Two neighbouring, Adriatic, former-Yugoslav states, both now members of the EU: one is continuing a remarkable recovery from a banking crisis, the other showing glimmers of a revival after a full six years without growth.
Slovenia’s economy grew by 2.6 per cent last year; Croatia’s shrank by 0.4 per cent. The growth gap between them should narrow this year, with Slovenia’s economy slowing and Croatia’s at last picking up to leave the worst years behind. Croatia will benefit from rising exports and increasing European Union funding, while Slovenia’s export growth slows and an EU cash injection tapers. Nonetheless, as the countries enter the second half of the decade, Slovenia looks likely to set the pace, with its southern neighbour still a laggard. Read more
Three years after its last International Monetary Fund (IMF) deal was suspended over its budgetary profligacy, Serbia at last has a new €1.2bn package from the Fund, intended to stiffen resolve for a wave of privatisation and fiscal consolidation.
That is likely to prove the hard part, and investors are awaiting full details of promised reforms. Nevertheless, the Serbian government has repeatedly avowed its determination, and some of the assets coming up for sale should attract international interest. Read more
Given the shifts taking place in European politics, particularly in the wake of Syriza’s assumption of power in Greece, the decision of another sunny country in south-eastern Europe to write off the debt of tens of thousands of its poorest people has naturally made a splash.
Croatia’s unprecedented “emergency” debt-relief initiative, launched on February 2 under the name “Fresh Start”, will be welcomed by those it targets. It is also indicative of continental political currents. But the tight parameters of the deal mean that it is unlikely to have a substantial stimulus effect, and that it may be seen as an electoral gambit by the beleaguered government. Businesses are not too rattled by the move – many have signed up in support – but it may push costs up for other borrowers and taxpayers in the medium-term. Read more
Might another unlikely partnership with a growing Gulf airline save a second ailing national carrier in south east Europe? Slovenia appears to hope so, as it has reportedly offered Qatar Airways a stake in Adria Airways, which the Ljubljana government is lining up for privatisation. The prospect of a Qatari takeover is tenuous, not least due to the Slovenian airline’s difficulties. But the offer is nonetheless intriguing as it highlights both growing interest from non-European carriers in European aviation and the progress of Slovenia’s privatisation programme. Read more
After a difficult two years that saw five governments, ongoing street protests and a banking crisis, Bulgaria’s politics and economy may be getting back to something approaching normality in 2015.
Blessed with greater stability – but with a significant fiscal deficit and loans to repay – the county plans to raise 6.9bn lev (€3.5bn) from bond issues this year. But investors may still be wary of the risks of a slow-growing country with a recent history of instability. Read more
Croatia’s new president-elect will use her role to promote stalled economic reform, she has told beyondbrics in exclusive comments. But as Kolinda Grabar-Kitarovic herself says, the powers of the president are limited – and the details of the reforms that she would champion remain to be seen. Perhaps the greatest significance of her surprise victory in this month’s election is as a barometer for parliamentary elections expected later in the year, in which her conservative Croatian Democratic Union (HDZ) now seems odds-on favourite. Read more
In the pale sunlight of an unseasonably warm December day, Chinese Premier Li Keqiang and Serbian Prime Minister Aleksandar Vucic on Thursday cut the ribbon to open the Mihailo Pupin Bridge, spanning the Danube in west Belgrade.
Logistically, the $170m, 1.5km bridge, built by state-owned China Road and Bridge Corporation, is intended to ease traffic in and around the Serbian capital. But Li’s visit to Belgrade has a considerably greater significance – the latest steps in China’s efforts to use the Balkans as a bridge to Europe. Read more
Following the successful second tranche of Croatia’s largest-ever bond issue, the government looks set to line up more next year to cover maturing debt and bridge its budget deficit. While the government has taken advantage of abundant liquidity that has pushed yields down, the country’s patchy macroeconomic condition may see the cost of issuing debt edge upwards in 2015. The economy has not grown since 2008, and with hotly-contested elections due next year, deep reform seems highly unlikely. Read more
Six months and a day after Kosovo’s general election, the country finally has a government. But it is a government of strange bedfellows that faces daunting challenges. The new administration approved by parliament on Tuesday is headed by incoming prime minister Isa Mustafa (pictured), with his predecessor and fierce rival Hashim Thaci as his deputy and foreign minister.
Yet, while that may sound like a recipe for instability, the division of power is more likely to mean business as usual for Kosovo, both domestically and internationally. Read more
Vladimir Putin seemed pretty emphatic on Monday that Russia would stop construction of the South Stream gas pipeline, shelving a strategically important project that Moscow was counting on to cement its influence in south-eastern Europe.
Speaking after talks with President Recep Tayyip Erdogan, his Turkish counterpart, in Ankara, Putin said Russia would abandon the project to bring Russian gas to Bulgaria under the Black Sea, bypassing Ukraine, unless the EU dropped its opposition.
