V L V L U &
H S R U X ( Q VWHU
V W F H S V R U 3
D H K W 6RX
Editor' s note South-Eastern Europe, especially the Western side, is often associated with fledgling states, impossible politics, stalled economies, violence and corruption. Romania, Bulgaria, Albania along with the countries that emerged from the disintegration of Yugoslavia set out to forge their futures as independent market-based democracies. Important efforts by internal forces and by the international community have been devoted to stabilise this region. Accession to the European Union has been an idea of right direction for the Balkan countriesâ€™ transition process. Although further efforts of the Balkan states to fulfil the criteria and reach the required political, economic and technical standards are necessary, however, in this specific and peculiar moment, we can notice new circumstances that might put on a test the EU itself, too. These include the global economic and financial crisis and the challenges for the economic liberalism with the possibility of coming back to the concept of protectionism.
As South-Eastern Europe is open to the challenges brought about by the global economic crisis, the countries of the region are starting to search for new options towards renewed development policies leading to a sustainable recovery process. The resumption of economic growth, the accession to the European Union as well as accelerated reforms, modernization of infrastructures and new energy routes are critical for the regionâ€™s exit from the crisis. However, all of them imply teamwork, coherence, planning, multilateral networking, and increased investment flows.
In an attempt to create a new locomotive for all stakeholders, the International Conference on â€œSouth-Eastern Europe: Crisis and Perspectives"w organized by the Centre for Progressive Policy Research in co-operation with the Hellenic Center for European Studies and the Institute of International Economic Relations, under the auspices of the Ministry of Foreign Affairs, brought together political leaders, decision makers, EU officials and business executives and provided a platform to discuss regional prospects. This special issue includes some of the most interesting speeches delivered in this international seminar, offering to the public an updated view for the regional developments that are in pipeline. Dimitris Xenakis
A quarterly review on European integration SE Europe & the SE Mediterranean
Guest editor for this special issue: Dimitris Xenakis (University of Crete, Hellenic Centre for European Studies)
Dimitris Droutsas What we do there
The bridge is a publication of the “Agora Ideon” forum www.agoraideon.eu Project Manager: Metropolis Publications S.A. Contact: 12A Kyprou Street, Moschato, 18346 Athens, Greece tel: +30-210.482.3977 fax: +30-210.483.2447 e-mail: email@example.com
cover story 12 - 15
Spyros Kouvelis Entering the EU
cover story 26 - 29
Publishing and Business Development Director: Kostas Tsaousis Editor in Chief: Dimitris Maziotis Scientific Coordinator: Ioannis Armakolas
Håkan Malmqvist The way ahead
Editorial Consultants: Eleni Fotiou Kostis Kapopoulos Editorial Team: Constantinos Angelopoulos Ali Osman Egilmez Maria Katechi Alexandra Sarmas Simos Ververidis Project Director: Victor Dhimas
cover story 32 - 35
Vladimir Chkhikvishvili Creating a common energy point
Internet Edition Manager Vasilis Loukanidis Copy Editing: ICET Artwork team: Rubini Natsi Dimitris Stergiou Advertising Executive Manager: Christy Sotiriou Montage-Printing: Bibliosynergatiki S.A. ISSN 1791-2237
cover story 40 - 41
© The bridge. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The bridge. Where opinion is expressed it is that of the authors and does not necessarily coincide with the editorial views of the publisher of The bridge. All information in this magazine is verified to the best of the authors’ and the publisher’s ability. However, The bridge does not accept responsibility for any loss arising from reliance on it.
Neven Mimica Steps forward into the European Integration processes Dr. Milan Parivodic The European Union as a challenge
cover story 30 - 31 cover story 16 - 18
Cristian Bichi Restart the growth to change tha balkans
Daniel Speckhard Reconstructing the area
cover story 20 - 23 cover story 36 - 38
Louka T. Katseli Priorities of Greece
Riccardo Puliti The impact of pipelines cover story 48 - 49
cover story 44 - 45
:KDWGRHVWKLV H[SUHVVLRQUHDOO\ PHDQ" First, planning for later years means planning now, for more years. Second, planning for the future means different things to different people. Differences can be found between generations, genders, low-and high-income, countries and regions. Lower income employees, even within less advanced economies, have higher expectations for their lifestyle during retirement. The attitude towards retirement and managing assets has changed (e.g. how long do people want to work). It is obvious that these developments affect the financial solutions that companies and pension funds provide to address the wide-ranging needs of customers worldwide. Investing in later life While mainly men in the advanced economies will be prepared, women and low income households in the transitional and developing countries’ economies will find themselves unable to financially secure themselves in old age. In between these two extremes there is a large group; those vulnerable to financial hardship in later life, unless they get prepared. All of us (government, self, employer, and families) have to real-
ize the importance of having more than one source of retirement income. However, a previous research showed that it was not the lack of money which people feared most during their old age, but the softer values, like the loss of status and the loss of power and opportunity to contribute to societies and communities where they live. Adding to the above, what most people would like to leave as their legacy -again- is not money, but non-monetary values, such as their perspective of life, their knowledge, and their way of offering to their communities.
)DFLQJWKHUHDOLW\ Population structure in the EU25 is expected to change dramatically between now and 2050. Particularly, life expectancy will tend to raise the elderly population (ages 65+) by about 80% in Greece and 77% in the EU25. Moreover, the ratio of the elderly population over the working age population is projected to double in 2050 for EU25 and more than double in Greece. So we do have some good news and some bad news. On the one hand, we live longer. On the other hand, less people will finance the social system. Furthermore, the social system must finance more elderly people. If we want to establish a sustainable and fair pension system, we shouldn’t focus in only one pillar, as it is not sustainable either at the present, or at the future: Pay-as-you-Go state pensions are no longer affordable,
given the current and future demographic situation. It is urgent to transform the mono-pillar pension system into a multi-pillar one. Only then will the employees be able to receive retirement income from different sources. We need to restructure the first pillar, by transforming it into a standard basic retirement income provider, in order to enhance solidarity between generations and society. The second pillar (occupational pensions) should also be activated by improving the existing legal framework. This will provide a second source of income during retirement and make the level of retirement a matter of personal choice, which won’t based on generic rules. Moreover, we have to further expand third pillar by providing tax incentives to consumers and develop a level playing field.
7KHFRPSDQLHV·UROH Private companies can definitely support pension reform. Interna-
*DLQLQJEHQHILWV After having developed a level playing field we can enjoy a number of benefits, such as a highly transparent system, a consistent and longterm political support without political opportunism, a consistent legal framework which will encourage the arrangement of pension provisions and a wide array of investment opportunities.
5HFRQVLGHULQJWKHILQDQFLDO LQGXVWU\·VZD\RIWKLQNLQJ Nevertheless, its time for the financial industry to change its mindset. Currently, advisors and financial services providers are accustomed to accumulating wealth rather than
distributing it. Under these circumstances, advice is crucial: the financial industry must Bram Boon CEO ING Greece understand issues of providing income for life and offer appropriate recommendations. It should focus on products that facilitate careful de-cumulation of due to, among other things, (i) gensavings in retirement and emphasize eral economic conditions, in particuon compliance, transparency, simple lar economic conditions in ING’s core and straightforward information. Fi- markets, (ii) performance of financial nally, the financial industry ought to markets, including emerging mareducate the consumers, so the latter kets, (iii) the frequency and severity of will be able to make the right deci- insured loss events, (iv) mortality and morbidity levels and trends, (v) persissions for their retirement plan. Certain of the statements contained tency levels, (vi) interest rate levels, (vii) herein are statements of future ex- currency exchange rates (viii) general pectations and other forward-looking competitive factors, (ix) changes in statements. These expectations are laws and regulations, (x) changes in based on ING Greece management's the policies of governments and/or current views and assumptions and regulatory authorities. ING assumes involve known and unknown risks no obligation to update any forwardand uncertainties. Actual results, per- looking information contained in this formance or events may differ mate- document. rially from those in such statements
tional companies bring international expertise by importing ready made and tested solutions, in the fields of customer service, actuary, risk management, fund management and asset management. Increased competition contributes also to the development of the pensions sector in a plethora of ways; firstly, by giving customers more possibilities to switch to other pension providers; secondly, by enhancing efficiency in terms of pension administration, thirdly, by bringing constant pressure to optimize investment returns; and finally, by bringing innovative approach to the whole industry. Last, but not least, companies employ highly skilled advisors or consultants that can provide individual advice and personal customer service.
%TKUKUCPF2GTURGEVKXGU By Yannos Papantoniou
For the last two decades, Southeastern Europe met, like other European regions, outstanding developments. The most significant difference between Southeast Europe and other regions is that the collapse of the communist regimes unleashed uncontrollable powers that led to well known, tragic conflicts. However, despite the typical forecast (maybe even wish, for some people) that the Balkans would confirm their former characterization as the “powder keg of Europe”, conflicts have been confined geographically, without managing to compromise peace and stability in the wider area. Southeastern Europe had started the painful adjustment to the new conditions, almost immediately after the collapse of the
communist regimes, even before tranquility returned to the region. Every country tried to gain stability and economic growth; even those which at first place had focused on nationalistic priorities –that were eventually proven catastrophic. After all, the abolition of the EastWest divisive line allowed Europe to recover gradually its normal political and economic unity, while its military safety was taken for granted. Within this framework, it is not a paradox that many Southeast European states sought their accession to the Euro-atlantic institutions as soon as possible. The time of
expression of this pursuit varies, as the conditions (internal and external) were different from one country to another. NATO and European Union took a positive stance vis-à-vis the Balkan states’ interest to join them. Concerning NATO, things were easier. A minimum level of military structure’s conformation to the alliance’s criteria was enough in order for the application to be accepted. The procedure’s resilience was not due to the NATO members’ need to enhance their security by accepting new countries as allies; it was due to the perception that the latter’s integration would have been a prerequisite for the consolidation of security in Europe, where the vast majority of countries belonged in the same group. I leave aside the matter of protecting the new candidates from the ex-superpower’s potential expansionary aspirations, as those
of the accession criteria. Very few countries from those that joined European Union in the last years were actually fulfilling the conditions that European Union had posed. Comparing this with the strictness that characterized the older candidacies, we can realize that the most important criterion for the new countries to enter was that of political convenience. The original aim was to accelerate the accession process, even with some derogation towards the economic criteria. Of course, European Union was rigid towards matters concerning the respect of human rights and democratic freedoms: every acceding country fulfilled totally the Union’s demands in this sector. However, the accession to the Euro-atlantic institutions alone didn’t (and couldn’t) solve the endogenous problems that were facing many countries. For a variety of reasons, not all countries of the region managed to enter. Some of them, like Croatia, are too close to do so. For some other,
concerns were -at large- exaggerated. In all, participating in the North Atlantic alliance contributed effectively, not only to the security, but also to the internal stability of the specific states. The European Union also took positively the new countries’ entrance applications. It wasn’t particularly rigid towards fulfillment
like Bosnia, accession seems to be too far away. Unfortunate experiences concerning certain newly admitted countries’ performance have made Brussels more cautious. The current economic crisis has hit all countries. It is, however, particularly painful for the weaker economies, consequently for the most countries in the region. The fall of production was too large in the Southeast European countries. In the area, the growth rate fell to -6.2% in 2009. Nevertheless, the crisis duration doesn’t seem long. Recovery is expected for the 2010. Despite the initial projections, capital outflow was smaller now than during past crises or here than in other regions.
The amelioration of the international environment, particularly in the rest of Europe, the stimulus packages that were adopted by the governments of the area and the support the latter were given by the international organizations have contributed to recovery. The International Monetary Fund and the European Union stood by the weak economies of the region, while the international banks and the countries where their headquarters lie were providing them with adequate levels of liquidity for the normal operation of their financial systems. E x per iencing this crisis has enabled us to draw some useful conclusions concerning the effectiveness
of the implemented economic policies during the transition to market economy procedure in the last two decades. First of all, positive and negative aspects of financial integration have come to light. Integration fostered growth, but also drove to a credit bulge that created destabilizing effects, deepening the crisis, especially through exorbitant borrowing in foreign currency. Con-
sequently, those risks should be addressed by revising the regulatory framework and hardening supervision, in order to control more effectively the credit expansion and narrow borrowing in foreign currency. It is becoming more evident that what is needed is not a smaller government with constant privatization and deregulation, but a more effective government and better institutions. Investor climate is largely affected by administration operation. Bureaucracy, ineffectiveness and corruption are the main impediments against undertaking healthy business initiatives. The bigger failures towards transition can be spotted in the quality of institutions and business practices. Along with the improvement of the regulatory framework about the financial systems’ operation and the establishment of stronger domestic capital markets, it is crucial to rationalize and modernize the institutions. This includes the updating of the education system and investment on human capital which -in the era of knowledge economy- contributes decisively to growth. If these reforms are com-
bined with convergence macroeconomic policies and the continuation of support by the international organizations, they will secure the preconditions for the dynamic recovery of the Balkan states and their full integration to the European institutions. Towards this goal will help the fact the region is evolving into an intercontinental energy transit. Most of the existing or planned oil and gas pipelines between Europe and Asia pass through the area. This development, apart from strengthening regional economies, also upgrades the geo-
political role of the area and attracts international investment funds. Moreover, the resolution of pending political issues is a necessary precondition for the integration to Euro-atlantic institutions. I do not want to be thorough, but I would like to remind -as an example- the Bosnia-Herzegovina case. It has been led to the current situation, in order to escape from a really bloody civil war. This development, however, doesn’t facilitate Bosnia’s transition from an international protectorate regime to a status of an equal partner that will be able to join international organizations. Bilateral problems of political nature that still exist among countries encumber the process of integration to international institutions. It would be an exaggeration if we demanded from NATO or the EU to handle situations that could destabilize their cohesion. This conference is not going to give solutions to every problem that we have to face. It does create, nevertheless, a framework for seeking effective approaches and strengthening international cooperation in a key geopolitical area. The magnitude of the economic and social problems and the developments that are set into motion for the near future don’t let any space for complacency and entrenchment into barren positions and policies of the past. The cooperation of all actors that can offer creatively to the efforts undertaken is needed, in order to secure stability and development in Southeastern Europe. Yannos Papantoniou is the President of the Centre for Progressive Policy Research (KEPP), Former Minister of Economy & Finance and of National Defense of the Hellenic Republic
:KDWZHGRWKHUH By Dimitris Droutsas
Greece is once again taking a leading role in the Balkans. We are sending messages to the countries of the region to the effect that they can once again count on Greek support with a vision of European integration. The incorporation of the countries of Southeast Europe into Euro-Atlantic institutions is a strategic choice for us; for Greece. After a series of conflicts and crises, the countries of Southeast Europe are now closer to achieving social and political stability and economic development. Throughout the region, democratic governments are now in power. The carrying out of peaceful and fair elections – in which the members of minorities participate freely – is in large part considered a given. Two countries in the region, Bulgaria and Romania, are already members of the European Union, while all the countries in the Western Balkans have established significant institutional links with the European Union, whether as candidate countries or potential candidates for accession.
