EU Enlargement


Growth Plan for the Western Balkans 2024-2027

Considering geopolitical changes during last several years and growing importance of the Western Balkans for the security of the EU and its citizens, in order to enhance EU engagement with the Western Balkans and to accelerate reforms and economic growth, the Growth Plan for the Western Balkans was adopted by the Commission on 8 November 2023. 

The Plan aims to:

  • integrate the Western Balkan partners into the EU’s single market, 
  • advance regional economic cooperation, 
  • deepen EU-related reforms 
  • increase pre-accession funding in view of accelerating socio-economic convergence of the Western Balkans to the EU. 

The Growth Plan incentivises enlargement partners’ preparations for EU membership, by bringing forward some of its benefits ahead of full integration into the EU. This in turn should significantly accelerate the speed of the enlargement process and the growth of their economies. Economic convergence is an essential element in getting the Western Balkan partners closer to the EU. The lack of convergence is a major issue for the Western Balkan region; it is currently at around 35% of EU average level. The Growth Plan has the potential to double the size of the Western Balkan economies within the next decade. To support this process a new €6 billion financial instrument, the Reform and Growth Facility for the Western Balkans, was adopted for the period 2024-2027.

Structure of the Growth Plan for the Western Balkans

The Plan is based on four pillars, aimed at:

(1) Enhancing economic integration with the European Union’s single market.
Integration with the EU’s single market has been the main driver of economic growth for all countries that joined the EU. For countries on the path to EU accession, closer association with the EU’s single market would bring benefits that could be felt directly by their citizens.
The offer to the Western Balkans included seven priority actionsfor integration into the EU’s single market:

  1. Free movement of goods;
  2. Free movement of services and workers;
  3. Access to the Single Euro Payments Area (SEPA);
  4. Facilitation of Road transport;
  5. Integration and de-carbonisation of Energy markets;
  6. Digital Single Market;

    (2) Integration into industrial supply chain,
    boosting economic integration within the Western Balkans through the Common Regional Market    , based on EU rules and standards.
    The Common Regional Market (CRM)is vital to overcome small fragmented markets, make businesses competitive, attract investors and retain workers. Based on EU rules, it is a stepping-stone to the opportunities of the EU’s single market. Substantial opportunities for integration in the EU’s Single Market will happen only if the region delivers on regional economic integration. 

    (3) Accelerating fundamental reforms, including on the fundamentals cluster, supporting the Western Balkans’ path towards EU membership, improving sustainable economic growth including through attracting foreign investments and strengthening regional stability.
    Each beneficiary prepares and implements a Reform Agenda, which is approved by the Commission following positive assessment by the Council. 

    (4) Supporting convergence through increased financial assistance: the Reform and Growth Facility for the Western Balkans.
    The Facility has a total financial envelope of €6 billion for 2024-2027, consisting of €2 billion in grants and €4 billion in concessional loans, with payment conditioned on the Western Balkans’ partners implementing specific socio-economic and fundamental reforms. The key to how the EU funds are divided among beneficiariesis determined in the Annex to the Reform and Growth Facility regulation.

The Reform and Growth Facility will reinforce the current financial assistance under IPA III.

The Reform and Growth Facility Regulation (RGF)

The Reform and Growth Facility Regulation (RGF) is a legal document that entered into force on 25 May 2024. In line with the RGF, financial support under the Facility will only be disbursed upon the successful implementation of reforms by the beneficiaries. Each beneficiary has to prepare a Reform Agenda, which is consulted, assessed and approved by the Commission following positive assessment by the Council.

At least 50% of the total amount (grants and loans) will go to investments through the Western Balkans Investment Framework (WBIF). The remaining amount of loans will be channelled to the treasuries of the beneficiaries.

The key to how the EU funds are divided among beneficiaries[1] is determined in the Annex to the Reform and Growth Facility regulation.

In the Reform Agenda, reforms are split into quantitative and qualitative steps, which serve as payment conditions, and each step has a timeline of implementation.

