COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(94) 361 final 
Brussels, 27.07.1994 
COMMUNICATION FROM THE COMMISSION TQ THE COUNCIL 
FOLLOW up TO COMMISSION COMMVNK AIION_ON_1TIIK JKIIROPI A<;RKKMI:N IS AND 
1UVONI): A STRAIIXA IP PRKPARKIIIK (OUNIKIKS OKj: KNIRAL ANDj^AS I KRN Kl ROPK I OR 
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FOLLOW UP TO COMMISSION COMMUNICATION ON ,rI HE_EUROPK 
AGREEMENTS AND BEYOND: A STRATEGY TOPREPARE THE ( OUNTR1ES OL 
CENTRAL AND EASTERN EUROPE FOR ACCESSION" 
Introduction 
The Commission recently sent to the Council a Communication entitled "Europe Agreements 
and beyond: A strategy to prepare the countries of Central and Eastern Europe for accession" 
This was a first response to the request of the Corfu European Council for a strategy to 
prepare for the accession of the associated countries The Council held a preliminary 
discussion on 18 July and noted that the Commission would bring forward specific proposals 
for implementing this strategy. The present Communication sets out specific proposals 
grouped under the following main themes: 
A creating the framework for a deepening relationship 
B creating the appropriate legal and institutional environment for economic development 
and integration 
C. enhancing trade opportunities 
1) macro-economic and structural change and other forms of co-operation 
E Community assistance to integration and reform. 
A. CREATING THE FRAMEWORK FOR A DEEPENING RELATIONSHIP 
(') Proposals on the structured relationship with the institutions of the Union 
The Copenhagen European Council concluded that "the Community proposes that the 
associated countries enter into a structured relationship with the institutions of the Union 
within the framework of a reinforced and extended multilateral dialogue and concertation on 
matters of common interest The arrangements ... include dialogue and concertation on a broad 
range of topics and in several fora". 
The structured relationship was viewed by the European Council as a means progressively to 
involve the associated countries in the European Union's work in areas of common interest, 
through joint meetings of an advisory nature with the Union's institutions The European 
Council concluded that the structured relationship would apply to all three areas ("pillars") 
of the Union's activities Thus joint meetings in areas covered by Community policies, 
especially with a trans-European dimension, the common foreign and security policy, as well 
as justice and home affairs, should all be included in the structured relationship. In order that 
these meetings should be effective, they should be announced well in advance to enable the 
necessary preparations to be made at joint meetings with COREPER, the political committee 
and the relevant working groups level. 
.2 
Joint meetings at the level of the Council on General Affairs and sectoral joint 
meetings should be held on matters of common interest 
Sectoral joint meetings could be useful in fields such as energy, environment, transport 
and telecommunications where discussion will take place on trans-European networks 
Such meetings could provide important input to the Chnstophersen Group which has 
been invited by the European Council to continue its study on the extension of Trans-
European networks to neighbouring countries, in particular central and eastern Europe 
Joint meetings of the Council and associated countries to be held in other areas as 
mentioned in this document, in particular macro-economic developments, the internal 
market, social policy, culture, youth and health, where there is mutual benefit to be 
gained from working together to address common concerns 
The Union should hold preparatory meetings with the associated countries for the 
United Nations General Assembly, an initial meeting at ministerial level could be held 
in New York, to be followed by meetings at permanent representative level, as issues 
arise on which a common view would be mutually beneficial 
The Union should hold joint preparatory meetings with the associated countries for the 
Budapest CSCE review conference and subsequent summit as well as joint meetings 
on issues of common interest within the CSCE framework. 
The Union representatives should concert with those of associated countries on the 
follow-up to the Pans conference on Stability in Europe and on the implementation 
of accompanying measures. Close cooperation will be essential if the Stability Pact is 
to achieve its objectives. 
Regular joint meetings of Political Directors (of which three have already taken place), 
Shadow correspondents and policy planners should also be envisaged 
Procedures should be established to associate the central and eastern European 
countries to the actions relevant of the CFSP, such as the demarches, declarations and 
joint actions decided by the Union. 
On this basis, the Presidency may wish to draw up a schedule of joint meetings These should 
be announced well in advance to enable the necessary preparations to be made at joint 
meetings at COREPER, Political Committee and working group level 
It is suggested that the Presidency and the Commission report to a joint meeting of the Essen 
European Council, with the participation of the associated countries, on progress made in the 
structured relationship and that, on that occasion, a provisional schedule be agreed of joint 
meetings in 1995 
I 
3 
(ii) Co-operation in the fields of Justice and Home Affairs 
The procedures for consulting and informing the countries of Central and Eastern Europe 
within a more structured relationship are under examination by Justice and Interior Ministers 
whose urgently needed decisions can be expected by the end of 1994 
Although with regard to the content of such a dialogue, recent emphasis has been placed on 
subjects related to the fight against organized crime, including drug trafficking, illicit trade 
in nuclear materials, sight should not be lost of other "Third Pillar" related areas, such as 
immigration and asylum policies in particular, where closer co-operation between these 
countries and the Union is also important 
Immigration and asylum 
The countries of central and eastern Europe are considered as one of the gateways towards 
the Union. In the context of the Vienna, Berlin and Budapest Conferences on East-West 
migration, which took place between 1991 and 1993 the countries concerned have committed 
themselves to respect certain standards related to visa policies, border controls, admission 
policies and repatriation of those found to be illegally resident The implementation of these 
commitments can, however, pose problems due to lack of technical and financial resources. 
Co-operation between the Union and these countries could help the establishment of adequate 
procedures and standards in the interest of both partners and as essential preparation for 
eventual membership of the Union Against this background, consideration should be given 
to opening up the Phare programme to this type of co-operation. 
Fight against drugs 
The Union's existing agreements with the countries concerned, drawn up before the entry into 
force of the Treaty on European Union, already provide for a degree of co-operation against 
drug trafficking The Europe Agreements contain highly relevant provisions on the fight 
against drugs In particular, they call for the introduction of legislative provisions on 
precursor chemicals and money laundering. It would be logical to use the institutional 
arrangements offered by these arrangements as an additional framework for dialogue on these 
aspects. 
