COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

Enlargement Strategy and Main Challenges 2011-2012

1. Introduction

The European Union's enlargement process has entered a new phase. The completion of accession negotiations with Croatia, opening the way to membership in mid-2013, vindicates the policy adopted in the aftermath of the devastating Balkan conflicts of the 1990s, which aims to bring peace, stability, democracy and ultimately EU membership to the whole region. As fresh evidence for the transformational power of the EU's enlargement policy, it provides new momentum for reform in all enlargement countries.

The EU’s enlargement policy, as enshrined in the Treaty on European Union[1], is the response to the legitimate aspiration of people of our continent to join the endeavour of a unified Europe. The integration of the countries of Central and Eastern Europe over the past decade has shown that enlargement benefits the EU as a whole and allows it to be better positioned to address global challenges.

The enlargement policy has proven to be a powerful tool for societal transformation. Countries that have already acceded to the EU and those on the road to join have undergone impressive changes through accession-driven democratic and economic reforms. Commitment, conditionality and credibility have been situated at the core of the accession process and its success.

The renewed consensus on enlargement, agreed by the December 2006 European Council, and based on the principles of consolidation of commitments, fair and rigorous conditionality and good communication with the public, combined with the EU's capacity to integrate new members, remains the framework for the EU enlargement policy.

Through the enlargement policy, the EU extends its zone of peace, stability, democracy, and prosperity; concepts that have gained renewed relevance, in the light of recent developments:

– The dramatic events in the Southern Mediterranean and the Middle East, as well as the fragility of the ensuing situations, underline the importance of a pole of stability and democracy in South-East Europe, solidly anchored in the EU’s enlargement process.

– The recent global financial crisis and the present difficulties in the Eurozone have highlighted the interdependence of national economies both within and beyond the EU. These events underline the importance of further consolidating economic and financial stability and fostering growth, also in the enlargement countries. The enlargement process is a powerful tool to that end.

Since the adoption of the last enlargement package, further positive developments have taken place in the Western Balkans. The arrest and transfer to the International Criminal Tribunal for the former Yugoslavia (ICTY) of Ratko Mladić and Goran Hadžić removed a major stumbling block from the European path of Serbia and marked an important step towards reconciliation. A dialogue between Belgrade and Pristina, aiming inter alia at achieving progress on the road towards the EU, was established and has yielded first results. Progress in EU-related reforms can be reported in most enlargement countries. Visa-free travel has been granted to the citizens of two more Western Balkan countries, Albania and Bosnia and Herzegovina.

Nevertheless, in a number of countries important reforms were delayed, often as a result of internal political developments and conflicts. Delays and blockages were particularly serious in Bosnia and Herzegovina and Albania. Good governance, the rule of law, administrative capacity, unemployment, economic reform and social inclusion remain major challenges in most countries. There have been a number of concerning developments in the area of freedom of expression in the media. Differences over status continue to affect negatively both Kosovo[2] and the region. The recent events in Northern Kosovo are cause of grave concern. The name question concerning the former Yugoslav Republic of Macedonia remains unsolved.

Iceland's accession process has made headway over the past year. Progress in negotiations is due to Iceland's already highly integrated structures through its long established democracy, its membership of the European Economic Area and the Schengen zone, and its high calibre public administration.

In Turkey, accession process remains the most effective framework for promoting EU-related reforms, developing dialogue on foreign and security policy issues, strengthening economic competitiveness and diversifying supply of energy sources. In the accession negotiations, it has regrettably not been possible to open a new negotiating chapter for over a year. A new constructive phase in the relations with Turkey needs to be triggered based on concrete steps in areas of common interest.

Croatia's imminent accession demonstrates that the enlargement process is geared to maximise its transformative effects on the countries concerned. Improvements brought to the process by the 2006 renewed consensus on enlargement were put into practice with Croatia and have proved their value. Ongoing and future negotiations with other enlargement countries should build further on this experience. In particular, difficult negotiating chapters such as those on the judiciary and fundamental rights and on justice, freedom and security should be tackled as early as possible to allow adequate time for the candidate country to build the necessary track record of reform.

The accession of Croatia will be a major step in the historic project of integrating the Western Balkans into the EU. The EU has consistently proclaimed the inclusiveness of its policy towards the Western Balkans, starting with the ‘regional approach’ of the mid-1990s and most prominently through the Stabilisation and Association process launched in 1999 and the 2003 Thessaloniki summit which confirmed that the future of the Western Balkans lies within the EU. Far from drawing a dividing line in the Balkans, it should serve as an incentive and catalyst for the rest of the region to accelerate its course towards the EU. In view of the EU’s commitments, as well as the history and geography of the region, ‘unfinished business’ will remain until the whole of the Western Balkans are included, once the conditions are met.

Within this context, the Commission remains fully attached to the principle of own merits. The pace at which each country advances towards membership depends mainly on its performance in meeting the established criteria and conditions.

Croatia’s successful experience sends strong messages to other enlargement countries:

· The EU delivers on its commitments once the conditions are met.

· The criteria and conditions for accession are demanding and their implementation is monitored with increased attention. This, however, is not an obstacle, but results in the candidate state achieving a higher level of readiness which will benefit both it and the EU upon accession.

· Bilateral disputes with neighbours should and can be addressed through dialogue and compromise, in line with established principles.

The continued credibility of the enlargement process is an important element for advancing reforms in the enlargement countries and ensuring support of Member States. Developments over the past year have confirmed that tangible results along the path towards the EU are also achievable ahead of accession, when the respective conditions are met. The Commission recommendations in this Communication for moving to next stages of the accession process and the extension of visa liberalisation to Albania and Bosnia and Herzegovina are eloquent examples. On the other hand, where political will and the commitment to achieve concrete results are insufficient or lacking, the accession process has not advanced and risks stalling.

This communication assesses the current state of the European Union's enlargement agenda, comprising the Western Balkans, Turkey, and Iceland. Based on the accompanying in-depth country analyses[3], it takes stock of what these countries have achieved preparing for membership, where they stand today, assesses their prospects for the coming years and in this regard makes a number of recommendations. As in previous years, a number of key challenges are given particular attention.

2. Key challenges

2.1. Increased focus on strengthening the rule of law and public administration reform

Strengthening the rule of law has been identified as a continuing major challenge and a crucial condition for countries moving towards EU membership. This issue has been given greater attention in recent years at all stages of the accession process, in line with the renewed consensus on enlargement.

This emphasis on the rule of law was reflected in the extensive consideration given to these issues during the accession negotiations with Croatia, particularly in the context of the negotiating chapters on the judiciary and fundamental rights and on justice, freedom and security. The weight of rule of law issues in the key priorities set out as conditions for the opening of accession negotiations with Albania and Montenegro is another example of prioritising this area ahead of the actual negotiations.

The experience acquired from the accession negotiations with Croatia will put to the benefit of the ongoing and future negotiations with other countries. To that end, the Commission will propose a new approach with respect to issues related to the judiciary and fundamental rights and to justice and home affairs. These should be tackled early in the accession process and the corresponding chapters opened accordingly on the basis of action plans, as they require the establishment of convincing track records. The Commission would report regularly, at all stages of the process, on progress achieved in these areas along milestones defined in the action plans with, where appropriate, the necessary corrective measures. IPA funds will be targeted to support this process.

Within the framework of the pre-accession process, the Commission has been encouraging countries to build up independent and efficient judiciaries and to remedy existing shortcomings. In this respect, Croatia improved its system of appointing judges, Serbia launched a review of the re-appointment procedure for judges and prosecutors, Montenegro started a revision of key constitutional and legal provisions concerning the judiciary. Kosovo completed its vetting process of judges and prosecutors.

The fight against corruption is one of the key challenges for the rule of law in most enlargement countries. Corruption remains a serious problem, affecting not only citizens' everyday life in vital areas such as healthcare and education. It also has serious negative impacts on investments and business activities and damages national budgets, especially concerning public procurement and privatisation. The Commission has sharpened its focus on the fight against corruption in the enlargement countries in recent years.

The important experience gained working with the enlargement countries has contributed to the development of the EU's own approach to fighting corruption, across all policy areas, internal as well as external[4]. While the Commission is setting up a corruption monitoring mechanism for the Member States, it will continue to give high priority to the monitoring of anti-corruption policies in the enlargement countries, with an emphasis on results and sustainability, from the early stages of accession preparations. The Commission will also promote close coordination between international donors to ensure an optimal use of resources.

The fight against organised crime remains an important priority for the enlargement countries. It is closely linked with fighting corruption and establishing independent judiciaries. The cross border nature of many criminal activities poses a major challenge to the fight against organised crime. Regional cooperation between law enforcement and judicial bodies, including the creation of professional networks, is particularly important for addressing this challenge. The Commission is supporting the creation of a regional prosecutors' network that is assisted by seconded experts from Member States, as well as by the relevant European agencies. The Commission also assists the establishment of coordinated witness protection systems in the region.

