Ghosts of war haunt Bosnia’s European future

By Andrew MacDowell

Ethnic and political deadlock is stifling the economy and annoying Brussels.

SARAJEVO — It’s two decades since a massacre in Srebrenica prompted NATO to intervene to stop the war in Bosnia. But the state created out of the 1995 peace deal is struggling and dysfunctional, leaving Bosnia lagging in its bid to eventually join the EU.
Some movement in recent weeks toward the Union has been quickly followed by disappointment.

In early June, Bosnia’s EU Stabilization and Association Agreement finally came into force, reviving efforts for it to join the bloc. The agreement had been frozen since late 2007 because of lagging political reforms.
The idea was to push troublesome constitutional changes into the future, and put in place a raft of economic reforms aimed at improving living standards for ordinary Bosnians, rather than focusing on demands to change the ethnically-defined political system.
But by June 10, Milorad Dodik, president of the ethnic Serb entity, the Republika Srpska, refused to sign a more detailed reform agenda put forward by the EU, objecting to measures that included energy privatization. As a result, Enlargement Commissioner Johannes Hahn canceled a planned visit to Sarajevo during which he was due to sign off on a draft of the program.
Dodik is now playing Russia off against the EU. Dodik, together with the government of Serbia, managed to rope Moscow into using its UN Security Council veto on Wednesday to kill a resolution on the 1995 Srebrenica massacre, when Serb fighters slaughtered more than 8,000 Bosnian Muslim men and boys after overrunning a UN enclave where they had sought refuge.
“Everything is done to promote a non-truth, namely that there was a genocide there, while ignoring the Serb victims,” Dodik told Bosnian Serb television.

Unemployment at 60%

The past continues to overshadow Bosnia in other ways, such as hampering efforts to kickstart a sputtering economy.
Bosnia’s youth unemployment, at 60 percent, is one of the highest in the world. Multiple layers of government, sometimes with inimical interests, lead to political deadlock. Inefficient government-linked companies, run on patronage, proliferate.
It is “a pretty challenging country,” was the understated assessment of one senior Western diplomat in Sarajevo.
The challenge is growing. Anti-government protests in Bosnia last year and the ongoing political crisis in nearby Macedonia have highlighted the continuing risks of instability in the Balkans.
“Bosnia and Herzegovina … has been stuck for years,” Croatian Foreign Minister Vesna Pusić, who helped initiate the new reform agenda, told POLITICO. “But there is hope that there might be a breakthrough in the coming year, and where there is hope, there is interest. I believe there’s a chance to succeed.”
The idea is that economic reforms will create a more favorable environment for tackling ethnic issues, partly by expanding the number of Bosnians who have private-sector jobs and are less dependent on state patronage.
One example of how constitutional reforms have been at least temporarily shelved is the so-called “Sejdić-Finci” question. This was a response to a European ruling that found Bosnia in contravention of the European Convention on Human Rights for effectively barring anyone not defining themselves as Serb, Croat or Bosnian Muslim from official posts, including the presidency and the upper house of parliament.
The case was brought by prominent members of the Jewish and Roma communities who pointed out that they were disenfranchised by the system, installed by the 1995 Dayton Agreement which brought the war to a close.
But the pressure now is less on untangling issues like that — for the time being — and more on economics and business.
“The country is not as stable as we’d like,” said the diplomat. “The new approach is a recognition that the country can’t afford to just focus on constitutional and political reform — though that has to be resolved, that simply has to happen — but should take into account other things that are more important to ordinary people, like jobs.”

Elites block reforms

There is an enormous amount to do. Although the International Monetary Fund predicts the Bosnian economy will grow by about 2 percent this year, the country has fallen far behind its regional peers. Bosnia is significantly poorer than Montenegro and Serbia.
“Growth could accelerate to 4 percent over the medium term, provided that sustained progress is made in structural reform implementation,” noted the IMF in a recent assessment of the Bosnian economy. “Absent this, growth prospects are likely to be much weaker than before the crisis.”
Serbia is doing better in its quest to join the EU. It signed its stabilization and association agreement in 2007, has visa-free entry to the EU, became a member candidate in 2012 and is engaged in accession negotiations. Even Macedonia, dogged by the dispute over its name with Greece and also dealing with ethnic tensions, is further ahead. While Bosnia has not yet formally applied for membership, Macedonia has been a candidate since 2005.
In Bosnia, diplomats are confident that there is at last momentum behind change following protests early last year in which government buildings were torched and officials’ cars tossed into a river. This, they say, has shaken Bosnian politicians out of their torpor and made them realize that the status quo is unsustainable. It has also reminded the international community that the country is potentially unstable.
The senior diplomat calls the association agreement “a down-payment” on Bosnia’s future reforms. But it places the onus on Bosnian politicians to honor commitments that may actually be opposed to their interests.
“There is very little appetite to undertake challenging reforms that would damage Bosnia’s elites, especially where public sector, pension and labor market reforms are concerned,” said another diplomat with long experience in Bosnia.

Bosnian Serbs push away

Dodik is not only opposing the EU initiative, he also recently called for a referendum on the Serb enclave’s secession from Bosnia in 2018 should it not be granted further autonomy.
In the Croat-Bosniak part of the country that accounts for 51 percent of its territory, there are also continuing tensions. The entity’s government is on the brink of collapse over disagreements on the divvying up of management of state-owned companies.
It is not just the political elite that is skeptical: trade unions have already rallied against labor reform, and threatened a “final showdown” if the authorities persist with liberalization.
“Some of my European colleagues have said that Bosnia and Herzegovina has been given this window of opportunity and they have to use it,” said Pusić. “My approach is that this is true, but we have to reach through the window and pull them through in order for this to work.”