Comprehensive monitoring report of the European Commission on the state of preparedness for EU membership  of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia {SEC (2003) 1200 - 1209}
Date: 2003-11-05
Institutions: European Commission
Subjects: Baltic States, Cyprus, Czechia, Hungary, Malta, Poland, Slovakia, Slovenia, accession to the European Union

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 5.11.2003
COM (2003) 675 final

Comprehensive monitoring report

of the European Commission
on the state of preparedness for EU membership

 of the Czech Republic, Estonia, Cyprus, Latvia,
Lithuania, Hungary, Malta, Poland, Slovenia and
Slovakia

{SEC (2003) 1200 – 1209}

A.

Introduction ................................................................................................................ 3

B. Comprehensive Monitoring Reports .......................................................................... 4

1.

2.

2.1

2.2

Methodology........................................................................................................... 4

Summary of the findings ........................................................................................ 6

Economic policy improvements........................................................................... 6

Legislative and administrative preparations......................................................... 7

General administrative capacity ......................................................................................... 7

Progress made in adopting and implementing the acquis................................................... 8

Issues requiring enhanced efforts ..................................................................................... 10

Areas of serious concern................................................................................................... 13

C. Dealing with gaps ..................................................................................................... 16

1.

2.

Remedial measures............................................................................................... 16

Support measures.................................................................................................. 18

D. Next steps ................................................................................................................. 18

1.

2.

Between now and accession ................................................................................. 18

From accession ..................................................................................................... 19

E. Conclusions .............................................................................................................. 21

Annexes23

Annex: Conclusions of the Comprehensive monitoring reports on the Czech Republic,

Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and
Slovakia.............................................................................................................. 24

Czech Republic................................................................................................................. 24

Estonia ............................................................................................................................ 26

Cyprus ............................................................................................................................ 27

Latvia

............................................................................................................................ 29

Lithuania........................................................................................................................... 31

Hungary ............................................................................................................................ 34

Malta

............................................................................................................................ 36

Poland ............................................................................................................................ 38

Slovenia ............................................................................................................................ 40

Slovakia ............................................................................................................................ 42

2

A.

INTRODUCTION

In  its  Strategy  Paper  “Towards  the  enlarged  Union”,  which  accompanied  the  2002
Regular  Reports  on  the  candidate  countries  for  accession,  the  Commission  considered
that  ten  candidate  countries  will  have  fulfilled  the  criteria  for  membership  from  the
beginning of 2004 and recommended that the accession negotiations  be  concluded with
them.  Subsequently,  the  accession  negotiations  with  the  Czech  Republic,  Estonia,
Cyprus,  Latvia,  Lithuania,  Hungary,  Malta,  Poland,  Slovenia  and  Slovakia  were
concluded and a Treaty of Accession was signed in Athens on 16 April 2003. These ten
countries are to join the EU on 1 May 2004.

More details on the overall state of the enlargement process can be found in the Strategy
Paper  entitled  “Continuing  enlargement”,  which  continues  the  series  of  yearly  strategy
papers  adopted  by  the  Commission  on  the  enlargement  process  as  a  whole.  This  paper
also  presents  the  summary  findings  of  the  Regular  Reports  on  the  candidate  countries
Bulgaria, Romania and Turkey.

As underlined by the Heads of State and Government at the signing ceremony in Athens,
accession  is  a  “new  contract  between  our  citizens  and  not  merely  a  treaty  between
states”. EU membership affects everyday lives directly, and what goes on in one Member
State  has  consequences  in  the  others.  Keeping  in  mind  the  deep  integration  and
interdependence  which  the  Member  States  have  reached  at  the  moment  of  the  Union’s
fifth  enlargement,  the  Union  needs  to  be  able  to  absorb  this  enlargement  rapidly  and
smoothly. It is essential to safeguard the functioning of the internal market and maintain
public confidence in areas such as food safety or cooperation in the field  of justice  and
home affairs.

In  presenting  this  Report,  the  Commission  fulfils  its  commitment  made  in  the  Strategy
Paper “Towards the enlarged Union” of last year, notably to “produce six months before
the envisaged date of accession a comprehensive monitoring report for the Council and
the European Parliament”. The Commission also responds to a request expressed by the
European  Council  meeting  in  Copenhagen  in  December  2002,  that  monitoring  should
continue up to accession, and that it should give further guidance to the acceding states in
their  efforts  to  assume  the  responsibilities  of  membership  and  give  the  necessary
assurance to current Member States. The European Council also invited the Commission
to make the necessary proposals on the basis of its monitoring findings. In monitoring the
implementation of the acquis by the acceding countries, the Commission is carrying out
its usual role as guardian of the Treaties.