Regional cooperation has undergone, I would say, a qualitative upgrading, with the establishment in 2008 of the Secretariat of the Regional Cooperation Council in Sarajevo, which coordinates cooperation programmes amongst Balkan states in the most important sectors of state activity, including economy, infrastructure, energy, security and human resources. However, despite the noteworthy progress that has been achieved, we have even more important work ahead of us; work that will enable us to capitalize to the greatest extent possible on what has been achieved so far. The rate of reform – we must be frank – is not always, and in all cases, satisfactory, in spite of the positive steps that have been taken in the fight against corruption, organized crime, illegal migration, inadequate infrastructure and the grey economy. New efforts are required to fully eradicate these phenomena and their repercussions for the societies of the region. Finally, there are a number of unresolved political issues and differences between the countries of the region.
The international economic crisis and its impact on the countries of the region are, according to forecasts, probably going to be deeper and of longer duration than initially expected. This renders more imperative the need for a coordinated effort amongst the countries of the region, as well as cooperation with European agencies and international financing mechanisms, so that the crisis can be dealt with. So that the economic development work can be completed, along with the consolidation of the rule of law and the creation of effective institutions that can be trusted by all of the citizens of the countries of the region. In light of the developments in Southeast Europe, the basic priorities of the Greek presence are, first, the creation of a climate of political stability, the strengthening of good neighbourly relations and closer coop-
eration with the countries of the region on both a bilateral and a regional level. Our second priority is the economic and social development of the Balkan countries. Third, the promotion of the European perspective of the whole region. Allow me, ladies and gentlemen, to underscore the contribution of Greece and Greek investments to the economic growth of the region; the efforts to create a single economic space in Southeast Europe, as well as the initiatives we have undertaken in the energy sector, with the aim of creating a larger and more competitive market. The Hellenic Plan for the Reconstruction of the Balkans, HiPERB, is an effort on the part of Greece to incorporate isolated and fragmentary development assistance initiatives into a single plan, promoting a comprehensive development policy aimed at the political, economic and social stability of Southeast Europe. Through this Plan, actions are being carried out for the construction of major infrastructure projects, as well as for strengthening private initiative in Albania, Bosnia-Herzegovina, Bulgaria, Montenegro, the Former Yugoslav Republic of Macedonia, Romania and Serbia.
These actions and projects contribute significantly to – among other things – the modernization of infrastructure, the promotion of productive investments, the strengthening of the social state and the redressing of social inequalities. The total sum that is to be disbursed for the purposes of the Plan by 2011 comes to €550 million, while total commitments to date have surpassed 50% of the total budget. At the same time, the dynamic presence of Greek enterprises has made a significant contribution to the stability of our neighbouring countries for some years now. Enterprises that at the outset undertook considerable business risks, extending their activities to our neighbouring countries, while at the same time opening the way for cooperation between our countries. Today, Greek investments in the countries of Southeast Europe come to over $20 billion, and over 3,500 Greek enterprises are active in the region, having created some 200,000 jobs.
Greece is the top foreign investor in Albania, the Former Yugoslav Republic of Macedonia and Serbia, and is second among foreign investors in Romania and Bulgaria. In the financial sector alone, there are some 2,000 branches of Greek banks in Southeast Europe. I believe that our dynamic economic presence in the region makes us a real motor force for development and progress on the course to Europe. The need to strengthen the European perspective of the Western Balkans is a longstanding Greek position, clear from the most recent Greek EU Presidency, in 2003. With the now famous Thessaloniki Agenda for Southeast Europe, we elaborated at that time a solid institutional framework through which the Balkan countries as a whole – as well as each of these countries individually – might move towards the organs of the European Union. And we worked hard for the accession preparations and harmonization of all the Balkan countries with the European Criteria. The first result of this policy is – I think – that four Balkan countries are today already members of NATO, and two are in NATO’s partnership for peace programme,
two Balkan countries have been EU member states since 2007, with active Greek support, I dare say. Two states are candidates for accession to the European Union, while all of the countries of the Western Balkans have signed Stability and Association Agreements with the European Union. At the same time, the gradual liberalization of the visa regime for all of the citizens of the countries of the region has been decided upon, based on targeted obligations for reforms that will lead to their harmonization with European standards. In view of the institutional developments in the European Union, we believe that new momentum is needed for European integration and deepening. It is our impression – we see it every day – that the momentum we created in 2003 for the European accession courses of the countries of our region has died down. For this reason, Greece has already undertaken a new initiative that will give new momentum to the Union’s enlargement in Southeast Europe, and this initiative requires
the close cooperation of all the countries of the region. We propose the drawing up of a new roadmap for the European integration of the Western Balkans, with a target date of 2014, which we hope will give new momentum to the European Union itself, particularly in light of the enlargement fatigue being voiced by certain partners. I want to stress that this proposal, the date of 2014, is a clearly political target date. It is a political proposal and has symbolic content: It is 100 years after the outbreak of World War I, and in simple historical terms one might say that the problems and differences that we still see today in our region have their roots in 1914. And we say this: The European Union – and I think we all agree on this – is the most successful peace project Europe has ever known. So we think the European Union needs to undertake its responsibilities in the Balkans, to contribute actively to peace and stability in our region as well: The Balkans, an integral part of Europe. Allow me to add that even the current situation we see in Kosovo could – I believe – have been avoided if the European Union had undertaken the role is should have in the Balkans in a timely manner and with resolve.
This is our vision for the region. This is Greece’s vision for the region, and I will have the pleasure and the opportunity in the coming days to pass on this message from Greece regarding our region during a brief tour I will carry out of all the Balkan countries. On this course, ladies and gentlemen, all of the countries must, of course, prepare effectively to meet the necessary prerequisites for adoption of the European acquis, respect for international law and, of course, good neighbourly relations. I would like to stress at this point that for us, for Greece, prior resolution of the name issue is a clear prerequisite for FYROM’s opening accession negotiations with the European Union. And I make it clear once again, from this platform, that the opening of accession negotiations is the exclusive responsibility of EU member states, and thus Greece as well. Greece’s position – our position on the name issue – our national red line, as we call it, is clear and well known to everyone: a
name with a geographical qualifier for use in relation to everyone, in all instances – erga omnes. Equally clear and well known is our desire, within the framework of our national position, to contribute constructively to the finding of a solution. Greece is participating with proven dedication in the negotiation process within the framework of the UN, with the aim of finding a mutually acceptable solution. We go to the negotiating table with an open mind, as I have repeatedly stressed. And we proved this with the recent initiative on the part of the Prime Minister himself to hold a brief introductory meeting with his counterpart, Mr. Gruevski. We also briefed UN Secretary General Ban Ki-moon during his recent visit to Athens, as well as his personal envoy. And I want to underscore that Greece is driven by a genuine desire for a solution, but there should be no misunderstandings or surprises. We – Greece – are making things very clear. Unfortunately – and I have to say this – the other side persists, even in recent state-
ments, in a sterile nationalistic intransigence and continues to trade on Greek history and culture. We, as Greece, are extending a hand of friendship to our neighbouring people, and it is up to our neighbours’ leadership to choose between the inflexibility and nationalistic rhetoric that is blocking the country’s European course, and the constructive dialogue that will free up its European future – which we genuinely hope for. Our vision, ladies and gentlemen – the vision of any Greek – cannot be a foreign policy that stops at batting away problems. We will work for a foreign policy that is dynamic and multifaceted. A foreign policy of initiatives. Our guide is the creation of conditions that will contribute to peace and cooperation, as well as the protection of Greek interests and Greek sovereign rights. It is our goal and vision for Greece to return to the front line, to strengthen the country’s position, showing it once again to be an active and trusted power prepared to pursue its interests. We are picking up the thread of a foreign policy that addresses all major international
developments, effectively defending national rights, giving a voice and negotiating power to Greece. Today, Greece is being called upon to find its identity again – its role – and for us this course is clear: Greece makes gains as a country of values, a country that defends the principles, international law and human rights through which we too reinforce our integrity and security. We want Greece to play a leading role again, as a force for security, stability and development; as a guarantor of respect for international law, human rights and universal values. We want Greece to play the leading role in its immediate neighbourhood – the Balkans – and we want the countries of the Balkans to move ahead with a clear European perspective and future, with Greece as a strong ally and steadfast friend. Dimitris Droutsas is the Alternate Minister of Foreign Affairs of the Hellenic Republic
(XURSHDQ8QLRQ By Dr. Milan Parivodic
The world economic crisis did not leave a major impact on Serbia because it was not involved into the international economic arena as much as other international business and other more developed countries. In some cases though, the luck of liquidity has led companies to fail, resulting in unemployment. That is not a disaster. Perhaps more dangerous are the structural problems of the Serbian economy, because those problems cannot be resolved after the revolution of 5th October, 2000. The crisis is just a very low temperature comparing to the structural problems of the Serbian economy. In order to solve these problems we have also to solve certain political issues, without which, Serbia cannot improve its economy to the level of its true potential. The most important political issues which the governments and the
Parliament of Serbia are dealing with can be summarized in four: we are late in European Union accession, while Bulgaria and Romania are part of it; NATO remains a very open and debatable issue in Serbia; Kosovo remains an open wound regarding the issue of recognition; and finally, Hague is unfortunately still not a closed book for Serbia. We need to find quickly the appropriate solutions on those four issues. Recently, a political event took place for the Serbian position in the world and that was the visit of US Vice President Biden. It was the first visit we had since 1976 actually. This visit has marked a new US position towards Serbia, and somewhat has the impact of unlocking Serbian international relations. Since then only Holland is blocking Serbiaâ€™s application of the stabilization
and association programme, keeping Serbia on the margins of the European Union integration. But now Holland is under pressure from US to change this. It seems a matter of weeks for this to happen. However, it really seems strange that the European Union is not, itself, using the privilege to de-block the application, because, such a development is in favor of Europe, as Serbia has already benefited from the trade arrangements with the European Union. Serbia has the right to follow the application for the candidate status to the European Union, some-
DVDFKDOOHQJH thing that could happen very soon, even next month. The recent arrangement between Serbia and the International Monetary Fund is very important, in order to balance the losses in revenues in the first half of 2009. This is a 3 years arrangement with about 3 billion euros in support of financial stability, in addition to the European Unionâ€™s loans for stabilizing the budget. Hence, in the second half of the year, the revenues have been significantly improved, certainly more than what we expected for this soon. The Serbian foreign policy is multiple in the
sense that the government and the President define foreign policy. For both of them the European Union is an essential strategic target. Serbia also sees naturally the US, Russia and China, as strategic helpers. This multiple policy of course in-
cludes Greece as literally best friend. But this multiple policy came as a consequence of the weaknesses we felt, particularly, during the first Bush government, when he made a clear unipolar policy and we felt unsupported. I remember him being very disappointed about Serbia with
the support we got in 2002-2003, when the financial system was really stretched after the devastation of Milosevic regime and so forth. The results of the
Serbian government in the last period are very good. Most important is that the European Commission has finally decided to remove traveling restrictions to Serbians. It started from the symbolic Saint Nicholas, that the Serbians would be able, finally, to freely travel the world. This is a very important success.
