Sri Lanka is a poor nation of 20 million people, yet four percent of its GDP goes on defence. Civil war has weighed heavily on the Sri Lankan economy, from its violent outbreak in 1972 to a full-scale declaration of war 11 years later. 70,000 people have died, development has been slowed and the bloodshed has lengthened the odds on any reconciliation.Tensions between the 74 percent, mainly Buddhist Sinhalese majority and the 15 percent Tamil Hindu minority are longstanding. Former colonial ruler Britain favoured the Tamils, but after independence in 1948 Sri Lankan law, custom, religion, and language was imposed and the Tamils were pushed to the margins of society, and often into the remote areas controlled by Tamil guerillas. Sri Lanka’s Tamils live mainly in the north and along the east coast. In these heartlands the Tamil Tigers set up their bases. Three years ago they controlled a third of the country. They were determined on statehood, and after years of talks, compromises, possibilities and Norway’s mediation, negotiations never really took off. It became clear the Tigers wanted it all, and the government was determined not to budge. That became even clearer with the election of President Rajapakse on an ‘end-talks, crush-the-Tigers’ platform four years ago, a victory the Tigers supported. They intimidated moderate voters who wanted a ‘pro-talks, federal state’ solution to the conflict. The tactic seriously backfired. Years of struggle made the Tigers dictatorial, accused of child conscription, and using civilians as human shields. The Tamil community was trapped, and seen by the Sri Lankan government as potentially dangerous. For more than the last 40 years the choice for Sri Lanka’s Tamils has mostly been between armed struggle or emigration. Now with demobilisation, unemployment may jump and masses of young people will search for something to do and a place in society. Is the war government ready for peace? If the answer is no, the Tamil diaspora which has swollen in the last 20 years could become an exodus. Neighbours like India, with its large Tamil population, are nervous about the implications of that possibility.