[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 5.11.2008

COM(2008) 674 final

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

Enlargement Strategy and Main Challenges 2008-2009

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COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

Enlargement Strategy and Main Challenges 2008-2009

1. INTRODUCTION

Enlargement is one of the EU's most powerful policy tools. It serves the EU's strategic interests in stability, security, and conflict prevention. It has helped to increase prosperity and growth opportunities, to improve links with vital transport and energy routes, and to increase the EU's weight in the world. In May 2009, the EU will mark the fifth anniversary of the 2004 enlargement.

The present enlargement agenda covers the Western Balkans and Turkey, which have been given the perspective of becoming EU members once they fulfil the necessary conditions. The European perspective has contributed to peace and stability, and enabled partners to cope with major challenges, such as Kosovo's declaration of independence, while maintaining regional security. It provides in both the Western Balkans and Turkey strong encouragement for political and economic reform. It is in the EU's strategic interest to keep up the momentum of this process, on the basis of agreed principles and conditions. This interest to project stability is all the more apparent in the light of recent challenges to stability to the East of the EU, including in the southern Caucasus.

Turkey’s strategic importance to the EU has further increased in key areas such as energy security, conflict prevention and resolution and regional security in the Southern Caucasus and the Middle East. The country's engagement with the EU, through the negotiations and related reforms which are underway, makes it a stronger force for stability in a region facing many challenges. The present security environment in Europe also calls for the consolidation of stability and enhancement of reform in the Western Balkans.

Against this background, the consistent implementation of the renewed consensus on enlargement, as defined by the December 2006 European Council, is more important than ever. This consensus is based on the principles of consolidation of commitments, fair and rigorous conditionality and better communication with the public, combined with the EU's capacity to integrate new members.

The EU has taken steps to improve the quality of the enlargement process, considering in particular the lessons learned from previous enlargements. Greater focus is now given at an early stage to the rule of law and good governance. The pace at which a candidate or potential candidate approaches the EU reflects the pace of its political and economic reforms as well as its capacity to assume the rights and obligations of membership in accordance with the Copenhagen criteria.

The year ahead will be a crucial one in addressing challenges in the Western Balkans. The progress of the Western Balkan countries towards EU membership can be accelerated, provided they meet the necessary conditions. Croatia is expected to reach the final phase of accession negotiations by the end of 2009 if it has taken the necessary preparatory steps. Further reforms in the former Yugoslav Republic of Macedonia will bring the country closer to the EU. For the potential candidates, progress could result in candidate status when they have demonstrated their readiness.

The pace of accession negotiations with Turkey reflects the pace of reform as well as the country's fulfilment of the relevant conditions. Turkey now needs to renew its political reform effort.

The international financial crisis has so far had only a limited direct impact on the economy and the financial sector of the Western Balkans and Turkey. However, the significant widening of the current account deficit experienced by most countries raises their vulnerability to external shocks. Both external credit and FDI are likely to slow as a result of the global financial crisis.

As regards the Cyprus issue, the leaders of the Greek Cypriot and Turkish Cypriot communities started full-fledged negotiations on a comprehensive settlement under the auspices of the United Nations. The Commission supports their efforts and stands ready to provide technical advice on issues within EU competence.

The European Union is stronger with stable, prosperous and democratic neighbours. Working together on the basis of shared values and common interests, the EU and its neighbours can more effectively address current challenges. The Union will also intensify its relations with European Neighbourhood Policy partners to the East and South to further enhance mutual security and prosperity. The Eastern Partnership under preparation as well as the Barcelona Process: Union for the Mediterranean will be particularly important in this regard.

The present communication sets out the progress made and the key challenges faced by the countries engaged in the enlargement process. It outlines the Commission's approach to guiding and supporting their efforts in the coming year.

2. IMPLEMENTING THE RENEWED ENLARGEMENT CONSENSUS

2.1. State of play of progress made and remaining challenges in the countries

Western Balkans

The Western Balkans have moved closer to the EU over the past year, as the region made progress, albeit uneven, in reforms and in meeting established criteria and conditions. Stability has been maintained in the region and the situation remained generally calm after the declaration of independence and the entry into force of the constitution in Kosovo. The region continued to enjoy high growth rates, thanks in particular to domestic and foreign investments while, in general, reforms progressed and overall living standards improved. The Regional Cooperation Council (RCC) took over from the Stability Pact, strengthening ownership of regional cooperation in South East Europe by the countries directly concerned.

Still, the Western Balkans are today confronting a number of testing issues which could affect security, stability and prosperity in the region. Reform and reconciliation have yet to become entrenched. In much of the Western Balkans, state-building, consolidation of institutions as well as better governance constitute priority concerns. In most countries a professional, impartial and accountable civil service remains to be set up. The enforcement of the rule of law, notably through judicial reform and the fight against corruption and organised crime, remains a major issue throughout the region. Dialogue among political forces and a spirit of compromise are still insufficient, including on ethnic-related issues. Unresolved neighbourhood issues persist. Average inflation picked up. Current account deficits have risen significantly. Unemployment remains very high in some countries. Further reforms of employment and social policies are needed. Macro-economic challenges have risen, due to a less favourable external environment, in particular the international financial crisis.

At a country level, the following developments can be reported.

Croatia's accession negotiations have entered their decisive phase, thus demonstrating to the region as a whole that the perspective of EU membership is a reality, in line with the Union's commitments provided the necessary conditions are fulfilled.

In the former Yugoslav Republic of Macedonia, progress has been made in a number of key areas highlighted in the Commission's communication of March 2008[1], in particular as regards judicial reform, and police reform, and implementation of requirements under the Stabilisation and Association Agreement. However, violent incidents and serious irregularities marred parliamentary elections. A constructive political dialogue and decisive action are needed to implement reforms in accordance with the Accession Partnership priorities.

Albania has continued to make progress on key political reforms. The interim agreement with the EU entered into force two years ago and is now being implemented smoothly on the whole. However, the rule of law and ensuring the proper functioning of state institutions remain major challenges. Administrative and enforcement capacity requires further improvement.

Political reforms have gone ahead in Montenegro. Implementation of the interim agreement, which entered into force at the beginning of this year, is progressing smoothly on the whole. However, there is a need to pursue judicial reform and to entrench the rule of law, which remain major challenges. Administrative and enforcement capacity require further improvement.

The signing of the Stabilisation and Association Agreement (SAA) with Bosnia and Herzegovina confirmed the EU’s commitment to the country’s European future. Bosnia and Herzegovina began implementing the interim agreement in July. But constitutional elements established by the Dayton/Paris peace agreement have been challenged by key political leaders in both entities, and EU related reforms have stagnated. Consensus remains weak on key reform priorities.

Following presidential and parliamentary elections, Serbia has renewed its commitment to a European future based on shared values. The SAA was signed and the interim agreement will start being implemented as soon as the Council ascertains that Serbia is fully cooperating with the International Criminal Tribunal for the former Yugoslavia (ICTY). The arrest and bringing to justice of Radovan Karadzic was a major step forward but this process needs to be completed. Serbia has shown that it has the administrative capacity to make substantial progress towards the EU. However, over the past year reforms were delayed. Judicial reform and preventing corruption remain important challenges.

The new reality in Kosovo[2] has led to the reconfiguration of the international presence. This should facilitate the deployment of the EULEX mission which is now underway. The situation in Kosovo is sui generis and cannot be considered as creating a precedent. The European Council stated the EU's readiness to assist Kosovo's political and economic development through a clear European perspective, in line with the EU perspective of the region. The constitution adopted by Kosovo is in line with European standards and a considerable amount of key legislation has been adopted. However, major challenges remain, notably to strengthen institutions, to entrench the rule of law, and to enhance dialogue and reconciliation between the communities.

Turkey

The year was marked by strong political tensions. The Chief Public Prosecutor applied to the Constitutional Court to close the governing party for anti-secular activities. The Court eventually decided not to follow the request of the Prosecutor and imposed instead a financial penalty. This helped to avert a serious political crisis and should provide fresh opportunities to restore dialogue and a spirit of compromise between political parties.

The EU has strongly condemned terrorist attacks by the PKK which have claimed many lives. The Turkish armed forces carried out several operations against PKK bases in northern Iraq.

Turkey has played a constructive role in its neighbourhood and the wider Middle East through active diplomacy. Following the crisis in Georgia, it proposed a Caucasus Stability and Cooperation Platform to promote dialogue between the countries of that region. President Gül paid a visit to Yerevan, the first visit ever of a Turkish President since the independence of Armenia. Turkey undertook efforts as a mediator between Israel and Syria and conducted a dialogue with Iran on the nuclear issue.

Turkey's geo-strategic position gives the country a vital role in the EU's energy security, particularly diversification of energy sources. Closer energy cooperation between the EU, Turkey, as well as other states in the region - both suppliers and transit countries - is essential. Existing and future pipeline projects are a resource for all countries through whose territory they pass, notably for Turkey. The timely completion of the Southern Gas Corridor through the swift realisation of the planned projects, and notably the Nabucco gas pipeline, is among the EU's highest energy security priorities.

