Six months and a day after Kosovo’s general election, the country finally has a government. But it is a government of strange bedfellows that faces daunting challenges. The new administration approved by parliament on Tuesday is headed by incoming prime minister Isa Mustafa , with his predecessor and fierce rival Hashim Thaci as his deputy and foreign minister.

Yet, while that may sound like a recipe for instability, the division of power is more likely to mean business as usual for Kosovo, both domestically and internationally.

“The main priority of the new government will be on developing the economy and generating new jobs,” says Bekim Collaku, the newly-appointed minister for European integration and previously Thaci’s chief of staff. “Structural reforms are desperately required to improve the government’s overall performance.”

But analysts expect uneven progress.

The political deal that created the new government came under significant international pressure on Mustafa’s LDK party, which won 30 seats in June’s election, to put aside its opposition to forming a grand coalition with Thaci’s PDK, which sent 37 deputies to the 120-member parliament.

Kosovo’s economy has been growing at a steady clip but many of its citizens remain mired in poverty and unemployment and corruption remains a serious problem. Over the past year, another unpleasant issue has arisen, as around 200 Kosovans are thought to have gone to Syria and Iraq to fight for the Islamic State, leading to concerns about radicalised returnees.

Kosovo also remains unrecognised by the UN and many diplomatic heavyweights: its independence in 2008 was rejected by Serbia, which still considers Kosovo a breakaway state. A European Union-brokered rapprochement with Belgrade has helped shift both countries closer to EU accession talks but membership remains a distant prospect.

The economy will grow by 3.5 per cent this year and next, according to September forecasts by the European Bank for Reconstruction and Development. The last government had a more bullish figure of 4.1 per cent in its 2015 budget – which will have to be approved by the new administration. However, unemployment tops 30 per cent and may be even higher, and poverty rates are similarly high.

“We do admit that we face many constraints in achieving our goals, in particular budget constraints,” said Collaku. “However, oureconomic growth has been positive and stable and it will continue. Many reforms that have taken place over the last four years have made Kosovo an attractive place to do business.”

He cites investment opportunities including the ski resort of Brezovica, soon to be privatised and expected to bring in €410m, and construction of the Kosova e Re power plant, fired by the country’s ample lignite reserves.

The last government often trumpeted its pro-investment reform – Thaci liked to say that Kosovo was the best place in the region to do business. The World Bank put Kosovo 75th in the world in its Doing Business 2015 rankings, below neighbours Macedonia (30th), Montenegro (36th) and Bulgaria (38th), as well as a number of other post-Communist states, though admittedly few experienced war as recently as Kosovo, which was the centre of a conflict with Serbia that ended in 1999.

Krenar Gashi, a Kosovan policy analyst, says he has concerns about the new government’s fiscal direction, particularly given Mustafa’s long list of spending promises, from social welfare to health, education and culture.

“We had long-term problems with the previous Thaci government and its continuous increase of public wages, which seems to continue with the new government,” Gashi said. “As a consequence, the government will continue to use any possible means to cover these expenses, by extracting as much as it can from natural resources in mining and energy, without any sustainability plan, and by continuing the fast and rigid privatisation process as a cash-withdrawal mechanism.”

Nonetheless, Gashi notes that some ministers are more reform-minded and says the coalition will hold together due to both parties’ desire to retain power. On foreign policy as well, the government will retain a steady course, continuing dialogue with Serbia and undertaking technical work on EU accession. This, however, remains a long way off, and Serbia and Russia, its ally on the UN Security Council, will not countenance recognition of Kosovo, particularly in the current geopolitical climate. Whether Thaci’s long experience and undoubted charm can outweigh unsavoury allegations about his wartime past and help reinvigorate the international campaign for recognition remains to be seen.

Collaku says that enforcing the rule of law, the fight against corruption and organized crime and the “prevention of and fight against extremism of all kinds” will remain a priority.

Kosovo’s commitment to Atlanticism is certain, and the authorities have cracked down on extremist elements at home, which remain a tiny part of the population, albeit with the ability to attract disaffected youths and exploit the legal blackspots that still exist in the Balkans.

The struggle against corruption may present more of a challenge. Transparency International ranks Kosovo 110th on its corruption perception index, equal with Ethiopia and Ecuador. The new speaker of parliament once headed SHIK, a shadowy security organisation being investigated for criminal activities. And the grand coalition may encourage the less scrupulous on both sides merely to divide up the spoils.