Over the course of the past year, the Commission has intensified its rule of law dialogue with the countries of the Western Balkans. The aim is to strengthen preparations at earlier stages of the pre-accession process, based on in-depth analyses of the justice and home affairs sectors. To that end, expert missions were carried out in most of the enlargement countries. The Commission strengthened cooperation and the exchange of information with the relevant EU agencies, including Europol, Frontex, Eurojust, and the European Monitoring Centre for Drugs and Drug Addiction, as well as with regional initiatives, the Council of Europe and other international organisations. Where appropriate, benchmarking was already applied during early stages of the process. A Structured Dialogue on justice was launched with Bosnia and Herzegovina and the Commission proposes a similar dialogue with Kosovo on the rule of law with the aim to address the challenges in this area and support judicial reform.

Public administration reform, aiming at enhancing transparency, accountability and effectiveness, essential for democracy and the rule of law, continues to be a key priority under the political criteria in most enlargement countries. Adequate administrative procedures, including with respect to human resource and public financial management, are crucial for the implementation of the acquis. Countries need to increase their efforts to improve their public administrations on the basis of overall national strategies.

In some enlargement countries, there is increasing evidence that the distinct roles of the ruling parties and of the state are inadequately respected. Such practices risk undermining the rule of law and the functioning of democracy.

2.2. Ensuring freedom of expression in the media

Freedom of expression is a fundamental right, which is safeguarded by international law and forms an integral part of the functioning of pluralistic democracy. For the accession process, ensuring this freedom is a key component of the Copenhagen political criteria for membership.

The enlargement countries are characterised on the whole by pluralist media landscapes. However, in a number of countries, negative developments in this area have recently been observed. This is a source of serious concern. The Commission further examines freedom of expression in the accompanying reports, where the situation in each country is outlined.

Challenges to freedom of expression and the media include: political interference, sometimes manifested also through the legal system; economic pressure; using crime and corruption to influence the media; and insufficient protection of journalists against harassment or even violent attacks. Economic challenges relate to a lack of transparency and concentration of ownership, lack of fair competition, and the lack of independence of market regulators. In a number of enlargement countries, the overall implementation of media legislation is not satisfactory. A number of cases of attacks on journalists, including killings, remain unresolved, several years after their occurrence. In Turkey, the legal framework does not yet sufficiently safeguard freedom of expression. The high number of legal cases and investigations against journalists and undue pressure on the media raise serious concern.

All of these issues place serious restrictions on the expression of views by media critical of governments and discourage investigative journalism. Media and journalists are often forced into self-censorship.

It is essential that the enlargement countries guarantee open and pluralistic media landscapes, which allow for a culture of critical and independent journalism. Public Service Broadcasters need to improve their economic standing and autonomy in order to fulfil their role. At the same time, the media profession should commit itself to self-regulation on the basis of comprehensive codes of ethics and professional standards.

In May 2011, the Commission organised a conference on freedom of expression, which brought together media and civil society stakeholders from the Western Balkans and Turkey. This conference aimed to reach out, beyond its official government interlocutors, to those directly concerned and listen to their views and experiences. The conclusions of the conference will continue to feed into the Commission’s work in this area.

The Commission will closely monitor developments in the framework of existing agreements and structured dialogues with the enlargement countries. It will further integrate these issues into accession negotiations, notably under the judiciary and fundamental rights chapter. It will identify priorities and encourage government efforts to reach European standards in the field of freedom of expression. To this end, cooperation will be strengthened with the relevant partner countries and international organisations - in particular the Council of Europe and the Organization for Security and Cooperation in Europe. Dialogue with journalists and their associations will be further developed.

2.3. Enhancing regional cooperation and reconciliation in the Western Balkans

Regional cooperation and good neighbourly relations are essential elements of the Stabilisation and Association process and, as such, are closely monitored by the Commission at all stages of the accession process. Regional cooperation underpins and enhances reconciliation in a region that suffered major conflicts in the recent past. Regional cooperation and trade can bring further economic benefits to the region. It is also an integral part of the process of integration into the EU, which often necessitates regional approaches and measures.

Significant progress has been achieved in this respect over the past decade and further important steps can be reported in the past year. Visits by leaders of the region, in particular those of Serbia and Croatia, to neighbouring countries, as well as statements made on the conflicts of the 1990s have contributed substantially to regional reconciliation. The Sarajevo process on refugee return involving Serbia, Croatia, Bosnia and Herzegovina and Montenegro, is about to be successfully completed in the coming days. Initiatives by NGOs and civil society, such as the Youth Initiative for Human Rights, the Truth and Reconciliation Commission (RECOM), and the Igman Initiative play an important role in enhancing reconciliation beyond governments among the citizens of the region.

Cooperation within specific sectors is functioning well and is advancing, including through the Energy Community, the European Common Aviation Area, and joint training at the now fully operational Regional School of Public Administration (ReSPA). In December 2010, a strategy to boost the development of the Danube region was proposed by the Commission and subsequently endorsed by the Member States[5]. Regional trade within the Central European Free Trade Agreement (CEFTA) framework is growing and the agreement is being extended to areas such as competition policy, further abolition of tariff barriers and liberalisation of services. The Regional Cooperation Council (RCC) has started implementing its three-year strategy and work programme, working towards more result-oriented action.

At the same time, issues stemming from past conflicts, together with other open bilateral issues remain key challenges to stability in the Western Balkans that affect regional cooperation, relations between countries, as well as their internal functioning and reform process. It is urgent to address these remaining issues. Resolving these issues will remove a major impediment to the Western Balkans’ course towards the EU.

In particular, disputes related to inter-ethnic or status issues, notably in Bosnia and Herzegovina and Kosovo, continue to obstruct the normal functioning of institutions, act as a brake to the reform process and the European agenda and can sometimes have broader regional implications. The Commission holds that pursuing their EU path is the best way for the countries to address these problems. Recent developments, in particular progress in the EU-facilitated Belgrade-Pristina dialogue is key in this context. The 10th anniversary of the signing of the Ohrid Framework Agreement, celebrated this August, is a reminder that difficult ethnic-related issues can be successfully addressed through dialogue and compromise.

Positive results were recently achieved in overcoming problems concerning the inclusive functioning of regional initiatives resulting from differences of views over the status of Kosovo, but more needs to be done. An agreement was reached in the framework of the Belgrade-Pristina dialogue on the acceptance by Serbia of the Kosovo customs stamps; this should allow for regional trade to be restored within the framework of CEFTA. Previously, the holding of CEFTA and RCC meetings with participation of all parties was restored and the Pan-Euro-Med Convention on Preferential Rules of Origin was signed. However, differences over the status of Kosovo have continued to obstruct the finalisation and signing of the Transport Community Treaty and the extension of the Autonomous Trade Measures for Kosovo and other Western Balkan partners. These differences remain an obstacle to the development of contractual relations between the EU and Kosovo.

A comprehensive settlement of issues related to regional cooperation is pending in the Belgrade-Pristina dialogue. The Commission calls upon all parties involved to continue to seek practical and pragmatic solutions to ensure the inclusiveness of regional cooperation, without prejudice to differing positions over the status of Kosovo. Progress made in the past year shows that this is possible.

Completing the process of rendering justice for crimes committed during the wars in the former Yugoslavia is essential for lasting reconciliation. Full cooperation with the ICTY remains an essential condition for the accession process in the Western Balkans. The recent arrests and transfers to The Hague of the last two ICTY indictees were major steps in that direction. The Commission also calls upon the governments concerned to pursue with greater vigour the proper conduct of domestic war crime trials.

The Commission takes very seriously the report endorsed by the Parliamentary Assembly of the Council of Europe in January (Marty report) concerning crimes, including human organ harvesting, allegedly committed in the period during and after the conflict in Kosovo. It fully supports the investigation conducted by EULEX, notes the importance of witness protection in this context and welcomes the establishment of a Brussels-based EULEX Task Force, as well as the cooperation of the relevant governments with this Task Force.

Overall, it is important that governments and civil society organisations in the region do more to explain to citizens that reconciliation is an integral part of their European future and that justice with respect to war crimes is an indispensable element of this process. Political leaders should avoid statements and measures that could call these important principles into question.

With respect to open bilateral issues, these need to be solved by the parties concerned as early as possible during the enlargement process, with determination, in a good neighbourly spirit and taking into account the overall EU interests. The Commission urges them to make every effort towards solving outstanding border disputes in line with established principles and means, including referring issues to the International Court of Justice if appropriate. Bilateral issues should not hold up the accession process. The Commission stands ready to facilitate the creation of the necessary political impetus in the search for solutions and to support related initiatives.

The border arbitration agreement between Slovenia and Croatia, the implementation of which is due to begin later this year, paves the way for addressing bilateral issues. The Commission strongly encourages the parties to the dispute over the name of the former Yugoslav Republic of Macedonia to employ a similarly constructive spirit in the ongoing UN-led talks.

2.4. Achieving sustainable economic recovery and embracing Europe 2020

All enlargement countries have now embarked upon a path of recovery, though at varying paces: Turkey has emerged from the crisis with a bigger economy and its growth continues to be impressive, but there are increasing signs of overheating. The Western Balkan economies are also beginning to recover, though it will take some time for them to reach pre-crisis levels. Iceland's economy continues to emerge from the major economic disturbances it experienced during the crisis.

