Balkan trip
August 22, 2011
Before Chancellor Angela Merkel's departure for Croatia and Serbia on Monday, her office announced that international, bilateral and trade ties would dominate the agenda. Government sources also acknowledged, however, that the touchiest topic in Belgrade would be Kosovo's claim to independence, recognized by Germany but not by Serbia.
Merkel is expected to praise Croatia as a model for the rest of the region as the country inches ever closer to full integration in the European Union and other Western political structures.
The German chancellor will visit both countries in the space of a day, accompanied by an all-important trade delegation.
Key Croat partner
No one in Croatia would contest that Germany has been the country's most important trading partner for the past two decades, but some people now perceive a slight cooling of relations.
For political scientist Damir Grubisic in Zagreb, this sentiment stems in part from the recent, sterner warnings from Berlin on issues like corruption. The readiness of German companies to invest in Croatia, he says, has also waned somewhat.
"This feeling that Germany's holding back a little might also be explained by the involvement of former Croat Prime Minister Ivo Sanader in the Hypo Bank scandal," Grubisic told Deutsche Welle, referring to Sanader's alleged political involvement in the ultimately disastrous 2007 takeover of the Austrian Hypo Alpe Adria Bank by Bavarian Bayerische Landesbank lender.
The German bank eventually sold its controlling stake to the Austrian government at a price of just one euro per share in December 2009; the bank was nationalized to prevent its collapse. Sanader claims the accusations are part of a political smear campaign against him.
Red tape constricting trade
Another key element of bilateral ties is the tourism sector; every third foreign visitor to Croatia comes from Germany.
Meanwhile, a flaw lamented on the Croat side is the massive trade deficit with Germany. According to data from Croatia's Foreign Ministry, 2009 bilateral trade totaled almost 2.9 billion euros ($4.17 billion), but only 827 million euros of this tally was made up of Croat exports to Germany.
Grubisic believes the flaws in the Croat economy also help explain the lack of willingness to invest among German firms - he points to excessive bureaucracy and standardization.
"If, for example, you want to put solar panels on your own roof, then you need to get 27 permits, and the process might last two years. At the same time no financial subsidies are offered to support your decision to use environmentally friendly energy. This proves that bureaucracy is still stifling the free flow of investments," he said.
Mixed investment climate in Serbia
For Serbia, Germany is not just a key trading partner, it's a key donor. Over the past 11 years, Berlin has sent roughly a billion euros in aid and charitable contributions towards work on infrastructure, the energy sector, the water supply and other humanitarian projects.
Still, German investors face similar problems in Serbia as they do in Croatia - described as "administrative deficits" by Bojan Predovic, deputy chairman of the German Economic Union (DWB) in Belgrade. In some cases, Predovic says, that term would also incorporate corruption.
A recent DWB survey revealed 360 businesses registered with the organization, creating some 20,000 jobs. The foreign trade department of Serbia's Economy Ministry says the automobile industry, environmentally friendly businesses and food producers see great potential in the country's low wages, favorable tax rates and well-trained workforce.
However, Predovic sees threats in Serbia's failure to conform with EU standards, along with other political problems that industry cannot solve.
These are the issues Merkel is likely to discuss in Belgrade. Her first meeting is with the widow of former Serb Prime Minister Zoran Dindic - who was murdered while in office in 2003 - and contributors to the Dindic foundation.
After that, Merkel is to meet with President Boris Tadic and Prime Minister Mirko Cvetkovic for talks on the country's EU accession process and the targets it must reach to proceed. Kosovo is set to dominate these talks. Diplomats in Belgrade say there's a widespread belief that Merkel will categorically reject a possible division of Kosovo, instead demanding a normalization of relations in the north of the country, where most of Kosovo's Serb population live.
'Second Cyprus out of the question'
Government sources in Berlin, meanwhile, say Merkel will make it clear in Belgrade that recognizing Kosovo's unilateral declaration of independence from Serbia in 2008 is not a prerequisite for Serb EU membership. However, she is likely to say Serbia will have to accept the new borders as recognized by several Western countries, including Germany.
"A second Cyprus is out of the question," said Peter Weiss, the chairman of the German parliamentary group for Southeastern Europe. Cyprus was brought into the EU in 2004, despite its continued division - a move that has brought Turkish EU accession talks to a standstill, with the breakaway north of the island supported by the government in Ankara.
"That means that for Serbia to have a chance of entering the EU, we need a satisfactory deal on Kosovo. Once again, Angela Merkel will emphatically encourage and insist that the Serb government bring these talks to a positive conclusion," said Weiss.
For Weiss, Merkel's visit to Croatia and Serbia comes at a crucial time. In Croatia's case, he said Merkel needs to forge a common set of policies with the future EU member. The regional expert said Merkel would also encourage politicians there to continue their attempts at reconciliation with other countries that once made up the former Yugoslavia.
Authors: S. Bogdanic, I. Petrovic, S. Filipovic / msh
Editor: Martin Kuebler