Greece and FYROM: the dynamics of economic relations

Abstract

Economic relations between Greece and the Former Yugoslav Republic of Macedonia (FYROM) have come a long way since the challenging early days of confrontation and non‐recognition. This article analyzes the three main components of this dynamic and mutually beneficial relationship: the official government policy regarding FYROM (the Greek Plan for the Economic Reconstruction of the Balkans); commercial/trade relations; and Greek investment in FYROM. Finding a lasting solution to the question of FYROM’s name has taken on a new urgency in light of NATO’s enlargement and FYROM’s desire to join the organization; it remains to be seen whether the momentum built over the past decade can be maintained or whether economic relations will suffer as a result of renewed political tension and diplomatic roadblocks.

Keywords:

• FYROM
• Greece
• economic cooperation
• trade
• reconstruction
• diplomatic relations

Notes

1. Greece explicitly stated that it would not support FYROM’s accession to NATO and all other organizations until the dispute over the country’s name was resolved.

2. While this paper briefly discusses the background of the Athens–Skopje dispute over the question of the new country’s name – inasmuch as it affects the evolution of the countries’ economic relationship – it refrains from attempting an in‐depth examination, evaluation and assessment of the issues involved, judging that the intricacies of the dispute are beyond the scope of this study. For a comprehensive analysis of the crucial issues see Valinakis and Dalis 1996; Rozakis 1996; Veremis and Couloumbis 1994; Kofos 1999, 2005; Tziampiris 2005; Kondonis 2005; and Shea 1997. For a FYROM perspective of the issues, see Milosavlevski 1996; International Affairs Agency 1995; selected articles in the daily newspaper Nova Makedonija (www.novamakedonija.com.mk) and the monthly periodical The Macedonian Times; and press releases of the Macedonian Foreign Ministry (www.mfa.gov.mk).

3. The 16‐pointed star of Vergina has been attributed to the ancient Macedonian dynasty of Phillip and Alexander the Great.

4. Article 11, par. 1. For the full text of the Interim Accord, see http://www.hri.org/docs/fyrom/95‐27866.html.

5. Ibid.

6. See Preamble, sections 3, 2, 5 of the Interim Accord.

7. Article 7, para. 2.

8. Nearly 120 countries – including the United States, China and Russia – recognize the country by the name Republic of Macedonia, but the United Nations, the European Union and NATO still refer to it as FYROM.

9. The Socialist Republic of Macedonia was the poorest and least developed of the six republics that comprised the Socialist Federal Republic of Yugoslavia, producing approximately 5% of the country’s Gross Domestic Product. Between 1952 and 1991, the Socialist Republic of Macedonia’s GDP was the lowest in the federation, surpassing only that of the Serbian province of Kosovo. Upon independence in 1991, FYROM’s GDP per capita was about one third that of Slovenia, the federation’s richest republic.

10. For a thorough analysis of the events prior to and during the breakup of Yugoslavia, as well as the political and economic implications for the region, see Carter and Norris 1996; Bianchini and Uvalic 1997; Kourvetaris 2002; Heuberger, Riegler, and Vidovic 1999; Liotta 2001; Jeffries 1996; and Bookman 1994.

11. Three‐quarters of FYROM’s trade, including 90% of its oil requirements, normally moved through the port of Thessaloniki.

12. The figures presented in Tables 3–8 have been calculated by the author, based on data from the National Statistical Office of Greece and the National Bank of the Republic of Macedonia.

13. According to data provided by the Statistical Yearbook of the Republic of Macedonia, during the period 1999–2001 FYROM’s production of tobacco (as was the case with other industries as well) had fallen by almost 30%.

14. A closer analysis (4‐digit SITC) indicates that the impressive growth of this sector was due solely to an increase of exports of one particular subgroup, namely that of surface washing and cleaning preparations (SITC 5542), which may be attributed to the signing of specific contracts for that year

15. All significant macroeconomic indicators deteriorated, privatization practically halted (since foreign investors were not forthcoming), industrial production declined dramatically in almost all sectors, and the necessary restructuring of the banking sector was brought to a standstill.

16. Greek investments in the textile sector usually involved small to medium‐sized enterprises, which primarily imported semi‐processed raw material from Greece and produced final products for the Greek and other European markets.

17. With the exception of 1998 and 2005.

18. In September 2004, the Commission noted that the difference over the name still persisted, and encouraged both parties to find a mutually acceptable solution, but stated that it is not part of the conditions for FYROM’s accession to the EU.