The current government came to power on the basis of free and fair elections in July 2007 with a strong mandate for reform. It renewed its commitment to the EU accession process and related reforms and announced work on a new constitution. Some progress was achieved in the areas of freedom of expression and the rights of non-Muslim religious communities. Article 301 of the Penal Code was amended with the intention of strengthening safeguards for freedom of expression. The Parliament adopted a new law on foundations, which addresses a number of problems faced by the non-Muslim religious communities. Furthermore, the Government decided to complete the South-East Anatolia Project (GAP) for the economic development of the southeast of the country.

However, a new impetus now needs to be given to reform, in order to strengthen democracy and human rights, to modernise and develop the country and to bring it closer to the EU. The rules on political parties, constitutional reform, freedom of expression, and women's rights require particular attention.

Turkey's economy continued to perform relatively well, and macro-economic stability has been preserved in spite of a slower GDP growth. The international financial crisis has led to a correction of asset prices and currency, without seriously affecting the banking sector so far. However, the considerable external financing needs increase the vulnerability to external shocks. Turkey is now a functioning market economy in terms of the Copenhagen economic criteria. It should be able to cope with competitive pressure and market forces within the Union in the medium term, provided that it continues to implement a comprehensive reform programme to address structural weaknesses. In addition, Turkey's economic interdependence with the EU increased.

2.2. Pre-accession instruments: addressing the key challenges

The Commission has made full use of its pre-accession instruments for addressing the key challenges of state building, good governance, the rule of law, and civil society development, based on the 2007 enlargement strategy document. This has already yielded significant results.

Continued efforts were made to improve the quality of the enlargement process, including by laying down rigorous benchmarks as conditions for opening and closing negotiating chapters, and by issuing further impact studies on key policy areas.

The Council adopted Commission proposals for Accession and European Partnerships that include these key priorities. The Commission has intensified political dialogue, with the partnerships as main reference documents. Progress was also made on economic dialogue through the pre-accession fiscal surveillance mechanism.

Partnership priorities guided programming and delivery of aid under the Instrument for Pre-accession Assistance (IPA), leading to increased support for fundamental reforms. IPA support amounts to €1.4 billion for 2008. Of the €840 million earmarked for transition assistance and institution building in national IPA programmes, 33 % is now used to enhance governance, encourage administrative and judicial reform, strengthen the rule of law, support the fight against corruption and organised crime, promote human rights, protect minorities, and develop civil society. Rapid-response assistance from EU member state officials is also provided through TAIEX and SIGMA[3]. Medium-term assistance to those reforms includes twinning networks between public administrations and grant schemes for NGO projects.

The Commission has taken initiatives to coordinate IPA support with that of the International Financial Institutions (IFIs) and other donors. This increases the leverage of IPA support in the area of economic and social development. An Infrastructure Projects Facility has been launched with the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and the Council of Europe Development Bank (CEB). It constitutes an important move towards establishing a Western Balkans Investment Framework by 2010, as agreed by the Commission, the EIB, the ERBD and the CEB and endorsed by the June European Council. Other initiatives include an energy efficiency facility as well as a single instrument for SME development: the European Fund for South East Europe. This benefits tens of thousands of small businesses across the region.

The transition from implementation of pre-accession assistance by the European Agency for Reconstruction (EAR) to the Commission delegations and offices in Belgrade, Podgorica, Pristina and Skopje has been completed. The agency will be phased out on 31 December 2008. The eventual goal is for partners themselves to take over the implementation of assistance, when they demonstrate their readiness to do so.

The Commission organised in July a Donor Conference for the socio-economic development of Kosovo which resulted in a total pledge of €1.2 billion, with the European Union and its member states contributing nearly €800 million. This support should provide a considerable boost to Kosovo's development. It is essential that the Kosovo government accompany donor assistance by delivering on its commitments as regards fiscal discipline, public expenditure management and economic policy reform.

Special attention has been given to people-to-people contacts in line with the 2007 enlargement strategy document. Visa facilitation and readmission agreements entered into force with all countries concerned in January 2008 and the Commission is conducting a dialogue on visa liberalisation with them. In this context, roadmaps for visa liberalisation were established, setting out clear and realistic benchmarks for the lifting of the visa obligation. Measures aimed at increasing people-to-people contacts also include more mobility opportunities for undergraduate and graduate students under the Erasmus Mundus programme and additional funds for youth exchanges and partnership under the Youth in Action programme. The Tempus programme continued to provide support to higher education reform through partnerships between universities.

Following the establishment of the Energy Community, negotiations have begun for the creation of a Transport Community with the Western Balkans with the aim of signing an agreement in the course of 2009. Progress has also been made towards implementation of the European Common Aviation Area (ECAA). In the field of environment a new regional cooperation mechanism is being developed to jointly tackle the environmental challenges linked to pre-accession.

In response to the international financial crisis, the Commission stands ready to assist the authorities in the enlargement countries in managing its financial and economic consequences.

Important efforts have been made to provide support for regional cooperation initiatives, in accordance with the Thessaloniki agenda and with steps outlined in the Commission's communication of March 2008. The newly established Regional Cooperation Council (RCC) is operational. It now faces the challenge of ensuring the efficiency of regional activities and their further streamlining. Regional initiatives supported by the Commission include assistance to the secretariat of the RCC, the Regional School of Public Administration to be set up in Danilovgrad (Montenegro), a new disaster risk reduction initiative, as well as cultural heritage rehabilitation and history textbooks projects. The Commission also supports cooperation in trade matters through the CEFTA Secretariat. Regarding customs, provisions on diagonal cumulation on rules of origin between the EU and some Western Balkan countries will soon come into effect, thus facilitating regional trade integration[4].

The Commission set up a new financing facility under IPA to promote civil society development and dialogue. Support under the Civil Society Facility for 2008 amounts to some €30 million, geared towards capacity building at local level. The Commission organised a major conference on civil society development in Southeast Europe in April. The conference stimulated networking, exchanging best practices and building partnerships. These initiatives favour reconciliation among peoples as well as progress on the path towards EU membership.

Better communication with the public is a key principle of the renewed consensus on enlargement. The Commission is promoting public debate about EU enlargement, both in the member states and the enlargement countries, carrying out communication activities for civil society organisations, journalists and youth, including the release of video clips, the European Street Football Festival in Foca and a competition for young journalists "Enlarge your vision". These initiatives complemented communication efforts undertaken by member states and partner countries.

3. THE ENLARGEMENT AGENDA IN 2008-2009

3.1. Accelerating the course of the Western Balkans towards EU membership

The June 2008 European Council reaffirmed its full support for the European perspective of the Western Balkans. It stressed that by making solid progress in economic and political reform and by fulfilling the necessary conditions and requirements, the remaining potential candidates in the Western Balkans should achieve candidate status, according to their own merits, with EU membership as the ultimate goal.

The EU perspective remains essential for the stability, reconciliation and development of the Western Balkans, in accordance with the Stabilisation and Association Process (SAP). It is in the interest of the European Union, and of Europe as a whole, that the region should go ahead as rapidly as possible with political and economic reform, reconciliation among peoples and progress towards the EU. The EU should be ready to accelerate their pre-accession preparations, as soon as they meet the necessary conditions, and to ensure that the region continues to benefit from the highest level of political and economic treatment in line with the SAP. However, ultimately progress on the way towards membership lies in the hands of the people of the region and their leaders, as its pace depends on each country's achievements in adopting the necessary reforms.

The Commission is proposing in the present communication an indicative roadmap for concluding the technical negotiations with Croatia by the end of 2009, provided the conditions are met. This is explained in section 3.2.

Further steps by the former Yugoslav Republic of Macedonia in its progress towards the EU will be possible, once the Copenhagen political criteria are met and the key priorities of the accession partnership are fulfilled. In particular the country needs to ensure free and fair elections. The dialogue between major political parties and actors needs to improve so as to permit the normal functioning of institutions and accelerate the pace of reforms. The Commission will closely monitor the former Yugoslav Republic of Macedonia's progress. Outstanding key partnership priorities concern establishing a track record of implementation of the judicial reforms, ensuring an impartial and non-politicised police service, continuing the fight against corruption in an objective manner, and ensuring that recruitments and promotion in the civil service are based on professional criteria.

A number of countries in the Western Balkans have indicated that they are considering submitting applications for membership in the EU. The Commission recalls that a satisfactory track record, notably in implementing obligations arising from an SAA, including the trade-related provisions, is an essential element for each country's progress towards membership. An application for membership gives rise in due course, upon request from the Council, to a Commission opinion assessing the country's readiness and a study on the impact of accession on the key policy areas.

Albania needs to ensure that its 2009 parliamentary elections are properly prepared and conducted. Montenegro needs to intensify judicial reform. Both countries need to further build up their track records of SAA implementation, including by improving their administrative and enforcement capacity and by strengthening the rule of law.

