Vol 1, No 17
18 October 1999
EC Progress Report Summary
One of our key interests at Central Europe Review is the Eastward expansion of the European Union, and along with our frequent articles on this evolving story, we intend to follow this process in a new series of monthly updates. Every month, our contributors throughout the region and beyond will summarise efforts of the Central and East European countries to attain membership and the evaluations of their progress by Brussels.
There is no better way to kick off this series than with a look at last week's "Regular Report from the Commission on Progress towards Accession" issued by the European Commission. This Report of hundreds of pages judges the preparedness of each candidate country and points out the most important areas of concern. The Commission highlights everything which could possibly trip up a hopeful applicant. Those countries wishing to enter the EU must demonstrate stability of institutions guaranteeing democracy, rule of law, human rights and respect for and protection of minorities; the existence of a functioning market economy; and the ability to take on the obligations of membership (including making progress in harmonising regulations with EU norms and addressing safety concerns in the nuclear industry). These are the all-important "Copenhagen criteria," so-called because they were set out at the Copenhagen Summit in 1993.
The Report issued on 13 October 1999 is of key importance for EU expansion, as the recommendations contained within are almost guaranteed to be accepted at the decisive European Council in Helsinki in December.
The Report contains warm praise for the region as a whole in the field of political reform, but the Commission has mixed judgements on economic reform from country to country. Certain problematic areas deserving special mention include the human rights of children in institutionalised care in Romania, the Bulgarian government's failure to commit itself to the closure of units 1-4 at the Kozloduy Nuclear Power Plant and discrimination against the Roma minority across the region.
In general, however, it would appear that the Commission is slightly more bullish on Eastward expansion than when it issued its last progress Report in November 1998. Part of the reason for this - a factor noted in the Report itself - is clearly the events in Kosova which seem to have reminded the European Union that it has a vital interest in European-wide peace.
One signal that Eastward expansion is being taken more seriously is this report's call for accession negotiations to be opened for the qualifying "Second Wave" countries in 2000. This means that at least some of the countries concerned - Bulgaria, Latvia, Lithuania, Romania and Slovakia (and Malta) - have a chance to catch up to some of their First Wave (or "5+1") neighbours - the Czech Republic, Estonia, Hungary, Poland and Slovenia (and Cyprus) - if they can meet the Copenhagen criteria.
In general, the focus of the Report is not on "First Wave" and "Second Wave" but on judging each applicant by its own individual merits in the light of these criteria. With this Report the EC is stressing that all countries be judged individually based on specific chapters of EU law actually adopted. They will no longer accept mere commitments. Each chapter will be evaluated individually, and the evaluators will not finish thier work on any chapter until they are convinced the particular reform has actually been carried out. "First Wave" and "Second Wave" are fading distinctions; the EC intends to judge applicants based on progress, not promises. (The first ranking and classification of the larger applicant group could be issued by the middle of next year.)
The clearest sign that expansion is getting a boost by this Report is the copious discussion of dates throughout the document. For years, diplomats avoided setting specific dates, as East European politicians failed to take the complexity of EU integration seriously and West European politicians avoided the internal reforms necessary for the EU-15 to become the EU-18 or EU-25. (see article on last year's report)
With this new report, we are finally seeing the dry land of definite dates emerge from the Euro-swamp of Eastern evasion; EU membership for some countries in Central and Eastern Europe could be only about 38 months away.
True, that's still not exactly tomorrow, and, true, no specific dates for entry have yet been set for any particular country, but this Report does welcome the fact that individual countries in the region are setting their own dates to focus attention on the task at hand, and this Report also begins to put a time-frame around the whole expansion process. The EU, it declares, should finish its own preparations to accept new members by 2002 and commit itself to be ready to decide on new members from that year. Budgetary calculations are still being made on the basis of expected enlargement between 2000 and 2006 as set out by the European Council in Berlin.
All this leads us to expect that the most well-prepared countries, such as Estonia, Hungary and Slovenia will be members of the club on 1 January 2003.
But each country will be treated individually, and the evaluations for each country in the region do have important specific factors mentioned within them. Here are the highlights from each country's progress report:
Bulgaria: The Report states that Bulgaria "has continued to make progress in establishing" a functioning market economy, but has a long way to go, adding that it still would not be able to cope with competition in even the medium term. However, the Report does praise Bulgaria for sticking by its reform plans despite an "adverse external environment."
