Balkanalysis.com

By Matteo Albertini

At 9.00 pm on the 12^th of November 2011, Silvio Berlusconi resigned from his position as Italy’s prime minister, due to a failure to preserve his majority in the Chamber of Deputies, the lower house of the Italian parliament. Primarily, of course, Berlusconi’s departure came after pressure from internal and foreign institutions, public opinion and political leaders, as a consequence of the country’s worsening economic crisis and fears that he was no longer capable of the necessary strong leadership at this time.

His meeting with President Napolitano at the Quirinale marked the end of one of the most controversial government in Italian history, and is seen by many commentators as the last chapter of Berlusconi’s life as a political leader.

Enter Monti

The day after, Napolitano appointed Professor Mario Monti as new prime minister, asking him to form a new government capable of solving Italy’s chronic debt crisis. Monti is a well known figure in Europe and abroad: a member of the Trilateral Commission (as is Lucas Papademos, the new Greek prime minister, whose own situation was assessed in this recent Balkanalysis.com article), international adviser to Goldman Sachs, a former European Commissioner for competition and former rector of the eminent Bocconi University of Milan.

No surprise, then, that this appointment by Napolitano was praised by European and international institution like the IMF and World Bank. Less predictable was the support Monti immediately gained from domestic political parties (including Berlusconi’s, which has still a relative majority), industrial representatives and trade unions’ officials- each of them, for different reasons, having identities light years away from that of an insider to international financial trusts.

In two days, Monti accepted his designation and defined his new so-called “technicians’ government,” which won a trust vote both from the lower and the upper chambers of the Italian Parliament. The principal members of the technical government are: Giulio Terzi di Sant’Agata (a former ambassador to the US) as Minister of Foreign Affairs; Anna Maria Cancellieri as Minister of Interior; Paola Severino as Minister of Justice; Francesco Profumo as Minister of Education; Corrado Passera as Minister of Development and Infrastructures, and Admiral Giampaolo di Paola as Minister of Defense.

Unprecedented Expertise

Each of these ministers is a recognized expert in the field in which he or she will operate as a public official- a fact which represents quite a rarity in Italian political tradition. This comes as a confirmation that the first hardship of Monti;s cabinet is to be recognized by international and Italian observers as a credible answer to the risk of collapse.

And indeed, the new government is now being called upon to make many crucial decisions, and not only restricted to the economic and financial sectors, which constitute its main area of expertise and will require its biggest efforts. In Italian newspapers today, the question most frequently being repeated is “what next?”, implying that a long-term solution to the crisis cannot be reached only on national terms, but must involve new policies in economic management at an EU level.

The sides are principally two (or three, maybe): those saying that the debt crisis may be solved only through a wider participation of European Central Bank in financing “shaky” countries, and those, with Germany ahead, which underline the “domino-risk” of using money from virtuous states to help squanderers (the third being the position of those pointing out, in different ways, that the problem is Europe itself).

Concerns for Economy, and a Medium-Term Presence

Needless to say, the decisions that will be taken in Brussels will affect the behavior of European countries towards the Western Balkans, and will have an impact on their economies; European countries such as Germany and Italy are the main commercial partner of the area. As was seen in a previous Balkanalysis.com article, investors are attracted by the dimension of new markets, the cheap labor costs, the profitable tax regime and so on. Sound political and diplomatic relations permitted also high-level alliances in energetic and financial sectors, whose effective outcome depends now widely on the success of the “economic rescue” of Italy and Euro-zone.

In the Western Balkans, economic integration in the European market precedes the admission in the European Union for the most populous countries of Croatia – the forthcoming 28th EU member – and Serbia, as well as for smaller countries “looking for approval” like Montenegro and Kosovo, that adopted the euro as everyday currency (for practical and business reasons, not by virtue of any qualifying procedure, however).

As was well reported in the broad research collected in no. 3 of PECOB’s paper series (Portal of Central Eastern and Balkan Europe), dated September 2010, the crisis affected Balkan states by slowing down still fragile economic systems, bound to political and infrastructural reconstruction; as a consequence, the dreaded reduction of foreign investments, the unemployment, the perceived corruption and the lack of solid welfare, could constitute a major factor of destabilization in the region, boosting inequality, poverty and differences between social classes. These were of course the same factors that led, 25 years ago, the Yugoslav Federation down the road to collapse.

