EUROPEAN INVESTMENT IN THE BALKANS

This research paper discusses the historical background and contemporary geopolitical and economic perspectives of foreign, primarily European, direct investment (FDI) in the Balkans and in particular Balkan nations.

The national economies which make up the Balkan Peninsula have not shared appreciably in the tremendous global expansion of FDI which has occurred in the last quarter of the 20th century. The ending of the Cold War and the apparent dampening down of the wars of the 1990s which accompanied the disintegration of the former Yugoslav Federation have ushered into power throughout most of the region governments which are receptive to FDI.

FDI and other forms of European foreign capital played a major role in the initial economic modernization of the major Balkan nations, especially during the half century which preceded the First World War and to a lesser extent during the mid-1920s. That modernization was, however, very incomplete and was interrupted by two World Wars, ethnic and religious tensions, political instability, economic nationalism, the Depression and other factors. FDI was excluded from the Balkans, except in Yugoslavia during the latter phase of Josef Tito's rule, in the communist centrally planned economies of the years 1945-1990, which generally unbalanced and retarded Balkan economic development and made Balkan re-entry into the world economy a very painful process.

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,696, Hungary 159 and Rumania 55 (Berend and Raki 55). FDI and other forms of European capital dried up in the Balkans due to the Balkan Wars (1912-1913) and the First World War. Growth resumed in the 1920s, but for the interwar period as a whole was only 1 to 2 percent (Berend and Raki 284). Inter-regional trade was crippled by the rise of economic nationalism, exemplified by the 1925 Rumanian law which barred foreigners from owning more than 40 percent of mining companies, and high tariffs, and was ruined by the effects of the Depression on commodity export prices. The 1920s and 1930s were marked by rising ethnic tensions between majority and minority populations. Landes commented: "these . . . societies did not generate enterprise from within. Trade and money were for Greeks, Jews, Armenians, and Germans," most or all of whom were either discriminated against, deported (such as the Germans after 1945) or destroyed (almost all the Jews 1941-1945) (252). Romania, Bulgaria, Albania and Yugoslavia (until 1965) relied on centrally planned economies which emphasized heavy industry to the detriment of agriculture and consumer goods and completely excluded foreign capital. Although impressive gains were made in output of capital go
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Approximate Word count = 5458
Approximate Pages = 22 (250 words per page)

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