Considerations on COM(2023)692 - Establishing the Reform and Growth Facility for the Western Balkans - Main contents
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| dossier | COM(2023)692 - Establishing the Reform and Growth Facility for the Western Balkans. |
|---|---|
| document | COM(2023)692 |
| date | May 14, 2024 |
(2) There is a need to bring forward some of the advantages of Union membership before accession. Economic convergence is at the heart of these benefits. Currently, the convergence of Western Balkans in terms of GDP per capita expressed in purchasing power standards remains low at between 30% and 50% of the Union average and is not progressing fast enough.
(3) To reduce this disparity, the European Commission adopted a Communication on a Growth Plan for the Western Balkans based on four pillars: (a) increasing integration with the EU’s Single Market; (b) boosting regional economic integration, based on EU rules and standards, by fully implementing the existing Common Regional Market Action Plan; (c) deepening reforms aiming at accelerating growth in the region, promoting economic convergence and strengthening regional stability; and (d) establishing a new Financing Instrument: the Reform and Growth Facility for the Western Balkans.
(4) The implementation of that Growth Plan requires increased funding under a dedicated new Financing Instrument, the Reform and Growth Facility, to assist the region in implementing the growth-promoting reforms, regional integration and Common Regional Market.
(5) To achieve these goals, special emphasis with respect to investment areas should be placed on sectors that are likely to function as key multipliers for social and economic development: connectivity, including transport, energy, green and digital transitions, education and skills development.
(6) Transport infrastructure is essential to improve connectivity between the Western Balkan partners and with the EU. It should contribute to integrate the region in the Union. In its proposal revising the trans-European transport framework (TEN-T), the Commission included a new Corridor crossing the Western Balkan region (Western-East Mediterranean corridor). The TEN-T network should be the reference for funding transport infrastructure in the region.
(7) The Facility should support investment and reforms that promote the beneficiaries’ path to the digital transformation of the economy and society in line with the EU vision for 2030 presented in the Commission communication ‘2030 Digital Compass: the European way for the Digital Decade’3. It should strive to facilitate their achievement of the general objectives and digital targets with regard to the Union. As outlined by the Commission in its communication of 15 June 20234, the 5G cybersecurity Toolbox should be the reference for EU funding to ensure security, resilience and protection of integrity of digital infrastructure in the region.
(8) Union support under the Facility should not replace the bilateral and regional support provided under Regulation (EU) 2021/1529 of the European Parliament and of the Council5, focussing on preparing the Beneficiaries for Union membership, but complement it and add to it, while using already existing mechanisms and structures where possible. The approach should build on the existing enlargement methodology, notably the 2020 Revised Methodology6, and the Economic and Investment Plan7 from the same year.
(9) The support under the Facility should be provided to meet general and specific objectives, based on established criteria and with clear payment conditions. The general objectives of the Facility should be to accelerate regional economic integration, progressive integration with the Union single market, socio-economic convergence of Western Balkans economies and alignment with Union laws, rules, standards, policies and practices with a view to Union membership. The Facility should also help accelerate reforms related to fundamentals of the enlargement process, including rule of law, public procurement and State aid control, public finance management and fight against corruption. These objectives should be pursued in a mutually reinforcing manner.
(10) The Facility should promote the development effectiveness principles, respecting additionality to the support provided under other Union programmes and instruments and striving to avoid duplication between assistance under this Regulation and other assistance provided by the Union, the Member States, third countries, multilateral and regional organisations and entities.
(11) The Facility should ensure consistency with, and support to the general objectives of Union external action as laid down in Article 21 of the Treaty on European Union, including the respect for fundamental rights as enshrined in the EU Charter of Fundamental Rights. It will notably ensure the protection and promotion of human rights, and the rule of law.
