Weak institutions and legal protection in the region

One of important the lessons from economics is that institutions (both formal and non-formal ones) matter because they influence the behavior of individuals and their actions. Probably the most important institutions are courts and delivering of justice. This area is considered as an example of public goods and that it can only be delivered successfully by the state, whose primary task is providing legal enforcement. The Freedom Barometer Index takes into account data from Freedom in the World Index regarding:

1.    Judicial independence
2.    Impartial courts
3.    Protection of property rights
4.    Military interference in rule of law
5.    Integrity of the legal system
6.    Legal enforcement of contracts
7.    Regulatory restrictions on sale of real property
8.    Reliability of the police
9.    Business cost of crime

Legal system and property rights in the Balkans rely on weak institutions – average points in this area is only 4. Montenegro seems to have the strongest legal institutions, followed by Macedonia while all other countries are below the average, particularly Serbia.
Albania    B&H    Croatia    Montenegro    Serbia    Greece    Bulgaria    Macedonia       
 3.84       3.94    3.89         5.15              3.06       3.86        3.81          4.36           

Bad conditions of the legal system is widespread among all legal subcategories, aside from military interference in the rule of law and restrictions of sale of property, which implies that military is put effectively under civilian control, corresponding with the level of society democratization which took place during the transition period. The lack of judicial independence and impartiality of courts is at the core of the problem. 
A common trait of the Balkan countries are weak legal and property rights institutions. Property rights are more protected in Montenegro and Greece than in other countries, while Serbia and Albania are particularly lagging behind the rest of the countries in this aspect.   
Albania    B&H    Croatia    Montenegro    Serbia    Greece    Bulgaria    Macedonia       
3.56        3.90    4.59         5.98              3.52       5.29        4.17          5.04           

Without safe property rights, no investment is secure. This also encourages high level of political corruption which is present in these countries – on one hand bribe is considered as a way to protect one’s interest when it is hard to do so legally and on other, courts do little to prosecute it. Legal enforcement of contracts is another issue that needs to be strengthened in order to improve the current condition – low level of contract enforcement raises risk and cost of businesses.
Countries in the Balkans engage themselves into secondary functions of the state (wealth re-distribution, affirmative action, youth policy) propelled by high public consumption but with little regard to primary state functions, such as provision of justice and security of property rights. In order for the countries to prosper, they must change their paradigm by deliberating first on the quality of institutions – effective, independent and impartial courts – and only later, after these conditions are met, all the other political issues. Without solid foundations all structures will collapse sooner or later. Therefore, it is a prerequisite for sustainable development of these countries to derive strong and independent public infrastructure and institutions, most notably independent, impartial and effective courts. This infrastructure is difficult to build and maintain and is time consuming, but its effects are long lasting.