What are the challenges for the Serbian economy? Unfortunately there are numerous challenges. First is our competitiveness. The competitiveness of our economy is weak, and the reasons for that lie in the weak industrial base devastated in the â€˜90s and not enough developed in beginning of the 21st century. At the moment the crisis impact is really on the companies, resulting in weak Serbian exports. The consequence of that is an international trade imbalance, in the sense that we export about 15% of what we import, nearly 55%. This year imports dramatically decreased a bit more than exports. Therefore foreign investment into Serbia is essential. What should be changed and what are the proper actions that could unblock and significantly improve the situation in Serbia? Firstly, a combined election system: a combination between proportional and a majority system would improve the quality of politicians and strengthen the Parliament. Another problem detected is that the Democratic Party,
which is really the leading force towards European Union, does not have a true partner on the right side. This remains a big challenge. We very much support the initiative for 2014 of the Hellenic Republic, although it is a very complicated issue in Serbia, as the majority is against NATO. So, some kind of arrangement with NATO has to be invented. Something similar to what Tito did in 1995, by a treaty which actually gave us privileged relations with NATO, but not all of it. Formally our policy is neutrality and that is something clearly blocking. A clear vision for Serbia is needed. The political parties are not willing to define their vision of Serbia because this strengthens their freedom on policies they would like to choose. And they are opportunists by nature. Unfortunately I donâ€™t see really a challenging vision in that respect. I donâ€™t see elections on the horizon, but political stability and a few potentials to boost investment in Serbia. Dr. Milan Parivodic is former Minister of International Economic Relations & Finance of the Republic of Serbia
5HVWDUWWKHJURZWK By Cristian Bichi
I will focus on how and to what extent the global economic and financial crisis spilled over to Romania and what were the policy responses to these developments. I will also make some remarks on the outlook for the Romanian economy and on challenges in the future period. Starting position During the early stages of the current global financial crisis, the Romanian economy performed well. However, with the deepening of the crisis in the fall of 2008, the collapse in global trade and the increase in risk aversion on the international financial markets, a period of five years of sustained economic growth in Romania came to an abrupt halt. Notwithstanding the robust growth of 7.1 percent registered in 2008 as a whole, the economic activity declined sharply in the last quarter of the year (-2.75 percent, quarter-on-quarter) and has fallen even further in the first quarter of the current year (-4.6 percent, quarter-on-quarter). The strong economic growth over the last few years, which was fuelled by large foreign direct investments and capital inflows, as well
as by a domestic credit boom, has been accompanied by widening external imbalances. At the end of 2008, the current account deficit reached 12.3 percent of GDP. Loose fiscal and income policies also contributed to the increase in the vulnerability of Romanian economy to adverse developments, with the government deficit rising from 1.1 percent of GDP in 2004 to 5.4 percent of GDP in 2008. The relatively strong reliance of domestic banks on external funds and a high share of foreign currency loans in the loan stock added to the vulnerabilities of the country. Economic reform program In response to the perceived vulnerabilities and deteriorating prospects, the government and the National Bank of Romania have developed a comprehensive economic policy program comprising measures to address the external and fiscal imbalances and strengthen the financial sector. Its immediate objective was to facilitate an orderly adjustment of the external deficit, thus easing excessive pressures on the exchange rate which could otherwise cause severe balance-sheet effects on the corporate and household sectors, resulting in a sharper downturn and tensions in the banking sector. Specific program objectives aim at: (1) reducing the fiscal balance to bring the deficit below 3 percent of GDP by 2011; (2) maintaining adequate capitalization of banks and liquidity in domestic financial markets; (3) bringing inflation within the target range of
the central bank by end-2009 and maintain it there; (4) securing adequate external financing and improve confidence. In support of this program, a joint financial assistance of up to EUR 20 billion was provided to Romania by the EU, the IMF, the World Bank and the EBRD. Banking sector measures The Romanian banking system proved to be resilient during the crisis thanks to the absence of toxic assets, strong balance sheets in the financial sector and strict supervision by the central bank. It has so far weathered relatively well the shock generated by deeper than anticipated contraction in the economic activity. Although the nonperforming loans (measured as the ratio of overdue and doubtful loans to total loans, at net value) have increased from 0.24 percent in September 2008 to 1.23 percent in September 2009, the profitability of the banking system remains in positive territory. As of end-September 2009, the average capital adequacy ratio was 13.7 percent, up 0.57 percentage points since March 2009, and all the banks recorded solvency ratios above 10
WRFKDQJHWKH%DONDQV percent. On the same date, the liquidity indicator was 1.63, a level which is well above the prudential requirement of 1. In the second half of last year and during the current year, the Romanian authorities took several actions aiming at enhancing the stability of the domestic banking system and underpinning public confidence. These actions included measures to ensure that the banking system will remain well-capitalized and sufficiently liquid, steps to strengthen the crisis management framework and improvements in the deposit guarantee legal and operational framework. A key measure undertaken by the Romanian authorities was the preventive increase in own funds and solvency of fundamentally sound credit institutions operating in Romania in order to allow them to withstand the negative effects of the financial crisis. This capitalization program was also seen as a tool to strengthen the possibilities of these institutions to finance the real economy. Under the program, the National Bank of Romania has used stress testing techniques to assess the vulnerability of the capital positions of 29 banks, Romanian legal persons. The stress tests were conducted in March-April 2009, in accordance with a methodology agreed with IMF. Based on
the stress tests results, additional capital requirements were identified for a number of banks (subsidiaries of EU credit institutions and domestically- owned banks) in order to maintain at least a 10 percent capital adequacy ratio in the period September 2009 - May 2011. These banks were asked to ensure the required capitalization by-end September 2009 and end-March 2010. Under the so-called â€œVienna Initiativeâ€?, the parent banks of the largest nine foreign banks incorporated in Romania, met in March, May, and August 2009, on which occasions they committed to maintaining their existing overall exposure to the country and to increasing capital of their subsidiaries as needed. The continuing involvement of these foreign banks (from Austria, Greece, France and Italy), representing more than 70% of the domestic banking sector assets, is crucial for the successful implementation of the macroeconomic reform program of Romania. In the area of liquidity, the National Bank of Romania has required banks to put in place alternative financing agreements and/ or to diversify their financial resources. Other measures taken by the Romanian authorities concern the protection of bank deposits. In October 2008, in order to underpin public confidence in the banking sector, the Romanian government has increased the deposit guarantee ceiling for natural persons to the lei equivalent of EUR 50,000
(previously the lei equivalent of EUR 20,000 per account holder and per bank). Further amendments to the existing legal framework regarding the bank deposit guarantee scheme were introduced in June 2009, by government ordinance. The new legal provisions ensure the full transposition in the national law of the recent EU requirements in the field of deposit protection, providing for increasing the coverage level for small and medium size enterprises to EUR 50,000 (in lei equivalent) and reducing the payout delay to a maximum of 20 days. The ordinance also introduces a new mechanism of declaring deposits unavailability by the central bank and improves the financing regime of the bank guarantee scheme providing for a state loan, in extraordinary situations, when the resources of the scheme are insufficient. In the area of crisis management, the NBR has introduced measures aiming at enhancing its enforcement powers. Under Government Emergency Ordinance No. 25/2009, amending the existing banking law, the NBR was granted the powers to request capital increases and restrict dividend distributions for credit institutions in distress. New amendments to the banking
law and the special bank insolvency law are planned in the near future, with the objective to allow the Romanian authorities to take timely and effective measures to restore the viability of a troubled credit institution. The amendments will offer, inter alia, more powers to the administrators of banks placed under the special administration regime. Monetary policy measures The conduct of monetary policy during the current financial crisis has been characterized by a prudent management of interbank market liquidity, combined with successive reductions of interest rates and minimum reserve ratios. The downward trend of the monetary policy rate has been consolidated during 2009, its level being gradually decreased to 8 percent. The minimum reserve ratio (MRR) for FX-denominated liabilities with a maturity lower than two years was reduced down to 30 percent in two stages with equal magnitude of 5 percent, following the MRR reduction to 0 percent for FX-denominated liabilities with a maturity longer than two years in May of the current year. At the same time, the MRR
for local currency liabilities with maturities lower than two years has been decreased in two stages from 20 to 15 percent, while the maturity of the main monetary policy instrument (auction-based repo operations) was increased up to one month. Through these measures â€“ adopted in the context of persisting low volatility of the exchange rate of the domestic currency and ongoing economic contraction â€“ the NBR aimed at calibrating the broad money conditions with a view to consolidating the inflation rate convergence towards its medium-term targets and to securing the necessary conditions for the sustainable revitalization of the lending process. Fiscal policy measures The economic program of the Romanian authorities includes also a strong fiscal policy package aimed at achieving a necessary short-term fiscal adjustment and introducing reform measures to make public finances more sustainable on the longer term. The government deficit target for 2009, initially established at 4.6 percent of GDP, was revised in August 2009 to 7.3 percent of GDP to take into account the larger-thanexpected economic contraction. Achieving this objective will still require further significant adjustment efforts, including measures to reduce the wage bill and implementing the announced spending cuts in good and services. For the next year, the Romanian
authorities are committed to taking further measures to bring the deficit to 5.9 percent of GDP. Crucial for the success of the fiscal strategy are reform measures in the following areas: (1) restructuring of the public sector to reduce the budgetary staff together with a unified wage law to produce a less costly pay scale for public sector employees; (2) pension legislation reform; (3) implementation of a Fiscal Responsibility Law; (4) public enterprises reform; (5) restructuring of the financial relations with the local governments; (6) improvements in tax administration; and (7) streamlined social assistance programs. In early November 2009, two important laws concerning the fiscal reform package were promulgated. The first one, the unified wage law, would allow the public sector wage bill to be reduced to about 7 percent of GDP by 2015. The second provides for the restructuring of numerous state agencies in the government sector by
either abolishing or incorporating them into relevant ministries. The fiscal responsibility law and the pension reform law, (agreed as structural benchmarks under the IMF assistance program, by 30 November 2009, respectively 31 December 2009) are still to be approved by Parliament. Romaniaâ€™s macroeconomic outlook is improving, but there are still policy challenges facing the country. The economy is likely to register a GDP contraction of -7.5 to -8 percent in 2009, and a slow recovery of 0.5 to 1 percent is expected next year. The external imbalances have also undergone significant adjustments. Through the first nine months of this year, the current account deficit stood at EUR 3.3 billion, reflecting a sharp fall by 74.6 percent compared with the same period of 2008. This current account deficit was covered by foreign direct investments inflows in a proportion of 106.4 percent. The significant narrowing of the current account has eased the concerns about the financing requirements and the vulnerability of the country to capital outflows. It also contributed to the easing of
pressures on the exchange rate and inflation. The CPI inflation rate is projected to be 4.5 percent for end-2009, within the variation band of the central bank under the inflation targeting regime. In 2010, the inflation rate is forecasted to fall below the central target of 3.5 percent to as low as 2.6 percent. Currently, the key challenge that Romania needs to address is the successful implementation of its program of fiscal consolidation and of institutional reforms in the public sector. The political turmoil in recent weeks, preceding the presidential elections scheduled for 22 November 2009, with a run-off on 6 December 2009, led to an interim government. Currently, this government cannot legally submit a 2010 budget to Parliament. It also cannot undertake strong commitments on the rebalancing measures envisaged under the revised pension reform legislation in order to bring the 2010 deficit down to the fiscal target (5.9 percent of GDP) established in the economic program under the multilateral financial support package provided by the European Commission, the IMF and the World Bank.
Under the circumstances mentioned above, despite good overall performance under the economic program, the IMF and the European Commission decided, in early November 2009, to delay the next installments of the multilateral financial support package until a new government takes office. Evidence suggests that there is a broad political consensus on the fiscal target for 2010, although differences of views remain on how to achieve this target. I am confident that the future government, to be nominated after the presidential elections, will show a strong commitment for reforms. This will allow for a rapid completion of the program review and a smooth disbursement of delayed financing. At the same time, the macroeconomic policy mix will benefit from a more efficient coordination. Cristian Bichi is Head of Section for the Financial Crisis Management Unit in the National Bank of Romania
By Spyros Kouvelis
The enlargement of the European Union has always been an important, independent chapter of European integration and not simply a corollary of the Community’s success or of the notion of the Single Market. European integration was aimed from the outset at Europe’s peaceful reunification. The European Community is not and should not be the exclusive club of the six founding members. In fact, the accession of new member states has been a crucial issue that has concerned the European Union repeatedly during its major development phases. So the enlargement is one of the most effective tools at the disposal of the European Union for the consolidation of peace, stability and prosperity in Europe. But this truth stands perhaps even more for the region of Southeast Europe. The European Union has repeatedly confirmed, even at the highest level, the European perspective
of the countries of the Western Balkans. This region cannot and should not be absent from a united Europe. On this course of the Balkans towards the EU, a useful precedent has been set by the accession of other countries from the region, and particularly the recent entry of Bulgaria and Romania. Greece, as an old member state, realises and recognises this. With the accession of Bulgaria and Romania to the European Union, on 1 January 2007, the fifth wave of enlargement in the Union's history was completed. This wave symbolised the reunification of a continent that had been divided for decades. In fact, it is important that this was the first time since Greece’s accession to the then EEC, in 1981, that other Balkan countries became members of the Union. Bulgaria’s and Romania’s course towards the EU certainly went through different phases. Their accession crowned a process that had started in the early 1990s, with the signing by Bulgaria in 1993, and Romania in 1995, of the Association Agreements with the European Communities. Following the decision of the European Council of Helsinki
in 1999 to accept an enlarged group of 12 candidate countries, the negotiations with Bulgaria and Romania started in 2000. But a year later, the two Balkan countries were separated from the group of 12, because of deficiencies identified in the adoption and implementation of the community acquis, chiefly in the fields of Justice and Home Affairs. The European Council of Thessaloniki in 2003, held under the Greek EU Presidency, was a milestone not only for the countries of the Western Balkans, but also for Bulgaria and Romania, as it confirmed that these two countries were “part of the same inclusive… enlargement process”, and that the target date for their accession was 2007. Finally, following intensive efforts and an acceleration of the reform process, the above target was achieved and the two countries became the 26th and 27th EU member states.