Title VI of the Treaty on European Union provides a strengthened basis for co-operation 
between Member States of the Union in the fight against drugs. The Commission's recent 
communication on how to turn these new possibilities to good use includes ideas in the field 
of relations with third countries including therefore those of Central and Eastern Europe as 
members of the Pompidou Group and potential members of the Union. The associated 
countries could be invited to participate in the wider debate which the Commission's 
Communication has sought to open up. 
On the particular subject of the relationship between drugs and organised crime, the Corfu 
European Council called on the German Presidency "to arrange a conference with the central 
and east European states on drugs and organised crime" The German Presidency has 
indicated that it will follow up this conclusion through the organisation of a conference which 
will provide an opportunity to define new grounds for further co-operation 
Judicial and police co-operation 
There are a number of areas currently under discussion among Member States of the Union 
which are natural candidates for co-operation between the Union and the associated countries. 
These include action to prevent illegal activities, such as trafficking , car crime and 
environmental crime. This form of co-operation should help the associated countries to set 
up necessary legislative and administrative infrastructure. 
Many Member States are already engaged on a bilateral basis in some form of technical co­
operation with the countries concerned There is a need however for a co-coordinated 
approach in this respect, which the structured dialogue envisaged could help to promote. 
(iii) Intra -regional cooperation 
Co-operation between neighbours is an integral part of Union Membership Close co-operation 
between the countries of Central and Eastern Europe will be economically beneficial and will 
help to accelerate accession Major initiatives have already been taken by the associated 
countries such as the creation of the ('entrai European Free Trade Area (CEFTA), the Baltic 
free trade area agreement soon to be agreed, the numerous bilateral trade agreements in the 
region and the regional co-operation initiatives such as the Council for the Baltic Sea States, 
the Black Sea Co-operation Council and the Central European Initiative 
Although it is for these countries themselves to act, more could be done to foster co-operation 
between the associated countries themselves The Union, as the natural partner for such 
cooperation in the region, can help to promote these objectives in a variety of ways: 
the Community could put forward an initiative with the associated countries 
to promote intra-regional trade Such a trade programme would include the 
following elements: 
support for the introduction of modern trade legislation where necessary, 
extension of EU know-how for export promotion and marketing 
support programmes which aim to spread European Union norms, standards 
and practices throughout the region both to promote trade within the region 
hut also to accelerate the development of a sounder business environment 
across the whole continent 
the development of export insurance and guarantee systems through the 
provision of technical cooperation, the development of insurance facilities, the 
improvement of bank clearing and payments systems, including the possible 
use of the ECU, and support for credit facilities for the development of export 
services, with particular reference to promoting trade within the region. 
by creating a major fund to promote multi-country co-operation in ( entrai and 
Eastern Europe by bringing together certain Phare intra-regional programmes 
as well as the recently introduced cross-border programme1, without, however, 
reducing the efforts alreculy envisaged for regions bordering the Community 
Such a fund could also stimulate co-funding with other sources of finance in 
the Member States as well as in the associated countries themselves. 
B. CREATING THE APPROPRIATE LEGAL AND INSTITUTIONAL 
ENVIRONMENT FOR ECONOMIC DEVELOPMENT AND INTEGRATION 
It is essential for the associated countries to build an environment which is conducive to the 
market economy and to the alignment of their economic and regulatory structures with those 
of the Union, adapted as necessary to take account of future accession. Their authorities are 
progressively putting in place a legislative and regulatory system which is compatible with 
that of the Union. This huge task has the following components: 
(i) Approximation of laws 
On accession, each associated country will have to adopt the "acquis communautaire" which 
exists at that time Alignment with European Union legislation can mean either substantial 
revisions to existing laws, or where no relevant laws exist, European Union legislation can 
be used as a basis. Several of the associated countries have already instituted systems for 
ensuring that new laws conform to the Union's legal framework. 
This huge task of approximation of legislation can only be done by the associated countries 
themselves. However, there is a need for close co-ordination and for technical assistance 
along the following lines: 
In order to pave the way for accession and for participation in the Internal Market 
each country needs to draw up a programme of priorities and a time-table for ensuring 
ajyproximation of legislation, technical harmonisation and development of common 
European standards and certification procedures. 
Co-ordination and monitoring can best be carried out in the specialised sub-committees 
of the Association Councils, including where necessary the development of specific 
arrangements. 
Through Phare, the Union will continue to provide appropriate technical assistance. 
El I Mem ber States also have a role to play here and should consider making resources 
and experience available, where a[)propriate and feasible. The experience in the 
transposition of Union legislation of ETTA members who are about to join the EU 
will be particularly helpful in this area. 
1 Regulation 1628/94 O.J. L171 of 06/07/94 
6 
(ii) Competition policy and the control of state aids 
The implementation in the associated countries of competition and state aid policies which 
are compatible with those of the Union is important in two respects Firstly, an active 
competition policy will help the transition process by creating healthy economic structures and 
avoiding abnormal profits There are also obvious public finance reasons for keeping state aids 
under strict control Secondly, in order for these countries to participate in the wider 
European market it will be necessary to achieve a climate of confidence comparable to that 
which exists between Member States to ensure that all economic operators are working under 
the same rules and thus not enjoying any unfair advantage over competitors operating in the 
same market. 
In the Europe Agreements, the associated countries have undertaken to adopt rules on the 
implementation of competition policy within three years. Work is already well advanced in 
most of the associated countries in terms of the adoption of legislation and the setting up of 
offices to deal with the application of competition policy to regulate company behaviour. 
Implementing rules on anti-trust and merger cases have been agreed with Poland, Bulgaria, 
Hungary and the Slovak Republic, subject to confirmation by the relevant authorities, and will 
shortly be agreed with the Czech Republic. 
