SARAJEVO The results of Sunday's Bosnian election show the Balkan country's electorate remains trapped in an ethnic divide that has made the country virtually dysfunctional and alienated investors.
Like other emerging Balkan countries, Bosnia aspires to join the European Union but lags almost all others in the region. It cannot apply until the international protectorate oversight, introduced in 1996 in the wake of Europe's most serious conflict since World War Two, is removed.
More than 15 years after fighting came to an end, Bosnia's ethnic rivalry endures in the absence of a single dominant group.
On Sunday, voters in Bosnia's Serb Republic gave the biggest support to a nationalist party that threatens secession. By contrast, parties seeking a strong federal government appeared to be the biggest winner in the Muslim-Croat half.
Political analysts and diplomats say a greater role by the EU or the United States may overcome these deep-rooted divisions, which threaten regional stability and could slow progress by the emerging Balkans as a whole toward EU entry.
"If this country continues on the same trajectory as over the last four years, there will be a meltdown," said one Western ambassador. "The situation is unsustainable."
"Can we live with a failed state? I don't think we can," the official continued. "It will be a generator of problems for Europe. At least it will be a generator of organized crime, it could be a generator of terrorism."
DOOR TO THE REGION
Zlatko Lagumdzija, head of Bosnia's multi-ethnic SDP party, said that although some said Serbia was the key to the region, "the door is in Bosnia, because the region cannot be sorted out without Bosnia being sorted out."
Although the EU and Washington have played an important role in Bosnia's postwar reconstruction, a growing number of voices complain that their intervention has failed to foster stability.
Christian Schwarz-Schilling, a former international high representative for Bosnia with protectorate powers, said it was unfair to blame the Bosnians for the stalemate.
"We will have a disaster in the future as long as Europe and the United States are not connecting on Bosnia," he added.
Other states that emerged after the break-up of Yugoslavia are more ethnically homogenous. Most of Bosnia's population is descended from the same stock of South Slavs, but hundreds of years under Ottoman domination led many to convert to Islam.
In the region, even the non-religious are categorized by their religious heritage, whatever their beliefs.
Sarajevo, once a model for ethnic tolerance where Muslims, Roman Catholics, Orthodox Christians and Jews lived side by side, became a symbol of ethnic hatred in the 1990s.
Many Bosnians still feel safer voting exclusively for their own ethnic parties.
STRONG CENTRAL STATE
Muslims, the largest of the three groups, want a strong central state. Bosnian Serbs, the second largest group which sought to carve out a separate state in the 1992-95 war, want more autonomy from Sarajevo and their leader Milorad Dodik has said he may break away from Bosnia in the coming years.
Many Muslims say they would not allow such a move and war would follow. The internationally negotiated peace deal in 1995 ended the fighting, in which 100,000 people were killed, but left the wartime Serb half of Bosnia intact.
"What you had was an armistice, not a peace," said Schwarz-Schilling.
In economic terms Bosnia is certainly far better off now as the war left the economy in tatters. Its gross domestic product fell to $2.1 billion in 1995, from $8-9 billion before the war, according to a World Bank report.
The country has since received more than $15 billion in foreign aid, according to the U.S. State Department, and by last year, GDP had grown to about 12 billion euros ($16.5 billion).
Modern shopping malls and office towers dot Sarajevo as do dozens of restored mosques, but many buildings still bear the scars of more than three years of shelling.
As political uncertainty has grown and the global financial crisis took hold, foreign investment has dwindled.
"The long-term prospects for foreign direct investment are substantial," said Clifford Bond, a former U.S. ambassador. "Bosnia has demonstrated potential in agriculture and food processing, mineral water, woodworking and lumber, hydroelectric power and tourism."
A lack of political stability remains the main short-term obstacle, he said, and this could be tackled through progress toward membership of the EU and NATO.
(Additional reporting by Daria Sito-Sucic)
(Editing by Zoran Radosavljevic and Andrew Dobbie)