The notable difference with regard to the accession of other Central European countries is that in the case of Bulgaria and Romania, the difficulties that lingered until the last moment in a series of fields, and particularly in the field of Justice and Home Affairs, resulted in the accession of the two countries with the concurrent implementation of accompanying measures recommended by the European Commission and approved by the Council, which combined the provision of assistance with the threat of sanctions. It should be noted that the reform of the justice system and the fight against corruption and organised crime are still areas of major European interest also in the case of the Western Balkans. What are the political conclusions to be drawn from the accession of Bulgaria and Romania to the EU? Certainly, their entry, the outcome of constant efforts, is a turning point, firstly for themselves, on their course towards a better future. Secondly, it is a turning point for the future of the entire
region of Southeast Europe, as it gave new momentum to regional cooperation on the basis of respect for European principles and values. For the EU itself, its enlargement to the Balkans offers several important opportunities for a more active role in the region. With regard to Greece, it has been offering new prospects for bilateral cooperation with our two neighbours and partners. Allow me to set out the following in more detail: The accession of Bulgaria and Romania to the European Union is first of all the achievement of their peoples. It came as the reward for the necessary efforts and sacrifices that spanned many years, to the benefit of the countries themselves of course, in order for them to be in a position to take up their full obligations as participants in the common European endeavour. The full implementation of European criteria and prerequisites is at the heart of this endeavour. As full members of the European Union, Bulgaria and Romania now have the ability to make their own contribution to this joint effort and thus enrich the Union’s cultural diversity. Furthermore, for the first time since Greece’s accession in 1981, two more Balkan countries became members of the European
Union, which was an event of major symbolic significance. Their accession has been a positive development for the stability and prosperity of the entire Balkan peninsula, whilst showing the way to the European perspective’s of the region’s other countries. Moreover, it was confirmed that this path towards accession is traversed through persistence, will for progress, the fulfillment of all the criteria and prerequisites, intensive work, and of course the power of cooperation and the promotion of good neighbourly relations. Bulgaria and Romania’s EU accession has also given a new momentum to the Union’s interest in Southeast Europe and, in fact, during a period of enlargement fatigue. Furthermore, their accession translates into the expansion of the Union's presence in the Black Sea region – a development of strategic importance. Finally, the EU enlargement to the Balkan countries was very important for our country as well. For more than two decades,
Greece was a “European island” at the corner of the Balkan peninsula, geographically cut off from the rest of Europe. With the accession of Bulgaria and Romania, Greece is now geographically connected with the rest of Europe. But it is of the utmost importance mainly because it furthers the Greek strategic goal of turning the Balkan peninsula into a truly European neighbourhood of peace and cooperation. The region’s European integration translates into the creation of a zone of security and stability around Greece; a stable framework of relations and understanding with our neighbours, and also broadened cooperation abilities aimed at development. For this reason, Greece became – and has been acknowledged as – a firm and active supporter of Bulgaria's and Romania's efforts.
The indisputable fact is that since 2007, the conditions have been created for substantial strengthening of regional cooperation and, most of all, bolstering solidarity between the Balkan EU member states on the basis of respect for European principles and values. The potential and opportunities for bilateral cooperation between Greece and its two neighbours and partners have now been multiplied. With the launching of the trilateral cooperation, we also intensify the coordination of our actions within community bodies, as three equal European partners. Also, Romania, Bulgaria and Greece jointly reinforce the region’s voice within the EU. Here, I would like to point out that beyond the significant funds allocated to these countries by the European Union through its financing programmes, Greece has also supported Bulgaria and Romania through HiPERB. HIPERB is an ambitious plan, initially of five-year duration (2001—2006), subsequently extended for a second five-year period (2007-2011), with a view to implementing the comprehensive policy for the region
of the Balkans. This policy’s objectives are the modernization of infrastructure, the promotion of productive investments, support for democratic institutions and the rule of law, the strengthening of the welfare state, and the mitigation of social inequalities. HIPERB's budget, worth a total of more than €500 million, finances projects, actions, studies, and activities in other Balkan countries (Albania, Bosnia-Herzegovina, Montenegro, FYROM) but also in Kosovo. Its aim is to encourage the Western Balkans on their European course and, at the same, to consolidate political, economic, and social stability across the entire region of Southeast Europe. Our country does not see the next enlargement wave as just another step forward. We see it as an historic wager, because it essentially concerns our neighbourhood. Thus, we have every reason to be active in this process and become the motor force behind our region’s course towards European integration. Greece, as a country that has benefited from enlargement, knows that the next enlargement fatigue should not affect the European perspective of the Western Balkans.
Greece’s gains from its accession into the European Union have been manifold: It consolidated and deepened its democratic institutions, it secured funds and foundations for its economic development and has succeeded in participating on an equal footing in an economic and political world power, also having a say in the decisions the EU makes. Today, most Greeks recognize that the European Union is a foundation on which security, economic prosperity and progress are built. It can and should become the foundation for our broader region. Furthermore, given that our country is taking a leading role in guiding the Western Balkans on their accession course, a new framework of regional cooperation could be created with an emphasis on green de-
velopment, environmental protection, energy security through the use of renewable and alternative sources of energy. This new policy of sustainable economic development that the EU has been trying to implement can be promoted across the broader Balkan region, which is the most appropriate from a geopolitical point of view. Greece can and must promote this policy and play a leading role in achieving stable and sustainable development for the region. Our country has been a pioneer of the European course of all the countries of the Balkans. Under the Greek EU Presidency in 2003, the well-known Thessaloniki Agenda was adopted and has now become the official springboard and compass for our Western Balkan neighbours’ European course thus far. And today, following an admittedly difficult period of reflection for the European Union, it is now high time to give new momentum to this perspective. This is the aim of the initiative announced recently by the Prime Minister in Istanbul concerning a new road map for the intensification of the European course of the region’s countries.
This initiatives, by setting 2014 as a target date for the accession of all the countries of the Western Balkans to the EU, is not just strongly symbolic. It is also based on a specific and tangible logic: To encourage the countries of the Western Balkans to move ahead with more determination with the necessary reforms and the resolution of their pending issues, and to given new incentives to the peoples and governments of the region’s countries in order for them to fulfill their common European vision. Spyros Kouvelis is the Deputy Minister of Foreign Affairs of the Hellenic Republic
RSDORENQV@QC By Neven Mimica
Croatia is a candidate country for the European Union membership and our accession negotiations are getting well underway. Once we managed to agree how to proceed with a solution to the border issue with Slovenia, we are now in a position to conclude the technical part of our accession negotiations, somewhere by mid of the next year, and then to go into ratification process, which might bring Croatia to full European Union membership by the very beginning of 2012. This is good news for Croatia, because it is a clear recognition of all successful reforms we have done, and that those reforms, actually, irreversibly brought us to the European values. But this is good news for European Union as well, because it is a clear proof that after the indecisive and vague common foreign and security policy at the beginning of the crisis and war in former Yugoslavia, today it has definitely designed an efficient policy for the southeastern Europe that could stabilize the region and could generate new candidates and new members of the European Union from that region. It is also good news for other western Balkan countries as Croatia becomes a kind of motivation - a model which proves that implementing very demanding and hash European Union reforms is a rewarding process. After 20 years of the Fall of the Berlin Wall, the European Union was granted a
political promise and commitment towards countries that were on the wrong side of the Wall. Nobody could deny that almost all countries of southeastern Europe were on the wrong side of the Berlin Wall. So, 20 years ago the point of departure for the central, eastern and southeastern European countries was the same or very similar. But where is the region of the southeastern Europe today? It is clearly ranking far behind central and eastern Europe. This is a potentially dangerous situation for the region. But this is also potentially dangerous for the stability and security of the Europe as a whole. And this is a burden for the ambitious European Union to be one of the few key players on the global world scene. What went wrong with the region? Definitely there are at least three reasons or three causes of this situation. First there were conflicts in the last decade of the 20th century, in the southeastern Europe. Then a fade of very modest national economic and other reforms were pursued. There was also a lack of truly modern and democratic leadership in the 1990s. Actually, a kind of nationalistic instinct prevailed on democratic values and democratic principles in those newly established countries. On the other part of the problem we have to admit also that an inadequate and late response of the international community to the conflicts and wars in the region, also contributed to that unfortunate situation in the region. In short, one could argue that there was a lack of will and capacity internally but also a lack of incentive and a
push externally for the Europeanization of the Balkans. European Union so far often acted in a way â€œwe shall be waiting until the region and the countries of the region make a move, first move shall be done regionally and then we shall another move to support their European roadâ€?. But this could not be a productive policy. European and regional efforts must go in parallel. In spite of all of these, during the term of the next European Commission, until 2014, all countries in the region would make a step or two forward into the European integration processes. Croatia shall be a new European Union member most probably by 2012. FYROM would start accession negotiations. The joining Turkey in advance stage of negotiations. Albania, Montenegro and Serbia would become candidate countries, and Bosnia-Herzegovina and maybe Kosovo would also apply for membership in that period. In the European Union there is still a very complex and interâ€“related mixture of financial crisis, economic crisis and recession. This is a new element adding in all the problems that European Union so far has shown. The institutional setup of the European Union is still underway, while the enlargement process has created bigger differences among the member countries. These elements often seem to somehow straight away from each other until Lisbon. Actually all those negative elements finally match together in
Lisbon, where a new institutional treaty was accepted. European policy towards the region could be successful when only if it is consistent, coherent, and credible. Consistence means keeping the same requirements for all that are of course changing in the region, but also changing in the European Union member states. So the requirements should be the same Copenhagen criteria. Coherence means to ask for the same commitments that are exercised by the very new member states, and credibility means to keep the enlargement and membership perspective high on the European agenda without doubts about the European prospects of the western Balkan countries. We have to show that we are able to forge a political consensus on accession to the European Union among all political stakeholders in the countries. We must also be ready to show the capacity to attract foreign and direct investments even in the time of crisis. This would be our entry card, for the European Union. Hence there are still some instabilities growing in the new arrangements for Kosovo’s independence and Serbia. The first lesson we have learnt in the process of accession to the European Union is more important than the very accession. During that process everything has been reformed and transformed in the country: state of democracy, political values, econ-
omy, legislation, society, institutions. And people’s mind has also changed, which is the most difficult reform for sure. Second lesson we have learnt is about communicating to the people. This process must not remain just in the political elite. The latter must always turn their eyes behind their shoulders in order to see that somebody follows on the road to Europe. So, communication of Europe must not be one way street, but must be a true dialogue between the public and all those participating in the reform process. The third lesson is about the importance of regional cooperation. We have learned, maybe in the hard way, from the very beginning, but now we are definitely sure that without stable European neighbourhood, Croatia could not be a European country. Concluding, our region needs more Europe. We need the European Union to be present in the region. This is the last instable part of Europe and without enlargement to the region there can be no sustainable stability and security for the Europe as a whole. Regardless of the problems of the present concerns on the borders of enlargement, the end result of Croatia’s accession is already known. South-eastern Europe shall be a part of the European Union, because Europe is unimaginable without the Balkans, as it is south-eastern Europe without Europe. As the Lisbon Treaty is now ratified, there are no longer obstacles to the continuation of the enlargement policies. This should also be a signal to lift all existing political and mental reservations within the European Union and therefore, a renewed
consensus on enlargement is necessary. For a renewed commitment of the European Union in the region, we need to work together on a new approach. We need actually a “new Thessaloniki”. That is something that the Presidency of the European Union and the new President of the European Council should really think off, to have a renewed commitment, very clear commitment on the perspective of the southeaster countries on their European future. Croatia has proven that enlargement continues to work even under much stricter criteria. We are ready to share our experiences to help our neighbours in their integration efforts, and we are ready, even before the membership, to advocate the region into European Union and visa-versa. Today we can see the same commitment by high Greek diplomatic officials, who actually described the same vision Greece wants to advocate in the region and the European Union. Hopefully very soon, Croatia from the northern part of the Balkans and Greece from the southern part of the Balkans could join efforts and work together to the benefit of all Balkan countries for their European future. Neven Mimica is Deputy Speaker of the Croatian Parliament and Chairman of the European Integration Committee, former Minister for European Integration & former Deputy Minister of Economy of the Republic of Croatia
