Bloomberg News

Euro Crisis Hampers Macedonia’s EU Entry Efforts, Premier Says

October 19, 2011

Oct. 20 (Bloomberg) -- The euro area’s debt crisis is slowing Macedonia’s progress toward European Union membership as talks with Greece over the use of the country’s name have stalled, Prime Minister Nikola Gruevski said.

The former Yugoslav republic has been a European Union candidate since 2005 and its spat with Greece has obstructed negotiations. Greek officials say Macedonia’s name implies a territorial claim on the Mediterranean country’s province with the same name that was the birthplace of Alexander the Great. Greece also blocked Macedonia’s NATO membership bid in 2008.

“The crisis in Greece hasn’t created serious problems in the economy,” Gruevski said yesterday in an interview in London. “It’s causing us political problems. In the last several months the discussions have been non-existent. We’re losing a lot waiting outside.”

The delay in the talks is holding back economic development, Gruevski said. Macedonia is calling on EU governments to allow the negotiations to begin while at the same time seeking a solution to end the name dispute with Greece, Gruevski said.

Should entry negotiations begin, the country would be able to join the trading bloc in two-three years, Gruevski said. The deadline for starting EU entry talks “depends on Greece,” he added.

Borrowing Plan

The Balkan nation of 2 million may borrow between 150 million euros ($207 million) and 200 million euros or seek a loan guarantee from the World Bank to finance its 2012 budget deficit, Gruevski said. The government targets a budget deficit of between 2.3 percent and 2.5 percent of gross domestic product next year, he said.

In March, Macedonia became the first country to draw on an International Monetary Fund precautionary credit line. The country borrowed 220 million euros of the 390 million euros granted two months earlier after it shelved plans to sell Eurobonds, citing early elections. Gruevski and his VMRO party were re-elected in parliamentary elections on June 5.

The country has no immediate plans to tap international bond markets because it still has money from its IMF loans and the conditions in international markets have turned less favorable, Gruevski said.

‘Not so Stable’

“The markets are not so stable,” Gruevski said. The country will decide next year whether to sell Eurobonds, take a commercial bank loan or tap the IMF funds again “if markets are very-very bad.”

Gruevski reiterated the government’s 2011 forecast for 3.5 percent economic growth, saying the government hasn’t revised the estimate amid the global economic slowdown because of faster-than-expected 5.2 percent growth in the first six months of the year.

Next year the government expects growth to pick up to 4 percent to 4.5 percent, he said.

Foreign direct investment this year will be “close to” the 2008 inflow of 430 million euros, which was the second largest after 2007’s 570 million euro worth of foreign investments, he said.

--With assistance from Gordana Filipovic in Belgrade. Editors: Balazs Penz, Andrew Atkinson

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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