On eve of Serbia vote, E.U. pact means more aid

Kosovo is set to receive the biggest boost: a doubling of aid over last year to €125 million, largely due to its anticipated declaration of independence on Feb. 17. "The increase might have come, but maybe not in this order of magnitude," says Rainer Freund, director of the Montenegro branch of the European Agency for Reconstruction, which was set up in the region following the Balkan wars of the 1990s.

By 2011, the EU expects to spend €3.5 billion in the western Balkans, a per capita high for EU aid. Some of that will go to building schools like the Dragisa Ivanovic Elementary School, built five years ago in Podgorica.

The bright white building stands out in a derelict neighborhood of tall grass and garbage. It was built for 900 students, but 1,500 attend – a fact that attests to its value to the community, says Principal Niko Raicevic. "This school has meant a lot to this part of town," he says.

Throughout the region, EU aid is funding basic infrastructure improvements and economic reform, like a €1.6 million investment in Kosovo's livestock sector.

But the money is also supporting more abstract things like institution building and "good governance."

Assistance projects run the gamut in scale, from spending €82.1 million to fight organized crime and build up policing in Macedonia to €1.8 million for an environmental monitoring system in Albania.

Montenegro, a nation smaller than Connecticut and historically the poorest region of the former Yugoslavia, is budgeted to receive €32.6 million in EU assistance this year – at nearly €50 per citizen the most in the region save for Kosovo. That has helped fuel rapid progress within the country's institutions and economy since it declared independence from Serbia two years ago.

Montenegro has reduced its unemployment to 12 percent, the lowest in the region. For two years, the government has run a budget surplus, and capital investment is up 80 percent.

"If the Radicals come to power [in Serbia], the EU is going to hold up Montenegro as a small little success story," says James Lyons, a Balkan expert with the International Crisis Group. "Really, Montenegro is the little country that could."

Ana Vukadinovic, head of Montenegro's Office for European Integration, says the country is now focused on fully implementing its SAA, bringing the institutions and policies in line with EU standards. She mentions 2012.

"We are not talking about this as an EU entry date, but about this as a date for being ready to join," she says. Polls show 75 percent of Montenegrins want to join the EU.

But while financial aid might continue to foster goodwill for the EU in the region, it doesn't smooth out everything, says Kristof Bender, a Balkan expert at the European Stability Initiative in Germany.

Mr. Bender points to divisiveness in the bloc's support of Kosovo's declaration of independence and the blow Greece delivered last month by blocking Macedonia's NATO's bid. "That was a major set-back to the EU's Balkan policy," he says. "Right now, I don't think there is a visible strategy."

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