1. Constitution of "Europa South-East". We, representatives of 25 independent policy institutes of South-East Europe, working in cooperation with the Centre for European Policy Studies (CEPS) in Brussels and the network of Open Society Foundations, meeting on 18-20 July 1999 in Ljubljana, have constituted the "Europa South-East" policy forum.
2. Aim: European integration. Our aim is to contribute
to the full integration of the whole of South-East Europe (including Moldova)
into the European Union (EU). We advocate for our countries accelerated
political and economic reforms in the aftermath of war, assuming that the
European Union itself makes radical moves in its policies to support the
process. Slovenia and Turkey, also members of the Stability Pact and applicants
for full accession to the EU, will actively participate in this process.
It is good that the war over Kosovo has ended. But
this will not now give way automatically to a positive new era. Without
a comprehensive and fresh policy approach the best outcome will be stalemate
and stagnation, the worst a continuous descent into renewed conflict, chaos
and impoverishment.
3. Stability Pact. We welcome the decision by the EU at the highest level in initiating and leading the implementation of the Stability Pact. Our aim is to offer substance to go into this framework, having in mind the summit meeting of the Stability Pact due to take place in Sarajevo on 30 July 1999.
4. Bench-mark time-tables: 1.1.2000 and 1.1.2003. To give immediacy and tangible political perspectives, we propose that these two dates be the occasions to accumulate multiple decisions and targets for action. By 1.1.2000 the new strategy should be set in motion. By 1.1.2003 there should be major achievements. There will of course be many differences in detailed timetables by country. We give examples below.
5. Method. We adopt a three-step action plan for our own work:
5.1 Blueprint. We have adopted the recent CEPS paper as our starting point, and elaborated on it. We submit this and the present paper for consideration by the Stability Pact and its Working Tables.
5.2 National strategies. Our institutes are preparing proposed national strategies, each for their own country, but in cooperation with each other. We intend to submit a consolidated document in October to our governments and the Stability Pact and its Working Tables.
5.3 Momentum. We shall endeavour to create in our countries a momentum of awareness and support for both the regional and national strategies. If at last the whole region were to work constructively together towards shared goals, united also in the drive towards EU integration, then a mutually reinforcing virtuous circle could be initiated, with surprisingly rewarding results.
6. Trade and market policies. We refine the CEPS proposals as follows:
6.1 Free trade within the region. This should be generalised on 1.1.2000 multilaterally between all countries of the region.
6.2 Zero tariffs on EU imports from region. The EU should generalise on 1.1.2000 its zero-tariff regime for imports of industrial products from all countries of the region.
6.3 Zero tariffs on region’s imports from EU. Countries of the region not yet in free trade with the EU should make four equal tariff reductions of one quarter on all imports from the EU on 1.1.2000, 1.1.2001, 1.1.2002 and 1.1.2003.
6.4 Agricultural produce. There should be balanced agricultural concessions from 1.1.2000 to accommodate a substantial expansion of exports to the EU (e.g. quotas at the level of only 1% of EU production would give ample room as current agricultural exports of the former Yugoslavia and Albania amount to 0.01% of EU production, whereas the EU exports to them are twenty times as much).
6.5 Free trade effective on 1.1.2003. Thus the whole of South-East Europe would effectively be joined in a multilateral free trade area comprising the EU, EFTA, CEFTA, and all accession candidate countries including Turkey.
6.6 Compensation for loss of customs revenues. Countries with extremely weak tax resources would receive budget grants from the EU to compensate for the early dismantling of tariffs. This exceptional assistance would be conditional on willingness by the country in question to accept joint control with the EU over customs and port facilities, so as to cut out frontier corruption and trafficking. Such budgetary grants would also be associated with macroeconomic policy surveillance and conditionality.
6.7 Custom union. We would also propose to go an important step further on 1.1.2003, to unite the whole of South-East Europe with the existing customs union of EU and Turkey. This means adoption of the Common External Tariff of the EU. For this enlarged customs union to be ready technically by 1.1.2003 it is essential that preparatory work begin already from 1.1.2000.
6.8 Single market. Countries of the region which are not yet candidates for full accession to the EU would be invited none the less to align their domestic market reform and transition programmes to the maximum degree on the norms and legislation of the single market of the EU, leading to a "European Economic Area - Mark II", independently of the question of full membership of the EU.
