May 12 (Bloomberg) -- Bosnia and Herzegovina faces its worst crisis since ethnic wars in the 1990’s as the country’s Serb region pushes for a referendum that may increase tensions, a European Union official said.
The former Yugoslav republic is made up of the predominantly Serbian entity called Republika Srpska and a Muslim-Croat Federation. Bosnian Serb lawmakers approved on April 13 a referendum that would challenge the authority of the federal judiciary, a move which may increase hostility between the two sides, Inzko, said in a phone interview.
“The U.S. and the EU are saying that Republika Srpska has gone a step too far,” Inzko said on May 10 from Washington D.C. “If they don’t withdraw the decision on the referendum, the international community will have to act. I will have to act.”
Bosnia, a nation of 3.8 million residents wedged between Croatia, Serbia, Montenegro and the Adriatic Sea, was the scene of the worst fighting during the disintegration of Yugoslavia in the 1990s. It has had no federal administration since October elections because Serbs, Croats and Muslims have failed to agree as each nation seeks a dominant position in the Balkan country.
The lack of a government is hampering the economic recovery in a country that aims to join the European Union and is impeding the flow of funds from international-aid donors which are essential to the everyday operation of the state.
Inzko, who represents the U.S., EU and Russia in Bosnia, has the power to annul decisions and even remove officials if he deems they are undermining the U.S.-brokered Dayton peace agreement that in 1995 ended the bloodiest conflict in Europe since World War II.
Tensions resulting from the referendum could ripple across the region and impact the economies of countries such as Croatia, Montenegro or Serbia, said the Austrian-born diplomat, who has given Republika Srpska until May 13 to withdraw the decision to hold the vote.
“If somebody started thinking that Bosnia may fall apart and if some concrete steps are taken, then we could see the conflict flare up again,” Inzko said. “These countries are tied together and what happens in the neighborhood impacts Bosnia and the other way round. The whole region could become problematic.”
The Balkans are struggling to kick start their economies after the worst recession since the fall of communism saw a stop in capital inflows and investments. Bosnia’s economy advanced 0.9 percent last year and is forecast to expand 3 percent this year, according to the central bank in the capitalSarajevo.
Bosnia is “falling behind” other countries in its efforts to gain EU membership, according to Inzko, and officials should focus on boosting the economy.
“In the last 15 years, Bosnia has lost hundreds of millions of euros as the three nations can’t agree on many things,” Inzko said.
The European Bank for Reconstruction and Development has offered Bosnia 300 million euros ($431 million) to build highways, while the World Bank offered funding to build hydro-power plants, Inzko said. The money hasn’t been used, he said.
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