the bridge magazine issue 15
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SoutheastenEurope: Crisis & ProspectsTRANSCRIPT
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Editor' s noteSouth-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 countries’ 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 liberal-
ism 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 recov-
ery 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 region’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 “South-Eastern Eu-
rope: 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 execu-
tives 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
Guest editor
for this special issue:
Dimitris Xenakis
(University of Crete,
Hellenic Centre
for European Studies)
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ISSN 1791-2237
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A quarterly review on European integrationSE Europe & the SE Mediterranean
Vladimir ChkhikvishviliCreating a common
energy point
cover story 40 - 41
cover story 12 - 15
Dimitris DroutsasWhat we do there
cover story 32 - 35
Håkan MalmqvistThe way ahead
cover story 26 - 29
Spyros KouvelisEntering the EU
www.bridge-mag.com
Daniel SpeckhardReconstructing the area
cover story 36 - 38
cover story 20 - 23
Cristian Bichi Restart the growth
to change tha balkans
Neven MimicaSteps forward into the European
Integration processes
cover story 30 - 31
cover story 16 - 18
Dr. Milan ParivodicThe European Union as a challenge
Riccardo PulitiThe impact of pipelines
cover story 44 - 45
Louka T. KatseliPriorities of Greece
cover story 48 - 49
contents
First, planning for later years means planning now, for more years.Second, planning for the fu-ture means different things to different people.Differences can be found be-tween generations, genders, low-and high-income, coun-tries and regions. Lower income employees, even within less advanced economies, have higher expec-tations 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 develop-ments affect the financial solutions that companies and pension funds provide to address the wide-rang-ing needs of customers worldwide.Investing in later lifeWhile mainly men in the advanced economies will be prepared, wom-en and low income households in the transitional and developing countries’ economies will find them-selves 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, em-ployer, and families) have to real-
ize the importance of having more than one source of retirement income. However, a previ-ous 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 pow-er 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 mon-ey, but non-monetary values, such as their perspective of
life, their knowledge, and their way of offering to their communities.
Population structure in the EU25 is expected to change dramatically between now and 2050. Particular-ly, 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 dou-ble 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 so-cial system must finance more el-derly 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 fu-ture 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 dif-ferent sources. We need to restruc-ture the first pillar, by transforming it into a standard basic retirement in-come provider, in order to enhance solidarity between generations and society. The second pillar (occu-pational pensions) should also be activated by improving the existing legal framework. This will provide a second source of income dur-ing retirement and make the level of retirement a matter of personal choice, which won’t based on ge-neric rules. Moreover, we have to further expand third pillar by provid-ing tax incentives to consumers and develop a level playing field.
Private companies can definitely support pension reform. Interna-
8 9
tional compa-nies bring inter-national expertise by importing ready made and tested so-lutions, in the fields of customer service, actu-ary, risk management, fund management and asset management. Increased competition contributes also to the development of the pen-sions sector in a plethora of ways; firstly, by giving custom-ers more possibilities to switch to other pension providers; secondly, by enhancing efficiency in terms of pension administration, thirdly, by bringing constant pressure to opti-mize 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.
After having developed a level play-ing field we can enjoy a number of benefits, such as a highly transpar-ent system, a consistent and long-term political support without politi-cal opportunism, a consistent legal framework which will encourage the arrangement of pension provi-sions and a wide array of invest-ment opportunities.
Nevertheless, its time for the finan-cial 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 understand is-sues of provid-ing income for life and offer appropriate recommen-dations. It should focus on products that facilitate careful de-cumulation of savings in retirement and emphasize on compliance, transparency, simple and straightforward information. Fi-nally, the financial industry ought to educate the consumers, so the latter will be able to make the right deci-sions for their retirement plan.Certain of the statements contained herein are statements of future ex-pectations and other forward-looking statements. These expectations are based on ING Greece management's current views and assumptions and involve known and unknown risks and uncertainties. Actual results, per-formance or events may differ mate-rially from those in such statements
due to, among other things, (i) gen-eral economic conditions, in particu-lar economic conditions in ING’s core markets, (ii) performance of financial markets, including emerging mar-kets, (iii) the frequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persis-tency levels, (vi) interest rate levels, (vii) currency exchange rates (viii) general competitive factors, (ix) changes in laws and regulations, (x) changes in the policies of governments and/or regulatory authorities. ING assumes no obligation to update any forward-looking information contained in this document.
Bram Boon CEO ING Greece
For the last two decades, South-
eastern Europe met, like other Euro-
pean regions, outstanding develop-
ments. The most significant differ-
ence between Southeast Europe and
other regions is that the collapse of
the communist regimes unleashed
uncontrollable powers that led to
well known, tragic conflicts. How-
ever, 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 immedi-
ately after the
collapse of the
communist regimes,
even before tranquility returned to the re-
gion. Every country tried to gain stability
and economic growth; even those which at
first place had focused on nationalistic pri-
orities –that were eventually proven cata-
strophic. After all, the abolition of the East-
West 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 para-
dox 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 con-
ditions (internal and external) were different
from one country to another.