The definition of state aids and their control in a transparent way is less advanced and is an 
area requiring immediate attention While none of the associated countries have the budgetary 
means to pay large subsidies, there are a variety of support mechanisms reliefs, classified as 
state aids in the Community 
A number of steps can be taken in the shprt to medium term to put in place in the associated 
countries, state aid control systems which are compatible with those of the Community: 
each associated country should empower a single authority to monitor and control all 
state aids Such an authority would assess each aid scheme according to (he 
obligations of the Europe Agreement and its potential compatibility with article 92 of 
the EEC Treaty before final authorization is given. 
together with the Commission, each associated country should draw up, and thereafter 
update, an inventory of state aids, which should be defined and quantified on the 
same basis as in the Community. The Commission will provide appropriate technical 
assistance for this purpose and the empowered authority will manage the inventory. 
in the past, the Commission has drawn up guidance on the problems of controlling 
state aids in the special situation of new Member States. It will now indicate the 
types of aid and the limits it would consider suitable for economics in the situation 
of the associated countries. 
the Union should also set up a competition policy training programme in the 
associated countries, to provide training for their authorities based on the experience 
of the Community and on their own experience. This could be funded by Phare and 
supported by competition authorities in European Union Member States. 
7 
It will be necessary to ensure that the different national authorities maintain coherence in the 
development of policy, its interpretation and application, linked to Community jurisprudence. 
It may be considered desirable in the future to develop a "competition authority" along the 
lines of the EFT A Surveillance Authority, to which several or all of the associated countries 
could belong or some other appropriate mechanisms However, the Commission does not 
consider that such a step is necessary at this stage 
In time, the state aids control authority in each associated country should aim to reach a 
degree of effective enforcement and transparency which is recognised as equivalent to the 
authority exercised by the Commission inside the Union. Once satisfactory implementation 
of competition policy and state aids control, together with the application of those parts of 
Community law linked to the wider market, has been achieved, the Union could decide to 
progressively reduce the use of commercial defence instruments for industrial products for the 
countries concerned, since it would have a level of guarantee against unfair competition 
comparable to that existing inside the Internal Market 
C. ENHANCING TRADE OPPORTUNITIES 
Since 1989 trade patterns between the Union and the associated countries have changed 
radically Although the European Union now absorbs over 50% of the associated countries' 
exports they still only account for 4 2% of total European Union imports In spite of the 
rapid rise in their exports to the Union, the Union's exports have risen even faster causing 
concern in the associated countries about the large trade deficit (5.6 bn ECU in 1993). (See 
Annex II for details.) 
The Europe Agreements provide such far-reaching liberalisation in industrial goods, even in 
the sensitive sectors, that it does not appear that further trade measures affecting tariffs or 
quotas are necessary over the medium term If the Europe Agreements are all brought into 
line with those of the Visegrad countries, the Community will offer free trade in industrial 
goods on January 1st 1995, with the exception of ECSC steel products (on January 1st 1996) 
and textiles (on January 1st 1998). However, a further impetus to exports could be given by 
developing the access of the associated countries to European Union public procurement as 
provided in the Europe Agreements. 
There are a number of other areas of trade policy where the Union should consider further 
action m order to facilitate trade flows and to reduce trade tensions, m addition to those 
mentioned in the section on agriculture below 
(I) A nil-dumping and safeguards 
The strengthening of competition, state aids control and other relevant paris of the 
acquis communautaire which are related to the internal market will help to eliminate 
the need for anti-dumping and safeguard action. A ntidumping and anti subsidy duties 
do not apply cither in the Union or the EEA where this situation prevails 
The use by the Union of these commercial policy instruments is perceived by the 
Europe Agreement countries as both a political and an economic problem; they 
believe that the existence of these instruments is likely to have a dampening effect on 
8 
trade and inward investment Nonetheless it will be necessaiy for the Union to 
maintain its commercial policy instruments until the associated countries have been 
integrated into the internal market. 
In the short term, given that these countries are potential Member States which have 
undertaken to apply EU rules, the Union should offer information to any Europe 
Agreement country prior to the initiation of any antidumping or safeguard proceeding 
I'urthermore in cases where dumping and injury are found, the Union could give a 
clear preference to price undertakings rather than duties in order to conclude the 
investigation 
The EU should undertake a major exercise to inform the authorities and economic 
operators in the Europe Agreement countries about the way in which the Union's 
commercial defence instruments are applied 
(2) Cumulation of rules of origin 
While technical in nature, rides of origin can have a major impact on the way in 
which trade develops. To draw full benefit from the approach suggested in this paper, 
the region needs increasingly to behave as an integrated unit for trade purjwses 'To 
give maximum encouragement to integration, further progress should be made towards 
full cumulation of origin in trade between the EU and the associated countries This 
would mean that goods made within the region could more easily benefit from 
preferential trade access, in that manufacturing and assembly processes could be 
spread across the associated countries (and indeed from the EU), without there being 
artificial thresholds or barriers to cross in order for products from the associated 
countries to be considered as having the origin of one of those countries. Such an 
approach would not, however, be without repercussions on EU manufacturing interests, 
since competition would increase. Studies of the impact on particularly sensitive 
sectors (textiles and electronics for example) are currently under way, and may lead 
to limited sectoral exceptions to the broad approach described, once it comes to 
formulating specific proposals in this domain Nonetheless, an overall approach 
promises to be of great benefit to EU business and the associated states alike. 
(3) trade in textiles 
A proposal to implement the Copenhagen decision regarding the exemption from 
customs duties for products concerned by outward processing atrangements and 
covered by regulation No 636/82 is before the Council, which is urged to adopt it 
rapidly. 
(4) ( * rearing the same base for all the associated countries 
the Union could decide that the timetable of the Bulgarian and Romanian Europe 
Agreements will be aligned with that of the V isegrad Europe Agreements in the areas 
of duties and tariff quotas in industrial products, textiles, EC\S(J products, processed 
agricultural goods and non-processed agricultural goods. 
9 
D. MACROECONOMIC AND STRUCTURAL CHANGE 
(i) Macroeconomic policies 
To alleviate the constraints on competitive growth, the associated countries will need to 
develop macro-economic and reform policies that are conducive to mobilizing domestic 
saving, curbing fiscal deficits, attracting larger flows of foreign direct investment and 
expanding their exports, including maintaining adequate exchange rates that do not erode 
external price competitiveness in order to dampen domestic inflation.The Union should: 
be involved in a regular dialogue based on the Community's own multilateral 
surveillance procedures which would of course apply to the associated countries when 
they become members Joint Tic of in ministerial meetings would provide peer-group 
pressure towards the conduct of sound policies 
(ii) Promoting Inward Investment 
One of the keys to recovery and development in the associated countries lies in an increase 
in inward investment flows In order to promote inward investment, it is proposed that the EU 
should: 
further the initiatives taken through Phare to set up inward investment agencies in all 
the associated countries 
building on the work of the G24 investment group, seek ways of assisting the 
associated countries to introduce measures to create a supportive investment 
environment This could include a study of the opportunities for and the obstacles to 
investment 
taking advantage of the European Energy Charter and its Treaties, encourage 
investment in the energy sector 
further develop (he JOPP (Joint Venture Phare Programme) programme to promote 
joint-ventures between companies in the Union and in the associated countries 
promote industrial co-operation, by organising Round-Table conferences involving 
European Union and association countty industrialists. 
