Forwards or backwards? – assessing the EU's enlargement agenda

A selection of key findings from the 2010 progress reports for Croatia, Bosnia and Herzegovina, the Former Yugoslav Republic of Macedonia (FYRoM), Kosovo (under UNSCR 1244/99), Montenegro and Serbia.

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Croatia

The good overall progress achieved by Croatia in numerous fields means that negotiations have entered their final phase. Negotiations should be concluded once Croatia has met the outstanding benchmarks, in particular in the field of judiciary and fundamental rights.

Political criteria

  • Croatia continues to meet the political criteria. Progress has been made on the benchmarks associated with Chapter 23, including efforts to strengthen the independence of the judiciary by adopting new legislation and reducing case-backlogs. The Office for the Fight against Corruption and Organised Crime (USKOK) remains active and the first high level political cases are before the courts. Croatia has contributed to improved bilateral relations in the region.
  • Efforts must continue in particular in the fields of judicial and administrative reforms, minority rights, refugee return and war crimes. Full cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) remains a requirement for Croatia’s progress throughout the accession process, in line with the Negotiating Framework. Judicial reform has continued, however remaining challenges include the application of objective and transparent criteria for the appointment of judges and prosecutors, the further reduction of the backlog of cases and the length of proceedings as well as improved enforcement of decisions. Corruption remains prevalent in many areas. The new structures and tools have not yet been tested fully in practice, particularly the courts’ ability to handle the increasing number and complexity of cases. Stronger political commitment and improved coordination between the key stakeholders is needed to achieve tangible results in the area of public administration reform. The Commission will closely monitor Croatia’s progress in the field of judiciary and fundamental rights and take stock of the situation in the first quarter of 2011.

Economic criteria

  • Croatia is a functioning market economy. It should be able to cope with competitive pressures and market forces within the Union, provided that it continues to implement its comprehensive reform programme with determination in order to reduce structural weaknesses.
  • Croatia’s economy was severely affected by the global economic and financial crisis. Like many other countries, Croatia fell into recession in the first quarter of 2009 and there were no clear signs of a recovery by mid-2010. Unemployment, public deficit and debt have increased significantly. External indebtedness rose further and remains a vulnerable aspect of the economy. Monetary stability was preserved by the policies of the central bank and the financial sector weathered the crisis relatively well. The Economic Recovery Programme has given economic policy a medium-term orientation, but this needs to be implemented effectively.
  • The labour market remains rigid. The investment climate continues to be hampered by regulatory burdens and para-fiscal taxes. Further efforts are needed to contain the rising deficit and to increase the efficiency of public spending. Improving the budgetary process and discipline remains a key challenge in order to achieve medium-term fiscal sustainability.

EU Legislation

  • Croatia’s preparations for meeting EU requirements are well advanced. There has been further progress in all key areas, including in those chapters where the level of alignment with EU rules was already high. However, additional efforts are needed, in particular to strengthen further the administrative capacity necessary for the proper implementation of the EU legislation, and standards, as well as the absorption of EU funds.

Bosnia and Herzegovina

The lack of a shared vision by political leaders on the direction of the country continued to block key reforms and further progress towards the EU. Initial steps need to be taken to align the Constitution with the European Convention on Human Rights and to improve the efficiency of institutions. The country needs to be in a position to adopt, implement and enforce the laws and rules of the EU in order to pursue its European integration strategic goal.

