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EU growth plan: small funds for big ambitions

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In November last year, the European Commission presented the Western Balkans Growth Plan, an economic program aimed at reducing the socio-economic gap between EU member states and the Western Balkans, strengthening integration of the countries of the region within the framework of the common regional agreement. market (CRM) and prepare for the region’s inclusion in the EU single market.

To this end, the EU will allocate 6 billion euros, of which two billion will be in the form of grants and four billion in the form of loans on favorable terms. The EU’s goal is to double the economy of the Western Balkans over the next ten years.

Note from economic experts for the European Western Balkans that the growth plan has its advantages, but they stress that the funds offered are not enough to achieve all the ambitions set by the EU.

Branimir Jovanovićeconomic expert from the Vienna Institute for International Economic Studies (wiiw), declares for ISF that the EU growth plan represents around 20% of the funds that countries in the region currently receive via IPA funds, which is not a significant increase.

“The goals set by the EU, such as doubling GDP in the region and other similar goals, will certainly not be achieved because the concrete measures are too weak. The total amount of the financial component of the Plan amounts to 6 billion euros. The IPA funds currently in place total €30 billion. They have been in place for several years and we see that they have not produced significant results. Why would this new instrument, five times smaller, be better? “, says Jovanović.

Predrag Zečevićeconomic analyst and owner of the BiznisCG portal from Montenegro, estimate that Montenegro may be entitled to around 413 million euros from the growth plan. He believes that these funds are important, but not enough to reduce the economic gap between the countries of the region and the EU.

“Montenegro alone needs 6-8 billion euros just to build the much-needed network of highways and expressways and to completely rebuild the railways, which is literally the value of Montenegro’s annual GDP . Montenegro needs substantial funds to meet the closure criteria of Chapter 27 on environmental protection and significant resources for digital and green transformation,” Zečević said.

He adds that the growth plan is a good idea, but that the EU would better serve countries in the region by allowing the use of EU structural funds.

Funds too weak to force political elites to undertake reforms

All European institutions have insisted that countries in the region must meet a series of criteria to access the funds. They also include reforms related to the rule of law and democracy, as well as political criteria. For Kosovo and Serbia, the condition will also be linked to progress in the normalization of relations.

Alignment with EU foreign policy will also play an important role in the distribution of funds. According to Radio Free Europe, there is disagreement between the European institutions on this issue. While the European Parliament insisted that alignment on foreign policy, including sanctions against Russia, should be a precondition for distributing funds, the position of other institutions prevailed, arguing that countries in the region are adapting to their foreign policy rather than adapting to their foreign policy. explicit precondition.

Branimir Jovanović emphasizes that these funds are too modest to force politicians in the region to implement the necessary reforms.

“If we look at the details of the new instrument, only 2 billion euros are in the form of subsidies, over a period of 4 years. So only 500 million euros per year for the entire region, or around 0.3% of the region’s annual GDP. How can we expect such modest funds, which are at the level of statistical error, to force politicians to implement reforms they have not been willing to implement for years? ? “, says Jovanović.

In response to the question whether it is possible that some countries may not receive funds due to lack of reforms, Branimir Jovanović answers in theory yes, but in practice some countries may receive less, others more, but none will not be zero.

What I believe will happen is that countries will receive perhaps half of the funds available. Because the condition for receiving the funds is the implementation of reform programs, which the countries themselves will negotiate with the European Commission. It is therefore not the EU which will impose reforms on countries, but each country will negotiate with the EU what must be done. And then these agendas will include reforms that do not pose too many problems, which countries will implement and which will therefore receive funds,” Jovanović estimated.

Stefan Ristovskyresearcher at the European Policy Institute (EPI) in Skopje, believes that the absence of reforms could certainly prevent some countries in the region from reaping the benefits of the growth plan.

The offer of the Growth Plan is conditional on progress at the national level, that is to say the political will and a broad societal agreement for accelerated reforms, progress in the common regional market and absorption capacities of WB countries for additional funds. The absence of reforms could certainly prevent some countries in the region from benefiting from the benefits offered by the growth plan. This will also depend on effective monitoring and evaluation of reforms, as well as the EU’s strong commitment to impartially apply the built-in conditional mechanism,” Ristovski believes.

While European institutions finalize the text of the decision on the growth plan for the Western Balkans, countries in the region are working on preparing a reform agenda, the implementation of which will be a condition for receiving funds.

The only country in the region that, at the time of publishing this article, has published its reform plan is Montenegro.

Predrag Zečević believes that the government document is both ambitious and good, but that some aspects could have been improved.

“The Montenegrin government must support the private sector (barely mentioned in the document) with at least 100-150 million euros for the development of small and medium-sized businesses. Montenegro is the only country in the world where average salaries in the public sector (950 euros) are at least 30% higher than those in the private sector, which makes no sense because it is the private sector that fills the budget and runs the economy. Public administration has become so attractive that it is the private sector that fills the budget and runs the economy,” says Zečević.

Plan does not grant full access to EU single market

The foundations of the growth plan are based on four pillars that countries in the region need to achieve better growth rates, economic convergence with the EU and social progress.

The first pillar supports economic integration within the region via the existing Regional Common Market (CRM), essentially aiming to develop a single market for the region inspired by the EU single market model. The second pillar aims to extend this integration to the European Union (EU) level, strengthening the region’s economic links with the EU single market. The third pillar aims to provide additional financial assistance to the region to facilitate integration efforts and encourage necessary reforms. The fourth pillar is designed to accelerate key reforms needed for the region to meet EU standards, serving as a stick to the carrot of financial support.

Speaking about the positive aspects of the growth plan, Branimir Jovanović said it was good that the plan included an open recognition of the EU’s intention to open its single market to the Western Balkans before their accession to the EU, positioning the existing initiative for a Common Regional Market within the EU accession process and increasing the financial support that the EU provides to the region.

“However, each of these elements has its weaknesses and flaws, which gives the general impression that the plan does not live up to expectations,” says Jovanović.

“As for the Western Balkans Common Regional Market, it is currently not functioning properly due to unresolved political problems in the region, and the plan does not offer solutions to overcome these problems,” adds Jovanović.

Regarding access to the EU single market, Jovanović explains that the specific measures outlined in the plan are insufficient and focus on less critical aspects, thus not granting the Western Balkans full access to the EU market .

Stefan Ristvoski argues that “early” integration into the single market would not completely open EU borders, but rather offer simplified procedures and reduced trade costs if WB countries adopt the relevant EU acquis.

“Western Balkan economies lag significantly behind EU averages, so increasing funding and integrating into the single market may narrow the gap but would hardly replicate the effects of membership. EU,” concluded Ristovski.

The European Parliament and the Council of the EU have not yet managed to agree on the final text of the decision. The institutions are under significant time constraints following the dissolution of the European Parliament in April, and the approval of this institution is necessary for the adoption of the decision. If a consensus is not found next week, the adoption of the Growth Plan for the countries of the region risks being delayed until the winter.

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