Following the need for the Western Balkan countries to shift the EU accession process, which has predominantly been conducted through political dialogue, towards a dominant process of economic integration, the European Commission adopted a proposal for a new Growth Plan for the Western Balkans on November 8, 2023. The main objective of the program is to accelerate the enlargement process and achieve faster economic development within the EU, as well as quicker economic convergence of the Western Balkan region. The key assumption of the European Union’s new approach is that implementing reforms, with more substantial financial support, will have a positive effect on the economic growth of the candidate countries. Several announced EU initiatives tied to the new plan, such as the introduction of facilitated flow of goods, services, and money, are aimed at strengthening the economies of the Western Balkans and preparing them to become part of the large EU Single Market.
To this end, a new Instrument for Reform and Growth for the Western Balkans has been proposed, valued at six billion euros for the 2024-2027 period. EU Regulation 2024/1449 stipulates that the financial support package includes a combination of 2 billion euros in EU grants and 4 billion euros in loans from international financial institutions granted on favorable terms. According to the EU’s prescribed methodology (which is based on a formula that includes variables such as population and GDP), Montenegro will be allocated 383.5 million euros under the new plan for a four-year period. This amount consists of around 273 million euros in loans from the EU provided on favorable terms and 110 million euros in EU grants.
This financial support is conditioned on the fulfillment of a range of reform measures across various public policy areas, as well as additional criteria in the fields of democracy, the rule of law, and human rights, which are individually defined for each Western Balkan country in the Reform Agenda format, an official document submitted by the countries for approval by the European Commission. In addition to the announced reforms, the allocation of financial support is also contingent upon further adherence to other general conditions regarding macro-financial stability, good governance of public finances, transparency, and budget oversight.
After extensive consultations with the European Commission, the Government adopted the Reform Agenda 2024-2027 for the EU Instrument for Reform and Growth on September 26, 2024, which was subsequently approved by the European Commission at the end of October this year. The final document contains 32 indicative priority reform measures within four policy areas, 14 sub-areas (sectors), and 130 steps defined as necessary to fulfill the reforms. The defined steps also include success indicators, which will serve as the basis for monitoring progress in implementing reform measures and for the EU’s assessment of the fulfillment of conditions for the allocation of funds.
In parallel with adopting the Reform Agenda, intensive work is being done on utilizing the opportunities offered by the EU through other pillars of the Growth Plan. All citizens and economic entities will have simplified payment transactions with countries in the Single Euro Payments Area (SEPA), of which Montenegro has been a formal member since November this year. Furthermore, concrete benefits are expected from gradual integration into the single digital market, such as membership in digital hubs, the use of the Single Digital Wallet, greater availability of wireless internet in public spaces in our municipalities, and increased use of digitalized public services.
Although the proposal for the Growth Plan for the Western Balkans has been received differently by countries in the region, as well as by EU member states, it has certainly raised a crucial question that underpins the EU accession process—how quickly can we achieve the average development level of EU member states, and how can the EU help our citizens live at the same standard as those in the EU? The European Commission, when drafting the Growth Plan, used the results of a special study by the European Bank for Reconstruction and Development from early 2024 titled Can the Western Balkans Reach the EU Standard of Living? The results of the econometric model at that time were not encouraging—without the Growth Plan, the region could achieve the EU average standard of living at best by 2046, and at worst by 2093. Now, with the Growth Plan, it is clear that if this plan is fully implemented, a range of concrete benefits—from EU financial support to the impact of joining certain areas of the European market and carrying out large infrastructure projects, to the financial effect of reforms we will implement—will have a positive impact on the medium-term economic growth rate. Time will certainly tell whether such an effect, along with all the multiplicative factors, will be sufficient to meet the ambitious announcement by the European Commission that this plan could double the region’s economic growth rate by 2030 and shorten the period in which the region could achieve the average growth and development rate at the level of EU 27.
In the case of Montenegro, the Growth Plan is an instrument whose implementation will go hand in hand with the acceleration of the negotiation process and will be an element that will help us, even at this stage of accession, and in daily life, see that the European Union considers us as a future member state. The responsibility of the Government, the Parliament, the judiciary, the prosecution, and the entire system of institutions will, in the coming period, be all the greater—to timely and effectively implement all reform measures we will commit to in the Reform Agenda. However, this process of implementing reforms should not be viewed only as a mechanism that will help the European Union allocate additional financial support. While the importance of these funds is undeniable, it is much more important that through key reforms, such as the reform of state-owned enterprises, improving the work of inspection services, digitalizing public services, aligning with the EU Energy Market, and enhancing the education system, building new schools and kindergartens, and reforms in the rule of law, we create better and fairer conditions for the economic activity of each of us. Only in this way will we be in a certain position to contribute to the further transformation of society through this set of reforms, which will make the moment we become an EU member state merely the final, formal confirmation that Montenegro is fully part of the European Union.
Author: Bojan Vujović, General Director of the Directorate for Coordination of EU Financial Support