(iii) Transport 
The integration of the associated countries into a single European transport area will 
contribute both to improved economic performance and to the wider objective of their 
membership of the Union. 
The Commission's aim has been to promote gradual integration through comprehensive 
transport agreements with Central and Eastern Europe covering as many countries as possible. 
The Europe agreements, coupled with wider processes such as the Pan-European Transport 
10 
Conference, have been regarded as the best vehicles for achieving this 
However, progress has so far been slow, for example in the inland waterways sector where 
the achievement of a global approach is dependant on a rapid settlement of the Yugoslav 
crisis, and in the air transport sector where little has yet been done apart from encouraging 
the associated countries to harmonise their legislation with that of the Union Negotiating 
directives for EC aviation relations with the associated countries are now in preparation and 
should shortly be submitted to the Council. The integration of the associated countries with 
the Union will also require an extension of the relationship in the area of railways and 
combined transport 
The Europe agreement approach is essentially a bilateral one. Although the Council is now 
discussing a transit agreement with three of the associated countries (Hungary, Bulgaria and 
Romania), this is considerably reduced from the Commission's original 1992 proposal for a 
multilateral agreement on the road transport sector between all the Central and Eastern 
European and CIS countries Consideration needs to be given to arrangements which can 
ensure that the institutional environment of the EC's relationship with the associated countries 
reflects a balance between bilateral and multilateral elements, the absence of which can often 
lead to discriminatory practices 
The Joint 'Transport Sub-Committees of the Europe Agreements constitute an appropriate 
framework for co-operation. At the same time, the wider framework for consideration of 
future actions and policy development will have to be developed, perhaps in the context of 
the joint ministerial meetings between the Council and the associated countries. 
(iv) Energy 
The energy sector will play a crucial role in the economic restructuring of the associated 
countries. The current framework for energy co-operation is provided by the Europe 
Agreements and the European Energy Charter 
Restructuring of the energy sector in these countries started from different points and has 
proceeded at different paces necessitating a bilateral approach Nevertheless three key areas 
remain important across all the associated countries: 
the development of overall energy policies, taking into account policies within the 
Union, and the need for improved nuclear safety levels in the associated countries 
the acceleration of energy saving measures to improve energy efficiency and reduce 
environmental damage 
the promotion of competition in the sector 
The following proposals are intended to assist in these areas: 
The Union should launch an intensive policy dialogue with associated countries, at 
ministerial and official levels, covering all aspects of policy formulation, through an 
"energy contact group" to be established between the Commission and each 
associated country A joint ministerial meeting is due to take place during the (icrman 
Presidency 
New ways of promoting private sector investments into new state-of-the-art generating 
capacities should be studied 
Where appropriate, the associated countries should, as soon and as closely as 
possible,be associated with the European Union's work on Transeuropean energy 
networks, possibly through the Energy Contact Croup 
A ssociated countries participation in European Union energy programmes (e.g. SA VE 
programme for harmonisation of energy efficient standards) should be accelerated; 
Diplomatic support should be given to facilitate associated countries' accession to the 
International Energy Agency. 
hull support should also be given to those countries joining European standards 
organisations to allow them to adopt accepted standards, especially in the fields of 
energy efficiency and grid interoperability 
(v) Agriculture 
Agriculture plays an important part in the economies of the associated countries, m most of 
them it is far more important than in the European Union Annex III shows the share of 
agriculture in employment and output in each country. 
In all these countries output has fallen since the transition to a market economy has started. 
The causes include a fall in internai demand but production was also affected by increased 
prices for inputs, lack of capital and management problems related to the difficulties of 
privatisation. The livestock sector was particularly hard hit by the fall in production. 
Governments have responded by providing support for producer prices by setting minimum 
prices for certain major products Some even provide export subsidies. 
Although the European market can never be the only outlet, the associated countries look to 
it as a natural destination for their agricultural production, and as one which can ensure 
satisfactory prices However, exports of agricultural products from the associated countries 
have decreased recently while their imports of agricultural products from the European Union 
have increased rapidly over the same period The details are set out in Annex IV 
With the exception of Hungary all of these countries now have a negative agricultural trade 
balance with the EU, whereas in 1 c>90 only Romania had a negative balance This has 
prompted some of them to consider applying measures to stem imports, which will have to 
be examined for their compatibility with the Europe Agreements. 
12 
Agricultural Trade - El) balance with associated countries (in M^O.!) 
Balance 990 
- 960 199 
-702 992 
-305 1993* 
433 
* January to November 
Source: EUROSTA T 
Against this background, it is crucial that the agricultural policies of the associated countries 
evolve in a way which is compatible with the reform of the CAP as well as with GATT 
commitments entered into by the European Union and these countries Therefore the 
Commission will prepare a review of options for future agriculture policies in a wider Europe 
with a view to preparing for the accession of the associated countries to the European Union. 
In the short term, agricultural trade relationships have to be reviewed for the following 
reasons: 
first, in order to adapt (he Europe Agreements to the new situation created for the 
European Union and for the associated countries by (he conclusion of the Uruguay 
Round. This should go beyond a technical adaptation and provide the opportunity to 
reassess the balance of the agricultural part of these Agreements in (he light of recent 
developments 
the second challenge is to adapt the Europe Agreements to the enlarged Union, m 
particular to include the arrangements made by the future Member States in their 
bilateral agreements with the associated countries At the same time, a thorough 
examination has to be made of (he reasons why only a few oj (he tariff quotas which 
the European Union has opened so far are fully utilised. The causes have to be 
analyzed, together with the associated countries and remedies have to be urgently 
sought. 
finally, a similar review of developments regarding Union agricultural exports to the 
associated countries should be undertaken in order to evaluate (he reasons for (he 
marked expansion of these exports, with a view to addressing any serious imbalances 
(vi) Environment and nuclear safety 
Pollution levels in certain parts of the associated countries have reached alarming proportions 
In extending its cooperation with these countries to environmental policy the European 
Union's main objectives should be: 
to contribute to solving major European transborder environment problems 
especially in areas such as the Black Triangle, the Danube basin, the 
Mediterranean and Baltic Sea regions. 
