Europe's leaders warned of new crisis in Kosovo

Ethnic violence, economic paralysis and poor organisation threaten province's future, EU report asserts

Almost a year to the day since the beginning of Nato's air war to liberate Kosovo, Europe's leaders face a grim warning that the international community is failing to secure the province's future.

A starkly written paper by the European Union's most senior foreign policy officials argues that the United Nations is having "considerable difficulties" in Kosovo, that ethnic violence is "at high levels" and that the UN administration has "insufficient personnel and resources".

The document, prepared by Javier Solana, the EU's foreign policy high representative, and Chris Patten, the commissioner for external relations, is to be presented to EU heads of government at today's Lisbon summit. It claims that a plethora of decision-making bodies involved with the Balkans means duplication, delay and ad hoc procedures. "The time has come", it says, "to take a fresh look at the situation and to develop a coherent strategy."

This unprecedented exercise in soul-searching is designed as a wake-up call for the EU's leaders as the Balkans slips down their list of priorities. Money is going into Kosovo - this year the EU expects to spend 360m euros (£221m) - and the international community can claim credit for averting a winter crisis, returning around one million refugees to their homes and reopening most hospitals and schools. So what is going wrong?

Ten minutes north of Pristina, Kosovo A is a coal-fired power station built in the Sixties with Russian technology. When in service, it belches out 1,000 tons of ash each day but for much of the time it does not work. The immediate problem is not the planned renovation of Kosovo A, but keeping it going. When, earlier this month, a technical fault stopped generation Kosovo A had two days' worth of coal left to burn. Western officials planned to recoup costs of power generation from consumers but in January, when bills were sent out for the first time since the war, only 3 per cent were paid.

The lack of a real economy is a familiar theme in Kosovo which, well before the 78-day bombing campaign began, was being reduced to near-collapse by Belgrade. Joly Dixon, the UN's deputy special representative in Kosovo, said: "From the economic point of view, we thought that we were coming into a society damaged by a relatively short war. What we found was an economy weakened over 10 years and with no administrative structure."

The big international presence has become the primary source of income. As well as those who have found work with the EU or the UN, many Kosovars have moved out of their homes to rent them to foreigners at exorbitant prices.

Meanwhile, lawlessness provides a fertile breeding ground for ethnic violence and a mafia-backed black market. A new chain of petrol stations, Kosovo Petrol, is springing up through the province and no one seems quite sure who owns it. One EU official said: "Perhaps its the mafia, [or it] may be linked to the old KLA [Kosovo Liberation Army]."

The Solana/Patten paper does not duck these issues. It says: "We must ensure that Unmik [the UN Mission in Kosovo] receives the necessary resources, in particular adequate financing, police officers, judges and prosecutors. Early progress on economic reconstruction and the development of a market economy is vital for continued Kosovar support for the international presence."

The paper calls for a streamlining of the West's Balkans initiatives and it argues that technical problems which have stopped Kosovo and Montenegro being eligible for international funding (because they are not independent countries) must be overcome.

All this could be a race against time, as the support of Kosovo's Albanians appears to be evaporating, which could make the province ungovernable. When Mr Patten met the Kosovo Transitional Council earlier this month, local politicians asked where the cash was going. One council member was blunter still: "The West was happy to pay for bombing this place", Ylber Hysa said, "but there is not the same willingness to rebuild it."