Bosnia and Herzegovina now urgently needs to achieve the necessary political consensus and to proceed with reforms, in particular with a view to assuming greater ownership of its governance. A shared vision on the direction of the country is needed for a smooth operation of institutions, for creating more functional and efficient state structures, and for speaking with one voice on EU matters. The Peace Implementation Council (PIC) will review later this month the country's readiness for closure of the Office of the High Representative. This depends on progress in meeting five specific objectives[5] as well as of a positive assessment by the PIC of the political situation based on full compliance with the Dayton Peace Agreement. The Commission stands ready to support the efforts of Bosnia and Herzegovina towards fulfilling these conditions.

The June European Council stated that Serbia can accelerate its progress towards the EU, including candidate status, as soon as all the necessary conditions are met. The Commission considers that it should be possible to grant candidate status to Serbia in 2009 if these conditions are met and in the light of a Commission opinion. Serbia needs to build on positive developments through implementing full cooperation with ICTY and pressing ahead with its reform agenda, leading to tangible progress in priority areas including on strengthening the rule of law and accelerating economic and budget reforms. Serbia has a key role to play in the region. It is encouraged to take a constructive approach towards Kosovo's participation in regional initiatives and international fora and to the EU's efforts to contribute to peace and stability in the Western Balkans.

The socio-economic development of Kosovo is crucial to the well-being of its population and for the stability of the wider region. The European Council stated in June that, in line with the rest of the Western Balkans, Kosovo has a clear EU perspective. The EU expects Serbia to take a constructive line on EULEX deployment and encourages Kosovo Serbs to participate in Kosovo's development. The regular dialogue between the Commission and the Kosovo authorities on reforms will intensify. The Commission will explore all avenues to promote Kosovo's involvement in regional cooperation and calls on all parties to adopt a constructive approach in this regard. It will evaluate means to further Kosovo's political and socio-economic development, and will examine how Kosovo can progress, as part of the region, towards integration with the EU in the context of the Stabilisation and Association Process. The outcome of this analysis will be presented in a feasibility study in the autumn of 2009.

Good neighbourly relations and regional cooperation remain key in advancing towards EU membership and as such constitute a central element of the Stabilisation and Association Process. Nearly all regional partners have unresolved bilateral issues with their neighbours, including border disputes. The Commission will continue to monitor developments in this respect and urges all partners to address bilateral issues as a priority. Significant efforts are needed to enhance judicial cooperation on criminal matters, including for investigations on domestic war crimes.

People-to-people contacts make the European perspective tangible for citizens.

The Commission will continue to closely monitor the correct implementation of the visa facilitation agreements. It will monitor the implementation of the roadmaps for visa liberalisation and will support the countries in meeting the benchmarks set out in the roadmaps. The pace of the visa dialogue will depend on the results obtained by each of the countries. Provided the benchmarks are met by a country, the Commission may propose, on a country-by-country basis, lifting of the visa obligation in the course of 2009.

The Commission will also double the funds allocated to scholarships for students of the Western Balkans under IPA 2009.

Participation in Community programmes and agencies has proved useful in bringing institutions and citizens of partner countries closer to the EU. The Commission will encourage greater participation by beneficiaries from these countries in programmes that are open to them. It will also explore possibilities to open further programmes to the potential candidates. As regards Community agencies, the Commission will seek to offer further participation possibilities, including observer status for all enlargement countries in the meeting of the management boards or expert groups. The Commission proposes to upgrade the opportunities and conditions for participation offered to potential candidate countries. The EU could co-finance up to 90% of the country contribution to a Community programme or Agency in the first year of participation through IPA. In the following years, that contribution would decrease, in percentage or in real amounts. The total level of co-financing for the Community programmes, other than research and development ones, should in principle remain around 10% of the national IPA programmes.

Increased participation of civil society organisations in the reforms undertaken in the enlargement countries is a strong determinant for the pace and quality of the accession process, as well as in attaining public support for accession. Further capacity building and networking projects will be funded as part of the new Civil Society Facility, including the 'People 2 people' visitor programme, the setting up in the first half of 2009 of technical support offices in each country, and support schemes to civic partnerships in the areas such as environment, energy efficiency, health and safety at work, as well as the fight against corruption, organised crime and trafficking. Under IPA 2009 support schemes to civil society partnerships will give priority to sectors such as culture, minorities and business associations.

Ensuring public support remains a crucial goal for the EU enlargement policy. Member states in particular have a responsibility to foster public understanding of the challenges and benefits of enlargement. Partner countries need to play their part in explaining to their own citizens the conditions for progress towards the EU. The Commission will continue to treat enlargement as a priority area of its communication policy and will carry out further actions to support and complement their efforts by providing factual information and encouraging debate among key opinion formers.

3.2. Furthering accession negotiations

Croatia

Croatia has made good overall progress three years after the opening of negotiations. 21 out of 35 chapters have been opened and four chapters have been provisionally closed[6]. Following an acceleration of work over the past months, Croatia has now fulfilled the opening benchmarks for all but two chapters.

Overall, Croatia continued to comply with the general conditionality of the Stabilisation and Association Process (SAP). It now largely complies with its obligations under the Stabilisation and Association Agreement and has agreed with the Commission a solution for eliminating the discriminatory taxation of cigarettes. Over the past months Croatia has taken significant steps to improve its management of EU pre-accession funds, although it will still need to demonstrate concrete results in improving its management.

In the light of the overall progress to date, it should be possible to reach the final stage of accession negotiations with Croatia by the end of 2009, provided that Croatia fulfils all the necessary conditions. With this in mind the Commission proposes an indicative road map for concluding technical negotiations. This indicative timetable may need to be adapted depending on progress made in meeting the conditions. Croatia needs to devote substantial further efforts in order to complete the work on the benchmarks set out in the negotiating chapters. The country needs to pursue reform efforts, in particular in the judiciary and public administration, the fight against corruption and organised crime, the promotion of minority rights, including refugee return, the pursuit of war crime trials, and access for ICTY to documents. Croatia must also make substantial further efforts in restructuring shipyards. The Commission will closely monitor the fulfilment of commitments undertaken by Croatia.

Turkey

Now that Turkey has averted a political crisis linked to the constitutional court case against the ruling party, it needs to reinvigorate the process of political reform. The closure case highlighted the importance of amending the rules governing political parties so as to ensure transparent financing mechanisms and to bring the provisions on the closure of parties in line with European standards and best practices. Legislation is also necessary to reinforce the defence of citizens' rights irrespective of personal beliefs or political affiliations, and to establish an ombudsman function. Judicial reform needs to be pursued. Greater dialogue is needed among the country's different political forces in order to build a consensus favourable to reform.

Continued efforts are required to promote women's rights and gender equality, guarantee freedom of expression and freedom of religion in practice, prevent corruption, reinforce cultural rights for all citizens, strengthen civilian control over the military, and bring the legislation on trade unions into line with ILO and EU standards.

Following the start of full fledged negotiations between the leaders of the Greek Cypriot and Turkish Cypriot communities on a comprehensive settlement of the Cyprus issue, it is crucial that Turkey continues supporting a solution and the efforts of the UN.

Good neighbourly relations remain key. Turkey is expected to ensure full, non discriminatory implementation of the Additional Protocol to the Association Agreement and to make progress towards normalisation of bilateral relations with the Republic of Cyprus. The EU will continue to follow up and review progress made on the issues covered by the Declaration of 21 September 2005, in accordance with the Council Conclusions of 11 December 2006.

The adoption of a National Programme for the Adoption of the Acquis (NPAA) to address the priorities of the Accession Partnership will constitute an important signal of Turkey's willingness to relaunch its reform effort. The pace of accession negotiations reflects the pace of reform as well as Turkey's fulfilment of the relevant conditions.

***

EU public opinion on future enlargement is influenced by perception of past enlargements. It is essential to listen to citizens, address their concerns, and provide further information so that the public can see both the benefits and challenges clearly.

2009 will mark the fifth anniversary of the entry of new member states in the Union and will coincide with the 20th anniversary of the fall of the Berlin Wall. In this context, the incoming Czech Presidency will organise a major event to mark the anniversary of the 2004 enlargement. The Commission will provide its full support to this event and will present on that occasion a study on the impact of the fifth enlargement on the EU's economy.

4. CONCLUSIONS AND RECOMMENDATIONS

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

1. Enlargement serves the EU's strategic interests in stability, security and conflict prevention. It has helped to increase prosperity and growth opportunities, to improve links with vital transport and energy routes, and to increase the EU's weight in the world. The present enlargement agenda covers the Western Balkans and Turkey, which have been given the perspective of becoming EU members once they fulfil the necessary conditions.

2. The consistent implementation of the renewed consensus on enlargement, as defined by the December 2006 European Council, gains importance in the light of recent challenges to stability to the East of the EU, including in the southern Caucasus.

3. The EU has taken steps to improve the quality of the enlargement process. Based on the analysis set out in the 2007 enlargement strategy paper, greater focus is being given at an early stage to the rule of law and good governance, including the fight against corruption and organised crime, administrative and judicial reforms, and civil society development.

