Albania politics: Berisha is Back

The Economist Intelligence Unit ^

[Alex Marko]

The opposition Democratic Party of Albania (DPA) and its smaller allies are preparing to return to government following Albania's parliamentary election on July 3rd, although complaints by the losers are delaying the handover of power. The result is a triumph for Sali Berisha, the DPA leader, who had pledged to retire from politics if he suffered a third straight general election defeat at the hands of the ruling Socialist Party of Albania (SPA). Mr Berisha’s previous period in office in the 1990s was marked by autocratic rule and financial collapse, and the outside world is wary at the prospect of his imminent return to power. The performance of his new government will be crucial in determining how quickly Albania can conclude an EU Stabilisation and Association Agreement (SAA).

The opposition Democratic Party of Albania (DPA) and its smaller allies appear poised to secure a workable majority in Albania's 140-seat parliament in the wake of the general election on July 3rd. Results from the Central Election Commission (CEC) show that the DPA has won 55 of the 100 single-member constituencies, compared to 40 for the ruling Socialist Party of Albania (SPA). Meanwhile, thanks to tactical voting agreements, the DPA's smaller partners look set to pick up at least 18 of the 40 seats allocated proportionally, thereby giving the opposition forces an overall majority in parliament.

The CEC has yet to release final results from three constituencies, but overall Mr Berisha and his allies seem to have won a clear victory. However, the SPA, led by Fatos Nano, the prime minister, has so far refused to concede defeat, and says that it intends to challenge the results in about 30 constituencies. The Socialist Movement for Integration (SMI), an SPA offshoot, and some other small parties want the proportional vote to be rerun on the grounds that the tactical voting agreements used by the DPA (and, to a somewhat lesser extent, the SPA) were unconstitutional.

Although these protests are unlikely to alter the result, a protracted dispute over the outcome would delay the formation of a new government and could harm Albania's prospects for EU and NATO integration. The election was largely free of violence but "complied only partially" with international standards, according to the Organisation for Security and Co-operation in Europe (OSCE). The outside world has refrained from commenting further on the election, since the process has yet to be completed; a messy handover of power could cause the EU in particular to take a gloomier view.

Bad memories

The close international scrutiny that Mr Berisha will face when he takes office is a consequence of his previous spell in power from 1992-97. As a strong anti-communist leader in what had been the most repressive one-party state in Eastern Europe, Mr Berisha was feted in western capitals in the early part of that decade. However, his period in office was marred by hostility toward certain sections of the media, and then in 1997 by the collapse of pyramid savings schemes whose rapid growth he had tolerated.

During his long period in opposition Mr Berisha retained both his tight grip on the DPA and a capacity to worry foreign onlookers with unpredictable behaviour. In February 2004, for example, he led street protests in the capital, Tirana, calling for Mr Nano to resign. One such rally ended with protesters throwing objects at the windows of the government headquarters building, prompting police and members of the national guard to fire warning shots into the air to disperse the crowd. Western diplomats subsequently urged the opposition to voice its concerns in parliament rather than on the street.

In recent months the risk of a third straight general election defeat at the hands of the SPA seemed to have concentrated Mr Berisha's mind. With the help of a US political consulting firm, the DPA held a slick party convention in April at which Mr Berisha made specific policy proposals (on tax, for example) rather than personal attacks on Mr Nano. The DPA leader also tried to make the party appear more inclusive by bringing in young professionals to draft much of the party's election manifesto; and by welcoming back onetime allies such as Genc Ruli, a former DPA finance minister, who had left the party during the 1990s in protest at Mr Berisha's domineering style.

Nevertheless, international observers remain wary and want to know whether these apparent changes are more than cosmetic.

Cause for concern?

Mr Berisha has repeatedly said that his priority as prime minister in a DPA-led government would be to fight corruption, organised crime and illegal trafficking, and destroy unlawful monopolies. He considers corruption to be Albania’s biggest problem, describing it as "the cancer of this country". A serious anti-corruption drive would be both welcome and overdue. Several prominent members of the outgoing SPA-led government are widely regarded as corrupt, and a Berisha-led government will need to show signs of real progress in this area if the EU is to conclude a stabilisation and association agreement (SAA) with Albania. The fear, however, is that possible high-profile cases against Mr Nano and other senior SPA officials could provoke a backlash among SPA militants and put too much pressure on a judiciary whose independence and competence are in doubt.

Another worry is the mutual loathing between Mr Berisha and Edi Rama, the popular mayor of Tirana who is regularly the subject of flattering coverage in the international media. Failure to establish a working relationship here could have serious consequences for the capital's development and Albania's image abroad. In light of Mr Berisha's increasingly authoritarian rule when he was in power in the 1990s, there is also scepticism about his claim that, once in power, the DPA will respect the media and drop all civil and criminal cases against journalists.

The main regional question is whether Mr Berisha, who is said privately to be a staunch defender of ethnic Albanians living abroad, will, once in office, continue to act with restraint over Kosovo. Like Mr Nano, the DPA leader has so far largely endorsed the UN mantra for the province of "standards before status", and western diplomats were encouraged by Mr Berisha's moderate reaction to the violence in Kosovo in March 2004. The hope is that Mr Berisha will continue to toe the international line, emphasising the need for regional stability rather than advocating immediate independence for the province.

Economic policy

The economic policy framework under Mr Berisha will continue to be determined in large part by the IMF and the World Bank. A new DPA-led government will almost certainly seek to conclude a new three-year IMF agreement after the current deal expires later in 2005, but the negotiations may not be easy. Mr Berisha's insistence that his government will cut the tax on small businesses within two weeks of taking office has caused some concern at the IMF, although the Fund may agree to this if the government can come up with offsetting spending cuts. However, the IMF strongly opposes the DPA's plan to introduce a two-tier value-added tax (VAT) system, including a new lower rate of 6%, on the grounds that the tax administration would not be able to handle such a regime. The independence of the Bank of Albania (the central bank) is more firmly entrenched than in the 1990s, and monetary policy is unlikely to change significantly following the transfer of power.

There are also signs that a DPA-led government may endorse two controversial deals that were approved by the outgoing SPA administration but will need to be ratified by the new parliament. Until recently DPA officials had threatened to annul the sale of state-owned Albtelecom to a Turkish consortium (the sole bidder), on the grounds that the tender for the country's dominant fixed-line operator had been uncompetitive and had generated too low a purchase price. Mr Berisha is now taking a softer line, saying that his government will "review" the privatisation. Nor is the DPA likely to oppose a US$95m rail link from Tirana to Durres, on Albania's Adriatic coast. The project has been criticised by the IMF and World Bank on the grounds of cost and a lack of transparency, but it has strong US support.

Looking ahead

The new government's performance will be crucial in determining how fast Albania moves ahead with its EU integration efforts, and how quickly it can conclude an SAA. Since the next annual progress report from the European Commission, expected in November 2005, will most probably come too soon to contain a meaningful assessment of the new government, the Commission is unlikely to make a recommendation until early 2006 regarding Albania's readiness to sign an SAA.