Demonstrators hold a banner reading 'Kosovo' and wave flags during a protest against the accord on the normalisation of relations between Serbia and Kosovo in Belgrade. Photograph: Getty Images.
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The western Balkans are in danger of sliding backwards

The EU cannot afford a wait and see approach that creates the risk of economic divergence and renewed instability.

Fifteen years after the wars that devastated and divided the former Yugoslavia, the countries of the western Balkans are facing a different kind of challenge: the risk of permanent marginalisation as part of Europe’s “super-periphery”, a zone of stagnation beyond EU’s troubled southern rim. That has been one of the under-reported consequences of an economic crisis that has simultaneously derailed the region’s efforts to catch up with the rest of Europe while sapping the EU’s enthusiasm to admit new member states. It is the reason why all seven Prime Ministers from the region are gathering in London today for an economic development conference hosted by the European Bank for Reconstruction and Development.

A defining feature of transition economies is their ability to achieve growth rates that put them on a convergence path with the highest income countries. That is what the countries of Central and Eastern Europe managed to achieve in the years before and after EU accession. Judged by this measure the economic transition of the western Balkans has stalled with a double-dip recession, inadequate investment flows and unemployment running at around a quarter of the adult population. Growth is just beginning to return, but at levels that effectively amount to stagnation. Without a return to a higher growth path, the countries of the region will remain stuck at less than a third of the EU’s average wealth per capita.

It should be acknowledged that the nations of the western Balkans face significant economic difficulties that are not of their own making. Their relative distance from the EU’s largest and wealthiest markets and their proximity to Greece mean that they have felt the impact of Europe’s economic crisis more than most. But as a paper published by the London School of Economics last year found, there is a specific “western Balkans effect” that inhibits inward investment and retards economic development. This is the result of serious deficiencies in politics and governance that the leaders meeting in London need to address.

The first aim should be to reduce the political risk factors involved in doing business in the region. The Balkan wars are a fading memory, but there has been little in the way of real reconciliation. The different ethnic communities of Bosnia-Herzegovina continue to live separate lives. Serbia has normalised relations with Kosovo, but refuses to recognise it. Even Greece’s unresolved objection to the description of FYROM as Macedonia disfigures the politics of the region. As long these dividing lines and enmities remain frozen, investment will look like a risk.

One legacy of this political division has been to limit the scope of regional economic integration, raising costs and reducing opportunities for potential investors. Despite laudable initiatives like the Regional Co-operation Council and the Central European Free Trade Agreement, good intentions are not always matched by delivery and trade between countries in the region is far lower than it should be. Efforts to promote reconciliation and deeper economic linkages should go hand in hand, helping to convince investors that renewed conflict is unlikely.

The second issue that needs to be addressed is the absence of strong, market supporting institutions, like clean government and independent courts, needed to uphold the rule of law and protect property rights. Problems like corruption and the lack of judicial independence are responsible for a business climate that, according to international indices, falls far short of European standards. The political elites are viewed as predatory, using legal and administrative tools to intimidate businesses and secure financial and political favours.

Some efforts have been made to address these problems. But too often reform is superficial, introducing new laws and procedures without any change of underlying behaviour. For example, the European Parliament expressed concern about provisions in Serbia’s criminal code that give the authorities broad scope to criminalise commercial activities that are considered perfectly normal in any functioning market economy. Serbia revised its code and then reopened all of its existing cases under the new Article 234. An estimated 1,500 business people are currently under investigation (including Serbia’s second wealthiest entrepreneur, Miroslav Miskovic) often for doing little more than making a profit.

This creates real policy problems for the EU. Faced with its own internal pressures and economic difficulties, it needs to export the European model of governance, rather than import more problems from the western Balkans. Further enlargement will not therefore happen quickly or easily to a region with mass unemployment and limited economic prospects. But the EU cannot afford a wait and see approach that creates the risk of economic divergence and renewed instability across the western Balkans. It needs to redouble efforts to promote lasting change and real economic convergence

The traditional legalistic process in which the terms of accession are laid out and the member states are expected to demonstrate compliance on their own initiative won’t work any more. Getting countries of the region up to European standards will require a much more intensive form of supervision and a willingness by the EU to be firmer and more interventionist in dealing with the most serious deficiencies. But the political will to do that unless the region’s leaders first show that they mean business. That should be the message coming out of today’s meeting.

David Clark is the founder and editor of Shifting Grounds, and served as special adviser to Robin Cook at the Foreign Office from 1997 to 2001

David Clark was Robin Cook’s special adviser at the Foreign Office 1997-2001.

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North Yorkshire has approved the UK’s first fracking tests in five years. What does this mean?

Is fracking the answer to the UK's energy future? Or a serious risk to the environment?

Shale gas operation has been approved in North Yorkshire, the first since a ban introduced after two minor earthquakes in 2011 were shown to be caused by fracking in the area. On Tuesday night, after two days of heated debate, North Yorkshire councillors finally granted an application to frack in the North York Moors National Park.

The vote by the Tory-dominated council was passed by seven votes to four, and sets an important precedent for the scores of other applications still awaiting decision across the country. It also gives a much-needed boost to David Cameron’s 2014 promise to “go all out for shale”. But with regional authorities pitted against local communities, and national government in dispute with global NGOs, what is the wider verdict on the industry?