However, the enlargement countries are confronted with important socio-economic challenges. Unemployment remains high and rising in most countries. Unemployment in Kosovo, Bosnia and Herzegovina and the former Yugoslav Republic of Macedonia remains the highest in Europe. Labour force participation rates are low, especially for women and the young and widespread informal employment remains a challenge. Exports from the Western Balkans, which are contributing to the recovery, remain dominated by low added value products, including commodities, which are exposed to price volatility and strong competition from emerging markets.

Most enlargement countries have maintained overall prudent macroeconomic policies. Fiscal consolidation and the reform of labour markets remain the most urgent short-term priorities, reflecting largely similar challenges to those presently faced in the EU. More structural reforms are needed to boost competitiveness and improve the investment climate, thus attracting foreign direct investment, fostering job creation and ensuring the sustainability of growth. In the Western Balkans, improving the capacity of public administration, and strengthening the rule of law, including by reforming the judiciary and combating widespread corruption present particular challenges. Progress in these areas would also be conducive to the business environment. Public services to the business and investment in infrastructure remain scarce.

Labour market reforms, including a review of transfer-benefit systems, taxation issues and overhauls of education systems, should contribute to addressing a major structural weakness in the Western Balkans and an impediment to achieving stronger, sustainable, and inclusive growth.

Embracing the objectives of the Europe 2020 strategy

Europe 2020 is the EU's growth strategy for the present decade, guiding the Union towards becoming a smart, sustainable and inclusive economy in a changing world. The enlargement countries are encouraged to associate to the Europe 2020 strategy and its flagship initiatives[6]. This provides a useful anchor for reform.

The Europe 2020 objectives are reflected, as appropriate, in the dialogues on economic policy and on employment and social policies between the Commission and enlargement countries. The Commission has guided the programming of financial assistance towards the objectives of Europe 2020, especially with respect to socio-economic development. The Commission's cooperation with the international financial institutions (IFIs) takes these objectives into account.

The ongoing debt crisis in Europe has underlined the importance of sound public finances and the Commission is sharing some of its peer review mechanisms with the candidate countries and potential candidates. Multilateral fiscal surveillance by the EU is an important tool to this end. It will be progressively adapted to the upcoming strengthened economic governance in the EU.

In the area of private sector development, policy coordination with the Western Balkans and Turkey is guided by the provisions of the EU's Small Business Act[7]. This coordination, based on regular evaluations against established EU benchmarks, has resulted in the emergence of well-tested recommendations reflecting the national particularities of the enlargement countries. The Commission proposes that the results of the Small Business Act be used as a reference tool for future Small and Medium Enterprises (SME) -related activities in the region.

Within the Western Balkans Investment Framework, the Commission encourages partner International financial Institutions (IFIs) to support new forms of SME financing, in particular equity, venture capital and guarantee mechanisms. The Commission will co-finance a Western Balkan SME platform, which aims to improve access to finance for SMEs through guarantees and venture capital.

In the area of research and innovation, the cooperation of enlargement countries with the EU is already advanced in terms of eligibility for participation in EU initiatives. Enlargement countries participate in the 7th Framework Programme for Research and Technological Development and the Competitiveness and Innovation programme. Current indicators, however, show that in most cases they are significantly below the EU average in terms of investments and development of research and innovation policies. Regional leaders, including at the upcoming ministerial conferences, are encouraged to commit to increase investment in research, innovation and human capital.

Enlargement countries need to become better prepared to withstand climate change and align with the EU's efforts to address this challenge, including through awareness raising. Progressive climate action will bring benefits through low-carbon development and can create jobs.

The nascent economic recovery has yet to be reflected in an improved social situation. The share of the population living below the poverty line remains high and in the Western Balkans continues to grow. High informal employment impacts negatively on the social situation, particularly concerning young people.

Securing jobs and the social inclusion of vulnerable groups is a priority. However, little real investment has occurred in the social sector and cooperation with international donors has faced obstacles in strategic planning. The Commission emphasises employment and social policies in its policy dialogue and encourages countries to set clear and realistic targets in these two areas and to better target and prioritise social spending. The objectives of the European Platform against Poverty and Social Exclusion should be taken up as appropriate by the enlargement countries.

Sustained measures for the inclusion of all vulnerable groups into mainstream society should be adopted. Concerning the particularly disadvantaged Roma minority, the Commission has invited the Western Balkans and Turkey to cooperate within the EU Roma platforms, which systematically monitor inclusion and propose related actions. The Commission has held a series of seminars on Roma issues to encourage the countries of the region to review and strengthen the relevant national action plans and their implementation on fighting discrimination and improving Roma integration, particularly in the areas of education, employment, housing and health. Strong efforts should be made by the countries of the Western Balkans to facilitate the civil registration of displaced persons.

Improved education and training are key factors of structural change for sustainable and inclusive growth. So far, investments into education, skills and qualifications have typically been low and regional recognition of national qualifications is insufficient. State education systems and infrastructure need to be reformed and internationally comparable vocational, education and training programmes are needed to address the existing skills mismatch.

The Commission has opened the Education and Training 2020 strategic framework for participation of the candidate countries which the former Yugoslav Republic of Macedonia and Montenegro are yet to join. The Commission has proposed to develop a Western Balkans Platform on education and training, based on the open method of coordination, to allow for the participation of all enlargement countries. This will enhance dialogue on main policy challenges and secure implementation and monitoring. The countries of the Western Balkans have been invited to participate in the centralised activities of the EU's Lifelong Learning Programme.

2.5. Extending transport and energy networks

Improved transport and energy cooperation with the enlargement countries directly benefits European citizens and businesses. Transport and energy interconnection are key elements in the EU's cooperation with all neighbouring countries aimed at promoting sustainable economic growth, trade and cultural exchange, employment, as well as at improving living conditions. In the case of the enlargement countries this cooperation also aims at preparing them to fully take on and implement the transport and energy acquis.

With its strategic location at the crossroads between Europe, the Middle East and the Caucasus, Turkey has steadily developed and strengthened its links with the EU – as illustrated by recent developments in the aviation sector or its role in the establishment of the Southern Gas Corridor. Further development of these links would benefit both sides. The Southern Gas Corridor would contribute to Europe's security of supply for natural gas, as it would make a considerable contribution in expanding supply routes and stimulate competition in the international gas market. The Commission supports Turkey financially in the further development of its transport networks, in particular concerning high speed rail connections and the modernisation of port facilities. At the same time, Turkey should be encouraged to deepen its gas market, increasing liquidity and contract flexibility. Such a process would lead to the emergence of an 'energy hub', the existence of which would achieve greater energy security.

In the Western Balkans, a regional transport network has been defined within the framework of the South East Europe Transport Observatory (SEETO) identifying priority projects of regional interest. The Western Balkan countries participate, together with the EU Member States and other European countries, in the European Common Aviation Area Agreement, which was signed in 2006. Cooperation in the field of transport is also foreseen under the Danube Strategy.

Since 2008, the Commission has been negotiating the creation of a Transport Community with the Western Balkan countries, establishing an integrated market for infrastructure and land, inland waterway and maritime transport. Negotiations have been almost completed, but are held back by differences over the denomination of Kosovo. The Commission urges the parties concerned to take the necessary steps that will allow for a rapid conclusion of the negotiations and the signing of the Treaty.

The Commission has proposed a review of the EU's Trans-European Networks in the field of transport (TEN-T) with a view to improving connections with the countries covered by the enlargement and neighbourhood policies[8].

In the field of energy, the EU is also pursuing the integration of networks, notably through support for the Energy Community which encompasses the EU and its Member States, all the Western Balkans as well as some neighbourhood countries[9]. The Energy Community, based on EU energy rules, establishes an open, transparent and competitive regional market which helps to attract investments. The Energy Community acquis already covers the internal energy market, energy efficiency and renewable energies, as well as selected parts of environmental, social and competition acquis. It will be extended to cover mandatory oil stocks, in addition to the electricity and gas markets.

3. Progress in the enlargement countries and agenda for 2011-2012

3.1. Western Balkans

Croatia

The accession negotiations with Croatia were closed in June. This was the result of Croatia meeting the closing benchmarks in the remaining areas over the past year, including in difficult chapters such as judiciary and fundamental rights and competition policy. Croatia has achieved substantial results in the fight against corruption, introduced a new objective and transparent system for appointing judges and prosecutors, and has much improved implementation of housing care programmes for returning refugees. The restructuring of its shipyards in difficulty has progressed substantially.

The result of the accession negotiations will be embodied in an accession treaty which, as foreseen by the June European Council, should be signed by the end of the year. This should enable Croatia to join the EU on 1 July 2013 provided that the necessary ratification procedures have been completed. Croatia has achieved a very high level of preparation to assume the responsibilities of membership upon accession. It meets the Copenhagen political criteria. It is expected to meet the economic and acquis criteria by 1 July 2013. This momentum needs to be maintained.

