Kosovo again deadlock: funds, reforms, economy at risk

Every day without new institutions makes the bill of the political crisis in Kosovo higher: millions of euros from European Union funds can be lost, reforms are pending, businesses and investors face uncertainty...

More than a month after the June 7th parliamentary elections, political parties have still not found the formula for creating new institutions.

Instead of signals for compromise, developments in recent days have added to the uncertainty that when Kosovo will have a functional Assembly and a new Government.

Hope for a quick deal was dimmed on July 15th, when the chairman of the Democratic League of Kosovo, Lumir Abdixhiku, announced he would suspend talks with the winning party, Vetevendosje Movement, due to the initiative of several partners for his dismissal.

A coalition between LVV and LDK was seen as the most likely alternative for the establishment of institutions from Parliament to president.

The LVV says it continues to remain ready for agreement with Albanian parties.

“We try maximum. We are active and constructive for meetings and conversation, open and honest about agreements. We hope that the opposition will not be balanced against and take us back to the election”, government spokesman Arlind Manjuka told Radio Free Europe on duty.

Free Europe Radio contacted several LDK figures, including Armen Zemajn, Florian Dusin and Lutfi Haziri, to ask whether developments within their party endanger negotiations on forming new institutions and how much responsibility the LDK holds for this process, but neither responded to the demand for comment.

LDK Secretary Ilir Ferati said Thursday before reporters that holding the party's extraordinary coalition has become urgent, due to the deadline for the institution's constitutionalisation.

He did not show when that meeting can be held, while the constitutional deadline for the Kosovo Assembly binding is August 7th.

The other two parties, which, at least theoretically, could secure a stable parliamentary majority with LVV, have already made their stance clear: The Democratic Party of Kosovo has said it will remain in opposition, while the Alliance for the Future of Kosovo has not even responded to LVV chairman Albin Kurti's first invitation for the meeting.

Is there a way out?

Political analyst and Professor of Journalism at Pristina University, Nundman Pacarizi, says the current stalemate was not created only by the latest developments in the LDK, but is the result of years-built reports among political parties.

According to him, rejection of The PDK and AAK to enter a coalition with LVV relates to these reports, while recent developments in the LDK have dimmed the possibility of this party becoming LV partner.

He doubts that the LDK, even if it manages to overcome the internal crisis, could secure its 18 deputies' votes for an agreement with LVV.

Whatever the outcome, the LDK will exit the non-unique from its Parliament, if for nothing else, then at least in the sense of the possibility of orientation of 18 votes towards a evental agreement”, says Pajarizi of Radio Free Europe.

He estimates that the responsibility for unlocking the situation cannot be left to one party, and adds that efforts to shift the blame to the opponent only draw the country towards a new election campaign rather than an agreement.

This type of confessional building leads to a new pre-election situation, where political subjects try to get less guilt on themselves. If we want to discuss the blame, political parties, generally, have their share of responsibilities and merits for any situations that arise”, says Pajarizi.

Similar positions include Nnomza Arifi, executive director of the Group for Jury and Political Studies (GLPS).

She says that, although the main responsibility for establishing institutions falls on the winning election party, the solution requires commitment from all over the political spectrum.

“In each case, the entire political spectrum should be engaged in finding a consensus that brings long-term institutional stability to the country, being stripped of party interests”, Arifi tells Radio Free Europe.

According to her, negotiations between the LVV and LDK initially generated the impression that an agreement was possible, but recent developments in the LDK led that prospect into question.

“se is this last lost chance remains unclear, because it is not known when the LDK Parliament can be collected and what its epilog will be, given the constitutional deadlines that have already begun to flow”, Arifi says.

The Vetevendosje movement, together with MPs from non-partisan communities who traditionally support the formation of institutions, has enough votes for the constitution and the election of its chairman.

But, the challenge starts immediately after this step: electing the president requires at least 80 votes in the Assembly numbers that the LVV does not have.

For that very reason, Kurti started negotiations with other Albanian parties last week.

If the president is not elected within the constitutional deadline, up to 60 days from the day of the constitution the country automatically heads to new elections.

Time is not on Kosovo's side

After the meeting he held with Abdixhiku on July 10th, Kurti said there was still time to find an agreement on the institution's constitutionalisation.

But according to political development connoisseurs, each lost day makes the price of institutional corrosion heavier.

The exhumation always costs”, says the pavis.

According to him, Kosovo is already losing ground in relation to international partners, at a time when other countries in the region are advancing in the European integration process.

“Bota, EU institutions respectively, NATO and the others, they don't match our timelines with meskins and small ones. We're the ones that need to adapt to their” dynamics, says the Pazizi.

After nearly two years of institutional blockades, Arifi says any new delay sends negative signals to international partners and leaves Kosovo even further behind in the European integration process.

With almost two years of stagnation, our country continues to send negative signal to international partners... Kosovo does not enjoy candidate status either, and remains the last in the negotiation process with the European Union”, she says.

But the cost of delays is not measured only by the pace of European integration.

The political stalemate has already begun to reflect on public finances, with Kosovo losing tens of millions of euros in EU Growth Plan funds.

Experienced journalist on European issues Augustin Palockaj tells Radio Free Europe that lack of functional institutions risks implementing reforms that are conditional on the benefit of these funds.

“It is no secret either in Brussels or Pristina that the main reason for the loss of these tools is the political crisis and the lack of institutions through which the reforms would pass, as some of them should be approved in the Kosovo Assembly”, Palockaj says.

Kosovo submitted the report for implementation of reform steps on 15 July, on the last day of the deadline.

European Commission sources confirmed to Radio Free Europe that the report has already been accepted and that it will submit to the assessment.

Based on this process, it will determine how many reforms have been implemented and how much funds can be distributed.

Kosovo's chief negotiator with the EU, Jeton Zulfaj, warned days ago that the country risks losing over 40m euros, due to delays in implementing reforms.

He explained that five out of the six unfinished reforms depend on the adoption of laws in the Assembly a process that has remained blocked due to the failure of institutions.

Palocaj says that there is the danger that some lost means will be lost.

The untapped “funds from Kosovo, Serbia or Bosnia and Herzegovina can be re-regarded to countries that have more successfully met the criteria, such as North Macedonia, Montenegro and Albania”, he says.

Under the 2024-2027 Growth Plan, Kosovo was allocated about 882m euros to 253m euros in grants and 629m euros in loans, making it the largest per capita beneficiary in the Western Balkans.

Consequences Do Not Stop at EU Funds

Beyond European funds, the effects of political deadlock are felt by the economy.

Pristina University professor Majid Bektashi says the lack of functional institutions curbs economic decision-making, weakens investor confidence and makes long-term planning difficult for businesses.

One of the most obvious consequences, he says, is rising prices.

The Kosovo Statistics Agency's data shows that inflation in June was 6% higher compared to the same period last year, driven by the expensive transportation, housing, energy, water and food products.

If political uncertainty persists, Bektas warns, it could also jeopardise financial stability.

High inflation reduces deposits in commercial banks, increases the need for loans, and adds financial burden to citizens”, Bektas says of Radio Free Europe.

He adds that institutional uncertainty also makes foreign investors more reserved, while local producers find it more difficult to expand their activity. As a result, the economy remains increasingly dependent on imports.

And that's what the AKS data shows: during the first quarter of this year, the value of imports reached about 3.6 billion euros, up from 3.2 billion euros in the same period last year. / REL