Payments from the Facility are subject to strict conditionality. There are three sets of conditions: preconditions, general conditions and payment conditions:

  • Pre-conditions need to be fulfilled at all times, namely that the beneficiaries continue to uphold and respect democratic mechanisms. Serbia and Kosovo need to engage constructively in the normalisation of their relations, as a specific pre-condition.
  • General conditions include macro-financial stability, sound public financial management, transparency and oversight of the budget.
  • Payment conditions are specific to each beneficiary and defined in the Reform Agendas.

Payments are done twice a year, based on requests submitted by the partners and following verification by the Commission of the achievement of the relevant payment conditions and fulfilment of general conditions and pre-conditions. In case necessary conditions are not met, the Commission will suspend or deduct a corresponding amount from the payment.

[1] https://enlargement.ec.europa.eu/enlargement-policy/growth-plan-western-balkans/allocations-available-each-beneficiary_en

each-beneficiary_en

Loans and Facility Agreement

The Commission has signed (should sign) loan[1] and facility[2] agreements with each beneficiary having an approved Reform Agenda, which will include obligations for beneficiaries to undertake appropriate measures to prevent, detect and correct fraud, corruption, conflicts of interests and irregularities affecting the financial interests of the Union, to avoid double funding and to take legal action to recover funds that have been misappropriated, the collection of adequate data on the recipients of funds under the Facility and the rights to be granted to the Commission, the European Anti-Fraud Office (OLAF), and the European Public Prosecutor’s Office (EPPO) where applicable.

Beneficiaries have requested the release of a pre-financing of up to 7% of their total allocation foreseen under the Facility and some have already received its payment. 

The disbursement of pre-financing is a subject to the entry into force of the two agreements (loan and facility agreements), and subject to the respect of the preconditions. 

In parallel, a pipeline of investments to be channelled through the Western Balkans Investment Framework is in preparation, for the decision of the WBIF Board.

[1] https://www.mep.gov.mk/data/7_%20Loan%20Agreement%20MK-EC%20signed.pdf

[2] https://www.mep.gov.mk/data/6_%20Facility%20Agreement.pdf

Commission Implementing Decision

On 23th October 2024, with the Commission Implementing Decision approving the Reform Agendas and the multiannual work programme under the Reform and Growth Facility for the Western Balkans[1] [2]the Commission approved the Reform Agendas of Albania, Kosovo, Montenegro, North Macedonia and Serbia following the EU Member States’ positive opinion. In their ambitious Reform Agendas, the five Western Balkans governments commit to socio-economic and fundamental reforms they will undertake to spur growth and convergence with the EU under the Growth Plan during the period of 2024 – 2027. This step was key to allow payments under the EU’s €6 billion Reform and Growth Facility, which will be made upon completion of agreed reform steps.

 

The Reform Agendas focus on the reforms in the priority areas of rule of law and other fundamentals, governance, the digital and green transition, human capital development and the business environment. In addition, each beneficiary has proposed a list of indicative investments to be funded under the Facility, critical to unlocking socio-economic growth, to be approved in the context of the Western Balkan Investment Framework.

 

The Commission has assessed each Reform Agenda based on the criteria established by the Reform and Growth Facility Regulation. The Commission concluded that the Reform Agendas fulfil the objectives of the Facility, including to accelerate the closing of the socio-economic gap between the beneficiary and the Union, and to further strengthen the fundamentals of the enlargement process.

[1] ANNEX I to the Commission Implementing Decision approving the Reform Agendas and the multiannual work programme under the Reform and Growth Facility for the Western Balkans. APPENDIX 1 The deadline of Dec-27 is to be read as Aug-27, in accordance with Article 13(1), point (i) of Regulation (EU) 2024/1449, as explained above. APPENDIX 2, country allocations. APPENDIX 3 List of indicators

[2] ANNEX II to the Commission Implementing Decision approving the Reform Agendas and the multiannual work programme under the Reform and Growth Facility for the Western Balkans