Croatia needs to continue building on the reforms implemented and capacities developed during the course of the accession negotiations. The Commission will closely monitor Croatia's fulfilment of all the commitments undertaken and its continued preparations to assume the responsibilities of membership upon accession. The monitoring will focus in particular on commitments undertaken by Croatia in the following areas: judiciary and fundamental rights; justice, freedom and security; as well as competition policy.

The monitoring will consist of regularly updated monitoring tables, the dialogue under the Stabilisation and Association Agreement, peer assessment missions, the pre-accession economic programme and fiscal notifications. The Commission will issue six-monthly assessments up to Croatia’s accession on the implementation of commitments taken by the country in these chapters. A Comprehensive Monitoring Report will be presented to the European Parliament and the Council in autumn 2012.

If issues of concern are identified during the monitoring process and are not remedied by Croatia, the Commission will, if necessary, address early warning letters to the Croatian authorities and may propose to the Council to take all appropriate measures already prior to accession. In addition, as in the fifth enlargement, the accession treaty will contain a general economic safeguard clause, an internal market safeguard clause and a safeguard clause in the area of justice, freedom and security.

Croatia is expected to continue playing an active role in regional cooperation in the Western Balkans. The Commission looks forward to the implementation of the border arbitration agreement between Slovenia and Croatia. It will support the establishment and functioning of the Arbitral Tribunal, as foreseen in the said agreement. The Commission welcomes the Statement by the Croatian Government to support the other countries of the region on their path to EU-membership, and encourages Croatia to address the remaining open bilateral issues with its neighbours ahead of accession. At the same time, political leaders should avoid statements and measures that could call into question the importance of reconciliation or neglect the seriousness of war crimes.

The former Yugoslav Republic of Macedonia

The June parliamentary elections in the former Yugoslav Republic of Macedonia were mostly in line with international standards and the country has continued accession-related reforms. The governing coalition has been stable. The country continues to sufficiently meet the political criteria. Some progress has been made as regards the reform of the parliament, the judiciary, public administration and respect for and protection of minorities, though core challenges remain. Further efforts are needed in particular as regards freedom of expression in the media, independence of the judiciary, reform of public administration and fighting corruption. The efforts of the political forces to cooperate need to be strengthened.

The country continues to fulfil its commitments under the Stabilisation and Association Agreement (SAA). The Commission maintains its proposal to move to the second stage of the association as provided for by the SAA and encourages the Council to act on this without further delay.

The Commission notes that the Council has not been able to follow up on the Commission recommendation dating from 2009 for opening accession negotiations with the former Yugoslav Republic of Macedonia. Moving the accession process of this country to its next stage will benefit the momentum of reforms and the climate of inter-ethnic relations, and will impact positively on the region.

The dispute between Greece and the former Yugoslav Republic of Macedonia over the name of the latter has remained unresolved for almost two decades. A dialogue under the auspices of the UN has been ongoing since the 1990s and it is complemented since 2009 by bilateral contacts, including at Prime Ministerial level. However, these processes have yet to yield results. Maintaining good neighbourly relations, including a negotiated and mutually acceptable solution to the name issue, under the auspices of the UN, remains essential. The Commission underlines the need for a redoubling of efforts for a solution without further delay. It also recalls that actions and statements that could negatively impact on good neighbourly relations should be avoided. A solution to the name issue is long overdue.

Montenegro

In December 2010, the European Council granted candidate country status to Montenegro and endorsed the seven key priorities for the opening of accession negotiations identified in the Commission's Opinion on Montenegro's application for EU membership.

Since the adoption of the Opinion, Montenegro has made good progress in meeting the Copenhagen political criteria, achieving overall satisfactory results, in particular in the identified key priorities. The legislative and institutional framework has been improved with a view to strengthening the work of the parliament, the electoral framework, professionalism and de-politicisation of public administration, the independence and accountability of the judiciary, fight against corruption and organised crime, media freedom and cooperation with civil society. Sustained efforts are needed, however, in further developing a track record in the area of rule of law, in particular with respect to high-level corruption and organised crime cases. Positive steps have also been made in anti-discrimination policies and in improving the situation of displaced persons. This now needs to translate into reducing discrimination in practice towards vulnerable groups, including displaced persons.

The Commission will place particular attention on monitoring Montenegro’s progress in the areas of rule of law and anti-discrimination in view of maintaining the momentum of reforms in these areas and will continue to support Montenegro in implementing EU-related reforms.

Albania

Albania's domestic political scene has been largely dominated by the continuation of the political stalemate and further confrontational developments. Violent clashes between anti-government protestors and police led to the death of four persons and amplified the climate of mistrust between political forces, as well as vis-à-vis certain State institutions. The local elections in May, although assessed as competitive and transparent, were decisively marked by shortcomings which need to be addressed. In particular, the controversy surrounding the vote count of misplaced ballots for the Tirana mayor increased polarisation between the ruling majority and the opposition.

It is now urgent that the political forces in Albania re-establish and maintain a level of political dialogue that would allow the proper functioning of key democratic institutions, notably the parliament, and progress on the EU integration path. The significant shortcomings identified in the last two elections warrant a comprehensive electoral reform that would benefit from external independent advice and consensus among political parties.

The two main political parties have taken up the EU's offer for reengaging constructively with the country's European integration priorities. It is essential now for Albania's political parties to commit to a structured and sustained process of working together on European reforms. The way forward should include a process of joint review and adoption of the Action Plan addressing the Opinion recommendations and a schedule for essential reforms, including on parliamentary work and elections.

Overall, Albania has made limited progress in meeting the political criteria for membership and the twelve key priorities for the opening of accession negotiations, as identified in the Commission’s Opinion endorsed by the Council in December 2010. There has been some progress in fighting organised crime, improving the treatment of detained persons in prisons, and on rights of the child, but progress remains insufficient regarding, the judiciary, anti-corruption policy, property rights and improving the living conditions of the Roma community in addition to the work needed on parliamentary procedure and elections. Albania has started implementing an action plan to address the recommendations of the Commission’s Opinion. However, further efforts are required to ensure the effectiveness and completeness of the actions envisaged, including through close cooperation with the opposition. Albania will need to make sustained efforts and achieve demonstrable progress on all of these matters before the Commission can recommend candidate status and the opening of EU accession negotiations.

Albania has continued to smoothly implement the Stabilisation and Association Agreement. In December 2010, the country was granted visa-free access to the Schengen area for its citizens, as a result of its satisfactory achievements in the visa liberalisation dialogue.

The Commission is committed to continue supporting Albania in achieving EU-oriented reforms and meeting the Opinion’s key priorities.

Bosnia and Herzegovina

In Bosnia and Herzegovina, the actions of its political representatives continue to reflect a lack of a common understanding on the overall direction and future of the country and its institutional setup. No consensus has been found for ensuring and improving the functioning of the institutions, while safeguarding the interests of its constituent peoples, especially in view of the country's widely shared EU aspirations. The process of establishing executive and legislative authorities following the October 2010 elections still has to be completed with the formation of the State-level Government. This long delay has been hampering Bosnia and Herzegovina's much needed reforms which would allow the country to make further progress towards the EU. The EU accession process requires functional institutions at all levels and an effective coordination mechanism for dealing with the EU, allowing the country to speak with one voice.

As a result, the overall pace of reforms has been very limited. Some results were achieved, notably concerning achievements which led to the country being granted visa-free access to the EU for its citizens in December 2010. In June, the country's leadership agreed to engage with the EU on a Structured Dialogue on Justice under the Stabilisation and Association process, aiming at ensuring an independent, effective, impartial and accountable judicial system.

Compliance with the European Convention on Human Rights is an essential requirement of the Interim Agreement and the Stabilisation and Association Agreement. In this respect, the persistent delay in harmonising the Constitution with a European Court of Human Rights' ruling on ethnic discrimination regarding representation in the institutions of the country remains an issue of serious concern[10]. A credible process must be put in place for addressing the ECtHR decision and a State Aid Law adopted at state level. Progress is also needed towards adoption of a state level census law and speeding up reforms to facilitate the country’s EU integration process. The adoption of the Global Fiscal Framework is a priority for fiscal sustainability.

Bosnia and Herzegovina's governance continues to involve an international presence with an executive mandate. Regarding the Brčko Final Award, one of the objectives and conditions for the closure of the Office of the High Representative[11], progress was made in resolving the electricity issue. Further efforts are needed to meet remaining outstanding objectives, to facilitate the transition from a country with an international system of governance and security towards a country with domestic institutions in full ownership of their political and legislative process- in line with the requirements for a country aspiring to become a member of the EU. Overarching these issues is the need for a stable political environment.

The establishment of the Structured Dialogue on Justice, as well as experience from the reforms that were carried out under the visa liberalisation process show the way forward: by adopting a European approach of dialogue and compromise and focusing on the EU agenda, the country will be able to gradually move from paralysis and confrontation to cooperation, and from international supervision to its EU future.