Political criteria

  • Bosnia and Herzegovina has made limited progress in addressing the political criteria. The general elections of October 2010 broadly met international standards for democratic elections. Some progress related to the rule of law, notably in areas such as border management and migration policy, was made through reforms aimed at meeting visa liberalisation requirements. The administrative capacity of the Parliament improved but coordination with the Council of Ministers and with the Entities remained poor. A single state-level Ombudsman is functioning well. Financial resources for the implementation of the Roma Strategy have been increased.
  • Important steps were also taken to promote regional reconciliation, notably in the area of support for refugee return and judicial cooperation with neighbouring countries. The mandates of international judges and prosecutors dealing with war crimes were extended. Prosecution of war crimes by the state court has continued to be satisfactory, but needs to improve in the Entities and Cantons. The Anti-corruption agency has been established has been appointed. Over the last few years, cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) has remained satisfactory.
  • The country has made very little progress towards meeting the requirements for the closure of the OHR. The domestic political climate during the pre-electoral period was dominated by nationalistic rhetoric. The role played by ethnic identity in politics has continued to hamper the functioning of the executive, the legislative and the judiciary as well as the country’s overall governance. The process for changing the Constitution to comply with the European Convention on Human Rights (ECHR) has not been initiated. The State-level census law was not adopted. The political pressure on the judiciary has continued and the backlog of cases remains very high. Implementation of the Justice reform strategy and of the National war crimes strategy was insufficient. Cases of intimidation against journalists increased. Separation of children along ethnic lines within schools remains an issue. Widespread corruption remains a serious problem.

Economic criteria

  • Bosnia and Herzegovina has made little further progress towards a functioning market economy. Considerable further reform efforts need to be pursued with determination to enable the country to cope over the long-term with the competitive pressures and market forces within the Union. Implementation of the Stand-By Arrangement with the International Monetary Fund has been broadly satisfactory. Confidence in local banks has returned. Some limited improvements in the business environment can be reported, in particular regarding business registration.
  • The fiscal situation in Bosnia and Herzegovina remains difficult, especially in the Federation. Commitment to the agreed fiscal adjustment and structural reform measures, as well as their implementation, remains weak. Privatisation, restructuring of public enterprises and the liberalisation of network industries did not advance. The high and poorly targeted social transfers reduce the propensity to work, further highlighting the need for reform of the social benefits system. Unemployment continued to be very high and the informal sector remains an important challenge. The business environment is affected by administrative inefficiencies and the weak rule of law. Progress towards the creation of a single economic space within the country has been very limited.

EU Legislation

  • Some progress has been made in aligning the country’s legislation, policies and capacity with European standards in areas such as free movement of capital, intellectual property, education and research, transport, financial control, and a number of justice, freedom and security-related matters. Bosnia and Herzegovina now needs to step-up its efforts at implementation.
  • Progress remains insufficient in other areas, such as free movement of goods, persons and services, customs and taxation, competition and state aid, public procurement, employment and social policies, agriculture and fisheries, environment, energy and information society and media. Sustained efforts in sensitive areas such as the fight against corruption and organised crime are also a priority.

Former Yugoslav Republic of Macedonia (FYRoM)

FYRoM continues to sufficiently fulfil the political criteria. Following substantial reforms in 2009, further progress has been made in key reform areas although at an uneven pace.

Political criteria
  • The former Yugoslav Republic of Macedonia continues to sufficiently fulfil the political criteria. Overall, the governing coalition is stable and there is cooperation between political forces. Some progress has been achieved as regards the reform of the parliament, the police, the judiciary, public administration and cultural and minority rights. However, further efforts are needed in areas related to the political criteria, in particular as regards independence of the judiciary, fight against corruption, reform of public administration and freedom of expression in the media. Political dialogue needs to be strengthened.
Economic criteria
  • The country made further progress towards becoming a functioning market economy. In order to enable it to cope over the medium term with competitive pressure and market forces within the Union, it needs to continue reforming and strengthening its legal system and to implement its reform programme to reduce the structural weaknesses.
  • The economy contracted slightly in 2009 due to resilient private capital inflows and a stable public sector demand. Monetary and fiscal policies were stability oriented. The country’s external balances improved, reflecting a slight recovery in exports and a drop in imports.
  • Structural reforms have continued, albeit very high structural unemployment persists, in particular among young people and the less educated. Some improvements have been achieved with respect to addressing institutional weaknesses and to reducing barriers to market entry and exit, but some deficiencies in the rule of law continue to have a negative bearing on the business climate and on Foreign Direct Investment inflows.
EU Legislation
  • Further progress was made in aligning legislation, policies and administrative capacity with the EU, in particular as regards the free movement of goods, company law and financial services. Good progress was also made on alignment with EU policies in the area of justice, freedom and security. Efforts to address the new rise in asylum applications in EU Member States are ongoing.
  • Less progress has been achieved in other areas such as public procurement, information society and media as well as social policy and employment. Sustained efforts are needed to strengthen administrative capacity for the implementation and enforcement of legislation.

