Madam President, thank you for your kind words. I know that my colleague Mrs Hoff would like to address a few words to you herself at the end of the speech which I am going to read out on her behalf, but I will thank you at the start. Madam President, Commissioner, Mr President-in-Office of the Council, the accession of Poland and Lithuania will make Kaliningrad not only a Russian enclave, but also an enclave of the European Union. This problematic, unique and positively paradoxical situation results from the fact that Kaliningrad, being Russian territory, falls within the scope of the Partnership and Cooperation Agreement with Moscow, but is in fact rather more affected by European Union enlargement. Attention was drawn to Kaliningrad's precarious situation as long ago as 1994, in a report by Parliament which described the future of the Kaliningrad region as a matter of immediate and pressing importance for Russia, for the states bordering on the region, and, equally, for the European Union. The practical response was, even then, to decide on measures which have become, in the meantime, even more relevant to the area's growth prospects. One can take as examples of this the encouragement of cross-border cooperation as well as the increased integration of the Kaliningrad area into European transport and telecommunications structures. It is to be regretted that adequate use has not been made of the time that has elapsed since then. Now, in the context of the strategic partnership which we are aiming at and of which you have spoken, new possibilities are taking shape, involving the neighbouring Poland and Lithuania, for finding solutions to Kaliningrad's situation, solutions that will ensure the area's viability and perhaps even enable it to play an active part in joining the partners together. At the same time, I would like to echo what was said as long ago as 1994 by emphasising that any consideration of Kaliningrad's future development must start from the premise that the area will continue to belong to Russia under international law and that its legal status will be determined solely by those competent to do so in Moscow and in Kaliningrad itself. There are two possible scenarios, one negative and the other positive. A negative scenario would see the European Union's relationship with Russia under great strain, with both sides having failed an important test of their ability to cooperate and prevent crises in accordance with the partnership agreement. In the positive scenario, however, Kaliningrad could take on the overall role of a centre of economic activity and as a point of reference for transport links, commercial activity and modern services in a dynamic Baltic region. The area could, by piloting the implementation of economic structural reforms, influence the whole of north-western Russia and bind this cross-border region more closely with Europe. An amicable settlement on Kaliningrad could, in short, be a model for how the partnership between the EU and Russia might become practical rather than existing in name only. New flexibility is, in the meantime manifesting itself on both sides as the acute need for action becomes apparent. I welcome President Prodi's recent reference to the need to make arrangements for Kaliningrad even before Poland and Lithuania join the EU, the Commission having elaborated some ideas on the subject in its 2001 communication on Kaliningrad. What is also positive is President Putin's evident commitment to a constructive negotiated solution. I do not propose, in what follows, to go in to detail into the various areas which we need to sort out together, but I would like to make just a few basic observations. People are understandably touchy about the issue of visas and border controls, and here a balance needs to be achieved between tight controls on the EU's external borders on the one hand, and the need for easier passage across the border on the other. Russia will also have to face up to the need for fundamental acceptance of the rules applicable under Community law, and we are working on the assumption that it will accept them. On this point, the EU cannot allow any exceptions to be made, as this would be to prejudge the cases of other border regions. For its part, the European Union should, at the same time, be considering what range of options there might be for a less onerous visa system within the Schengen boundaries, over and above the instances referred to in the communication. My report includes a number of proposals for a way ahead on this. The inclusive offer to partly integrate Kaliningrad into the Baltic area must be revived, but not by a border regime that excludes people. Flexible arrangements for the transport of people and goods may well be important preconditions for Kaliningrad's growth process, and they also have symbolic value in the eyes of people in the no-man's-land between containment and exclusion, but, despite what many in Moscow continue to believe, they are not enough to bring about growth on their own. We have seen that at the open borders of Poland and Lithuania. Kaliningrad's economic indicators are mainly negative and still show no definite upward tendency. The living standard in the border region is significantly inferior to that in Russia as a whole. One essential cause for the persistent downturn is certainly Kaliningrad's problematic geographical situation and its favourable treatment as regards taxes and customs duties, the whole of which has a natural tendency to facilitate criminal activity. Any opening up of Kaliningrad to the outside world must therefore be combined with profound economic and administrative reforms in the region. Without these, there is the danger that local industries, which are uncompetitive, will largely be cut out of the market by their foreign competitors and that foreign investors will be even less committed in Kaliningrad. It is, therefore, to the leaders in Moscow and Kaliningrad, who bear responsibility for the region, that we appeal for the creation on the ground of the conditions for good governance in the form of administrative, legal and political structures that work, are transparent, and can be relied upon. At the same time, there are many ways in which these efforts might be supported. In particular, it would make sense to set up an investment agency that could lay the financial foundations for this. This of course involves continued intensive cooperation within the TACIS framework and the willingness to make funds for this purpose available through the international financial institutions, among which I particularly mention the European Investment Bank. Madam President, Commissioner, Mr President-in-Office of the Council, ladies and gentlemen, I would very much like to conclude by handing over to my colleague Magdalena Hoff. (Applause)

Political group: PSE