested that a new agreement between Macedonians and Albanians is drafted since, according to him, the Government and the ruling VMRO-DPNME destroyed the Ohrid Framework Agreement, which in 2001 ended the armed conflicts in Macedonia between Albanian guerrillas and Macedonian security forces. In the meanwhile, Ali Ahmeti, the leader of another Albanian party in Macedonia and VMRO-DPNME’s coalition partner – the Democratic Union for Integration (DUI) – was greeted in Brussels in the same way that the Macedonian PM Nikola Gruevski was greeted not long ago, which could be taken as a political sign of how the Government should treat its political partner. DUI’s leader was invited to Brussels for a private party visit on which he wanted to show that Albanians in Macedonia want a faster solution of the name conundrum and that the country still needs the help of the EU when it comes to realizing the Ohrid Framework Agreement. According to the DPA, this scandal might lead to the disintegration of the ruling coalition, which the DUI is involved in.



Analysis and forecast (↑ increasing risk)


The DUI is put under extreme pressure since it has to consider not only its electorate but also the other oppositional Albanian parties. Surveys show that ethnic Albanians, which constitute around one fourth of the population, are willing to compromise on the name issue while Macedonians, on the other hand, associate the name of the country with their identity. That, together with the recent back and forth between the countries’ heads of state, is creating unnecessary ethnic tension in the country. Only the prospect of NATO, and later EU, membership has the power to unite Albanians and Macedonians within the country. The more it is postponed, the more uncertain becomes the stability of Macedonia. If Albanians and Macedonians are deprived of this perspective, the rising ethnic tension and the increasing centrifugal political attitudes could jeopardize the existence of the country as a unitary state.



Macedonia Passes Budget Rebalance


Macedonia’s Parliament adopted a budget revision proposed by the government aimed at reducing both revenues and expenditure figures for 2009. Macedonia was forced to cut budget figures by approximately 9.0% of its EUR 2.5 billion budget for this year. Overall budget revenues this year have been reduced by EUR 170 million with expenditure reduced by about EUR 168 million while leaving deficit for the year practically unchanged at EUR 187 million. Despite the downward revision of macroeconomic policies the government expects a 1% GDP growth, down from the initial 5% projection. The average annual inflation target for 2009 was also revised to 1.0% from 3.5%.


Analysis and forecast (↓ decreasing risk)


The revision of budget projections for 2009 is definitely an important step to guarantee the stability of the public finances and the confidence of foreign investors. However, Macedonia is likely to be forced to rebalance the budget as despite budget cuts expenditure is still to be aligned with the revenue. Macedonian budget for 2009 was conceived as highly spending-oriented aiming at avoiding recession, but higher than expected budget deficit and large trade gap may threaten local currency stability. The central bank recently raised the banks’ mandatory reserves requirement from 10% to 13% for foreign currency loans and from 10% to 20% for loans in local currency in an attempt to support the denar and the stability of the banking system. Additional measures to rebalance the budget are expected to be made in the second half of the year.


The balance of the central budget in Macedonia



Source: Ministry of Finance of Macedonia