4. Good neighbourly relations and regional cooperation remain key. The peaceful settlement of disputes remains a priority for all parties.

5. In the light of the overall progress to date, it should be possible to reach the final stage of accession negotiations with Croatia by the end of 2009, provided that Croatia fulfils all the necessary conditions. With this in mind the Commission proposes an indicative road map for concluding technical negotiations. This indicative timetable may need to be adapted depending on progress made in meeting the conditions. Croatia needs to devote substantial further efforts in order to complete the work on the benchmarks set out in the negotiating chapters. The country needs to pursue reform efforts, in particular in the judiciary and public administration, the fight against corruption and organised crime, the promotion of minority rights, including refugee return, the pursuit of war crime trials, and access for ICTY to documents. Croatia must also make substantial further efforts in restructuring shipyards. The Commission will closely monitor the fulfilment of commitments undertaken by Croatia.

6. Turkey needs to renew political reform efforts, in order to strengthen democracy and human rights, to modernise and develop the country and to bring it closer to the EU. The pace of accession negotiations reflects the pace of reform as well as Turkey's fulfilment of the relevant conditions. Turkey is expected to ensure full, non-discriminatory implementation of the Additional Protocol to the Association Agreement and to make progress towards normalisation of bilateral relations with the Republic of Cyprus.

7. As regards the Cyprus issue, the leaders of the Greek Cypriot and Turkish Cypriot communities started full-fledged negotiations on a comprehensive settlement under the auspices of the United Nations. The Commission supports their efforts and stands ready to provide technical advice on issues within EU competence. It calls on both leaders to make decisive progress and on Turkey to contribute to a favourable climate for such a comprehensive settlement.

8. The former Yugoslav Republic of Macedonia needs to ensure the holding of free and fair elections, to improve the dialogue between major political parties and actors, and to fulfil outstanding key partnership priorities. The Commission will continue to monitor closely progress in these areas.

9. The progress of the Western Balkan countries towards EU membership can be accelerated, provided they meet the necessary conditions. For the potential candidates, this could result in candidate status when they have demonstrated their readiness, in accordance with established procedures.

10. Implementation of the interim agreements with Albania, Montenegro and Bosnia and Herzegovina is progressing; the rule of law remains a major challenge, and administrative and enforcement capacity requires further improvement. In particular, Albania needs to ensure proper preparation and conduct of its 2009 parliamentary elections. Montenegro needs to make particular efforts to pursue judicial reform. Bosnia and Herzegovina's political leaders need to reach a common vision on the direction of the country, to speak with one voice on EU and international matters, and to achieve consensus on the key reforms required for European integration.

11. Serbia needs to build on positive developments through full cooperation with ICTY and tangible progress in priority reform areas. The Commission considers that it should be possible to grant candidate status to Serbia in 2009, if the conditions are met and in the light of a Commission opinion assessing the country's readiness.

12. Kosovo has a clear European perspective, in line with the rest of the Western Balkans. In the autumn of 2009, the Commission will present a feasibility study evaluating means to further Kosovo's political and socio-economic development, and examining how best Kosovo can progress as part of the region towards integration with the EU in the context of the Stabilisation and Association Process.

13. The Commission is taking measures to make the European perspective tangible for citizens in the Western Balkans. Provided that the benchmarks set out in the roadmaps for visa liberalisation are met, the Commission may propose, on a country-by-country basis, lifting the visa obligation in the course of 2009. Funding for scholarships for students of the Western Balkans will double in 2009. Negotiations for a Transport Community with the Western Balkans will be carried forward with the aim of signing an agreement in the course of 2009.

14. Assistance under the Instrument for Pre-Accession Assistance (IPA) will further focus on core reform issues. This is reflected in the revised Multi-annual Indicative Financial Framework covering 2010-2012, which the Commission is presenting today. Implementation of the new Civil Society Facility will continue in 2009. Greater participation by partner countries in Community programmes and agencies will be encouraged.

15. Coordination with International Financial Institutions (IFIs) and other donors increases the leverage of IPA support. The Commission will move towards establishing a Western Balkans Investment Framework by 2010 as agreed with the European Investment Bank, the European Bank for Reconstruction and Development and the Council of Europe Bank.

16. The international financial crisis has so far had only a limited direct impact on the Western Balkans and Turkey. The Commission stands ready to assist the authorities in the enlargement countries in managing its financial and economic consequences.

17. In May 2009, under the Czech Presidency, the EU will mark the fifth anniversary of the 2004 enlargement. The Commission will present on that occasion a study on the impact of the fifth enlargement on the EU's economy.

18. Public support for enlargement is crucial. It is important for authorities in the member states and EU institutions to foster public understanding of the Union's interest in enlargement.

ANNEX 1

A road map for reaching the final stage of accession negotiations with Croatia

In line with the negotiating framework and the December 2006 European Council conclusions, the pace of the accession negotiations depends on Croatia meeting the necessary conditions. In accordance with the own merits principle, progress in the negotiations depends on Croatia implementing the necessary political, economic, legislative and administrative reforms. The country needs to pursue reform efforts, in particular on judiciary and public administration, the fight against corruption and organised crime, minority rights, including refugee return, war crimes trials, and access for ICTY to documents in Croatia, as well as the restructuring of shipyards.

Given the close link of these issues with the accession negotiations, Croatia will need to demonstrate concrete results in fulfilling its obligations under the Stabilisation and Association Agreement, complying with the general conditionality of the Stabilisation and Association Process (SAP) and improving its management of EU pre-accession funds.

Opening of the remaining chapters:

- Free movement of capital

- Public procurement

- Competition policy)

- Agriculture and rural development

- Food safety, veterinary and phytosanitary policy

- Fisheries

- Taxation

- Regional policy

- Judiciary and fundamental rights

- Justice freedom and security

- Environment

- Foreign, security and defence policy.

The Commission suggests that the accession conference make every effort to open the outstanding chapters by the end of 2008, if made possible by Croatia's meeting of the necessary conditions, and any remaining ones early in 2009.

Regarding opening benchmarks for the chapter competition policy , Croatia must make further efforts, in particular as regards shipbuilding. Regarding the chapter on judiciary and fundamental rights, Croatia must make final efforts in order to meet the outstanding elements of the opening benchmarks.

Provisional closing of the remaining chapters:

31 chapters remain to be closed. This depends on Croatia meeting the closing benchmarks that have been set.

Croatia has requested a substantial number of transitional arrangements in certain chapters which increases the need for further negotiations and therefore may delay the provisional closure of a chapter.

In order to reach the final phase of the accession negotiations by the end of 2009, it would be necessary for Croatia to complete its work on the closing benchmarks sufficiently in time as to allow for the closure of chapters according to the following priority schedule:

Priority schedule for the remainder of 2008

- Intellectual property law

- Economic and monetary policy

- Trans-European networks

- Customs union

Priority schedule for the first half of 2009

- Right of establishment and freedom to provide services

- Company law

- Financial services

- Information society and media

- Transport policy

- Energy

- Statistics

- Social policy and employment

- Consumer and health protection

- F oreign, security and defence policy

- Financial control

Priority schedule for the second half of 2009

- Free movement of goods

- Freedom of movement of workers

- Free movement of capital

- Public procurement

- Competition policy

- Agriculture and rural development

- Food safety, veterinary and phytosanitary policy

- Fisheries

- Taxation

- Regional policy and coordination of structural instruments

- Judiciary and fundamental rights

- Justice, freedom and security

- Environment

- Financial and budgetary provisions

- Institutions

- Other issues .

Subject to Croatia maintaining overall progress in its preparations, the Commission will present a Communication in the course of 2009 on a financial package for the accession of Croatia.

The Commission further recommends that the Council set up the ad-hoc technical working party for the drafting of the Accession Treaty, on the basis of texts prepared by the Commission. This group may work in parallel to the negotiations and could therefore start its work during the first half of 2009. In parallel, Croatia needs to ensure the timely availability of the translation of the acquis in its official language.

The indicative timetable put forward in this roadmap may need to be adapted depending on progress by Croatia. The Commission will continue to support Croatia in its preparations for accession and to continue to help it with expertise, including by making full use of instruments such as TAIEX and twinning, and through well targeted financial assistance.

The Commission will closely monitor that the commitments undertaken by Croatia in the negotiations are fulfilled and will report on its findings. It will make use of regular peer assessment missions, including as regards the rule of law, as well as of all other available tools.

ANNEX 2

Conclusions on Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia, Montenegro, Serbia, Kosovo[7], Turkey

Albania

As regards political criteria , Albania has continued to make progress on democracy and the rule of law. Based on cross-party consensus, key reforms have made headway. However, the culture of dialogue between political parties and the proper functioning of the state institutions require further consolidation. The 2009 parliamentary elections need to be properly prepared so as to demonstrate the democratic maturity of the country. Albania needs to further build up its administrative capacity. Despite some progress, the fight against corruption and organised crime remains a major challenge.

