This is a discussion paper written by Claudia Grupe and Sinisa Kusić from the Centre for the Study of Global Governance London School of Economics and Political Science. The paper analyses the role of regional integration and the by this means facilitated cooperation in the Western Balkans and its effects on economic performance and interactions with the medium- to long-term perspective of an EU-accession. It tries to assess whether regional integration can foster economic growth of the small economies and in how far overcoming the under-developed markets and the creation of an integrated South East European market with improved labour division will attract additional foreign capital and stimulate trade. The economic analysis of the effects of a free trade area is the fundament of discussion. Starting with a short overview on the theory of regional economic integration, its theoretical predictions are applied to the special case of integration in the Western Balkans. Based on these evaluations, the paper finishes with a discussion of measures that could be taken to convert the regional cooperation that is often merely cheap talk into real economic outcomes.