Politically, Bulgaria meets all EU requirements, though again criticism came down on human and minority rights (especially for Roma), as well as corruption and successful implementation of government decisions. The Report also points out deficiencies in various areas, from land restitution to social policy.
However, the Report in no uncertain terms calls on Bulgaria to issue a timetable for the closure of the Kozloduy Nuclear Power Plant.
Though few expected Bulgaria to receive a glowing report, the results are not poor. The Report does put Bulgaria in the back group of the newly promoted six, and even that status is contingent on the fate of Kozloduy. (MH)
The Czech Republic: In the case of the Czech Republic, the Report's criticism focuses on the lack of progress and the slow pace of implementation in almost all areas criticised in last year's report. The general consensus throughout the Report is that nothing much has changed. The EC's overall assessment of the country's record in terms of meeting short-term Accession Partnership priorities is "not satisfactory."
Interestingly, the Report makes a point of explaining that the discrepancy between the government's intentions - which the EC finds to be favourable toward remedying problems pointed out in the 1998 report - and actual implementation is due to three factors: length of procedures for preparing draft legislation, the current government's minority status and the previous governments' insufficient attention to certain priority policy areas.
Politically, the Report states that the Czech Republic fulfils the Copenhagen criteria but is in need of further efforts in the areas of reform of the judiciary, improvement of the situation of the Roma (and here the Report specifically stresses adequate funding of policy and efforts to combat discriminatory attitudes in society), and development of effective policy measures to combat economic crime and corruption.
Perhaps one of the most telling assessments of the Report comes in the area of economic development. Although deeming the Czech Republic a "functioning market economy" capable of coping with competitive pressure and market forces within the Union, eight years after Klaus's heralded coupon privatisation, some fundamental elements of a market economy are still regarded as absent. According to the Report, processes of restructuring and privatisation need to be accelerated; limited progress is noted in bank privatisation and addressing the bad loan problem. Price liberalisation is to continue. Law enforcement and corporate governance are in need of special attention," and "urgent action" is needed to restructure and increase transparency of public finance. Enterprise activity is found to be lacking an adequate legal framework.
In fact, an inadequate or wholly absent legal framework is behind much of the Report's criticism. Correspondingly, the most damning assessment in the Report comes with regard to legislative alignment, where the Report declares that the pace "has not picked up significantly" and progress has been "uneven across sectors." Key problem areas where movement toward alignment is seen to be nil are: intellectual property, public procurement, data protection, insurance, anti-trust, state aids and VAT/excise, audio-visual legislation, transport sector (aside from air), labour legislation and health and work safety. Slow pace is noted in agriculture, veterinary and plant health, and - aside from drugs legislation - JHA efforts have "stalled" completely.
In the area of environment, the adoption of a general policy and ratification of certain conventions is noted, but, again, a legal framework is lacking to make these efforts effective. A legal framework is also needed, along with reinforcement of administrative capacities, in order to sustain the momentum that has been achieved in such areas as liberalisation of capital markets, border enforcement and regional and structural policy.
Another weak area for the Czech Republic, public administration reform, has not seen adequate progress - except in certain areas of the internal market acquis such as strengthening banking and financial services supervision capacities. Aside from the need for general public administration reform, state aid monitoring capacities need to be strengthened, independent authorities for data protection and telecommunications need to be set up, as do structures for the implementation of the CAP (Common Agricultural Policy).
The Report's praise is sparse and usually qualified; it comes unequivocally only on some aspects of economic reform, standards and certification, regional development and veterinary obligations, where the Report acknowledges that short-term accession priorities have been met.
Overall, the EC expresses concern over what it sees as a "piecemeal approach to the alignment process" and is unambiguous in its advice to the lagging front-runner: "The pace of alignment needs to pick up substantially across the board." (KS)
See the accompanying article on the Czech media's reception of the Report.
Estonia: The Report states that Estonia "is" a functioning market economy and praised its macroeconomic policies and its ability to compete. The Report calls on the attention to be shifted to sectoral and structural reforms, in areas such as oil shale and agriculture.