NATO and European Union took a posi-
tive stance vis-à-vis the Balkan states’ inter-
est 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 ap-
plication to be accepted. The procedure’s
resilience was not due to the NATO
members’ need to enhance their se-
curity 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 Eu-
rope, 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
concerns were
-at large- ex-
aggerated. In
all, partici-
pating in the
North Atlantic
alliance con-
tributed effec-
tively, 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
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 po-
litical convenience. The original aim was to
accelerate the accession process, even with
some derogation towards the economic cri-
teria. 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-at-
lantic institutions alone didn’t (and couldn’t)
solve the endogenous problems that were
facing many countries. For a variety of rea-
sons, not all countries of the region man-
aged to enter. Some of them, like Croatia,
are too close to do so. For some other,
like Bosnia, accession seems to be too far
away. Unfortunate experiences concerning
certain newly admitted countries’ perfor-
mance 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.
By Yannos Papantoniou
10 11
The amelioration of the international en-
vironment, 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 recov-
ery. The International
Monetary Fund and
the European Union
stood by the weak
economies of the re-
gion, while the inter-
national banks and
the countries where
their headquarters
lie were providing
them with adequate
levels of liquidity for
the normal opera-
tion of their financial
systems.
E x p e r i e n c i n g
this crisis has en-
abled us to draw
some useful con-
clusions concerning
the effectiveness
of the imple-
mented eco-
nomic policies
during the tran-
sition to market
economy proce-
dure 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 ex-
orbitant 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 in-
stitutions. Investor climate is largely affected
by administration operation. Bureaucracy,
ineffectiveness and corruption are the main
impediments against undertaking healthy
business initiatives. The bigger failures to-
wards transition can be spotted in the qual-
ity 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 in-
stitutions. This includes the updating of the
education system and investment on hu-
man 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 intercontinen-
tal energy transit. Most of the existing or
planned oil and gas pipelines between Eu-
rope and Asia pass through the area. This
development, apart from strengthening
regional economies, also upgrades the geo-
political role of the area and attracts interna-
tional investment funds.
Moreover, the resolution of pending po-
litical 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-Her-
zegovina case. It has been led to the current
situation, in order to escape from a really
bloody civil war. This development, how-
ever, 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 frame-
work for seeking effective approaches and
strengthening international
cooperation in a key geopo-
litical area. The magnitude
of the economic and social
problems and the devel-
opments 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 coop-
eration of all actors that can offer creatively
to the efforts undertaken is needed, in or-
der 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 & Fi-
nance and of National Defense of the Hel-
lenic Republic
cover story
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 institu-
tions 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 stabil-
ity and economic development.
Throughout the region, democratic gov-
ernments 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 sig-
nificant 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 Secre-
tariat 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 prog-
ress 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, orga-
nized 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 coun-
tries 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 devel-
opment 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 South-
east 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-
By Dimitris Droutsas
12 13
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 per-
spective 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 Reconstruc-
tion 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 ma-
jor 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 pres-
ence of Greek enterprises has made a sig-
nificant 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 coun-
tries 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 prog-
ress 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 or-
gans of the European Union. And we worked
hard for the accession preparations and har-
monization of all the Balkan countries with
the European Criteria.
The first result of this policy is – I think
– that four Balkan countries are today al-
ready members of NATO, and two are in
NATO’s partnership for peace programme,
cover story
two Balkan countries have been EU member
states since 2007, with active Greek support,
I dare say. Two states are candidates for ac-
cession 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 liberaliza-
tion of the visa regime for all of the citizens
of the countries of the region has been de-
cided upon, based on targeted obligations
for reforms that will lead to their harmoni-
zation with European standards.
In view of the institutional develop-
ments in the European Union, we believe
that new momentum is needed for Euro-
pean integration and deepening. It is our
impression – we see it every day – that the
momentum we created in 2003 for the Eu-
ropean accession courses of the countries of
our region has died down.
For this reason, Greece has already un-
dertaken 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 mo-
mentum to the European Union itself, par-
ticularly 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 differ-
ences 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 ef-
fectively 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
14 15
name with a geographical qualifier for use in
relation to everyone, in all instances – erga
omnes.
Equally clear and well known is our de-
sire, 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 accept-
able 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 per-
sonal 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 Euro-
pean 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 dy-
namic and multifaceted. A foreign policy of
initiatives. Our guide is the creation of con-
ditions that will contribute to peace and co-
operation, 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 na-
tional 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 univer-
sal 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 Euro-
pean 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
cover story
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 busi-
ness and other more developed countries. In
some cases though, the luck of liquidity has
led companies to fail, resulting in unemploy-
ment. 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 tempera-
ture 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 can-
not improve its economy to the level of its
true potential. The most important politi-
cal issues which the governments and the
Parliament of Serbia are dealing with can
be summarized in four: we are late in Eu-
ropean 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 unfortu-
nately still not a closed book for Serbia. We
need to find quickly the appropriate solu-
tions 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 to-
wards Serbia, and somewhat has the impact
of unlocking Serbian international relations.
Since then only Holland is blocking Ser-
bia’s application of the stabilization
and association programme, keeping Serbia
on the margins of the European Union inte-
gration. 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 privi-
lege 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 applica-
tion for the candidate status to
the European Union,
s o m e -
By Dr. Milan Parivodic
16 17
thing that could happen very soon, even
next month.
