Who’ll Pick Up the Tab for Kosovo?

When Bill Clinton and his European counterparts sit around a table savoring their Kosovo achievement at this weekend’s summit in Germany, there’ll be no gentlemanly rush to get the check for the war and its cleanup. The Europeans and the U.S. have each politely indicated that they expect the other to slap down a heftier share than they’d been planning to. They also have figure out if that check should include any monies to rebuild Serbia, or simply leave it broken and impoverished as long as its reviled leader remains in power. Either way, while the guesstimates vary widely, the first year of peace looks set to cost the allies at least 10 times what they spent on war.

Bombing Yugoslavia and providing relief for refugees may have already cost NATO as much as $7 billion. But the war has all but destroyed the economy and infrastructure of Kosovo and wiped out as much as half of Serbia’s already depleted economy. Even for the neighboring countries not involved in the conflict, the impact of refugee flows and loss of markets, transport routes and tourism is estimated by the IMF to run in the region of $2.25 billion. Here’s a reckoning of the factors being weighed in the allies’ minds as they look forward to the postwar reconstruction era:

Peace Ain’t Cheap

The Cost of War
Current cost estimates for the war in Kosovo

78-day air war and refugee crisis:
$7 billion

Rebuilding Kosovo:
$18 billion

One year of KFOR peacekeeping:
$25 billion

Five-year regional economic recovery plan:
$50-$100 billion

Total:
$100-$150 billion NATO believes that avoiding future wars in the Balkans depends on creating viable economies throughout the region, which can serve as a foundation for democracy and integration. But Balkan peace will cost the allies a lot more than Balkan war. The allies have spent $5 billion rebuilding Bosnia over the past five years, but the estimated cost of reconstructing Kosovo alone is estimated to run at $18 billion. And the European Union –- which will coordinate the reconstruction effort –- plans to make that part of a comprehensive five-year plan to rebuild the economies of the region at a cost of $50 billion. Many experts believe that figure hopelessly optimistic, setting a more realistic target at somewhere between $75 billion and $150 billion. And that’s over and above the tab for keeping 50,000 KFOR peacekeeping troops in Kosovo, which is estimated to run at about $25 billion a year (the U.S. contingent is expected to cost Washington $3.5 billion a year).
Who Pays?

Not surprisingly, the allies are at loggerheads over who should foot the bill. The E.U. has offered to pay 60 percent of the tab, but Washington believes their European pals can do better than that –- particularly since the bulk of the air war was financed by the U.S. The Europeans counter that that while their economies aren’t exactly a picture of health, Washington has the luxury of a record budget surplus. “In the end, it’ll be up to Congress to determine how much the U.S. spends on reconstruction in the Balkans,” says TIME U.N. correspondent William Dowell. “And while Capitol Hill will almost certainly be reluctant to spend large amounts on foreign aid, some argue that this is shortsighted because the U.S. has a lot to gain in terms of influence, and even access to markets, by not simply turning this over to Europe.”

Reaping the Reconstruction Dividend

To be sure, the Europeans recognize a potential economic reward for the countries who put together a sort of mini-Marshall Plan for the Balkans. “Remember, the Marshall Plan wasn’t entirely altruistic,” says TIME senior business writer Bernard Baumohl. “It opened up a major trading relationship for the U.S. There could even be some short-term economic rewards for Europe from investment in rebuilding Kosovo, because it will create a substantial market for European manufacturers.” The scramble for potentially lucrative building contracts is already on, with the British government marshalling firms to be ready to move in at a moment’s notice, while the potential payoff even has old foes in Greece and Turkey discussing the possibility of joint ventures. European officials are also suggesting that countries such as Rumania and Bulgaria be given first dibs on construction work as a means to strengthen their economies in transition away from communism.

Will Serbia Be Helped Before Milosevic Is Ousted?

The $64 billion-dollar question, though, is how much — if any -– aid will be given to Serbia. Publicly, Bill Clinton and Tony Blair are leading NATO countries in insisting that the Serbs won’t get a bean until they’ve overthrown Milosevic. Privately, European governments indicate they’ll provide humanitarian assistance to the Serbs, and there’s some disquiet over tying aid to Milosevic’s ouster. Finland’s President Martti Ahtisaari, the incoming E.U. president who brokered the final peace deal, suggests that the international community should make aid available on condition that Serbia complies with monitored democratic changes. “The democratization process should take care of [Milosevic],” Ahtisaari is quoted as saying. “We shouldn’t be shooting ourselves in the foot by making demands that don’t make sense.” To be sure, there’s unlikely to be any stability in the region while Serbia remains shattered and isolated, and Milosevic still retains a tight grip on power. “It’s obvious that in the long run Milosevic will be forced out of power, but the question is whether destroying the fabric of a society is a means of ensuring long-term stability, or whether it will simply result in his replacement by someone equally unpalatable to the West,” says Dowell. “Keeping Iraq isolated hasn’t yet brought down Saddam Hussein, but it may have destroyed the country’s middle class and the chances of a stable and democratic government taking over from him.”