Its main focus will be to keep evidence of crimes and damages committed by Serbia in Kosovo during the time period 1990-1999. With its institute the Government of Kosovo aims at filing charges against Serbia at  the International Court of Justice – as soon as this will be possible (after a still pending UN membership. In the meantime it serves to support according  efforts of external institutions).

As the institute’s new director Minister Kuci introduced international law specialist Dr. Zejnullah Gruda: Prof. Dr. Gruda was born in 1936 in Peja. He holds a Magister degree from the law faculty of the University of Sarajevo and a Doctoral degree in political science from the University of Belgrade, where he also worked as a lecturer. From 1975-1978 Gruda was the Yugoslav ambassador in Panama. Later on Dr. Gruda served as the General Secretary of the Yugoslav Red Cross. Currently he is a University Professor with a special focus of his lectures on International Public Law. KON / NK

Almost all workers of public enterprises (the mayor economic sector) were fired from their workplaces and the connected social and health care systems. Teachers and Professors of Albanian ethnicity were pushed out of Schools and Universities (and all cultural institutions), and – against the Yugoslav constitution – Albanian curricula were deleted and teaching in Albanian language was forbidden. Comprising about 90 percent of the Kosovar population Kosovo Albanians were forced to live in a parallel society and feel like foreigners in their own country.

Recently published figures of victims data by The Hague Tribunal reveal that only in the short time from March to June 1999 as many as 10,356 ethnic Albanians were killed in Kosovo. These figures in addition refer to a departure of at least 700,000 Kosovo Albanians from Kosovo in the same time. Further two thousand persons are still missing.

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In this context the accusations refer also to the PDK parliament member (MP) Azem Syla, the former Transport Minister PDK MP Fatmir Limaj, the Vice-President of the Kosovo parliament PDK MP Xhavit Haliti, the Head of the former KLA secret service (SHIK) Kadri Veseli – as well as the PDK MP Dr. Shaip Muja, who was the chief medical coordinator of the KLA during the war time.

EU spokesperson Kocijancic confirmed the EU decision "to create a Task Force, in order to investigate the accusations which come from the report of Dick Marty". Reportedly the investigation will be carried out formally under the supervision of the EU Rule of Law mission in Kosovo (EULEX). Despite this the task force is said to be working independently. As to EULEX spokesperson Nicholas Hawton, due to the international dimension of according investigations "this task force, composed of prosecutors and investigators, … will be partly based in Brussels." 

The de-facto separation of the investigation task force from EULEX structures raised doubts at several Kosovar and international media regarding both a possible mistrust of EU concerning its own mission in Kosovo – as well as the influence of Serbia on the EU decision.  

Meanwhile the Kosovo Minister for European Integration, Vlora Çitaku welcomed the decision of the EU, but still believes in the innocence of the accused persons: “We know that (Marty’s report) is just a product with clear political tendencies. However we want justice to be done, to remove this report once and forever from the agenda”.

Contrasting that, the Marty Report itself shows a more balanced approach: "The crimes committed by the Serb forces have been documented, denounced and, to the extent possible, tried in courts of law. The frightful nature of these crimes hardly needs to be further illustrated. … In the Kosovo conflict, the ethnic Albanian population suffered horrendous violence as the result of an insane ethnic cleansing policy … . None of these historical events could be cast in doubt today.  However, … In the horror and perpetration of crimes there can be no principle of compensation. The basic essence of justice demands that everyone be treated in the same way. Moreover, the duty to find the truth and administer justice must be discharged in order for genuine peace to be restored, … "

Concretely the Marty Report refers to "… a small but inestimably powerful group of KLA personalities apparently wrested control of most of the illicit criminal enterprises in which Kosovar Albanians were involved in the Republic of Albania, beginning at the latest in 1998 … Thaqi’s Drenica Group built a formidable power base in the organized criminal enterprises that were flourishing in Kosovo and Albania at the time."

As to Dick Marty the members of the Drenica Group managed "to exploit their position in order to accrue personal wealth totally out of proportion with their declared activities."

The group is said to have committed crimes respectively to have been involved in crimes concerning the trading of "heroin and other narcotics", smuggling of alcohol and cigarettes, as well as"… assassinations, detentions, beatings and interrogations in various parts of Kosovo", human trafficking and sexual abuse and further inhuman treatment and torture in KLA detention camps in Albania, and finally the capture and killing of persons in order to sell their organs "to private overseas clinics as part of the international “black market” of organ trafficking for transplantation".       

In a press release the organization Human Rights Watch (HRW) expressed hope that "this EU special investigation brings us closer to justice for serious crimes committed after the Kosovo war". Nevertheless HRW reminds the need for "an experienced senior prosecutor with clout … to build an effective team, guarantee witness security, and garner support from key governments, including the United States."