Thus, many eyes are now looking at the new Italian government’s moves with growing concern, because they will have consequences outside Italy too. This is even more the case since it is now likely that the present government will remain in charge until the next elections (spring 2013), and will thus set medium-term policy for the entire country.

Balkan Banking Connections

At first sight, this government seems to have less interest in the Western Balkans than the previous one had, considering that Berlusconi was considered by many domestic observers as a close friend, or at least an ally, of the former Montenegrin President Milo Djukanovic.

Many business agreements have been signed under the aegis of this Adriatic friendship, such as the acquisition by Italian group A2a of almost half of the national Montenegrin electric company EPCG, or the building of new pipelines from Bar to Bari. Most of these agreement were financed by Italian banks and specifically by the two giants, Intesa-San Paolo Group and Unicredit Banca, which already hold a consistent part of the financial market in Yugoslav successor states.

A clue as to the new government’s Balkan orientation may be found in the presence in the Monti cabinet of Corrado Passera. Still last week CEO of Intesa-San Paolo, Passera has been deeply involved in the group’s investments in the Western Balkans during the past years. Even if he resigned from his bank as soon as he was appointed Minister of Development and Infrastructures (which also covers energetic supplies), it is reasonable to imagine that he will take advantage of his experience towards the area and support those project he financed as a bank manager.

However, the main characteristic of this technical government lies exactly in the personal biography of the ministers: at least five of them have had long careers in the financial and entrepreneurial area. The new Minister of Welfare, Elsa Fornero, was together with Passera a high-rank official of Intesa-San Paolo, vice-president of the Surveillance Council since 2010; we might also recall her role as consultant to the World Bank in 2003-2004, when she was appointed to evaluate the state of transition economies such as Russia, Lithuania and later, Albania and Macedonia.

Military and Diplomatic Appointments and the Balkans

The new government is then well aware of the possible consequence of an Italian “step back” from the region, at least for how it might affect the financial and credit markets. But the possible role of the new Italian cabinet as a stability factor in the Western Balkans stands out also in the military and diplomatic sectors: Admiral Giampaolo di Paola, appointed as Minister of Defense, is currently serving as Chairman of the NATO Military Committee but has long experience as Italian Chief of Staff, and has frequently visited Bosnia and Kosovo, where Italian soldiers are participating in EUFOR and KFOR peacekeeping missions, respectively.

The task of cutting through the diplomatic knots of the Western Balkans will fall on the new Minister of Foreign Affairs, Giulio Terzi di Sant’Agata, current Italian ambassador to the United States. A member of the Italian representation to the United Nations during the nineties, he served in New York as vice-president of the Italian delegation in the Security Council during the war in Bosnia. And he is considered one of the leading Italian experts on international security and human rights: during his career, he has been a close counselor of the Minister of Foreign Affairs, especially for issues related with the Balkans and Middle East.

Another more subtle aspect of possible diplomatic influence concerns Italy’s unique religious dynamic. The new Minister for International Cooperation and Integration, by necessity, is also the minister tasked with handling the Balkan countries. The nominee is Andrea Riccardi, a top official of the Catholic Comunità di Sant’ Egidio. This is the same organization whose member is Juliusz Janusz, appointed by the Holy See as apostolic delegate to Kosovo on 10th February 2011. The significance of the Vatican’s overtures in Muslim-majority Kosovo has been discussed by two Balkanalysis.com articles, the first in October 2008 and the second in April of this year.

This thus leads us to another important link between Italy’s new government and the Balkans: that between the Vatican and Catholic “headquarters” in Rome, which are well represented in this cabinet and may condition Italian foreign policies in the next months, even towards project and investments in the Balkans.

Other Concerns: North Africa and Above All, the Economy

Certainly the Western Balkans will not be the main concern of the new executive, if we consider the general situation on the Mediterranean chessboard: the turbulent events in North Africa and the consequences of the Arab Spring require careful attention from Italy, being a neighboring country. But Admiral di Paola, speaking as NATO commander, frequently underlined the importance of enlarging the Treaty to Balkan countries, as members or partners. This position has been depicted as clashing with Russian interest in the region and in Serbia in particular, as a consequence of the ineffectiveness of the NATO-Russian council (Russian envoy Dmitry Rogozin said in 2009 that it is a council where “scholastic discussions were held”).