Kosovo (Under UNSCR 1244/99)

Given Kosovo’s strengthened commitment to the European agenda and policy reforms, the Commission is committed to launch a visa liberalisation dialogue shortly, to assist Kosovo to put into place the conditions needed for a possible trade agreement with the EU, and to propose the opening to Kosovo’s participation in relevant Union programmes, such as ”Europe for Citizens” and ”Culture”.

Political criteria

  • Kosovo has made progress as regards the political criteria in a number of important areas. The decentralisation process has advanced significantly. Local elections were held at the end of 2009. Cooperation with the EU rule of law mission (EULEX) has improved. This trend needs to continue.
  • However, the capacity of the public administration remains weak. The judiciary is not functioning effectively. The rule of law remains a serious concern. Efforts to tackle corruption, organised crime and money-laundering need to be strengthened. Decentralisation can only be completed with the participation of local communities.

Economic criteria

  • Kosovo has made little progress towards establishing a functioning market economy. Considerable reforms and investments are needed to enable it to cope over the long term with competitive pressure and market forces within the Union.
  • Kosovo’s economy continued growing in 2010. The use of the euro, the low levels of external debt and the narrow exports’ base have limited the economy’s exposure to the economic crisis. The banking sector continued to expand and remained stable and profitable.
  • However, deficiencies in policy formulation and implementation increased the already high uncertainty in the economy. Unemployment remains very high particularly among the young. The weak rule of law, corruption, uncertainty over property rights and high interest rates continue to impact negatively on the business environment and prevent economic development. The informal sector remains an important challenge.

EU Legislation

  • Progress is mixed in aligning Kosovo’s legislation with European standards. The legal framework has been developed further in the areas of customs, taxation, free movement of goods, statistics, policing and anti-terrorism. Approximation is at an early stage as regards competition, intellectual property, environment, energy, agriculture and food safety, integrated border management and money-laundering. Alignment with European standards remains limited in the areas of public procurement, financial control, drug-trafficking, organised crime and personal data protection.

Montenegro

Montenegro is ready to become a candidate country to EU membership, while further reforms are needed in a number of key areas, as set out in the opinion, before the country is ready to start accession negotiations.

Political criteria

  • Montenegro has continued to make progress in addressing the political criteria. It improved its legal framework and strengthened its administrative and institutional capacity. Regarding human rights and the respect for and protection of minorities, the legal and policy framework is largely in place and broadly corresponds to European and international standards. The institutional framework is largely adequate.
  • However, there are gaps in implementation. Montenegro needs to effectively implement and enforce legislation in all fields. Increased awareness and sensitivity of the administration, police and the judiciary for applying EU standards in this field are needed. Main concerns are related to the following areas: effectiveness of anti-discrimination policies, freedom of expression and government relations with civil society as well as the situation of displaced persons from Croatia, Bosnia and Herzegovina and Kosovo. Furthermore, Montenegro needs to intensify its efforts to consolidate rule of law, in particular in the fight against corruption and organised crime, which remain serious problems. Montenegro plays a constructive role in maintaining regional stability and fostering good neighbourly relations with other Western Balkan and EU countries.