7. Monetary regimes. The euro is surely going to become, sooner or later, a key element in the monetary stabilisation of the region. We advocate advancing this with the following concrete steps:
7.1 Radical banking reform. Radical reform and opening of the banking and payments systems coupled with support for regulatory and supervisory functions by the EU will be another key element in fighting corruption and diminishing the influence of the anti-reformist power structures.
7.2 Euro-DM currency board. This type of monetary regime could be adopted, from 1.1.2000, by the weakest entities of the region, with the initial required back-up of foreign exchange reserves provided by a loan from the EU where needed, conditional on the banking reforms mentioned above. Such regimes already operate in Bulgaria and Bosnia, but in the latter the full benefits of this monetary regime have not been reaped because of delays in banking reforms.
7.3 "European Monetary Association Agreement". Starting from 1.1.2000, preparatory work would begin on the design of a new category of monetary agreements for those countries interested in going beyond the currency board to full euro-isation. This would be particularly appropriate for countries that do not intend to leave their currency board arrangement before joining the euro area in full, and should lead to substantial savings through lower risk premia. Details to be clarified include the reimbursement by the EU of the seigniorage and adoption of EU norms of banking supervision.
7.4 Full euro-isation. From 1.1.2003, full adoption of the euro, either under new "European Monetary Association Agreements" for countries not yet full member states, or as full EU member states (e.g. maybe Slovenia).
8. Reconstruction and investment.
8.1 Reconstruction of Kosovo. We welcome the swift setting up by the EU of the European Agency for Reconstruction (EAfR) for Kosovo, with substantial grant funding. However, the example of Bosnia shows that this initial physical repair work will not alone assure sustained economic growth, this requiring also development of human resources and sound economic ground rules. And the region has to be considered as a whole.
8.2. South-East European Infrastructure Initiative. We therefore advocate that the EAfR operation form part of a wider initiative for the whole region:
- immediate priorities, e.g. bridges across the Danube (connecting Bulgaria and Romania, transit through FR Yugoslavia - see Annex);
- organise financing capacities. Between them the European Investment Bank, EBRD and IBRD have vast resources to finance the pan-European corridors for transport, energy and telecommunication networks;
- jump to modern standards. The objective would be to organise not just the repair of damaged infrastructures and the building of new alternative infrastructure networks, but to jump to modern standards of public/private partnership (PPP) for the management of the main economic infrastructure networks (ports/airports, rail networks, road systems, rail/road mass transit services, energy transmission and telecommunication network); and the "build-operate-transfer" method (BOT), which allow for temporary title to be held by investors in assets, with subsequent reversion to public authorities.
- a regulatory authority, to which governments may voluntarily grant powers to set standards, to manage privatisation actions, and award and regulate new concessions. Operating across the region, this would, for example, take on the problems of the break-up and dilapidation of the former Yugoslav networks.
8.3 Investment climate. The vital need is for clear and clean ground-rules for economic agents. This is why free trade across corruption free frontiers, sound money and banks with access to international capital, efficient economic infrastructures, law and order in business relations and stable democratic government are all fundamental. Every country should initiate comprehensive anti-corruption programmes (e.g. as in Bulgaria). If these conditions are implemented, investment and growth will follow.
8.4 Investment guarantees. The Multilateral Investment Guarantee Agency of the World Bank group should be invited to make a general assessment of the needs of the region, and how existing national and international facilities could be strengthened to boost foreign investment in the region.
8.5 SME finance. There should be a priority for global loans from EIB/EBRD/IBRD/IFC to financial intermediaries to on-lend micro loans to small and medium sized enterprises. However, this will work only if the appropriate investment climate and infrastructure are in place.
8.6 Local procurement. Business cooperation initiatives should be organised to ensure that enterprises of the region participate to the maximum extent in tendering and procurement, including through joint ventures with EU firms.
8.7 Environment. A new "Environmental Partnership for South-East Europe" should address current environmental priorities including those due to the war.
9. Social safety net.
9.1 Priorities. There are now three major priority categories, each requiring specific methods, if economic reform is to proceed under conditions of political stability:
- refugees and internally displaced persons,
- persons unemployed or disabled through the ravages of war,
- those unemployed due to the transition to the market economy.