What is fracking?

Fracking, or “hydraulic fracturing”, is the extraction of shale gas from deep underground. A mixture of water, sand and chemicals is pumped into the earth at such high pressure that it literally fractures the rocks and releases the gas trapped inside.

Opponents claim that the side effects include earthquakes, polluted ground water, and noise and traffic pollution. The image the industry would least like you to associate with the process is this clip of a man setting fire to a running tap, from the 2010 US documentary Gasland

Advocates dispute the above criticisms, and instead argue that shale gas extraction will create jobs, help the UK transition to a carbon-neutral world, reduce reliance on imports and boost tax revenues.

So do these claims stands up? Let’s take each in turn...

Will it create jobs? Yes, but mostly in the short-term.

Industry experts imply that job creation in the UK could reflect that seen in the US, while the medium-sized production company Cuadrilla claims that shale gas production would create 1,700 jobs in Lancashire alone.

But claims about employment may be exaggerated. A US study overseen by Penn State University showed that only one in seven of the jobs projected in an industry forecast actually materialised. In the UK, a Friends of the Earth report contends that the majority of jobs to be created by fracking in Lancashire would only be short-term – with under 200 surviving the initial construction burst.

Environmentalists, in contrast, point to evidence that green energy creates more jobs than similar-sized fossil fuel investments.  And it’s not just climate campaigners who don’t buy the employment promise. Trade union members also have their doubts. Ian Gallagher, Secretary of Blackburn and District Trade Unions Council, told Friends of the Earth that: “Investment in the areas identified by the Million Climate Jobs Campaign [...] is a far more certain way of addressing both climate change and economic growth than drilling for shale gas.”

Will it deliver cleaner energy? Not as completely as renewables would.

America’s “shale revolution” has been credited with reversing the country’s reliance on dirty coal and helping them lead the world in carbon-emissions reduction. Thanks to the relatively low carbon dioxide content of natural gas (emitting half the amount of coal to generate the same amount of electricity), fracking helped the US reduce its annual emissions of carbon dioxide by 556 million metric tons between 2007 and 2014. Banning it, advocates argue, would “immediately increase the use of coal”.

Yet a new report from the Royal Society for the Protection of Birds (previously known for its opposition to wind farm applications), has laid out a number of ways that the UK government can meet its target of 80 per cent emissions reduction by 2050 without necessarily introducing fracking and without harming the natural world. Renewable, home-produced, energy, they argue, could in theory cover the UK’s energy needs three times over. They’ve even included some handy maps:


Map of UK land available for renewable technologies. Source: RSPB’s 2050 Energy Vision.

Will it deliver secure energy? Yes, up to a point.

For energy to be “sustainable” it also has to be secure; it has to be available on demand and not threatened by international upheaval. Gas-fired “peaking” plants can be used to even-out input into the electricity grid when the sun doesn’t shine or the wind is not so blowy. The government thus claims that natural gas is an essential part of the UK’s future “energy mix”, which, if produced domestically through fracking, will also free us from reliance on imports tarnished by volatile Russian politics.

But, time is running out. Recent analysis by Carbon Brief suggests that we only have five years left of current CO2 emission levels before we blow the carbon budget and risk breaching the climate’s crucial 1.5°C tipping point. Whichever energy choices we make now need to starting brining down the carbon over-spend immediately.

Will it help stablise the wider economy? Yes, but not forever.

With so many “Yes, buts...” in the above list, you might wonder why the government is still pressing so hard for fracking’s expansion? Part of the answer may lie in their vested interest in supporting the wider industry.

Tax revenues from UK oil and gas generate a large portion of the government’s income. In 2013-14, the revenue from license fees, petroleum revenue tax, corporation tax and the supplementary charge accounted for nearly £5bn of UK exchequer receipts. The Treasury cannot afford to lose these, as evidenced in the last budget when George Osborne further subsidied North Sea oil operations through increased tax breaks.

The more that the Conservatives support the industry, the more they can tax it. In 2012 DECC said it wanted to “guarantee... every last economic drop of oil and gas is produced for the benefit of the UK”. This sentiment was repeated yesterday by energy minister Andrea Leadsom, when she welcomed the North Yorkshire decision and described fracking as a “fantastic opportunity”.

Dependence on finite domestic fuel reserves, however, is not a long-term economic solution. Not least because they will either run out or force us to exceed international emissions treaties: “Pensions already have enough stranded assets as they are,” says Danielle Pafford from 350.org.

Is it worth it? Most European countries have decided it’s not.

There is currently no commercial shale-gas drilling in Europe. Sustained protests against the industry in Romania, combined with poor exploration results, have already caused energy giant Chevron to pull out of the country. Total has also abandonned explorations in Denmark, Poland is being referred to the European Court of Justice for failing to adequately assess fracking’s impact, and, in Germany, brewers have launched special bottle-caps with the slogan “Nein! Zu Fracking” to warn against the threat to their water supply.

Back in the UK, the government's latest survey of public attitudes to fracking found that 44 per cent neither supported nor opposed the practice, but also that opinion is gradually shifting out of favour. If the government doesn't come up with arguments that hold water soon, it seems likely that the UK's fracking future could still be blasted apart.

India Bourke is the New Statesman's editorial assistant.