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Europe

Kosovo Pins Economic Future on EU Donor Conference

The European Union holds a donors conference in Brussels on Friday, July 11 looking to help Kosovo, the poorest and least developed country to emerge from the violent disintegration of the former Yugoslavia.

Kosovo Albanians celebrate with the new Kosovo flag

Kosovo is desperate for donations to finance its embryonic statehood

"The purpose of the conference is to mobilize external assistance to support Kosovo's socio-economic development with the aim of bringing greater prosperity to all people, contributing to sustainable growth and consolidating democratic institutions and practices," the European Commission said in a statement.

"Kosovo is a profoundly European matter. The EU is ready to use all instruments to help Kosovo realize its European perspective," EU enlargement chief Olli Rehn said ahead of the conference. "Bringing growth and prosperity to the poorest part of Europe will help secure stability in the western Balkans," he added, urging donors to contribute generously.

The German government alone said it would pledge 100 million euros ($157 million) in development aid for Kosovo this year and next.

In Berlin, the Foreign Ministry said Germany was the second biggest source of foreign aid for Kosovo after the United States, with a focus on energy generation, water supplies and sewage, reforms to public administration and improvements to vocational training.

It said German officials would tell Prime Minister Hashim Thaci at the meeting that it was vital to concentrate on good government, make development the priority, and protect minorities.

The ministry noted that on top of the aid, Berlin was also bearing part of the costs of the UN mission in Kosovo (UNMIK), NATO's Kosovo peacekeeping force (KFOR) and other international programs.

But even with some 1.5 billion euros ($2.35 billion) expected in pledges, it is impossible to quickly fill all the gaping holes in the foundations of the new country.

Cash for democracy and law

Euro coins are seen on a hand

Spare some change for a newly independent republic?

Donors will also be invited to contribute towards developing institutions to consolidate democracy and the rule of law. High on Kosovo's list of priorities is improving its dilapidated infrastructure and an education system that requires some schools to have three shifts a day.

Donors have already contributed around 3 billion euros to Kosovo since its 1998-1999 war ended when a NATO bombing campaign ousted Serbian forces waging a brutal crackdown on Albanian separatists.

That was in addition to funding from the United Nations, which has also pumped almost as much money into Kosovo to service its interim mission there, known as UNMIK, since the conflict.

Kosovo declared independence from Serbia in February of this year and is now looking for aid to push along its transition from a repressed province to an international protectorate to a sovereign state.

Along with the US, more than 40 countries including all but seven of the EU's 27 member nations have recognized Kosovo's statehood, but others like Russia, China and Spain are refusing to follow suit.

Serbia still views the breakaway province as its medieval heartland and has rejected its self-proclaimed independence as illegal. It refuses to acknowledge the departure of its Albanian-dominated province and has, with Russia's backing, so far blocked its induction into the United Nations.

Kosovo has a meager gross domestic product of $1,800 per capita. Of that, one-fifth is foreign aid and another 15 percent is remittance from the loyal Diaspora, mostly in Switzerland and Germany.

Kosovo weighed down by high unemployment

Street scene in Pristina, Kosovo

There is a real danger of poverty striking the region

The modest economic growth of roughly 3 percent annually can do little to help with the burning problem of unemployment, currently running at 30 to 40 percent of the workforce in the nation of two million, 90 percent of whom are Albanians.

The unemployment issue is aggravated by the highest-in-Europe birth rate, which delivers up to 30,000 adults to the moribund labor market every year. On top of that come some 120,000 pensioners and 50,000 families on welfare.

The Brussels donors' conference seeks funding for some 600 energy, infrastructure, education, health and agriculture projects. Experts have criticized the list, saying at least some industrial projects should have been included.

"The government should first and foremost look at mid-term industrial development, where jobs can be generated," Rrustem Aslanaj, a professor of economics in Pristina, told DPA news agency. "After all, our unemployment rate is the highest in Europe."

However, prioritizing is difficult with limited funds in hand, particularly as donations dwindled since NATO intervened against Serbia to effectively remove Belgrade's control over Kosovo in 1999.

Snowballing trade deficit

An ethnic Albanian dealer exchanging the Euro money with other currencies

Kosovo is hoping for euros, dollars...anything

The territory, itself de facto firmly divided into the Albanian south and the Serbian quarter of the land to the north, has snowballed its trade deficit to nearly half of its GDP, according to International Monetary Fund estimates.

Many families in Kosovo depend heavily on small-scale agricultural production and about one-quarter lack running water. One out of every three Kosovars is poor and 15 percent are "extremely poor" by World Bank standards.

The problems persist stubbornly as, amid uncertainties over Kosovo's future, foreign investors continue to avoid the territory.

Aggravating the situation further is the strength of organized crime, which has cemented its activities in the chaotic protectorate with porous borders since 1999.

Kosovo hopes the donors' conference can help prevent the Balkan territory from descending deeper into poverty, five months after it split from Serbia.

A chance to build a modern republic

A graffiti on a bus stop in Gracanica, Kosovo

A lot of work is needed to get Kosovo back into shape

"This is one of the most important chances for Kosovo, together with its strategic allies the United States and European Union, to address its needs and face challenges ahead," Economy and Finance Minister Ahmet Shala told AFP news agency.

"This is also a chance to build a modern republic and reaffirm in that way our clear vision for European integration," said Shala, who will address the conference.

Shala said his government would request the 1.4 billion euros for Kosovo's mid-term budget, and to respond to pressing needs as it sets up its own institutions.

"It is a realistic sum. I hope we will get (it). It will allow us to move ahead," he said, adding however that "it will not enable us to solve all of our difficulties."

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