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Dgexpo/B/Poldep/Note/2008 094 04/06/2008 [PE N°] EN DIRECTORATE-GENERAL FOR EXTERNAL POLICIES OF THE UNION DIRECTORATE B - POLICY DEPARTMENT - NOTE ON THE POLITICAL AND ECONOMIC SITUATION OF ALBANIA AND ITS RELATIONS WITH THE EU Abstract: This note gives an overview and update on the domestic political and economic developments in Albania and its relations with the EU. Any opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. DGExPo/B/PolDep/Note/2008_ 094 04/06/2008 [PE N°] EN This note was requested by the European Parliament's Delegation for relations with the countries of South East Europe. This paper is published in the following languages: English Author: Marga De Jaegere, under the supervision of Georgios Ghiatis. Manuscript completed in June 2008. Copies can be obtained through: E-mail: [email protected] [email protected] Brussels, European Parliament, 4 June 2008 Sources: European Commission Reuters/Factiva Oxford Analytica Economist Intelligence Unit World Markets Research Center World Bank IMF 2 CONTENTS Page 1. INTRODUCTION ................................ 4 2. POLITICAL SITUATION ................................ 4 2.1. Historical Background ................................ 4 2.2. Institutional system ................................ 5 2.3. Recent domestic developments ................................ 6 2.4. International relations ................................ 8 3. ECONOMIC SITUATION ................................ 9 3.1. Economic basis and structure ................................ 9 3.2. Macroeconomic Developments .............................. 10 3.3. Trade .............................. 11 4. RELATIONS WITH THE EUROPEAN UNION .............................. 11 4.1. Stabilisation and Association Agreement .............................. 11 4.2. Challenges and opportunities from the SAA .............................. 13 4.3. EU assistance .............................. 13 4.4. European Commission Progress Report November 2007 ................................13 4.5. Steps taken towards reform .............................. 14 4.4. European Parliament .............................. 15 ANNEX 1 (Political parties / Albanian government) .............................. 16 ANNEX 2 (Map of Albania) .............................. 17 3 1. INTRODUCTION Albania is physically and culturally rooted in Europe. As part of the South-Eastern European countries, it shares a border with Serbia/Kosovo, Montenegro, FYROM (the Former Yugoslav Republic of Macedonia) and Greece. Albania (or Shqipëria in Albanian), like most of the Balkan countries, has several ethnic minorities. These account for 2% of the population and include Greeks in the south, Macedonians in the east, Montenegrins in the north and Vlachs and Roma in the rest of the country. With a 98% ethnically Albanian population, Albania is however the most homogenous of the Western Balkan countries. Religion, often a secondary factor in Albania, is split as follows: Sunni Muslims account for 50% of the population, Bektashi Muslims 20%, Orthodox Christians 20% and Roman Catholics 10%. While the total population of Albania is more than 3.6million, an equally large national minority is found in neighbouring countries. These minorities have often been a source of conflict in the region. They live mainly in Kosovo (2million), FYROM (more than 0.5million) and southern Serbia and in Montenegro. The Albanian governments over recent years have made it clear however that Albania does not have any territorial claims to its neighbours, thereby removing any fears about a 'Greater Albania'. Economic transition in Albania has encountered many obstacles. The main aims of the successive governments since the fall of Communism in 1991 have been to tackle corruption, high unemployment and organised crime and to succeed in establishing a basic infrastructure for the country. The parliamentary elections of 3 July 2005, held more or less in line with international standards, were crucial to the conclusion of the Stabilisation and Association Agreement (SAA) with the EU. The SAA negotiations, which began in January 2003, have finally been concluded in early 2006 and the agreement was signed on 12 June 2006. In a resolution adopted on 6 September 2006 the European Parliament gave its assent to the SAA Albania now has the status of a potential candidate country for EU membership. Guidance to the Albanian Government for necessary reform priorities is provided by the EU trough the European Partnership. 