Economic criteria

  • Montenegro has taken important steps towards establishing a functioning market economy. To be considered as a functioning market economy Montenegro needs to further address internal and external unbalances, as well as weaknesses, notably in the financial sector and the functioning of labour markets. To be able to cope in the medium term with competitive pressure and market forces within the Union, Montenegro needs to continue implementing reforms and reducing structural weaknesses.
  • Montenegro achieved a good track record in the implementation of economic reforms and a broad domestic consensus on the fundamentals of economic policy. The free interplay of market forces has been developing in the last decade through privatisations and the abolition of controls on prices. Foreign investments were attracted by the improved business environment. The Montenegrin economy remains very open and the level of trade and investment integration with the EU and the Western Balkan region is high.
  • However, the global crisis unveiled significant internal and external imbalances exposing the country and threatening macroeconomic stability. The crisis also revealed vulnerabilities in the regulation and supervision of the banking sector, calling for critical recapitalisation of banks. Persisting unemployment points to weaknesses in the education and vocational training systems, as well as to some labour market rigidities. The country has a still insufficient energy and transport infrastructure. Persisting weaknesses in the rule of law and the large informal sector negatively affect the business environment.

EU Legislation

  • Montenegro has made further progress in aligning with European standards, particularly in some areas of the internal market, trade-related provisions, customs and taxation.
  • However, additional efforts are needed to align with the EU legislation and to implement it effectively in the medium term as regards freedom of movement for workers, services and capital, public procurement, competition, financial services, information society and media, transport policy, energy, economic and monetary policy, consumer and Health Protection.
  • The country faces major challenges in implementing and enforcing legislation. Administrative and judicial capacities remain overall limited and the country will need to make sustained efforts to strengthen them in order to assume the obligations of membership in the medium-term.

Serbia

In line with 25 October 2010 Council Conclusions, the Commission has launched the preparatory work for the publication in 2011 of an opinion on Serbia’s membership.

Political criteria

  • Serbia has made progress meeting the political criteria. Judicial reform has continued but there were serious shortcomings in the re-appointment procedure of judges and prosecutors.
  • Additional efforts are required regarding public administration reform and the fight against organised crime and corruption. Despite the active on-going cooperation of Serbia with the International Criminal Tribunal for the former Yugoslavia (ICTY), the two remaining ICTY fugitives, Ratko Mladić and Goran Hadžić, are still at large. The UN General Assembly adopted on 9 September a joint resolution tabled by Serbia and co-sponsored by the EU as a follow up to the International Court of Justice opinion on Kosovo. The resolution aims at opening the way for a process of dialogue between Pristina and Belgrade to promote cooperation, achieve progress on the path to the European Union and improve the lives of the people.

Economic criteria

  • In the context of the economic crisis, further progress towards establishing a functioning market economy has been limited. Serbia needs to make more efforts in restructuring its economy so as to cope in the medium-term with the competitive pressures and market forces within the European Union.
  • The economy picked up in 2010, despite being severely hit by the economic and financial crisis. Strong exports and the adoption of timely and appropriate measures in agreement with the IMF where key in re-establishing macroeconomic stability.
  • However, Serbia has further postponed the reforms to tackle structural shortcomings. The labour market has continued to deteriorate. Privatisation of the socially-owned companies has back-paddled following repeal of numerous sale contracts. Privatisation of the state-owned companies has been further delayed. The business environment continues to be constrained by the burdensome administrative procedures and the weak rule of law. Furthermore, deficiencies in competition and infrastructure bottlenecks remain barriers to doing business.

EU Legislation

  • Serbia has further progressed towards aligning its legislation to European standards. Serbia has also continued to implement the Interim Agreement provisions and made further progress towards complying with the Stabilisation and Association Agreement (SAA) requirements in a number of areas including agriculture, science and research, and statistics. Significant progress was achieved on the fight against organised crime with good results in high-profile investigations against organised crime groups.
  • However, further efforts are necessary to bring the legislation and the policies in line with European standards. Implementation and enforcement of the adopted EU-related legislation need to be ensured.

The views expressed here are entirely those of the European Commission.

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