EU CONDITIONAL ASSISTANCE
AS A FOREIGN POLICY TOOL
TOWARDS SOUTHEASTERN EUROPE

PLAMEN RALCHEV

Introduction

The European Union is a major reform-driving factor for the countries of Southeastern Europe. It sets standards and paragon for development that the countries in the region aspiring for membership should follow. In this paper I shall argue that the EU conditional assistance to the countries in the region, and the principle/ mechanism of conditionality applied in general, is an indispensable policy tool that the EU has at its disposal both for optimizing its policies towards the SEE, as well as stimulating the improved performance of the countries.

Using incentives to modify states’ behaviors or policies, known as ‘conditionality’, “is a core strategy through which international institutions promote compliance by national governments. Conditionality is an arrangement by which a government takes or promises to take certain policy actions, in support of which an international institution provides specified amounts of assistance. Pre-conditions are its most important component part.” (Checkel, 2000: 1)

Conditionality can also be described as “the use of fulfillment of stipulated political obligations as a prerequisite for obtaining economic aid, debt relief, most-favored nation treatment, access to subsidized credit, or membership in coveted regional or global organization.” (Schmitter 2001: 42)

Dwelling on SEE should keep us aware of the fact that it is a rather incoherent region, suffering from the dividing lines and multi-track effects. These divisions are particularly visible in the EU perspective. Bulgaria and Romania, for example, are moving on one of the EU tracks - the accession process, while most of the Western Balkans is on the track of the stabilisation and association agreement. (Ralchev, 2004)

What is for sure, however, is that the EU prospect exercises a speeding effect on the countries in focus, irrespective of the individual level of productivity.

I shall discuss first the “soft power” of the EU to bring stability to the region. In the second part of the paper, I shall consider some of the implications of EU conditionalities on Bulgarian and Romanian politics. Being the regional frontrunners in the process of EU integration, the experience of Bulgaria and Romania may serve as blueprints for the progress towards the EU of the Western Balkan countries. The EU policy priorities towards the Western Balkans, especially those featured at the Thessaloniki summit, will be discussed in the last section of the paper.

The EU and the Power of its CFSP in SEE¹

It is generally considered that the European Union is intensely committed to promoting ethnic reconciliation, democracy - building and economic reconstruction of the Balkans. The EU exercises these commitments through providing humanitarian aid, economic assistance, market access and political support. In long-term run the Union is also an important player in the region because the prospects of EU membership it offers significantly shape and re-shape the policies, behavior and course of action of domestic players. The prospect of EU membership, though uncertain and sometimes vague, is an effective incentive for political elites in Southeastern Europe to launch and follow reform agendas. The successful transition in most of the countries in the region is dependent on the assumption of integration with the EU. The EU’s policies towards the Balkans are hard to be comprehended outside the context of the much broader process of EU enlargement. As M. Vachudova notes, “Since 1989, building liberal democracies and market economies in East Central European states has been profoundly influenced by the process of attaining membership in the EU.” (EES News, Vachudova 2004: 1)

As M. Vachudova assumes in her book Europe Undivided (2004), the ‘benefits combined with the substantial requirements of membership have set the stage for the EU’s unprecedented leverage on the domestic policy choices of aspiring member states.’ It is difficult to find similar examples of sovereign states voluntarily agreeing to meet special requirements and then subjecting themselves to complex verification procedures following the overwhelming objective to enter an international organization. (EES News, Vachudova 2004: 1)

However, it is appropriate to clarify that, though M. Vachudova equalizes the EU and an international organization, there are at least three limitations to be made in such a comparison. First, I assume that the cost-benefit analysis of entering the EU is different from the cost-benefit analysis of entering an international organization of classic type. Second, at psychological level the expectations of possible gains after joining the EU usually outnumber or justify what would be sacrificed. These are important reasons for inducing cooperative behavior and attitude in domestic political, and not only political, elites. Third, the transfer of sovereignty from the member-states to the EU makes it a unique supra-national subject, which differs from a standard international organization in that the EU provides ‘pooling’ of sovereignty, resources and opportunities that not only the member-states but also single citizens of these states can benefit from.