(12) Activities under the Facility should support progress towards the Sustainable Development Goals, the Paris Agreement and the United Nations Framework Convention on Climate Change, the United Nations Convention on Biological Diversity and the United Nations Convention to Combat Desertification and should not contribute to environmental degradation or cause harm to the environment or climate. Measures funded under the Facility should be in line with the Beneficiaries’ National Energy and Climate Plans, their Nationally Determined Contribution and ambition to reach climate neutrality by 2050. The Facility should contribute to the mitigation action and to the ability to adapt to the adverse effects of climate change, and foster climate resilience.
(13) The implementation of this Regulation should be guided by the principles of equality and non-discrimination, as elaborated in the Union of Equality strategies. It should promote gender equality and the empowerment of women and girls, and seek to protect and promote women’s and girls’ rights in line with the EU Gender Action Plans and relevant Council conclusions and international conventions. The implementation of the Facility should be in line with the United Nations Convention on the Rights of Persons with Disabilities and ensure accessibility in its investments and technical assistance.
(14) This Regulation should promote the Green Agenda for the Western Balkans8 by reinforcing environmental protection, contributing to the mitigation of climate change and increasing resilience to climate change, and accelerating the shift towards a low-carbon economy.
(15) Reflecting the European Green Deal as Europe’s sustainable growth strategy and the importance of tackling climate and biodiversity objectives in line with the commitments of the Interinstitutional Agreement, the Facility should contribute to the achievement of the overall target of 30% of Union budget expenditure supporting climate objectives and 7.5% in 2024 and 10% in 2026 and 2027 to biodiversity objectives. At least 37% of the non-repayable financial support channelled through the WBIF should account to climate objectives. The Facility should support activities that fully respect the climate and environmental standards and priorities of the Union and the principle of ‘do no significant harm’ within the meaning of Article 17 of Regulation (EU) 2020/8529.
(16) The Commission, in cooperation with the Member States and the Beneficiaries, should contribute to increased transparency and accountability in the delivery of assistance, including by implementing appropriate internal control systems and anti-fraud policies. The support under the Facility should be made available under the preconditions that each of the Beneficiaries continues to respect and uphold effective democratic mechanisms and institutions, including a multi-party parliamentary system, and the rule of law, and to guarantee respect for human rights, including the rights of persons belonging to minorities. Another pre-condition should be that Serbia and Kosovo engage constructively in the normalisation of their relations with a view to fully implementing all their respective obligations stemming from the Agreement on the Path to Normalisation and its Implementation Annex as well as all past Dialogue Agreements and engage in negotiations on the Comprehensive Agreement on normalisation of relations.
(17) The overall maximum amount for the Union support through the Facility should be EUR 6 billion in current prices for the period from 2024 to 2027, of which up to EUR 2 billion in non-repayable support and EUR 4 billion in concessional financial-assistance loans provided by the Union and provisioned from the EUR 2 billion. At least half of the total amount should be allocated through the Western Balkans Investment Framework (WBIF), including the entire amount of the non-repayable support, less 1.5% of technical assistance and the amounts necessary for provisioning of the loans.
(18) This Regulation lays down a financial envelope for the entire duration of this Instrument, which is to constitute the prime reference amount, within the meaning of point 18 of the Interinstitutional Agreement of 16 December 2020 between the European Parliament, the Council of the European Union and the European Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, as well as on new own resources, including a roadmap towards the introduction of new own resources, for the European Parliament and the Council during the annual budgetary procedure.
(19) The financial liability from loans under this Facility should not be supported by the External Action Guarantee, by way of derogation from Article 31(3), second sentence of Regulation (EU) 2021/947. Loans type of support under this Facility should constitute financial assistance within the meaning of Article 220(1) of Regulation (EU, Euratom) 2018/1046. An indicative amount of financing for each Beneficiary should be calculated based on the formula laid down in Annex I, combining the population share of a Beneficiary over the overall population of the Western Balkans region and the average GDP per capita for the Western Balkans region over the GDP per capita of the respective Beneficiary, weighing the two factors with 60% and 40% respectively. If the payment conditions for the release of funds are not met, the Commission may redistribute part of or the entire amount to other Beneficiaries.