The recent arrangement between Ser-
bia 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 Union’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 Presi-
dent 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 help-
ers. 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 govern-
ment, 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
Serbi-
an 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 impor-
tant success.
cover story
What are the challenges for the Serbian
economy? Unfortunately there are numer-
ous challenges. First is our competitive-
ness. The competitiveness of our economy
is weak, and the reasons for that lie in the
weak industrial base devastated in the ‘90s
and not enough developed in beginning of
the 21st century.
At the moment the crisis impact is re-
ally 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 dra-
matically 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 Demo-
cratic Party,
which is really the leading force towards
European Union, does not have a true part-
ner 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
don’t see really a challenging vision in that
respect. I don’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
18 19
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 econ-
omy 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 di-
rect investments and capital inflows, as well
as by a domestic credit boom, has been ac-
companied by widening external imbalanc-
es. 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 vulnerabili-
ties and deteriorating prospects, the gov-
ernment 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 im-
mediate objective was to facilitate an or-
derly 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 sec-
tor. Specific program objectives aim at: (1)
reducing the fiscal balance to bring the defi-
cit below 3 percent of GDP by 2011; (2) main-
taining 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 fi-
nancing and improve confidence.
In support of this program, a joint finan-
cial 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 su-
pervision by the central bank. It has so far
weathered relatively well the shock gener-
ated by deeper than anticipated contraction
in the economic activity. Although the non-
performing 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 Sep-
tember 2009, the profitability of the bank-
ing 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
By Cristian Bichi
20 21
percent. On the same date, the liquidity in-
dicator 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 im-
provements in the deposit guarantee legal
and operational framework.
A key measure undertaken by the Roma-
nian authorities was the preventive increase
in own funds and solvency of fundamentally
sound credit institutions operating in Roma-
nia 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 tech-
niques to assess the vulnerability of the
capital positions of 29 banks, Romanian le-
gal 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 institu-
tions and domestically- owned banks)
in order to maintain at least a 10 percent
capital adequacy ratio in the period Sep-
tember 2009 - May 2011. These banks were
asked to ensure the required capitalization
by-end September 2009 and end-March
2010. Under the so-called “Vienna Initia-
tive”, 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 subsidiar-
ies 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 under-
pin 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 frame-
work regarding the bank deposit guarantee
scheme were introduced in June 2009, by
government ordinance. The new legal provi-
sions ensure the full transposition in the na-
tional 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 de-
lay to a maximum of 20 days. The ordinance
also introduces a new mechanism of declar-
ing 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 divi-
dend distributions for credit institutions in
distress. New amendments to the banking
cover story
law and the special bank insolvency law
are planned in the near future, with the
objective to allow the Romanian authori-
ties 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 administra-
tion regime.
Monetary policy measures
The conduct of monetary policy dur-
ing 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 mini-
mum reserve ratio (MRR) for FX-denomi-
nated 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 – adopted in the context
of persisting low volatility of the exchange
rate of the domestic currency and ongoing
economic contraction – 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 condi-
tions for the sustainable revitalization of the
lending process.
Fiscal policy measures
The economic program of the Roma-
nian authorities includes also a strong fiscal
policy package aimed at achieving a neces-
sary short-term fiscal adjustment and intro-
ducing reform measures to make public fi-
nances 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-than-
expected economic contraction. Achieving
this objective will still require further signifi-
cant 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 strat-
egy 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) implementa-
tion of a Fiscal Responsibility Law; (4) public
enterprises reform; (5) restructuring of the
financial relations with the local govern-
ments; (6) improvements in tax administra-
tion; and (7) streamlined social assistance
programs. In early November 2009, two
important laws concerning the fiscal re-
form 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
22 23
either abolishing or incorporating them into
relevant ministries. The fiscal responsibility
law and the pension reform law, (agreed as
structural benchmarks under the IMF as-
sistance program, by 30 November 2009,
respectively 31 December 2009) are still to
be approved by Parliament.
Romania’s macroeconomic outlook is
improving, but there are still policy chal-
lenges 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 expect-
ed 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 pro-
portion of 106.4 percent. The significant nar-
rowing 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. Cur-
rently, 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 De-
cember 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 multi-
lateral 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 install-
ments 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 nomi-
nated 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 Fi-
nancial Crisis Management Unit in the Na-
tional Bank of Romania
cover story
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 suc-
cess 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 found-
ing members. In fact, the accession of new
member states has been a crucial issue that
has concerned the European Union repeat-
edly during its major development phases.
So the enlargement is one of the most
effective tools at the disposal of the Euro-
pean 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 reuni-
fication 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 accelera-
tion of the reform process, the above target
was achieved and the two countries became
the 26th and 27th EU member states.
By Spyros Kouvelis
26 27
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 implemen-
tation of accompanying measures recom-
mended 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 ar-
eas 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 turn-
ing 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 oppor-
tunities 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 Roma-
nia to the European Union is first of all the
achievement of their peoples. It came as the
reward for the necessary efforts and sacri-
fices that spanned many years, to the ben-
efit 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 endeav-
our. 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 sym-
bolic 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 per-
sistence, will for progress, the fulfillment of
all the criteria and prerequisites, intensive
work, and of course the power of coopera-
tion 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 strate-
gic importance.