The cost-benefit analysis and the expectations of possible gains after acquiring membership on behalf of the CEE states made the EU leverage of the principle of conditionality seem effective. It also worked in the case of Bulgaria’s and Romania’s accession. It is quite uncertain however, whether the same principle would deliver similar, or at least partly similar, results in the case of Western Balkans.

There are three mechanisms that the EU employs to assist reform-oriented governments from SEE – (1) intermediary EU rewards through aid and market access; (2) accession to the EU is by itself an acknowledgement of the credibility of the country and eventually reassures economic actors and foreign investors; (3) persistence on behalf of the EU for continuing enforcement of the requirements of membership. (EES News, Vachudova 2004: 2)

In many Balkan countries democracy- and institution-building and implementing economic reforms, though reasonable, are not self-inducing processes, due to the complicated domestic settings. Here comes the importance of intermediary rewards serving as support for reformist elites. The effect of such rewards in longer run is the improved performance and increased popularity of reform-oriented elites. Whatever effects these rewards may bring, however, M. Vachudova rightfully observes that they also impose higher costs on the EU member states. (EES News, Vachudova 2004: 8)

Since the enlargement process is one of the main domains of CFSP, the principle of conditionality as part of this process is perhaps the most effective EU foreign policy tool.

Applying the Principle of Conditionality

As Aneta Spendzharova suggests, conditionality is among the linkage mechanisms between international and domestic politics. (Spendzharova, 2003: 144)

The mechanisms for interaction between the international and the domestic political process are presented in the following table. (Spendzharova 2003: 145)

(Source: Spendzharova 2003: 146, taken from Schmitter 2001: 29)

If we are to contemplate the efficiency of EU conditionality in post-communist transitioning countries, we have to make first several assumptions: (1) domination of legitimate domestic processes in the country; (2) integrated and authoritative nation-state; and (3) avoiding the risk of zero-sum confrontations in domestic politics. (Spendzharova 2003: 146)

The Impact of the EU Democratic Conditionality²

In the case of post-communist applicants for EU membership, Spendzharova distinguishes two types of conditionality – reactive and proactive. Under reactive conditionality “the international organization reacts to the fulfillment or non-fulfillment of its conditions by granting or withholding rewards.” The proactive conditionality implies that the international organizations “punish or support non-compliant states”. The table below summarizes the momentum of European Union conditionality on acceding countries. (Spendzharova 2003: 146)

Source: Spendzharova 2003: 147, taken from Demetropoulou 2002: 93

Organizations like the EU by placing conditions on membership and applying external pressure act as active promoters of democratic transitions. (Spendzharova 2003: 147)

Though EU conditionality is not a special mechanism for promoting economic, social development and modernisation, it serves as a harmonizing mechanism, bringing them in tune with EU policy-making. It provides a blueprint for the modernisation of the political, economic and social systems of candidate countries domestically and Europeanization becomes “a series of operations leading to systemic convergence through the processes of democratisation, marketisation, stabilisation and institutional inclusion”. (Demetropoulou 2002: 92, cited in Spendzharova, 2003: 144)

With respect to the effectiveness of conditionality, studies have established that countries with favorable initial conditions such as Poland, Hungary, and the Czech Republic, where adaptation costs are not big, ethnic homogeneity is significant, accompanied by traditions of democracy and capitalism, as well as peaceful international environment enter a virtuous circle and qualify for EU benefits earlier.

(Spendzharova 2003: 147)

Internal conditions and legacies of political culture however are rarely so favorable. In countries like Bulgaria and Romania the lack of democratic and capitalist traditions, aggravated by the insecure environment, “conditionality works more slowly and less effectively”. (Spendzharova 2003: 147)

I would refrain from including ethnic cleavages among the factors limiting the effects of conditionality because these cleavages are part of the systemic and structural dysfunctions of respective polities and societies rather than being immediate hurdles for conditionality of the EU accession process.

