The country formerly called "Yugoslavia" was a creation of the post-1918 European peace settlement. A maverick communist state after 1945, it was torn apart by nationalist tensions in a violent civil war in 1991–1995, leaving of the six former republics, only Serbia and tiny Montenegro in a rump federation. After the ousting of the discredited Serbian nationalist Slobodan Miloševic as federal president in 2000, a more democratic successor regime ended the country's international pariah status. Montenegro and Serbia agreed in 2002 to a looser confederal model, giving up the name Yugoslavia.

The social order has been devastated by the last decade of conflict in the region. There is a depressingly high suicide rate among the old living in cities. In Kosovo, 900,000 ethnic Albanians fled (mainly to Albania and Macedonia) during the 1999 conflict. The June 1999 agreement opened the way for most to return, since which time many of the province's embattled Serb minority have gone (or been driven out) themselves, fearing both vengeance and the longer-term prospect of Kosovan independence.

The Hungarian (and mainly Roman Catholic) minority is concentrated in, but does not dominate, the relatively prosperous northern Serbian province of Vojvodina. Limited autonomy was restored in 2002, after economically motivated pressure from within the region. Orthodox Serbs who converted to Islam during Ottoman rule are considered to be an ethnically separate group.

Strengths

Return of international aid and investment in 2000–2001. Economic potential of the Danube.

Weaknesses

Severe damage caused by sanctions and 1999 bombings. Low hard-currency reserves. Outflow of skilled professionals in past decade.

Profile

The former Yugoslavia was among the most advanced of the socialist countries in terms of its living standards. It has now all but collapsed, although as much as 50% of all activity goes on within the resilient informal sector. The conflicts of the early 1990s effectively stalled much-needed economic reform. Sanctions, maintained until 1996 and reimposed more fully in 1999, stifled trade and decimated both the emerging private and the state sectors. Hyperinflation had already pushed the economy to virtual collapse. Damage to infrastructure caused by NATO bombing in 1999 was extensive; the EBRD estimated reconstruction costs at $20 billion over three years. Sanctions were lifted shortly after Miloševic's downfall, and prospects for investment boosted by his extradition and wider agreement to cooperate with the ICTY.

Serbia and Montenegro, each with a separate parliament and president, are represented in the bicameral Federal Assembly.

Profile

Slobodan Miloševic, Serbian president from 1989, dominated Yugoslavia for a decade. Conflict from 1991 to 1995, then again over Kosovo, created a permanent sense of siege. It was the tightening of UN sanctions in 1999, more than the NATO bombing, that sealed Miloševic's fate. After he was ousted in the October 2000 popular uprising, the reformists consolidated their position, dominating elections in December. However, nationalists in the DOS coalition, including President Vojislav Kostunica, were affronted by Miloševic's extradition in 2001, and Kostunica has since withdrawn his party.

Main Political Issues

Kosovo

The Yugoslav army had to withdraw from Kosovo to end NATO bombing in 1999. The ethnic Albanian majority awaits a promised referendum on its future. International administrators oversaw the election of a Kosovo assembly in 2001. Local Serbs participated, but are wary of Albanian calls for independence.

Montenegro

Although less subservient to Serbia from 1997, calls for Montenegro's independence were subdued in 2002 when President Milo Djukanovic agreed to a trial period in a loose confederation.

In 1995, mutual recognition among the countries which had constituted the Socialist Federal Republic of Yugoslavia paved the way for the normalization of relations.

The pariah status of the Miloševic regime in the late 1990s was underlined by his indictment by the International Criminal Tribunal for the former Yugoslavia (ICTY) in 1999, and the military action by NATO forces over the situation in Kosovo. Russia, long an ally of Serbia, shares its Orthodox Christianity and its Slavic ethnicity, and strongly opposed the NATO military action over Kosovo, but backed the settlement proposals which Yugoslavia accepted to end it. The inauguration of the Kostunica government in 2000 was welcomed enthusiastically by the West and Russia. The new regime was quickly invited to take up its vacant seat in the UN. Agreement to cooperate with the ICTY has reopened aid channels.

The country's military capability was specifically targeted for "degrading" by the NATO air strikes in 1999. The impact on anti-aircraft defenses, heavy weaponry, logistics capacity, and infrastructure was less severe than had first been claimed, however.

The Serbian military had previously played a major role in the conflicts in the former Yugoslavia in the early 1990s. Traditionally the center of the country's armaments manufacture, Serbia was able to arm itself – although the need to create money to pay for domestically produced weapons was a major factor in the crippling hyperinflation of that era.

In 2002 the country made its first (modest) contribution to a UN peacekeeping force.

Serbia and Montenegro is self-sufficient in coal and electricity production. Vojvodina's oil industry could cater for one-third of the country's needs, but was badly hit by NATO bombing in March–June 1999.

In Serbia, ecological awareness peaked in the late 1980s when the Ecological Forum was active. NATO bombing of Serbia in 1999 caused extensive pollution of the Danube and raised fears of contamination from dioxins. Depleted uranium from NATO munitions has also aroused serious concerns both in Serbia proper and in Kosovo.

