Thursday’s figure of nearly 3.3 million set a grim record. “A large part of the economy just collapsed,” said Ben H… https://t.co/aNB36p7Y2A
Balkans EU accession prospects
On 18 June, the Council of the EU postponed its decision, to be taken unanimously, to open EU accession negotiations with Albania and North Macedonia until October due to resistance from some member states, including Germany, France and the Netherlands.
The decision to postpone accession talks for Albania and North Macedonia is highly likely to decrease EU-backed reform prospects across the Western Balkans. North Macedonia has been an EU candidate county since 2005 and Albania since 2014. In June 2018, the Council decided to delay by a year its decision on accession talks with the two countries despite being recommended by the European Commission to start membership negotiations. In May, the Commission again noted the progress achieved by the two countries in improving their judicial and anti-corruption frameworks and in combatting organized crime, reiterating the need to start accession talks. The countries in the Western Balkans region will most probably interpret the repeated postponement as the EU unwillingness to accept any Western Balkan state in the near future. This would very probably reduce the incentive to implement a sound judiciary, anti-corruption and governance reforms in Albania and North Macedonia, but also in Serbia (in EU accession negotiations since 2014) and Montenegro (in EU accession negotiations since 2012).
North Macedonia is likely to suffer from policy volatility and an increased likelihood of early election before the scheduled vote in December 2020 because of the delay to the accession talks. EU accession is a key objective for the government of Prime Minister Zoran Zaev. The administration has accomplished a diplomatic success by resolving a 27-year-long name dispute with neighboring Greece resulting in changing the country's name from the Former Yugoslav Republic of Macedonia to the Republic of North Macedonia. The deal, however, has remained divisive, prompting anti-government protests and strong criticism by the opposition nationalist Macedonian Revolutionary Organization-Democratic Party for Macedonian National Unity (VMRO-DPMNE). Without reliable EU prospects, MPs supporting Zaev's government would probably back a no-confidence vote initiated by VMRO-DPMNE. This, and Zaev's outright resignation, would be especially likely if the Council again rejects the start of accession talks in October.
The government of Prime Minister Edi Rama in Albania, already engulfed in political turmoil, will be further weakened by the latest EU decision. The Albanian public has become bitterly polarized in recent months, with the opposition staging weekly protests and boycotting parliament and the upcoming local elections while demanding Rama's resignation. Rama had staked his hopes on a clear date to commence talks on EU membership, a key policy objective of the ruling Socialist party, to gain some respite. The EU decision is likely to stall the reform drive in the country, including important measures aimed at improving the efficiency and independence of the judiciary, such as the ongoing vetting process. If protests persist and turn particularly violent, there is increased risk of Rama being forced to negotiate and agree to early elections.
The EU's signal of enlargement fatigue is likely to undermine political stability in Kosovo and Bosnia. The prospect and promise of EU integration has been a key anchor of stability for the Western Balkans in the post-war period. The Kosovo-Serbia negotiations to normalize bilateral relations, although currently frozen, were only possible due to the understanding that the end result would be EU membership. With EU membership becoming ever more elusive and local governments having little to show in terms of economic success, it will become increasingly tempting for local governments to return to old nationalist tendencies as a means to shore up electoral support. This increases the likelihood of unintended escalation in the form of low-level inter-ethnic violence in certain hotspots such as northern Kosovo.
Indicators of changing risk environment
- If the government of Zoran Zaev in North Macedonia resigns in the one-year outlook, followed by the installment of a VMRO-DPMNE government, this would increase the likelihood of North Macedonia withdrawing from the name agreement with Greece, resulting in almost certain undermining of the country's potential EU accession.
- If the next government in Greece is led by the center-right opposition New Democracy party, this would decrease the likelihood of opening accession negotiations with North Macedonia under a VMRO-DPMNE government or slowing down the accession process for both Albania and North Macedonia in the case of already opened EU membership talks.
- Protests in Albania escalate and become more violent as protesters attempt to storm parliament and security responds with live fire, further diminishing the country's eligibility to enter EU membership negotiations in the eyes of key EU member states.
- If the German parliament approves the start of accession negotiations with Albania and North Macedonia in September, this would increase the likelihood that the Council of the EU opens membership talks with both countries or at least with North Macedonia in October.
- An accord is reached between the Albanian government and opposition that resolves the impasse and allows for the continuation of judicial
- Capital Markets Weekly: Risk of multiple emerging-market defaults increasing
- Weekly Pricing Pulse: Commodities sell off as the shut-downs continue
- Capital Markets Weekly: Market volatility to remain severe amidst flight to cash
- COVID-19 Impact Update: US GDP to plunge to -13% in Q2, unemployment approaching 9.0% by December
- Weekly Pricing Pulse: Commodities drop sharply as the global economy shuts down
- The global economy: Headed for recession
- COVID-19 to precipitate US recession in 2nd quarter
- Fed does not dither: Aggressive monetary policy response to COVID19