9.2 Instruments. Where national social policies are inadequate there has to be reliance on:
- UNHCR for emergency operations for refugees, often lasting however for years;
- the World Bank, which has considerable experience of sector specific restructuring programmes;
- EU, whose Social Fund has long experience within the EU of retraining and job-creation schemes for areas badly hit by industrial restructuring, but little yet outside. The EU should prepare wider use of such mechanisms in the region in the framework of its strategy for the whole of the region, including its pre-accession strategies, adapted however with suitable mechanisms for selection of local partners and control, so to overcome weaknesses of national administrations.
10. Democracy, civil society and education.
10.1 Norms. Membership of the Council of Europe, accession to its Convention on Human Rights and implementation in practice of its political and human rights codes are necessary steps for integration with the EU (see below on conditionality).
10.2 Needs. The legacy of communism and the disintegration of Yugoslavia have produced tremendous political and social needs, which cannot be met without outside assistance. Existing programmes of the EU, such as Phare, are not so appropriate to the extent that government-to-government methods cannot go to the heart of the matter. The need is to strengthen a wide range of appropriate institutions and organisations, including independent judiciaries and media, political parties, local government, health care and educational institutions. Detailed need assessments will be prepared.
10.3 Mechanisms. There has already been a considerable development of private initiatives in this area. The needs are however on such a scale that these efforts should be strengthened by a new grant-giving organisation directed at the region. We suggest therefore a broadly based South-East European Foundation for Democracy. This would receive funds primarily from the EU budget, but also include the United States, other bilateral donors and private funders.
10.4 Operating priorities. Grants would be given to governmental bodies, local governments and non-governmental organisations in the region. Allocations would be made on the ability to perform. The budgetary allocation would be for the whole of the region, without fixed quotas by country. This would provide an appropriate incentive for performance. Western recipients would qualify only to the extent needed to support local initiatives. Partnerships between civil society and governments would be encouraged (the Albanian Educational Development Programme can serve as an example). The emergence of regional civil society structures should be among the priorities of the grant-giving. This approach will eliminate many but not all of the unintended adverse consequences of international assistance programmes, reducing political meddling and corruption and making the process more competitive.
10.5 Other mechanisms. Diversity of initiatives are the hall-mark of this wide field. The EU should allocate resources to vital regional programmes in educational cooperation at all levels, including revision of curricula and renewal of textbooks (especially on the region’s history). We highlight the value of regional educational institutions, which form new European elites, so important for South East Europe. The Central European University and American University in Bulgaria are good examples; as also the College of Europe, for which we recommend establishment of a third campus, to be located in the region.
11. Budgets and financing.
11.1 Budget financing. As the main sponsor of South-East Europe, the EU will be the leading financier. The CEPS paper suggested $5 billion a year of budgetary expenditure per annum for the "5" countries of the former Yugoslavia and Albania for five years, scaled on the efforts planned for EU accession candidate countries. This amount, 5% of the EU budget total, could be accomodated within the maximum limit for the EU budget identified in the "Agenda 2000" decisions of the Berlin summit. There would also be grant contributions on a smaller scale from the US and other bilateral donors.
11.2 Capital financing. Here the European Investment Bank, the World Bank and EBRD would be the main public sector financiers. We are aware of the work now under way jointly by the World Bank and the EU Commission to evaluate both war damage and needs for sustainable development. Financing from these three institutions might amount to about $3-4 billion per annum for the whole of the region. However, purely private investment, banking, security markets and guaranteed trade credits would become the most important source of capital, as long as the investment climate is dramatically improved (section 8 above).
12. Military and civilian security.
12.1 New situation for military security system. The security system - of alliances, guarantees and partnerships - for South-East Europe needs to be radically re-considered, in the light of the recent war. In particular we look forward to a new political regime in Belgrade that accepts modern European norms. When this occurs it will be possible to design a new system on an all-inclusive and equal basis for all countries of the region, integrated with OSCE, NATO and EU structures.
12.2 Working group on a future system. The institutes for strategic and security studies among us are therefore setting up a working group to explore ideas for a desirable future security system.