(20) Horizontal financial rules adopted by the European Parliament and the Council on the basis of Article 322 TFEU should apply to this Regulation. Those rules are laid down in Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council10 and determine in particular the procedure for establishing and implementing the budget through grants, procurement, indirect management, financial assistance, blending operations and the reimbursement of external experts, and provide for checks on the responsibility of financial actors.
(21) Restrictions of eligibility in award procedures under the Facility should be allowed on account of the specific nature of the activity or when the activity affects security or public order.
(22) In order to ensure an efficient implementation of the Facility, including the facilitation of the Western Balkans Beneficiaries’ integration in European value chains, all supplies and materials financed and procured under this Facility should originate from Member States, Beneficiaries, contracting parties to the Agreement on the European Economic Area and countries covered by Annex I to Regulation (EU) 2021/947 of the European Parliament and of the Council11 and Annex I to Regulation (EU) 2021/1529 and countries for which reciprocal access to external assistance in Beneficiaries is established by the Commission, unless the supplies and materials cannot be sourced at reasonable conditions in any of those countries.
(23) While respecting the principle that the Union budget is set annually, the possibility to apply the flexibilities in accordance with Regulation (EU, Euratom) 2018/1046 for other policies should be ensured, including for carry overs and re-commitments of funds, to ensure efficient use of the Union funds, thus maximising the Union funds available under the Facility.
(24) The implementation of the Facility for Western Balkans should be underpinned by a coherent and prioritised set of targeted reforms and investment priorities in each Western Balkans Beneficiary (a Reform Agenda), providing a framework for boosting socio-economic growth, clearly articulated and aligned with Union accession requirements. The Reform Agenda will serve as an overarching framework to achieve the objectives of this Facility.
(25) Disbursement of Union support should be conditional on compliance with the payment conditions and on measurable progress in the implementation of reforms set out in the Reform Agendas assessed and formally approved by the Commission. The release of funds should be structured accordingly, reflecting the objectives of the Facility.
(26) The Reform Agendas should include targeted reform measures and priority investment areas, along with payment conditions in the form of qualitative and quantitative steps that indicate satisfactory progress or completion of those measures, and an indicative timetable for the implementation of those measures. Those steps should be planned for no later than 31 August 2027, although the overall completion of the measures to which such steps refer may extend beyond 2027 but not later than 31 December 2028.
(27) The Reform Agendas should include an explanation of the Beneficiary’s system to effectively prevent, detect and correct irregularities, corruption, fraud and conflicts of interests, when using the funds provided under the Facility, and the arrangements that aim to avoid double funding from the Facility and other Union programmes as well as other donors.
(28) Measures under the Reform Agendas should, where appropriate, contribute to improving an efficient public finance management and control system, fight against corruption, fraud and organised crime, and to an effective system of State aid control, aiming at ensuring fair conditions for all undertakings. Such measures should be implemented by the Beneficiary by an indicative date which could be set, appropriate for each measure, in the early stage of implementation of the Facility.
(29) The Commission should assess each Reform Agenda based on the list of criteria set out in this Regulation. In order to ensure uniform conditions for the implementation of this Regulation, implementing powers should be conferred on the Commission to approve those Reform Agendas. Those powers should be exercised in accordance with Regulation (EU) No 182/2011 of the European Parliament and of the Council12. The Commission will duly take into account Council decision 2010/427/EU and the role of the EEAS where appropriate, and in particular when monitoring the fulfilment of the precondition for Union support.
(30) The Commission implementing decision referred to in this Regulation should at the same time constitute a work programme within the meaning of Article 110(2) of the Financial Regulation in respect of the amount of non-repayable financial support under this Regulation.
(31) Given the need for flexibility in the implementation of the Facility, it should be possible for a Beneficiary to make a reasoned request to the Commission to amend the implementing decision, where the Reform Agenda, including relevant payment conditions, is no longer achievable, either partially or totally, because of objective circumstances. A Beneficiary should be able to make a reasoned request to amend the Reform Agenda, including by proposing addenda where relevant.