In the period 1995-1999 the EU resorted to an active leverage involving ‘strategies reinforcing democratization and marketization reforms such as setting an explicit threshold level of democracy and functioning market economy before countries could qualify for membership in the Union.’ (Spendzharova 2003: 147 - 148)

The Implications of EU Conditionality in Bulgaria and Romania

Influenced by the EU pre-accession conditionality, Bulgaria and Romania have included a considerable number of EU-related issues in their domestic political agendas. Ultimately, this will ‘translate into increasing awareness and harmonization with EU policy-making mechanisms in the two countries, which, in turn, will make the prospect of EU membership more achievable’. In terms of domestic performance, ‘potential membership in the EU can function as an incentive for the modernization of the political, economic and social systems of candidate countries’. The mechanism of conditionality puts the burden of Europeanization ‘on domestic elites who are pressured to speed up reforms in order to meet EU accession criteria’. (Spendzharova 2003: 141)

Besides shaping the foreign policy orientation of Bulgaria and Romania in the most recent history of the two countries, the momentum of EU accession negotiations has made considerable impact on the domestic political agendas in both Bulgaria and Romania. In that sense, even if the two countries are going to be nominally outside the EU for several years after the EU enlargement in 2004, they have already been anchored in a process of letting Europe in their domestic politics.

The EU has provided Bulgarian and Romanian decision-makers with roadmaps to membership as evidence for the role of EU conditionality in structuring the accession process of the two countries. Roadmaps are a useful instrument, which guides the accession process for Bulgaria and Romania within the reinforced strategy. Provided guidance help both the governments of the two countries and EU officials to better identify and address pending issues in the short-term, medium-term and long-term perspective. The burden of properly addressing pending issues and the implementation of reforms is goes to domestic political and administrative level. Therefore, the success of the accession negotiation process depends on the internal reforms and developments in the countries striving for membership. (Spendzharova 2003: 149)

The roadmaps are important for another reason as well. Once anchored in the process of negotiations, countries are subject to the strong impact of EU conditionality, which measures progress toward membership by checking and evaluating policies for necessary reforms. (Spendzharova 2003: 149)

“According to a number of enlargement scholars, the main lever of EU conditionality is the provision of financial assistance, conditioned upon fulfillment of a set of criteria formulated by the EU. Indeed, as an encouragement in the case of the anticipated late joining of Bulgaria and Romania, ‘the Commission proposes that financial assistance to Bulgaria and Romania should be increased considerably from the date of first round of accessions, linked to progress on implementing the roadmaps and their absorptive capacity”. (Spendzharova 2003: 149)

The total EU pre-accession financial assistance for Bulgaria and Romania together amounts to 1,228 million Euro for 2004, 1,330 million Euro for 2005, and 1,432 million Euro for 2006. (Spendzharova 2003: 150)

In the case of Bulgaria and Romania the EU conditionality has worked for real more or less and the EU managed to induce domestic changes in a series of domains, such as market and public administration reforms, democratization and institution-building.

The Western Balkans and the EU Priorities

It is a matter of scholarly and pure policy-making interests to speculate on possible replication of the principle of conditionality in the countries of the Western Balkans in view of their EU perspective. At least at the level of political declarations the Western Balkans are ‘moving towards European integration’.³

The European Union’s policy of Stabilisation and Association has contributed critically to progress achieved throughout the region in promoting stability and in bringing the countries closer to the Union.

It remains open whether the policy of Stabilisation and Association will be further enriched with elements from the enlargement process, so that it can better meet the new challenges. Currently, the Stabilisation and Association Agreements constitute the overall framework for the European course of the Western Balkan countries.

