Mr President, ladies and gentlemen, the report by the Committee on Budgets under discussion, which recommends extending the Community guarantee given to the European Investment Bank to loans granted to Croatia, deals with two important matters. Firstly, the political situation in Croatia has improved dramatically. The new government is committed to political and economic reform. That is an opportunity for the European Union to continue once more with cooperation, which was interrupted in 1995 when Croatia began military action in Krajina. The other message is contained in Croatia’s still very difficult economic situation. For years the country practised an economic policy based on plundering, which has left the new government to shoulder the burden of a depressed business sector and an unemployment rate of more than 20%. The rapporteur, Esko Seppänen, says quite rightly in the explanatory statement in his report that social conditions in Croatia are difficult and the Community’s contribution to the reform process should also have a positive impact on the social dimension. An important political change was seen in Croatia in the parliamentary elections that were held earlier this year. The country’s inhabitants showed by voting that they demanded democratic change. The new government was made up of a democratic frontline of six parties, which has a firm majority in the country’s parliament. The government has indicated it is rapidly recognising the values of European democracy and the rule of law. In foreign relations it gives priority to the integration of a Euro-Atlantic framework. In its programme, the government is committed to such matters as a respect for human rights and the rights of minorities, the repatriation of refugees, improved relations with its neighbours, and considerable economic reform. Legislation is already in place to achieve these aims. Developments in Croatia have swiftly led to closer relations between the EU and Croatia after a gap of several years. Between the Union and Croatia there is an advisory working party in place, whose purpose it is to offer Croatia expertise and technical assistance in negotiations on contractual relations. According to the Commission, talks on the Stability and Association Pact with the country should be started as soon as possible. The Council decided in August that the Tempus 3 programme, which relates to higher education, should extend to Croatia. In July the Commission freed 10 million euros to support the repatriation of refugees. The proposal under discussion contains a target figure of 250 million euros in EIB loans for Croatia for the period 2000-2007. With that sum, it is proposed to finance basic infrastructure projects and environmental investment, the development of industry and SMEs, housing reconstruction, urban renewal and tourism. The plans are in accordance with projects that were put forward by Croatia at the Regional Funding Conference held in March. Croatia’s leaders are committed to difficult but necessary economic reform. The cure will be hard to endure, but, hopefully, the loans now being spoken about will help to soften the negative effects of economic reform on the lives of the people. We also have to remember that Croatia has good industrial manufacturing plants, a qualified and trained workforce and excellent opportunities for the development of tourism, for example. According to a survey by the Commission the country’s competitiveness in European markets could be strengthened enormously with a raft of consistently applied and ambitious structural reforms, but at present many Croatian businesses still have problems competing in the free economy. The events in the Balkans and the future of the region are burning issues. This week, in the wake of the Presidential elections, we have followed the situation in Yugoslavia with bated breath. The winds of change are blowing in Belgrade too. The international community has already indicated it will support the Serbian nation and sanctions are being lifted. The European Union and the European Parliament have every reason to support positive developments in the Balkans. Instability in the region is a threat to Europe as a whole. We know that nationalism and poverty mean war. Ahead of us there is a massive amount of physical and spiritual reconstruction to take place and we also, for our part, have to clear the barriers to effective assistance. Unfortunately, interinstitutional discussions on next year’s budget – in particular section IV on financing – still appear to be very difficult for the time being. Hopefully, the signs of hope in Croatia and now also in Yugoslavia will encourage us to find a solution to the problems of the budget and its financial perspectives.

Political group: PSE