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Former Yugoslav Republic of Macedonia: Persisting Structural Constraints to Democratic Consolidation

Macedonia has recovered from the severe security crisis in 2001. The internationally mediated framework agreement of Ohrid established a new power-sharing system between the Macedonian majority and the Albanian minority. Proportionate ethnic Albanian representation in the police force was ensured in 2004 by the annual additional employment of 500 minority policemen. However, the state’s monopoly on the use of force is still contested in some rural areas in western Macedonia. Parliamentary elections are free and fair, but presidential elections in 2004 were accompanied with irregularities, just as in 1999. The independence of the judiciary is still restricted by weak professional standards, carelessness and corruption. Macedonia’s party system is characterized by two great Macedonian parties with a very low rate of voters moving between them, and a dominant party with an overwhelming majority in the Albanian camp. The party system still follows political battle lines drawn at the time of Macedonia’s independence. The economy has continued to recover since 2001. Growth of Gross Domestic Product (GDP) in 2003 is estimated at approximately 3.2 per cent, macroeconomic stability has been preserved, inflation is low and monetary policy continues to be based on a de facto near-peg of the denar to the euro. Good progress was observed in privatization; the private sector made up 60 per cent of GDP in 2003. Price and trade liberalization and banking sector supervision standards are well-advanced, but the regulatory framework for non-bank financial institutions remains weak. However, there is little sign yet of a sustained take-off in growth. The reported unemployment rate remains over 30 per cent and GDP per capita remains low at US$1,885 in 2002. The economy continues to