5)&8":")&"% By Håkan Malmqvist
While it is still early to assess the outcome of the on-going enlargement during the Swedish Presidency, I’ll try to summarize the achievements so far and give an outlook that links the future of enlargement policy with the broader institutional changes, mainly due to the Lisbon Treaty. The overriding priorities of the Swedish Presidency have to do with the global economic situation, employment and climate. We also want to enhance the EU’s role as a global actor. Enlargement is another top priority. And of course, discussions about the new Treaty have taken another prominent position up till now. The Lisbon Treaty replaces the rotating Presidency in the area of external relations with a High Representative for Foreign and Security Policy. This person will chair the Foreign Affairs Council and also head the new European External Action Service. We all hope that this will bring a new momentum to the EU’s external dimension and its role as a global actor. We should not expect miracles from the New Treaty, as the history of the EU is one of evolution rather than revolution. Still, this will be an exciting period as the new
institutional structure hopefully will translate into more clarity, coherence and clout in the EU’s external policy. We cannot predict the results of this transformation today as all mayor transformations take time but I am optimistic that the EU will emerge as a stronger global player a year or two from now. The Treaty will now enter into force and the new Commission and top positions have to be filled quickly so that policy discussions can take centre stage again. An extra, informal European Council is planned for the 19 November in Brussels, with the aim of sorting this out. The history of EU and its enlargement tells us that membership is a strong guarantor of lasting peace, reforms and social and economic progress. This outcome from enlargement policy is even more important in the Western Balkans than it was at the previous accession with the EU-12. The benchmarks and conditions to be met to move towards accession are a crucial there to avoid that internal or bilateral conflicts resurface. Croatia is the most recent example of swift developments and changes, achieved just a bit more than one decade after Civil War. The agreement between Croatia and Slovenia, just concluded in Stockholm on 4 November, shows that the incentive of EU membership is still powerful enough for
countries to try to overcome difficult bilateral issues. This is an important trend that hopefully can show the way forward for other countries. The attraction of enlargement continues to transcend all political and geographical divides of Europe and could not be better illustrated than by the fact that both Turkey and Iceland at different ends of Europe are striving for EU membership. The Western Balkan countries are on the same journey. It has turned out to be a rocky one for some of them. However, I have no doubt that all Balkan countries will become members once they fully overcome the tendency to make policy along ethnic lines and show the political will to further integration, regional cooperation, good neighbourly relations and respect for minorities. These conditions together with rule of law will be their admission tickets to the European Union, joining a group of countries with common values and standards. For the EU, this will not only complete the reunification of the continent 20 years after the fall of the Iron curtain. It is a matter
of enlightened self-interest and of enhancing our own economic growth, security and freedom. And it creates opportunities to broaden the common EU approach in crucial areas such as energy security, migration and infrastructure such as the Trans-European networks. We are quiet content with the achievements of the past few months. The number of countries that has now formally requested membership has doubled from three to six within the last 12 months. The membership negotiations for Croatia have been unblocked and there are ongoing preparations for an “avis” on the applications of Montenegro and Iceland. We hope to add Albania to this group very soon. The Commission’s progress report package has been generally positive and demonstrate that enlargement is a positive force for reforms in Turkey and the Western Balkans. Before the end of the year, we aim to decide on granting visa liberalization to the FYROM, Serbia and Montenegro. Our efforts to speed up Bosnia-Herzegovina’s pace on its European track have been difficult but we hope that they have pointed to the way forward for the country, in the light of the PIC on 18 November. The study presented for Kosovo should be the beginning of new avenues for cooperation. Hopefully we will make further steps forward in the enlargement field ahead of the
European Council of the Swedish Presidency in December. I hope the Swedish Presidency has demonstrated to the skeptics that enlargement policy is still moving forward. This is not to say that we do not face significant obstacles in this area. Progress is uneven among the countries, where some are moving forward and others are standing still or even risk falling behind, for different reasons. The most critical challenge remaining is the failure in some countries to carry out the reforms required to meet the Copenhagen criteria. Such reforms require two basic ingredients: political will and hard work to adopt and implement the necessary laws, building of institutions and making them work effectively. The EU can help with the latter by giving advice and assistance but political will cannot be substituted – it is fully in the hands of national politicians and authorities. Let us take a closer look at where we stand with each of the countries that aspire to EU membership, from the perspective of the Presidency and after having received the Commission’s progress reports. And I include Iceland, though its not by any measures a South-East European country, but to give you the full picture:
Croatia Croatia has traveled very far on its road to membership of the EU and kept up a high pace of reform. We welcome the agreement with Slovenia, which allowed negotiations to continue. Croatia is approaching the finishing line even though substantial work still remains in some areas such as the justice system, improved cooperation with the ICTY and the transformation of the agricultural support system. It is up to Croatia to do what is required and demonstrate concrete results in these areas in order to enter the EU as the next Member State. The start of discussions on a financial package and the drafting group for the Accession Treaty indicate that the conclusion of the negotiations are approaching. If Croatia delivers, the EU Member States are ready to propose the opening of the remaining chapters and next year could see negotiations coming to a conclusion. Turkey We welcome the fact that Turkey continues to maintain EU integration as its top priority and that it now has a new national programme for the adoption of the acquis. Accession negotiations continue to move forward. More positive steps have been taken to strengthen the justice system and related institutions.
Other reform proposals need to lead to concrete results. A real national consensus on the remaining large scale reforms required is now needed, to increase the speed of membership preparations. Democracy, rule of law, respect for human rights, including minorities, freedom of expression and media, as well as women’s rights, need to be strengthened in a way that leads to irreversible results. Turkey has become a more active player in the region and the normalization of relations with Armenia is most welcome. Still, we need to see movements also in other areas. Turkey must fulfill the obligations of the Ankara Protocol and normalize relations with the Republic of Cyprus. Former Yugoslav Republic of Macedonia The EU is encouraged by this year’s presidential and local elections which, according to observers, met most international standards. We are hopeful that negotiations on the name issue with Greece can soon enter into a decisive and constructive phase, characterized by mutual confidence. Given the positive assessment that the country received in the progress report, we hope that membership negotiations can be opened very soon.
Montenegro Montenegro’s EU perspective has been embedded in a series of formal agreements including the comprehensive SAA, which is expected to enter into force soon. Key issues such as the capacity and further independence of the judiciary need to be tackled decisively in order for the reform momentum to continue. After a decision by the Council, an avis report is prepared by the Commission, with Montenegro working hard right now on answering the questionnaire. The avis, which is expected for next year, will form the basis for deciding whether Montenegro can formally become a candidate country for EU membership. Albania Albania has been gradually moving towards European integration, a process that has accelerated in recent years. A Stabilization and Association Agreement entered into force last April. We hope that the Commission can very soon be tasked with preparing an “avis” for Albania. To reach its goal of EU membership, Albania must rapidly establish a constructive dialogue between its main political parties so that together they can support the national project of European integration, not least to create a fully satisfactory judiciary system and root out the high level of corruption. Serbia The progress report points out that there is a stable, pro-EU government in place in Belgrade, aiming at bringing Serbia closer to the EU. In our view Serbia shows a
new maturity and commitment in terms of fulfilling the obligations of EU accession. Cooperation with the ICTY is improving – the latest update from Mr. Brammertz will likely reflect this - and the capacity of the public administration is good. The Presidency’s ambition is to reach agreement among Member States on a decision on the Commission’s proposal to allow the IA to enter into force and to start the ratification process of the SAA. We would then also be ready to receive Serbia’s application for membership. Bosnia-Herzegovina The Progress report showed overall satisfactory implementation of the IA. At the same time, progress has been very limited with respect to other EU-reform areas including the European Partnership and the SAA. Due to internal political division and obstruction in key reform commitments the political situation in B-H remains of serious concern to the EU, since key reforms have come to a halt. Real progress towards membership is not credible as long as the OHR is present in the country. In order to break the deadlock on political dialogue and obtain the necessary agreement on such issues as the conditions for the closure of the OHR, the Swedish Presidency and US partners has held talks with local political leaders at Camp Butmir. It is now entirely in the hands of the local leadership to move their countries out of deadlock and avoid falling behind the rest of the region in the EU-integration process.
Kosovo We find it encouraging that the EU remains committed to its long term engagement in the developments of Kosovo. The fact that the EU is divided about the status of Kosovo does not prevent a fully committed approach as regards Kosovo’s political and socio-economic development – in line with the European perspective of the region. It is clearly in the interest of the EU that Kosovo develops in accordance with the rest of the region. In addition to the progress report, the Commission presented a communication examining means to further Kosovo’s political and socio-economic development. This communication provides a framework for concrete measures to be taken by Kosovo in order to move forward on its EU integration. Iceland Following a year of historic political and economical challenges, Iceland applied for membership in July 2009. Considering that Iceland has a strong democratic tradition and has already adopted large parts of the Community acquis as a member of the EEA and Schengen cooperation, we expect that Iceland could soon become a candidate country and open membership negotiations in due course.
There is however, no fast track for Iceland’s accession process, but it should move with the speed that is appropriate and fair given its preparations for membership. Lastly, a few words on the importance of functional regional cooperation in the Western Balkans. This cannot be overestimated, both for the region’s development and its EU integration. Continued EU-support in this field is necessary. It is also crucial to strengthen the strategy and impact of the Regional Cooperation Council as a complementary instrument to the Stabilization and Association Process, and to outline a clearer and more operational mandate from the South-East European Cooperation Process (SEECP) and other stakeholders. The recent review of the work of the RCC demonstrates that much needs to be done to increase the effectiveness of this body so that it can become the driving force for regional integration which it aims to be. To look more into some of these questions, together with the Regional Cooperation Council, the Swedish Presidency and the Commission are organizing a conference in Brussels on 9 December called “The Western
Balkans: Overcoming the economic crisis from regional cooperation to EU membership”. It will focus more on the economic and financial situation in the Western Balkans with particular emphasis on the consequences of the economic crisis, analyzing the current situation and identifying ways forward, for example through improved regional cooperation. You can see that at the end of the year, we will look back and say that this has been a busy Presidency for us, but also hopefully a successful one where Sweden has tried to make its contribution to keep enlargement policy on the right track. Håkan Malmqvist is the Ambassador of Sweden to the Hellenic Republic
SFDPOTUSVDUJOH By Daniel Speckhard
I will focus on the U.S. Administration’s priorities for the region – and particularly the Western Balkans – and how we are working in partnership with our European friends to get where we need to go. Let me start, by sharing with you one concrete symbol of the partnership and shared vision between our countries. I am speaking of our energy cooperation in the Balkans. Greece’s and the United States’ development agencies have partnered together to help create an environment to support private investment, improved energy security, and increased economic growth in Southeast Europe. I am proud of this cooperation, particularly since both President Obama and PM Papandreou have made climate change and greening the economy a priority. We hope to continue to build on this collaboration as we work toward our shared objectives of supporting stability, prosperity and full integration into the Euro-Atlantic community for the entire region.
For the United States – and many other countries represented here today – the Balkans are an area of symbolic and strategic importance, and. in the last century a battleground. While enormous progress has been made, the Western Balkans remains one of the last regions in Europe where there is potential for people to turn to violence to solve their differences. Bringing Balkan countries onto the mainstream Euro-Atlantic path is probably the single most important tool for ensuring peace and stability in this region. And the economic benefits of this path – with the growth of investment, trade and employment – will reinforce the sustainability of peace in the region. The Obama Administration places great importance on completing the task of supporting a fully integrated Balkan region into the Euro-Atlantic community. Despite the challenges from the global economic slowdown, we can see that the region is moving forward. All of the countries have undergone dramatic political, economic and social transitions. All of the countries in the region have become valuable partners of the United States and Europe including contributing or planning to contribute, to international security operations. And, all of the countries in the region are committed to, and have taken steps toward, eventual membership in the European Union.