Politically, Estonia fulfils EU requirements, but the Report calls Estonia's stricter language law a "step backwards" and calls for its amendment. The Report also reproaches Estonia over intellectual property protection and corruption. Finally, the Report calls on Estonia to sustain its efforts in justice and home affairs (JHA), especially the police.
The reports for the "5+1" group tend to be more critical and harsher, but most believe Estonia's Report is rather good. No serious problems are noted and few "alarm" words are used in the Report - except perhaps on the language law issue. (MH)
Hungary: The Report declares that Hungary now fulfils all the political criteria for EU entry set in Copenhagen in 1993, but there is still some concern over the position of the Roma minority and the fight against corruption.
Overall, the Report is positive for Hungary. The market economy and the legal and institutional structures which support it have been further strengthened, and the country is deemed to have the capacity to cope within the EU market. Hungary has maintained a good pace and made steady progress when it comes to the adaptation of the acquis. Furthermore, Hungary has the highest economic growth rate amongst the applicant countries while inflation is lower than expected.
The Report does, however, advise Hungary to beware of its budget deficit, and it also warns that the health sector, which is a major drain on economic resources, needs reform. There has been progress in Hungary's implementation of the EU's agricultural policy although policies in this field need to be reassessed, especially the level of subsidies and a special deal with Israel which needs to be cancelled. As for environmental legislation, strategic plans need to be enforced due to the work that is still to be done in this sector.
The Hungarian government has shown "increased efficiency" in its fight against organised crime but needs to strengthen its efforts to counter corruption. Hungary also needs to ratify the Council of Europe convention on money laundering and address the problem of drugs. Further attention also needs to be given to minority representation, as no legislation has been passed on this despite two years of discussions. Press freedom is another area of potential concern.
In all, the Report says that Hungary has fulfilled its short- and medium-term accession priorities. (PN)
Latvia: The Report states that Latvia "can be regarded" as a functioning market economy, which still puts it behind Estonia in that area. It commends Latvia for weathering the Russian economic crisis but calls for vigilance in fiscal issues. The Report calls on Latvia to privatise its remaining large state-owned companies and to remove "bottlenecks" to entrepreneurial and investment activities. Though Latvia satisfies the political conditions, the Report calls on Latvia to "ensure" that the law is compatible with international norms.
The Report criticises shortfalls in dealing with corruption and promoting language teaching among non-Latvian speakers. Criticism also fell on protection of intellectual property and dealing with organised crime and other problems. The Report also chides Latvia for slow implementation of reforms in public administration.
Latvia's progress Report is generally free of harsh criticism, and it is likely to be portrayed by EU watchers as a message that Latvia is considered a "front-runner" among the six newly promoted candidates. (MH)
Lithuania: The Report states that Lithuania "has continued to make progress in establishing" a functioning market economy, which places it a bit behind Latvia and significantly behind Estonia in that area. The Report cautions Lithuania that fiscal and external balance problems, stemming from government reactions to the Russian economic crisis, are growing and may become "unsustainable." The Report states that the budget deficit must be cut.
The Report is positive on the political aspects, saying that Lithuania satisfies all political conditions but work is needed in judicial reform and the fight against corruption.
Issues of concern in the Report include piracy and audio/visual sector problems, as well as uneven development in various sectors such as agriculture. It does state that the customs administration is a "matter of concern."
However the Report praises the country's commitment to shutting down the Ignalina nuclear power plant as a "significant sign" of the country's dedication to European integration. (for more on this issue, see Mel Huang's article in Central Europe Review 23 August 1999)
This Report is a bit harsher than the Report on Latvia, and the language of criticism is much stronger and much more detailed. (MH)
Poland: The Report comments on the shift of focus by the Polish government towards domestic issues and reforms since the 1998 report.
The reforms in the areas of health, education, social security system and regional administration are described as "of impressive scope and depth," and once they are fully implemented, they should "facilitate Poland's integration into the European Union."
While the Report concludes that Poland fulfils the EU's Copenhagen political criteria for new applicants, it also notes that corruption continues to be an issue which needs closer attention, as does increasing the efficiency of the judiciary.