Finally, the EU enlargement to the Bal-
kan countries was very important for our
country as well. For more than two decades,
cover story
Greece was a “European island” at the corner
of the Balkan peninsula, geographically cut
off from the rest of Europe. With the acces-
sion 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 strate-
gic 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 un-
derstanding with our neighbours, and also
broadened cooperation abilities aimed at
development. For this reason, Greece be-
came – 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 sub-
stantial strengthening of regional coop-
eration 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 inten-
sify the coordination of our actions within
community bodies, as three equal Euro-
pean partners. Also, Romania, Bulgaria and
Greece jointly reinforce the region’s voice
within the EU.
Here, I would like to point out that be-
yond 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), subse-
quently extended for a second five-year pe-
riod (2007-2011), with a view to implement-
ing the comprehensive policy for the region
of the Balkans. This policy’s objectives are
the modernization of infrastructure, the pro-
motion 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, ac-
tions, 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 South-
east 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 neigh-
bourhood. Thus, we have every reason to be
active in this process and become the motor
force behind our region’s course towards Eu-
ropean 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.
28 29
Greece’s gains from its accession into
the European Union have been manifold: It
consolidated and deepened its democratic
institutions, it secured funds and founda-
tions 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, en-
ergy 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 de-
velopment 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 offi-
cial springboard and compass for our West-
ern 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 mo-
mentum 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 Euro-
pean course of the region’s countries.
This initiatives, by setting 2014 as a tar-
get 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 spe-
cific 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 re-
gion’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
cover story
Croatia is a candidate country for the
European Union membership and our ac-
cession negotiations are getting well un-
derway. 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, actu-
ally, 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 gener-
ate 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 south-
eastern 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 ambi-
tious 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 lead-
ership in the 1990s. Actually, a kind of na-
tionalistic 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 commu-
nity to the conflicts and wars in the region,
also contributed to that unfortunate situa-
tion 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 “we 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 road”. 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 in-
tegration processes. Croatia shall be a new
European Union member most probably by
2012. FYROM would start accession nego-
tiations. 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 inter–related mixture of finan-
cial 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 pro-
cess has created bigger differences among
the member countries. These elements of-
ten seem to somehow straight away from
each other until Lisbon. Actually all those
negative elements finally match together in
By Neven Mimica
30 31
Lisbon, where a new institutional treaty was
accepted.
European policy towards the region
could be successful when only if it is con-
sistent, 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 perspec-
tive 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 politi-
cal 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 ar-
rangements 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 be-
hind 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 be-
tween 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 be-
ginning, 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 sta-
bility 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 con-
tinuation 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 Euro-
pean Union in the region, we need to work
together on a new approach. We need actu-
ally 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 commit-
ment 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 experienc-
es 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 commit-
ment by high Greek diplomatic officials, who
actually described the same vision Greece
wants to advocate in the region and the Eu-
ropean Union. Hopefully very soon, Croatia
from the northern part of the Balkans and
Greece from the southern part of the Bal-
kans 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
cover story
While it is still early to assess the out-
come 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 eco-
nomic 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 momen-
tum 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 trans-
late into more clarity, coherence and clout
in the EU’s external policy. We cannot pre-
dict 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, infor-
mal European Council is planned for the 19
November in Brussels, with the aim of sort-
ing this out.
The history of EU and its enlargement
tells us that membership is a strong guaran-
tor of lasting peace, reforms and social and
economic progress. This outcome from en-
largement policy is even more important in
the Western Balkans than it was at the pre-
vious accession with the EU-12. The bench-
marks and conditions to be met to move to-
wards 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 bilat-
eral 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 il-
lustrated 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 ten-
dency 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
By Håkan Malmqvist
32 33
of enlightened self-interest and of enhanc-
ing 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 in-
frastructure such as the Trans-European
networks.
We are quiet content with the achieve-
ments 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 member-
ship negotiations for Croatia have been un-
blocked and there are ongoing preparations
for an “avis” on the applications of Montene-
gro and Iceland. We hope to add Albania to
this group very soon.
The Commission’s progress report pack-
age has been generally positive and demon-
strate 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-Her-
zegovina’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 for-
ward in the enlargement field ahead of the
European Council of the Swedish Presidency
in December.
I hope the Swedish Presidency has dem-
onstrated 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 fall-
ing behind, for different reasons.
The most critical challenge remaining
is the failure in some countries to carry out
the reforms required to meet the Copenha-
gen 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 mea-
sures 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 fin-
ishing 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 con-
clusion of the negotiations are approaching.
If Croatia delivers, the EU Member States are
ready to propose the opening of the remain-
ing chapters and next year could see nego-
tiations coming to a conclusion.
Turkey
We welcome the fact that Turkey con-
tinues 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.
cover story
Other reform proposals need to lead to
concrete results. A real national consensus
on the remaining large scale reforms re-
quired is now needed, to increase the speed
of membership preparations.
