Economy

Campus Europe Goes Balkans

by Admir Čavalić

Bosnia and Herzegovina is a country with 4 million people, located in the heart of the Balkan region, sharing borders with Croatia in the West and North, with Serbia in the East, and with Montenegro in the South.

It has a very rich history in which we had Illyrian and Slavic tribes, the Roman Empire, Bogomil heretics with their Bosnian Church, several Bosnian kings, the arrival of the Ottoman Empire and the spread of Islam in Europe. Afterwards the Austro-Hungarian Empire, followed by the beginning of World War I in Sarajevo, the birth of the Yugoslav state, then World War II with Partisans fighting in hilly Bosnia, later communist Yugoslavia with its charming dictator, in 1992 the declaration of independence. But also the start of the four-year war with the genocide in Srebrenica in 1995. Since then and until today – the era of transition and Euro-Atlantic integrations.

The political complexity

What makes Bosnia and Herzegovina politically so interesting is the complex administrative-territorial system of the country. Basically there is a state-level government with three presidents, under which there are two entities with their governments, and as a third part a district called Brčko. The first entity, the Federation of Bosnia and Herzegovina covers 51% of the territory of Bosnia and Herzegovina and is mostly populated by Bosniaks (mostly members of the Islamic religion) and Bosnian Croats (mostly members of the Catholic religion). The Federation is further divided into ten cantons (following the Swiss model), where each canton has its own government and budgets. Cantons are formed by cities and municipalities.

The other entity is called Republic of the Srpska and is accounting for 49% of the territory and is mainly inhabited by Bosnian Serbs (mostly Orthodox religion). Unlike the Federation, which is highly decentralized, the Republic of Srpska is centralized and below the entity government there are only cities and municipalities.

Finally, the Brčko District is independent of two entities and is often referred to as a Hong Kong of Balkans. All in all, the above-described structure implies that we have a total of 14 governments, 13 Prime ministers and 136 ministers. The head of the state is made by three presidents, each of the three constituent nations by the Constitution of Bosnia and Herzegovina (Bosniaks, Serbs and Croats).

Economic paradoxes

The political complexity of Bosnia and Herzegovina is further forced by frequent political conflicts that are mainly inspired by nationalism. This leads to the country’s economy being totally ignored, and the existence of some remarkable paradoxes. Regarding the labour taxation for example, Bosnia and Herzegovina is among the first in the World (on 100 euros, the state takes 72 euros). This is one of the reasons why the country is the world’s record holder in youth unemployment, with a rate of 57.9% of young people unemployed. There are also lots of other problems of course, from the labor market and tax policy to bad legislation and business conditions. Let us add that the citizens of Bosnia and Herzegovina are the least economically free in Europe, and on the 97th place worldwide on rankings by Index of Economic Freedom.

However, one sphere of economy is among the healthiest in Balkans. At the same time it is the only sphere that local politicians do have no control of. It is the monetary sphere, ie, printing money. The local currency called the convertible mark (BAM) is pegged to the euro through the Currency Board. Bosnia does thus not have the ability to control its currency, which is therefore extremely stable and always worth 1.95 against the euro (1 euro is 2 KM). Interestingly, the currency uses the name „mark“ because during the war the German mark became the dominant currency of confidence among various nations.

EU integrations

Where we can be optimistic and hopeful for Bosnia and Herzegovina is the determination of its citizens to join the European Union as a full member, and to integrate further with NATO, too. Therefore, the ultimate political goal of any political party, regardless of whether they are left or right, moderate and extreme, is the European Union. The level of support among citizens is incredibly high, with more than 80% of citizens supporting EU membership. Therefore, the 2015 is often called the year of reforms for Bosnia and Herzegovina, because this year we signed the Stabilisation and Association Agreement with the EU, but also started serious reforms within the framework of the so-called reform agenda which was created with the help of EU.

