Initial Situation and Post-Kosovo War Problems

Abstract

The economic and political problems of the Balkans are partly linked to secession wars and the Kosovo War, but they are also rooted in the socialist past. The costs of reconstruction for the Balkans after the Kosovo War were in a broad range of some $ 20–100 bil. Total costs for Kosovo reconstruction, including reconstruction of housing, infrastructure, and industrial buildings plus the costs of returning refugees could be close to $ 30 bil.; an early estimate by Group-17 Serbian economists of the total economic damage of NATO bombardments is close to $ 30 bil. (PLANECON, 1999). The destruction of infrastructure and the loss of capital in economic and noneconomic areas was estimated at $ 4.1 bil. Human capital losses were placed at $ 2.5 bil. The remaining $ 23.2 bil. are the opportunity costs to the whole economy because of lost GDP — projected by Group-17 to fall 40.7% in 1999. Certainly overall costs for the Balkans are much higher since one also has to take into account collateral damage in neighboring countries and problems with trade and foreign investment due to destruction of many bridges over the Danube and increased political risk in the region. Finally, it is impossible to quantify the destruction of “social capital” — the confidence people in the Balkans had in each other before the Balkan War and the war in Bosnia.