It's a poor country still struggling to learn democracy. Around it are hostile neighbors; inside are disgruntled ethnic minorities.
By conventional Balkan wisdom, Macedonia is another conflict zone waiting to happen.
But despite the odds, this tiny, mountainous former Yugoslav republic has become a source of stability in a region known better for war.
Last week, Macedonia passed what was perhaps its biggest test to date: It peacefully formed a new government that is expected to enhance minority rights and continue on a road of reform.
International diplomats are hopeful that the example set by this country of 2 million people can have a positive impact on the rest of the region - particularly Serbia, where ethnic Albanians are fighting for independence in the province of Kosovo.
"Macedonia has to be an inspiration to other countries," says US Ambassador to Macedonia Christopher Hill, who is also the chief US envoy working on a political solution in Kosovo. "It's a classic buffer state between larger people - a gasket between the sharp edges of the Balkans."
Already Macedonia's positive development has paid dividends: The government recently agreed to allow NATO "rapid reaction" forces to be stationed on its soil to provide emergency backup for international monitors in Kosovo. As a partial consequence, Macedonia's ambitions to join NATO and the European Union are being taken with increasing seriousness.
Conversely, Macedonia's neighbors are falling backward. Yugoslavia has a simmering war in Kosovo; Albania is still in a state of chaos after last year's civil unrest; and Bulgaria is among the most corrupt countries in Europe. Relations with Greece are still fragile because Greece thinks it has rights to Macedonia's name and flag.
Just a few months ago, it appeared as if Macedonia would follow the Balkan script. Its approximately 25 percent ethnic Albanian minority was threatening to withdraw from the government and mirror the Albanians in neighboring Kosovo.
There were even indications that the ethnic Albanian Kosovo Liberation Army, which is fighting in Kosovo, was spreading across the border and taking root in Macedonia.
But, in a political surprise, Arben Xhaferi, a radical ethnic Albanian leader in western Macedonia, agreed to become part of the ruling parliamentary coalition. Rather than break from the government, he became an essential part of it. "This coalition will offer more stability to Macedonia than ever before," says Mr. Xhaferi. "The reason we agreed to join is that they offered more respect to our demands for Albanian rights, at all levels."
Albanians have complained that they are underrepresented in state institutions and that their Albanian-language university in the western city of Tetovo should be recognized by the state. Two ethnic Albanian mayors were jailed for raising the Albanian flag over city-hall buildings.
Ljubco Georgievski, the new prime minister, has promised to work with Xhaferi on resolving such issues, although it remains to be seen whether he will change the Constitution to do so.
Mr. Georgievski is the head of the Internal Macedonia Revolutionary Organization (IMRO), named after a radical Macedonian resistance movement that fought against a 500-year occupation by the Ottoman Turks and later became a terrorist organization.
In 1991, the IMRO, then a nationalist party, was the first to advocate independence from Yugoslavia - something that was achieved the next year without firing a single shot.
But the new face of the IMRO is one of reconciliation and progress, Georgievski says. "We can guarantee a severe fight for getting into NATO and the European Union - and for bringing about economic reform," he said just minutes before his coalition took control of the parliament.
The previous government, ruled by the Social Democrats, also included ethnic Albanians - but not hard-liners like Xhaferi.
"The international community believed that only the Social Democrats could form a government with the Albanians," says Branko Geroski, the editor in chief of the Skopje daily Dnevnik, one of the Balkans' few independent newspapers.
"Now it has been proved that the Albanians are a permanent part of our political system," he says.
Mr. Geroski and Western observers in Macedonia say that the greatest danger of the new coalition is that it has heightened people's expectations - and good times are still far away.
Unemployment is more than 25 percent, foreign investment for this year is projected to be only $120 million, and monthly wages are less than $200.
"Macedonia needs more progress on several fronts," says one international official. "People will be mistaken if they think that the new government can put more money in their pockets overnight."
Another concern is that President Kiro Gligorov is due to step down next year. Although his post is largely ceremonial, Mr. Gligorov has been a sensible and cautious leader, Western diplomats say. It is not known if his successor will follow suit.