This  report  serves  the  purpose  of  presenting  the  findings  of  the  Commission’s
comprehensive  monitoring  of  the  preparations  made  by  the  acceding  countries  in  the
period  leading  up  to  their  accession.  Based  on  the  individual  country  reports,  the
conclusions  of  which  are  annexed,  it  assesses  their  overall  state  of  preparedness  for
membership, identifies the remaining gaps  and  presents  policy  options  for  dealing  with
these gaps. This report reflects the situation at the end of September 2003.

The  Commission’s  point  of  departure  is  that  the  acceding  countries  must  be  fully
prepared  for  membership  from  the  date  of  accession.  This  report  confirms  that  great
progress has been made by the acceding countries, but that certain important tasks must

3

still be undertaken  between  now  and  accession.  The  importance  of  these  tasks,  and  the
serious  consequences  in  the  event  of  failure,  must  not  be  underestimated.  The
Commission is determined to take the appropriate measures to safeguard the functioning
of the Union in all areas, and in particular of the internal market, wherever necessary.

As  regards  Cyprus,  Protocol  No.  10  of  the  Accession  Treaty  lays  down  a  simplified
procedure to adapt the terms of Cyprus’s accession to take account of  a  comprehensive
settlement.  However,  if  there  would  be  no  such  settlement  by  accession,  the  Protocol
would suspend the application of the acquis in the areas not under effective control of the
Government,  given  that  Cyprus as  a  whole  will  accede  to  the  Union.  Before  accession,
the  terms  under  which  EU  law  will  apply  to  the  line  between  the  north  and  the
government-controlled  areas  would  have  to  be  defined.  As  a  comprehensive  settlement
has  not  yet  been  reached  at  this  stage,  this  report  only  monitors  the  application  of  the
acquis in the government-controlled part of Cyprus.

B.

COMPREHENSIVE MONITORING REPORTS

1. 

Methodology

Accession negotiations with the ten acceding countries were concluded in Copenhagen in
December  2002  based  on  the  assessment  that  those  countries  will  be  ready  for
membership at the beginning of 2004. The Commission has continuously monitored the
progress  made  by  the  acceding  countries  towards  meeting  the  requirements  of
membership over a number of years. Its principal findings were published in the form of
yearly  Regular  Reports  on  each  country.  This  monitoring  has  enabled  the  Union  to
conduct and conclude the accession negotiations in parallel with, and on the basis of, real
progress  on  the  ground  in  the  countries  concerned.  Closure  of  the  negotiations  on
individual  chapters  was  based  on  the  progress  already  achieved  in  aligning  with  the
acquis.  Nevertheless,  given  the  considerable  period  of  time  between  the  conclusion  of
negotiations and the actual date of accession – more than two years for most negotiating
chapters  –  closure  was  also  based  partly  on  credible  commitments  by  the  acceding
countries on the adoption and implementation of the EU legislation. The Commission’s
monitoring  work  has  been  intensified  since  the  conclusion  of  the  negotiations  in
December  2002,  specifically  to  verify  that  the  commitments  made  by  the  acceding
countries in the negotiations are being met in practice as the accession date draws closer.

The reference framework for this monitoring is found in the outcome of the negotiations
as reflected in the Treaty of Accession, which contains rights and obligations of the future
Member States and concrete commitments on their adoption and  implementation  of the
Union’s political and legal order, known as the acquis communautaire.

The basic commitment, and indeed a central Treaty obligation, is to apply the full acquis
from  the  first  day  of  membership,  with  the  exception  of  those  areas  where  transitional
arrangements have been agreed in the negotiations. This includes the acquis which was
covered  by  the  accession  negotiations,  i.e.  the  acquis  adopted  until  1  November  2002,
and  the  new  acquis  adopted  after  that  date  which  will  be  in  force  by  accession.  The
monitoring in general also covers new acquis that will enter into force only after 1 May
2004, but of course due account is taken of the different time line for its implementation.
The  monitoring  also  takes  into  consideration  the  effect  of  the  transitional  measures

4

agreed in the accession negotiations to the extent that they allow the application of certain
specific  requirements  of  the  acquis  to  be  postponed.  It  should  be  noted  that  in  the
agricultural and veterinary area the Accession Treaty provides the possibility to introduce
additional transitional measures to deal  with  unforeseen  problems. Significant delays  in
alignment of  implementation as compared  with  specific  dates  of  commitments  made  in
the  negotiations  have  been  signalled  where  this  is  relevant  from  the  point  of  view  of
whether a country is likely to be ready by accession.

