European Union leaders are scheduled in the next few weeks to discuss once again advancing the long-stalled applications from Balkan states to join the bloc. But recent studies exploring the scale of money-laundering in the region are unlikely to assuage France and the Netherlands, which among other member states want to delay EU enlargement, say officials.
Albania, Serbia, North Macedonia and Montenegro are all EU candidates and have expressed frustration with their stalled applications. But opponents to EU enlargement are already seizing on a study suggesting that the real estate market in the Western Balkans is being used to launder proceeds from drugs trafficking and migrant smuggling, prompting soaring property prices in the region.
The Global Initiative Against Transnational Organized Crime, an international non-governmental organization headquartered in Geneva says illegal money is flowing into the real estate markets and the construction industries of the Western Balkans. “The dirty money being made and laundered in the region is perpetuating an ecosystem of crime and corruption,” said Kristina Amerhauser, one of the authors of a report the NGO published last month.
The authors say in their report, "Spot Prices: Analyzing flows of people, drugs and money in the Western Balkans," it is not possible “to put a concrete number on how much illicit money generated in the Western Balkans and abroad is actually laundered in the region,” but they estimate the range is between $2.2 billion and $5.6 billion.
While that might look small compared to some much wealthier regions, they note “these numbers are remarkable, especially when put in perspective.” They add: “For example, in 2021, the budgets of the interior ministries of North Macedonia and Albania each amount to €168 million [$200 million] ; the Kosovo police force has only €87 million [$106 million] at its disposal.”
Real estate
Large amounts of criminal money are being channeled into the property markets across the region, skewing them “as prices are artificially driven up by criminals who want to launder their assets there.” While real estate prices dropped across the region as a whole in 2020 because of the pandemic, many places still showed significant gains since 2017. Last year, the Albanian economy contracted on average by 10.2 percent, but the real estate market continued to expand by 5.5 percent.
And the pandemic and economic slump had little impact on the residential property market in the Albanian capital of Tirana, which saw prices double from 2017 to 2020. The hike is “largely driven by cash from organized crime and corruption which has been invested in construction and real estate.”
The real estate industry in Serbia has also seen unusually high and inexplicable growth between 2018 and 2020, where the construction industry continued to expand despite the pandemic last year and the contraction of the overall economy.
Pushback
Several money laundering probes involving real estate and large infrastructure projects have been launched in North Macedonia, including one investigation into Nikola Gruevski, the country’s former prime minister, and his business associates.
Large public infrastructure projects have also drawn the attention of anti-corruption campaigners. “Respect for European standards has proven to be a particular challenge for the Western Balkan countries when it came to large projects in areas such as infrastructure and energy in recent years,” according to Marko Pankovski of the Institute for Democracy “Societas Civilis,” a Macedonian think tank.
Writing in a commentary for European Western Balkans, a news site, he added: “Despite all the efforts of civil society, the ruling parties seem to be adamant not to let the contracts for these projects become fully transparent and subjected to control of independent institutions. The primary reason behind the disrespect for standards is not hard to guess — ruling parties can arrange for the money to end up in the pockets of their associates, which often leads to inflated prices.”
France has been a leading opponent of states of the Western Balkans joining the EU. French officials argue that the EU has suffered some bad experiences with the enlargement to Central and Eastern Europe countries as well as continual problems with corruption and the rule of law in countries such as Romania and Bulgaria. They say that’s been the result of permitting what some officials describe as “unprepared” countries to join the EU and they fear Western Balkan countries have turned into states captured by corrupt politicians, linked with organized crime.
Advocates of EU enlargement counter that being member states will help Balkan countries in their anti-corruption efforts.
In 2019, after French President Emmanuel Macron wielded a veto, an exasperated Charles Michel, president of the European Council, tweeted: “I would like to send a message to our Macedonian and Albanian friends: don’t give up! You did your share and we didn’t. But I have absolutely no doubt that you will become full members of the European Union.” The then president of the European Commission, Jean-Claude Juncker, said stalling accession talks was “a major historic mistake.”
Last week, Prime Minister Janez Janša of Slovenia, whose country takes up the presidency of the Council of the EU on July 1 for next six months, said he will push for member states to accept an aggressive enlargement of the European Union. He said at a press conference that saying the Balkan candidate states would assist in solving several problems bedeviling the bloc, including with migration and with “malign interference” by outside powers, taken to mean Russia, Turkey and China.
But he said reaching unanimity among EU heads of state and government would be difficult. “Obviously we can’t do this from one day to the next, we’re not going to be able to do it without the consensus of everyone,” he said.
In March 2020, the EU gave a green light for Albania and North Macedonia to begin the accession process but in November Bulgaria blocked further formal steps because of bilateral disputes with North Macedonia over language and history. Serbia and Montenegro have already begun membership talks, but they have been slow, too.
North Macedonia’s prime minister, Zoran Zaev, has warned the EU will lose ground to rival powers, if the bloc fails to start admitting Western Balkans countries soon.
