December 8, 2025.

Published by Carnegie Europe in December 2025, this paper by Iliriana Gjoni, Iva Čukić, Alba Çela and Aleksandër Trajçe analyzes the impact of foreign investment in the Western Balkans through the concept of “corrosive capital.” It refers to the notion that some investments exploit governance weaknesses in countries with unstable or corrupt structures, while simultaneously reinforcing those very weaknesses. They involve local elites in mechanisms that prioritize short-term, visible results over institutional resilience and long-term reform.

Based on several case studies in Serbia, Montenegro and Albania, the paper shows how several real estate, tourism and infrastructure projects have benefited from regulatory exemptions, unclear procedures and limited public oversight.

The analysis highlights a growing gap between the formal adoption of European standards and their effective implementation. In several candidate countries, the need to boost economic attractiveness and partnerships with foreign investors tends to weaken mechanisms for transparency, competition and environmental protection, which are, after all, the core of the EU accession process.

This publication aims to contribute to the debate on the European Union’s role in regulating strategic investments in the Western Balkans. It calls for strengthening enlargement conditionality, increased support for local oversight mechanisms and more visible economic engagement by the EU to promote investments that are compatible with the principles of effective governance and the rule of law.

You can find the report Rules or Deals? The EU’s Challenge in Regulating Corrosive Capital in the Western Balkans by Iliriana Gjoni, Iva Čukić, Alba Çela and Aleksandër Trajçe here.