The United States shares the goals of the European Union and Greece. We are working to create the preconditions for sustained stability – functioning democratic processes and institutions, respect for the rule of law and human rights, regional cooperation, and economic development. In concert with our European partners, we are intensifying our engagement with the region’s leaders and pressing for reforms that will advance their states toward the European mainstream. Vice President Biden’s May visit to the region and his public speeches in Bosnia and Kosovo made clear our commitment to helping the countries in the region to overcome debilitating legacies and realize their aspirations. And most recently in Bosnia, Swedish FM Carl Bildt and Deputy Secretary of State Jim Steinberg have joined together in the Butmir process to help that country’s leaders to find a way through the political impasse that stands in the way of their Euro-Atlantic aspirations. However, critical challenges remain challenges compounded by the pressures of a global economic crisis and the significant
UIFBSFB demands placed on the Euro-Atlantic partnership by other priorities around the world. These priorities compete for, and place pressure on, a limited set of resources available for accomplishing our shared objectives – a situation that that can exacerbate social pressures within the region if not managed well. Crime and corruption remain one of the most serious problems hindering political and economic development in the region despite extensive internal reforms and international support. After more than a decade after assistance, the forces of democracy, openness and modernity still struggle in some places against backward-looking ethnic nationalism and intolerance. Much work remains to be done. To this end, U.S. support has placed and emphasis on helping authorities in the region to reduce opportunities for corruption and bribery through building oversight and audit capabilities and increasing their capacity to investigate and prosecute corruption and financial crimes. We have worked to empower civic groups, associations, and the media so they are better able to scrutinize
government operations. And we helped these countries to reform judicial systems by increasing accountability, transparency, and independence. To give just one example, the United States is participating in the EU’s Rule of Law mission in Kosovo, which is monitoring, mentoring and advising the Kosovo police and judicial institutions. The U.S. government remains a major donor of assistance to the Western Balkans in the areas of democracy, human rights and the rule of law. In 2009 alone, the United States allocated more than 116 million dollars to these activities. 44 million dollars of this amount went for support for fair elections, development of a vibrant nongovernmental sector, and effective and transparent government. Assisting in the development of justice systems that effectively fight crime while preserving due process and ensuring full access by citizens to legal remedies is a priority. We are spending more than 70 million on this in 2009, including in training and capacity development for police. And we are engaged not only in financial support but also on a humanitarian and person-to-person level. The fight against
trafficking in persons is a personal priority for me – it is a modern tragedy with age old roots, and the Balkan Peninsula – unfortunately – is one of this illicit trade’s most popular modern routes. To combat the trafficking of victims within the region and to Southeastern and Western Europe, the U.S. Government is working with local governments, Non Governmental Organizations and international organizations, including the International Organization for Migration and UNHCR. Together we are building local capacity to identify and assist victims. This includes funding crisis hotlines and women's shelters, improving training to help law enforcement better identify and treat victims, and expanding public awareness and education efforts to prevent vulnerable individuals from becoming victims in the first place. For others struggling to find a voice, the U.S. government is working with governments and international organizations to
increase and facilitate minority representation in the civil service, judiciary, central government, and elected bodies. Secretary Clinton has also made it clear that the Administration – and she personally – remains strongly committed to promoting the rights of Roma. On International Roma Day, embassies throughout the region hold events and activities to highlight the plight of Roma, and they continue to press governments to work to end discrimination and ensure equality of opportunity for these communities. Through small grants and technical assistance programs, we are also working to help build the capacity of local and regional NGOs to advocate for policy reform, build partnerships with public and private sectors, and promote inter-ethnic dialogue and understanding. We are working to advance media freedom and enhance the media's watchdog role by promoting investigative journalism and providing training, legal, and technical support to independent media outlets. For instance, the U.S. Government has helped to create a regional network of
investigative journalists in Southeast Europe through the Crime and Corruption Reporting Project. This is greatly expanding the reach of investigative journalism and has garnered support from other donors, including the United Nations Development Program. We all have a common interest in supporting the development of civil society, the media, rule of law and human rights in the region as a key component of long term stability and development. The United States looks to Greece as a partner and anchor of stability in the Balkans. We have been impressed with the priority the new Greek Administration has placed on the region. Greece exerts considerable influence in the Balkans through its strong diplomatic ties as well as its leadership in foreign investment and trade. We commend Prime Minister Papandreou’s public support for moving the Western Balkans toward EU accession. We recognize the challenge that the name issue has placed in meeting this broader strategic objective. Resolving this issue is also important to both countries as it will promote stability and provide the foundation for enhanced economic ties. We continue to support The U.N. led process to
finding an acceptable solution in the near term and welcome the bilateral contacts that have taken place recently to reinforce this objective. I am proud of the cooperation between the United States and Greece in promoting stability and development in the Western Balkans. The Obama administration is intensifying our engagement with Greece and the region’s leaders to support their reforms and advance their aspirations into the European mainstream. In the end, we will all benefit from their success. Daniel Speckhard is the Ambassador of the United States of America to the Hellenic Republic
book reviews By Dimitris Xenakis
The Incomplete Breakthrough in Greek-Turkish Relations Greece’s decision to lift its veto and grant candidate status to Turkey at the ΕU Summit in Helsinki in December 1999 was the result of a paramount shift in Greece's foreign policy that most analysts attributed to Greece's entry into the European Community in January 1981. The paramount shift in Greece’s policy toward Turkey has been the instigator of a process that managed to bring a substantive change, actually a breakthrough, on Greek-Turkish relations. What were the reasons for this U-turn in Greece’s foreign policy vis-à-vis Turkey, the neighboring state which was considered to be Greece’s major security threat over the course of the last thirty years, as well as of the reasons behind Greece’s major foreign policy initiatives? Was this fundamental reorientation of Greece’s strategy the result of a rational recognition of Greece’s new strategic needs and priorities, of a more in-depth ideational change related to a collapse of the traditional – and reigning – orthodoxy about how to deal with the ‘threat from the east’ or of a combination of both? When did Greece’s new strategy to transform the three decades dispute with its NATO-ally and ‘arch-enemy’ into a less confrontational and more stable relationship reach its climax? What were the particular goals the new strategy was aiming at achieving and, most importantly, to what extent had the new strategy managed through its implementation to affect the behavior of Turkey and/or its definition of national identity and interests? To what extent had the assumption of power by a conservative government, in March 2004, resulted in an alteration for the better – the so-called refinement – or for the worse – the so-called invalidation – of the strategy adopted by the socialists? Panayotis Tsakonas’ new book offers insightful answers to the above central questions which --although related to the most important chapter of Greece’s foreign policy in the post-WWII era—remained unanswered in the relevant literature. Moreover, based on unique primary sources (given
that the author is an academic who served as an advisor to the former Minister of Foreign Affairs, George Papandreou from June 1999 to January 2004) and extensive research on secondary sources, the book presents the first theoretical treatise of the most significant shift ever made in Greece’s strategy vis-à-vis Turkey. Indeed, by advancing the 'strategic culture' literature the book illustrates that culture is a basic determinant in understanding change in a state’s strategy. It also highlights the causal linkage between culture and strategic behavior by demonstrating the role particular realms of Greece’s strategic culture – agentic culture and national culture – play in explaining outcomes and in accounting for change. Moreover, by proposing how states employ international socialization in their strategic approaches to transform the behavior of other states, the book presents the most comprehensive explanation to date of what defines a state's socialization strategy, when it is likely to emerge in relations between adversaries, what forms it can take and with what consequences. The book thus shows how the paramount change in the traditional strategy Greece followed towards Turkey from the mid-70s and the adoption and implementation of a new strategy in the late-90s provides a unique empirical case to approach the concept of international socialization as a state strategy, pursued and implemented by a threatened Greece vis-à-vis a threatening Turkey. By developing a particular type of socialization strategy, namely active socialization strategy, Greece managed –Tsakonas argues—to transform over a certain period of time the EU factor into a catalytic instrument able not only to strengthen its balancing efforts but also to lead to the resolution of the Greek-Turkish dispute. The book does not only offer a fascinating new theory on foreign policy behavior, as T.V. Paul, James McGill Professor of International Relations, notes in his endorsement. More important, taking stock of the book’s findings Greek and Turkish decision makers now do know what it would take for a breakthrough in Greek-Turkish relations to happen.
Panayotis J. Tsakonas, The Incomplete Breakthrough in Greek-Turkish Relations. Grasping Greece’s Socialization Strategy (Palgrave Macmillan, Basingstoke and New York, 2010), pp. 304
CREATINGACOMMON By Vladimir Chkhikvishvili
I will concentrate on Russian gas and oil supplies to the region. To begin with I would like to point out that such projects as Bourgas-Alexandroupolis oil pipeline and “South Stream” gas pipeline do not represent - as it is often deemed - a “political plot” of Moscow aimed at a takeover of Europe. We do not impose these pipelines to anybody. They are merely commercial projects – result of mutual understanding of participating countries that we need to strengthen the energy security in Europe by diversifying ways of energy transportation. I would like to provide an explanation Many analysts suppose that by the year 2020 Europe will need additional gas volume equivalent to 200 bcm per year, taking into consideration growing consumption and demand as well as the fact that gas production in Europe (with the exception of Russia) is decreasing. Another example: at present through the Turkish Straits tankers deliver 110 mln. tones of oil and 45 mln.tones of oil products from the Black sea basin to international market. That is the limit, and it will be impossible to guarantee safe passing for those tankers if this limit is exceeded. Taking into account the expansion of the Caspian pipeline consortium (CPC) and the growing export of oil from Kazakhstan, Black Sea within 2-3 years period will receive additionally 50 mln.tones of oil, which will be impossible to transfer through the Straits. Here should be added that the capacity of the existing infrastructure has been fully
exhausted. Its deterioration and moreover – economic, as well as political problems in the transit-countries noticeably increase risks. Ukrainian gas transportation system is considerably worn out and needs modernization. As it is known, last March the European Commission and the Government of Ukraine signed the Joint Declaration on modernization of the Ukrainian gas transportation system. However, up to now no practical steps have been taken to this end. By the way, we were surprised that this Agreement was reached behind Russia’s back which is in fact the only gas exporter through Ukraine. Moreover, we indicated repeatedly that we were ready to provide technical and financial support for modernization of gas transportation system in this country. With the main purpose to overcome those interconnected and overlapping problems such projects as South Stream and Burgas-Alexandrupolis were planned and - I hope – would be realized. South Stream gas pipeline project with the leading role of Italian ENI and Russian Gazprom is designed for transportation of 63 bcm of gas per year and its realization should begin approximately at the end of 2010. At present time Intergovernmental agreements with most countries willing to participate in this project, namely Bulgaria, Greece, Serbia, Hungary were signed. Negotiations with Slovenia and Austria are close to an end. Recently Turkey has given its consent to create offshore section of the pipeline running within its exclusive economic zone. Those Intergovernmental agreements provide for establishing joint project companies which will undertake feasibility studies
and, in case the project is technically and commercially viable, will proceed with further planning, constructing and operating the pipeline in territories of participating countries. That kind of agreement was signed with Greece on April 29, 2008. In accordance with this agreement Gazprom and the Greek company DESFA are going to set up a joint venture on a parity basis. The relevant basic agreement between these two companies was signed on May 15, 2009 in Sochi. Some words about our cooperation with Greece in natural gas sector Russian gas came to Greece at the end of 1996 when the main pipeline KulataAthens was put into operation. During last thirteen years about 30 billion cubic meters of gas were supplied to Greece from Russia through gas transportation system running via Ukraine, Romania and Bulgaria. Since then this system in Greece has developed greatly. With the participation of Russian companies branch pipelines to Thessalonica, Keratsini, Lavrion, Volos and Alexandrupolis were built. Other branch pipelines to Evia and Ptolemaida are planned to be constructed. Local gas networks are now developing in Athens, Thessalonica and Larisa. Some years ago we reached the upper limit of 3,0 bcm of annual supplies of Russian gas to Greece through existing pipeline. It’s impossible to pump more using the old infrastructure. In case of necessity - and naturally of Greek government’s willingness additional quantities of Russian gas could be supplied through South stream gas pipeline.
GPGTI[POINT I would also like to dwell on the project of Trans-Balkan oil pipeline Burgas-Alexandroupolis. As it is known, discussion about this project initiated by the Greek side started in 1994 under the PASOK government. Later - in the period of 2005-2008 - during the New Democracy governing, this project got official legalization. I hope that in 2011 or 2012 the first oil quantities will start being pumped through the new pipeline. Now the implementation of the TBP project with initial capacity of 35 million tons of crude oil has entered the final stage. The trilateral Agreement between Russia, Greece and Bulgaria was signed in March 2007. This agreement is a result of the good will shown by the three countries to create an alternative transportation route for Caspian oil to the international markets. The shareholders reached an agreement in 2008 to register in the Netherlands an International Project Company (IPC) “Trans-Balkan pipeline” where the Russian shareholder owns 51%, the Greek shareholders own 24,5% and the Bulgarian - 24,5%. Taking into consideration that the Russian companies have to secure necessary quantities of oil to fill the pipeline, I suppose such division of shares is justified. Greek and Bulgarian branches of the IPC and its office in Moscow were established in 2008. At the same time a number of oil producing companies from other countries shows permanent interest in TBP. The possibility for new shareholders to join the IPC is on the agenda and such theoretical development does not contradict with the trilateral Agreement.
We assume that the construction of the pipeline will commence in the fourth quarter of the next year. This schedule requires the unconditional support of all States-Participants of this project. In particular, the Law proclaiming TBP a project of national importance is expected to be adopted in Greece, the IPC has conveyed for the consideration of the Greek authorities the draft “Host State Agreement”. But at present the project implementation to a great extent depends on the Bulgarian government which has not said its steadfast “Yes”. OJSC “Transneft” (the leader of the Russian Joint Venture-shareholder of the IPC) has initiated necessary steps aimed at forming oil flows along the entire transit route. In particular, on October 23, 2009 the IPC “Trans-Balkan pipeline”, OJSC “Transneft”, Sovcomflot and the Novorossiysk Shipping Company signed an Agreement of Intent which will guarantee uninterrupted and stable transportation of crude oil along the route from the port of Novorossiysk to the port of Burgas. Talking about possible competition with the Samsun-Ceyhan oil pipeline, I would like to underline that these two projects are different with relation to their sources. Samsun- Ceyhan oil pipeline will be filled, as I understand, by the existing oil flows redirected from the Black Sea Straits. In respect of the ecological factor of the TBP project, being frequently discussed in Greece lately, it is necessary to underline
that the IPC “Trans-Balkan pipeline” enlisted the services of leading world engineering companies with best experience in the field of environment protection to design and build the pipeline. Company intends to use the most up-to-date equipment and the latest technical solutions for constant eco-monitoring applied at thousands other similar pipelines. This will reduce the risks to a minimum. But nobody could give 1000% guarantees. Such guarantee could be issued only by the Lord but no such precedent has ever been registered. By the way, the representatives of NGOs, local authorities, mass media and other interested parties from Burgas and Alexandroupolis got acquainted this May with the modern, safe and ecological-friendly facilities of the Caspian Pipeline Consortium in Novorossiisk. Public presentations of the TBP project with special emphasis on environmental issues were held in the municipalities of the Evros prefecture at the end of April. They proved positive attitude towards the project on the side of local residents. I am convinced that the implementation of the South Stream and the TBP projects will bolster the energy security in Europe. The construction and the operation of these pipelines will attract to the participating countries additional foreign investments, create new jobs, secure inflow of considerable amounts as transit fees to the budgets and contribute to the economic development of the regions which the pipelines will be routed through. Vladimir Chkhikvishvili is the Ambassador of the Russian Federation to the Hellenic Republic
While the past decade has witnessed remarkable progress in stabilizing the Western Balkans and positioning the region on the ladder to NATO and EU membership, significant work still needs to be accomplished in order to fully secure the peninsula as a component part of the Euro-Atlantic community. Working in tandem, the United States and Greece can move this process forward as the two long-standing allies share the objectives of political stabilization, durable security, respect for human rights, economic development, and international institutional integration for the entire Balkan region. A collaborative bilateral initiative by two key policy institutes in both countries, CSIS (United States) and EKEM (Greece), aims to promote the process of the Western Balkansâ€™ Euro-Atlantic integration through the establishment of a U.S.-Greece Task Force. Objectives & Agenda â€˘ Assemble policy experts, regional specialists, security and foreign policy analysts, NGO representatives, business leaders, and other interested parties to create a durable network of expertise committed to developing the U.S.-Greek partnership in working more effectively in the wider Balkan region. â€˘ Alert the Washington policy community, the NGO sector, and business leaders to specific opportunities and obstacles facing the Western Balkans in the re-
gionâ€™s drive toward democracy, the rule of law, market economics, regional security, and international institutional integration. Promulgate practical policy recommendations for American and Greek policymakers and innovative approaches in the Balkans and within international fora on the basis of Task Force discussions and findings. Publish Task Force papers and recommendations and disseminate them to a wider audience in the United States and in Europe.
