Four years after its unilateral declaration of independence from Serbia, Kosovo won full independence this week. The International Steering Group, a body representing 25 countries that recognize Kosovo’s statehood, ended its official supervision of the young nation Monday.

This “milestone,” as many put it, is largely a formality – NATO peacekeepers, EU overseers, and the UN will continue to monitor conditions on the ground until 2014 at least. But it also reflects Kosovo’s state-building progress while offering a moment to reflect on the considerable challenges remaining. They follow below in no particular order, though the last two issues are arguably the most urgent.

Democratic Consolidation: Kosovo’s parliament has adopted over 300 laws in the country’s transition to a multi-ethnic democracy under the so-called Ahtisaari Plan, a 2007 proposal by UN special envoy Marti Ahtisaari that obliquely recommended Kosovo’s statehood after a period of international supervision (which ended this week) and in exchange for concessions by Pristina to accommodate the Serb minority. But the transition is unsure. The last elections, in December 2010, were the worst since the conflict ended, in 1999. Observers found evidence of fraud in up to 60 percent of the ballots cast, leading to repeat polls in several municipalities and a recount of nearly half the original votes. KIPRED, a Pristina-based think tank, estimated that nearly 5,000 commissioners in over 700 polling stations broke electoral rules. The government’s legitimacy is frequently challenged as a result.

Sovereignty: “Supervised independence” may be over, but the “internationals” are hardly bowing out. While NATO, the EU’s rule of law mission, EULEX, and the UN aren’t going anywhere soon, the international community also retains a hand in Kosovo institutions: for instance, three of the nine judges on the Constitutional Court are international appointees,KIPRED points out. Moreover, Pristina is neutered in northern Kosovo, the separatist majority-Serb territory above the Ibar River often called a “frozen conflict.” I return to this issue below.

International Legitimacy: Or, as KIPRED puts it, “international half-legitimacy.” Four years after independence, only around 90 countries recognize Kosovo; South Sudan has more recognitions a year into its independence. Critically, five EU members are holdouts. So Kosovo has only joined two international organizations, the IMF and World Bank, while the EU, NATO, and the UN remain out of reach.

The Role of Islam: Though most Kosovo Albanians are officially Muslim, as a nation they’ve always considered themselves secular on social and political questions. The constitutionoutlines a secular state, and Pristina’s nightlife would do Bacchus proud. But young people are beginning to embrace Islam, attending mosque with greater frequency, promoting Islam on social media, and demanding religious rights. A ruling by the Constitutional Court last year upholding the government’s effective ban on girls wearing the Islamic headscarf in public schools sparked protests. Youth say they’re looking for order and meaning, but the old guard fears radicalization and a threat to Kosovo’s secular tradition. On the ground in Kosovo today, this is a key social issue.

The Economy: Kosovo has Europe’s highest unemployment rate at 45 percent. This would be alarming even if it didn’t also have Europe’s youngest population. By one estimate, Kosovo’s economy must average 7 percent annual growth to halve unemployment by 2025. But it’s growing around 5 percent today, largely driven by international aid and remittances in an economy so weak that butter and eggs are imported. Kosovo’s countryside is spectacular though, especially Rugova Gorge in the west, so it might be able to follow Albania’s lead in building up tourism as infrastructure improves.

The North: By many accounts, Pristina’s greatest post-independence success is decentralization, Ahtisaari’s vision to build a multi-ethnic state by granting majority-Serb areas considerable self-rule. In Gracanica and other majority-Serb municipalities, local governments are functioning; residents vote in national elections; and the so-called “parallel” public services including health care and education that Belgrade funds to support the Kosovo Serbs while undermining Pristina are weakening.

But decentralization is only advancing south of the Ibar. The north’s roughly 40,000 ethnic Serbs reject Kosovo institutions. The parallel institutions are entrenched there, Pristina has scant influence, and many residents favor a policy officially known as “partition,” or effectively giving northern Kosovo to Serbia, which Pristina and the international community stridently oppose. Integrating the north into Kosovo’s state-building efforts is arguably the key challenge because the territory has become an interethnic flashpoint of intermittent violence where the population increasingly sees any encroachment by Pristina or the international community as occupation. A border dispute there in summer 2011 threatened to escalate into outright conflict and still simmers today. Brussels wants Belgrade and Pristina to settle the “frozen conflict” as soon as possible. Without a resolution, Kosovo’s state-building efforts will always be incomplete.

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