2. POLITICAL SITUATION 2.1. Historical Background There was a brief period of independence in the 18th century, but the territory occupied by modern Albania has been under foreign domination for much of the past 2.000 years. An independent republic of Albania was proclaimed in November 1912, and confirmed by the London Treaty of 1913, while Serbia acquired Kosovo and the Albanian-inhabited areas of Macedonia. A long history of resistance to foreign powers, together with the recent transition from an excessively strict communist regime, go some way towards explaining why institutions in Albania are fragile, and the rule of law is sometimes tenuous. Following more than four decades of isolation under the rule of communist leader Enver Hoxha since the end of World War II and a more moderate rule of his successor Ramiz Alia since 1985, it was not until 1990/1991 that Albania accepted a multiparty system. The first elections were won by the Albanian Workers' Party, which became the Socialist Party of Albania (SPA/PSSH). The political and economic instability of 1991 and 1992 caused new elections to be held, in which the largest opposition party, the Democratic Party of Albania (DPA/PDSH), led by the current Prime Minister, Sali Berisha, claimed victory. The challenges facing the new leader were fairly complex. On the domestic front, he had to move from a planned to a market economy, while taking into account that Albania was the 4 poorest country in Europe. At this time, Albania survived thanks to humanitarian aid and various international funds. The next parliamentary elections in 1996 were again won by the DPA. The elections were however heavily criticised by international observers and the United States and EU for several irregularities. In 1997, Albania underwent a serious crisis when the 'pyramid investment schemes'1 collapsed. Albanians who had invested most of their savings in these schemes were ruined. Blaming those in power, the savers rioted, creating an atmosphere of near civil war in the country. The uprising by savers in southern Albania, supported by the SPA, led to early elections. These were held in July 1997 under OSCE monitoring and the protection of an Italian-led military force2, which was responsible for transporting humanitarian aid, restoring order and gathering up the weapons that had been stolen during the riots. The elections were won by a left-wing coalition led by the Socialist Party (SPA/PSSH) of Fatos Nano, another of Albania's important political figures. In 1999, the war in Kosovo and the NATO bombing of Serbia - ruled at the time by Slobodan Milosevic - had a serious impact on Albania. Of a total of 800.000 Kosovars forced to leave their country, 480.000 headed to Albania to seek refuge. The Socialist Party (SPA) emerged again victorious from the multi-round Parliamentary elections in 2001, with 41% of the vote and its smaller allies winning a further 11%. The DPA- led opposition coalition, the Union for Victory (UV), won 37% of the vote and subsequently boycotted parliament. The 2001 elections were followed by a chaotic 12 month period, with three different Prime Ministers. The former Prime Minister Ilir Meta (SPA) initially remained in place after the elections. However, conflicts within the ruling SPA, including accusations of corruption of the government by party Chairman Fatos Nano, led to the resignation of 4 Ministers in December 2001 and of Prime Minister Ilir Meta in January 2002. Following an interim period with Prime Minister Pandeli Majko (SPA) Mr. Nano took over the post himself in July 2002. The elections were observed by an International Election Observation Mission, which identified a number of isolated but serious irregularities. The results of 37 out of the 100 electoral zones were challenged by the right and the left in the Constitutional Court. The opposition coalition boycotted Parliament until 31 January 2002, because of the disputed election results. 2.2. Institutional system The Republic of Albania is a parliamentary democracy. Albania's current constitution was adopted by referendum in November 1998 and replaced an interim document that had been in place following the abandonment of a Marxist-inspired constitution in April 1991. The 1998 constitution apportions the largest share of political power to the prime minister and the government. 1 Pyramid schemes are investment trusts using a basic 'chain principle': sums of money are handed over to 'institutions', which promise savers astronomical interest rates. Savers are then paid with money from the most recent deposits. 2Following numerous discussions and negotiations among the Western countries of the EU and NATO, it was decided that a military operation, known as Operation Alba, would be organised under the aegis of the OSCE and under Italian command, involving countries such as France, Greece and Turkey. 5 Since the 2001 parliamentary election the unicameral legislature has comprised 140 deputies, 100
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