Some progress has been made on democracy and the rule of law . Albania's parliament adopted major constitutional amendments, including on electoral reform, based on a broad consensus between the two largest parties. A new electoral code remains to be adopted in time for the 2009 parliamentary elections. Albania has made some progress in strengthening its government structures to implement SAA commitments and to coordinate work towards EU integration. However, further strengthening of capacity and strategic planning remains necessary. In the area of public administration, major efforts are needed to establish an independent, efficient and merit-based civil service. There continue to be appointments in breach of the civil service law. Full implementation of the civil service law, including the official career structure, will be key to progress.

There has been some progress on reforming the judicial system . Important legislative acts on the organisation of the judiciary have been adopted. Court infrastructure has started to improve but remains inadequate. A comprehensive reform strategy for the judiciary is missing. Major legislative acts regarding the functioning of the High Court of Justice and the Prosecutor's Office are pending. Enforcement of judgements, particularly in civil cases, remains slow. The problem of backlogs continues and court infrastructure remains inadequate. The judiciary has continued to function poorly and much remains to be done to ensure its independence, transparency and efficiency.

The government has continued its efforts in the fight against corruption , which is a key European Partnership priority. An overall anti corruption strategy, with its action plan, was adopted but implementation has not started and monitoring mechanisms remain to be assessed. Electronic procedures have been introduced for taxation and public procurement. Anti-corruption investigations led to the dismissal and, in some cases, arrest of a number of officials. The perception of corruption has improved. However, corruption remains widespread and constitutes a particularly serious problem. The institutional arrangements and inter-agency coordination in the fight against corruption remain weak. Fighting corruption in the judiciary remains a key issue. A thorough investigation of the Gerdec explosion case is needed. Much work is still needed on all aspects of the issue, including judicial accountability and transparency of political party funding.

Some progress has been achieved regarding human rights and the protection of minorities . The legislative framework is broadly in place. Some efforts have been made to prosecute cases of ill treatment in pre-trial detention. New prisons and pre-trial detention centres have been built. However, considerable efforts are still required to protect human rights and prosecute those accused of violations. Regarding access to justice, legislation is in place to provide free legal aid, but it is not applied effectively. Very poor detention standards, exacerbated by overcrowding, remain an issue of serious concern.

Albania has made further progress on freedom of expression . The legal framework on media policy has improved, but better implementation of the existing legislation is required. Further efforts are needed in order to decriminalise defamation and to ensure freedom of information and independence of the public broadcasting regulator.

There is a favourable legal framework for civil society organisations. A Civil Society Fund to promote NGOs has been established, but implementation mechanisms are not in place. Civil society organisations remain weak and their participation in policy-making requires further strengthening.

There has been further progress on strengthening women's rights . New legislation on gender equality was adopted. A strategy to prevent domestic violence was adopted but has not been implemented. The protection of women against all forms of violence is insufficient and remains an issue of serious concern. There has been further progress on children's rights . Amendments to the criminal code were adopted regarding the exploitation of children but more efforts are needed to address child labour. Juveniles can now be given sentences of community service or be put on probation. School attendance rates among Roma children have improved somewhat. However, full implementation is hindered by lack of resources. A social protection strategy for 2008-2013 was adopted, but lacks implementation mechanisms. Support mechanisms for socially vulnerable people and people with disabilities remain limited. Better co-ordination of government agencies is needed. Regarding anti-discrimination policy, there has been little progress on the legal framework. Lack of progress in amending labour legislation hampers the development of social dialogue.

There has been progress on consolidating property rights . The initial registration of real estate is almost completed and the process of valuing property for assessing restitution and compensation claims is ongoing. Unresolved property issues have undermined efforts to develop a functional land market and kept foreign investment below potential.

Albania took some measures to fulfil its commitments on the protection of minorities , notably to promote the use of minority languages. Improvement is needed, in particular by collecting reliable data on the size and situation of minorities. Some steps have been taken to improve the situation of the Roma, particularly on school registration, but the impact of these measures has been limited. Better coordination and adequate resources are needed for participation in the Roma Decade and to implement existing strategies. The Roma minority continues to face very difficult living conditions and discrimination, with poor access to education, social protection, health care, housing and employment.

Regarding regional issues and international obligations, Albania has continued to play a constructive role in maintaining regional stability and fostering good relations with other Western Balkan and neighbouring EU countries. The country participated actively in regional cooperation, including the newly established Regional Cooperation Council (RCC) and the Central European Free Trade Agreement (CEFTA). As regards the International Criminal Court, the bilateral immunity agreement with the United States is not in line with the relevant EU common position and guiding principles.

The economy of Albania continued to grow at a relatively fast pace. Inflationary pressures were contained, but external imbalances widened and the fiscal stance loosened. Macroeconomic stability was broadly maintained, supported by a wide range of structural reforms. The business environment improved. However, unreliable energy supply, poor infrastructure, and weak rule of law and contract enforcement continued to hinder economic development.

As regards the economic criteria , Albania made further progress towards establishing a functioning market economy. A continuation of structural reforms and sizeable investment in infrastructure and education are needed in order to enable the economy to cope with competitive pressures and market forces within the Union over the long term.

Political consensus on the fundamentals of market-oriented economic policies and macroeconomic stability has been maintained. The economy coped well with strong pressures from rising global food prices, and achieved an improvement in the labour market performance. The administration of public finances improved, resulting in higher tax revenues. Privatisation of large-scale state-owned companies progressed and business registration procedures were extensively simplified.

Measures were taken to improve labour force skills and to promote investments in infrastructure and enterprise restructuring progressed. The government intensified its fight against corruption and tax evasion. The financial sector remained sound, with increasing transparency in the credit market. State-induced distortions of competition remained limited.

However, macroeconomic risks increased as the current account deficit widened, mainly driven by increased demand for energy and machinery imports. Exports remained limited, and were well below the level of imports. On the financing side, capital inflows remained relatively small. A delayed fiscal consolidation also contributed to the existing aggregate savings-investment gap, given the increases in public investments in infrastructure. The unfinished restructuring of the loss-making state-owned power corporation remained a fiscal risk.

Unreliable energy supply continued to hinder economic development. The competitiveness of the economy remained hampered by shortages of qualified staff and a limited capital stock, including poor infrastructure. Employment in the agricultural sector remained unproportionally high. The large informal sector is fuelled by weaknesses in tax and expenditure policies, as well as in law enforcement, including the fight against corruption and organised crime. The informal sector remains an important challenge, as it reduces the tax base and the efficiency of economic policies.

Albania has made progress in aligning its legislation, policies and capacity with European standards and in implementing its Interim Agreement commitments. Progress continued in areas such as customs and competition. In other areas, such as energy, transport and intellectual property rights, progress has remained limited. Progress on veterinary and phytosanitary control is still necessary in order to benefit fully from trade concessions under the Stabilisation and Association Agreement (SAA). Further efforts are needed to improve administrative capacity for the non-trade-related provisions of the SAA and for effective law implementation.

There has been progress in some internal market fields, but further efforts are needed in order to fulfil Albania's SAA obligations. Progress in adopting European technical standards and in accreditation has continued. Some improvements in the areas of metrology and market surveillance have taken place, but further efforts are required. The legislative framework on consumer protection improved. No significant progress can be reported on the right of establishment . Certain restrictions on liberalisation of movement of capital remain in place.

Progress continued on customs' administrative capacity. Infrastructure at border crossing points is being improved. Customs revenue continued to rise, while tariff reductions under the Interim Agreement were implemented on time. However, strategies for information technology and training need to be defined and further improvements in infrastructure and alignment with EU practices are required. There has been progress in t axation. Income and corporate tax revenues have increased . However, tax collection remains low, particularly at the local government level. Tax collection, control strategy and further alignment with EU legislation and practices need to be further strengthened.

Progress continued in the area of competition . The Competition Authority was further strengthened, by imposing anti-trust fines in key sectors. The legislative framework is largely in line with the acquis, but further efforts are needed to implement it. Albania has made further progress towards meeting its state aid obligations under the Stabilisation and Association Agreement. An inventory of aid schemes has been completed.

Limited progress can be reported as regards public procurement . E-procurement procedures have been introduced, but further legislative approximation is required, particularly in the areas of concessions and utilities. Capacity at the Public Procurement Agency has improved, but requires further strengthening. The impartiality of the review procedures needs to be ensured. Current procedures for handling complaints do not meet international standards. Amendments to the Customs code in relation to intellectual property rights (IPR) and a law on industrial property rights were adopted. However, IPR enforcement remains weak and the number of infringement cases brought to court is low. The capacities of the Patent and Copyright offices remain weak. Considerable further efforts are required to fulfil Interim Agreement obligations on IPR.

There has been some progress in approximating to European standards on employment and social policies . Programmes have been put in place to foster the employment of vulnerable groups. The labour inspectorate was strengthened, but its capacity to enforce labour rights is limited. Occupational health and safety standards remain poor. Continued progress has taken place in public health . Some progress has been made on education. The education budget has continued to increase. A new digitalised central system for university admissions was introduced. Access for students with disabilities has improved. However, secondary schools enrolment in rural areas remains low. There has been some progress in the field of research , but capacity requires further strengthening.