Swiss Senator Dick Marty became "famous" by his 2007 report about secret CIA prisons throughout European states. The first reaction to his report at that time was denial. Later on his allegations were confirmed.

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KFOR officials confirm that the suspect allegedly "intimidated the women and used his position as their superior to rape them and coerce them into sexual acts." According to the Austrian Ministry of Defence the accusations refer to incidents in 2009 and 2010. The responsible KFOR authorities have ordered the immediate return of the soldier from Kosovo to the Austrian district of Kaernten. After an internal investigation, the case is said to be presented before an Austrian prosecutor. KON / NK

Insofar it concerns Kosovo, Dr. Sewel addresses "in short the real economic story of Kosovo", which according to his findings "lies in the ongoing weaknesses of its institutions, the failure of its governing elite to breach the ethnic divide, the twin problems of corruption and organized crime … poor relations with Serbia and sometimes difficult relations with … Macedonia. Its weak economy cannot be expected to take off".

Against this background Rapporteur Sewel concludes that Kosovo’s "European ambitions will never be fulfilled until these issues are squarely addressed."

Sewel reminds, that "the International Court of Justice … has recently reaffirmed the country’s legal status as a sovereign nation, ruling that its February 2008 declaration of independence did not violate international law." Nevertheless he also remarks that "the state … confronts consistent challenges to its legitimacy launched by the Serbian state and from a sizeable Serbian minority." Due to the ongoing dispute with Serbia, Kosovo (likewise Serbia) doesn’t "meet the core Copenhagen criteria of enjoying fixed borders and good neighborly relations".

In direction to Serbia and the former Yugoslavia the report states that "many of Kosovo’s most serious economic problems arise from the very apparent deficiencies in its institutional structure and political culture both of which are partly the product of decades of political marginalization, occupation and finally war."

Regarding Kosovo’s economic situation, Sewel reports figures from 2009, which, apart from minor changes, still accurately describe the current situation: Kosovo "received 25 times more international aid per capita than Afghanistan, but this assistance has failed to genuinely galvanize the national economy or to help create an institutional structure that, in turn might facilitate economic take off."

To say it clearly: "Kosovo remains the poorest country in Europe … According to the IMF average per capita income stands at euro 1,726 or 6.9% of the EU 27 average … Perhaps the most telling indicator of its economic weakness is the 45.9% unemployment rate."

Concerning an ongoing Kosovo-sided problematic respectively responsibility, the report refers to the "Council of Europe Report" of the Swiss parliamentarian Dick Marty, by which "senior Kosovo officials, possibly including Prime Minister Hashim Thaci," are accused to be "involved in organized criminal activities including human organ trafficking during the war." In this context the report also addresses "new allegations … made in recent months describing KLA intelligence service involvement in political assassinations, … illegal organ trafficking and the murder of hundreds of prisoners."

On this regard Sewel complains that – as to EU evaluation – "Kosovo has no viable crime reduction strategy in place and … lacks a witness protection law". Through this, Sewel writes, the possibilities to investigate "high level crime" are strongly limited. This situation appears even more complex, regarding the fact that – like in most countries of the Balkans – "loyalty to the state is … eroded by the prevalence of clan leadership structures".

Finally with his report Lord Sewel leaves no doubts: "The EU has identified these as matters that must be addressed before it further expands ties to the country."

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This article was first published on Technorati – Politics!

Press Release No. 11/208: "Kosovo enjoyed robust growth in the 2000s and has weathered the global financial crisis well. However, the economy depends on transfers and direct investment from the Kosovar diaspora, a growth model that is likely unsustainable. Moreover, social challenges loom large, with unemployment estimated at about 40 percent of the workforce. Strengthening competitiveness—through administrative and legal reforms, better infrastructure, and wage restraint – is needed to foster the emergence of a tradable sector and self-sustained growth. Fiscal policy addresses pressures to increase capital and social spending from a limited revenue base. In the short term disciplined budget execution is pivotal. In the medium term a re-orientation of fiscal priorities is needed, including raising more revenue from direct taxes. The financial system has developed rapidly while maintaining a sound funding structure.

The mission reached a staff-level agreement with the authorities on a package of policies to be monitored in the context of a Staff Monitored Program (SMP) until the end of 2011. The policies target decisive steps towards fiscal sustainability and stronger budget management and execution. Successful implementation would help establish a track-record of sound fiscal management that could pave the way for a renewal of financial assistance by the IMF in 2012 and facilitate the continuation of donor support."

Concluding Statement of the 2011 IMF Consultation Mission

Recent developments

7. Since 2008, the government has adopted an increasingly expansionary fiscal stance, financing deficits from cash buffers, asset sales, and donor support. The general government balance shifted from a surplus of more than 7 percent of GDP in 2007 to a deficit of 2.6 percent in 2010. Capital spending has been the expansion’s main driver. In 2010, construction started on a highway linking Pristina with the Albanian border. Costs are estimated at more than 20 percent of annual GDP. This year, spending pressures spread to current expenditures, with large increases in public sector wages and war related benefits.

