The political tensions in Bosnia and Herzegovina continue without breakthroughs for now. The rhetoric from the RS's political leader Mr Dodik has not ceased even though the High Representative, Mr. Schmidt has provided his first report on political developments in B&H since taking over the position in August 2021, during the UN’s session on Tuesday, November 2nd. The report clearly underlined worrying developments which derail integrity, sovereignty and even peace in the country, which caused numerous alarming headlines in the leading world media. However, the current risk of the armed conflict is not the baseline scenario and despite very tough and rhetoric escalated to a new level, all local political stakeholders clearly underlined that the armed conflict scenarios are out of the question.
However, positive news came on the second day at the meeting of the Security Council of the UN voting for the EUFOR mission being prolonged for another year in B&H, as its ultimate mandate is to protect integrity and peace within the State according to the Dayton peace agreement. Nevertheless, there is still a high level of political uncertainty while the next key date which will provide more insight in terms of the future developments related to the current political crisis in B&H, is the announced session of the National Assembly of RS which should take place until mid-November 2021. A decision on revocation of RS from the key three State institution the B&H Arm forces, the Indirect Tay Authority and the High Prosecutors Office of B&H should be reached at the meeting along with the decision of establishment of its own, RS's institution. This motion is defined by the State and international community as unconstitutional and illegal and if adopted should trigger international actions and sanctions for the responsible political individuals and their allies in RS.
We expect further very intensive presence of the international community in coming days and months in B&H who are trying to calm down the political momentum, mediate and organize constructive talks between key political leaders, RS leader, Mr Dodik, and other two key politicians from Federation of B&H (Mr Izetbegović and Čović), especially on key stumbling pieces of legislation — Constitutional and Electoral Law which needs to be reformed to enable the viability of sovereignty of the country and being in line with the democratic principles and the EU requirements. Diplomats from the US and the EU, Mr. Palmer and Ms. Eichhorst were discussing these two topics intensively in the last few days also with local political leaders, where Mr. Dodik also participated. Mr. Escobar, special representative of the President of US for Western Balkans is coming next week to B&H for meetings with leading politicians, while in November 2021 also visit of Mr. Varhelyi, the Commissioner for the Enlargement and Neighboring policy of the EU is expected.
In light of the ongoing inflation uptick, central banks are tightening monetary policy, in the form of tapering in the case of the Fed whilst CE central banks continue their rate hiking cycles at differing speeds, i.e. CNB more aggressively than NBP. Meanwhile, the economic recovery continues, although being hampered by supply chain disruptions, both in the euro area (especially Germany) and in CEE.