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Friday, June 18, 1999 Published at 12:45 GMT 13:45 UK

World: Europe

Rebuilding the Balkans: Who pays ?

Destruction in Novi Sad, but will Serbia get cash to rebuild?

By BBC News Online's Fergus Nicoll

Western leaders are moving fast to begin the huge job of reconstructing the Balkans, but already the arguments are beginning over who is to foot the bill.

Kosovo: Special Report
The damage caused by the war in Kosovo to the regional economy is enormous.

The European Commission has estimated that the reconstruction of Kosovo alone will cost $18bn.

In Yugoslavia itself, repairing vital infrastructure is high on the agenda.

[ image:  ]
But Western leaders have made it clear that financial assistance for Serbia will only be given if President Slobodan Milosevic is no longer in power.

More than 50 Serbian road and rail bridges were destroyed by Nato.

Alliance air strikes also targeted oil refineries, and 28 fuel storage sites were attacked.

In Montenegro, Serbia's junior partner in the Yugoslav Federation, the damage was lighter.

The BBc's Andy Tighe: "European and US delegates in Cologne expect each other to pay"
Anxious not to destabilise a more conciliatory government in Podgorica, Nato planners limited their attacks to Yugoslav military positions, especially around the capital's airport.

The wider Balkan region has been badly affected by the conflict in many ways.

Most trade routes pass through Yugoslavia, in many cases along the River Danube. Air freight routes and lorry transport corridors have also been badly interrupted.

An estimated 5% has been knocked off the output of countries in the affected area. This, in turn, leads to a large trade imbalance - estimated at nearly $2bn.

EBRD President Horst Koehler: "Only with reconstruction can future conflict be avoided"
In addition, neighbouring countries - especially Albania and the Former Yugoslav Republic of Macedonia - have had to accommodate hundreds of thousands of Kosovo Albanian refugees.

Horst Koehler, the president of the European Bank of Reconstruction and Development (EBRD), told the BBC that people in the Balkans need to know they have "a place to live in peace and where they will have a job".

"Only then," he said, "will the potential for further conflicts be contained."

So who will pay ?

Even as the G8 summit got underway in Cologne, European delegates were hinting strongly that the United States - which is enjoying a huge budget surplus - should bear the brunt.

[ image: Serbian power stations fell victim to Nato strikes]
Serbian power stations fell victim to Nato strikes
But President Clinton has already stated quite explicitly that he expects Europe to pick up most of the tab.

Washington, he said last week, had done its share in providing two-thirds of the aircraft and all the cruise missiles for Nato's 78-day air war.

At about $100m a day, that comes to more than $7bn.

The Milosevic factor

Many senior politicians in Europe have ruled out substantial cash for Serbia until President Milosevic is removed from power.

French Prime Minister Lionel Jospin on Friday drew a distinction between humanitarian assistance and development aid.

[ image: Rebuilding Djakovica, western Kosovo]
Rebuilding Djakovica, western Kosovo
"A humanitarian policy for Serbia is necessary and justified," he said, "but as for reconstruction, we need an interlocutor of a different nature" from Mr Milosevic.

His comments echoed remarks on Thursday by both President Chirac of France and Mr Clinton that there could be "no development aid for a regime which is not democratic".

In a foreign aid bill approved on Thursday by the US Senate Appropriations Committee, about $535m is targeted for the Balkan region - but none of it for Serbia.

Republicans in Washington want the bill to include a reference to Serbia as a "terrorist state", which would make it ineligible for future US aid.

Greece, too, has raised the issue of "democratic reforms" in the context of regional reconstruction.

The price of peacekeeping

One major additional expense will be the peacekeeping operation itself, both military and civilian.

Given the extended period for which it is likely to remain in place, some analysts argue that peacekeeping could prove even more expensive than the war.

The Royal Institute of International Affairs in London has calculated that, with a projected K-For presence of about 50,000 troops, the bill could amount to as much as $25bn a year.

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