The aim of the reforms is the liberalization and deregulation of the domestic economy, and the reduction of fiscal liabilities with the of increase fiscal discipline and privatization of the rest of commanding heights of the Bosnian economy. Ruling political parties that are center-right are working on this, although the unions and the public are often opposed.

In the long term, the vision is that Bosnia and Herzegovina becomes a competitive EU mini-states that will offer its relatively cheap and skilled labor force, but also actively compete with their companies in the European internal market. Even today, many Bosnian companies are doing subcontracting work for multinationals and EU companies. By joining the EU this trend will increase, and we will further work on economic integration as a long-term condition for peace and prosperity in Bosnia and Herzegovina, as well as generally on the Balkans.

 

Career & Education

by Louise Bicknese

 

Getting a job right after you are done with your education – sounds great, right? It used to be quite normal, but it is not today. Youth unemployment is at a peak and it has several causes. The European Union tries to tackle some of those with the ‘Youth Guarantee’. It focuses on getting people under 25 to ‘do something’ within 4 months after their leaving education or getting fired: either with a job, an apprenticeship, a traineeship or continued education. But what exactly is this guarantee, how is it implemented, and does it really bring about significant change?

The EU Commission has accepted the proposal for this youth guarantee. It is, in their words, ‘both a structural reform to drastically improve school-to-work transitions and a measure to immediately support jobs for young people‘. Their plan is to improve cooperation between all actors involved. A key role is reserved for the PESs: the Public Employment Services. They should work together with social services, firms, and educational facilities, among others, to include young people in their project and find them jobs or educational or apprentice opportunities.

One of the main problems in youth unemployment is the vast amount of so-called NEETs. These are youths that are Not Employed, in Education nor in Training. The problem with them is, they are not registered anywhere, so it is hard to reach them. That is why the Guarantee wants PESs to cooperate with social services as well, so they can include these NEETs.

Each country can implement this plan in their own way. For example, the Netherlands focuses on a policy which reduces the number of early school dropouts, while Germany has to work on its equality of job opportunities; socio-economic background still plays a role there. However, a lot more work has to be done by countries that deal with a significantly higher youth unemployment rate, such as Italy and Croatia. They get help from the Youth Employment Initiative, which provides subsidiaries.

The main problem with this plan is that it is battling symptoms. Instead of looking at the core of the problem, the Youth Guarantee deals with its consequences. The big issue is that, one, universities apparently do not prepare young people well enough for their jobs, and two, too many people choose a field of study in which there are not enough jobs. These problems ask for a different kind of reform: changing the programmes and courses at university and informing the prospective students better about the chances on the labour market for different fields of study.

However, the Youth Guarantee does no such thing. It tries to battle the youth unemployment problems by taking on the youth that is the victim of these circumstances, rather than changing the circumstances themselves. They offer opportunities for extra schooling or training, when this should be incorporated in their previous education – extra education should not even be necessary. Even though this plan might – and I will return to that later – help the people who need that right now, it does not bring about the structural reform needed to prevent these youths from ever falling into this gap.

Regarding the effectiveness of the plan itself; this article poses some doubt to that as well. Since the economic crisis, the number of ‘zero-hours contracts’ has risen enormously. These contracts do not specify a certain amount of hours worked by the employee, but rather means that the employee can be called upon to work anything between full-time hours and not at all – zero hours. This is an extremely insecure form of employment and not a stable income at all.

This does not necessarily mean that zero-hours contracts are pure evil: they can be quite useful for, for example, part-time jobs for students. The difference is that in these cases, it is a part-time job next to university, while for the youths in question it would be preferably full-time. What adds to the instability of these contracts, is that once a company hits a low, the employees with such a contract are the first ones out.

Now it would be harsh to say that all youths helped by the Youth Guarantee will get a zero-hours contract, but realistically speaking, a lot will. The success numbers of for example Finland are only based on whether the young people get a job, not on how long they stay with it. Therefore, it is very likely that for most youths, the Youth Guarantee is nothing but a short-term solution that does not call for the structural reform needed.