Democracy, rule of law, respect for hu-
man 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 Ar-
menia is most welcome.
Still, we need to see movements also in
other areas. Turkey must fulfill the obliga-
tions 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, ac-
cording 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 re-
ceived 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 indepen-
dence of the judiciary need to be tackled de-
cisively in order for the reform momentum
to continue. After a decision by the Council,
an avis report is prepared by the Commis-
sion, 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 Mon-
tenegro can formally become a candidate
country for EU membership.
Albania
Albania has been gradually moving to-
wards European integration, a process that
has accelerated in recent years. A Stabiliza-
tion and Association Agreement entered
into force last April. We hope that the Com-
mission can very soon be tasked with pre-
paring an “avis” for Albania. To reach its goal
of EU membership, Albania must rapidly es-
tablish 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 sat-
isfactory 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. Co-
operation 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 al-
low 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 appli-
cation for membership.
Bosnia-Herzegovina
The Progress report showed overall sat-
isfactory implementation of the IA. At the
same time, progress has been very limited
with respect to other EU-reform areas in-
cluding 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 neces-
sary agreement on such issues as the condi-
tions 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.
34 35
Kosovo
We find it encouraging that the EU re-
mains committed to its long term engage-
ment 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 communica-
tion examining means to further Kosovo’s
political and socio-economic development.
This communication provides a frame-
work 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 tradi-
tion 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 Ice-
land’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 overesti-
mated, both for the region’s development
and its EU integration. Continued EU-sup-
port in this field is necessary. It is also crucial
to strengthen the strategy and impact of the
Regional Cooperation Council as a comple-
mentary 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 re-
gional integration which it aims to be.
To look more into some of these ques-
tions, together with the Regional Coopera-
tion 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 member-
ship”. It will focus more on the economic
and financial situation in the Western Bal-
kans with particular emphasis on the con-
sequences of the economic crisis, analyzing
the current situation and identifying ways
forward, for example through improved re-
gional 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
cover story
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 to-
gether to help create an environment to
support private investment, improved ener-
gy security, and increased economic growth
in Southeast Europe. I am proud of this co-
operation, 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 Bal-
kans are an area of symbolic and strategic
importance, and. in the last century a battle-
ground. While enormous progress has been
made, the Western Balkans remains one of
the last regions in Europe where there is po-
tential 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 sustain-
ability of peace in the region.
The Obama Administration places great
importance on completing the task of sup-
porting a fully integrated Balkan region into
the Euro-Atlantic community. Despite the
challenges from the global economic slow-
down, we can see that the region is moving
forward. All of the countries have undergone
dramatic political, economic and social tran-
sitions. 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 se-
curity 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 work-
ing 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 re-
gion and his public speeches in Bosnia and
Kosovo made clear our commitment to help-
ing the countries in the region to overcome
debilitating legacies and realize their aspira-
tions. 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
By Daniel Speckhard
36 37
demands placed on the Euro-Atlantic part-
nership by other priorities around the world.
These priorities compete for, and place pres-
sure 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 inter-
national support. After more than a decade
after assistance, the forces of democracy,
openness and modernity still struggle in
some places against backward-looking eth-
nic nationalism and intolerance. Much work
remains to be done.
To this end, U.S. support has placed and
emphasis on helping authorities in the re-
gion to reduce opportunities for corruption
and bribery through building oversight and
audit capabilities and increasing their capac-
ity 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 monitor-
ing, mentoring and advising the Kosovo po-
lice 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 dol-
lars to these activities. 44 million dollars of
this amount went for support for fair elec-
tions, development of a vibrant nongovern-
mental 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 mil-
lion on this in 2009, including in training and
capacity development for police.
And we are engaged not only in finan-
cial 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 – unfor-
tunately – is one of this illicit trade’s most
popular modern routes. To combat the traf-
ficking of victims within the region and to
Southeastern and Western Europe, the U.S.
Government is working with local govern-
ments, 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 en-
forcement better identify and treat victims,
and expanding public awareness and educa-
tion 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 govern-
ments and international organizations to
cover story
increase and facilitate minority represen-
tation in the civil service, judiciary, central
government, and elected bodies. Secretary
Clinton has also made it clear that the Ad-
ministration – and she personally – re-
mains 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 govern-
ments to work to end discrimination and
ensure equality of opportunity for these
communities.
Through small grants and technical as-
sistance 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 sec-
tors, 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 Bal-
kans. We have been impressed with the
priority the new Greek Administration has
placed on the region. Greece exerts consid-
erable influence in the Balkans through its
strong diplomatic ties as well as its leader-
ship in foreign investment and trade. We
commend Prime Minister Papandreou’s
public support for moving the Western Bal-
kans 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 inten-
sifying 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 Hel-
lenic Republic
38 39
book reviewsGreece’s decision to lift its veto and grant candidate
status to Turkey at the ΕU Summit in Helsinki in De-
cember 1999 was the result of a paramount shift in
Greece's foreign policy that most analysts attribut-
ed 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 rea-
sons behind Greece’s major foreign policy initiatives? Was this fundamen-
tal 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 conser-
vative 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 cen-
tral 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 strate-
gic behavior by demonstrating the role particular realms of Greece’s stra-
tegic 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 rela-
tions between adversaries, what forms it can take and with what conse-
quences. The book thus shows how the paramount change in the tradi-
tional 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 socializa-
tion as a state strategy, pursued and implemented by a threatened Greece
vis-à-vis a threatening Turkey. By developing a particular type of social-
ization 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.