The EU resorts again to the principle of conditionality underscoring that the pace of further movement of the Western Balkan countries towards the EU will depend on each country’s performance in implementing reforms, abiding by the Copenhagen criteria and the conditionality of the Stabilisation and Association Process. (European Council Conclusions, June 2003)

The EU pledges its commitment and assistance provided that they are ‘matched by a genuine commitment of the governments of the Western Balkan countries to make concrete steps towards the necessary reforms, to establish adequate administrative capacity and to co-operate amongst themselves’. (European Council Conclusions, June 2003)

The EU spells out a list of objectives and expects the Western Balkan countries to pursue these objectives at an accelerated pace: building fully functioning states capable of providing for the needs of their citizens; fighting organised crime and corruption and ensuring the rule of law. (European Council Conclusions, June 2003)

The EU envisages preparing European Partnerships for each SAP country, inspired by the Accession Partnerships for candidate countries, and adapted to the specificities of the SAP. These partnerships, being regularly updated, will identify priorities for action in supporting efforts of the SAP countries to move closer to the European Union. The partnerships will also serve as a checklist against which to measure progress, and to provide guidance for Community and Member State financial assistance. In order to enhance support for institution-building the EU will extend the instrument of twinning to all SAP countries and will finance it under the CARDS program. (European Council Conclusions, June 2003)

SEE Beyond the EU Enlargement

Having in mind the heterogeneity of the Balkan region, it is difficult to envisage a comprehensive way of keeping the EU perspective vital and effective for all the countries and entities within it. The results of the European Council and the Balkan Summit in Thessaloniki in June 2003 failed to distinguish the necessary consistent implementation strategy for the European integration of the Balkans.

“At the same time, the euphoria related to the successful completion of Eastern enlargement seems to nurture the illusion that this role model of integration suffices to cope with the stability risks and the developmental deficits of the Balkans. A rethinking and renewal of Balkan strategies, however, is still outstanding and should produce an arrangement with as many pre-accession instruments as practicable, as much stabilization policy as needed and as much economic development assistance as possible. The real challenges are moving from stabilization to integration, and from an externally-driven reform process to partnership, regional ownership, and sustainability. In sum, EU policy instruments need to become more flexible and differentiated. Whereas the advantages of eventual membership will come in a managed, incremental process, the illusions of partial or virtual membership should be avoided by developing functional forms of cooperation between the region and Europe as well as within the region.”

(Kempe and Van Meurs 2002: 9)

Kempe and Van Meurs list some of the recommendations for rethinking and renewal of European strategies for the Balkans point in various directions: (a) a consistent and comprehensive implementation of the perspective of EU integration; (b) functional cooperation both within and beyond the logic of EU integration, within the region, but also between the region and the EU or for a Wider Europe; and (c) specific strategies for the inevitable asymmetries and unintended consequences involved in international interference in a region of stability deficits, weak states, and unresolved issues of nation and state building. (Kempe and Van Meurs 2002: 9)

The complexity of EU guidance and assistance and the relative weakness of the Union’s counterparts in the Western Balkans require a consistent benchmarking and monitoring system. Monitoring should include but not be limited only to the criteria and conditionalities of the Stabilization and Association Agreements. (Kempe and Van Meurs 2002: 9-10)

Kempe and Van Meurs advance the argument that “in order to include all countries and entities of the region in the Stabilization and Association Agreement (SAA) path, a special SAA-Minus has to be defined for those incapable of fulfilling the SAA admission criteria in the medium term, e.g. due to unresolved status issues.” (Kempe and Van Meurs 2002: 10)

For example, after settling the SAA procedure for Serbia and Montenegro, Kosovo would be a candidate for SAA-Minus, with reduced conditionality and reduced but effective assistance and benefits. This reasonably leads to the conclusion that the specifics of Southeast European stabilization, development and integration require substantial modifications to the successful model of eastern enlargement.

It needs to be recognized that the Stabilization and Accession Process (SAP) in managing the integration of Western Balkan states is in essence a process of external governance, which runs the risk of weakening SEE state institutions and marginalizing democratic processes. “As long as state institutions and political processes in Southeastern Europe are judged solely on their compatibility with EU mechanisms, rather than in relation to domestic political, economic and social constraints, there is a risk that governance reform will fail to address key domestic questions.” (Kempe and Van Meurs 2002: 11)

If SEE governments are more intensely involved into SAP and Community Assistance for Reconstruction, Development and Stabilization (CARDS), the EU funds would be spent much more efficiently. The greater involvement of SEE governments would also avoid the risk of ‘imposing external policy frameworks that could result in paper institutions with little influence over, or relationship to, society.’ (Kempe and Van Meurs 2002: 11)