12.3 Police cooperation. As the SFOR and KFOR operations should wind down in due course, there will be phased transfer to heavy policing operations. Elsewhere in the region there will be surely many different demands for police cooperation, ranging from the example of customs and ports (point 6.6 above) to training and exchange programmes to cooperation with Europol. These should be negotiated in "Special Security Agreements" between the EU (new 3rd pillar competences) and individual countries of the region.
12.4 Judiciary cooperation. The independence of the judiciary is not adequately assured in some parts of the region, and should be supported institutionally (e.g. EU participation in selection procedures for judges) and through training and exchange programmes with the EU.
12.5 Immigration and visa rules. The aim should be for all countries to aspire to, and prepare to qualify for visa-free travel, and, when full accession candidates, for the Schengen system of frontier free travel. The EU should show openness to exploring a widening of categories for visa-free travel. The easing of EU visa restrictions would however depend on the performance of individual countries over their border controls and security policies.
13. Conditionality and engagement.
13.1 Unconditional. Some policies and categories of assistance should be offered to all countries, including the present FR Yugoslavia:
- free trade,
- support non-government civil society institutions,
- humanitarian assistance.
Aside from episodes of wartime blockade, trade sanctions may even have a perverse impact on such countries and their neighbours.
13.2 Conditions for full EU membership. The established Copenhagen criteria for EU accession regarding political institutions and economic performance should not be changed.
13.3 Conditions for associate membership. Government must respect basic rules of democracy and human rights and must be engaged in adequate programmes of reform where necessary (criteria include: positive monitoring assessments of the Council of Europe, elections satisfactory by OSCE monitoring standards, and acceptance of the jurisdiction of the International War Crimes Tribunal). Progress would be modulated by country according to their individual performance.
13.4 Serbia today. Since the future of Serbia is central to the region, conditionality towards this country needs to be spelt out more precisely:
- Participation in free trade arrangements should go ahead now without further political conditions.
- Humanitarian assistance, as well as support for independent media, civil society, education and culture should be unconditional but provided in as manner that does not reinforce the authority or prestige of a pariah government.
- All sanctions should be lifted, except for arms and the freezing of the assets in the West of named individuals.
- Reconstruction and infrastructure assistance could begin in cities or regions where the local leadership is taking a stand in favour of radical political change in line with modern European norms.
- Planning work should begin already for investments in vital parts of the network of South-East European transport, energy and communications infrastructures, so major investments can proceed without delay when the political regime is renewed.
- Public information efforts should show how radical economic and monetary reform programmes (e.g. those of Group 17) could be underwritten by the EU and international financial organisations.
We hope that these conditions will encourage the formation of a fresh interim government, to be followed by elections conducted under OSCE auspices.
13.5 Montenegro today. We support the efforts of the democratic leadership in building a new, open and democratic society and believe that it should not become a hostage to the leadership in Belgrade. Economic and social reforms in Montenegro should be encouraged, in particular through participation in the Stability Pact.
14. EU integration.
14.1 Full Membership. For existing applicants for full accession to the EU we advocate a clarification of time-tables by the EU. The opening of negotiations for Bulgaria and Romania should be set for 1.1.2000, and the target date for full accession of Slovenia and Hungary should be set for 1.1.2003 (as for other candidates from other regions). The whole enlargement process should be accelerated. However the EU should not be expected to waive its existing criteria for full accession, and so all these countries would have to calibrate, or re-calibrate the speed and intensity of their preparations accordingly.
14.2 Principles of new associate membership. We note the EU’s acceptance of the need for a new and more powerful form of association. But the outgoing Commission’s recent proposals for Stabilisation and Association Agreements are not sufficiently substantial. We support ideas for progressive inclusion into the EU institutions of new associate members as well as accession candidates, such as through participation in consultative bodies of the EU, staff exchanges and elected but non-voting members of the European Parliament etc. This relates also to the interesting 1997 Poettering Report from the European Parliament on a new approach for pre-accession strategies.
14.3 Timing of new associate membership. Negotiations for new associate membership should begin on 1.1.2000 for Albania and Macedonia in any case. This date could also be possible for Croatia, depending on the new government after the forthcoming elections. It could be possible too for FR Yugoslavia in the event of a swift political regime change in Belgrade. For Bosnia and Herzegovina, a special formula for contractual relations with the EU should be worked out at an early date.
