The Republic of Macedonia’s premier headed to France on Tuesday to meet his opposition rival and European Parliament members seeking to defuse a crisis over a wire-tapping scandal and a deadly clash with insurgents.
Prime Minister Nikola Gruevski told a rally of tens of thousands of supporters on Monday that he wouldn’t resign after a similar-sized crowd demanded he step down a day earlier. The confrontation sent the yield on Macedonia’s benchmark Eurobond to a record high, and the International Monetary Fund said it could pose risks for medium-term economic growth.
The former Yugoslav nation is grappling with its deepest political turmoil since its independence in 1991. Zaev has leaked what he says are wire taps that show abuse of power by government officials, including Gruevski, whose administration denies wrongdoing. Along with the political standoff, 22 people died in a battle between police and Albanian insurgents in the northeastern town of Kumanovo two weeks ago.
“If this goes on for a protracted period of time, or deepens, we may see confidence deteriorating and some foreign direct investment projects and domestic investment will likely be put on hold,” Patrick Gitton, the IMF’s representative in the capital Skopje, said in response to questions by Bloomberg on Tuesday. “That would hurt the supply side of the economy and negatively affect medium-term growth prospects.”
The yield on Macedonia’s euro-denominated bonds maturing in 2021 rose to the highest level since debt was sold in July 2014. The yield surged 30 basis points, or 0.3 percentage point, to 4.35 percent at 4:42 p.m. in Skopje. That compares with 3.83 percent on May 8 before the battle in Kumanovo, according to data compiled by Bloomberg.
Macedonia’s economy is set to outpace its regional peers with 3.8 percent growth this year and 3.9 percent next year, according to the IMF. Gruevski, who MIA said would meet Zaev in Strasbourg on Tuesday, told his supporters that the opposition wants to destabilize the country and take credit for the economic expansion.
“They firmly believe that they will break us, that they will mislead us with fabricated, cut and pasted pictures and false narratives, that they will frighten us with terrorist gangs,” Gruevski said on Monday, MIA reported. “There will be no retreat, there will be no surrender.”
The country of 2 million people borders European Union members Greece and Bulgaria, as well as Serbia, Albania, and Kosovo. While it has been an EU candidate since 2005, it has made little progress, with a main hurdle being an objection in neighboring Greece to the use of the term “Macedonia” because the Mediterranean state has a province of the same name.
“Much depends on the actions taken by the EU,” Vladimir Gligorov, an economist at the Vienna Institute for International Economic Studies said in an e-mail. “If there are new possibilities to unblocking the stalled accession process, that would have huge stabilizing effect.”