The “technicians’ government” led by Mario Monti is going to face more than one trial in its effort to drag Italy out of the crisis. Many questions are still unanswered: will Monti’s cabinet just follow the ‘golden rules’ expounded by the IMF and international financial organization, since it is constituted by representatives of these groups? And what will guarantee, let alone the control of public debt, the redistribution of wealth and the economic growth necessary to avoid default and a tragic chain effect in the European Union and neighboring countries? Time is short, and everyone is expecting to receive an answer as soon as possible.

Given the unprecedented severity of the financial crisis and its possibly transformational effects on the entire EU, it is natural to assume that the Balkans will not loom large on the agenda of the Monti government. However, where and how it chooses to act will no doubt reflect the cumulative experience and interests of the cabinet members discussed above.

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(Balkanalysis.com Research Service)- Despite the continuing effects of an uncertain economy on tourism globally and regionally, Montenegro remains determined to carve out an identity as a chic, sophisticated and exclusive destination, as ongoing development projects show.

Speaking for Britain’s Daily Mail, tourism ministry official Ferdinand Wieland attested that the government’s strategy “…is to not just renovate old hotels, but create state-of-the-art new projects and turn Montenegro into a higher-quality tourist destination.”

Documenting several high-profile developments currently opening or under construction, the newspaper noted that price adjustment for properties has settled since a peak in 2007, but that interest remains relatively higher than in other once-touted Balkan getaways such as Bulgaria. Further, the excitement surrounding exclusive hotels such as the newly-opened Aman Sveti Stefan – on the fabled isle near Budva – remains palpable.

Key to the government’s strategy is a new “super-marina”, known as Porto Montenegro, being built near Tivat. The 10-year project will include luxury amenities, apartments, a five-star restaurant, and leisure activities. It is being backed by Peter Munk, a Canadian mining executive with extensive business activities in Eastern Europe and Russia.

In October 2006, Munk concluded negotiations with the government, taking over a Yugoslav-era shipbuilding and naval yard. At the time, the pioneering investor enthused that with the acquisition, “…we are establishing a brand new industry which will enable Montenegro to be competitive with the most successful yacht harbors on the Mediterranean.” according to SETimes.com.

Now, completion of the first residential units and 85 of the planned 600 yacht berths well ahead of schedule is adding to industry confidence, reads the Daily Mail, especially at a time when other planned projects in the region have stagnated due to the state of the economy.

Proclaiming that their marina is being ‘created by yachtsmen, for yachtsmen,’ the Porto Montenegro management has assembled a notable team of international heavyweights to design, build and outfit the place. Among these include landscape designer Robin Lane Fox, vice-chairman of the British Horticultural Society who has done work for Queen Elizabeth II, and structural engineering company ARUP, whose past projects include the Sydney Opera House, Centre Pompidou in Paris, and several venues for the Beijing Olympic Games in 2008, according to the Porto Montenegro website.

Yachting is an important part of the draw in a small country often compared with Monaco and San Tropez. Numbers for the year so far are impressive. On July 28, Radio-Television Montenegro quoted Sanja Brankovic of the Tourism Organization of Kotor as saying that thus far in 2010, some 110 ships with 47,965 passengers and 248 yachts with 965 passengers have been moored in the harbor.

Industry and governmental leaders are keen to present tourism development as the prime focus for economic development in the tiny, rugged and often spectacularly beautiful Adriatic state. At least for three months of the year, there is promise for seaside tourism- while Montenegro would like to also develop its mountain-based offerings for summer and winter sports as well. Developing and lengthening the season by adding on things like spa and wellness centers is an area of new attention.

While the current economic crisis has seen decreases in tourism in traditionally-touristed countries such as Greece, June saw a 13 percent increase in passengers at Podgorica and Tivat airports over last year. On July 8, Turkish Airlines began running direct flights to the Montenegrin capital on a thrice-weekly basis, making Montenegro even more accessible to global travelers.

For the British media, Mr. Wieland also stated that he expects western visitor levels to increase by up to seven per cent this year, up from the around 1.2 million visitors who visited Montenegro in both 2008 and 2009.

Already, increased visitor numbers have been noted, according to the Radio-Television Montenegro report. For example, the public relations manager of the Budva Riviera Hotel Group, Tijana Kotarac, said that the company’s hotels in Budva and Petrovac have experienced a 13 percent rise in total stays over last year.

She added that the majority of guests from abroad or from Russia, Serbia, France, Germany, Bosnia and Herzegovina and the countries of Eastern Europe.