13 
to help the associated countries to integrate the requirement of sustainability 
into their economic and sectoral policies 
to help them to prepare for their future accession to the EU through 
approximation and enforcement of their environment laws and standards. 
The environment, nuclear safety and energy are already priority areas in Phare whose 
objectives should be the creation of conditions permitting sustainable growth and efficient 
energy production The EU, which has special responsibility for G-24 coordination, is the 
leader in technical assistance aimed at introducing uniform norms, standards and practices 
throughout the region Such technical assistance should be extended to infrastructure 
measures concerning legislation, liability and insurance 
In the context of the structured relationship the EU and the associated countries should 
jointly develop a common framework for consultation to guide their future cooperation. This 
approach would avoid unnecessary duplication of effort and would also facilitate cooperation 
between the associated countries themselves 
(vii) Regional development 
The Europe Agreements provide for co-operation in regional development and land-use 
planning between the associated countries and the Union. The co-operation will for the 
moment be based on the exchange of information and officials and the provision of technical 
assistance as well as on joint action by regional and local authorities in the area of economic 
development 
Such cooperation has been under way since 1990 through links between Member State towns 
and regions and those in Central and Eastern Europe financed by the Ecos-Ouverture 
programme This has supported actions to he!p small and medium-sized enterprises and, by 
means of exchanges of experience, has encouraged tourism, development, the rational use of 
energy, better waste management, improved town planning and the strengthening of local 
democracy More recently much mote intensive cooperation has started in the border areas 
between the Union and Eastern Europe through a cross-border programme financed by the 
Structural Funds 1 men eg Programme and Phare. 
Cross-horde*' cooperation also needs to be further developed between the countries of Central 
and Eastern Europe themselves in order to break down barriers to trade and encourage 
economic development. 
On a more strategic level it will be important to involve the associated countries in the 
Community's discussions oi spatial planning The Commission is about to publish Europe 
2000-1- which analyses trends in land use and builds on the first such Community-wide 
exercise, Europe /OCX), published in 199]. The new version pays considerable attention to 
•fv1 impact of opening to the east on the Community's territory and will provide a solid basis 
P?r future ms'ogye with the associates"! countries. Such discussions have already started, most 
notably at the 1993 Dresden Conference on Spatial Planning in the wider Europe. Further 
studies are already being earned out, looking at the land use implications of the changing 
14 
relations with three regions: the Baltic region, the Danube basin and the Black Sea 
These programmes of regional cooperation have a part to play However, the most important 
task for the Community will be to draw on its experience of social and economic cohesion 
within the Community, to assess the infrastructural, human resource development and other 
structural changes which will be fundamental in preparing those associated countries which 
so desire for accession. The needs are formidable and new Imaginative solutions are 
required if the burden is to be manageable 
(viii) Social Policy 
Accession to the Union also entails adoption of the acquis communautaire in the social policy 
area. With a view to accession the Union will build on the Europe Agreements which already 
provide for co-operation in certain areas, such as social security and health. They aim to 
improve the level of protection of the health and safety of workers in the associated countries, 
taking as a reference the level of protection existing m the Community, to upgrade services 
such as vocational training and to adapt social security systems to the new economic and 
social situation. In Copenhagen the European Council decided, in the context of furthering 
economic integration through the approximation of laws, that it is particularly important that 
progress be made in areas such as the protection of workers 
In the light of the framework provided by the Europe Agreements and the decisions taken in 
Copenhagen there are a number of areas where the Union and the associated countries could 
develop their co-operation on social policy These include 
employment and labour market policy In order to help the associated countries to 
integrate the economic and social dimensions of the transformation process, assistance 
should be provided to develop effective labour market policies in areas such as 
employment promotion including training, reform of labour legislation, management 
efficiency etc. These will be particularly important in the context of industrial 
restructuring which will have important labour implications 
social security and social protection: The European Union has adopted a 
recommendation on the convergence of social policy objectives (92/442/EEC) which 
while fully respecting the independence and diversity of systems in operation in each 
country, defines three essential tasks of social protection. These are social and 
economic integration, guarantee of minimum resources and income maintenance The 
experience of Member States in these areas could serve as a useful point of reference 
for the associated countries as they adapt their social security systems 
health and safety at work Reducing work accidents and occupational diseases are 
fields where the Union can provide support and expertise to the associated countries 
which should aim, over time, to introduce minimum requirements and practices 
compatible with those of the Union. The Union could also provide technical assistance 
to help the associated countries draw up a programme and timetable for the 
approximation of legislation in this area 
public health. The associated countries should be involved in the activities described 
15 
in the Commission's proposed action plans in areas such as cancer, drug dependence, 
health promotion and information 
(i\) Cultural co-operation 
Cultural co-operation contributes to mutual awareness and can create important links between 
the Union and the associated countries. It should be fostered as a visible sign of our common 
cultural heritage In the Europe Agreements the parties undertake to promote cultural co­
operation in areas such as the exchange of works of art and artists, literary translations, 
conservation and restoration of monuments and sites, training and mutual awareness raising 
in cultural affairs 
Where appropriate, the Europe Agreements provide for the Community's existing cultural co­
operation programmes to be extended to the associated countries The Commission will be 
proposing the extension of the following programmes to the associated countries: 
Kaleidoscope, a programme which provides support for artistic activities with a 
European dimension 
Ariane, which supports literary works, and in particular their translation. 
Since the entry into force of the Treaty on European Union initiatives in the cultural area will 
be based on article 128 Through its activities in this area the Union can contribute to 
strengthening the links and cultural dialogue between the Member States and the associated 
countries, thus complementing their bilateral relationship. The Member States and the Union 
could consider additional ways of promoting cultural exchanges with the associated countries 
e.g. by the establishment of Europe Houses in these countries to provide easier access to the 
rich diversity of national and regional cultures in the Union. 