(32) The Commission should be able to amend the implementing decision, in particular to take into account a change of the amounts available.
(33) In case of redistribution of support under this Facility which would lead to additional support to a Beneficiary, this Beneficiary should submit a revised Reform Agenda with additional measures to be achieved.
(34) A Facility Agreement should be concluded with each Beneficiary to set up the principles of the financial cooperation between the Union and the Beneficiary, and to specify the necessary mechanisms related to control, supervision, monitoring, evaluation, reporting and audit of Union funding under the Facility, rules on taxes, duties and charges and measures to prevent, detect, investigate and correct irregularities, fraud, corruption and conflicts of interest. Consequently, a loan agreement should also be concluded with each Beneficiary setting out specific provisions for the management and implementation of funding provided in the forms of loans.
(35) Financial support for the Reform Agendas should be possible in the form of a loan. In the context of Western Balkans financing needs, it is appropriate to organise the financial assistance under the diversified funding strategy provided for in Article 220a of Regulation (EU, Euratom) 2018/1046 and established as a single funding method therein, which is expected to enhance the liquidity of Union bonds and the attractiveness and cost-effectiveness of Union issuance.
(36) It is appropriate to provide loans to the Beneficiaries on highly concessional terms with a maximum duration of 40 years and to not start the repayment of the principal before 2034. It is also appropriate to derogate from Article 220(4), of Regulation (EU, Euratom) 2018/1046.
(37) Considering that the financial risks associated with the support to the Beneficiaries in the form of loans under this Instrument is comparable to the financial risks associated with lending operations under Regulation (EU) 2021/947, provisioning for the financial liability from loans under this Regulation should be constituted at the rate of 9%, in line with Article 211 of Regulation (EU, Euratom) 2018/1046 and the funding of the provisioning should be sourced from EUR 2 billion envelope under this facility.
(38) In order to ensure that the provisioning rate remains adequate to the financial risks, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of amending the provisioning rate. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement on Better Law-Making of 13 April 201613. In particular, to ensure equal participation in the preparation of the delegated acts, the European Parliament and the Council receive all documents at the same time as Member States’ experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.
(39) In order to maximise the leverage of of Union financial support to attract additional investment, and to ensure EU control over the expenditure, the infrastructure investments supporting the Reform Agendas should be implemented through the WBIF. Individual projects or programmes should be submitted to the WBIF Operational Board for its opinion only upon completion of relevant payment conditions defined in the Reform Agendas. In case of non-fulfilment of relevant payment conditions for investments within one year, the Commission may redistribute the investment funding under the WBIF among the remaining Beneficiaries.
(40) In order to ensure that the Beneficiaries dispose of start-up funding for the implementation of the first reforms, each Beneficiary should have access to up to 7% of the total amount foreseen under this Facility financial assistance in the form of a pre-financing, subject to availability of funding and to the respect of the preconditions for the support under the Facility.
(41) It is important to guarantee both flexibility and programmability in providing Union support to the Western Balkans Beneficiaries. For that purpose, funds under the Facility should be released according to a fixed semi-annual schedule, subject to availability of funding, based on a request for the release of funds submitted by the Beneficiaries and following verification by the Commission of the satisfactory fulfilment of both the general conditions related to macro-financial stability, sound public financial management, transparency and oversight of the budget and the relevant payment conditions. Where a payment condition is not fulfilled in accordance with the indicative timeline set in the decision approving the Reform Agenda, the Commission could withhold part or whole of the funds corresponding to that condition. The disbursement of the corresponding withheld funds could take place during the next window for the release of funds and up to twelve months after the original deadline set out in the indicative timeline, provided the payment conditions have been fulfilled. In the first year of implementation, this deadline should be extended to 24 months from the initial negative assessment.
