EU warns Kosovo on fiscal discipline
(PRISTINA) - The European Commission on Thursday warned Kosovo to take fiscal discipline seriously and adopt measures to reduce a growing budget deficit, a day after the IMF took a similar hardline stand.
The European Commission "noted with concern the risks surrounding the 2011 budget and the financing of the deficit," the EC's liaison office in Pristina said a statement.
"The Commission stressed the importance of fiscal discipline as a prerequisite for a stable macro-economic environment and investment," it said, adding that commission representatives "urged the authorities to take upfront consolidation measures."
The warning came just a day after the International Monetary Fund (IMF) dropped a joint review of Kosovo's financial performance after the country unilaterally increased public sector wages by up to 50 percent.
The move means that Kosovo will not be able to draw down money from an IMF stand-by loan.
Falling foul of the IMF could be a costly for Kosovo Prime Minister Hashim Thaci, especially if the EU too were to withdraw or reduce funding needed to cover the budget deficit.
"Usually no one will give you a single cent if the IMF does not support you," Kosovo analyst Naim Gashi said.
"The question is whether the EU will ... follow the IMF or will it give priority to political stability of the country. If the EU gives up its commitment, I am convinced the country will collapse financially," he warned.