The Commission  services  have  closely  monitored  progress  in  the  acceding  countries  in
the course of this year and have provided the Council with the necessary information. The
findings  of  the  monitoring  reports  were  communicated  to  the  acceding  countries  for
guidance  in  their  further  preparations  for  accession.  They  were  warned  of  the  specific
gaps  in  alignment  and  implementation  which,  unless  they  were  immediately  addressed,
would lead to a negative assessment in the Comprehensive Monitoring Report.

The individual  Comprehensive  Monitoring  Reports  which  accompany  this report  assess
for  each  of  the  29  chapters  of  the  acquis  the  state  of  preparedness  in  the  respective
acceding countries, both in terms of transposition of legislation and from the perspective
of  implementing  structures,  administrative  capacity  and  enforcement.  As  a  rule,  only
legislation actually adopted and measures actually implemented are taken into account for
the assessment.  In  the  conclusion  for  each  chapter,  a  distinction  is  made  between  three
categories of issues.

The first category embraces those issues where a country is ready or where minor issues
remain  to  be  addressed.  These  are  largely  technical  issues  where  preparations  are  on-
going  and  which  will  be  resolved  by  accession  if  the  current  pace  of  preparations  is
maintained.

The  second  category  includes  remaining  issues  requiring  enhanced  efforts  and  an
increased pace of progress to ensure that they are resolved by the time of accession.

The  third  category  addresses  issues  of  serious  concern  where  immediate  and  decisive
action  needs  to  be  taken  for  the  country  to  be  ready  by  the  date  of  accession.  If  the
problem is not tackled, some of these issues may lead to a situation where a new Member
State will not have the full benefit of membership.

In  view  of  their  importance  for  the  implementation  and  enforcement  of  the  acquis  in
general,  the  Comprehensive  Monitoring  Reports  cover  the  issues  of  administrative  and
civil  service  reform,  judicial  reform  and  the  development  of  effective  anti-corruption
measures for all countries in an introductory part to the analysis for the 29 chapters of the
acquis. Such issues used to be dealt with in previous Regular Reports under the political
criteria, which all acceding countries now fulfil. Certain other issues are dealt with under
the relevant chapters of the acquis, e.g. the anti-discrimination legislation in Chapter 13 –
Social policy and employment.

The Comprehensive Monitoring Reports also look at economic policy improvements, in
particular  to  follow  up  on  the  issues  that  were  highlighted  for  each  country  in  the
economic  criteria  conclusions  of  the  2002  Regular  Reports  as  being  in  need  of
improvements. These concern in particular fiscal policy; restructuring  and privatisation;
reform  of  the  labour  market,  health  sector  and  pensions;  and  the  improvement  of  the

5

business  environment.  In  the  future,  this  surveillance  of  progress  with  regard  to
economic, budgetary and structural policies in  the acceding countries  will  be  continued
within  the  existing  economic  policy  co-ordination  processes  involving  all  the  Member
States (see more details under point 0).

A summary of the findings for all the acceding countries is presented in point 2 below.

2. 

Summary of the findings

Last  year’s  Regular  Reports  concluded  that  the  acceding  countries  fulfilled  the
Copenhagen political criteria and that all had functioning market economies. Bearing in
mind  the  progress  achieved  by  these  countries,  the  track  record  in  implementing  their
commitments,  and  taking  into  account  their  preparatory  work  in  progress  and  foreseen,
the  Commission  considered  that  “these  countries  will  have  fulfilled  the  economic  and
acquis criteria and will be ready for membership from the beginning of 2004”.

2.1.

Economic policy improvements

Last year’s Regular Reports led the Commission to conclude that all acceding countries
will fulfil the economic criteria by accession. This assessment remains valid. At the same
time, the Commission had also suggested some areas where further improvements could
still be made in the economic field. This year’s Comprehensive Monitoring Reports focus
on these  suggestions for  improvements,  and  includes  a  summary  of  the  main  economic
events in the last twelve months up to mid-2003.