8. An 18-month Stand-By Arrangement (SBA) approved by the IMF Executive Board in July 2010 was interrupted in 2011. The program aimed at restoring fiscal sustainability and safeguarding financial stability, by exercising restraint on current spending and bolstering the government’s deposits with the CBK. Elements of the 2011 budget – in particular the large increase in the wage bill -deviated from program commitments. As a result, no program review could be completed. During this mission, staff and the authorities reached staff-level agreement on a Staff Monitored Program to establish a track-record that could lead to an IMF-supported arrangement in 2012.

Short-term macroeconomic outlook and risks

9. The short-term outlook is benign, even though high food prices are putting pressure on inflation. Remittances, robust credit growth, and public investment continue to support domestic demand. Exports are growing fast, although from a low base. Overall the economy is projected to grow by about 5 percent in both 2011 and 2012. High import prices are expected to push inflation to more than 8 percent (annual average) this year. However, core inflation remains benign, even though possible spillovers from higher public sector wages need to be watched. IMF staff projects the current account deficit to increase to 25 percent of GDP, financed by FDI and other non-debt creating inflows.

10. The outlook is subject to large downside risks, from both domestic and external sources. Domestic risks include economic policy missteps and political disturbances. External risks include weaker growth in Europe. This could reduce incomes of Kosovars living abroad, thus limiting remittances and capital inflows, and forcing a contraction in domestic demand. Lower remittances could also affect the banking system by reducing deposits as well as debtors’ capacity to service their debts.

Enhancing competitiveness and promoting sustainable growth

11. Kosovo’s growth model needs reorientation. To date growth relied on exceptionally high remittances and FDI from abroad, but longer-term prospects for these flows are subdued as diaspora Kosovars integrate more closely into their host countries. Going forward, the key challenge is fostering the emergence of a tradable sector that could drive economic development and growth.

12. Numerous constraints impede the development of a tradable sector. Infrastructure is lacking, notably in transport and energy supply. Limited administrative and judicial capacity impede the business climate. Skill levels of large parts of the work force are modest, reflecting inter alia disruptions in the provision of education prior to independence. Wages, while low in nominal terms, are not particularly competitive when scaled with a measure of productivity (such as per capita GDP).

13. The government’s recently adopted competitiveness strategy contains important steps in the right direction,notably administrative and legal reforms to improve Kosovo’s rank in the World Bank’s “Doing Business” survey; the privatization of energy production and distribution to enhance the reliability of energy supply; and the government’s ambitious highway construction program, although related fiscal burdens require careful management.

14. Negative implications of government policies for labor costs should be avoided. The sharp increase in public sector salaries may trigger undesired spillovers to private sector wages. Minimum wages should be set at levels that avoid excluding employees from formal employment, especially younger workers.

Restoring fiscal sustainability

15. Fiscal policy should remain anchored by two complementing objectives: the maintenance of adequate liquidity buffers and the sustainability of public debt.

Liquidity buffers consist primarily of the government’s balances with the CBK. They are needed not only to satisfy the government’s own liquidity needs, but also to extend resources to the CBK to provide emergency liquidity assistance to banks if needed. A useful yardstick for bank balance adequacy are one month of public expenditures plus one-tenth of banks’ non-equity liabilities, adding up to about €300 million.

Debt sustainability. IMF staff recommends targeting a medium-term primary deficit of about 0.5 percent of GDP. This would allow for a very gradual increase of public debt, stabilizing at about 30 percent of GDP in the long term. Kosovo’s public debt law prescribes a maximum public debt ratio of 40 percent of GDP, thus, the recommended deficit path leaves room to react to external or growth shocks.

16. Kosovo’s current fiscal stance conflicts with both objectives. Liquidity management is complicated by the large outlays on the highway that give rise to temporary deficits of around 5 percent of GDP, with limited financing options through debt issuance. As regards sustainability, staff estimates the primary deficit underlying the 2011 budget at 3½ percent of GDP, implying a fiscal adjustment need of close to 3 percent of GDP.

17. Specifically, while fiscal challenges in 2011 appear manageable, adjustment and/or external disbursements are needed to prevent bank balances from falling below prudent levels in 2012. Revenues have evolved well, reflecting in part progress with tax collection. However, the civil service wage hike raises current expenditures permanently by about one percent of GDP. In the 2011 budget this increase is partly compensated by lower capital spending. Receipts from the privatization of the post and telecom operator are expected to be the main source of deficit financing. While privatization appears on schedule to be finalized before end-year, a possible delay is a risk, and IMF staff recommends building a contingency reserve. In the second half of 2012, bank balances are projected to be depleted on unchanged policies.