In the area of economic reform, the Report concludes that Poland has not progressed sufficiently to ensure a smooth integration into EU structures. The greatest reservations are expressed with regards to industrial and agricultural policy, and (lack of) environmental strategy, among others.
The Report urges that Poland to continue economic reforms, stressing that the process of privatisation and restructuring need to be accelerated.
Overall, the Report is negative. In general, it concludes that Poland has made a "notable lack of progress regarding some long-standing issues." While praising certain legislative advances in the social and political areas, it repeatedly stresses that there is far more to be done and that Poland has fallen short of the mark - and of expectations - of the 1998 Report. (JR)
Romania: The Commission's Report recommends that negotiations be opened in the year 2000 only with countries that meet the Copenhagen criteria, and although Romania is included as one of the six countries earmarked for this group and although the Report praises Romania for her continued commitment to reform, vast improvements are required before negotiations with the EU can be opened.
Institutionalised childcare facilities continue to be a major sore spot. According to the Report, in order to win a seat at the negotiating table, the Romanian authorities must take effective action to provide them adequate budgetary resources and to implement the structural reform of childcare institutions before the end of 1999. The EC regards the childcare issue a matter of human rights and will not instigate negotiations whilst the structure of childcare is unclear.
The other main area of concern is the Romanian economy. Romania is not considered to be functioning as a market economy. Prior to negotiations taking place, Romania must adopt appropriate measures addressing the macro-economic situation and show a sustained effort before a market economy can be put in place.
The conditions laid down by the European Commission appear straightforward; however, three months away from the year's end, time is short and demands great. Alongside continued reform in all political, economic and social sectors of society, and alongside pressures, targets and demands from the IMF and World Bank, Romania must restructure the entire childcare system and find funds in an economy that is in a "very worrying" situation. On top of this, the country has to develop measures that provide a solution to her vast and wide-ranging economic problems.
Of course, these conditions shouldn't result in a loss of momentum in the entire reform process; however, negotiations will not take place unless the EU's conditions are met, so where will Romanian priorities lie? (CL)
Slovakia: The European Commission Report says that Slovakia has taken considerable steps forward both politically and economically. Slovakia has made progress in its efforts to establish a market economy and has implemented essential reforms, but its efforts need to be strengthened in this field, especially due to government interference.
Even so, Slovakia should, in the medium-term, be able to handle the competition of the single market. There is, however, a need for restructuring of banking and the corporate sector. The Commission further recommend that Slovakia speed up its reform in the spheres of the environment, home affairs and justice.
Slovakia has "significantly increased its efforts" when it comes to legal and institutional preparations and increased its work in law enforcement, but legislation and policy still need to be transformed into more clearly visible improvements of institutions, the administration and the judiciary.P>The Report also says that Slovakia has made notable progress with regard to democratisation and human rights. Citing the reforms since 1998, the Report declares that Slovakia now satisfies the Copenhagen political criteria.
The new law on minority languages was welcomed by the EC, as there was concern over the treatment of minorities, particularly the Hungarians, but there is still work to be done in the field of minority protection, especially with regard to the Roma. The Report also points out that "discriminatory attitudes in society" should be dealt with.
In order to uphold democracy, the Report states, constant work is needed, but the implementation of decisions already taken should take Slovakia forward in terms of a working market economy and the legal and economic conditions necessary for EU entry. (PN)
Slovenia: The Report says that Slovenia "can be regarded" as a functioning market economy. Recent reforms were lauded by the report, which called the reform process "reinvigorated." Politically, Slovenia meets all EU criteria, though work needs to be done on making parliamentary and judicial processes more efficient.
The Report also praises the "impressive progress" in alignment with EU norms in various areas, from the Common Market to JHA.
However, the Report does criticise certain areas, such as administrative and judicial reform; the Report notes that recent legislation to deal with these concerns should be carefully and fully implemented.
Despite the somewhat surprising disappointment with these results in the Slovene press, Slovenia's Progress Report is perhaps the most positive among all the "5+1" group, alongside Hungary and with Estonia just behind. There were no major complaints and the Report contained many "positive" terms with reserved usage. It is obvious that the Commission stressed that Slovenia has done a good job since the reproach given in last year's Report - a signal to some of the other countries of the "5+1" which did not do quite as well in the last 11 months. (MH)
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