The EU has reinforced its role in Bosnia and Herzegovina, with the EU's first single representative in Bosnia and Herzegovina having taken up office. The EU will continue to strengthen its support for the country's institutions in implementing the objectives of the EU agenda, in line with the March 2011 Council conclusions.

Serbia

In parallel to this Communication, the Commission has adopted its Opinion on Serbia's application for EU membership. The conclusions and recommendation of the Opinion are set out in annex to this Communication.

Kosovo

In a period of early parliamentary elections and lengthy elections of a new President by parliament, little progress took place as regards the reform agenda. The elections themselves were marked by serious shortcomings, which need to be addressed. The constitutional court played a positive role through the way it exercised its responsibilities.

The new government has demonstrated commitment to Kosovo's European perspective, including through sustained efforts in areas such as visa and trade and the establishment of a National Council for EU Integration. The new parliament has recently started to pass the relevant legislation for launching key reforms. Much more needs to be done to tackle organised crime and corruption. Public administration is weak and the implementation of judicial reform remains a challenge.

Following the UN General Assembly Resolution of September 2010, an EU facilitated dialogue between Pristina and Belgrade was launched. The dialogue aims at promoting cooperation, achieving progress on the path to the EU and improving the lives of people. It was conducted in a generally constructive spirit until September and has led to agreements on several issues: freedom of movement of goods and persons, civil registry and cadastre. These constructive efforts need to continue and lead to further steps in normalising their relations. Agreements reached need to be implemented in good faith.

The integration of Kosovo Serbs south of the Ibër/Ibar river has improved. Kosovo Serbs took part in the Kosovo census and their participation in the recent general elections increased. On the other hand, in northern Kosovo inter-ethnic tensions and incidents persist. Separate Serb structures, supported by Belgrade, opposed the census and encouraged the boycott of the elections organised by the Kosovo authorities. The Commission urges all concerned in Kosovo to defuse tensions and to fully cooperate with EULEX.

Pursuit of solutions through dialogue, and rejection of unilateral actions and violence, is the only possible basis for moving ahead in Kosovo. The Commission calls on all actors to reject violence and to refrain from taking any measures which threaten stability.

Kosovo shares the European perspective of the Western Balkans. In March, the Commission issued its proposal for a framework agreement allowing Kosovo to participate in EU programmes, one of the key initiatives announced in the 2009 Kosovo communication.[12] The Commission will continue supporting Kosovo's efforts in reaching the other two key objectives – eventual visa liberalisation and a trade agreement with the EU, as well as other reform efforts enhancing its European perspective. The Commission will review its 2009 Communication to ensure that Kosovo can further benefit from the EU accession process. The Commission proposes to launch a structured dialogue with Kosovo on the rule of law. The Commission also underlines the importance of Kosovo launching a comprehensive agenda for the north.

3.2. Turkey

With its dynamic economy, important regional role and its contribution to EU's foreign policy and energy security, Turkey is a key country for the security and prosperity of the European Union. It is already integrated to a large extent into the EU in terms of trade and foreign investment through the Customs Union. The country has become an important industrial platform for a number of leading European companies, and is therefore a valuable component of Europe's competitiveness. Turkey's high GDP growth, which reached almost 9% in 2010 and is expected to attain 6.1% this year, as well as its membership to the G-20, further increases the economic significance of the country.

Turkey’s contribution to the European Union in a number of crucial areas will only be fully effective with an active and credible accession process. This process must respect the EU's commitments and the established conditionality.

It remains essential that Turkey continues its reforms concerning the political accession criteria. The creation of a specific Ministry for EU affairs is an encouraging signal in this regard. While substantial progress has been made over the past ten years, significant further efforts are required to guarantee fundamental rights in practice, in particular freedom of expression, women's rights and freedom of religion. Turkey's recent adoption of legislation on Religious Foundations facilitating the recovery of confiscated property of religious foundations is a significant step forward. The Commission stands ready to further assist Turkey in advancing the necessary reforms, including an inclusive constitutional reform process.

Turkey is further increasing its diplomatic activity following developments across Northern Africa and the Middle East. It also remains a constructive partner in the Western Balkans. As a stable state with democratic institutions, a fast growing economy and a candidate country negotiating its accession to the EU, Turkey can play an important role in projecting stability and supporting reforms in its neighbourhood, which is also the neighbourhood of the European Union. The EU is further developing its political dialogue with Turkey on foreign policy issues of mutual interest. In the present context, it is important that such dialogue further develops as a complement to the accession process and with the aim of increased coordination.

In the light of progress achieved between the leaders of the two communities under the good offices of the UN Secretary-General to find a comprehensive settlement to the Cyprus problem, Turkey is encouraged to increase in concrete terms its commitment and contribution to these talks. A comprehensive settlement is in the interest of all sides since it would enhance stability in the Southeast Mediterranean, offer new economic opportunities and give a strong boost to its EU accession negotiations, which have reached a critical stage.

The Commission is concerned about the recent tensions in relations between Turkey and Cyprus. It recalls that the Council has urged the avoidance of any kind of threat, source of friction or action that could damage good neighbourly relations and the peaceful settlement of disputes. The EU has also stressed all the sovereign rights of EU Member States which include entering into bilateral agreements, in accordance with the EU acquis and international law, including the UN Convention on the Law of the Sea. In line with the repeated Council and Commission positions from previous years, the Commission reiterates that it is urgent that Turkey fulfils its obligation of fully implementing the Additional Protocol and makes progress towards normalisation of bilateral relations with the Republic of Cyprus. It also urges the avoidance of any kind of threat, source of friction or action that could damage good neighbourly relations and the peaceful settlement of disputes. The EU will continue to follow up and review progress made on these issues in accordance with the relevant Council decisions.

Turkey needs to step up efforts to solve open bilateral issues, including border disputes, with its neighbours. A substantial number of formal complaints about violations of its territorial waters and airspace by Turkey were made by Greece, including flights over Greek islands.

The Commission will work to launch a new virtuous circle in the accession process with Turkey. Based on a pragmatic approach and incorporating concrete steps in areas of common interest, a joint understanding of constraints and a search for progress in Turkey's alignment with the EU, a fresh and positive agenda should be developed, to enable a more constructive and positive relationship.

This agenda should cover a broad range of areas, including intensified dialogue and cooperation on political reforms, visa, mobility and migration, energy, the fight against terrorism, the further participation of Turkey in Community programmes such as "Europe for citizens", town twinning, as well as trade and the Customs Union with the aims of eliminating ongoing trade irritants, seeking closer coordination in the negotiations on free trade agreements and exploring new avenues to make full use of the EU's and Turkey's joint economic potential. Alongside the accession negotiations, the Commission intends to enhance its cooperation with Turkey, in support of the country's efforts to pursue reforms and align with the acquis, including on chapters where accession negotiations cannot be opened for the time being. The Commission will continue informing the Council as soon as it considers that Turkey has met relevant benchmarks.[13]

3.3. Iceland

Iceland continues to recover from the 2008/2009 financial and economic collapse. The political situation has remained stable, though the coalition government has been tested on several occasions and seen its majority in Parliament reduced.

Iceland's accession process continued and screening of the Icelandic legislation is being completed. The country's already high level of integration with the EU across a wide range of policy areas is a considerable advantage in this process. The Commission takes Iceland's specificities and expectations into account, within the existing approach on accession negotiations and fully safeguarding the principles and acquis of the Union. Continued open and constructive work will produce solutions, reflecting the high level of cooperation between the EU and the Icelandic authorities.

On this basis, the accession negotiations on specific negotiating chapters have been launched. Four chapters were opened of which two have been provisionally closed. With an overall good level of alignment in particular in the chapters covered by the European Economic Area (EEA) and Schengen agreements, the negotiations should be able to proceed well. Iceland will still need to address existing obligations, such as those identified by the EFTA Surveillance Authority under the EEA Agreement.

Communication activities promoting an informed debate about Iceland's accession process have started. EU accession remains a controversial issue in Iceland. The Commission will continue to provide support in the field of information and people-to-people contacts.

4. Supporting the enlargement process

4.1. Financial assistance

The Commission provides financial and technical support to the enlargement countries for their preparation for accession. Assistance is provided essentially under the Instrument for Pre-Accession Assistance (IPA), under which total allocation over the period 2007-2013 is € 11.6 billion[14].

Since 2010 the Commission has been gradually shifting financial assistance from support to individual projects to a more global, sector-wide approach, focusing on key areas of the reform agenda of the beneficiary countries. Governments in the enlargement countries are encouraged to adopt comprehensive and sustainable policies in priority sectors such as justice and home affairs, public administration, private sector development, transport, energy, environment and climate change, social development, agriculture and rural development.

The Multi-Annual Indicative Planning Documents (MIPDs) for the period 2011-2013 identify for each country the key sectors, according to the specific situation in each country and the progress in the accession process. Special attention is devoted to the fight against corruption, development of civil society and freedom of expression. Around 10% of the available IPA funds will be allocated to multi-country projects across the Western Balkans and Turkey. The Commission adopted today its annual revised Multi-annual Indicative Financial Framework for assistance under IPA, covering the period 2012-13.

