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COMMUNICATION FROM THE COMMISSION TO THE COUNCIL on Operational Conclusions EU Stabilisation and Association process for countries of South-Eastern Europe Bosnia and Herzegovina, Croatia, Federal Republic of Yugoslavia, former Yugoslav Republic of Macedonia and Albania

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL

on Operational Conclusions EU Stabilisation and Association process for countries of South-Eastern Europe Bosnia and Herzegovina, Croatia, Federal Republic of Yugoslavia, former Yugoslav Republic of Macedonia and Albania

Introduction

In the context of the Regional Approach to countries of South-Eastern Europe [1], the Council established political and economic conditions [2] to be fulfilled by these countries, as the basis for a coherent and transparent policy towards the development of bilateral relations with these countries in the field of trade, financial assistance and economic cooperation, as well as of contractual relations.

[1] Conclusions of the General Affairs Council of 26 February 1996, followed by a Commission report on common principles for future contractual relations with certain countries in South-Eastern Europe: Report from the Commission to the Council and the European Parliament COM(96)476 final of 2.10.96

[2] Conclusions of the General Affairs Council of 29 April 1997

In 1999, the Regional Approach was developed into the EU Stabilisation and Association process [3]. This process did not a priori change the conditions applying to the development of bilateral relations in the field of trade or financial assistance and economic cooperation, or for the start of negotiations on contractual relations. What was changed was the nature of the contractual relations on offer - replacing the prospect of a Cooperation Agreement with that of a Stabilisation and Association Agreement.

[3] Conclusions of the General Affairs Council of 21 June 1999, based on the Commission Communication to the Council and the European Parliament on the Stabilisation and Association process for countries of SouthEastern Europe COM(99)235 of 26.5.99

The EU Stabilisation and Association process foresees that the conditions for the opening of negotiations are those laid down in the Council Conclusions of 29 April 1997 [4]. The various steps involved in the opening of negotiations are

[4] Although no specific criteria were ever developed, in that context, for the further development of the existing contractual relations with Albania and the former Yugoslav Republic of Macedonia.

- Fulfilment of the conditions set out in the Council Conclusions of 29 April 1997 (i.e. as assessed in these conditionality reports), followed by

- A report, by the Commission, on the feasibility of the opening of negotiations for an SAA with that country, followed by

- Assessment by the Council of this "feasibility report" and, if positive, a request for the establishment, by the Commission, of a proposal for negotiating directives

- A formal proposal, by the Commission, of negotiating directives for an SAA

- Adoption of these negotiating directives by the Council, and the launch of negotiations.

The Commission has also presented [5] a new strategy on assistance for the countries concerned by the EU Stabilisation and Association process, establishing a single legal basis for assistance - replacing the present OBNOVA and PHARE programmes. This new strategy will have as general objectives the promotion of institutional capacity-building, economic development and regional cooperation. With a view to increased emphasis on the development of regional cooperation, existing programmes and conditionality will be re-orientated accordingly.

[5] COM (1999) 661 final of 8.12.99

The present Commission Operational Conclusions have been reached on the basis of a factual report [6] which reviews compliance with these conditions by Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia (FRY) - all of which are subject to obligations under the peace agreements - as well as the former Yugoslav Republic of Macedonia, and Albania. For each country, compliance has been reviewed under the following headings: democratic principles; human rights and the rule of law; respect for and protection of minorities; market economy reforms; regional cooperation; and, in the case of Bosnia and Herzegovina, Croatia and the Federal Republic of Yugoslavia, compliance with obligations under the Dayton and Erdut Agreements, the Peace Implementation Councils and, most recently, the implementation of UNSCR 1244 (Kosovo).

[6] Commission Staff Working Paper: EU Stabilisation and Association process for countries of SouthEastern Europe - Compliance with the Council Conclusions of 29 April 1997 and 21 June 1999 SEC(2000) 168 /2 of 09.02.2000

While work is presently underway on the refocussing of assistance, and the relevant conditionality, the revised legislative process for a new assistance Regulation has not yet been completed. The Conclusions drawn in the present document therefore relate to the existing system i.e. eligibility for the autonomous trade preferences, economic and financial assistance under the PHARE programme (but not the OBNOVA programme, which is subject to different conditionality) and contractual relations. It also takes account of the ongoing work, by the Council, on the Commission proposal for negotiating directives for an SAA with FYROM [7], and of the Commission report on the feasibility of the opening of negotiations, with Albania, for an SAA.

[7] SEC(99)1279 final of 8.9.99

Conclusions

On the basis of the factual report - covering the period to January 2000 - contained in the Commission Staff Working Paper on compliance, by the five countries concerned, with the conditions set out in the Council Conclusions of 29 April 1997 and 21 June 1999 (SEC (2000)168 / 2 of 09.02.2000), the Commission has reached the following conclusions.

Section 1

1. Bosnia and Herzegovina

Bosnia and Herzegovina will continue to benefit from the autonomous trade preferences which have been substantially improved with effect from 2000.

Bosnia and Herzegovina is passing from a phase of heavier reconstruction to a phase of political and economic consolidation that requires more attention, particularly in the field of institution building and economic reform. The main problems of the country are the lack of consensus on a common statehood, general weakness of the institutions and an underdeveloped civil society. State institutions need to be developed and new coordination mechanisms at the entity and local level are needed to ensure effective and coherent action on the part of the country as a whole. A substantial improvement in the functioning of the State is essential for rapprochement to the European structures. BiH authorities at all levels are expected to commit themselves to this end, for which specific assistance will be made available. Another major challenge facing Bosnia and Herzegovina in the coming years will consist of achieving a process of self-sustained economic growth in the face of declining aid flows. This will require the establishment of an economic environment conducive to private sector led growth and the adoption of a medium-term coherent economic reform programme accompanied by stability oriented macroeconomic policies.

