The rapid emergence of Serbia from the ranks of pariah states is likely to shine a spotlight on the European Union's strategy for the western Balkans. The picture revealed will not be pretty, and hard questions about cash are going to be posed very fast.
Take the much-vaunted Stability Pact process. Signed in June 1999, the pact is supposed to be a framework for regional co-operation, supported financially by 26 countries and a number of international financial institutions. It is not, EU officials are quick to remind one, an EU subsidiary, although run by Germany's Mr Bodo Hombach, a man who makes enemies easily, with a Brussels staff of 28.
Today only the Germans have kind words to say about the Stability Pact as an institution (although the strategy of encouraging regional interdependency is still at the core of EU policy). In part that was the fault of the heads of government. They had hinted broadly at the idea of a Marshall Plan for the Balkans and the states of the region had discovered quickly that it was to be nothing of the kind in terms of hard cash. And Mr Hombach's inefficiency did not help.
The latter emerged from the March pledging conference to claim that it had generated some €2.4 billion in commitments to regional aid for next year, a full third more than his target. But it turned out that much of the money, for example 350 million from the US, was simply recycled pledges and not new cash.
To cap matters it was revealed that no one had actually been taking minutes and so no one was really sure who had offered what.
In the region there was a strong suspicion that the Stability Pact was in reality merely a mechanism for keeping them at arms length from the EU and the real prize of eventual accession.
That concern has been heard in Brussels and the result has been a significant shift in emphasis towards the development of bilateral relationships between the Union and each of the states of the region through "Stabilisation and Association Agreements".
Negotiation of the first two of these, with Macedonia and Croatia, is underway and the hope is to sign the Macedonian package at the EU-Balkans summit called by the French Presidency for November 24th.
Modelled on the Europe agreements which the accession countries signed ahead of their current partnership agreements, they range from political dialogue to incentives for regional co-operation, to agreements on harmonising aspects of market regulations and provisions for movement of workers. The Feira EU summit in June made explicit that such agreements are to be seen as staging posts to eventual - very eventual - accession.
Most EU cash is likely to be funnelled to the region through these dialogues, but Serbia's rapid transition to democracy has exposed a massive hole in the budgetary process.
The Commission had sought to make a theoretical provision for a democratic Serbia of €2.3 billion for the 2000-2006 period as part of an overall contribution of €5.5 billion to the western Balkans (€11 billion if Bulgaria and Romania are included). That is on top of the €18 billion spent by the Union and member-states in the western Balkans since 1991.
But the new cash for Serbia will have to be found through increased contributions from member-states and they have until now proved unwilling to revise the budget. Any attempt to redistribute currently agreed Balkans cash to include Serbia is likely to provoke howls of rage from its neighbours.
The issue has the potential to turn the Zagreb summit, now certain to include the Serbs, into a very acrimonious meeting. And the structural problems are huge for this diverse region. Levels of annual per capita income range from $4,250 in Croatia to $810 in Albania. With a population of 15 per cent of the EU, the region generates barely 0.7 per cent of its GDP. Unemployment rates in Bosnia and Macedonia are close to 40 per cent.
Figures for Serbia are not available but are likely to be comparable. Enhancement of trade will be a major emphasis in EU policy but is much more important to some than others. In Macedonia the trade to GDP ratio is as high as 90 per cent, in Bosnia 60 per cent, while in Albania only 35 per cent.
Assisting its development should not, however, be costly for the Union. The total western Balkans domestic market is equivalent to barely half that of Greece. Its share of the EU market is 0.6 per cent of total EU imports. Intra-regional trade is tiny, at barely 12-14 per cent of the total.
EU foreign ministers last month lifted tariffs unilaterally on roughly 90 per cent of exports from the region and can be expected to move to do the same in the next three months in respect of Serbia.
The Brussels think-tank, the Centre for European Policy Studies (CEPS), in a recent report argues that the Union should go farther, abolishing all trade barriers to the region unilaterally, or, in the jargon of the business, "asymetrically".
CEPS argues that the EU should also encourage rapid integration of the region into the CEFTA, the Central European free trade zone, effectively liberalising intra-regional trade. Increased market access will compensate for the loss of customs revenue and encourage interdependency, the argument goes.
psmyth@irish-times.ie
