20. IMF and World Bank Contributed to Economic Tensions in the Balkans

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Source: THIS, July/August 1999, Title: “Banking On the Balkans,” Author: Michael Chossudovsky

Faculty Evaluator: Peter Phillips, Ph.D.
Student Researchers: Jeremiah Price & Lisa Desmond

The World Bank and International Monetary Fund (IMF) were leading contributors to economic tensions in the Balkans that stimulated the breakup of Yugoslavia. The divisiveness in Bosnia/Herzegovina and Kosovo was reported by media to be caused by “aggressive nationalism” and the ongoing ethnic and religious conflicts. However, other causes involving the IMF and the World Bank contributed to the rise in ethnic tensions.

Declassified documents from 1984 reveal that a U.S. national security decision directive, entitled “United States Policy Towards Yugoslavia,” set a policy for destabilizing the Yugoslavian government. U.S. policy was to expand efforts to promote a “quiet revolution” to overthrow Communist governments and parties, while reintegrating the countries of Eastern Europe into a market-oriented economy.

In the early 1980s, the World Bank and IMF provided loans to the former Yugoslavia to supposedly “fix” the economic hardship of the region. The loans from these two organizations included mandated macroeconomic restructuring that, rather than helping, in fact destroyed the industrial sector and dismantled the welfare state. In 1980, when the first phase of macroeconomics reform started, industrial growth began its seven-year decline from 7.1 percent per annum during the years of 1966-79, to 2.8 percent from 1980-87.

Within a climate of severe inflation and wage freezes, restructuring moved on to include new laws, which ushered in import liberalization and a freeze on credit. This caused investment and industrial growth to plummet to zero. Consumer price indexes increased 2,700 percent. Hundreds of firms filed bankruptcy or liquidation, and tens of thousands of industrial workers were laid off. In Kosovo, one of Yugoslavia’s poorest provinces, economic depression sparked ethnic conflict between the Albanian majority and Serb minority. Albanian pressure to secede increased and Slobodan Milosevic began moves to suppress Albanian nationalism. In the process, hundreds of Albanians were thrown out of state jobs.

In 1990, the IMF and the World Bank delivered a new “financial aid package” that required new extensive expenditure cuts by the federal government. Belgrade suspended transfer payments to republics and provinces, and real wages collapsed by 41 percent causing half a million workers to have their wages suspended. Inflation began to rise and industrial growth plummeted to 10.6 percent. The entire Yugoslavian banking system began to be dismantled under the supervision of the World Bank. A year later, in 1991, Croatia, Slovenia, and Macedonia declared independence from Yugoslavia and civil war broke out in Croatia.

The IMF and World Bank involvement led to the impoverishment of the population, which in turn led to hatred, confusion, and divisiveness. The United States and NATO wanted to see Yugoslavia become a market-oriented economy, but due to structural adjustment programs the country has experienced out of control inflation and enormous drops in real wages. Now that the economy is in shambles, the U.S. and the European Union have installed a “full-fledged colonial administration” to replace the sovereign economic control of the country. Unfortunately, most of the Western world doesn’t realize the root of the problems in the Balkans and sees NATO and the U.S. as the saviors of an “ethnic war.”

UPDATE BY MICHEL CHOSSUDOVSKY: The military invasion and occupation of Kosovo is but a stage in the broader process of conquest and political destabilization of Yugoslavia. After the separation of Kosovo from Yugoslavia, the Alliance is intent on promoting the secession of Montenegro, Yugoslavia’s only remaining access to the Adriatic. Washington has backed the puppet government of President Milo Djukanovic, politically as well as financially since 1997. Conditional upon the adoption of “free market” reforms, U.S. assistance has included support to the 12,000 strong police force loyal to President Djukanovic, not to mention the financing of the Montenegrin civilian militia. (See U.S. State Department, Press Conference, Washington, DC, June 9, 1999; see also The Statements of Secretary M. Albright and President M. Djukanovic, State Department Press Conference, April 22, 1999).

Advised by Western economists and consultants, the preconditions for Montenegro’s “economic separation” from Yugoslavia had been firmly established. The Deutschmark was adopted as the “official” currency in November 1999 leading to Montenegro’s de facto withdrawal from the Yugoslav monetary system alongside the paralysis of federal transfers to the Podgorica government. A Currency Board was installed on the model of Bosnia-Herzegovina under the Dayton Agreement. Meanwhile, Montenegro’s Central Bank had severed its ties with the Yugoslav Central Bank in Belgrade with a view to eventually establishing its own currency pegged to the Deutschmark. The new currency would be established under the currency board arrangement, with the support and financial assistance of the IMF.

