Brussels – The European Commission waited for the start of President Ursula von der Leyen’s annual autumn visit to the Western Balkans to announce the long-awaited details of the Growth Plan for the Western Balkans. This major strategic investment by the European Union, aimed at bringing the six regional partners closer together through a financing package tied to the implementation of social and economic reforms, is now ready for launch, following the approval of reform agendas from Albania, Kosovo, North Macedonia, Montenegro, and Serbia on October 23.
Thus begins the process that, according to von der Leyen, will result in the disbursement of the first pre-financing tranche of the new EU instrument “by the end of the year.” However, Bosnia and Herzegovina remains excluded for the time being, paralyzed by an institutional deadlock that has made it impossible to define and present the necessary document to Brussels, which would assure European partners of the sustainability of investments in social and administrative reforms.
What is the Growth Plan for the Western Balkans?
The Growth Plan for the Western Balkans was presented by the EU Commission in November 2023 and approved by the co-legislators of the European Parliament and the Council in April 2024. The plan is structured around four key pillars, aiming both to “close the economic and social gap” between the EU and the Western Balkans and to allow for “on-the-ground integration even before the countries formally become EU member states,” as stated by von der Leyen.
The first pillar focuses on economic integration into the Single Market across seven key sectors, provided the countries align with EU rules and open relevant sectors to neighboring countries. These sectors include free movement of goods, services, and workers; access to the Single Euro Payments Area (SEPA); facilitation of road transport; integration and decarbonization of energy markets; the digital single market; and integration into industrial supply chains.
The second pillar emphasizes internal economic integration through the Common Regional Market, based on EU rules and standards. Brussels estimates that this could boost the economies of the six partners by an additional 10%.
The third pillar focuses on reforms that will support both the EU accession process for candidate countries and foreign investments, while also strengthening regional stability.
The fourth pillar addresses financial assistance. A new instrument worth €6 billion for the period 2024-2027 – including €2 billion in grants and €4 billion in low-interest loans – with payments conditioned on the successful implementation of agreed socio-economic reforms outlined in the Reform Agendas (similar to the Next Generation EU for the 27 member states).
Financial Support for the Western Balkans
According to the Regulation governing the Reform and Growth Instrument, the allocations for each country are based on the most up-to-date data (as of May 25, 2024) concerning population and the ratio of GDP per capita in the region compared to each country. Serbia is the largest beneficiary, receiving €1.59 billion (28.3% of the total), followed by Bosnia and Herzegovina (€1.08 billion), Albania (€922 million), Kosovo (€883 million), North Macedonia (€750 million), and Montenegro (€383 million). Additionally, €30 million is allocated for technical and administrative assistance, and €360 million is earmarked for loan provisions (which will not be directly distributed to the beneficiaries).
The first pre-financing tranche – up to 7% of the total amount – will soon be disbursed to five of the six countries involved. This tranche is contingent on the approval of the “relevance, completeness, and adequacy” of each country’s Reform Agenda, which includes both rule-of-law and socio-economic reforms, as noted by European Commission spokespersons. Payments will occur twice yearly until 2027, based on requests from the partners and verification of a set of conditions in Brussels.
On September 25, the EU executive issued a positive assessment to Member States, which gave final approval on October 11 within the IPA Committee (the European Council body responsible for pre-accession assistance). Thus, the Commission was able to approve the five Reform Agendas and is now finalizing financing and loan agreements with each partner, enabling the disbursement of pre-financing. These agreements will require countries to adopt measures to prevent and combat fraud, corruption, and conflicts of interest that threaten the EU’s financial interests.
The Bosnia situation and the Serbia-Kosovo issue
Of the six Western Balkans countries, Bosnia and Herzegovina is the only one that has not yet submitted a final reform agenda to Brussels, a delay that could have broader consequences beyond the postponement of the first pre-financing tranche, estimated at around €70 million. In November 2023, Commission President von der Leyen warned in Sarajevo that “resources will be redistributed to other countries that are able to implement the reforms” if the fundamental reforms are not enacted.
Despite political pressure (including a summer extension for reaching a last-minute agreement), institutional chaos has persisted following the presentation of the draft by the ad hoc Working Group. First, Bosnian Serb president Milorad Dodik refused to accept two points regarding the appointment of judges to the central Constitutional Court and the recognition of its decisions. Then, representatives from four cantons of the Federation of Bosnia and Herzegovina (Central Bosnia, Tuzla, Zenica-Doboj, and Una-Sana) withheld their consent to the document. As of now, the situation remains at a standstill, and EU executive spokespersons have expressed hope that “Bosnia and Herzegovina will finalize its reform agenda soon so that the formal assessment can proceed.”
Regarding Serbia and Kosovo, an additional condition has been added. This entails a “constructive” commitment to normalizing bilateral relations, with the goal of fully implementing all obligations stemming from the February/March 2023 agreement (and its implementation annex), in addition to resuming negotiations on the Comprehensive Agreement. Without progress in the Pristina-Belgrade dialogue, the funds allocated under the Growth Plan will remain stalled or potentially forfeited, beginning with the “payment deadline evaluations” for the first tranche, as the EU Commission has clarified.