Progress can be reported on some sectoral policies . Regarding industry and SMEs , progress has been made in implementing the European Charter for Small Enterprises. Some progress can be reported on agriculture , particularly as regards the legislative framework and in setting up rural development structures. The legal framework on food safety, veterinary and phytosanitary policy has improved, but compliance with EU standards remains poor, and further efforts are needed to strengthen institutional capacity. There has been some progress in the area of fisheries regarding inspection, control and international cooperation. Law enforcement and implementation require further attention.

Regarding environment , horizontal legislation has improved, but implementation and enforcement are lagging behind. The administrative capacity for environmental policy making and enforcement needs to be strengthened.

Some progress can be reported in the field of transport. Albania continues to actively participate in the South East Europe Transport Observatory. However, substantial improvements are still needed in all transport sectors.

There was limited progress in the energy sector. Albania made progress towards implementing EU legislation in line with its Energy Community Treaty commitments. Progress continued on the restructuring of the electricity company and efforts are underway to improve its financial situation. However, the energy sector remains in a critical state. Security of electricity supply is not ensured as generation capacity is not sufficient to meet domestic demand, and limited interconnection capacity continues to hinder imports.

Some progress can be reported regarding information society and media . New legislation on electronic communications and e-signature was adopted and market liberalisation started. However, the regulatory framework is not yet in line with the acquis and the capacity of the telecommunications regulator is inadequate. On audiovisual policy the administrative capacity of the broadcasting authority was strengthened, but technical resources remain limited. Regarding financial control , a new budget law was adopted. However, managerial accountability and financial control are at an early stage. Progress has been reasonable in the field of statistics . The capacity of the Albanian statistical office improved. Most statistical classifications are in place, in line with EU standards. Alignment is moderately advanced.

In the field of justice, freedom and security, some progress has been made in most areas, albeit unevenly. Further improvement is needed overall. Regarding visas , a reliable civil registry and address system is being set up to improve document security. The law on foreigners was adopted. The EC-Albania readmission agreement has been in place since 2006. The EC-Albania visa facilitation agreement entered into force and the visa liberalisation dialogue was launched. Biometric passports in line with EU standards need to be issued. The visa regime is not yet in line with EU standards.

Border control has been improved as a result of a new law on border management, better infrastructure and inter-agency co-operation. Implementation of the integrated border management strategy has started. However, staffing levels and training for the border police needs strengthening. Cross-border cooperation needs to be enhanced. There is little progress to report on asylum policy . The review of the legal framework for approximation to EU standards has not been completed. Implementation capacity remains weak and inter-agency cooperation needs strengthening. Some progress can be reported in the area of migration . A central return and readmission unit was established to oversee regional readmission centres. Migration checks at borders are more effective, but considerable further efforts are needed.

Limited progress has been made in preventing money laundering . The legal framework and cooperation between banks and financial institutions on money laundering, have improved. However, enforcement capacity to confiscate assets remains low. Investigation resources, inter-agency cooperation and enforcement capacity need to be further improved.

Limited progress can be reported in the fight against drugs, and drug trafficking remains a serious concern. Drug-related prosecutions have increased. Better infrastructure for pre-trial storage of seized drugs has been built. However, strong determination is needed to achieve sufficient results in this area, while detection measures and equipment at borders need to be improved.

Progress continued on policing, with the implementation of the new police law. Implementation of the Europol strategic agreement and of the South East Europe Police Cooperation Convention has started. However, police management, staffing, training, and internal control structures need to be further strengthened. More efforts are needed to develop reliable crime statistics.

Limited progress can be reported in the fight against organised crime, which remains a serious problem and is affecting the rule of law and the business environment. A national strategy to fight organised crime was adopted. The legal framework improved. Co-operation with Interpol has improved, allowing a number of international arrest warrants to be executed. However, efforts to combat organised crime are undermined by corruption and poor witness protection. Difficulties in cooperation between police and prosecutors continued to reduce the effectiveness of investigations.

A strategy to combat trafficking in human beings has been adopted. Much remains to be done, particularly in terms of victim protection. More political will and better coordination are needed for the implementation of the anti-trafficking strategy, particularly regarding victim protection. Albania remains a significant country of origin for trafficking in human beings, both for sexual exploitation of women and girls and forced labour. Internal trafficking of women and children is on the increase.

Good progress can be reported on the protection of personal data. The legal framework is now in place and an independent data supervisory authority has been appointed. However, adequate resources are needed for the proper implementation of its mandate.

Bosnia and Herzegovina

Bosnia and Herzegovina has made limited progress in addressing political criteria in line with the European Partnership. Following progress in four key areas set out by the Commission and the Council in 2005[8] the Stabilisation and Association Agreement (SAA) was signed in June 2008. However, the lack of consensus on the main features of state building, frequent challenges to the Dayton/Paris peace agreement and inflammatory rhetoric have adversely affected the functioning of institutions and have slowed down reform. A shared vision by the political leaders on the direction of the country and on the key EU-related reforms, as well as ability to speak with one voice on EU and international matters, are essential elements for the country's further progress towards the European Union. Bosnia and Herzegovina also needs to further build up its administrative capacity, in particular at the State level, and to increase its anti-corruption efforts.

Regarding democracy and the rule of law , there has been limited progress towards creating more functional and efficient state structures and no progress on constitutional reform. Bosnia and Herzegovina's system of governance continues to involve international presence. The closure of the Office of the High Representative (OHR) is conditional on Bosnia and Herzegovina's progress in addressing specific requirements[9].

The municipal elections in October 2008 were held in accordance with international standards. There has been some progress in improving the efficiency of the Parliamentary Assembly of Bosnia and Herzegovina. The assembly adopted a number of important laws based on the European Partnership during the first half of 2008, but its work has been adversely affected by the political climate, systematic voting along ethnic lines and insufficient administrative resources. As regards the government at State level, consensus on European integration helped to move the legislative agenda forward until the spring of 2008. However, reforms have stagnated in recent months. Internal tensions and fragmented and uncoordinated policy-making between the State and the Entities remain the main obstacles to efficient work by the State-level government. Lack of political will and capacity problems in government and parliament continue to delay the adoption of legislation. The Directorate for European Integration has continued to play an important role in promoting European integration, but has been adversely affected by limited resources for personnel and the difficult political climate. The lack of a recent population census is a serious handicap for policy planning in Bosnia and Herzegovina as a whole.

Some progress has been made in the area of public administration, but further efforts are needed. The public administration reform co-ordinator's office has been strengthened. The public administration reform strategy, which is a key European Partnership priority, is being implemented. The public administration reform fund has become operational. Coordination between the State- and Entity-level Civil Service Agencies has improved, with joint involvement in several large-scale training schemes. Nonetheless, sustained efforts remain necessary to prevent political interference, to limit the role played by ethnic identity in appointments, and to establish a professional and efficient civil service based on merit and competence. The process of drafting the Law on State property, which is a condition for closure of the OHR, has been very slow. The appointment of the four State Ombudsmen and the transfer of the Ombudsmen's competences to the State-level have been delayed.

Bosnia and Herzegovina has continued to make progress in improving the judicial system. A National Strategy for Development of the Justice Sector, which aims to further strengthen the independence, accountability, efficiency, professionalism and harmonisation of the judicial system, has been adopted. The High Judicial and Prosecutorial Council continued its efforts to improve the situation in the judiciary. However, the fragmentation of the judicial system and complexity of the legal framework continue to hamper the operation of the judiciary. Problems persist with the prosecution of organised crime and of war crimes in the Entities and the Cantons. The independence, accountability and efficiency of the judicial system need to be further enhanced. The jurisdiction and the competences of the State-level judicial agencies to operate freely in Republika Srpska have been challenged by the Republika Srpska government, which is a serious cause for concern.

Bosnia and Herzegovina has achieved little progress in the fight against corruption , which remains widespread and constitutes a serious problem. The National Anti-Corruption Strategy is not properly implemented. Convictions for corruption remain very limited. Transparency of public administration activities is hampered by political pressure on public external audit institutions and corruption watchdogs. Bosnia and Herzegovina needs strengthened commitment and determined action against corruption.

There has been limited progress as regards human rights and protection of minorities . Bosnia and Herzegovina has ratified all the major UN and international human rights conventions including, in July 2008, the revised European Social Charter. However, implementation of international human rights conventions needs to improve. In a number of cases the decisions of the Human Rights Commission of the Constitutional Court of Bosnia and Herzegovina have not been properly implemented.

There has been some progress in addressing civil and political rights. Steps have been taken to support civil society development. The establishment of the Civil Society Board is a positive development, even though civil society organisations remain weak overall and their participation in policy-making requires further strengthening. The funds needed for the construction of the State-level prison have been secured. However, there continues to be no unified practice of criminal sanctions between the State and the Entities. Ill-treatment of inmates and detainees continues to be a problem. Prosecution of perpetrators remains low. Access to justice in civil and criminal trials remains a matter of concern, and equality before the law is not always guaranteed.