In line with its Communication of June 2011 on "A budget for Europe 2020"[15], the Commission is now preparing the legal framework for providing pre-accession assistance under the next multi-annual financial framework which will cover the period 2014-2020, as part of a package of instruments in the domain of external action.

Assistance under the current IPA Regulation has proved to be efficient and effective. The proposal for a new financial instrument to be presented in December 2011 will draw experience from the implementation of the current instrument. Building on this, the new instrument will cover both support for meeting the accession criteria and support for socio-economic development.

In dialogue with the beneficiary countries, the other donors and civil society and drawing from the experience to date, the Commission has been reflecting on ways to strengthen the link between financial assistance and the priorities identified in the enlargement strategy, as well as to make financial assistance more strategic, more focussed, more flexible and to simplify procedures. In this context, elements considered include longer term and comprehensive planning of the assistance covering all policy areas, greater focus on the needs and priorities of the recipient countries, rewarding progress in the accession process, using IPA funds to leverage more funds from other donors and the private sector and enhancing the role of civil society.

4.2. Visa liberalisation and mobility

Achieving visa-free travel to the EU is of the highest importance to the citizens of all the enlargement partners and is part of the accession process. However, steps towards liberalisation are subject to the countries concerned meeting conditions that safeguard the internal security and migration policy interests of the EU.

Iceland is already part of the Schengen area. In the Western Balkans, Croatian citizens have always travelled to the EU without visas. Citizens of the former Yugoslav Republic of Macedonia, Montenegro and Serbia were granted visa-free travel to the Schengen Area in December 2009 and the same status was granted one year later to the citizens of Albania and Bosnia and Herzegovina.

The recent decisions to drop the visa requirement for citizens of the Western Balkan countries were based on these countries fulfilling the benchmarks of roadmaps that were set out in the context of Commission-led visa liberalisation dialogues. The dialogues acted as a strong incentive for reforms towards reaching EU-standards in the justice and home affairs areas, notably in strengthening administrative capacity in border management and the security of documents, but also in strengthening the rule of law and combating transnational organised crime, corruption and illegal migration.

However, following the lifting of the visa requirement, some EU Member States witnessed significantly increased numbers of asylum applications by citizens from the countries concerned, in particular Serbia and the former Yugoslav Republic of Macedonia, pointing towards abuse of the visa-free regime. In response, the Commission set up, as of January 2011, a post-visa liberalisation monitoring mechanism under the framework of the Stabilisation and Association Process, engaging with the countries concerned in a dialogue to assess the consistent implementation of the reforms and effective remedial measures. The countries concerned have since strengthened controls on the ground and launched information campaigns to inform the citizens on the rights and obligations of visa free travel. The Commission invites the authorities of the countries concerned to take all the necessary further measures to allow for the visa free regime to function smoothly. The success of such measures will also need to be complemented by increased support and better living conditions for the most vulnerable groups concerned, including the Roma.

In a broader revision of the EU's visa policy, the Commission has presented to the Council a draft amendment to the visa regulation which would allow for a temporary suspension of an existing visa free regime with a third country in case of a sudden influx of persons[16].

Visa liberalisation for Kosovo would complete this process for the Western Balkans. In December 2010, the Council affirmed this perspective once all conditions are met. To address these conditions, Kosovo has adopted a legal framework for readmission and signed bilateral readmission agreements with 13 Schengen area states. It has adopted reintegration plans and continued their implementation. The Commission will therefore launch a visa dialogue with Kosovo towards the end of the year.

The EU and Turkey started to intensify their cooperation on visa issues, while the Commission entered into a dialogue with Turkey on visa, mobility and migration, in line with the Council conclusions of February 2011. This process started delivering results on both the issuance of visas for Turkish travellers and the tackling of irregular immigration to the EU and will help identify concrete steps required from Turkey in view of a future visa liberalisation. In this context, an important step would be that Turkey take the necessary action for the swift conclusion of the readmission agreement.

4.3. Information and communication

Public support is key to the success of enlargement policy. The authorities of Member States and enlargement countries at national, regional and local level have a central role to play in information and communication efforts to this end.

The Commission is committed to facilitating an informed public debate about the enlargement process, based on user-friendly, factual information provided through all types of media. These need to address as a priority young people and key opinion formers such as journalists and representatives of civil society organisations and business. Parliamentary exchanges can also play an important role in fostering informed debate and mutual understanding of the enlargement process.

In the period ahead, next steps in the accession process with enlargement countries will be under discussion. Tangible results are the best advertisements for the EU's enlargement policy. The successful outcome of negotiations with Croatia can be a powerful example, as is economic resilience in South-East Europe and concrete achievements on key issues such as energy supply or transport networks. It is essential to explain to the public how pursuing the enlargement agenda can help the EU attain its objectives linked to the economic crisis, jobs, the environment and climate change, safety, and migration while at the same time accelerating the reform agenda and improving living conditions in the enlargement countries.

5. Conclusions and recommendations

Based on the above analysis, the Commission puts forward the following conclusions and recommendations:

1. Enlargement aims to extend the EU's zone of peace, stability, democracy and prosperity. Enlargement benefits the EU as a whole and allows it to be better positioned to address global challenges. With the completion of accession negotiations with Croatia in June, the European Union's enlargement process has entered a new phase.

2. The enlargement policy has proven to be a powerful tool for societal transformation. Countries that have already acceded to the EU and those on the road to join have undergone impressive changes through accession-driven democratic and economic reforms. Croatia's development since it embarked on its accession path provides fresh evidence for this transformative power of the EU.

3. Through its enlargement policy, based on the renewed consensus approved by the European Council in December 2006, the EU applies a demanding conditionality and monitors progress with increased attention. This results in the aspiring states achieving a high level of readiness which will benefit both them and the EU.

4. Experience acquired from the negotiations with Croatia will be put to the benefit of ongoing and future negotiations. To that end, the Commission will propose a new approach with respect to issues related to the judiciary and fundamental rights and to justice, freedom and security. These should be tackled early in the accession process and the corresponding chapters opened accordingly on the basis of action plans, as they require the establishment of convincing track records. The Commission would report regularly, at all stages of the process, on progress achieved in these areas along milestones defined in the action plans with, where appropriate, the necessary corrective measures. IPA funds will be targeted to support this process.

5. A credible enlargement process, providing a clear accession perspective based on strict conditionality, is key for enhancing reforms in the enlargement countries and provides the citizens of the enlargement countries with tangible results already along their path towards the EU. Conditionality for advancing towards the EU provides strong incentives to embark on difficult reforms. It is also key in ensuring support for enlargement in the Member States.

6. Croatia's successful European course shows the way to the other enlargement countries. As the first Western Balkan country enters the EU, the region's European future is becoming a reality.

7. Strengthening the rule of law remains a major challenge for most enlargement countries and is a crucial condition for moving towards EU membership. The Commission continues to prioritise judiciary and public administration reform, the fight against organised crime and corruption, including through its regular monitoring, structured dialogues, peer reviews, institution building, twinning, and financial assistance.

8. In a number of enlargement countries, there have been negative developments in the area of freedom of expression. It is essential that the enlargement countries guarantee open and pluralistic media landscapes, which allow for critical and independent journalism. The Commission will closely monitor developments in this area and further integrate these issues into accession negotiations, notably under the judiciary and fundamental rights chapter.

9. Regional cooperation, underpinning reconciliation and integration into the EU, remains an essential element of the Stabilisation and Association process. While this cooperation has marked further progress in a number of areas, issues mostly stemming from past conflicts continue to have negative effects and to challenge stability in the Western Balkans. It is urgent to address these issues. Achieving in particular inclusiveness in regional cooperation is a pressing priority. This should be possible, irrespective of differences over the status of Kosovo, by all parties adopting a constructive and pragmatic approach.

10. Bilateral issues need to be solved by the parties concerned, with determination, in a good neighbourly spirit and taking into account overall EU interests. They should be tackled as early as possible and not hold up the accession process. Blockages linked to bilateral issues can compromise the transformative power of the enlargement process. The Commission urges parties concerned to make every effort towards solving outstanding border disputes in line with established principles and means, including referring issues to the International Court of Justice if appropriate. Good neighbourly relations remain key. The EU stands ready to facilitate the search for solutions and to support related initiatives.

11. Achieving visa-free travel to the EU is of the highest importance to the citizens of all the enlargement partners. Visa liberalisation, as part of the accession process, has seen further progress with the lifting of the visa obligation for citizens from Bosnia and Herzegovina and Albania in December 2010, once both countries had met the established conditions. The Commission urges the authorities of Western Balkan countries to take all the necessary measures against abuse of the visa-free travel regime. For its part, the Commission has strengthened the post visa liberalisation monitoring by setting up a dialogue mechanism with the countries concerned, including measures to remedy abuse.

