The Balkans struggles under a triple crisis of foreign debt, mass unemployment, and the productive sector. In reality this is a crisis of dependency on European capital. Economic life is completely dependent on importing expensive European capital to cover the yawning trade and budget deficits, representing a vast plunder of national wealth to the European bankers. With the crisis, the foreign bankers who control the financial system of the region stopped lending and the debt pyramid collapsed. Since then Greece, Slovenia, Serbia, Romania and Bosnia have been under the receivership of the Troika (IMF, EU, ECB), which has imposed, with the connivance of the official political class, austerity programs so savage as to provoke a humanitarian disaster. A new European war rages. Its aim is to make the Balkans and the rest of peripheral Europe pay for the debts of the Northern European banks.

We will try to show how our region has historically been passing through cycles of integrations into Great Power structures and what that meant for our region. We will also give a few examples of economic mechanisms that have been at play in order for this pattern to work, in an attempt to offer a socialist perspective on the often blurred question of “what position should the Left take considering the EU membership”, usually posed against the background of much louder local right-wing forces being firmly against – even though they are always pro integration into some other Great Power structure, such as Russia. This is also to make the rediscovered idea of the Balkan Socialist Federation much clearer, in the sense that it was understood by the great socialists of our past, such as Svetozar Marković, Hristo Botev, Christian Rakovsky, Constantin Dobrogeanu-Gherea, Dimitrije Tucović and Dimitar Blagoev – namely, as a strategic vision of “another Balkans”, as an alternative to various disastrous “processes of integration”, and not some sort of a common-sense corrective plug-in for the already existing EU integrations. If we agree on the simple fact that all of our countries are too small and too weak to smash the market and imperialist system, and on the need for the likewise small and weak new Left in our countries to step out of the usually academic habitus, one of the crucial things we must do is offer a fighting vision and a refutation of racism and tutelage coming both from “the outside” and “from within”, while unmasking the real reasons behind it – in order to fight the apathy and despair with hope, so that we can inspire a real movement, a truly viable political force, capable not only of interpreting our present, but of shaping our future. In order to make our case as clear as possible, we will be going back and forth through history, putting past and present side by side.

We were told that that a primitive ‘Balkan mentality’ is responsible for the ‘ethnic conflicts’ of the past. European integration, market transition, and NATO military intervention were presented as the antidote to a history of failed modernisation and so called ‘failed states’. Now, after two decades of economic destruction and neo-colonial dependency, it is clear our problems are inseparable from the history of imperialism in our region.

From the nineteenth century onwards the decline of the Ottoman Empire created the so called “Eastern Question”. This turned on the question of which of the Great Powers was to control both south-eastern Europe and the commercially and strategically vital gateway between Europe and Asia when the “sick man of Europe” had finally been put out of his misery. Just as the collapse of Ottoman power in Europe drew in all the Great Powers, so the ex-Yugoslav civil wars were the ground on which the Great Powers fought to take advantage of the collapse of Soviet power in Eastern Europe.

Pretexts for Great Power intervention in the “Eastern Question” were provided by the frequent revolts of the Balkan peoples against the Empire. The alleged ‘protection’ of Christian communities, and later the ‘national rights’ of the Balkan peoples, became the favoured cloak of Great Power intervention – just as was the case with ‘humanitarian intervention’ in the ex-Yugoslav civil wars. Such interventions allowed the Powers to maintain their control over the region while laying the basis of future devastating conflicts between the Balkan peoples. The classic example is the Congress of Berlin of 1878 which was the author of the modern Balkans and would turn the region into the ‘powder-keg’ of Europe.

After its victory in the Russo-Turkish war of 1877-78, Russia carved out an enormous Bulgarian state which was shrunk at Berlin to less than half its original size by the other Powers. Bosnia and Herzegovina, the scene of a peasant insurrection against Ottoman rule in 1875, were placed under Austrian occupation. Serbia, having been induced by Russia into war with Turkey in 1876 with the promise of gains in Bosnia and Herzegovina, was placed under Austrian protection in exchange for Russia playing a similar role in Bulgaria and grabbing south Bessarabia from Romania. Just as the Powers took advantage of Balkan nationalist conflicts to create their own Balkan clients, so the US exploited the ex-Yugoslav civil wars to create divisive neo-colonial protectorates in Bosnia, Kosovo and until recently Macedonia, farming out their administration to the UN, EU and NATO.

The Balkans that emerged from the Treaty of Berlin was fragmented into a patchwork of competing dwarf states dominated by the Great Powers and eyeing up the same territory in order to secure their viability. The fact that the new Balkans was cut from the diplomatic meetings of the Great Powers, against the wishes of the representatives of the Balkan peoples who were excluded from the Berlin Congress, taught Balkan nationalists a fatal lesson. Great Power sponsorship, if not protection, were necessary, if dreams of national unification and territorial aggrandisement were to be realised.