Economic growth in the acceding countries continued to be sustained, despite a lacklustre
international  environment.    The  consequences  of  the  global  uncertainty  were  felt  and
economic activity slowed down, but in general far less than in the EU, their main trading
partner, where growth came almost to a standstill in the first half of 2003.  Inflation was
on a downward trend in most countries and, in some, prices declined even slightly.  The
continuing  liberalisation  of  administrative  prices  and  the  adjustment  of  indirect  taxes
towards  EU  rules  delayed  in  some  countries  the  disinflationary  process  or  temporarily
reversed  it.  While  the  unemployment  rate  is  still  high  as  a  result  of  the  economic
restructuring  which  took  place,  its  rising  path  appears  to  have  been  curbed  in  the
countries  where  the  unemployment  rate  was  not  already  declining.  There  is  less  labour
shedding and in some countries employment creation is taking hold.

In 2002, most countries had a general government deficit and in some countries the fiscal
slippage was considerable.  General government deficits ranged from about 2 % to 9 % of
GDP. Public finances deteriorated because of the economic slowdown and loose policies,
but  part  of  the  deficit  can  be  attributed  to  better  measurement.  The  current  account
balance  widened  in  most  countries  in  2002,  but  remained  within  sustainable  levels.
Generally,  it  was  not  the  trade  balance  which  worsened  but  more  outflows  were
registered  in  the  income  and  services  accounts.    The  current  account  remains  largely
financed  by  foreign  direct  investment,  although  under  the  influence  of  the  global
investment slump also the acceding countries received less foreign direct investment.

Macroeconomic  stability  has  been  preserved.  The  continuation  of  the  reform  path  will
increase  the  ability  of  the  acceding  countries  to  take  full  advantage  of  the  economic
opportunities  offered  by  their  integration  into  the  internal  market.  Depending  on  the

6

country,  between  two  and  six  areas  for  improvements  were  identified  in  last  year’s
Regular  Report.  The  Comprehensive  Monitoring  Reports  assess  the  implementation  of
the recommendations for improvements and find that in general some progress has been
made but challenges remain. They will be followed up in the EU surveillance procedures
in  place  for  Member  States,  particularly  the  Broad  Economic  Policy  Guidelines  or  the
Excessive Deficit Procedures.

2.2.

Legislative and administrative preparations

As  recognised  already  in  last  year’s  Strategy  Paper,  the  acceding  countries  have
successfully undertaken a wide-ranging legislative and administrative adjustment over the
past  years  in  order  to  implement  the  acquis  as  it  has  developed  in  the  current  Member
States over several decades. The Commission has aided this process through a range of
dedicated  instruments  including  technical  assistance  and  investment  in  infrastructure
needed  for  applying  the  acquis,  the  twinning  of  administrations  of  the  present  Member
States with their counterpart institutions in acceding countries, peer reviews, or the joint
elaboration  by  Commission  and  acceding  country  experts  of  concrete  action  plans.  A
particular  effort  has  been  made  in  the  last  year,  demonstrating  the  acceding  countries’
commitment to enter the EU as fully prepared Member States. They deserve recognition
for their remarkable overall achievements.

The  Commission’s  assessment  made  at  the  time  of  the  conclusion  of  the  accession
negotiations,  that  these  countries  will  be  ready  for  membership  from  the  beginning  of
2004, is confirmed.

General administrative capacity

In terms of general  administrative capacity, the  existence  of  an  effective  and  reliable
public administration  and of an independent and efficient judiciary are  essential  for  the
effective implementation of the acquis.

Sufficient  conditions  are  in  place  for  the  implementation  of  the  acquis  by  the  public
administration and judiciary, but there is room for further improvements in all acceding
countries.  The  assessment  shows  that  for  most  areas  of  the  acquis  the  administrative
structures are in place, and in a few of them has capacity already reached a point where
the structures are optimal for membership. However, most need strengthening in terms of
human  resources,  training  (including  language  training)  and  budget.  Even  within  the
existing budgetary constraints, better results could be achieved if priorities were clearly
identified  and  targeted  on  those  areas  that  are  critical  for  the  acceding  countries  to
function properly within the EU. Now is the time to make these investments. In a number
of  cases,  there  are  also  problems  arising  from  insufficient  co-ordination  among  and
within  various  institutions  involved  in  implementing  the  relevant  acquis.  The  on-going
reforms aimed at strengthening the judiciary in the acceding countries should continue, so
as to ensure the effective enforcement of the  acquis. This applies  also to the regulatory
and supervisory authorities which are required in a number of sectors to ensure the proper
enforcement of the acquis; they need to be sufficiently independent and receive adequate
resources to fulfil their tasks.