The Incomplete Breakthroughin Greek-Turkish Relations
Panayotis J. Tsakonas, The Incomplete Breakthrough in Greek-Turkish Relations. Grasping Greece’s Socialization Strategy (Palgrave Macmillan, Basingstoke and
New York, 2010), pp. 304
By Dimitris Xenakis
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 Bour-
gas-Alexandroupolis oil pipeline and “South
Stream” gas pipeline do not represent - as it
is often deemed - a “political plot” of Mos-
cow 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 im-
possible 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 mod-
ernization. As it is known, last March the
European Commission and the Government
of Ukraine signed the Joint Declaration on
modernization of the Ukrainian gas trans-
portation 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 modern-
ization of gas transportation system in this
country.
With the main purpose to overcome
those interconnected and overlapping prob-
lems 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 cre-
ate offshore section of the pipeline running
within its exclusive economic zone.
Those Intergovernmental agreements
provide for establishing joint project compa-
nies which will undertake feasibility studies
and, in case the project is technically and
commercially viable, will proceed with fur-
ther 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 Kulata-
Athens 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 construct-
ed. 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 Rus-
sian gas to Greece through existing pipeline.
It’s impossible to pump more using the old
infrastructure. In case of necessity - and nat-
urally of Greek government’s willingness -
additional quantities of Russian gas could be
supplied through South stream gas pipeline.
By Vladimir Chkhikvishvili
40 41
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 alterna-
tive 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 pro-
ducing companies from other countries
shows permanent interest in TBP. The pos-
sibility for new shareholders to join the IPC is
on the agenda and such theoretical develop-
ment 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-Partici-
pants of this project. In particular, the Law
proclaiming TBP a project of national impor-
tance 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 Rus-
sian Joint Venture-shareholder of the IPC)
has initiated necessary steps aimed at form-
ing 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 redi-
rected 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 engineer-
ing 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 Alex-
androupolis 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 envi-
ronmental issues were held in the munici-
palities 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 consider-
able amounts as transit fees to the budgets
and contribute to the economic develop-
ment of the regions which the pipelines will
be routed through.
Vladimir Chkhikvishvili is the Ambassador
of the Russian Federation to the Hellenic
Republic
cover story
While the past decade has witnessed re-
markable progress in stabilizing the Western
Balkans and positioning the region on the
ladder to NATO and EU membership, signifi-
cant work still needs to be accomplished in
order to fully secure the peninsula as a com-
ponent part of the Euro-Atlantic commu-
nity. 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 Balkans’
Euro-Atlantic integration through the estab-
lishment of a U.S.-Greece Task Force.
Objectives & Agenda
• 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.
• Alert the Washington policy communi-
ty, the NGO sector, and business leaders
to specific opportunities and obstacles
facing the Western Balkans in the re-
gion’s drive toward democracy, the
rule of law, market economics, regional
security, and international institutional
integration.
• Promulgate practical policy recommen-
dations for American and Greek poli-
cymakers and innovative approaches
in the Balkans and within international
fora on the basis of Task Force discus-
sions and findings.
• Publish Task Force papers and recom-
mendations 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 re-
spective Working Groups.
• Co-Chairs
Janusz Bugajski
Lavrentis Lavrentiadis Chair; Director,
New European Democracies Project &
Senior Fellow, Europe Program
Theodore Couloumbis
Professor Emeritus, University of Athens
• Director of Research
Ioannis Armakolas - Research Fel-
low, University of Oxford
• Athens Working Group
Spyros Economides - Senior Lecturer,
London School of Economics and Politi-
cal Science
Ruby Gropas - Lecturer, University of
Thrace
Kostas Ifantis - Reader, University of
Athens
Dimitris Xenakis - Lecturer, Univer-
sity of Crete
• Washington Working Group
Ambassador R. Nicholas Burns -
Professor, Kennedy School of Govern-
ment – Former Undersecretary of State
for Political Affairs
Heather Conley - Director, CSIS Eu-
rope Program - Former Deputy Assis-
tant 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- Presi-
dent and CEO, The United Nations Asso-
ciation 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 Associ-
ate, 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
42 43
Publications
CSIS and EKEM will publish concise
and forward-looking U.S.-Greece Policy
Reports on questions discussed and recom-
mendations 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 co-
operation, building stable democratic states,
and combating organized criminality. Three
interim U.S.-Greece Policy Reports will be
published following sessions of the Wash-
ington and Athens Working Groups and
through follow-up discussions by the proj-
ect 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 interna-
tional conference scheduled for April
2010 will host Greek and U.S. govern-
ment 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 confer-
ence 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 eco-
nomic development. It will be the ideal
venue for issuing policy recommenda-
tions that were formulated during the
first year of the project. The conference
will assemble U.S. and Greek officials,
security experts, business leaders, eco-
nomic 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 proj-
ect 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 condition-
ality, state building, impact of enlarge-
ment processes, security sector reform,
police reform, visa liberalisation, en-
largement fatigue, geopolitical gravita-
tion 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 is-
sues (Bosnia, Kosovo, Serbia-Presevo
Valley, FYROM), FYROM “name issue,”
transitional justice, legacies of conflict,
reconciliation (political consensus build-
ing, social and religious reconciliation,
economic collaboration), role of the in-
ternational community.