14.4 From associate to full membership. This would depend entirely on how far and fast each country was able to progress. Participation in South-East European regional cooperation will be advantageous to all, but must in no way hold back the advance of the most progressive countries in an artificial political grouping.
Ljubljana, 20 July 1999
(signing in personal and independent capacities)
Branislava Alendar, European Movement in Serbia, Belgrade
Srboljub Anic, Group 17, Belgrade
Fehmi Azermi, Riinvest Institute for Development Research, Tetovo/Pristina
Nicolae Chirtoaca, Euro-Atlantic Center of Moldova, Chisinau
Ljubomir Cucic, Europe House Zagreb (EGIDA)
Daniel Daianu, Center for Economic Policies, Bucharest
Anelia Damianova, Centre for Economic Development, Sofia
Aleksandar Denda, Group 17, Belgrade
Mladjan Dinkic, Group 17, Belgrade
Jovan Donev, OSI-Macedonia and Euro-Balkan Center, Skopje
Gerard Duchene, Paris University
Michael Emerson, Centre for European Policy Studies, Brussels
Ahmet Evin, Sabanci University, Istanbul
Georgy Ganev, Centre for Liberal Strategies, Sofia
Yulia Gourkovska, Center for Liberal Strategies, Sofia
Daniel Gros, Centre for European Policy Studies, Brussels
Mladen Ivanic, University of Banja Luka
Petar Ivanovic, Institute for Strategic Studies and Prognosis, Podgorica
Albina Karamitro, Albanian Institute for International Studies, Tirana
Ivan Krastev, Centre for Liberal Strategies, Sofia
Jane Miljovski, University of St. Cyril and Methodius, Skopje
Ognyan Minchev, Institute for Regional and International Studies, Sofia
Nickolay Mladenov, European Institute, Sofia
Muhamet Mustafa, Riinvest Institute for Development Research, Tetovo/Pristina
Sašo Ordanoski, Forum - Center for Strategic Research and Documentation, Skopje
Senad Pecanin, DANI magazine, Sarajevo
Oleg Petrushin, Center for Strategic Studies and Reforms, Chisinau
Zef Preci, Albanian Centre for Economic Research, Tirana
Igor Rajner, Democracy Foundation, Sarajevo
Genc Ruli, Institute for Contemporary Studies, Tirana
Dritan Shano, Institute for Contemporary Studies, Tirana
Mladen Stanicic, Institute for International Relations, Zagreb
Veselin Vukotic, Institute for Strategic Studies and Prognoses, Podgorica
Nicholas Whyte, Centre for European Policy Studies, Brussels
2. Implementing the principle of alternative transport opportunities for each one of the SEE countries in its trade routes to Central and Western Europe.
3. Balanced development of the South – North and the East – West axes of the SEE transportation system.
4. Diversification of energy resources supplies to the SEE countries (oil and gas).
5. Priority linkage of the SEE countries’ electricity systems to the European electricity network (UCPTE).
6. Demonopolisation and competitive development of the SEE countries’ telecommunications systems.
7. Developing a flexible system of projects investment into the SEE infrastructure involving EU public funds, private investment, concession options, BOT and BOO methods.
A. Constructing two new bridges over the Danube: one between Vidin - Kalafat (Bulgaria – Romania) as part of Corridor # 4 (Dresden – Prague – Vienna – Arad (- Bucharest – Constanta) – Sofia – Thessalonica); and the second between Becket – Oriahovo, or Rastu - Lom or Turno Magurele –Svistov (Romania – Bulgaria).
B. Constructing 56 km of railroad between the Macedonian town of Kumanovo and the Bulgarian border (Corridor #8 - also known as "East-West" through Bulgaria, Macedonia and Albania) as part of the Macedonian access to Corridor # 4. This would connect Macedonia to Central and Western Europe and give it access to the Black Sea ports.
C. Reconstruction of the main Kosovo highways, connecting: Mitrovica – Pristina – Skopje; Pristina – Nis; Mitrovica – Podgorica; Pristina – Prizren – Durres.
D. Reopening of navigation on the Danube, stopped after the demolition of the bridges in Yugoslavia (Corridor #7 – the so called Danube corridor).
E. Reconstruction of the Yugoslav bridges over the Danube and the destroyed sectors of the Corridor #10 (the so called Trans European Highway) in FR Yugoslavia.