Maintaining bilateral relations between the EU and individual SEE countries based on the principle of conditionality is probably the most important instrument for implementing certain EU objectives. The SEE governments are well aware of the criteria they have to meet, but conformity of the foreign assistance programs with these criteria have to be required as well, thus, providing for ‘a stronger link between existing EU conditionality criteria and concrete objectives of assistance programs.’ (Kempe and Van Meurs 2002: 12)

Since the EU membership of Western Balkan countries seems quite distant, it would be wise to assist development and transition efforts of their economies, rather than insisting on criteria that would be relevant not earlier than the moment of EU accession. Therefore, it is recommendable that these countries devote their scarce resources to reforms and development, rather than to harmonization with EU legislation. (Kempe and Van Meurs 2002: 12)

A major shortfall of EU policy priorities in regard to the Western Balkans stems from the propensity of following the model of eastern enlargement and EU preferences rather than the requirements and concerns of the region. As it was already mentioned, regional specificities require modified approaches. Therefore, unless modified, it is likely that the EU will not be so successful in imposing its conditionality on the Western Balkans. Eventual success could only come from the juncture of EU priorities and Western Balkans necessities.

Remaining Concerns

In conclusion, underlining the utility of EU conditionality in reforming Southeast Europe in general, it is worth stressing that the relations between the EU and the SEE/ Western Balkans states are of reciprocal character. Obviously there is a shared interest in the stability of the region. On the one hand, the SEE countries need EU to ensure and maintain their stability. On the other hand, regional stability is vital for the EU itself, because instability in this case would be much more costly for the Union.

Notably, the EU has a pioneer role to play in the Western Balkans, especially in terms of setting standards and rules. It should also find a way to cope with immediate security concerns, stemming from the weak states and institutions and ineffective governance in some of the countries, including the future of international protectorates Bosnia-Herzegovina and Kosovo, the pending status of Kosovo, the performance and effectiveness of the EU Concordia mission in Macedonia. Building upon the experience from the relations with Bulgaria and Romania, it is evident that applying the principle of conditionality of support and assistance is the only feasible approach for the EU to incite improved performance on behalf of reform-oriented governments in the region. Conditional assistance in this case may well act as a modified “stick and carrot” policy. What makes a difference however is that it is up to the EU to decide how to ensure the synergy of its assistance by providing the “carrot” sliced or grated.

20 February 2004

Brussels

References

CHECKEL, J. (2000), Too Much of a Good Thing? Conditionality and Change in Post-Soviet States, University of Oslo, October 2000, p. 1

Council of the European Union, The Thessaloniki Agenda for the Western Balkans: Moving towards European Integration, 2518^th Council Meeting (General Affairs and External Relations), Luxembourg, 16 June 2003

KEMPE, I. & W. VAN MEURS (2002), Toward a Multi-Layered Europe: Prospects and Risks Beyond EU Enlargement, CAP Working Paper; Policy Recommendations 2002, pp. 9 - 12

RALCHEV, P. (2004), Southeast Europe after the First Eastern Enlargement: Bulgaria's Stake in Regional and European Security, pp. 106-117 in: INOTAI, Andras and Hans Friedrich von SOLEMACHER (eds.), Europe beyond the first wave of enlargement, papers of the first regional scientific seminar, Pecs, 21-22 October 2003, Institute for World Economics of the Hungarian Academy of Sciences, Budapest, 2004

SCHMITTER, P. (2001), “International Context and Consolidation”, The International Dimensions of Democratization – Europe and the Americas, Oxford: Oxford University Press, 2001, p. 42

SPENDZHAROVA, A. (2003), Bringing Europe In? The Impact of EU Conditionality on Bulgarian and Romanian Politics, Southeast European Politics Vol. IV, No. 2-3 November 2003 pp. 141-156

VACHUDOVA, M. A. (2004), The European Union, the Balkans and Turkey: Can “Soft Power” Bring Stability and Democracy?; EES Newsletter, Woodrow Wilson International Center, January – February 2004, pp. 1-2