Event

President Gjorge Ivanov decided to pardon 56 politicians (government and opposition members) alleged of involvement in the wiretap scandal that erupted last year and led to the resignation of the Prime Minister Nikola Gruevski in January. Following this controversial decision, thousands took to the streets in the capital and other cities. The presidential amnesty is contradictory to an EU/US-brokered deal reached last June to end political deadlock. Indeed, an important element of this deal was the appointment of a special prosecutor to investigate the wiretap revelation along with the organisation of early elections due in June this year. In the meantime, the special prosecutor said that, despite the presidential amnesty, she continues her investigation. The amnesty also raised concerns in the US and the European Union, which cancelled a meeting with Macedonian authorities.

Impact on country risk

The EU/US-brokered deal was an important step to end the political deadlock and pave to way to parliamentary elections due on 5 June. The presidential amnesty is clearly a step backwards. Without withdrawal of the president’s pardon, the relation with the EU is likely to deteriorate further and the EU could consider further actions such as the imposition of sanctions (travel ban) on leading political characters of the Macedonian government and delay EU membership talks. This is likely to erode foreign investors’ perception of Macedonia. In the short term, this could complicate Macedonian companies’ access to external funding and hence weigh on Credendo Group’s short-term political risk. In the medium to long term, persisting rule of law issues could damage years of successful policies of the government which has been able to attract foreign direct investments by building infrastructure, granting tax breaks and streamlining red tape.

Analyst: Pascaline della Faille, p.dellafaille@credendogroup.com