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Update No: 062 (20/06/02)

Patched-up peace
The Former Yugoslav Republic of Macedonia (FYROM) is in a perilous state. It narrowly avoided civil war in 2001, saved as much as anything else by 9:11.
For soon afterwards ethnic Albanian rebels gave up their struggle to secede from Macedonia, strongly influenced by their realisation that NATO support for Albanians, decisive in the Kosovo War, would not extend to outright secessionist adventures in the southern Balkans.
The peace has been kept by the Amber Fox military mission, staffed by the Americans and the Europeans. The Americans who played the leading role, as in Bosnia, are due to hand over to an EU defence force in September. But intransigence by the Greeks to the NATO umbrella for this force, motivated by opposition to the strong role in it of Turkey, is threatening to scupper it (See Turkey).
Amber Fox has been providing security for EU monitors, and supervising the return of refugees to their homes after last year's fighting. 

US v EU by proxy
This will not necessarily mean an end to an EU role. Javier Solana, the EU's foreign policy chief, and Spain, holders of the rotating EU presidency, want to take over a commanding position in military operations in Macedonia as part of the European Security and Defence Policy (ESDP).
The US, dominant in NATO, is averse to the ESDP of the EU, which, it fears, portends a lessening of its hegemony over transatlantic military matters. It is almost certainly wrong, given its stupendous lead in technology and financial clout. But a showdown between the US and the EU on the issue is imminent, being fought by proxy (as is the US's wont these days with all its wars) between those responsible for NATO forces and those responsible for potential ESDP ones on the ground in tiny Macedonia. 

Economy rebounds with difficulty
The economy has naturally been adversely affected. GDP growth, which was 4.6% in 2000, plunged by 4.6% in 2001. Prospective growth for 2002 is 3%. 
Foreign investment has been negligible. Much remains to be done by the coalition ethnic Albanian-Macedonian government.

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FOREIGN LOANS

Macedonia fails to agree new loan deal with IMF 

Macedonia and the International Monetary Fund failed to strike a deal on a new stand-by financing arrangement, delaying Western aid needed to sustain an uneasy peace after last year's ethnic conflict, Reuters reported.
"We began discussions on a new programme that could be supported by the IMF. However they were not concluded owing to remaining differences on macroeconomic projections and the policies themselves," Franek Rozwadowski, Washington-based director of the IMF's Macedonia section, told a news conference.
The lack of an IMF deal will delay the delivery of a small but significant portion of US$274m in aid pledged to Macedonia at an EU-sponsored donors' conference in March.
Macedonia badly needs the cash to rebuild an economy ruined in last year's six-month conflict with ethnic Albanian rebels, which brought the Balkan state to the brink of civil war.
The main sticking points in the failed two-week negotiations were government plans to refund depositors in a failed pyramid investment scheme and to raise public sector wages, steps aimed at calming civil unrest before general elections in September.
"This policy puts a burden on the budget and as a result the budget deficit for 2002 will exceed the agreed target," Rozwadowski said.
Under an earlier IMF budgetary oversight program Macedonia is required to keep its budget deficit within 2.7 per cent of gross domestic product. That is well below the roughly 6 per cent shortfall in 2001 caused by soaring military spending, and compares with a 2.5 per cent budget surplus in 2000.
A US$4m deal signed with the IMF a year ago to support free market reforms was halted before any money was disbursed when it became clear Skopje would be unable to attain the required budget balance, as fighting broke out in February 2001.
Rozwadowski said Macedonia had met nearly all the IMF's targets for the budgetary oversight program and its budget implementation had been satisfactory.
Finance Minister Nikola Gruevski said he was confident that a deal would be agreed in October when talks with the IMF are due to resume, and that would allow the aid to arrive before the end of the year.
"It's obvious that we have a good chance of completing the negotiations successfully," he said at the news conference.
Analysts say negotiations were put off until October - after the general election - when the government may be better disposed to agree to a strict spending policy.
Macedonia is one of the poorest countries in Europe with a jobless rate of over 40 per cent and an average monthly income of around US$155. A small minority has been enriched by corruption and black marketeering.

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TELECOMMUNICATIONS

South Macedonia welcomes investments in telecoms 

To coincide with the "World day of telecommunications" (May 17th), Macedonian officials laid a symbolic cornerstone of a new monitoring station in the southern city of Bitola in late May, New Europe has reported.
Close to its border with Greece, the station will monitor radio from the southern cities of Bitola and Ochrid, as well as programmes from northern Greece.
The government will fund the station's construction and plans on completing it by this September, Europemedia.net reported. Equipment, valued at 1.5m Euros and provided by Germany's Rode Schwartz, will be installed in the monitoring station.
Another example of European investment in the region is evidenced by Siemens having signed an agreement, with Macedonia's Electric Power Supply (ESM) company and Ochrid's EMO, for the provision of a 400 kW energy transfer of 300 MVA, for the Skopje 5 power plant.

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TRANSPORT

Macedonian railway, steel companies sign agreement on goods transport 

General directors of Macedonian Railways and Makstil companies from Skopje, Vladimir Sokolovski and Tomislav Kaev, signed a one-year agreement for transport of goods on 6th June, MIA News Agency has reported. 
The agreement foresees transport of 500,000 tonnes of steel and other raw materials for the needs of Makstil enterprise, which will provide profit of 5m euros to the Macedonian Railways. 
The general director of the Macedonian Railways expressed the hope that this agreement, as the agreement in 2001, would be successfully realised, thus enhancing the financial situation in the company. 
"This agreement will improve the financial situation in the company, especially after the cancellation of the transport of crude oil after the opening of the oil pipeline," Sokolovski said. 
The Makstil leadership announced that despite the armed conflict in Macedonia in 2001, the company produced 10 per cent more steel than planned.

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