(x) Co-operation in science and technology 
Co-operation in science and technology between the Union and the associated countries will 
be mutually beneficial Since 1992 the Union has been engaged in a wide-ranging action 
costing over 150 MECU to promote scientific and technical co-operation, which covers partial 
participation in the Third Framework Programme as well as joint research projects, scientific 
networks, conferences and mobility. 
For the future two central themes are envisaged: 
the opening of the whole of the Fourth Framework Programme to project by project 
participation, allowing for closer integration into the joint Community effort in favour 
of RDT, thus favouring the development of industry (in particular small and medium 
sized companies) in the wider European market including an open and integrated 
information infrastructure in Europe. 
action focused on key areas (defined in concertation with these countries) in order to 
permit the rehabilitation of the production system and to improve quality of life. 
Science and technology can contribute to the resolution of some of the serious 
difficulties which confront these countries. This operation will be carried out under 
action 2 (international co-operation under the Framework Programme). 
(xi) Information 
The Europe Agreements each contain an article on the mutual exchange of information. 
Priority is to be given to programmes aimed at providing the general public with basic 
information. For the Union this means a major effort to provide information to general and 
specific audiences in the associated countries, including, where possible, giving them access 
to Union databases. All indications show that there is a great interest in such information and 
that a sustained effort will be needed in the years to come. 
E. COMMUNITY ASSISTANCE TO INTEGRATION AND REFORM 
(i) The Phare programme 
In addition to support for reform and economic transformation, Phare has provided financial 
support for the implementation of the Europe Agreements and will therefore support many 
of the elements of the strategy set out in this paper. 
The Commission has taken measures recently to improve the operation of the Phare 
programme in areas such as the programming cycle, the quality of programmes and the rate 
of disbursement. Phare needs however to be strengthened further in order for it to become 
an adequate tool for the realisation of this strategy The major changes which are considered 
necessary are as follows: 
The movement towards programmes which support investment and which 
provide direct financing to end-users should continue as it is what the partner 
countries require at this stage of the transformation. The infrastructure facility 
decided at Copenhagen should be developed beyond transport infrastructure 
and the 15% limit should be dropped. Programmes providing finance for the 
development of the private sector including privatisation and restructuring and 
the development of small and medium-sized enterprises should be extended. 
The further development of multi-annual programming over the period 1995-
1999 would enable the Commission through Phare to negotiate and adopt 
multi-annual framework conventions. This would increase decentralisation, 
stimulate investment through the predictability of Community assistance and 
improve the administration of the programme. In addition. Phare needs to 
have a sufficient degree of flexibility to determine the final allocation of funds 
between Phare countries and sectors on the basis of performance reviews. 
The attached financial statement sets out an indicative financing scenario for 
Phare over the 5 year period 1995-1999. It is coherent with the financial 
17 
guidelines agreed in Edinburgh with (he chapter on financial co-operation in 
the Europe Agreements and gives concrete substance to the Declaration of the 
Copenhagen summit that "the Community will continue to devote a 
considerable part of budgetary resources foreseen for external action to the 
central and eastern European countries, in particular through the Phare 
programme" This political priority, for which an endorsement of the 
budgetary authority will be sought, and which will be subject to the annual 
budgetary procedure would provide sufficient planning certainty in order to 
make the multi-annual programming approach worthwhile for the partner 
countries and to improve Phare 's efficiency in terms of its economic impact 
Phare's programmes in support of democracy and civil society need to be 
strengthened m order to consolidate political reform and to strengthen stability 
(ii) 1 ^ending instruments 
The Community has a number of loan based instruments which are used to promote economic 
development in these countries The first is macro-financial assistance, which has mainly 
been used in the initial stages of transition to ensure balance of payments sustainability and 
the introduction of external convertibility. The second consists of project based loans, mainly 
through the EIB, which have largely been used in infrastructure development. The 
Commission therefore suggests that: 
The EBRD could become a genuine instrument of Union policy, following the entry 
into force of the Maastricht Treaty As the Union, Member States and EIB combined 
hold the majority of shares, a decision could be taken that all Union directors would 
uphold a previously agreed common position, according to A rticle J-2.3 of the Union 
Treaty 
the Union could envisage providing macro-financial assistance to the associated 
countries along (he lines of (hat provided to Member States The assistance would 
take the form of medium-tenu loans to be financed by recourse to the international 
capital markets, or where appropriate by the Member Stales, within specified ceilings 
Apart from being mobilised in balance of payments crisis situations, this form of 
quick-disbursing loan assistance could complement project related grants (Phare) and 
loans (TAB, EBRD) and support the implementation of structural reforms and national 
programmes of structural adjustment. The general terms and conditions applying to 
this type of assistance could be systematized in a framework decision by the Council. 
the Union should consider whether a full budget guarantee remains necessary for EIB 
loan operations in associated countries. 