About one-third of railroads in Serbia and Montenegro are electrified. The rail link to Greece is one of Serbia's main trading routes, and lines through Serbia remain the best link between Budapest and Sofia.

Bridges and railroads were specifically targeted during the NATO bombing in 1999. The bombing of the bridge over the Danube at Novi Sad closed the river as a major regional trading artery, and its reopening was made a priority for international assistance once the Miloševic regime had fallen. Two flights daily link Belgrade with Montenegro.

Isolation from former trading partners has affected the quality of the health service, despite the exemption of medicines and medical supplies from sanctions. Social insurance is obligatory for those in employment, but medicines are scarce and costly, and death rates among infants and the elderly have risen dramatically. Health problems can be aggravated by bitingly cold winters.

Schooling was totally disrupted by the Kosovo conflict in 1999, leaving the education system in crisis; the wealthy go abroad for their education. Literacy rates in Kosovo, where ethnic Albanian schools were closed in 1990, were below the national average even before the conflict. Rebuilding the education system is key to reconstruction and reconciliation.

Crime was rife under Miloševic – from currency trading and black marketeering to narcotics and extortion. The country has fully cooperated with the ICTY since 2001, and began its own war crimes trials in Serbia in 2002. The death penalty is set to be abolished.

The country as a whole was seriously impoverished by sanctions; real incomes fell dramatically, yet food prices remained higher than in much of western Europe. Bank collapses in 1992 and continuing hyperinflation in 1992–1994 wiped out dinar savings. One business that did expand was the illegal import of sanctions-busting goods for the few who could afford them – black marketeers and those close to Miloševic.

The lifting of sanctions in 1995–1996 had hardly begun to be reflected in improvements in living conditions when the Kosovo conflict brought further dislocation and hardship in 1999. Even before it erupted, an estimated two-thirds of the population were living below subsistence level. Apart from the desperate situation of refugees and internally displaced families, unsupported pensioners fare worst.

Serbia has never been a center of tourism. The Montenegrin coast, however, has renowned beaches. Before 1999 they were monopolized by Serbians, particularly by political and criminal elements of the Serbian elite. Hyperinflation and recession kept the average vacationer away. The impact of UN sanctions and the conflict over Kosovo meant that foreign tourism ceased in the 1990s.

The Serbs were defeated by the Turks at the Battle of Kosovo in 1389. Parts of the region were later ruled by the Habsburgs.

• 1878 Independence gained by Serbia and Montenegro at Congress of Berlin.
• 1918 Joint Kingdom of Serbs, Croats, and Slovenes created.
• 1929 King Alexander of Serbia assumes absolute powers over state; changes name to Yugoslavia.
• 1941 Germans launch surprise attack. Rival resistance groups: Chetniks (Serb royalist) and Partisans (communist, under Tito).
• 1945 Federal People's Republic of Yugoslavia founded with Tito as prime minister (and president from 1953).
• 1948 Tito breaks with Stalin.
• 1951 Farmers permitted to sell produce on free market.
• 1955 Yugoslav–Soviet détente.
• 1963 Third postwar constitution adopts name Socialist Federal Republic of Yugoslavia (SFRY).
• 1973 Economic cooperation agreement with West Germany. Agreement of noninterference signed with USSR. Croat nationalists purged from party leadership and government.
• 1974 New constitution decentralizes government. Vojvodina and Kosovo given greater autonomy.
• 1980 Tito dies. Succeeded by collective presidency.
• 1981 Unrest among Kosovo Albanians; state of emergency.
• 1985 Serbian intellectuals publish memorandum listing Serb grievances within Yugoslavia.
• 1986 Slobodan Miloševic becomes leader of Communist (later Socialist) Party of Serbia.
• 1987 Wage freeze to combat inflation. Banking system crisis.
• 1988 Belgrade protests against economic austerity. Government brought down over budget failure.
• 1989 600th anniversary of Battle of Kosovo. Kosovo Albanians protest against Serb police unit; crackdown ends Kosovo's autonomy.
• 1990 Miloševic and Socialist Party victorious in elections in Serbia. Communists win presidency and dominate Montenegro elections.
• 1992 EU recognizes breakaway republics of Croatia, Slovenia, and Bosnia and Herzegovina. Bosnian war begins. UN sanctions imposed. Ibrahim Rugova elected president of self-declared republic of Kosovo. Miloševic reelected president of Serbia, but SPS loses majority.
• 1995 Miloševic signs Bosnian peace accord.
• 1996 UN sanctions formally lifted.
• 1997 Concessions after big protests, acknowledging malpractice in municipal elections. Miloševic becomes federal president.
• 1998 Conflict in Kosovo escalates.
• 1999 March, Kosovo talks break down; ""ethnic cleansing"" precipitates mass exodus. NATO aerial bombing. June, withdrawal of Serbian forces and police from Kosovo, and entry of international force, KFOR.
• 2000 September, defeat of Miloševic in first round of presidential election. October, opposition candidate Vojislav Kostunica swept to power by massive anti-Miloševic protests. December, Democratic Opposition dominates Serbian elections.
• 2001 April, arrest of Miloševic. June, Miloševic extradited to face war crimes tribunal in The Hague.
• 2003 March, assasination of Prime Minister, Zoran Djindjic.