Balkan Governments: Their Role and Size in a Comparative Perspective *

In the aftermath of September 11 and the settlement in Macedonia, the Balkans have become less popular as a news topic. In the future they will probably attract even less attention from the so-called international community.

Meanwhile, technical assistance programs and investment project are underway, and politicians and civic groups are trying to redefine their missions for the Balkans. Below we attempt a comparison of different measurements of the government economic tasks and the constitutional designs that would presumably provide or prevent prosperity and efficient functioning of government machinery.

It is almost impossible to have a unified notion outlining typical features of Balkan governments. Countries are at different situations in relation to outside extra-regional world, e.g. EU, NATO, and even UN.

Total expenditures in general government budget / GDP in %

a – Excludes municipal government operations for Republika Srpska and military expenditures financed by external grants
b – Excluding local budgets
Source: Statistical Background Data, WIIW, 2000; IMF Country Reports; IME own calculations

Measured as a percent of GDP, Balkan government expenditures are not exceptionally large. The "smallest" government is that of Albania, while the largest is the government of Bosnia and Herzegovina. There are rather obvious explanations for this fact. There is no comparable data for 2000 and 2001.In general, however, there is no significant trend in either direction, and countries in the region sustain relatively large expenditures. This is a rational strategy for the Balkan governments.

a – Scores from 0 to 10 (10 – Benchmark representing maximum economic freedom)
b – Government Consumption as a % of Total and Transfers and Subsidies as a % of GDP
c – Scores from 1 to 5 (1 – Benchmark representing maximum economic freedom); The measure comprises both government consumption and government production
Source: Economic Freedom of the World, Heritage Index of Economic Freedom

The above table attempts to summarise available data on governments' size and role in their economies. It provides an opportunity to compare Balkan economies (with the exception of Bosnia and Herzegovina, which for obvious reasons is not monitored) with core EU accession country economies and five relatively successful liberal economies.

The 1999 data provides a basis for comparison with current trends (for lack of space previous years have been omitted, but there are no significant differences from previous years). Both indexes are far from perfect(1) but they provide an opportunity to neutralize dramatic political development, which matches the overall inertia of various economic phenomena including greater economic freedom.

In both indexes Balkan governments demonstrate relatively high levels of government interference, combined with the expected low levels of economic performance. This situation is significantly different from countries outside the Balkan region, which maintain comparable levels of expenditure, transfer, and subsidies but regularly demonstrate a higher degree of economic freedom. One exception to this trend is Albania. Its government is rather small but it lacks reliable market institutions, and hence suffers a lower degree of economic freedom.

Economic freedom is understood as the liberty to engage in business and accumulate prosperity, restrained only by the regulation needed to sustain this opportunity.

The table below compares one of the economic freedom indexes and the latest Transparency International CPI for five Balkan countries(2) including Greece (EU and NATO member), Slovenia (a front-runner in regard to reforms, prosperity and EU accession compared with the rest transition Balkans), and Hungary (NATO member and EU accession leader).

Economic freedom and corruption in 2001

a – Scores from 0 to 10 (10 – Benchmark representing maximum economic freedom)
b – Scores from 0 to 10 (10 – Benchmark representing minimum level of corruption)
Usually there is a strong correlation between corruption perception and the lack of economic freedom, although the latter is measured objectively.(3) Balkan countries are no exception.
Balkan Polities: a constitutional comparison

Many constitutions in the region prevent flexibility on ethnic issues in their concept of statehood, envisage a constituent nation(4), ban autonomy(5), restrict foreigners from owning land, or prohibit political representation of ethnic and religious minorities(6). To this list one might also add that many constitutions provide for inefficient government machinery, protect monopolies, and impose duties on citizenry in an arbitrary manner.

The nations of Central Europe did not need to build statehood; rather they focused on creating a separation of powers and reforming government machinery. Romania and Bulgaria, because they did not adequately break with the past in the 1990 elections, embarked on constitution-making as form of legitimization of new political establishment, both communist and non-communist.

Besides building nation-state political establishments and societies in transition, the Balkan nations had to deal with severe economic challenges. All of them (with the exception of Slovenia) lost more markets than any of the other Central European transition countries. This fact prevented prompt liberalization of prices and trade (esp. imports). The governments did not put pressure on domestic businesses to restructure but instead sustained incentives to gain, seek rent and prosper at the expense of the others with the help of the government. Eventually, these developments were incorporated in respective constitutional and basic legal arrangements.

A complete constitutional perspective is beyond the capacity of this report. I would limit the discussion to themes that are presumably more of less directly related to prosperity and functions of democracy.

Property rights

As explained by Epstein(7), property rights are protected not only when the holder of these rights is free from physical invasion or the threat thereof but also if he may transfer them legally at lower costs.

