Kosovo conflict8217;s costing its Balkan neighbours a bomb

The Tirana government was forced to cut public spending by 70 per cent to finance aid to the refugees, Finance Minister Anastas Angjeli told AFP.

Macedonia meanwhile has lost a key market in Yugoslavia, which formerly took a quarter of its exports, while unemployment is touching 40 per cent. In Republika Srpska, the Serbian entity in Bosnia-Hercegovina, exports to Yugoslavia have fallen by 75 percent and the conflict is costing the economya million dollars a day, according to official estimates.

The isolation of Yugoslavia, which holds a central position in the area, has also seriously complicated regional trade. Macedonia counted on Yugoslavia for transit of 90 per cent of its trade with the European Union.

In Hungary, the government has set its losses at nearly 100 million dollars from dishonoured contracts as bridges on the Danube have been smashed by bombing, blocking navigation. The situation in Romania is similar, while the war has scared off tourists who provide valuable foreign exchange for Croatia and Hungary.

According to a recent study by the Organisation for Economic Cooperation and Development, the war could also diminish investors8217; confidence, hurt by an increase in interest rates, while slowing economic reforms.