The Stability Pact
for South Eastern Europe

What does European Perspective mean?

In the founding document, the EU, which has assumed a leading role in the Stability Pact, undertakes to draw south eastern Europe "closer to the perspective of full integration...into its structures", including eventual full membership. The European Union and its Member States are also the most important donors in the region. Since 1991, the EU has raised over 9 billion Euros through its various aid programmes.

Moving toward European structures includes, in principle, the possibility of full membership in the EU. Countries wishing to be admitted must, however, first meet the minimum conditions defined by the Council on 29 April 1997 concerning democratic, economic and institutional reforms.

As a contribution to the Stability Pact and an interim step towards membership, the European Union set up a new generation of Stabilisation and Association Agreements. They are aimed at the five south eastern European countries which still have no contractual relationship with the EU, i.e. Albania, Bosnia-Herzegovina, Croatia, the Federal Republic of Yugoslavia and Macedonia. At the Zagreb summit in November 2000, the EU initialed the first SAA agreement with Macedonia. Negotiations on a similar agreement with Croatia have started.

The intention is to increase economic, political and social co-operation between the EU and the countries through a new instrument, the aid regulation CARDS (Community Assistance for Reconstruction, Democratization and Stabilization). A financial amount of 4.65 billion Euros will be allocated over the period 2000-2006 to accompany and support the reforms of the countries concerned.

At the EU summit meeting in Helsinki in December 1999, Bulgaria and Romania, which already have association agreements (Europe Agreements) with the EU, were admitted to full negotiations on membership with the EU.

Successful Mediation in the Dispute
about the Danube Bridge

On 7 February 2000, mediation by the Special Co-ordinator succeeded in settling a dispute that had lasted for over a decade between Romania and Bulgaria over the location of a second bridge between the two countries over the Danube at Vidin - Calafat. On 27 March 2000 the Prime Ministers of both countries signed a joint declaration, on 5 June 2000 a technical agreement was concluded. The first loan contract with the EIB was signed on 8 December 2000.

Democratisation and Human Rights

The Stability Pact's stabilisation policy is not only about economic development. Without state institutions that work effectively and the democratic development of a state under the rule of law there can be no long-term economic development and prosperity. Equally, democratisation and non-discrimination are also fundamental preconditions to guaranteeing internal and external security. In this context, Working Table I has focused on the following:

• The Human Rights and Minorities Task Force has drawn up a comprehensive programme for the promotion of multiethnic co-existence and for the protection of minorities.

• The Good Governance Task Force, chaired by the Council of Europe, deals mainly with the development of local governments, the appointment of ombudsmen and women and the reform of the public administration.

• The Gender Task Force, chaired by the OSCE, is devoted chiefly to achieving equality and the appropriate representation of women in public life as well as enabling women to take part in the political process (empowerment).

• The Education and Youth Task Force deals with university education and vocational training, the teaching of history (school books), youth issues and democratic civics.

The Szeged Process

to support the democratic forces in Serbia

The Federal Republic of Yugoslavia was excluded from the activities of the Stability Pact as long as the political leadership in Belgrade flouted the principles of the Stability Pact. In October 1999, an initiative to support the democratic forces of Serbia was brought into being in the southern Hungarian town of Szeged. Since then, within the framework of the "Szeged Process", more than 40 partnerships have been concluded with cities and local authorities governed by opposition parties in Serbia. Further, Serbian municipalities and independent media received financial and technical support. Following the democratic changes the FRY became a full and equal participant of the Stability Pact on 26 October 2000. The FRY has been included in all existing activities of the Stability Pact.

• The Parliamentary Co-operation Task Force promotes education, exchange, and co-operation between members of parliament and their staff. On 13 September 2000, participants of the Zagreb summit meeting, committed themselves to expanding parliamentary cooperation and working with respective executive branches, and civil society institutions.

• The Steering Committee on Refugee Matters, chaired by Hans Koschnick, works on a package of legal, economic and social measures in Croatia and Bosnia-Herzegovina designed to assist the return of refugees and exiles to their home regions.

• In June 2000, the Regional Table adopted the Media Charter followed by an Action Plan with the aim of protecting the independence of the media and supporting the training of journalists.

Non-Governmental Organisations:
The NGO Charter

In October 2000, Working Table I adopted a charter on NGO-government partnership in the region. Partners will promote the development of NGOs and civic initiatives, adopt respective legislation, and promote state-NGO partnerships on a sustained and systematic basis.

Economic Reconstruction, Development and Co-operation

In its strategy paper "The Road to Stability and Prosperity in South Eastern Europe" in March 2000, the World Bank formulated the medium and long-term economic development goals of the Stability Pact. The goals are defined as follows:

• Private sector development, especially through the liberalisation of trade between the countries of south eastern Europe and the European Union, through the improvement of the business regulatory environment and the improvement of the financial sector;

• Poverty reduction and social development, especially through policies to foster social cohesion and inclusion; policies to encourage democratic and participatory processes, and; policies to strengthen social protection as well access to, and the performance of, the social services.

• Institutional development and governance, especially through the improvement of institutional and administrative efficiency and by addressing the problem of corruption;

• Increased investment in infrastructure

• Improvements in environmental protection.

Against this backdrop, Working Table II saw the following initiatives undertaken:

• The European Investment Bank (EIB) presented a comprehensive plan for the development of regional infrastructure (transport, energy, telecommunications and water supply). Preparations have started for a second round of infrastructure projects.

