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In political crises, Macedonia and Albania risk economic slowdown

Europe

Political instability is increasing in Albania, where the main opposition party is threatening not to participate in the June general election, and in Macedonia, where violent protesters have stormed into parliament. In both cases, political instability starts affecting economic activity.

Macedonian political crisis entered a violent phase when, for the first time in the country’s history, an Albanian candidate was nominated to become parliament Speaker. Nationalist protesters stormed into Parliament, beat an Albanian MP and isolated for hours Zoran Zaev, the leader of the Social-Democratic Party, which in the last parliamentary election gained a majority of votes. Voting an Albanian Speaker was meant to be the first of a series of moves from the new pro-western majority led by Zaev to form a government, while President Ivanov continues to refuse to give Zaev the mandate to form the new cabinet, justifying his choice with the pretext that allowing Zaev to form a government would be against national interests, given Albanians’ quest for more power and rights. The situation is complicated by the fact that Russia backed nationalistic parties, while western countries backed the winning coalition of Social-Democrats and Albanian parties. Amid all this political turmoil, the economy is suffering, with Macedonia’s economic activity having slowed and sovereign debt having grown higher in the last few years, eroding fiscal space for future expansionary measures.

On the other side of the border, what started more than two months ago as a political protest by the opposition in Tirana has caused a political crisis that is likely to put into question the general election scheduled to take place on June 18th. From a tent pitched in front of Prime Minister’s Office in the main boulevard of Tirana, the leader of the centre-right opposition Lulzim Basha has directed a parliamentary boycott and called for a “democratic revolution” to found a “New Republic”, threatening not to participate in the scheduled elections. Brussels attempted a mediation between PM Edi Rama and the opposition head, but the mission of Euro-Parliamentarians David McAllister and Knut Fleckenstein in Tirana failed to result in an agreement. Instead, the opposition leader continues to escalate rhetoric, threatening to block coming elections with all possible means. With the governing Socialist Party set to win next election, and opposing Democratic Party firmly refusing to participate, political risk is on the rise and the economy starts being affected. The Governor of the Bank of Albania warned that continuing political crisis might negatively impact economic growth, directly by affecting private investments and indirectly by hitting foreign investor confidence.