By Fatos Bytyci
SLUPCANE, Macedonia (Reuters) - The bullet holes in the walls of Qemail Ismaili's home are a reminder of how close Macedonia came to full-blown civil war in 2001, when he joined a guerrilla insurgency on behalf of the country's ethnic Albanian minority.
The rebels eventually disarmed in return for the immediate promise of greater rights and representation, and the more distant prospect of prosperity and opportunity within the European Union.
But just over a decade on, 56-year-old Ismaili is unemployed and unable to afford the fees to keep his son in university.
Macedonia's candidacy for membership of the EU, meanwhile, has gone nowhere since 2005, frozen by a dispute with neighboring Greece that has defied two decades of United Nations mediation.
"I thought this country would be completely different," Ismaili said in the northern village of Slupcane. "I was aching for a better life, but since 2001 things have only got worse, there's even more poverty."
Ismaili's complaints are common. So when an off-duty police officer shot dead two ethnic Albanians in the western town of Gostivar in a row over a parking space in late February, alarm bells began ringing.
More than a dozen people were wounded and more arrested in the two weeks of mob violence that ensued as gangs from the Macedonian Slavic-speaking majority and Albanian minority traded attacks with baseball bats and knives, often targeting public transport in the capital, Skopje. The national football league briefly postponed games for fear of stoking more unrest.
The violence appears to have subsided, but it underscored how far Macedonia still has to go to unite the communities that share this small, landlocked and impoverished piece of the former Yugoslavia.
Poverty and nationalism could yet form an explosive mix, diplomats and analysts say.
NAME ROW WITH GREECE
"It's a recipe for disaster," said a senior Western diplomat, who declined to be named.
"When people have no money, they try to find somebody to blame. In Macedonia's case, ethnic groups blame each other for their misfortunes."
Macedonia's was the final conflict stemming from the bloody collapse of Yugoslavia, the last domino to fall after the 1998-99 war in neighboring majority-Albanian Kosovo, when Serb forces under then strongman Slobodan Milosevic waged a brutal counter-insurgency war.
NATO and EU diplomacy halted the fighting in Macedonia before it escalated into all-out war.
The guerrillas entered politics in exchange for a more equitable distribution of power between the Slavic-speaking majority and the Albanians.
Albanians make up at least 25 percent of Macedonia's 2 million people. There could be more of them, but the country scrapped a population census last year in another row over who should be counted.
Implicit in the peace deal was the promise that, if the sides could get along, the country would have a better chance of joining the rest of the western Balkans on the path to membership of NATO and the EU -- an ambition shared by both communities.
But the process of accession has become hostage to a totally unrelated row with EU- and NATO-member Greece, which objects to what it says is its northern neighbor's appropriation of the name 'Macedonia' and its claim to the legacy of Alexander the Great, an issue which means nothing to ethnic Albanians.
With no compromise in sight, Macedonia can only watch as fellow ex-Yugoslav republic Croatia joins the EU in July 2013, while Serbia and Montenegro push to start accession talks this year.
Far from trying to placate the Greeks, conservative Prime Minister Nikola Gruevski has set about burnishing Macedonia's sense of national identity with a multi-million-dollar makeover of Skopje in Alexander's image.
The project, centered on a towering statue of the 4th century warrior-king on horseback on the capital's central square, grates on the Albanians, who are frustrated by the complications the issue has thrown up with the EU, not to mention the expense.
Macedonia is among Europe's poorest countries, with an unemployment rate of over 30 percent and every third person living below the poverty line.
"I'm not irritated by Gruevski's monuments, but I am irritated at why he's using my money without asking me," said Kim Mehmeti, an Albanian writer in Macedonia.
Macedonian political analyst Jove Kekenovski told Reuters: "Instead of having lower tensions, instead of having peaceful coexistence, we are witnessing that tensions are still rising."
"The economic downturn only worsens the situation. Poverty and unemployment give birth to social frustration."
Greek objections derailed Macedonia's bid to join NATO in 2008, and little is expected from a summit of the Western alliance in Chicago in May.
The country became an official candidate for EU membership in 2005, but talks cannot begin until a solution is found on Macedonia's name. It is a member of the United Nations as the Former Yugoslav Republic of Macedonia, or FYROM.
Analysts say that Greece is unlikely to give ground any time soon for fear of further stoking public unrest at a time of deep social and economic crisis over its sovereign debt troubles.
In a note last week, Fitch ratings agency warned that "further delays in the EU accession process could undermine inter-ethnic relations, as the Albanian minority does not share the intransigent stance taken by the ethnic Macedonians on the dispute with Greece about Macedonia's constitutional name."
In the western town of Tetovo, where ethnic Albanians dominate, former guerrilla leader Ali Ahmeti, now Gruevski's partner in the ruling coalition, said a solution to the name row with Greece was needed urgently.
"They (the Macedonian parties) must find an agreement, an understanding, and not misuse the name issue for everyday political point-scoring over who is a traitor and who is a patriot," Ahmeti told Reuters.
But he rejected the prospect of a return to conflict, saying "the politics of folklore is over."
(Additional reporting by Kole Casule; Editing by Matt Robinson and Sonya Hepinstall)