Return of refugees and displaced persons (especially minority returns) have improved. Both entities have made progress in the fields of judicial reform and economic legislation. The contribution of Bosnia and Herzegovina authorities, at State and entity level, to the activities of the EU-BiH Consultative Task Force (CTF) needs to be further improved and, in particular, BiH authorities should ensure an adequate coordination and follow-up of the CTF joint recommendations.

Due to the general political uncertainty and the institutional deficiencies, a Stabilisation and Association Agreement, or the conduct of a feasibility study to this end, cannot be envisaged at this stage.

2. Croatia

Recent developments are encouraging and can be a turning point in Croatian politics.. Despite concerns regarding the electoral legislative framework and a biased State television, the recent elections were conducted in a calm and orderly manner and signalled a strong desire for change by the Croatian population. The new Croatian leadership has the opportunity to put Croatia on a fully democratic path and rapidly to prove its commitment to solving the outstanding political questions which have so far hampered a substantial development of EU - Croatia relations.

Croatia will continue to benefit from the autonomous trade preferences, which have been substantially improved with effect from 2000.

The new Government is encouraged to undertake the necessary steps in order to enable the European Community to broaden its assistance and prepare a report on the feasibility of the opening of negotiations for a Stabilisation and Association Agreement. Until then, political dialogue, and cooperation within the Consultative Task Force, will be useful instruments with which to encourage reform and follow developments.

3. Federal Republic of Yugoslavia

a) FRY / Serbia

Given the continuing failure of the federal authorities to make any moves to fulfil the relevant conditions, the FRY obviously remains ineligible for the autonomous trade preferences.

Again, given the non-fulfilment of the relevant conditions, it is not appropriate to discuss the eligibility of the FRY for PHARE. Apart from humanitarian and democratisation assistance, which will continue, certain other forms of assistance (not provided to or through the central authorities) will continue.

It would also be inappropriate to propose the opening of negotiations for a Stabilisation and Association Agreement, although FRY remains eligible for the Stabilisation and Association process once it complies with the relevant conditions. In the meanwhile, political dialogue is being stepped up with representatives of the democratic forces within the Federal Republic of Yugoslavia.

All forms of relevant assistance (humanitarian, democratisation, reconstruction, budgetary) are being provided in Kosovo, which has also been specifically exempted from the oil embargo and flight ban. Support, both financial and in personnel terms, is being provided to the civil administration (UNMiK). Assistance should be targetted at, and conditional upon, reduced inter-ethnic tensions and increased cooperation with civil administration structures.

b) Montenegro

The main forms of bilateral relations with the European Community - autonomous trade preferences and PHARE - apply to the state (FRY) as a whole. As these instruments cannot therefore be used for the benefit of Montenegro, continuing assistance to that republic will continue to be by means of other Community instruments. Nor, for the same reason, can contractual relations be considered at this time.

As far as possible, Montenegro has been protected from the effects of the sanctions on the FRY / Serbia, and has been specifically exempted from the flight ban and oil embargo. Montenegro also participates in the political dialogue which has begun with representatives of the democratic forces within the Federal Republic of Yugoslavia.

Section 2

4. Former Yugoslav Republic of Macedonia

Acknowledging the positive record achieved by the country, its exemplary role in the region, and its compliance with the relevant conditionality, the Council adopted negotiating directives for a Stabilisation & Association Agreement with the former Yugoslav Republic of Macedonia on 24 January 2000, on the basis of the Commission's feasibility report [8] and recommendation for negotiating directives [9]. The Commission is making the necessary preparations with a view to opening negotiations during March 2000.

[8] Report on the Feasibility of negotiating a Stabilisation & Association Agreement with the former Yugoslav Republic of Macedonia, COM (99) 300 of 16 June 1999

[9] Recommendation for a Council Decision authorising the Commission to negotiate a Stabilisation & Association Agreement with the former Yugoslav Republic of Macedonia, SEC (1999) 1279 final of 8 September 1999

In the meantime, all existing instruments under the present Cooperation and Transport Agreements and within Community assistance as well as the political dialogue will be actively used in order to intensify the ongoing reform process in the country, in particular in areas where further progress is needed (economic reforms; public administration reform, reform of the judiciary, law enforcement and the media).

5. Albania

In accordance with conclusions of the recently adopted feasibility report [10],. the Albanian government is invited to present a status report, including a timetable on actions taken or envisaged in identified priority areas. These would include strengthening of security and public order improvement of governance and strengthening of law enforcement; continued macro-economic stabilisation and accelerated structural reforms. The Government is also invited to make further progress in all these areas with a view to a possible future opening of negotiations for a Stabilisation and Association Agreement. The Commission would also have to carry out additional technical talks with the Albanian authorities in order to clarify further certain aspects linked to the perspective of a Stabilisation and Association Agreement (Free Trade Area and alignment to EC acquis including related institutional aspects). In the meantime, all existing instruments under the present Trade and Cooperation Agreement and within Community assistance as well as the political dialogue will be actively used in order to support the ongoing process of stabilisation and reform in the country. Support to the public administration reform including the judiciary, police (in cooperation with WEU/MAPE) and the customs services remains of paramount importance, and could include specific support in order to allow Albania to benefit fully from the recently adopted trade preferences.