\% 
ANNEX I 
Possibilities lbi meetings between the Council of the Union and Associated Countnes ol 
Central and Eastern Europe and suggested items for discussion 
Meeting Date 
General Affairs September, UNGA, New York 
Research 29 September I 
Environment 4 October 
Youth 27 October 
Ecofin 7 November 
Telecommuncations 17 November 
Transport 21-22 November 
Energy 29 November 
Health 22 December 
ANNEX II \<t 
Trade balance of associated countries with EU (in bn ECU) 
Trade balance of associated countries with EU ( in bn ECU) 
Czech/Slovak 
Hungary, 
Poland 
CEFTA 
Bulgaria 
Romania 
6 assoc. countries 1989 
0.2 
-0.4 
-0.1 
-0.3 
-0.9 
1.9 
0.6 1992 
-0.7 
-0.1 
-1.1 
-1.9 
-0.2 
-0.5 
-2.5 1993 
-1.3 
-1.0 
-2.3 
-4.5 
-0.4 
-0.6 
-5.6 
Source: EUROSTAT 
Share of associated countries exports in EU imports (%) 
19g9 1992 1993 
___ . __ _ 
Share of associated countries' imports in EU exports (%) 
1989 1992 1993 
___ __ _ 
Source EUROSTAT 
ANNEX III 
TABIJC I 1c 
Share of agriculture in employment and output 
Bulgaria (3) 
Czech Republic (1) 
Hungary (I) 
Poland (3) 
Romania (3) 
Slovakia (1) 
EU (2) % (91) GDP 
16 
8.5 
15 
13 
22.7 
83 
2.8 % (92) Employment 
19.5 
9.9 
10 
28.1 
29 
13 
5.8 
Source: European Commission and OECD 
FAO, UNICE, National Authorities 
(I) 
(2) 
0) 1990 
1991 
1992 
TABLE 2 il 
EU AGRICULTURAL EXPORTS TO (MECU) 
Poland 
Hungary 
ex-CSFR 
Romania 
Bulgaria 
Total 1990 
615 
119 
149 
300 
83 
1266 1991 
996 
152 
267 
243 
155 
1813 1992 
924 
225 
418 
324 
125 
2016 1993 
973 
299 
467 
296 
195 
2230 
Source: Eurostat 
TABLE 3 
EU AGRICULTURAL IMPORTS FROM (MECU) 
Poland 
Hungary 
ex-CSFR 
Romania 
Bulgaria 
Total 1990 
1106 
713 
213 
41 
152 
2226 1991 
1080 
920 
247 
76 
192 
2515 1992 
952 
830 
277 
78 
184 
2321 1993* 
723 
624 
230 
72 
157 
1806 
Source: Eurostat 
33 
ANNEX IV 
FINANCIAL STATEMENT 
1. TITLE OF OPERATION 
Community assistance towards integration and reform in Central and Eastern Europe 
(Phare programme) 
2. BUDGET CHAPTER INVOLVED 
B7-60 Cooperation with the countries of Central and Eastern Europe 
LEGAL BASIS 
Council Regulation (EEC) No 3906/89 of 18 December 1989 on economic aid to 
the Republic of Hungary and the Polish People's Republic (OJ No L 375 of 
23.12.1989, p. 11); 
Council Regulation (EEC) No 2698/90 of 17 September 1990 amending 
Regulation (EEC) No 3906/89 in order to extend economic aid to other countries 
of Central and Eastern Europe (OJ No L 257 of 21.9.1990, p. 1); 
Council Regulation (EEC) No 3800/91 of 23 December 1991 amending 
Regulation (EEC) No 3906/89 extending economic assistance to other Central and 
Eastern European countries (OJ No L 357 of 28.12.1991, p. 10); 
Council Regulation (EEC) No 2334/92 of 7 August 1992 amending Regulation 
(EEC) No 3906/89 extending economic assistance to Slovenia (OJ NoL 227 of 
11.8.1992, p. 1); 
Council Regulation (EEC) No 1764/93 of 30 June 1993 amending Regulation 
(EEC) No 3906/89 on economic assistance for certain countries of Central and 
Eastern Europe (OJ No L 162 of 3.7.1993, p. 1); 
Europe Agreements ratified with Poland and Hungary and in the process of being 
ratified with the Czech Republic, Slovakia, Bulgaria and Romania. 
Council Regulation (EEC) No 4253/88 of 19 December 1988 laying down 
provisions for implementing Regulation (EEC) No 2052/88 as regards 
coordination of the activities of different structural funds between themselves and 
with the operations and the operations of the European Investment Bank and the 
other existing financial instruments (OJ No L 374 of 31.12.1988, p. 1), as 
amended by Regulation (EEC) No 2082/93 (OJ No L 193 of 31.7.1993, p. 20), 
and in particular Article 11 thereof; 
Council Regulation (EEC) No 1360/90 of 7 May 1990. 
lh 
4. DESCRIPTION OF OPERATION: 
4.1 General objective 
The Phare programme is part of a much wider Western aid programme to help 
Central and Eastern European countries. The aid is designed to facilitate each 
country's transition from a planned economy to a democracy based on a market 
economy. Furthermore, the Copenhagen European Council of June 1993 set the 
accession of those countries to the European Union as an objective to be achieved. 
The Phare programme is the special financial instrument for the Europe 
Agreements signed or in the process of being signed with those countries. 
The operations financed under this Chapter are therefore aimed, in the political 
context outlined above, at: 
stabilizing and supporting the initial transition phase (aid towards putting in 
place institutions characteristic of the rule of law and a basic regulatory 
framework); 
implementing and supporting the process of economic reform; 
developing a social framework in line with the Phare programme's general 
objective; 
cofinancing operations of a structural nature in third countries adjacent to the 
Community which will be cofinanced by the structural funds. 
These operations are carried out in the beneficiary countries according to each 
one's needs to take account of varying stages of transition and development. 
The programmes financed are as a rule defined in accordance with sectoral 
priorities identified by the beneficiary countries as this is a basic feature of the 
Phare programme (demand-driven approach). 
4.2 Period covered and arrangements for renewal or extension 
Given the current state of the countries of Central and Eastern Europe, the 
Community will contribute financially to the reform process until at least 1999. 
This is in line with the financial perspectives approved by the European Council in 
Edinburgh on 11 and 12 December 1992. 
H 
5. CLASSIFICATION OF EXPENDITURE OR REVENUE 
5.1 Non-compulsory expenditure 
5.2 Differentiated appropriations 
5.3 Type of revenue involved: not applicable 
6. TYPE OF EXPENDITURE OR REVENUE 
100% subsidy 
The financing generally takes the form of a 100% subsidy for the 
programme's operational expenditure. 
Subsidy for joint financing with other sources in the public and/or private 
sector 
Joint financing may be organized in the G24 framework, with the EIB, the 
IBRD and the World Bank, as part of initiatives by NGOs or in conjunction 
with the Central and Eastern European countries themselves. 
The joint financing will be used in particular in the context of trans-frontier 
cooperation in the structural field. 
Interest subsidy 
In some cases, particularly in programmes to develop and support small 
businesses (SMEs), there will be need for interest subsidies. 
