ABSTRACT
This chapter assesses the causes for the development failures in the Balkans or the region of South-east Europe. The Balkans or South-east Europe is in many ways the least developed region in Europe. It has exhibited a divergent growth performance from the more developed European countries. The chapter discusses certain features of the adjustment processes that occurred in the wake of the financial and economic crisis, including both transitory features as well as the more permanent impact of the initial disequilibria on the patterns of recovery or lack thereof. It also discusses the issue of external imbalances and the need to rebalance in the face of stoppages of capital inflows and even their reversal specifically in those economies which built up large external imbalances in the pre-crisis period. The chapter reviews some policy choices with a view to addressing the cyclical as well as the structural problems.