The State and the Entity constitutions provide for the freedom of expression and media, the freedom of assembly and association and the freedom of religion . However, there has been little additional progress in these areas, and better implementation of the existing legislation is required. The Federation public broadcasting law has been adopted, even though full harmonisation with the relevant state-level legislation is still required. All broadcasting laws will need to be properly implemented in order to meet this key European Partnership priority. There have been attempts to withhold financial resources from the public broadcasting system. There have been further cases of physical attacks against journalists and editors.

There has been limited progress in the area of economic and social rights . Sustained efforts are needed regarding the protection of women against all forms of violence. Although an Action Plan for children is in place, problems in the fields of health, social protection, education and domestic violence against children remain. Inadequacies in social welfare systems adversely affect the conditions of vulnerable groups , including the mentally ill. The ratification of the revised European Social Charter is a progress, but the complex system of government and the fragmentation of legislation continue to hamper social dialogue across the country. Progress has continued in the areas of property rights and land administration reform. The mandate of the Commission for Property Claims of Displaced Persons and Refugees has been extended to address residual property repossession cases. Bosnia and Herzegovina's legal framework includes provisions to protect economic and social rights, but overall, implementation remains poor.

There has been some progress in the area of cultural rights and minority rights. The State-level Council of National Minorities has been established, and a National Minorities Council is operational in Republika Srpska. Further steps need to be taken to improve the implementation of the Law on national minorities, and the State-level Constitution needs to be changed to allow access of minorities to all political functions. Separation of children within schools along ethnic lines remains an issue. Bosnia and Herzegovina has joined the Decade for Roma inclusion 2005-2015. An Action Plan on Roma housing, health and employment and a coordination mechanism are in place. However, the Roma minority continues to face very difficult living conditions and discrimination, with poor access to education, social protection, health care, housing and employment. The lack of civil registration continues to hinder their access to basic social and economic rights.

Concerning refugees and internally displaced persons , further improvements were recorded in the security situation, but little additional progress has been achieved in improving the socio-economic integration of those who have returned.

As regards regional issues and international obligations, Bosnia and Herzegovina has continued to participate actively in regional cooperation initiatives, including the Regional Co-operation Council (RCC) whose headquarters were established in Sarajevo in February 2008, and in CEFTA. Bosnia and Herzegovina has maintained satisfactory cooperation with the ICTY, which is a key European Partnership priority. As regards the International Criminal Court, the bilateral immunity agreement with the United States is not in line with the EU common position and principles. Bosnia and Herzegovina is still subject to the monitoring procedure concerning its obligations and commitments relating to its membership to the Council of Europe.

On the whole, Bosnia and Herzegovina's relations with its neighbours have been good, but there has been very little progress in resolving outstanding issues, including trade- and border-related matters with Croatia and Serbia.

The economy of Bosnia and Herzegovina has continued to expand rapidly. Macroeconomic stability weakened as a result of widening external deficits, higher inflation, and expansionary fiscal policies. The persistence of very high unemployment and low labour market participation in the country remains a major cause of concern together with diverging reform paths between the entities.

As regards the economic criteria , Bosnia and Herzegovina has made some uneven progress towards becoming a functioning market economy. Further considerable reform efforts must be pursued with determination to enable the country to cope over the long term with competitive pressure and market forces within the Union.

Some progress was made in reaching consensus on the fundamentals of economic policy, and inter-entity cooperation in economic policy areas has improved. A commitment to improve fiscal coordination was made through the adoption of the law on the National Fiscal Council and the inauguration of the Fiscal Council under the new law in early September. Agreement was reached on the allocation of indirect taxes. The currency board arrangement continued to function smoothly and financial stability was maintained for the most part despite international volatility and the high growth rates of domestic lending. Some labour market indicators improved. High corporate and income tax rates in the Federation were reduced and legislative measures were taken to avoid double taxation in the country.

The business environment improved somewhat in the areas of business registration, bankruptcy procedures and land registration. The SME sector is benefiting from better access to financing. FDI surged in 2007, driven by the large privatisations in Republika Srpska and fully covered the current account deficit. The upgrading of physical capital accelerated, also supported by rapidly growing public investment in Republika Srpska.

The fiscal slippage, which began in 2006, continued in 2007 and 2008. In the Federation, fiscal risks have risen owing to large commitments on social spending made against decelerating budget revenues. In addition, the public sector wage policy has been loosened at all government levels through wage increases and indexation mechanisms that weaken fiscal sustainability and private sector competitiveness. Restructuring and liquidation of state-owned enterprises advanced slowly, with only marginal progress being made in privatisation in the Federation. Unemployment has remained very high.

The shift in the structure of production towards higher value-added activities remains sluggish. The weak productive capacity and structural rigidities - high rates of social contributions, distorted wage-setting mechanisms, high and poorly targeted social transfers and low labour mobility – hamper job creation. The business environment is still affected by administrative inefficiencies. The large informal sector is fuelled by a weak regulatory framework, by inappropriate tax and expenditure policies, and by weaknesses in law enforcement, including the fight against corruption and organised crime. This remains an important challenge, as it reduces the tax base and the efficiency of economic policies.

Bosnia and Herzegovina has made some progress in aligning its legislation and policies with European standards. The implementation of customs-related provisions following the entry into force of the Interim Agreement on 1 July 2008 has generally been satisfactory. However, Bosnia and Herzegovina's administrative capacity needs strengthening and the country needs to build up its track record of SAA implementation.

Bosnia and Herzegovina has made some progress in addressing European Partnership priorities in areas of the internal market. As regards free movement of goods, limited progress has been made in the fields of standardisation, certification and market surveillance. Continued efforts remain necessary in order to approximate the legal framework to EU legislation in this area and to develop the necessary administrative capacity. The Law on pharmaceuticals and medical devices has been adopted, which will contribute to achieving a single internal market within Bosnia and Herzegovina in this sector. The Council for Consumer Protection has become fully operational.

Limited progress has been made as regards services , right of establishment and company law . There has been progress as regards business registration. However, no progress has been made towards the establishment of a single State-level supervisory agency for banking and the adoption of State-level legislation on leasing and obligations.

There have been no new developments in the area of free movement of capital , but Bosnia and Herzegovina's preparations in this area are on track. Progress has been made in the field of customs, as regards both legislative alignment and administrative capacity. Customs strategies – especially for training, information technology and other areas – need now to be defined. There has also been progress in addressing European Partnership priorities related to taxation. A national fiscal council was inaugurated in September 2008. VAT collection improved as a result of growing economic activity and the increasing number of registered VAT taxpayers.

As regards competition , Bosnia and Herzegovina has made some progress in the field of anti-trust control. The Competition Council has increased its activities, even though there has been no further legislative alignment with the acquis . No progress has been made in the field of state aid, and the legislation for and establishment of an operationally independent State aid monitoring authority remain pending. There has been only limited progress in the field of public procurement. Proper implementation of public procurement procedures across the country is not yet ensured. Little progress has been made regarding the enforcement of intellectual property rights . The legislative framework is incomplete and implementation capacity needs to be strengthened.

Limited progress was made on social and employment policies . Coordination and strategic planning in the public health sector has improved. A Conference of Health Ministers has been established and meets regularly. Some steps have been taken towards the implementation of the WHO Framework Convention, even though implementation needs to improve. However, social and employment legislation and policies remain extremely fragmented. The institutional set-up of the country continues to be a serious handicap to the development of the necessary co-ordinated approaches.

Some progress has been made with the European standards in the field of education . Coordination between the fourteen ministries of education in the country has improved slightly as a result of the establishment of a Conference of Ministers. A state level law on vocational training has been adopted. Bosnia and Herzegovina has also taken additional steps towards implementing the Bologna reforms. However, h armonisation of legislation at Entity and Canton-level has not been completed and implementation across the country is uneven. As regards research, the procedure to associate the country to the Seventh Research Framework Programme (FP7) has been launched, which should increase the research opportunities with EU partners. Nonetheless, significant efforts remain necessary in order to increase research capacity in the country.

Bosnia and Herzegovina is relatively advanced in its preparations to join the WTO , but it needs to step up its efforts to meet its own objective of early accession.

Bosnia and Herzegovina has made some progress in addressing European standards on a number of sectoral policies. There has been limited progress in the area of industry and small and medium enterprises (SME). No country-wide SME Strategy has been adopted. The industry policy strategy also remains outstanding.

Some progress has been made in approximation with EU policies in the area of agriculture and fisheries. The State-level Law on agriculture, food and rural development has been adopted. However, there has been no progress on setting up the State-level Ministry of Agriculture. The development of a comprehensive agricultural strategy has been delayed. There has been limited progress in the fields of food safety, veterinary and phytosanitary policies. Problems remain owing to inadequate human and financial resources and weak co-ordination between State and Entity services. Bosnia and Herzegovina's preparations in the field of environment remain at an early stage. A State-level environmental law to create the framework for a nationwide, harmonised environmental protection has not been adopted and the State environment agency has not been set up.

