On 17 July 2025, Christian Schmidt, Bosnia’s International High Representative under the Dayton Peace Agreement, issued an immediate ruling to resolve a critical budget impasse. He decreed that approximately 120 million Bosnian marka in debt to Slovenia’s Viaduct company be paid from the Serb Republic’s portion of road-toll revenues. The decision was intended to unblock the stalled 2025 national budget and restore fiscal governance in Bosnia and Herzegovina :contentReference[oaicite:1]{index=1}.
Debt Relief via High Representative Authority
The debt arose from a terminated hydropower contract in 2013. An International Centre for Settlement of Investment Disputes arbitration in April 2022 awarded nearly 80 million marka, boosted to about 120 million with interest. Bosnia’s tripartite presidency had refused to finalize the state budget without clarity on debt resolution :contentReference[oaicite:2]{index=2}.
Schmidt, empowered by Dayton‑era mandates, directed that the Serb Republic’s share of road-toll revenues pay down the liability. He also authorized central bank profits to fund improvements to the electoral voting system ahead of the 2026 general elections :contentReference[oaicite:3]{index=3}.
Serb Leadership Pushes Back
Serb leaders including Republika Srpska President Milorad Dodik and Prime Minister Radovan Visković have vehemently rejected Schmidt’s ruling. Dodik dismissed it as unconstitutional, accusing European institutions of overreach. He insisted debt should instead be covered by central bank profits, not entity-specific toll revenues :contentReference[oaicite:4]{index=4}.
Dodik, banned from politics for six years and sentenced in February 2025 for defying Schmidt’s authority, remains defiant. His government plans to mobilize Serb ministers in state institutions to formally challenge the ruling :contentReference[oaicite:5]{index=5}.
Crisis of Governance at the Heart of Bosnia
This fiscal showdown exemplifies Bosnia’s deep-seated structural fragility. The country’s two-entity system—composed of the Bosniak–Croat Federation and the Serb Republic—relies on nominal central cohesion under the Dayton architecture, now under strain from secessionist rhetoric and institutional deadlocks :contentReference[oaicite:6]{index=6}.
Dodik’s recent legal maneuvers include banning national police, judiciary, and state institutions within Republika Srpska and pursuing legislation to form parallel governance structures—moves widely recognized as direct violations of the Dayton framework :contentReference[oaicite:7]{index=7}.
International Reaction and Stakes
International actors, including NATO and EU institutions, have reasserted support for Bosnia’s sovereignty and the Dayton mechanism. NATO Secretary‑General Mark Rutte stated that undermining constitutional order is unacceptable and pledged to avert any security vacuum in the country :contentReference[oaicite:8]{index=8}.
Meanwhile, the Office of the High Representative rescinded financial support for RS political leadership as a punitive measure for continued defiance, adding to the pressure facing Dodik’s administration :contentReference[oaicite:9]{index=9}.
Looking Ahead: Stability or Fragility?
Bosnia is at a tipping point. If the fiscal decision holds and budget approvals proceed, it may signal a faint restoration of central coordination. But entrenched resistance from Serb leadership and escalating institutional fragmentation portend further destabilization.
With EU membership ambitions fading, ongoing Bosnia—Serb polarization echoes the risk of gradual erasure of state functions within Republika Srpska, unless stronger international or domestic reform initiatives emerge :contentReference[oaicite:10]{index=10}.
Conclusion
Christian Schmidt’s enforcement of the Viaduct debt settlement via road-toll revenues is a decisive exercise of Dayton-enforced authority. It seeks to restore fiscal continuity—but has unleashed fierce Serb opposition, further entrenching Bosnia’s constitutional gridlock. The outcome will test whether the peace architecture can sustain weighted sovereignty amid rising separatist sentiment.
