On November 8, 2023, the European Commission adopted a new growth plan for the Western Balkans, with the aim of bringing Western Balkan partners closer to the EU by providing the region with some of the benefits of EU membership before accession, boosting economic growth and by accelerating socio-economic convergence.
Lack of convergence is a major problem for the Western Balkans region; it is currently around 35% of the EU average level. This results in a limited revenue base to finance the accession process and associated reforms, and it also contributes to large-scale outward migration.
Economic convergence is an essential element in bringing Western Balkan partners closer to the EU.
The growth plan has the potential to double the size of the Western Balkan economies over the next ten years.
The growth plan encourages the Western Balkans’ preparations for EU membership and the need to accelerate reforms, highlighting some of its benefits that will directly benefit the citizens of the Western Balkan countries. This in turn should significantly accelerate the enlargement process and the growth of their economies.
To support this process, a new financial instrument of €6 billion, the Western Balkans Reform and Growth Facility, has been proposed for the period 2024-2027.
THE new growth plan for the Western Balkans is based on four pillarsaiming to :
- Strengthening economic integration with the European Union single marketprovided that the Western Balkans align themselves with the rules of the single market and simultaneously open the relevant sectors and areas to all their neighbors in accordance with the regional common market.
Seven priority actions are offered:
- Free movement of goods;
- Free movement of services and workers;
- Access to the Single Euro Payments Area (SEPA);
- Facilitation of road transport;
- Integration and decarbonization of energy markets;
- Digital single market;
- Integration into the industrial supply chain
- Boosting economic integration in the Western Balkans through the regional common marketbased on EU rules and standards, which could potentially add 10% to their savings.
THE Common regional market (CRM) is vital to overcoming small, fragmented markets, making businesses competitive, attracting investors and retaining workers. Based on EU rules, it provides a springboard to Single Market opportunities.
Substantial opportunities for integration into the EU single market will only arise if the region succeeds in achieving regional economic integration. Partners who are not fully committed to CRM cannot hope to benefit from Single Market integration opportunities. However, a partner who does not engage in or hinders CRM can only block itself and not the other five partners.
- Accelerate fundamental reformsparticularly on the fundamentals side, supporting the Western Balkans’ path towards EU membership, improving sustainable economic growth, in particular by attracting foreign investment and strengthening regional stability;
- Increase financial aid to support reforms through a Reform and Growth Facility for the Western Balkans for the period 2024-2027a proposal for a new instrument that is worth 6 billion eurosconsisting of 2 billion euros in grants and 4 billion euros in concessional loans, the payment of which is conditional on the implementation by Western Balkan partners of specific socio-economic and fundamental reforms.
Half of the funds, around €3 billion in long-term loans, will be released as direct support to national budgets, and the other half will be allocated through the Western Balkans Investment Framework (WBIF), in the form of 2 billion euros in grants and 1 billion euros in loans.
The Facility will have national envelopes, the amount of which will be based on the number of inhabitants and GDP.
The Reform and Growth Facility will reinforce the current financial assistance under IPA III.
As part of the growth plan, each Western Balkan partner will be asked to prepare a Reform program based on existing recommendations, notably those of the annual enlargement package and the countries’ Economic Reform Programs (ERP). This reform program will be consulted, evaluated and adopted by the Commission.
Payments will be made twice a yearbased on requests submitted by Western Balkan partners and after verification by the Commission of compliance with relevant payment conditions and preconditions, such as macro-financial stability, sound public financial management, budget transparency and surveillance.
If the payment conditions are not met, the Commission will suspend or deduct a corresponding amount from the payment. The Western Balkans partner will have 1-2 years to fulfill the conditions, otherwise the amount will be redistributed among the others in subsequent years.
Next steps
It is now up to the European Parliament and the Council to examine the proposal for the Facility as part of the MFF mid-term review programme. Once adopted, the six Western Balkan partners will be invited to submit their individual reform programs, outlining the socio-economic and fundamental reforms they will undertake to boost growth and convergence under the Growth Plan during the period 2024-2027. Serbia and Kosovo There is a need to engage constructively in the EU-facilitated dialogue on the normalization of relations, led by the High Representative, as a necessary precondition.
Background
Economic convergence is an essential element in bringing Western Balkan partners closer to the EU. Currently, the level of convergence between the Western Balkan partners and the EU is not progressing fast enough, with the average GDP per capita in purchasing power of our Western Balkan partners lying between 27 and 50% of the EU average. EU.
Integration into the EU single market has been the main driver of economic growth for all countries that have joined the EU. The positive impact of integration into the EU single market on a country’s GDP and income levels has been clearly demonstrated in the past.