18. Against this background, IMF staff recommends fiscal adjustment of ¾ of a percent of GDP annually over a period of four years, with a mix of revenue measures and restraint on current spending. Such a policy would safeguard both adequate liquidity buffers and a sustainable fiscal stance, provided international assistance resumes in 2012.

19. New spending initiatives need to be costed thoroughly, and their accommodation requires higher revenues or expenditure cuts elsewhere. Importantly, the government plans another highway from Pristina to Skopje/Macedonia, for which a sound financing plan is an indispensable prerequisite. Social priorities include a pension for war veterans and benefits for former political prisoners. Prior to designing such benefits, a comprehensive assessment of the number of eligible beneficiaries is needed.

20. More generally, the government’s ambitious spending plans suggest a need for a reorientation of fiscal priorities.Funding higher expenditures with one-off revenues is unsustainable if spending needs are permanent. In this case, more permanent revenues are required. One option is raising the low yield from direct taxes. An upcoming IMF technical assistance mission will develop recommendations in cooperation with the authorities.

21. Unorthodox funding measures should be avoided. Specifically, the government should not tap the assets of the pillar II pension fund, even though a modest part of new inflows could be invested in government paper within the limits of the current legal framework. Large-scale non-concessional borrowing should also be avoided. While such actions might alleviate short-term constraints, in the medium term they would make budget financing more difficult.

Safeguarding Financial Stability

22. While Kosovo’s financial system has evolved in a robust manner, further progress is impeded by limited judicial capacity and incompletely defined property rights. With assistance from the World Bank, the authorities are improving a cadastre to increase the use and enhance the quality of collateral in lending operations. Reforms to speed up contract enforcement by the courts are also needed.

23. Full institutional and operational independence of the CBK is critical for preserving financial stability. In this context, the appointment of a new central bank governor earlier this year was characterized by a clean implementation of the central bank law’s nomination rules.

24. Financial supervision has made progress. Following a based-risk supervision model under the framework of Basel I, the superintendency of banks conducts at least one comprehensive on-site inspection per bank each year. Advances are also being made in the area of stress-testing.

25. Passage of the new banking law will strengthen the institutional framework for banks and microfinance institutions. The draft law improves governance standards, tightens restrictions for lending to bank-related parties, and allows for consolidated supervision of banking groups. It also grants the authorities better tools for bank resolution. To this end, the deposit insurance law needs to be amended to allow funds of the deposit insurance fund to be used for purchase and assumption transactions. As regards microfinance institutions, the law should require a clearly defined ownership structure and assign to the CBK the responsibility for licensing.

26. A priority is enabling the CBK to provide emergency liquidity assistance (ELA) in needed. At the conceptual level ELA was introduced in 2010. Going forward, a memorandum of understanding between the government and the CBK needs to be completed to define duties and identify resources that the CBK can use for ELA.

An additional ministry, four  additional deputy prime ministers and 20 more deputy ministers. Finally a wage increase for government employees as well as further budget expenses resulted in a decrease of available funds due to the breach of agreements with the IMF. The miscalculation concerning the privatization of the publicly owned Post Telecom Kosovo (PTK) moreover contributes to Kosovo’s financial crisis: "100-poor days of Thaci Government", the daily titles. KON/NK

Prior to the current decision, the IMF repeatedly and strongly expressed its concern about an "irresponsible" increase of budget expenses caused – beyond others – by a costly highway project, a huge increase of wages in public institutions – following an election campaign promise of Kosovo PM Thaci – as well as by additional misled spending. Meanwhile an IMF team is said to be monitoring the ongoing budget activities throughout 2011 on request of the Kosovo government: Reportedly a decision about IMF support for Kosovo in 2012 will depend on the final evaluation of 2011 results. KON / NK

According to Isufi, the "today’s debate showed once again the strong confidence we have in international justice, but also concerning the innocence of Ramush Haradinaj, Lah Brahimaj and Idriz Balaj."

Under the slogan "justice delayed is justice denied", the AAK initiative particularly aims at implementing a faster procedure at the court in The Hague. It further on requests institutional support for the defendants by the Kosovo government.

On this regard Kosovo Prime Minister Thaci prior to the extraordinary session reportedly announced, he will offer support for Haradinaj and his the further defendants, as much as it is allowed by the law and the Constitution of the Republic of Kosovo.

Ramush Haradinaj served as the Prime Minister of the Republic of Kosovo for 100 days before he went to The Hague in 2005, in order to face a war crimes trial against him. He was released in April 2008. In June 2010 the ICTY decided to repeat the trial against Haradinaj. In both cases Haradinaj appeared voluntarily without resistance and delay in The Hague.  

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