(42) By way of derogation from Article 116(2) and (5) of Regulation (EU, Euratom) 2018/1046, it is appropriate to set the payment deadline for contributions to state budgets starting from the date of the communication of the decision authorising the disbursement to the Beneficiary and to exclude the payment of default interest by the Commission to the Beneficiary.
(43) In the framework of the Union’s restrictive measures, adopted on the basis of Article 29 of the Treaty on European Union (TEU) and 215(2) of the Treaty on the Functioning of the European Union (TFEU), no funds or economic resources may be made available, directly or indirectly, to or for the benefit of designated legal persons, entities or bodies. Such designated entities, and entities owned or controlled by them, therefore cannot be supported by the Facility.
(44) In accordance with Regulation (EU, Euratom) 2018/1046, Regulation (EU, Euratom) 883/2013 of the European Parliament and of the Council14 and Council Regulations (EC, Euratom) No 2988/9515, (Euratom, EC) No 2185/9616 and (EU) 2017/193917, the financial interests of the Union are to be protected by means of proportionate measures, including measures relating to the prevention, detection, correction and investigation of irregularities, fraud, corruption, conflict of interest, double funding, to the recovery of funds lost, wrongly paid or incorrectly used.
(45) In particular, in accordance with Regulations (Euratom, EC) No 2185/96 and (EU, Euratom) No 883/2013, the European Anti-Fraud Office (OLAF) should be in a position to carry out administrative investigations, including on-the-spot checks and inspections, with a view to establishing whether there has been fraud, corruption or any other illegal activity affecting the financial interests of the Union.
(46) In accordance with Article 129 of Regulation (EU, Euratom) 2018/1046, the necessary rights and access should be granted to the Commission OLAF, the European Court of Auditors and, where applicable the EPPO, including by third parties involved in the implementation of Union funds.
(47) The Commission should ensure that the financial interests of the Union are effectively protected under the Facility. At the same time, given the long track record of financial assistance provided to the Western Balkans Beneficiaries also under indirect management and taking into account their gradual alignment with the Unions internal control standards and practices, the Commission may rely to a great extent on the operation of the national internal control and fraud prevention systems. In particular, the Commission and OLAF should be informed of all suspected cases of irregularities, fraud, corruption and conflict of interests affecting the implementation of funds under the Facility without delay.
(48) Furthermore, the beneficiaries should report the irregularities including fraud which have been the subject of a primary administrative or judicial finding, without delay, to the Commission and keep the latter informed of the progress of administrative and legal proceeding. With the objective of alignment to good practices in Member States, this reporting should be done by electronic means, using the Irregularity Management System, established by the Commission.
(49) Each Beneficiary should establish a monitoring system feeding into an semi-annual report of fulfilment of its Agenda’s payment conditions accompanying the semi-annual request for the release of funds. Beneficiaries should collect and provide access to data and information allowing the prevention, detection and correction of irregularities, fraud, corruption and conflicts of interests, in relation to the measures supported by the Facility.
(50) The Commission should ensure that clear monitoring and evaluation mechanisms are in place in order to provide effective accountability and transparency in implementing the Union budget, and to ensure effective assessment of progress towards the achievement of this Regulation’s objectives.
(51) The Commission should provide an annual report on the progress with the implementation of the Regulation and the Facility to the European Parliament and to the Committee referred to in this Regulation.
(52) The Commission should carry out an evaluation of the Facility upon its completion.
(53) The communication capacities of the Beneficiaries should be enhanced in order to ensure strong and free pluralistic media and public support for and understanding of Union values and the benefits and obligations of potential Union membership, while addressing disinformation and information manipulation. Visibility of the Union funding should also be ensured.
(54) Since the objectives of this Regulation cannot be sufficiently achieved by the Member States but can be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the TEU. In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary to achieve those objectives.
(55) Given the ambitious general objectives of this Facility within a short implementation period, this Regulation should enter into force on the day following that of its publication in the Official Journal of the European Union.