WRITTEN QUESTION P-0674/02

by André Brie (GUE/NGL) to the Commission

(1 March 2002)

Subject: Compliance with the EU's financial commitments to Yugoslavia

In an interview with the German news magazine Der Spiegel (issue 9/2002), the Prime Minister of Yugoslavia, Mr Zoran Djindjic, has made the following assertions:

- in 2001, the European Union first deducted two thirds from the EUR 300 million pledged to Yugoslavia in order to redeem debts from the Milosevic era, and shortly afterwards, according to an interview given to Der Spiegel at the time, granted the country EUR 45 million; in 2002-2004 the EU intends to deduct these EUR 45 million again in three instalments;

- of the $ 1,3 billion pledged to Yugoslavia in emergency aid in 2001, barely $ 500 million had so far been disbursed.

Can the Commission confirm these statements?

If they cannot be confirmed, what specific facts can the Commission adduce?

Is the Commission aware of the enormous importance of abiding by financial pledges in order to preserve stability in Yugoslavia and make it possible for the government to continue to pursue its policy of reform?

Answer given by Mr Patten on behalf of the Commission

(11 April 2002)

The Commission disputes the accuracy of the statements made by Mr Djindjic. The Commission also notes that other parts of the same interview, on different issues, have been the subject of criticism by relevant international organisations.

The Commission has continuously supported the structural reform efforts in the Federal Republic of Yugoslavia (FRY) since their inception in 2000. This is done through our extremely rapid and efficient implementation of the large amounts of Community assistance to the FRY over EUR 1,3 billion since October 2000, most of which has already been disbursed.

Further reform-oriented political and economic support and advice are given by the Commission under the Stabilisation and Association process. The Commission is therefore at the forefront of laying the groundwork for sustainable reforms, both in economic and political terms. Mr Djindjic and his colleagues in Belgrade are well aware of this.

In his statements Mr Djindjic has brought up different issues:

- The first is the Community macrofinancial assistance to the FRY. An amount of EUR 300 million was decided in July 2001 by the Council. Following the signature of the Memorandum of Understanding between the FRY authorities and the Commission in September 2001 and the upfront clearance of all outstanding arrears of the FRY towards the European Investment Bank (EIB), the first tranche of EUR 260 million was released in October 2001, followed by a second tranche of EUR 40 million in January 2002. In light of commendable progress in economic stabilisation and reform and important financing needs in the FRY, the Council decided in December 2001, after consultation of the Parliament, to increase the amount of Community macro-financial assistance by a further EUR 45 million in grants (for which no reimbursement by the FRY is foreseen), bringing the total to EUR 345 million.

- It should be noted that this Community macro-financial assistance has been provided in the context of an International Monetary Fund (IMF) stand-by programme to meet the external financing requirements, including the need to repay the outstanding arrears to the Community and the EIB that amounted to some EUR 232 million and stemmed from old EIB loans extended between 1977 and 1989. With the clearance of these arrears, the FRY, as other Western Balkan countries before, has become eligible not only for Community, but also for EIB lending. It should also be noted in this respect, that an overall indicative amount of EUR 450 million in EIB lending to the FRY is envisaged over the next three years.

- The second issue which Mr Djindjic has raised is the general Community assistance for the FRY, under the CARDS programme for the Western Balkans. The budget proposal made by the Commission for 2002 for the Western Balkans states was reduced by the Budgetary Authorities by EUR 63 million. The budget for the Western Balkans must remain within an overall indicative amount set for 2000-2006. Within this, the amounts available are allocated, annually and on an indicative basis, between the five countries in the region. If funds are advanced to any country, as in the case of the additional macro-financial grant of EUR 45 million to the FRY late in 2001, they have to be deducted from that country's allocation in subsequent years.

Normally, it is possible to spread this deduction over several years, but this time the Budgetary Authority decided that this amount had to be repaid in 2002. The Commission nonetheless found a way of softening the impact of this budgetary decision in such a way as to ensure that as many programmes and projects as possible can be launched in all priority areas. The Commission has thus found a way to respond both to the urgent budgetary needs as well as the longer-term needs for investment and institution-building, as promised.

At the Donors' Conference which took place in Brussels in June 2001, the Community pledge (as part of the EUR 1,58 billion-$ 1,36 billion) for the FRY (excluding Kosovo) was for EUR 230 million in assistance programmes in Serbia, Montenegro and projects at federal level. By 31 December 2001 this whole amount had been committed and more than EUR 155 million (65 %) already contracted. The macrofinancial assistance mentioned above is additional to this amount.

Finally it should be noted that the Commission has continuously provided humanitarian assistance to FRY since the early 1990s. Even in 2001, in parallel to macrofinancial and development assistance, over EUR 69 million in Community humanitarian assistance was provided to FRY of which EUR 47,8 million for Serbia, EUR 7,5 million for Montenegro and EUR 13,9 million for Kosovo mainly addressing the needs of the most vulnerable segments of the population (refugees, internally displaced persons and extremely vulnerable individuals).

The FRY remains the main beneficiary of all Community assistance in the Western Balkans reflecting, inter alia, its impressive results in economic stabilisation and reform since end-2000. The Commission is committed to support this reform process and, in the process, stability in the FRY and the wider region.