Europe's Open Wound

Written By Brian Hicks

Posted October 17, 2006

Publisher’s Note: It’s not often that you come across a 23-year old whiz kid who’s booked more international miles than many United Airline pilots. But that’s exactly what Orbus Intelligence editor Sam Hopkins has done.

In his quest for the world’s most promising emerging markets, Sam has traveled to the ends of the earth… to the hinterlands of China, the disco clubs of Estonia and Latvia, and to the old port cities in Scotland. Sam is part Thomas Friedman, part CIA operative and part Wall Street trader.

In the days and weeks ahead, Sam will be revealing investment opportunities he’s discovered in some of the hottest, most obscure emerging markets around the globe. I’m talking about places like the Baltics, home to the fastest growing economies on the planet… even faster than China‘s.

But his investments are even more exotic than the former Soviet Union. Sam has pure plays on Cuba, as well as Libya and other African nations, which stand to play a major role in the future of global energy production.

If you don’t already receive Sam’s Orbus Intelligence, I urge you to sign up now by clicking here:

In the meantime, you should keep an eye out for an investment report Sam is currently putting together. It’ll highlight the some of the best-kept secrets in the emerging market universe.

-Brian Hicks

Publisher, Wealth Daily

Europe‘s Open Wound

These days many investors look at world markets through one of two lenses: a telescope or a microscope. In the search for international opportunities, it is important not to gloss over the mid-range opportunities, and the overlooked locales in which many of those chances for growth are found.

The historical view is also essential, as we have to take into account the roots of a country’s current economic situation in order to understand where it is going.

Today’s European Union is a historical and economic amalgam – a family grouped together by a desire for a more prosperous destiny while acknowledging a separated and destructive past.

The republics of the former Yugoslavia are part of this equation, and European and international investors must keep an eye on this pivotal area to the EU’s future.


Kosovo the Keystone

The last time you may have heard Kosovo mentioned was in reference to the Balkan Peninsula’s ethnic strife following the fall of the Eastern Bloc that included Yugoslavia. Yugoslavian military dictator Josip Tito provided the superglue that many strong-armed leaders (e.g. Saddam Hussein) have used to limit ethnic unrest in multifaceted countries.

As you can see in the lower-left of the map below, the former Yugoslavia region is marked by ethnic enclaves that do not correspond to national or even sub-national boundaries:

 

Ethnic Groups in Eastern Europe

 

Yet under Tito, Yugoslavia’s economy performed better than most others in the Soviet sphere of influence. Yugoslavians could travel to Western Europe and looked to the Mediterranean Sea they bordered as a balmy cultural touchstone even while Cold War Communism was official policy.

The precarious balance Tito established began to crumble following his death in 1980. By the early 90s, the region had erupted into civil war, turning the 1984 Olympic city of Sarajevo to rubble and unleashing a series of sectarian killings that are still being investigated and prosecuted.

Then once most of the dust settled in the north and west, another conflict flared up in landlocked Kosovo. As part of Serbia for most of the 20th century, Kosovo maintained its Muslim, Albanian population element into the period of Serbian independence.

The period of most intense fighting included a 78-day bombing campaign by multi-national NATO planes in 1999, intended to end military and paramilitary activity by Yugoslav (Serbian) national forces and Kosovar fighters alike.

Needless to say, the destruction was widespread. And Kosovo has yet to fully recover.

Now Kosovo is a ward of the United Nations, governed mostly by the United Nations Mission in Kosovo (UNMIK) since 1999. There is also a provisional government, with a nominal president and prime minister.

Rebuilding the Balkans

Greece, the southern tip of the Balkans, is ready to welcome its neighbors Bulgaria and nearby Romania into the EU, of which Greece has been a member since the beginning.

But the former Yugoslav republics are still up in the air legally and economically.

Kosovo, the poorest region in Tito’s Yugoslavia, is now one of the poorest in all of Europe. In 2002 and 2003, Kosovo actually had a negative economic growth rate. Remittances from abroad and foreign aid total around 47% of total GDP.

The European common currency is used, contributing some monetary stability, but because of the only provisional status of the government, little infrastructure is in place that could draw heavy foreign direct investment, which is sorely needed.

While the latest reports out of Croatia display optimism and the spoken seal of approval of US Secretary of State Condoleezza Rice for that country’s future EU and NATO accession, Kosovo is about to see a major deadline as to its fate pass by.

Serbia is in the process of writing its own constitution as an independent state with international aspirations, and legislators there are hostile to the idea of an independent Kosovo that has a 7% Serb minority.

Contrary to what one would expect, the Slavic Serbians are not supported by the Slavic Russians in their desire to maintain control of Kosovo. Rather, Russia is vociferous in its support of Kosovo’s independence because it wants to point to that precedent in its relations with Georgia, Moldova, and the breakaway Russia-friendly regions in those countries.

At the end of this year, the EU is supposed to culminate eight rounds of UN-led talks on Kosovo’s future with a decision as to its international status. That mark will probably pass uneventfully, as long as Serbian elections and territorial claims remain as a roadblock.

So Kosovo is again left in the lurch.

But I say strongly that the region is not hopeless. Ethnic cleansing and clear partitions have failed, and if the idea is to declare statehood with the ultimate goal of joining the European Union (itself a multinational and multiethnic polity), then the grand scheme of things directs successful plans away from further splintering.

The peoples of the former Yugoslavia and of the entire EU must ask themselves what they want in terms of reconciling the past and constructing the future.

Romania and Bulgaria will now join Greece as regional EU members, so the Balkans as a whole will hope to attract foreign direct investment in increasing amounts as stability begets international interest.

Greek banks are even acquiring Serbian ones in order to lay down their money on that country’s financial future.

Dutch Foreign Minister Ben Bot said Monday that the Kosovo case would be a true test of the EU’s mettle in accepting newborn nations:

"Kosovo will become one of the most difficult problems that will face the European Union in the months ahead," Bot said, calling it a test case for EU policy.

It is also a test case for an entire exhausted region.

Regards,

Sam Hopkins

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