12. Considering Kosovo's progress on readmission and reintegration of returnees and in line with the December 2010 Council conclusions, the Commission will launch a visa dialogue with Kosovo towards the end of the year. With Turkey, the EU has intensified cooperation on visa issues and the Commission has entered into a dialogue with Turkey on visa, mobility and migration and will identify concrete steps required from Turkey in view of a future visa liberalisation. An important step would be that Turkey takes the necessary action for the swift conclusion and entry into force of the readmission agreement.

13. Following the global economic crisis, the enlargement countries have now embarked upon a path of economic recovery, though at varying pace. Turkey has emerged from the crisis with a bigger economy and its growth continues to be impressive. However, all enlargement countries are confronted with important challenges. Unemployment remains high and rising in most countries. Fiscal consolidation, structural reform and improvement of the business environment, including through strengthening the rule of law and labour market reform, are major priorities for ensuring the sustainability of the recovery and achieving inclusive growth. In this context, the Commission invites the enlargement countries to use the objectives of Europe 2020 as a reform anchor.

14. In December 2011, the Commission will present the framework for providing pre-accession financial assistance under the 2014-2020 multi-annual financial framework, based on the positive experience from the current instrument. Drawing from this experience, the Commission will strengthen the link between assistance and the priorities of the enlargement strategy, emphasising socioeconomic development, increasing the flexibility of assistance and simplifying procedures.

15. Public support is key to the success of enlargement policy. The authorities of Member States and enlargement countries at national, regional and local level have a central role to play in information and communication efforts to this end. The Commission is committed to facilitating an informed public debate about the enlargement process, based on user-friendly, factual information. The Commission encourages the development of an active civil society as an essential element of democracy, also as a facilitator of an informed debate on EU enlargement.

16. The Commission adopted a favourable Opinion on Croatia's accession to the EU, as of 1 July 2013. The completion of the accession negotiations has been made possible by Croatia meeting the remaining closing benchmarks, including in difficult chapters such as judiciary and fundamental rights and competition policy. Croatia needs to continue consolidating its reforms, in line with the commitments undertaken during the accession negotiations. The Commission will closely monitor Croatia's further preparations to assume the responsibilities of membership upon accession. Croatia is expected to continue to support the accession process of the other Western Balkan countries.

17. With its dynamic economy and its important regional role, Turkey is a key country for the European Union. This has been highlighted by the current regional and global political and economic developments. Turkey has continued EU-relevant reforms, but significant further efforts are required, including on guaranteeing core fundamental rights. Regrettably, accession negotiations have not moved on for more than one year. The Commission will work for a renewed positive agenda in EU-Turkey relations, one that will continue to support reforms, in particular an inclusive constitutional reform process, and economic integration. This agenda could cover a broad range of areas of common interest including political reforms, foreign policy dialogue, alignment with the EU acquis, visas, mobility and migration, energy, the fight against terrorism, trade and participation in EU programmes. The country's contribution to the EU will only be fully effective within a credible and active accession perspective.

The Commission is concerned about the recent tension in relations between Turkey and Cyprus. The Commission recalls that the Council has urged Turkey to refrain from any kind of threat, sources of friction or action, which could negatively affect good neighbourly relations and the peaceful settlement of border disputes. Furthermore, the EU has stressed all the sovereign rights of EU Member States which include entering into bilateral agreements, in accordance with the EU acquis and international law, including the UN Convention on the Law of the Sea.

The EU has repeatedly underlined the urgency of Turkey's fulfilment of its obligation of full non-discriminatory implementation of the Additional Protocol to the Association Agreement and progress towards normalisation of bilateral relations with the Republic of Cyprus. This could provide a significant boost to the accession process. The EU will continue to follow up and review progress made on issues covered by the Declaration of 21 September 2005, in accordance with the relevant Council Conclusions. In the absence of progress, the Commission recommends that the EU maintains its measures from 2006.

18. As regards the Cyprus issue, the leaders of the Greek Cypriot and Turkish Cypriot communities have intensified the negotiations on a comprehensive settlement under the auspices of the United Nations. The Commission strongly supports their efforts and provides technical advice on issues within EU competence. The Commission urges both leaders to now make the necessary compromises to bring the negotiations to a successful conclusion and urges all actors involved to focus all efforts and minds on the comprehensive settlement in Cyprus. During the ongoing intensive phase of Cyprus talks, it is essential that all parties concerned exert restraint and do their utmost to ensure a positive climate that will facilitate a successful completion of the process, contributing in concrete terms to a comprehensive settlement.

19. The accession process with Iceland is gaining momentum and negotiations on specific acquis chapters have been launched. The country's high level of integration with the EU across a wide range of policy areas is proving a considerable advantage. The Commission takes Iceland's specificities and expectations into account, while fully respecting the established approach on accession negotiations and safeguarding the principles and the acquis of the Union, as well as the negotiating framework. The Commission will continue to supply the public debate on accession in Iceland with factual information about EU membership.

20. The former Yugoslav Republic of Macedonia continues to sufficiently fulfil the political criteria. Some progress has been made on core reforms. The implementation of adopted legislation, as well as guaranteeing the freedom of expression in the media, strengthening independence of the judiciary, reform of public administration, and fighting corruption continue, however, to represent significant challenges.

The Commission reiterates its recommendation that negotiations for accession to the European Union should be opened with the former Yugoslav Republic of Macedonia. The Commission also reiterates its proposal to move to the second stage of association as provided by the Stabilisation and Association Agreement, without further delay.

Maintaining good neighbourly relations, including a negotiated and mutually accepted solution to the name issue, under the auspices of the UN, is essential. Another year should not be lost.

21. Montenegro has successfully addressed the key priorities set out in 2010 by the EU as a pre-requisite to opening accession negotiations. The country has consolidated national consensus on European Integration. In view of the progress made, the Commission considers that Montenegro has achieved the necessary degree of compliance with the membership criteria and in particular the Copenhagen political criteria. Yet, maintaining the reform momentum, with particular focus on implementation of legislation and policies in the area of rule of law, remains essential. To that aim, the Commission intends to propose to apply in the case of Montenegro the new approach for the negotiating chapters on judiciary and fundamental rights and justice, freedom and security referred to under point 4 above.

In light of these considerations and taking into account the Council conclusions of December 2010, the Commission recommends that accession negotiations be opened with Montenegro.

22. Over the past year, Albania's domestic political scene has been largely dominated by the political stalemate between the ruling majority and opposition and further confrontational developments. It is now urgent that, building on recent encouraging signals, the political forces in Albania re-establish and sustain a level of political dialogue allowing the functioning of key democratic institutions, improving the electoral framework, and the implementation of essential reforms. The Commission encourages the key actors to jointly establish concrete methods for bridging domestic differences in order to realising the country's European perspective.

23. The Commission presented its Opinion on Serbia's membership application today. The Commission recommends that the European Council should grant Serbia the status of candidate country, taking into account progress achieved so far and on the understanding that Serbia re-engages in the dialogue with Kosovo and is moving swiftly to the implementation in good faith of agreements reached to date.

Serbia is well on its way towards sufficiently fulfilling the political criteria set by the Copenhagen European Council in 1993 and the conditions of the Stabilisation and Association process, provided that progress continues and that practical solutions are found to the problems with Kosovo.

The Commission therefore recommends that negotiations for accession to the European Union should be opened with Serbia as soon as it achieves further significant progress in meeting the following key priority:

- Further steps to normalise relations with Kosovo in line with the conditions of the Stabilisation and Association Process by: fully respecting the principles of inclusive regional cooperation; fully respecting the provisions of the Energy Community Treaty; finding solutions for telecommunications and mutual acceptance of diplomas; by continuing to implement in good faith all agreements reached; and by cooperating actively with EULEX in order for it to exercise its functions in all parts of Kosovo.

The Commission will present a report on Serbia's implementation of the above key priority as soon as sufficient progress has been achieved.

24. The EU will continue to facilitate the dialogue between Belgrade and Pristina to promote cooperation, achieve progress on the path to the EU and improve the lives of people. The dialogue has proved to date a valuable means to address differences between the two parties and has led to several agreements in areas including freedom of movement of goods and persons, civil registry and cadastre.

25. In a year marked by lengthy electoral processes in Kosovo, progress achieved with the reform agenda was limited. The President and government have demonstrated commitment to Kosovo's European perspective. This has produced some initial reforms. Major challenges remain concerning organised crime and corruption, as well as the strengthening of public administration. The Commission proposes to launch a structured dialogue with Kosovo on the rule of law with the aim to address these challenges and support judicial reform.

While the integration of Kosovo Serbs has improved in the South, tensions in northern Kosovo have increased. People in the north also need to benefit from the European perspective. To that end, the Commission underlines the importance of Kosovo launching a comprehensive agenda for the north.

The Commission will continue to support Kosovo's efforts to further fulfil its European perspective, notably as regards visas, a trade agreement, and Kosovo's participation in EU programmes, in line with its 2009 Communication. To this end, the Commission will review its 2009 Communication to ensure that Kosovo can further benefit from the EU accession process. The Commission encourages efforts for overcoming obstacles to the development of relations between the EU and Kosovo caused by differences on Kosovo's status.