With a few notable exceptions, the perception remains that the level of corruption in the
acceding countries is still high, and very high in some cases, and can affect confidence in

7

thereby  affecting  also 

the  public  administration  and  the 
the  proper
judiciary, 
implementation of the acquis. The fight against corruption must therefore remain a policy
priority in  the  coming years.  Most  acceding countries have now taken decisive  steps  to
develop such policies of increased public awareness and more effective  penalties, but  a
sustained effort is required to ensure full implementation. The emergence of high-profile
corruption cases can increase the perception of corruption but should be seized upon to
launch and implement decisive anti-corruption measures. The Commission, too, will pay
particular  attention  in  the  coming  years  to  protect  EU  funds  from  being  diverted  from
their rightful beneficiaries as a result of fraud and corruption.

The  acceding  countries  must  ensure  the  translation  of  the  acquis  into  their  official
languages.  While  the  EU  institutions  take  responsibility  for  the  final  revision  and
publication of  the translations in a  special  edition  of  the  Official  Journal,  it  falls  to  the
acceding states to produce the translations and to ensure a thorough legal and linguistic
revision. If the acquis is not made available in the language of a new Member State, as
required  by  the  Accession  Treaty,  this  country  may  be  subject  to  infringement
proceedings.  A  number  of  acceding  countries  had  initially  underestimated  this  task  and
have recently taken decisive measures to speed up the process. It is now on track for most
new  languages,  but  the  number  of  revised  texts  submitted  by  Lithuania,  Malta  and
Slovenia must still increase greatly in order to ensure timely publication.

Progress made in adopting and implementing the acquis

In most areas of the acquis, preparations for membership have been virtually completed
already at this stage. This is the case in the following areas.

As regards the free movement of goods, services, persons and capital, alignment is well
advanced. The acceding countries have well understood the “new approach” legislation,
with its emphasis on the safety of industrial goods rather than mandatory specifications.
The  necessary  institutional  capacity  is  in  place  and  is  mostly  functioning  satisfactorily.
Provisions have been made to ensure the free movement of workers and the transitional
arrangements in this area apply. Capital movements have mostly been liberalised and the
EU’s  strict  anti-money  laundering  rules  have  been  introduced,  although  fine-tuning  is
needed in some countries. As regards financial services, the acquis in the banking sector
is  particularly  well  established.  Data  protection  rules  are  in  place.  Company  law  and
accounting  rules  are  for  the  most  part  already  aligned  with  the  acquis.  In  the  area  of
competition  policy,  both  the  anti-trust  and  state  aid  acquis  are  well  aligned  and
satisfactorily enforced in all countries, with only a few very specific exceptions (detailed
below).

In  agriculture,  preparations  for  the  application  of  the  common  agricultural  policy  are
being  finalised  as  required  in  most  countries,  with  some  specific  exceptions  in  certain
countries.  On  the  whole,  there  are  no  major  foreseeable  problems  to  apply  the  various
common  market  organisations,  or  the  rules  on  state  aid,  quality  and  organic  farming,
provided  the  problems  to  set  up  the  necessary  institutions  and  procedures  which  still
affect about half of the countries, are overcome (these problems are  detailed below). In
most  countries,  plans  for  rural  development  measures  involving  EU  funding  are  well
developed and should be able to start on time. In the veterinary and phytosanitary field,
certain  specific  aspects  can  be  considered  largely  completed,  notably  animal  disease
control measures and zootechnics.

8

 
In  fisheries,  the  alignment  with  EU  state  aid  rules  and  the  adaptation  of  international
fisheries  agreements  is  expected  to  be  completed  by  accession  without  major  problems
(with  one  exception  detailed  below).  All  land-locked  acceding  countries,  as  well  as
Slovenia, can be considered to be fully on track to apply the acquis by accession.