Bosnia and Herzegovina has made some progress in the transport sector, both on strengthening its institutional set up and on adjusting the regulatory framework. There has been progress on development of the trans-European transport networks, but substantial reforms and alignment are still required as regards railways. The country continues to actively participate in the South East Europe Transport Observatory. The market for commercial air carriers has been opened following ratification of the European Common Aviation Area (ECAA) Agreement. However, the ECAA Agreement should be applied consistently. Further efforts are needed to complete the transformation of the institutional set-up and ensure the conditions for market opening in all transport modes.

Limited progress has been made in the field of energy. As a party to the Energy Community Treaty, Bosnia and Herzegovina needs to implement the relevant EU energy legislation, but it is significantly lagging behind in a number of energy-related areas. Reforms in the gas sector in particular are delayed. In the electricity sector, transmission has been unbundled, and the independent system operator (ISO) and the transmission company (Transco) are in place. However, developments regarding Transco, in particular a proposal by Republika Srpska to split the company along Entity lines, put the progress achieved in the electricity sector at risk. No comprehensive energy strategy has been developed.

Bosnia and Herzegovina has made some progress in the areas of information society and media . With the adoption of the Federation Public Broadcasting Law, the legal framework for public broadcasting in Bosnia and Herzegovina has been completed, even though some alignment with the relevant state-level legislation is still required. The independence of the Communications Regulatory Authority has been further challenged by new staff salary rules and difficulties in appointing a director general. No progress has been made on the establishment of a State-level information agency. Some limited progress has been made in the area of financial control .

Some progress has been made in the area of statistics . However, the co-operation agreement between the country's statistics institutions at State and Entity level has not been properly implemented. Due to political divergences, a decision confirming that the census will be conducted in 2011 has still not been taken. Significant efforts are necessary to establish an effective, EU-compliant statistical system in Bosnia and Herzegovina.

In the area of justice, freedom and security , progress has continued in the fields of visa administration , border management, asylum and migration . Nonetheless, efforts directed at further improvements in all these areas need to be pursued. The Visa Facilitation Agreement between the EC and Bosnia and Herzegovina entered into force in January 2008. A visa liberalisation dialogue with the European Commission has been launched. Further steps have been taken towards the introduction of biometric passports. However, further improvement of the citizen identification protection system (CIPS) is required, including a secure and effective management of the system. A new integrated border management (IBM) strategy has been adopted. A State Border Management Commission, in charge of IBM coordination and implementation of the strategy, was established in July 2008. Further action is now needed to improve the cooperation between the different authorities at the borders. Further progress has been made in establishing a functioning asylum system. Some progress has been made on migration. A temporary reception centre for irregular migrants was opened in May, but the new migration strategy has still to be adopted. Bosnia and Herzegovina has implemented well the Readmission Agreement with the European Communities, which entered into force in January 2008.

Limited progress has been made on preventing money laundering . Cooperation at international level has improved, and the Council of Europe Convention on laundering, search, seizure and confiscation of the proceeds of crime and financing of terrorism has entered into force. However, domestic legislation remains to be harmonised with the Convention. Furthermore, the Financial Intelligence Unit (FIU) in the State Investigation and Protection Agency has not been significantly reinforced in terms of staff numbers. Increased efforts are needed to strengthen the administrative capacity to prevent money laundering. Some steps have been taken in the fight against drugs, and the Commission on Narcotic Drugs has been established. However, Bosnia and Herzegovina has not adopted a strategy on illicit drugs or a corresponding action plan. Drug trafficking remains a serious problem, which requires sustained efforts.

Progress has been made with regard to the operation of the police. The adoption of relevant police legislation, which will provide for seven new agencies at State level, is positive. These laws now need to be implemented without delay and the directors of the new agencies need to be appointed. Some steps have been taken to facilitate the work of the State Investigation and Protection Agency. However, Bosnia and Herzegovina's police forces remain fragmented, and competences related to communications systems, databases, computer-based investigation, criminal analysis systems and forensics remain divided.

Bosnia and Herzegovina has made limited progress as regards the fight against organised crime, which remains a matter of serious concern and affects the rule of law and the business environment. Implementation of the strategy to combat organised crime has been insufficient. The legal framework is in place, but law implementation needs to improve. Little follow-up has been given to the 2006 anti-terrorism strategy. Bosnia and Herzegovina has adopted a new national action plan for combating trafficking in human beings for 2008-2012. The Council of Europe Convention against Trafficking in Human Beings has entered into force. However, implementation needs to improve. Bosnia and Herzegovina is a country of origin, transit and destination for trafficking in human beings. This remains a matter of concern. The State agency for data protection is not yet operational.

Croatia

Croatia continues to meet the political criteria . Progress has been made across the board but further sustained efforts are still required in a number of areas, including judicial and administrative reform, the fight against corruption, minority rights and refugee return. The Accession Partnership priorities have been partially addressed.

Democracy and the rule of law have been further strengthened. Both government and parliament have continued to function well. However, there is considerable scope for further improvement in the judiciary, in the public administration and in the fight against corruption. Significant improvements in these areas are essential to create a solid basis for full implementation of the acquis .

Some progress has been made on public administration reform. The government adopted a Public Administration Reform Strategy, a proposal for a revised General Administrative Procedures Act and improvements were made to the Civil Service law. The capacity of the Central State Office for Administration was strengthened. Various e-Government initiatives have been taken. However, the legal basis for building a modern and professional civil service is still incomplete. Not all regulations necessary for implementation of the Civil Service Law have been adopted. This law is not implemented consistently across the state administration. An overhaul of legislation on administrative procedures is still pending. The administrative system still lacks efficiency. Weaknesses in human resources management remain and the civil service continues to suffer from high staff turnover and a lack of qualified personnel. There have been considerable delays in decentralisation. Further sustained efforts are needed across the board.

Some progress has been made on reform of the judicial system . New legislation was adopted and a revised Action Plan addressing all major reform issues was approved in June 2008. The system of judicial inspection is starting to show results. A more balanced approach in war crimes proceedings is slowly becoming evident, with a greater willingness to prosecute perpetrators irrespective of ethnicity. However, the case backlog before the courts remains large and the length of judicial procedures excessive. Court rationalisation has not yet begun in earnest. Further improvements in the accountability, professionalism and competence of the judiciary are required. A common standard of criminal accountability for war crimes is not being applied irrespective of ethnicity. Many such crimes remain unprosecuted. The issue of in absentia verdicts from the 1990s has not been adequately addressed. Overall, reforms in the judiciary continue but at a relatively slow pace, and concrete results are needed. Currently, effective dispensation of justice for Croatian citizens is not always assured.

There has been some progress in the fight against corruption . The legal framework has been further improved and a revised anti-corruption strategy and action plan adopted. A new inter-ministerial coordination system for monitoring anti-corruption efforts is in place. The Office for the Fight against Corruption and Organised Crime, USKOK, continues to intensify its activities. However, corruption remains widespread. Implementation of anti-corruption efforts still lacks strong co-ordination and efficient non-partisan monitoring and institutional capacity requires strengthening. The police need to become more effective in the fight against corruption and organised crime. The total number of corruption cases prosecuted has increased but the number of actual convictions remains low. Further efforts are required in tackling high level corruption. There has been little progress in preventing conflicts of interest. A culture of political accountability is lacking.

Some progress has been made in the area of human rights and the protection of minorities. Human rights protection is broadly ensured but certain important challenges remain in terms of implementation. Sustained efforts are needed on minority rights and refugees return.

A new Law on Legal Aid as well as legislation on attorneys' tariffs were adopted, aimed at improving access to justice, which has been hampered over the past year by the limits of the existing legislation and weaknesses in the judicial system. Some steps were taken to address shortcomings in prison conditions . However, a shortage of prison staff and capacity persists and the new legal aid system remains to be implemented

Freedom of expression, including freedom and pluralism of the media, is provided for in Croatian law and is generally respected. However, there have been cases of threats and attacks against journalists, particularly those working on corruption cases or organised crime. Two journalists have been recently murdered. Editors and journalists continue to report undue political pressure.

Policies aimed at improving women’s and children’s rights have continued to raise awareness. However, further improvements in implementation are needed. Implementation of measures regarding the protection of children's rights must also be accelerated.

The Office of the Ombudsman for Persons with Disabilities was set up and a National Implementation Plan on Social Inclusion 2007-2008 was produced. However, continued efforts are needed as regards the socially vulnerable and persons with disabilities . In the area of mental health, the policy of providing care through community-based services instead of in institutions has shown no tangible progress.

A comprehensive law on anti-discrimination was adopted in July 2008, signifying important progress. However, in practice the level of protection against discrimination and its judicial prosecution is not yet in line with EU standards. The functioning of the police and institutions of the health and social system displayed certain weaknesses.

Some progress has been made with regard to minorities . An action plan for implementation of the Constitutional Law on National Minorities (CLNM) was adopted, as was a