• Unconventional Threats: organised
crime, trafficking, terrorism, regional
cooperation, role of international
organizations.
• Human Security: environmental protec-
tion and environmental security, natural
disasters, health security and responses
to H1N1 flu, HIV-AIDS etc., social prob-
lems, integration of immigrants, re-
gional cooperation, role of international
organizations.
• Energy Questions: energy security, en-
ergy policy and infrastructure.
• Regional Networks and Infrastructure:
constructing infrastructure, European
and regional transport corridors, sea
transport routes, transport policy and
economic integration, new technolo-
gies, R&D, communications, linkages
with Trans-European and East Medi-
terranean transport networks, re-
gional cooperation, role of international
organizations.
• FDI and Economic development: prior-
ity areas for Western entrepreneurs,
business environment and stimulation
of investment, responses to global fi-
nancial crisis, privatization and market
liberalization, political risk, social impact
assessment, regional cooperation, role
of international organizations.
cover story
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 ex-
tended 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 distri-
bution of hydrocarbons. The total level of
investments by the EBRD in the energy sec-
tor is approximately equal to EUR 7 billion
– EUR 4.1 in Power and EUR 2.9 in Natural
Resources. In 2009 only, EBRD provided ap-
proximately EUR 1.5 billion to projects in the
energy sector.
EBRD usually finances/invests in pri-
vately 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 con-
sumption 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 en-
ergy 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 institu-
tions, transport and municipal infrastruc-
tures 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 pre-
crisis, 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 rap-
idly with a big impact on production of
goods;
• Finance – Financial integration pro-
ceeded at an even faster pace than trade
did, linked in part to political integra-
tion. 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 perfor-
mance since it generated considerable
remittance flows.
By Riccardo Puliti
44 45
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 unsus-
tainable 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 pro-
cess 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 infra-
structure was designed on a national basis.
Nowadays new countries look rather differ-
ent and energy infrastructures present a less
than optimal degree of efficiency. Investing
in regional integration related projects will
contribute to make energy use more effi-
cient and economically viable and will also
help in diversifying energy sources where
necessary.
An example of the above is the develop-
ment, financing and construction of under-
ground gas storage, which can very much
contribute to an efficient use of gas and to
mitigate possible gas crisis. The EBRD has al-
ready 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 stor-
age is important in a context of solidaristic
use of energy within the EU and with neigh-
bouring countries.
In terms of new routes, we follow close-
ly the development of the Trans European
Networks - Energy (TEN-E) routes identi-
fied 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 opportu-
nity 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 at-
tention is due to the relevance these projects
have in terms of energy diversification both
in terms of routes and sources. Russia will re-
main a very important gas supplier but other
countries could assume a bigger supplying
role, countries such as Azerbaijan, Turkmeni-
stan, Iraq, Egypt and the gulf region in terms
of LNG.
I strongly believe in the role of private
sector in the development of energy in-
frastructure. It is necessary that the right
instruments are developed to attract and
retain private investors. In this context the
importance of transparent, open, public ten-
ders procedures cannot be stressed enough
– these are the key pre-conditions to attract
and retain quality long term investors.
In conclusion, the identification and sup-
port of shared energy infrastructure projects
will bring about new investments, better se-
curity of supply and better efficiency which
will contribute to the economic recovery of
the region.
The improvement in the security of sup-
ply and the better energy integration should
also fuel both economic and political confi-
dence 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 Direc-
tor of the European Bank for Reconstruction
and Development
cover story
The issue of the panel today is the in-
frastructure 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 Commis-
sion and he mentioned that all candidate
countries and potential candidate countries,
when they build new environmental in-
frastructure it should follow the European
Union standards and abide by the European
Union directives, which of course is very
costly. The second speaker presented bud-
getary constraints of the various govern-
ments 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 coop-
eration in order to put together the resources
of the donors, who have grant money, and
the banks who have loans, in order to pro-
duce unique financial packages to finance
the big infrastructure projects in the Balkans.
The objectives are to maximize the le-
verage 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 pri-
oritize and obviously not everything can be
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 fi-
nanced. 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 cov-
erage. 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 projects’ preparation, or co-financing of
actual projects, constructions, or also, incen-
tives, interstates subsidies and insurance
premium.
But what exactly is the Western Balkans
Investment Framework? There are two com-
ponents. 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, Can-
ada 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 commit-
ted 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 ex-
ample, we have already a project, which is
called Infrastructure Project Facility, where
we provide technical assistance for 32 mil-
lion to prepare bankable projects. So, there
the idea is only to assist in projects to bring
them into a situation where they can be pre-
sented 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, pro-
gramming and screening of all the big infra-
structure 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 advan-
tage. Some grants, some loans on projects
are the most important and those who are
priority for financing. And then it goes to
implementation.