Other 
Should the operation prove an economic success, is there provision for all or 
part of the Community contribution to be reimbursed? No 
Will the proposed operation cause any change in the level of revenue? If so, 
what sort of change and what type of revenue is involved? Not applicable 
Reutilization Not applicable 
ï> 
1. FINANCIAL IMPACT 
7.1 Method of calculating total cost of operation 
See Table at Annex 
The multiannual indicative financial programming set out in the Annex reflects the 
guidelines adopted at the Edinburgh European Council and is in line with the 
Copenhagen European Council's declaration in that the Community will continue 
to allocate a major part of the budgetary resources earmarked for external 
operations to the Central and Eastern European countries, in particular through the 
Phare programme. 
Even though the amounts of financial assistance that the Phare programme can 
provide up to the end of the current financial perspectives is well short of what the 
Central and Eastern European countries need, the Union, subject to the annual 
budgetary procedure, is earmarking for 1995-99 ECU 7.072 billion under 
Chapter B7-60 "Cooperation with Central and Eastern European countries". This 
represents an annual average growth rate of around 10% for the corresponding 
period of the financial perspectives (1993-99). 
7.2 Itemized breakdown of cost 
The indicative breakdown by type of programme is as follows: 
- national programmes for each country 80% 
- multi-country programmes encouraging cooperation 
between several countries 15% 
- other programmes including support for implementation 
of Europe Agreements 5 % 
7.3 Indicative schedule of appropriations 
See Table at Annex. 
8. FRAUD PREVENTION MEASURES; RESULTS OF MEASURES TAKEN 
The projects financed under the Phare programme are subject to regular monitoring 
and systematic audit by the Commission or its authorized agents and by the Court of 
Auditors. 
X-
ELEMENTS OF COST-EFFECTIVENESS ANALYSIS 
9.1 Specific and quantifiable objectives; target population 
Specific objectives: links with general objective 
As part of the general objective described at 4.1, the operations undertaken 
under this Chapter are aimed at partial or total financing of programmes in 
the following fields: 
restructuring and privatization of industrial and agricultural state enterprises; 
assistance to the private sector, particularly small businesses, and promotion 
of private investment and tourism; 
modernization of the financial system, fiscal policy and financial services; 
development of a social protection framework comprising active employment 
policies and anti-poverty measures; 
nuclear protection and safety; 
reforms linked to the rehabilitation of basic infrastructure required to run a 
modern economy in, for example, environment, energy, health and human 
resources; 
assistance to border regions in the Central and Eastern European countries to 
overcome special development problems due to their relative isolation, to 
benefit the national economy and the population as a whole and take account 
of environment problems; 
encourage the creation and development of cooperation networks on either 
side of the frontier and establish links between those networks and the wider 
Community networks; 
assist the attainment of wider cooperation objectives on trade and cooperation 
agreements concluded between the Community and certain Central and 
Eastern European countries, particularly with a view to integrating the 
processes established under the Europe Agreements. 
Target population: distinguish as applicable for each objective; 
indicate the end-beneficiaries of the Community's financial 
contribution and the intermediaries involved. 
The end-beneficiaries of the Phare assistance are of course the citizens of 
each country. More practically, the target population of each programme 
depends on the type of programme and the ways and means chosen. Given 
the diversity of the programmes, it is difficult to give a full list of the types 
of end-beneficiaries and intermediaries used. 
1\ 
9.2 Grounds for the operation 
- Need for Community financial aid 
The beneficiary countries' economic situation prevents them from bearing the 
heavy burden of transition to a market economy unaided. The European 
Union, for obvious geopolitical reasons, is most keenly interested in the 
development of those countries as it has made clear on several occasions at 
European Councils. It should be at the forefront of Western aid to them. 
Moreover, the operations financed by the EU also serve to encourage 
operations and investments by other donors (G24, EIB, EBRD, etc.). 
- Choice of ways and means 
The different ways and means adopted by the Phare programme depend on 
the type of programme referred to at point 7.2 and on the situation of each 
sector and each country. The adoption of each programme is preceded by 
identification and feasibility studies necessary for the objectives to be 
attained. The types of intervention are in general those described at point 6. 
- Main factors of uncertainty which could affect the specific results of the 
operation 
The difficulty of the reform process and political events which could take 
place in certain beneficiary countries are taken into account at the planning 
stage of each programme in order to ensure that its objectives are not 
jeopardized. 
9.3 Monitoring and evaluation of the operation 
The Phare programmes are for the most part run by management units set up 
by the competent national authorities and bolstered by technical assistance 
and monitoring by the Commission delegations. Over and above permanent 
contacts and ad-hoc technical missions, general monitoring of a more formal 
kind is carried out on the basis of: 
a new monitoring, reporting and evaluation system set up in early 1994 
(Manual for the Decentralized Implementation System), which is made up of 
an annual strategic plan and a monitoring and assessment report, which are 
technical in nature, and half-yearly work programmes, which are more 
financial in nature. The quantitative and qualitative indicators are established 
when each programme gets off the ground on the basis of the logical 
framework matrix and monitoring is carried out using the documents already 
mentioned; 
is, 
a standardized computer system for financial operations (contracts and 
payments) carried out by each local management unit; 
a plan for systematic programme auditing; 
evaluation exercises by independent experts aimed in particular at the 
technical aspects of the programme and their impact on the sectors 
concerned. 
FINANCIAL, TECHNICAL AND ECONOMIC COOPERATION WITH THE CENTRAL AND EASTERN EUROPEAN 
COUNTRIES (CHAPTER B7-60) 
Multi-annual indicative programming of commitment appropriations (1) (subject to annual budgetary procedure) 
(ECU million, current prices) 
• 1993 1994 1995 1996 1997 1998 1999 TOTAL 
95/99 
Trend in the ceilings of 
heading 4 of the financial 
perspectives, at current prices 
for EUR-12 (2) 
Internal programming 
(indicative) of the multi-annual 
aid to Central and Eastern 
European countries (3) 4.115 
986 4.306 
985 4.605 
1.106 5.007 
1.235 5.463 
1.400 6.034 
1.586 6.719 
1.745 27.828 
7.072 7r 
(1) Where payment appropriations are concerned, the schedule comprises a 20% annual expenditure spread over five years, including 
the year of commitment. 
(2) Hypothesis for 1996-99 with an annual inflation rate of 3%. 
(3) These amounts confirm the priority given to Central and Eastern Europe assuming an average annual growth rate slightly higher than 
that assumed under heading 4 of the Edinburgh financial perspectives. 
OC-' 
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