Kosovo independence -- Good for your EU funds

February 23, 2008

On February 17th, the tiny province of Kosovo declared its independence from Serbia. Kosovo has 2 million mainly Albanian Muslims who were persecuted by the government of Christian Serbia.

Kosovo's economy is small and weak :

• GDP is $3.5 million (half of Zimbabwe's)
• Unemployment is 40% (same as Afghanistan)
• Poorly trained labor force.
• The lowest exports per capita in Europe.
• Heavily dependent on a low value-added service sector.

However, Kosovo does have large reserves of lignite, which can be used to develop up to 4000 MW of power generation. Privatization is proceeding rapidly, which is driving GDP growth to a healthy 3% while maintaining a low inflation of 2%. In addition, exports have increased 56%. (Source: The Economist, Kosovo, controversially free at last, 2/21/08; United Nations Mission in Kosovo, Kosovo Economic Outlook 2007, 9/27/07)

What Kosovo's independence means:
Russia, Spain and other countries with independent-minded minorities are concerned about the destabilizing effect that Kosovo's independence could mean for them.

Furthermore, Kosovo is plagued with the same economic disadvantages crippling African countries - small geographic area, landlocked, and poor natural resources. This makes it difficult to create the economies of scale needed to run an effective government or compete on a global scale.

However, Kosovo has an advantage the other provinces and African countries do not - support and trade alliances with the EU. This provides them with a market for exports, foreign investment capital for growth, and a transference of technical and business skills. Without the EU, Kosovo would have little chance of economic success.

The EU model has shown that a group of fragmented, disparate governments can act as a single economic entity, resulting in 300,000–900,000 net new jobs. In fact, the EU is now the world's largest economy. (Source: World Trade Organization, Benefits of Free Trade)

Action steps:

Talk to your financial planner, and make sure you have a healthy allocation of EU-based funds.

Related articles

2008 world economic outlook,1/15/08

Africa's economy,8/30/06

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