By Christos Gofas
inancing the infrastructure projects in the Balkans
46 47
It is important that the steering com-
mittee is giving strategic orientation, ap-
proves 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 partici-
pate in the project financiers group.
We have the case of the Corridor-10, a
project that will be presented in the West-
ern 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 assess-
ing and screening and technically assessing
the projects.
We are sitting in the project financiers
group, the European Commission, the part-
ner IFC, other bilateral financial institutions,
which Greece could take part. And they
are doing projectification, programming,
screening and assessment. What is interest-
ing 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 strate-
gies, they have to be in line with the envi-
ronmental 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 prepar-
ing priority projects and so on and so forth.
In transport there is a southeast Europe
transport observatory, which is based in Bel-
grade, and they have prepare a co-regional
transport network. There is priority to rail-
ways, 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 na-
tional authorities to the project financiers
group, who is prioritizing the projects. Then
you have the decision by the steering com-
mittee 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 pre-
sented 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 pro-
posed 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 addi-
tion, Corridor 5C is another very important
project that is presented for approval. This
is Bosnia –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 wa-
ter supply for Argyrokastro in Albania. The
scheme itself is 22 million. There is 4,7 mil-
lion of grants, and the rest is loans, about 12
million.
Also, in Serbia, we have agreed in co-fi-
nancing 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 Bosnia–Herzegovina-Biella water sup-
ply. So, we have already invested 2 million
for preparing a project in which total invest-
ment is 12 million.
Christos Gofas is the Head of Section for
Infrastructure and Cooperation with Inter-
national Financing Institutions, Directorate
General for Enlargement, European Com-
mission
cover story
The subject areas of today’s conference
“South-Eastern Europe: Crisis and Perspec-
tives” is as well-timed as ever. The coun-
tries 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 coun-
tries, 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 per-
spectives. In addition, in periods of crisis we
always have to see the opportunities emerg-
ing 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, devel-
ops new policy tools, regional institutions
and flexible means of financing for the fa-
cilitation of investments in key-projects for
the area, such as infrastructure works, SMEs
support, etc.
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 coop-
eration at economic, political and technical
level.
A. As is known, South-East European
countries are among the first market-
destinations 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), exceed-
ing 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 vol-
ume of Greece with the countries of South-
Eastern 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) ex-
ceeds 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 Al-
bania, F.Y.R.O.M. and Serbia, third in Roma-
nia and forth in Bulgaria. The value of Greek
investments in countries of the Balkans is
estimated to reach 11.888 billion Euros. Ac-
cording 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 for-
eign 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 inte-
gration of these countries in the European
institutions. As our Prime Minister under-
lined at the recent Summit Meeting in Brus-
sels, Greece - looking towards 2014- plays
a leading role in the Balkans while at the
same time plays a key role in the integra-
tion course of the countries of South-Eastern
Europe.
Typical example of a development tool
of Greece aiming at the economic, politi-
cal and institutional support of the Balkan
countries, with an ultimate target to en-
hance their European orientation, is the Hel-
lenic Plan for the Economic Reconstruction
of the Balkans (HiPERB). Secondary aims
of the HiPERB are the modernization of in-
frastructures, the promotion of productive
investments, the support of democratic in-
stitutions and justice, the modernization of
Public Management and Administration, the
enhancement of the social state, the con-
frontation 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 De-
velopment Bank, in order to make an impor-
tant 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 sec-
tor such as the Business Advisory Council – I
can see its President Mr Efthymiadis attend-
ing tonight- as well as the Union of Black Sea
and Caspian Confederation of Enterprises.
By Louka Τ. Katseli
48 49
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 in-
stitutions 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 advan-
tage such as shipping transportation, con-
struction, 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 co-
operation among European and develop-
ing 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 en-
able Greek enterprises to invest in develop-
ing countries.
Ladies and Gentlemen,
Main objective of the Ministry of Econ-
omy, 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 com-
petitive position. The support of the extro-
version of Greek companies in combination
with entrepreneurship strengthening are the
main axes of our strategy. The regional co-
operation 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 technologi-
cal advancement.
Especially in a crises period our answer is :
• Not to restrict but to strengthen periph-
eral cooperation
• No less but further investments in our
region
• No capital outflows but support and in-
crease of development aid in developing
countries as much as it is possible.
• Νo reduction but increase of the devel-
opment 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 at-
tract investments from developing countries
that will use Greece as a polar for their busi-
ness initiatives in the greater area. We are
preparing the bill in cooperation with the
commercial chambers.
To secure an institutional and tax frame-
work stability for at least a three year period.
Continuous changes reverse any plan and
produce uncertainty in the investment com-
munity 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 competi-
tiveness and the restructure of the produc-
tive 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 forma-
tion as a percentage of GDP increases to
4,2%.
The upgrading of external trade entities
and the relevant bodies for investment at-
traction such as “Invest In Greece” and the
“Hellenic External Trade Organization in
order to coordinate their policies. The com-
mon 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 ser-
vices and in particular in the areas of ship-
ping, 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 ref-
erence 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 suc-
cess 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
cover story
Tara river, Montenegro
50 51