Balkan constitutions are preoccupied with the protection of property rights but this is a relatively common feature of many post-Communist constitutional arrangements. All constitutions profess to protect private property rights. In the constitutions of Bulgaria (Article 17.1), Macedonia (Article 30.1), Poland (Article 21.1 and 64), Slovakia (Article 20.1), Slovenia (Article 33) and Yugoslavia (Article 51), the state protects not only property rights but inheritance rights as well. There are similar provisions in constitutions of Germany (Article 14.1) but not in such great detail. The Albanian constitution even list the various ways of acquiring property ("by gift, inheritance, purchase or any other classical means provided by the Civil Code" – Article 41.2). At the same time Bosnia and Herzegovina, Czech Republic and Croatia do not explicitly stipulate that property rights are sacred but this does not necessarily mean they are not protected..

There are many provisions which protect one's ownership of private property. In all constitutions there are rules concerning the privacy of the home. The home is "inviolable" (e.g. Bulgaria; Article 33.1); it is a part of private life protected by the constitutions (Bosnia and Herzegovina; Article 3)(8). The court can intervene in private property only when there are concerns that a crime was committed there (Croatia; Article 34.2). The property rights might be violated if there is a statutory stipulation, as in the case of needing to protect "public order or health", or "the rights and liberties of others" (Estonia; Article 33 and Macedonia; Article 26). There could be other reasons, as stipulated in the constitution of Romania, "to defend national security or public order" (Article 27.2,3). The constitution of Slovakia is rather vague; the conditions under which private property might be unprotected are: if such an incursion is "inevitable in a democratic society" and it is done to protect "lives, health, or property", or "public order". (9)

However, there are different stipulations concerning the conditions in which the state might divert private property rights. Only in "the public interest" may the state limit or expropriate property (Albania; Article 41.3). Property rights may be curtailed by law (Estonia; Article 32) and/or after the final judgment of a court (Poland; Article 46). If public benefits are higher than the costs of violating property rights, then the state can limit or expropriate private property (Romania; Article 41). The state might appeal not only to public interests but also to the needs of society and the national economy, which can justify the restrictions imposed on property rights (Slovakia; Article 20). [Property rights impose duties to be used not only in private but also in public interest, as it is stated in the Macedonian constitution; for public interests they might be diverted (Article 30).] The constitution of Slovenia states that property rights must be regulated and the benefits from them should be economic, social and environmental (Article 67). The constitution of Hungary stipulates that regulation can be undertaken only in the public interest unless there are exceptional cases (Article 13). The property rights may be diverted when there are state or municipal needs, which "shall be effected only by virtue of a law, provided that these needs cannot be otherwise met" (Bulgaria; Article 17). The constitution of Poland stipulates also that in a state of emergency there may be compensations for diverting property rights (Article 228). Public interests may require the state to divert property rights when rendering public services. Under the constitution of Slovakia, the state controls natural resources, which are excluded from other constitutional provisions on property rights (Article 4). Property rights may be restricted if public services are rendered. However, there are also constitutional rules, which provide the government with discretionary power to control how they are used (Slovakia; Article 20.3).

Land is considered to be of highest national value.

Property rights are protected if they can be transferred legally at low costs. There are different provisions on property rights over land. As already mentioned, in Bulgaria "arable land shall be used for agricultural purposes only" (Article 21.2). There are other legal barriers to obtaining property rights over land: constitutions ban foreigners from buying agriculture land, as it is in Bulgaria(10) and Romania (Article 41.2). In many other constitutions, including those of Croatia (Article 48), Estonia (Article; 32.3), Macedonia (Article 31), Slovenia (Article 68.1), and some non-Balkan nations, it is stipulated that the conditions under which the foreigners might acquire property will be set by law, making such acquisition illegal or at least difficult.). In Bulgaria there is a law protecting land which reaffirms the constitutional aim of preserving arable land for agricultural purposes only. In fact, around 40% of agriculture land is not used at all.

Constitutions and crisis

Every representative democracy requires a set of rules for the peaceful transition of power in government. Perhaps given the background of the region, Balkan constitutional framers have paid careful attention to rules regarding the transition of power in times of political crisis. It does not seem very efficient in the area of real politics.

Article 99 of Bulgaria's constitution allows for three consecutive attempts to form a cabinet in case of resignation or a no-confidence vote, with responsibility for the first attempting falling upon the failed political faction, while the head of the state is almost obliged to submit the mandate to it. In addition, there is no deadline for the completion of the three attempts. In fact, the constitution provides for a sort of second chance for incumbents who have just resigned or received a vote of no-confidence to form a new executive. This could, in principle, give way to endless bargaining that could be repeated several times during the mandate. Both scenarios actually occurred after the adoption of the constitution, in 1992 and in 1997. The prolonged crisis of 1992 halted reforms and brought about ad hoc majorities in the parliament. The crisis of 1996-1997 was only resolved by the successful effort of President Stoyanov and the National Security Council to convince the then incumbent Socialists not to opt for a second cabinet.

Before the recent amendments, the constitution of Croatia did not contain the assumption that the president is, among other thing, a mortal human being. In the period preceding the elections of 2000, Romania has twice come to the verge of a constitutional crisis due to the fact that although the constitution contains an indisputable mechanism of replacing the prime minister, the president Constantinescu and the chaotic parliamentary majority were able to replace two heads of the cabinet and to several times reshuffle the positions of key ministers.