• The EBRD developed a strategy to promote the private sector, particularly small and medium-sized enterprises and those which focus on foreign trade.

Investment Compact

With the adoption of the Investment Compact in February 2000, south eastern European countries undertook to introduce free market economy reforms and to improve the climate of investment. With the help of the OECD, every country drew up a specific list of reforms. In accordance with the deadlines specified in the plan of action, implementation has started in Summer 2000.

• In January 2000, 20 high-level representatives from the European Union, the USA, Canada, Japan and south eastern European countries founded the Business Advisory Council, which works, in particular, for the improvement of the investment climate in the countries of the region, and helps ensure the implementation of the Investment Compact.

• The Working Group on Trade is developing measures to break down customs barriers and other trade barriers. The countries of the region have signed an appropriate Memorandum of Understanding.

• A Co-ordination Group deals with measures to promote vocational training.

• A Task Force is working on the development and the implementation of environmental programmes.

• An E-Balkans initiative has been developed to help countries in SEE to seize opportunities offered by new technologies.

• The Social Dimension Initiative attempts to foster increased access to social rights and infrastructures (social security, health, housing); social dialogue between governments, employers and workers, as well as employment creation for youth and vulnerable groups in society.

• A financial sector reform initiative has been launched to promote cooperation between central banks in the region and to foster appropriate conditions for commercial banks.

Strengthening of Internal and
External Security

Through its two Sub-Tables, Working Table III deals with questions of both internal and external security. The aim is to establish transparency and predictability and to promote regional co-operation in those two areas.

Reintegration of Soldiers
into the Labour Market

Due to reductions and reforms in the armed forces of south eastern European countries, tens of thousands of people are becoming unemployed. At the initiative of the Special Co-ordinator, the World Bank and NATO launched a programme to facilitate the integration of those affected into the civilian labour market. In Romania and Bulgaria, implementation of the programme has already started. The expansion of the programme to other countries is under consideration.

The Sub-Table on Security and Defence mainly deals with the following areas:

• In the context of arms control and non-proliferation, Stability Pact partners cooperate work on issues such as exchange of military information, notification and observation of military activities, restrictions on the location of heavy weapons, notification of the dissolution of special operations forces, and verification and inspection regimes.

• The Regional Mine Action
  Support Group is a forum for coordination and information-sharing in the area of mine action between the mine–affected countries of the region and other participants of the Stability Pact.

• The Disaster Preparedness and Prevention Initiative (DPPI) offers a framework for regional cooperation in the field of training and response.

• Working Table III also pursues the objective of developing a unified regional approach to fight the excessive and uncontrolled circulation of small arms and light weapons in the region.

The Sub-Table of Justice and Home Affairs deals primarily with:

• Measures to fight corruption and organised crime, e.g. support to countries of the region to adopt efficient legislation, build up appropriate institutions and develop adequate practices for a sustained fight against corruption and organised crime.

• Strengthening the judiciary in order to improve law enforcement, increasing regional cooperation of police forces,

• improving the rule of law and the legal framework regarding migration and asylum.

Anti-Corruption Initiative

In February 2000 the Stability Pact partners on Working Table III agreed on a comprehensive list of measures to fight corruption. The measures will be implemented by the countries of the region on the basis of a definite timetable. They will be assisted in doing so by the Special Co-ordinator's staff, the Council of Europe, the OECD, the World Bank, the European Commission and the USA.

Drawing Lessons from the Marshall Plan

In the implementation of the Stability Pact, important lessons are being drawn from the Marshall Plan and other post World War Two reconstruction programmes. Donor processes throughout the world have shown that they can be less than positive. Up to a third of internationally promised funds are never paid. Often, too much time goes by before promised financial aid and credits can be released and implemented in concrete projects. Both donors and aid recipients are usually to blame:

• On the donor side, bureaucratic procedures and co-ordination problems can lead to duplication and mismanagement. And the priorities set (occasionally by internal policy) by the donors are not always congruent with the needs of the recipients. As a result, financial loopholes often arise in important areas.

• On the recipient side, on the other hand, there is often a lack of the institutional and legislative preconditions needed to ensure that foreign money is invested in a targeted and controllable way. It is also often forgotten that every country has only limited potential for absorption in order to avoid distortions (such as, for instance, corruption or the dependency syndrome).

The Stability Pact therefore works as a two-way street. In order to receive support from the international community, the recipient countries must first implement appropriate reforms. The south eastern European governments, for example, have undertaken to carry out economic reforms (dismantling of trade and investment barriers) and to fight corruption and organised crime within the context of the Stability Pact. In exchange, the donors have undertaken to support the construction process in a co-ordinated way through assistance and credits.

It is not the amount of the money that is, in the end, decisive for the success of aid. Rather, it depends on the activities to which the funds are directed. In other words, as far as support is concerned, it is not so much a matter of "how much" but "what for".

The Stability Pact partners therefore came to the following understanding:

• to first set priorities regarding content before raising funds. At the first meeting of the Regional Table in September 1999, a preliminary work plan was adopted. The second Regional Table meeting (June 2000) saw the wide ranging "Agenda for Stability" adopted;

• to link financial pledges to concise projects - several hundred projects were examined within all three Working Tables in the run-up to the Funding Conference. The projects selected were compiled into the Quick Start Package and were recommended for funding at the Funding Conference.