26. In Bosnia and Herzegovina the political and institutional deadlock has continued, prolonging the blockages in the functioning of the state and in the implementation of EU-related reforms. The formation of a State-level government is an urgent priority to ensure effective state-level governance. To advance towards the EU the country still needs to amend its Constitution in line with a European Court of Human Rights ruling, for eliminating ethnic discrimination regarding representation in state institutions, as well as adopting a Law on State Aid. A Census Law remains to be adopted. The country's engagement on a Structured Dialogue on Justice under the Stabilisation and Association process shows the way ahead, through dialogue and compromise as well as focus on the EU agenda.

Making further progress towards meeting the objectives and conditions which have been set for the closure of the Office of the High Representative remains essential. The appointment of the EU's first single representative in Bosnia and Herzegovina reinforces the EU presence and support to the country on its way from international supervision to its European future, in line with the March 2011 Council conclusions.

27. The EU's enlargement policy has brought about deep democratic and economic transformations in countries seeking to join. The past year's record underlines the value of a credible enlargement policy. At the same time, where political will and the commitment to achieve concrete results are insufficient or lacking, the accession process will not advance and risks stalling. Tackling difficult reforms brings stable, better prepared, and more prosperous enlargement countries closer to the EU.

ANNEX 1

Conclusions and Recommendations of the Commission's Opinions on the membership applications by Serbia

In the light of substantial reforms over the last years, Serbia has considerably progressed towards fulfilling the political criteria related to the stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities, set by the Copenhagen European Council in 1993, as well as the conditions of the Stabilisation and Association Process. Serbia has a comprehensive constitutional, legislative and institutional framework which overall corresponds to European and international standards. Parliament has become far more effective in its legislative activity under the current legislature. The legal and institutional framework for the rule of law is comprehensive, including in the areas of the fight against corruption and organised crime where initial results were achieved. The legal framework for the protection of human rights and minorities is well developed and has started being implemented. Serbia has reached a fully satisfactory level in its cooperation with ICTY and has taken an increasingly active role in fostering reconciliation in the region. Serbia has agreed to and participated in a process of dialogue with Kosovo to facilitate the lives of the people which has led to several agreements (free movement of persons and goods, civil registry and cadastre) and Serbia has taken initial steps for implementation.

As regards the economic criteria, Serbia has taken important steps towards establishing a functioning market economy and achieved a certain degree of macroeconomic stability in spite of the global economic and financial crisis. However, further efforts will be necessary for restructuring the economy and improving the business environment, in particular by strengthening the rule of law and removing red tape, enhancing competition and the role of the private sector as well as tackling rigidities on the labour market. In order to enable it to cope in the medium term with competitive pressure and market forces within the Union, Serbia needs to pursue structural reforms to upgrade the productive capacity of the economy and create a climate conducive to increased foreign investment.

Serbia has built up a positive track record in implementing its obligations under the Stabilisation and Association Agreement and the Interim Agreement.

Serbia would be in a position to take on the obligations of membership in the medium term, in nearly all acquis fields, provided that the alignment process continues and that further efforts are made to ensure the implementation and enforcement of legislation. Particular attention needs to be paid to the areas of agriculture and rural development, judiciary and fundamental rights, justice, freedom and security and financial control. Full compliance with the acquis in the field of the environment and climate change could be achieved only in the long term and would necessitate increased levels of investment.

Based on preliminary estimates, Serbia's accession would have a limited overall impact on European Union policies and would not affect the Union's capacity to maintain and deepen its own development.

The Commission recommends that the Council should grant Serbia the status of candidate country, taking into account progress achieved so far and on the understanding that Serbia re-engages in the dialogue with Kosovo and is moving swiftly to the implementation in good faith of agreements reached to date.

Serbia is well on its way towards sufficiently fulfilling the political criteria set by the Copenhagen European Council in 1993 and the conditions of the Stabilisation and Association process, provided that progress continues and that practical solutions are found to the problems with Kosovo.

The Commission therefore recommends that negotiations for accession to the European Union should be opened with Serbia as soon as it achieves further significant progress in meeting the following key priority:

- Further steps to normalise relations with Kosovo in line with the conditions of the Stabilisation and Association Process by: fully respecting the principles of inclusive regional cooperation; fully respecting the provisions of the Energy Community Treaty; finding solutions for telecommunications and mutual acceptance of diplomas; by continuing to implement in good faith all agreements reached; and by cooperating actively with EULEX in order for it to exercise its functions in all parts of Kosovo.

The Commission will present a report on Serbia's implementation of the above key priority as soon as sufficient progress has been achieved.

Serbia is encouraged to maintain the momentum of reforms in pursuing the necessary degree of compliance with the membership criteria, with particular attention to the rule of law, and to continue its constructive engagement in regional cooperation and in strengthening bilateral relations with neighbouring countries. Implementation of the Interim Agreement, and from its entry into force, the Stabilisation and Association Agreement, are expected to continue. The Commission will continue to support these efforts through the IPA financial instrument.

ANNEX 2

Conclusions on Croatia, the former Yugoslav Republic of Macedonia, Montenegro, Albania, Bosnia and Herzegovina, Kosovo[17], Turkey and Iceland

Croatia

After Croatia met the remaining closing benchmarks, accession negotiations were concluded in June 2011. Croatia now needs to build on the high degree of alignment achieved and focus on the remaining work before accession. This Progress Report is part of the Commission's monitoring of Croatia's fulfilment of all the commitments taken in the accession negotiations and its continued preparations to assume the responsibilities of membership upon accession.

Croatia continues to meet the political criteria. Substantial progress has been made in all areas, including rule of law, and results are becoming tangible. Efforts must continue to consolidate these results.

Democracy and the rule of law have been further strengthened. The government and the parliament have continued to function effectively. In the area of public administration reform, further efforts are needed to consolidate efficient implementation of the legal framework in order to complete building a modern, reliable, de-politicised and citizen-oriented public service.

Croatia has made good progress regarding the judiciary. New legislation further strengthened judicial independence and many measures have been taken to improve the efficiency of the judiciary. A new system for appointing judicial officials has been established. Some challenges remain, especially the need to further increase judicial efficiency, and to ensure the practical implementation of new measures relating to independence, impartiality and accountability of the judiciary. Progress has been made with the impartial handling of war crimes trials. The four specialised war crimes chambers have been made exclusively competent for all new cases and their role should be further strengthened for pending cases. The Ministry of Justice adopted a strategy for addressing impunity, especially in cases where the victims were ethnic Serbs or the alleged perpetrators were members of the Croatian security forces.

There has been substantial progress in the fight against corruption. Anti-corruption efforts have been accelerated with positive results; legislation has been improved and the relevant authorities strengthened. The track record of effective handling of corruption cases needs to be further developed, especially covering high level corruption, local level corruption and including cases related to public procurement and the judiciary. Further experience is needed on implementing the newly adopted preventive legal framework in practice and the implementing structures remain to be further strengthened.

Human rights continue to be generally well respected and further progress has been made in the areas of human rights and the protection of minorities. Croatia has continued to take various measures to raise public awareness and improve protection of human rights. As for access to justice, implementation of the Law on Legal Aid has continued to improve, notably by simplifying procedures. With regard to the prison system, work on the expansion of existing detention and treatment facilities has continued, but Croatian prisons remain overcrowded. As regards ill treatment, the Ombudsman continued to receive complaints regarding excessive use of force by the police which need to be followed up adequately.

Freedom of expression, including freedom and pluralism of the media, is provided for in Croatian law and is generally respected. There has been further progress regarding transparency of media ownership, but limited progress with investigating cases, from previous years, of intimidation of journalists working on cases of corruption and organised crime. Few new cases have been reported, however. Economic pressures in particular are hampering the development of investigative reporting. Problems with political interference at local level remain. Freedom of assembly requires continued attention in terms of handling of demonstrations.

There has been some progress with regard to women's rights and gender equality. However, the position of women on the labour market has not changed significantly and the percentage of unemployed women remains high. There has been limited progress with children's rights. The Ombudsperson for Children became more active in cases where violence against children was not being properly addressed by the relevant authorities.

There has been limited progress as regards the inclusion of socially vulnerable groups and persons with disabilities. The capacity of the Office of the Ombudsman for Persons with Disabilities is being strengthened. Criteria for establishing entitlements are not equally applied and legislation regulating specific rights is fragmented. The transition from institutional care to community-based care services has progressed slowly. Labour and trade union rights are generally respected.

Croatia has begun developing a track record of implementation of the Anti-Discrimination Law and legislation on hate crimes. Various awareness-raising measures were taken and the Office of the Human Rights Ombudsman is being reinforced. Law enforcement bodies have started a number of cases under hate crime legislation. However, the track record needs to be developed further and societal homophobic and xenophobic sentiment addressed.

There has been some progress with the respect for and protection of minorities and cultural rights. High-level public expressions of commitment to the rights of minorities, reaffirming their place in Croatian society, have continued. Funding has been secured for minority organisations. Police investigations into incidents against minorities have