With the above priorities in focus, two co-chairs of the U.S.-Greece Task Force have been appointed to coordinate the project in Washington and Athens as well as two respective Working Groups. â€˘ Co-Chairs Janusz Bugajski Lavrentis Lavrentiadis Chair; Director, New European Democracies Project & Senior Fellow, Europe Program Theodore Couloumbis Professor Emeritus, University of Athens â€˘ Director of Research Ioannis Armakolas - Research Fellow, University of Oxford â€˘ Athens Working Group Spyros Economides - Senior Lecturer, London School of Economics and Political Science Ruby Gropas - Lecturer, University of Thrace Kostas Ifantis - Reader, University of Athens Dimitris Xenakis - Lecturer, University of Crete
â€˘ Washington Working Group Ambassador R. Nicholas Burns Professor, Kennedy School of Government â€“ Former Undersecretary of State for Political Affairs Heather Conley - Director, CSIS Europe Program - Former Deputy Assistant Secretary of State for European and Eurasian Affairs Stephen J. Flanagan - Senior Vice President and Director for International Security, CSIS - Former Special Assistant to the U.S. President; senior director for Central and Eastern Europe Ambassador Robert S. Gelbard Chairman, Washington Global Partners, LLC - Former U.S. Special Representative for the Balkans Ian O. Lesser - Senior Transatlantic Fellow, German Marshall Fund of the United States James Miller - Professor, Georgetown University Ambassador Thomas Miller- President and CEO, The United Nations Association of the United States of America Former U.S. Ambassador to Greece and Bosnia-Herzegovina Ambassador Charles P. Ries - Senior Fellow, Rand Corporation -Former U.S. Ambassador to Greece William H. Siefken - Senior Associate, CSIS - Former Director for CEE and Eurasia, Lockheed Martin Corporation; former Deputy Director for EUCOM and CENTCOM John Sitilides - Chairman, Southeast Europe, Woodrow Wilson Center
Publications CSIS and EKEM will publish concise and forward-looking U.S.-Greece Policy Reports on questions discussed and recommendations formulated in the two Working Groups. The topics will focus on significant regional issues; for instance, promoting Serbia’s Euro-Atlantic inclusion, developing Kosova’s regional cooperation, resolving the Macedonian/FYROM name question, enhancing effective regional economic cooperation, building stable democratic states, and combating organized criminality. Three interim U.S.-Greece Policy Reports will be published following sessions of the Washington and Athens Working Groups and through follow-up discussions by the project directors. CSIS and EKEM will distribute the U.S.-Greece Policy Reports to the U.S. and Greek administrations, the U.S. Congress and Greek parliament, and policy institutes in the U.S. and Europe. The U.S.-Greece Final Policy Report will be used at the close of the project in September 2010. Conferences • Washington Conference: An international conference scheduled for April 2010 will host Greek and U.S. government officials and policy experts in Washington. The event will focus on the international security questions impacting the Balkan region and the policy priorities and approaches of both Washington and Athens. It will include senior U.S. and Greek officials, security experts, and representatives from other EU countries and the West Balkan states. Pertinent recommendations of the U.S.Greece Task Force on security questions will be issued at the conference and a post-conference report will be released and circulated in Washington, Athens, Brussels, and the Balkan capitals.
Athens Conference: A combined conference will be the culmination of the first year of the CSIS-EKEM initiative and is scheduled to be held in Athens in July 2010 focus on both security and economic development. It will be the ideal venue for issuing policy recommendations that were formulated during the first year of the project. The conference will assemble U.S. and Greek officials, security experts, business leaders, economic analysts, and representatives from international financial institutes. A post-conference report will be released and circulated in Washington, Athens, Brussels, and the Balkan capitals. Other Initiatives: The U.S.-Greece Task Force project is open to other timely initiatives, including briefings for U.S. and Greek businessmen, expert visits from Greece and the U.S., fact-finding trips to Balkan capitals by the two project co-chairs, and publication of policy relevant articles in various American and European media outlets.
Research Themes • EU and NATO Enlargement: transition and reform, SAA, MAPs, and conditionality, state building, impact of enlargement processes, security sector reform, police reform, visa liberalisation, enlargement fatigue, geopolitical gravitation of the EU, prospects for the Western Balkans. • Regional Politics: political transition, democratization, nationalism and populism, state weakness, Kosovo’s status, ethnic and religious minority issues (Bosnia, Kosovo, Serbia-Presevo Valley, FYROM), FYROM “name issue,” transitional justice, legacies of conflict,
reconciliation (political consensus building, social and religious reconciliation, economic collaboration), role of the international community. Unconventional Threats: organised crime, trafficking, terrorism, regional cooperation, role of international organizations. Human Security: environmental protection and environmental security, natural disasters, health security and responses to H1N1 flu, HIV-AIDS etc., social problems, integration of immigrants, regional cooperation, role of international organizations. Energy Questions: energy security, energy policy and infrastructure. Regional Networks and Infrastructure: constructing infrastructure, European and regional transport corridors, sea transport routes, transport policy and economic integration, new technologies, R&D, communications, linkages with Trans-European and East Mediterranean transport networks, regional cooperation, role of international organizations. FDI and Economic development: priority areas for Western entrepreneurs, business environment and stimulation of investment, responses to global financial crisis, privatization and market liberalization, political risk, social impact assessment, regional cooperation, role of international organizations.
WKHLPSDFWRISLSHOLQHV By Riccardo Puliti
The European Bank for Reconstruction and Development (EBRD) is an International Financial Institution (IFI) which is owned by an array of states and other institutions, such as the EC and the EIB. The states members of the EU own around 64% of the capital of the EBRD but the single largest shareholder is the USA with 10.11% of the shares. EBRD finances and invest in projects located in the countries formally part of the Soviet Union (FSU), the pact of Warsaw and the non-aligned countries in South East Europe (mainly the Balkans). Since January 2009 the mandate of EBRD has been extended to Turkey. The mandate of the EBRD is to finance project that contribute directly or indirectly to foster the transition from a dirigistic economy to a market based one. The EBRD performs its mandate starting from a EUR 20 billion capital base. As a Business Group Director of the EBRD, I lead the Bank’s efforts in the Energy sector, this means investments in power generation, transmission and distribution and investments in the whole related to the exploration, transportation and distribution of hydrocarbons. The total level of investments by the EBRD in the energy sector is approximately equal to EUR 7 billion – EUR 4.1 in Power and EUR 2.9 in Natural Resources. In 2009 only, EBRD provided approximately EUR 1.5 billion to projects in the energy sector. EBRD usually finances/invests in privately owned projects using market-based financial instruments such as corporate lending, private equity and project finance.
In the Energy sector the EBRD follows closely from core aims: • Increasing the security of the EU energy supply; • Promoting sustainable energy consumption and production to reduce the environmental impact of energy and to combat climate change; • Promoting energy efficiency and reduce energy intensity; • Ensuring the availability of affordable energy for the competitiveness of host economies and the EU. The aims described above, exemplifies our integrated approach to climate and energy policy. Obviously the financing/investments of the EBRD in South East Europe do not stop at the energy sector (more on this subject later on). EBRD is a major financier (providing debt like instruments and investor (equity/quasi equity like instruments) in financial institutions, transport and municipal infrastructures and to that very important economic interconnecting sector which is represented by the small-medium size enterprise. The amount of financing/investments in the South East region of Europe has reached the level of approximately EUR 2 billion in 2009, about 60% of which is in energy projects. The global financial crisis that we are experiencing globally, has hit the South East European Region later than the US and Western Europe but, even if the impact has been delayed it is quite important neverthe-
less. The “2009 Transition Report” published by the Bank a few days ago is very clear in showing the sudden slow down in GDP growth: on average GDP growth has been reducing from 7% in 2006, to 6.3% in 2007 to 6.5% in 2008 (estimate) to 6.2% in 2009 (projection). The good growth experienced precrisis, begins in the mid 90’s when many of these countries experience a rapid process of integration into the global economy and income convergence with more advanced economies. Economic integration occurred mostly at three levels: • Trade – Trade volumes between the EU (EI-15) and the South Eastern European countries expanded particularly rapidly with a big impact on production of goods; • Finance – Financial integration proceeded at an even faster pace than trade did, linked in part to political integration. The presence of foreign-owned banks grew dramatically especially in Central Europe, the Baltics and South Eastern Europe; • Labour – labour migration had a very strong impact on the economic performance since it generated considerable remittance flows.
The economic integration brought about very important benefits to the South Eastern European countries but also developed the significant macroeconomic vulnerabilities such as credit expansion being fuelled at a very quick pace, trade unbalances created by sudden imports fuelled by consumption etc. In the context of a global crisis like the one we are experiencing now, the unsustainable nature of these vulnerabilities was suddenly clear. I believe it is now the work of the host countries, the IMF, the IFI’s (such as the European Investment Bank and The World Bank Group), the EC and other important countries (in terms, for example, of donor countries) to help develop the right policies/ investments to kick-start economic growth. Obviously this will have to take place in the context of the global economic picture. It is the work of the EBRD to be part of the process described above. As promised, I did not forget that the subject of this panel is “New Energy Routes.” At the EBRD, we believe that one of the most compelling issues experienced by the South Eastern European region in terms of energy is the issue of lack of regional integration, both in power transmission and in natural gas transportation and storage. Lack of regional integration in energy infrastructure is a factor of vulnerability. In a not too distant historical past, energy infrastructure was designed on a national basis. Nowadays new countries look rather different and energy infrastructures present a less
than optimal degree of efficiency. Investing in regional integration related projects will contribute to make energy use more efficient and economically viable and will also help in diversifying energy sources where necessary. An example of the above is the development, financing and construction of underground gas storage, which can very much contribute to an efficient use of gas and to mitigate possible gas crisis. The EBRD has already financed two of these projects in 2009 for a total amount of around EUR 250 million (in Hungary and in Croatia). An additional amount of EUR 300 million should be used during 2010 to finance the construction of two new projects in Serbia and Bulgaria. The financing of underground gas storage is important in a context of solidaristic use of energy within the EU and with neighbouring countries. In terms of new routes, we follow closely the development of the Trans European Networks - Energy (TEN-E) routes identified by the EU and which will contribute to the trans-European energy infrastructure network. The development of most of these projects constitutes a first class opportunity for the Southern European countries to benefit of a network of high quality energy infrastructure assets. The concept of a South Eastern European “energy hub” is becoming a reality. In terms of large natural gas projects, we follow closely all major projects. Our attention is due to the relevance these projects have in terms of energy diversification both
in terms of routes and sources. Russia will remain a very important gas supplier but other countries could assume a bigger supplying role, countries such as Azerbaijan, Turkmenistan, Iraq, Egypt and the gulf region in terms of LNG. I strongly believe in the role of private sector in the development of energy infrastructure. It is necessary that the right instruments are developed to attract and retain private investors. In this context the importance of transparent, open, public tenders procedures cannot be stressed enough – these are the key pre-conditions to attract and retain quality long term investors. In conclusion, the identification and support of shared energy infrastructure projects will bring about new investments, better security of supply and better efficiency which will contribute to the economic recovery of the region. The improvement in the security of supply and the better energy integration should also fuel both economic and political confidence which in turn constitute a major base for an additional effort in market reforms which is the base for attracting international investments. Riccardo Puliti is the Business Group Director of the European Bank for Reconstruction and Development
inancing the infrastructure projects in the Balkans
The issue of the panel today is the infrastructure works in Western Balkans. I want to present to you the Western Balkans Investment Framework. What it is, how it works and what interest it could present for Greek and the Greek businesses. A couple of years ago I was attending a conference and it was about environment. And there were three speakers. The first speaker was from the European Commission and he mentioned that all candidate countries and potential candidate countries, when they build new environmental infrastructure it should follow the European Union standards and abide by the European Union directives, which of course is very costly. The second speaker presented budgetary constraints of the various governments and sponsors. And the third speaker, who was from the World Bank, explained the physical space, a limited physical space and limited capacity of governments and municipalities to borrow. So, how to solve this problem? The answer is the Western Balkans Investment Framework, we hope. During the last year or so, the European Commission, the European Bank for Reconstruction and Development and the European Investment Bank worked together to prepare a framework for cooperation in order to put together the resources of the donors, who have grant money, and the banks who have loans, in order to produce unique financial packages to finance the big infrastructure projects in the Balkans. The objectives are to maximize the leverage of the grants and donations. Also to maximize coherence, synergy, efficiency and the visibility in the investments, to support of the investments, because you have to prioritize and obviously not everything can be
By Christos Gofas
done at the same time, so you need to put together the major players and see which projects are priority and how can they be financed. Then, of course, the result is support of the development of grater infrastructure in the region. Who can participate? Obviously the western Balkans, as the geographical coverage. All sectors contribute into social, economic and environmental development. And the eligible beneficiary entities can be either the private sector or the public sector. Eligible cost of the individual organization that participate to the scheme: The EIB, the EBRD or the European Commission. The type of grant, it can be for technical assistance for projectsâ€™ preparation, or co-financing of actual projects, constructions, or also, incentives, interstates subsidies and insurance premium. But what exactly is the Western Balkans Investment Framework? There are two components. One component are grants, and one component are loans. At this moment we are at the very beginning of the scheme. We have already invested 110 million euros for grants. The banks, the partner banks, which are the European Investment Bank, and the Council of Europe Development Bank, have already pledged 30 million. Then the EBRD have created a joint fund where other donors, countries in the European Union and out of the European Union, Canada has expressed interest, can invest. All these, at this very moment, make something like, 160 million. But the idea is that this has to increase in the future. Then, of course, are backed by loans. And the IFC have committed already 2 billion in loans, which makes investment of the order of 4 billion. Who are the key players? Of course the beneficiaries, because we talk now from the
perspective of the investors, of the IFC and of the European Commission, but all these projects that we are talking are projects of priorities of the countries they presented to us for financing. The other players are the European Commission, the International Financing Institution, the EIB, the EBRD, the CEB. But also can come in European Union member states, other donors, and other financial institutions, like bilateral financial institutions, like the KFW of Germany. There are the two sides, the grants and the loans. On the side of the grants, for example, we have already a project, which is called Infrastructure Project Facility, where we provide technical assistance for 32 million to prepare bankable projects. So, there the idea is only to assist in projects to bring them into a situation where they can be presented to banks for financing. Also, we have invested already money for co-financing of municipal investments. Then you have the money of the Western Balkans Joint Fund and the other grants, and on the other side the loans. It works like that. The beneficiaries or the promoters are presenting to a project financiers group, which is a technical group, which does the project certification, programming and screening of all the big infrastructure projects that are presented, with the idea of having a common pipeline. Then, this technical group, proposes to a steering committee projects in the region that are priority for financing and prepares single financial packages, that is also the advantage. Some grants, some loans on projects are the most important and those who are priority for financing. And then it goes to implementation.