By November 1999, the political and economic secession of Montenegro was already de facto with the exception of the cutting off of Serbia from its access to the Adriatic. In this regard, the U.S. is intent with the support of the Djukanovic government of mounting an effective blockade of Bar, which is the port of entry for imported oil into Yugoslavia. Meanwhile, the Pentagon had already set out operations plans (OPLANs) “for the invasion and forcible expulsion of Serb forces in Montenegro” (Truth in Media, September 29, 1999). The same source indicates “that the unit designated as the spearhead for the invasion of Montenegro, II Marine Expeditionary Force (II MEF), stationed at Camp Lejeune, NC, has an Operational Planning Team (OPT) in Macedonia calculating how best to secure bridgeheads to militarily support the Montenegrin government should it decide to declare its independence from the Federal Republic of Yugoslavia (FRY)” (Truth in Media, September 29, 1999).

Destabilizing Vojvodina: Vojvodina is a “bread basket” and a source of raw materials for Yugoslavia. NATO’s ultimate objective is the total collapse of Yugoslavia as a viable national economy. Vojvodina has within Serbia the same status as Kosovo. It is an autonomous province with Novi Sad as its capital. NATO’s hidden agenda is to destabilize Vojvodina, calling for the establishment of a “special status.” The Budapest government (now a member of NATO) has called for the return of the northern territories ceded from the Austro-Hungarian empire as a result of the Treaty of Versailles after World War I. Barely a month after the end of the bombings, Hungarian Prime Minister Viktor Orban met behind closed doors with U.S. Defense Secretary William Cohen. On the agenda: autonomy to ethnic Hungarians in the north of Vojvodina.

Economic Reconstruction: The so-called “reconstruction” by foreign capital of the Balkans under the “stabilization program” will signify multi-billion dollar contracts to multinational firms to rebuild roads, airports, and bridges that will eventually be required (once the embargo is lifted) to facilitate the “free movement” of capital and commodities. The proposed “Marshall Plan” financed by the World Bank and the European Development

Bank (EBRD), as well as private creditors, will largely benefit Western mining, petroleum, and construction companies, while fueling the region’s external debt well into the third millennium.

Free market reforms have been envisaged for Kosovo under the supervision of the Bretton Woods institutions largely replicating the structures of the Rambouillet Agreement. Article I (Chapter 4a) of the Rambouillet Agreement stipulated that: “The economy of Kosovo shall function in accordance with free market principles.” The KLA government will largely be responsible for implementing these reforms and ensuring that loan conditionalities are met. In close liaison with NATO, the Bretton Woods institutions had already analyzed the consequences of an eventual military intervention leading to the military occupation of Kosovo. Almost a year prior to the beginning of the War, the World Bank con-ducted “simulations” that anticipated the possibility of an emergency scenario arising out of the tensions in Kosovo (World Bank Development News, April 27, 1999).

The “reconstruction” of Kosovo financed by international debt largely purports to transfer Kosovo’s extensive wealth in mineral resources and coal to multinational capital. In this regard, the KLA has already occupied (pending their privatization) the largest coal mine at Belacevac in Dobro Selo, northwest of Pristina. In turn, foreign capital has its eyes riveted on the massive Trepca mining complex that constitutes “the most valuable piece of real estate in the Balkans, worth at least $5 billion” (Chris Hedges, New York Times, July 8, 1998). The Trepca complex not only includes copper and large reserves of zinc but also cadmium, gold, and silver. Also, it has several smelting plants, 17 metal treatment sites, a power plant, and Yugoslavia’s largest battery plant. Northern Kosovo also has estimated reserves of 17 billion tons of coal and lignite.

The most profitable state assets are being transferred into the hands of foreign capital under the World Bank-sponsored privatization program. Strong economic medicine imposed by external creditors will contribute to further boosting a criminal economy (already firmly implanted in Albania) that feeds on poverty and economic dislocation.

Also, Kosovo is slated to reimburse this debt through the laundering of dirty money. Yugoslav banks in Kosovo will be closed down and the banking system will be deregulated under the supervision of Western financial institutions. Narco-dollars from the multi-billion dollar Balkans drug trade will be recycled towards servicing the external debt, as well as financing the costs of reconstruction. The lucrative flow of narco-dollars thus insures that foreign investors involved in the “reconstruction” program will be able to reap substantial returns. In turn, the existence of a Kosovar “narco-state” insures the orderly reimbursement of international donors and creditors. The latter are prepared to turn a blind eye. They have a tacit vested interest in installing a government that facilitates the laundering of drug money.