In transport policy, alignment is advanced in the rail and inland waterways sectors, and in
relation  to  trans-European  transport  networks.  A  majority  of  acceding  countries  is  also
well on track to apply the acquis on road, air and maritime transport by accession.

Most  acceding  countries  should  have  no  particular  difficulty  in  applying  the  acquis  on
taxation  (VAT,  excise  duties  and  direct  taxation)  upon  accession.  Most  are  also  well
prepared  for  implementing  administrative  cooperation  in  the  field  of  taxation  and
customs, and for correctly collecting and transmitting their country’s contributions to the
EU budget. As regards financial control, external audit is well developed, and half of the
acceding  countries  can  be  considered  to  already  have  optimally  functioning  public
internal financial control in place.

Except  for  the  most  recent  acquis,  the  level  of  alignment  with  social  policy  and
employment acquis has progressed satisfactorily, including, in most countries, on health
and safety at work and on labour law. The policies relating to equal treatment of men and
women,  employment,  social  dialogue,  social  inclusion  and  social  protection  are  well
understood. A good level of alignment has on the whole been reached in energy policy,
including  as  regards  electricity  and  gas  sector  liberalisation  and  nuclear  safety.  As  to
nuclear  installations,  the  closure  commitments  and  the  closure  dates  agreed  during  the
accession  negotiations  and  specifically  set  out  in  the  Accession  Treaty,  i.e.  the  closure
commitments related to the reactors at the Ignalina nuclear power plant in Lithuania and
the Bohunice nuclear power plant in Slovakia, must be scrupulously respected.

In the field of  environment policy, the  acceding  countries are  for  the  most  part  well  on
track  to  be  able  to  implement  the  acquis  from  accession,  in  particular  as  regards
horizontal  environmental  legislation,  air  quality,  waste  management,  water  quality,
chemicals  and  genetically  modified  organisms,  noise,  and  nuclear  safety  and  radiation
protection.

On  the  whole,  preparations  in  the  field  of  justice  and  home  affairs  are  progressing
satisfactorily.  Most  countries  are  well  on  track  in  implementing  their  Schengen  Action
Plan and strengthening external borders (internal borders with other Member States will
not  be  opened  as  from  accession,  but  only  at  a  later  stage).  The  acquis  on  police
cooperation  is  expected  to  be  implemented  by  accession,  and  on  the  whole  appropriate
measures in the fight against organised crime, terrorism and drugs are being developed.
No  particular  difficulties  are  currently  envisaged  as  regards  customs  cooperation  and
judicial cooperation in civil and criminal matters. The required legal instruments relating
to human rights are in place.

Preparations are also expected to be completed without particular difficulties in relation
to  the  following  acquis  chapters  as  a  whole  (with  a  few  limited  exceptions  in  certain
countries as detailed below): economic and monetary union (the acceding countries will
adopt the euro as their currency only at a later stage, after accession); statistics; industrial
policy  and  the  promotion  of  small  and  medium-sized  enterprises;  science  and  research
programmes;  education  and  training;  external  relations  and  the  common  foreign  and

9

security  policy.  The  culture  and  audio-visual  acquis  is  already  well  implemented  in  a
majority of countries.

The acceding countries have thus reached a high degree of alignment with the acquis at
the  cut-off  date  of  30  September,  which  was  seven  months  from  accession.  They  are
already sufficiently prepared to apply most parts of the acquis. Nevertheless, a number of
issues remains to be tackled in all countries. This includes a number of issues requiring
enhanced efforts from the acceding countries and, in a few cases, some issues of serious
concern, which are set out below.

Issues requiring enhanced efforts

The Commission has  identified  a  number  of  issues  requiring  enhanced  efforts  from  the
acceding countries. These are areas of the acquis where work is expected to be completed
in time for accession provided the countries make enhanced efforts by accelerating their
pace  of  progress.  Such  issues  have  been  found  in  all  acceding  countries  and  in  most
acquis chapters, as described below.