In turn, the alignment of competing Great Power blocs with particular Balkan states and their territorial ambitions, transformed the region into a ‘powder-keg’ in which local nationalist struggles acted as proxies and conductors for lethal imperialist rivalries. Serbia, blocked by Austria from expanding westward in the direction of Bosnia and Herzegovina or from unifying with Montenegro, was incited by Vienna in 1885 into a disastrous war against Bulgaria, a war designed to weaken Russia’s position in the Balkans. The apple of discord laid on the table at Berlin was to push Serbia, Bulgaria and Greece into an increasing vicious struggle over multi-ethnic Ottoman Macedonia, laying the basis for the fratricidal war in 1913. The contemporary Balkans continues to be an arena where Great Power interests clash, since Balkan nationalists, too weak to impose their ambitions on their rivals, continue to look to Great Power intervention. The results are all too familiar and follow a historical pattern of divide and rule. For example, in the case of Kosovo, the price of intervention is that ‘independent’ Kosovo is a US protectorate and Serbia is a Russian energy colony.

In the same sense, the independent Balkan states founded at Berlin were independent in name only. A number of conditions for independence were imposed by the Powers. One was the signing of free trade agreements with Great Power protectors. Similarly free markets were written into the Dayton Agreement that established a Bosnian state in 1995 and into the autonomous Kosovo foreseen by the abortive Rambouillet Agreement of 1999. After 1878 Serbia and Romania were obliged to sign over most favoured nation trading status to Austria-Hungary.

In the Balkans, cheap western manufactured goods destroyed traditional artisan industries, and even led to de-industrialisation where there was actual industry, as for example in the case of Bulgarian leather and textiles. After 1989 the pattern was to be repeated, with a new opening to the global market leading to industrial collapse and mass unemployment. At the same time the post 1878 Balkans became completely dependent on the export of agricultural products whose demand was inelastic and whose value was depreciated by international competition. As the founder of Bulgarian socialism, Dimitur Blagoev, warned in 1885, the Balkans was becoming an agrarian colony of Western capitalism.

Economic dependency then became financial dependency. One condition of independence was that the Balkan states had to pay for the building of railways of strategic or economic interest to the Great Powers, and tender the work to foreign contractors. Railway building became a new form of Great Power competition to dominate the region, just as today the Balkans is at the centre of pipeline competition between Russia and the EU-US over the supply of energy to Europe and control over Central Asian energy sources. As they were potentially military outposts of the Powers, the independent Balkan states were also obliged to create standing armies, setting off an arms race in the region. To finance railways, armies and the bureaucratic apparatuses necessary to administer them, the Balkan states were forced to turn to foreign loans. Very soon these tiny, impoverished and backward countries fell into a debt trap. The Powers took full advantage and imposed supervisory bodies, which took over the collection of special taxes and concessions in Serbia, Bulgaria and Romania. These were the IMFs of their day, operating in an analogous to the “structural adjustment programs” in the Balkans today. The ‘concessions’ of the nineteenth century are today called ‘opening up to competition’, that is, handing over domestic state monopolies to foreign capitalists.

This pattern of imperialist integration into the world economy has been repeated, albeit in a new form, in the Balkans over the last half century, and is at the root both of the collapse of Yugoslavia and of the present regional debt crisis.

Market integration with the EEC-EU, beginning in the 1970s with trade agreements between the EEC and Yugoslavia, a ten year trade deal between the Federal Republic of Germany and Bulgaria, and technology imports by Romania, led these countries into a debt trap. The major weakness of market integration was that technical expertise was purchased with hard currency but sold primarily in the Eastern bloc for soft currency due to both a lack of competitiveness and the closure of Western markets due to EU trade barriers. Hence in order to cover the cost of imports the Balkan states were forced to borrow heavily from the Western Banks. By 1989 Yugoslavia owed $20bn and Bulgaria $12bn, with payments taking up half of export earnings in the case of Bulgaria.

In order to impose the market discipline necessary for the repayment of the debt, the IMF and the EU demanded recentralisation of the Yugoslav federation. As a reward for successful reform the EU dangled the carrot of closer integration. In practice this meant the alignment of the EU with the positions of Milosevic and Great Serbian nationalism which sought to improve the competitiveness of the Serbian economy through Yugoslav recentralisation. But the promise of EU integration also gave heart to the rich northern republics which wanted to improve their competitiveness by ditching the poor south and joining the EU. In this way, the European Union was not only the agent of the economic disintegration of SFRJ, but through promises of future political integration accelerated its nationalist disintegration.

In Tito’s Yugoslavia the opening to the world market from the 1950s led to the fragmention of the federation into a set of competing and autarchic republican economies, and consequently from the 1960s to the rise of republican nationalism. The attempt to use the world market to compete with the Great Powers merely led to internal economic fragmentation. In the Balkans as a whole, the attempt to industrialise to ensure independence from the Great Powers increasingly detached the region from dependance on the Soviet economic zone and led it into dependence on the EU. The most important point to grasp is that the entire history of the market in the region has been one of external linkages of dependency at the expense of internal linkages between economies. This is best understood if we imagine the Balkans as a bycicle wheel: as a set of spokes attached to the central hub, but having no connection among themselves whatsoever. This is why from an economic point of view it has always remained in a semi-colonial economic relationship of poverty and backwardness, which in turn has opened it up to Great Power military domination. The current processes of EU orchestrated regional integration – such as the Central European Free Trade Association – does not aim to promote regional co-operation because that might enter into conflict with EU integration. In reality, the Balkans is being integrated as a capitive market for Western goods and investments, reinforcing trends to de-industrialisation and debt dependency.