None of the Balkan constitutions (with the exception of Yugoslavia, article 82) deals with political crises necessitated by a failure to adopt a budget. Such fiscal inefficiency, however, is a prominent element in the problems facing Poland (atricle225).

Adopted after the statehood crisis of 1997, the Albania constitution is probably the most specific of all constitutions regarding these procedures. Articles 87, 90, 91, 96, 104 and 105 address the following scenarios: five failures (reoccurring in one-week time) of the legislature to elect a council of ministers; a repetition of this failure after fresh elections; procedures to impeach the head of state for "serious violations of the constitution"; three recurrences in a period of 10 days; failures of the parliamentary majority to vote the prime-minister; and two 15-day attempts of the majority of elect a prime minister in an event of a no-confidence vote. Among Balkan nations, the most interesting procedure to tackle political crises on federal level is perhaps provided by the Federal republic of Yugoslavia (articles 82-84, 97-98 and 103-104): the legislature "shall be dissolved at the request of the federal government" (article 83.1) unless "the procedure for a vote of confidence in the federal government has been initiated" (article 83.2).

Some conclusions

As Stefano Bianchini (11) comments all post-communist constitutions guarantee the right to private property. The role of the state, however, is not only to adopt legal rules but also to protect specific rights that are vital in reinforcing the national sovereignty of the Balkan countries. These rights are a part of their security doctrines. They can be found in the constitutional provisions which impose restrictions upon the ability of foreigners to own land. The state and its land are viewed as synonymous, inseparable. The justification for these constitutional rules, as provided by Bianchini, is that for Balkan politicians the control over land is a conditio sine qua non for avoiding any "semi-colonial status". Property rights are also related to the unresolved problem of ethnic minorities.

An analysis of government monitoring results from different organizations reveals the following recurring characteristics of the size and the involvement of Balkan governments:

" There are relatively large governments,

" There are high levels of government transfers and subsidies,

" There are generally comparatively low levels of economic freedom,

" There is a high level of corruption perception.

Generally, one can conclude that there is a tendency towards market intervention in the majority of Balkan transition governments. The constitutional structure of Balkan countries often does not provide for either efficient government nor for effective protection of property rights. However, the constitutions of other reform countries are not much better, even as their economies enjoy greater prosperity. As we shall see below, the Balkan nations are returning to their pre-reform level of national income at half the rate of the countries of Central Europe. The impression is that individual countries were preoccupied with erasing the memories of the central planning and the lack of a privatization perspective but failed to secure conditions for prosperity.

In comparison, the basic laws of Hungary, the Czech Republic and Poland deal less with property rights and political crises hypotheses. Some constitutions, such as those of Albania and Bulgaria, seem to have designed their government machinery with the intention of providing for political stability. Unfortunately, the manner in which they do so serves to stabilize the incumbent government, making internal political transitions costly and difficult to control.

Notes:

* This article is a part of a larger report on the Balkan political and constitutional economics. Its first draft was presented on February 5, 2002, in Washington, D.C., at a NED/CSIS workshop conference entitled "Redefining the Balkans."

(1) These indexes use data from one or two years back and give a higher weight to background years in comparison to the previous or current year.

(2) TI does not monitor other countries.

(3)See: Krassen Stanchev, "Bureaus, investment and honest policies," IME Newsletter, vol. 5, 1998, November.

(4) E.g., the Croatian Constitution says: "Croatia, the nation-state of the Croatian people and the state of other nationalities and minorities which are its citizens". The Macedonian Constitution used to contain quite a similar statement: "Macedonia, the national state of the Macedonian people, which guarantees the complete civic equality and permanent cohabitation of the Macedonian people with the Albanians, Turks, Roma, and other nationalities living there." The Bulgarian Constitution states that "the official language is Bulgarian" (Article 3), while 10% of the citizenry has the Turkish as mother tongue.

(5) E.g., Article 21 of the Bulgarian Constitution.

(6) E.g., in the Constitution of Bulgaria one may find the statement that "the traditional religion [in the country] is the Orthodox Christian congregation" (Article 13.2), and that political parties established on "ethnic, racial or religious lines" are not allowed (Article 11.4), while such parties exist de facto and it is almost impossible to implement this provision de jure.

(7) Epstein, R. The Public Trust Doctrine, Cato Institute, Cato Journal, Vol. 7, No. 2 (Fall 1987).

(8) From all transitional constitutions only those of Slovenia and Czech Republic do not contain exclusive provisions regarding the inviolability of the home.

(9) In the Slovak constitution one can also find that if "the tasks of public officials" require it, the inviolability of the home, which is used for performing different economic activities, may not be defended (Article 21.3).

(10) "No foreign physical person or foreign legal entity shall acquire ownership over land, except through legal inheritance" (Article 22.1).

(11) Bianchini, Stefano, "The Idea of State in Post-Communist Balkan Societies", In State Building in the Balkans. Longo Aditore Ravenna. 1998. p. 64.