But does this really mark the full stop that it appears to be? It is true that Alexei Miller, CEO of Gazprom, the company charged with building the pipeline, told reporters: “that’s it, the project is closed”. But analysts see a more subtle game in play. Read more
The Bucharest Stock Exchange is the largest bourse in post-communist south-east Europe and for spells in the past decade has been ranked as one of the world’s best-performing.
Now the exchange and its new largest shareholder have set their sights on becoming a financial hub for the region, eyeing MSCI emerging-market status within three years, substantial increases in capitalisation, and greater participation by foreign investors and pension funds. Read more
Serbia’s long-awaited new deal with the IMF should bolster investor confidence in the country but the substantial fiscal tightening that the Fund has prescribed will prove politically difficult to implement.
On November 20, the Fund announced a new 36-month standby agreement for Serbia worth around €1bn, with the package expected to be in place from January 1, pending final approval. The deal foresees Serbia reducing its budget deficit from 8 per cent of GDP in 2014 to between 4 and 4.25 per cent by 2016. Dusan Vujovic, Serbia’s finance minister, said this would require savings of around €1.3bn to €1.4bn. Read more
Short of expectations for now but holding out hope for the future. That seems to be the best that can be said of Croatia’s first offshore oil and gas exploration tender, which closed for bidding this month.
Full results of the auctions, including the identity of the bidders, have yet to be made public, although the organisers said 15 of the 29 blocks on offer received bids. One person involved told beyondbrics they came from three bidders: INA, Croatia’s own national oil company; a consortium formed by OMV of Austria and Marathon Oil Corporation of the US; and a consortium of Eni of Italy, MedOil of the UK and a third unidentified company. Read more
Romania is set for a period of political uncertainty following the shock victory of liberal Klaus Iohannis (pictured) in a presidential election on Sunday. With 96 per cent of the votes counted, Iohannis was in the lead with nearly 55 per cent, an unexpected triumph over Prime Minister Victor Ponta of the ruling Social Democrats (PSD).
Ponta will now face calls to stand down from the premiership, even though he has said he is determined to stay on as Romania prepares to draw up its 2015 budget, paying for a pre-election splurge. Read more
Boyko Borisov: he's back
It is a minority administration involving a coalition within a coalition, backed by another coalition and a splinter party. But at least Bulgaria has a government, and a government with an agenda for reform. It has a hefty in-tray including energy sector restructuring, mopping up after a banking crisis, and getting a beleaguered economy moving again. Read more
Serbia has received more than 1,700 letters of intent from potential investors for the 502 enterprises that it is lining up for privatisation, Zeljko Sertic, economy minister, has told beyondbrics in an interview.
Sertic said the government was seeking investors to develop Belgrade’s Nikola Tesla Airport and emphasised the government’s appetite for reform to boost the private sector, which some investors have started to question.
With talks with the International Monetary Fund starting this week, Sertic was keen to emphasise that Serbia had embarked on privatisation and fiscal tightening without external pressure. Read more
The last time an Albanian prime minister visited Belgrade, the Iron Curtain was just descending across Europe, rock and roll had yet to be invented and Pelé was just six years old.
In this context, the decision of current Albanian premier Edi Rama to delay his planned trip to Serbia by a mere two and a half weeks may not seem hugely significant. But Rama’s postponement comes after a spat triggered by an episode bizarre even by Balkan standards and in the wake of subsequent attacks on Albanian property in Serbia. Read more
Bulgaria will have to conjure its fifth government in less than two years from its most fragmented parliament since the fall of Communism, after the country’s snap election on October 5.
Over the past 20 months, the EU’s poorest member state has experienced street protests against successive governments, a banking crisis, severe flooding and the loss of Brussels funding through maladministration. It has also been caught in a squeeze between its EU responsibilities and the baleful influence of long-time ally Russia, on which it has heavy energy dependence. The new government will have its hands full – once it is pieced together from the fractious groupings that made it into parliament. Read more
Romania’s latest interest rate cut – to another all-time low – comes after a sharp slowdown in growth, but further easing will have to be weighed against the political outlook and the government’s likely parting of ways with the IMF.
The National Bank of Romania (BNR) cut its key rate 25 bps to 3 per cent on September 30, while reducing its minimum reserve requirements two percentage points to 10 per cent. The latter is expected to increase market liquidity by around 3.6bn leu ($1bn) from October 24, according to a note from BCR, Romania’s largest commercial bank. Read more
Serbia’s prime minister has criticised his country’s culture of state handouts and its bloated public sector, vowing to create an economy of opportunity rather than one dominated by “charmed individuals”.
Aleksandar Vucic, a former ultra-nationalist elected in a landslide election victory in March, spoke to beyondbrics after announcing cuts in public sector salaries and pensions. Read more