Building Peace in South East Europe

Abstract

Before the Kosovo conflict, the countries of South East Europe (SEE)--albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia, Romania, and FR Yugoslavia--were at different stages of economic development, integration with the global market, and transition to a market economy. The economic performance of the group as a whole lagged behind that of Central Europe and the Baltics. The reasons for this development lagged behind that of Central Europe and the Baltics. The reaosns for this development varied from country to country, but ethnic conflict, political instability, and a timid and fitful approach to structural reform characterized several of them. The Kosovo crisis of spring 1999 and its aftermath was, in some ways, a defining event for the region. After the conflict and the political and economcic changes in FR Yugoslavia, there are encouraging, though early, signs of a broad-based improvement in the See countries' economic performance. Growth is strengthening and inflation is slowing in most SEE countries. Perhaps, more importantly,policy makers appear to be more sharply focused on macroeconomic stability and market-oriented reforms. The major exception to both is FYR Macedonia, where the recent crisis has stalled progress. If this favorable trend takes hold, the South East Europe region, which was born of historical citcumstances and political vision, will become a community of shared prosperity.