Hence to talk about a ‘transition to the market’ after 1989 ignores the fact that what is taking place is actually a second cycle of the debt economy. Debt has compelled the Balkan economies to open themselves to flows of foreign capital and finance – mainly receipts from privatisation – in order to repay the same debt. The high interest rates demanded by foreign capital fed growth based on imports and consumer debt, but at the same time destroyed industry and flung the region into an even deeper debt trap than ever before. And this was no coincidence. The key to understanding this is the role of monetary policy in stimulating the speculative boom of the 2000s, especially the role of strong currencies – models of indexing to the Euro, and currency boards. On the one hand, high interest rates and strong currencies were designed to attract foreign credits, enabling the borrowing needed to pay for imports. On the other, the same strong currency regimes and privatisation receipts were also responsible for destroying industry. Expensive money acted as a disincentive to investment in the real economy and made exports uncompetitive. Hence rising budget and trade deficits, resulting in the debt crisis we see today.

The Bulgarian case also demonstrates most clearly that the model of financialised growth is in reality a mechanism of capital extraction by the Western banks. The currency board pressuposes the full coverage and convertibily of domestic money into foreign currency reserves. Hence in such a regime the state no longer controls the money supply (as is the case in the Eurozone). Any deficit in the current account directly uses up currency reserves and thus contracts the quantity of money in the national economy, which has a negative knock on effect on liquidity, prices, wages and overal economic activity. Hence the goal of monetary policy is to build up fiscal surpluses, which must be invested in the purchase of foreign currencies in order to cover the issue of domestic money. These funds are invested mainly in government bonds of other European countries. And so it turns out that the poorest country in the EU funded the richest at the expense of its poorest citizens. Bulgaria, like the rest of the Balkans is a net creditor to the EU. To maintain the value of the currency in order to pay for loans contracted in foreign currencies, loans which cover the current account deficit and enable external debt repayment, the Balkan states have been paying for the debt of the rich Eurozone nations. In turn the Eurozone banks are using the debt crisis to seize hold of new sources of public wealth, like the energy sector in Greece, Romania and Bulgaria are being privatised under IMF structural adjustment programs. The regime of fiscal surplus requires as its counterpart a permanent austerity of public finances, meaning a vast transfer of wealth from the poor to the Balkan tycoons and Western bankers. And all the while the debt economy destroys the industrial basis for growth, and thus for escaping the debt trap.

The strong currency regime is also a regime of convergence with the Eurozone, enabling the Balkan economies to pay for debt denominated in Euros. But this means that all the Balkan states are de facto members, or more precisely colonies, of the Eurozone, since they are no longer able to pursue an independent monetary policy. Forced to build up fiscal surpluses to repay debt, they cannot invest in industry to get their economies moving again and so like Greece and the rest of peripheral Europe must impose the most brutal neo-liberal attacks on wages, pensions, and the social wage and privatise all public goods.

This is why the only way out of the crisis lies in a federation of our countries that would pool together and chanel resources into nationalised industries in order to increase employment and raise living standards. We should demand a model of regional integration that does not depend on importing expensive capital and Western goods while exporting vaste slave armies of migrant workers to pay for the resulting debt: but one that can become the basis for the development of public investment, industries and networks across the Balkans.

The idea of the Balkan federation enables us to link up the struggle against debt slavery with the struggle against imperialist control over the region. It is thus directed against both EU integration and Russian tutelage, against both debt and energy dependency. Therefore it is not a nationalist, but an internationalist idea, directed against the alliances between the local capitalist classes and imperialism.

Strategically, it enables the unification of all popular struggles across the region against our very own Troika – of IMF, EU-NATO and Russia – into one single national and social liberation struggle of the Balkan peoples. Because of the alliance between our rulers and their external sponsors, the Balkan federation shows us that our real allies are the workers, students, peasants and pensioners of the whole region, and that in order to fight against the external opressor we must overthrow the little oppressors at home.

Also, it is only the Balkan federation that can create an internationalist alternative to the greater nationalist struggles over Kosovo, Bosnia and Macedonia, struggles which enable the imperialist powers to divide and rule. Finally only a Balkan federation is a concept sufficiently wide to enable the national unification of all the Balkan peoples and allow them to live together in peace and equality.

The Balkan federation is our bond with the struggle of the Greek people against debt slavery and foreign domination; it is our own contribution to the destruction of the empire of European capital – which can open a new era in our region, an era where the peoples once again become the subjects of their own destiny. This is why we must once again talk of the Balkan federation, but also embed it in all aspects of our politics so as to link it with our day-to-day interventions and start building its foundations from below, through connecting our struggles and placing them beyond a purely national framework.

Andreja Živković and Matija Medenica, Marks21, Serbia