It is important that the steering committee is giving strategic orientation, approves the operation and does supervision of the action. For Greece, for example, it is very interesting. First of all Greece can participate as a full member at the steering committee, but also in case of co-financing it can participate in the project financiers group. We have the case of the Corridor-10, a project that will be presented in the Western Balkans Investment Framework. Greece is co-financing by 100 million euro and they can be fully associated and participated in the project financiers group, which is assessing and screening and technically assessing the projects. We are sitting in the project financiers group, the European Commission, the partner IFC, other bilateral financial institutions, which Greece could take part. And they are doing projectification, programming, screening and assessment. What is interesting is that the banks are sitting together and working together in order to have a common single pipeline of big investment projects. The steering committee is where the decision is taken, and where the strategic rotations are given with many players and actors. The regional cooperation council represents the states of the region. You have the beneficiaries, but you can have also other observers. We intend to call the World Bank to participate, for example, for the time being as an observer. A few words on the sectors: Of course there are sectoral strategies. Projects in environment for example, they have to be part of the national sector strategies, they have to be in line with the environmental European Union and they have to be included in regional pipelines that are already underway. The same way in energy,
they have to be in line with the guidelines for the trans-european networks that we have talked before. Also there is Southeast Europe Energy Community, which is preparing priority projects and so on and so forth. In transport there is a southeast Europe transport observatory, which is based in Belgrade, and they have prepare a co-regional transport network. There is priority to railways, inland, water waste, in order to fight against the climate change and of course regional corridors. Inside the Western Balkans Investment Framework, when you have projects for technical assistance, for project preparation of investment projects, they have to be in accordance with European Union priorities and European Union accession needs. So, the projects are presented through the national authorities to the project financiers group, who is prioritizing the projects. Then you have the decision by the steering committee and then we take the decision to give order for service to consultants to produce feasibility studies, designs, documents and so on. One is the investments that are presented either by the sponsors, the promoters themselves, or by the IFC or by others from the project financiers group, who does again the same work of analysis, of screening and of assessment. Then it goes to the steering committee where it could be decided that the project is not mature enough and then you go back to technical assistance, where we provide additional technical assistance for further study and come back, or be proposed for grant co-financing for investment. The first pipeline for projects will be submitted to the first steering committee of the Western Balkans Investment Framework on the 8th of December. But which are these projects? For example, for the next meeting,
the first one is about regional local roads in Albania with estimated investment of 100 million. This is not the loan, this is the investment. The loan is less than the figure, and then it will be supported by grant of 4 million co-financed by the EBRD and the EIB. Also Corridor 10 will be presented. The total investment is 1,6 billion euros, which is not the whole of the investment. A grant of 10 million will be discussed in order to fund the supervision of construction. In addition, Corridor 5C is another very important project that is presented for approval. This is Bosnia â€“Herzegovina part of the regional core network. We have already taken decisions that we introduce to the scheme, and we have already decided to co-fund actual works in different municipalities, mainly water supply in Serbia, in Bosnia, in Kosovo, in Albania for 84 million euros grants, that complement loans of 500 million. For example, the water supply for Argyrokastro in Albania. The scheme itself is 22 million. There is 4,7 million of grants, and the rest is loans, about 12 million. Also, in Serbia, we have agreed in co-financing the reconstruction the transports in Belgrade together with the EIB. Finally, this is another case where there is only technical assistance for preparation of this project, it is in Bosniaâ€“Herzegovina-Biella water supply. So, we have already invested 2 million for preparing a project in which total investment is 12 million. Christos Gofas is the Head of Section for Infrastructure and Cooperation with International Financing Institutions, Directorate General for Enlargement, European Commission
PRIORITIES The subject areas of today’s conference “South-Eastern Europe: Crisis and Perspectives” is as well-timed as ever. The countries of our neighbourhood are on a critical turning point. They have to face significant challenges, mainly in the area of economy. It is obvious that the economic crisis has hit hard also the economies of the Balkan countries, many of which have already entered in a vicious circle of political imbalance. IT is a common ground that economic instability to trigger political instability and vice versa : a political fluidity to induce economic wobbles thus exalting economic instability There is no doubt that the escape of Balkan countries from the economic crisis will not be an easy task. However, if you allow me, as closing speaker of this conference, I will not focus, in this short presentation, on the past and on problems but on the future and on perspectives. In addition, in periods of crisis we always have to see the opportunities emerging and we are here to suggest solutions and implement specific actions. The integration of Western Balkans into the European Union is a one-way for the exit from the crisis. Recently, we celebrated the 20th anniversary from the fall of the Berlin Wall and the experience from the accession of many countries of the former Eastern block to the EU could only be characterized as positive. The European Union is actively engaged in the support of Western Balkan economies, ensuring economic and political stability through necessary reforms, develops new policy tools, regional institutions and flexible means of financing for the facilitation of investments in key-projects for the area, such as infrastructure works, SMEs support, etc.
By Louka Τ. Katseli
What is the role of Greece in this procedure? Greece will and must have specific goals and play a leading role in the SE Europe as a lever of development & economic cooperation at economic, political and technical level. A. As is known, South-East European countries are among the first marketdestinations for Greek products. It is worth mentioning that according to the data of the National Statistical Service of Greece and our Economic and Trade Bureaus in the area, the volume of trade presents constant increase during the last 3 years (2006-2008), exceeding 8 billion Euros in 2008, showing a 7.1% raise compared to 2007 (7.4 billion Euros). Most significant trade partners of Greece are Bulgaria, Turkey and Romania, having a share reaching 76% of the total trade volume of Greece with the countries of SouthEastern Europe. As far as investments are concerned, our country holds an important position in South-East European markets. The total invested Greek capital (1996-2008) exceeds 16.288 billion Euros. Taking also into account investments made by businesses of Greek interests through their affiliates in third countries such as the Netherlands, Luxembourg, Germany etc, the actual size of total Greek investments is clearly bigger. In 2008, it is estimated that our country ranked first among foreign investors in Albania, F.Y.R.O.M. and Serbia, third in Romania and forth in Bulgaria. The value of Greek investments in countries of the Balkans is estimated to reach 11.888 billion Euros. According to the Turkish Ministry of Finance, Greece held the 3rd position among foreign investors in the years 2006 and 2007. It should be stressed that despite the adverse consequences of the economic crisis and the
impulsive escapism shown by many foreign companies, the Greek ones remained at the host countries supporting domestic economy. Greek banks played a particularly important role towards this direction. B. At political level, Greece constitutes an important junction partner for the integration of these countries in the European institutions. As our Prime Minister underlined at the recent Summit Meeting in Brussels, Greece - looking towards 2014- plays a leading role in the Balkans while at the same time plays a key role in the integration course of the countries of South-Eastern Europe. Typical example of a development tool of Greece aiming at the economic, political and institutional support of the Balkan countries, with an ultimate target to enhance their European orientation, is the Hellenic Plan for the Economic Reconstruction of the Balkans (HiPERB). Secondary aims of the HiPERB are the modernization of infrastructures, the promotion of productive investments, the support of democratic institutions and justice, the modernization of Public Management and Administration, the enhancement of the social state, the confrontation of economic inequalities as well as the vocational training of the work and scientific force of the advantaged countries. In parallel, we aim to upgrade the Greek participation in the Black Sea Trade and Development Bank, in order to make an important step towards the satisfaction of goals set by the Black Sea Economic Cooperation (BSEC). In addition to the above we support every initiative coming from the private sector such as the Business Advisory Council – I can see its President Mr Efthymiadis attending tonight- as well as the Union of Black Sea and Caspian Confederation of Enterprises.
OF(REECE It is a priority for the newly appointed Ministry of Economy, Competitiveness and Shipping which I lead - in coordination with the Ministry of Foreign Affairs-, to motivate the business community and the relevant institutions towards the promotion of regional cooperation, lowering as much as possible the fragmentation of power and increasing the effectiveness of any initiative in favor of the countries of SE Europe. Greek enterprises contribute to the transfer of know-how especially in sectors where they possess a comparative advantage such as shipping transportation, construction, tourism and so on. Within our goals rests the creation of a Development Finance Institution in our country as well, as seen in other European countries, which will attract investments, support commerce and development cooperation among European and developing economies as well as the developing countries situated in the wider area of the European community by using as a catalyst - among others-, the development aid and modern financial credit tools that will enable Greek enterprises to invest in developing countries. Ladies and Gentlemen, Main objective of the Ministry of Economy, Competitiveness and Shipping, which is the Ministry for the development of the country, is the promotion of coordinated policies with short-term target the reviving of the economy and medium-term target the restructure of the production basis of the country, and the improvement of its competitive position. The support of the extroversion of Greek companies in combination with entrepreneurship strengthening are the main axes of our strategy. The regional cooperation offers for Greece valuable advan-
tages: enlarges the market, produces new investment opportunities, supports external trade and facilitates the adjustment of Greek economy and the business community into the challenges of the necessary technological advancement. Especially in a crises period our answer is : • Not to restrict but to strengthen peripheral cooperation • No less but further investments in our region • No capital outflows but support and increase of development aid in developing countries as much as it is possible. • Νo reduction but increase of the development aid Greece is a European country in the conjunction of three continents. This is the strategic advantage of our economic policy. Significant precondition for the effective utilization of the strategic advantage is the undertaking of specific measures that are this Ministry’s and my commitments Our five major priorities are: Support the entrepreneurship and the extroversion of our economy by simplifying all procedures of business start ups, licensing and operation. Only in this way we can attract investments from developing countries that will use Greece as a polar for their business initiatives in the greater area. We are preparing the bill in cooperation with the commercial chambers. To secure an institutional and tax framework stability for at least a three year period. Continuous changes reverse any plan and produce uncertainty in the investment community both in Greece and abroad. The restructuring of public expense in favor of investment and the activation of
community funds for the modernization of infrastructure, the improving of competitiveness and the restructure of the productive basis with effective use of state aid and focus in Green Development. In the 2010 Budget Draft, public investments increased by 800 m. while gross fixed capital formation as a percentage of GDP increases to 4,2%. The upgrading of external trade entities and the relevant bodies for investment attraction such as “Invest In Greece” and the “Hellenic External Trade Organization in order to coordinate their policies. The common goal of all these entities is to promote the openness of the Greek economy, the creation of value added products and the improvement of competitiveness. We take advantage of the comparative advantages of our country in the area of services and in particular in the areas of shipping, tourism transportation and culture, in order to establish new development polars and regional development reconstruction. Our aim is to implement a specific plan with measurable results, which will be a reference point of progress and accountability. In conclusion, I would like to stress out that, beyond our political and economic relations, what unifies us, the people of the Balkans and of SE Europe, are our common historic ties, our common past, common feelings shall I say, that makes us having lived through a troubled history, speak of a common political and business language. This is the most important ingredient of success in the relations of our people. Those are the common bonds we must utilize for the sake of our countries and mostly for the sake of our children. Louka Τ. Katseli is the Minister of Economy, Competitiveness & Mercantile Marine of the Hellenic Republic
51 Tara river, Montenegro