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Last Updated: Tuesday, 3 May, 2005, 14:26 GMT 15:26 UK
Brussels offers first Kosovo loan
Kosovan man and UN police in Batuse outside power substation
Kosovans are angry at the state of the economy under UN stewardship
The European Union's long-term lending arm has set a precedent by agreeing to lend money to Kosovo, despite its unresolved international status.

Although no loans have yet been agreed, the European Investment Bank made clear its intentions at a signing ceremony.

The move may encourage other banks to lend Kosovo money, helping spur growth.

The Balkan province has been run by the UN since the 1998-99 war, leaving it unable to qualify for loans from global institutions such as the World Bank.

Crippled economy

The West hopes to open talks later this year on the area's "final status" - whether it should become independent, as demanded by the Albanian majority that lives there, or whether it should remain nominally part of Serbia.

However, at the signing ceremony in the capital Pristina, Kosovo's UN governor said he hoped the EIB loan would prompt more banks to follow its lead.

"The signing of this framework agreement today will serve as an important precedent that will help attract other international financial institutions extending loans for Kosovo," said Soren Jessen-Petersen.

The EU's deal is the latest bid by the UN to reinvigorate Kosovo's struggling economy.

Last month, the UN agreed new rules to speed up Kosovo's privatisation process.

Anger at lack of economic growth and widespread unemployment after six years of international leadership has sparked attacks on the UN mission and the province's ethnic minorities.

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