As regards the free movement of goods, services, persons and capital and related internal
market acquis,  although  much  has  been  done,  particular  efforts  will  still  be  required  in
Estonia, Latvia and Poland, but also in the Czech Republic and Slovakia:

–  All acceding countries except Cyprus have substantial work remaining to identify and
eliminate  all  national  measures  that  conflict  with  the  fundamental  principles  of  free
movement, and to introduce  the  principle  of  mutual  recognition.  This  affects  mainly
trade in goods, cross-border services and the recognition of professional qualifications.
In  some  countries,  including  the  Czech  Republic  and  Poland,  already  identified
barriers  are  sometimes  being  removed  only  reluctantly.  For  some  products  and
services,  the  acquis  prescribes  harmonised  rules  and  approaches.  All  countries  still
have  gaps  in  the  transposition  of  such  legislation  relating  to  industrial  products,
foodstuffs and certain services. In the field of capital movements, Latvia must increase
efforts  to  complete  liberalisation  in  time;  Lithuania  to  put  in  place  appropriate
payment  systems.  Although  much  of  this  legislation  is  planned  to  be  adopted  in  the
coming  months,  further  delays  beyond  the  date  of  accession  must  not  be  allowed  to
occur.

–  In terms of institutional capacity, market surveillance - an essential component of the
functioning of the internal market - must continue to be strengthened in all countries.
Failures in surveillance can allow unsafe products, both industrial and food products,
to  circulate  freely  in  the  internal  market.  If  unchecked,  this  can  undermine  public
confidence and lead to calls for restrictions on products from new Member States who
fail to control their markets.

–  The Czech Republic, Estonia, Latvia, Hungary, Malta and Poland have not completed
alignment  with  EU  public  procurement  rules.  This  must  now  be  undertaken,  taking
into account that only expenditure relating to projects implemented in full conformity
with  the  EU  public  procurement  rules  will  be  eligible  for  co-financing  under
thestructural funds as from 1 January 2004.

10

–  As  regards  financial  services,  Poland  needs  to  accelerate  the  final  transposition
relating  to  the  financial  sector.  The  Czech  Republic,  Latvia,  Lithuania  and  Slovakia
need to do this in the insurance sector, and Estonia, Cyprus, Latvia  and Lithuania in
the  area  of  investment  services  and  securities  markets.  This  is  also  the  case  for
information-society  services.  In  some  countries,  greater  efforts  are  also  needed  to
strengthen the independence and efficiency of the financial supervisory authorities, a
key requirement for safeguarding confidence in the EU’s integrated financial market.

In competition policy, Latvia and Slovenia must improve enforcement capacity in relation
to anti-trust rules; the Czech Republic, Malta, Poland and Slovakia must enhance efforts
to  ensure  proper  enforcement  of  all  state  aid  measures.  Concerning  industrial  policy,
substantial  tasks  remain  to  be  undertaken  in  the  restructuring  of  the  steel  industries  in
Poland, as well as in the privatisation of state-owned enterprises.

Although  the  acceding  countries  have  mostly  adopted  the  necessary  legislation  for  the
protection  of  intellectual  and  industrial  property  rights,  and  have  strengthened  the
relevant  enforcement  bodies,  a  relatively  high  degree  of  violations  of  intellectual  and
industrial property rights persists compared to the situation in the current EU. The fight
against piracy and counterfeiting needs to be stepped up in the coming years.

Although legislation is largely in place, all acceding countries except Slovenia must give
greater  priority  to  the  completion  of  preparations  in  agriculture  and  fisheries,  which
directly affects the livelihood of a large section of their population:

–  A  number  of  countries  must  accelerate  preparations  to  apply  the  common  market
organisations  for  certain  products.  This  is  the  case  for  sugar  in  the  Czech  Republic,
Latvia,  Hungary,  Slovenia  and  Slovakia;  milk  in  the  Baltic  countries,  Poland  and
Slovenia;  beefmeat  in  the  Czech  Republic,  Latvia,  Lithuania,  Malta,  Poland  and
Slovakia; wine in the Czech Republic, Hungary, Malta and Slovakia; eggs and poultry
in Poland; and fruit and vegetables and olive oil in Malta.

–  Enhanced efforts are needed to set up the Paying Agencies responsible for transmitting
EU funds to the final beneficiaries and for implementing the Integrated Administration
and Control System (IACS) and agricultural trade mechanisms in all countries except
Slovenia  and,  as  regards  the  Integrated  Administration  and  Control  System  (IACS),
Cyprus.  Cyprus  and  Malta  must  speed  up  preparations  for  applying  the  Farm
Accountancy Data Network. Organic farming rules remain to be aligned in Malta.

–  A  few  countries  are  lagging  behind  in  preparing  to  apply  EU-funded  rural

development measures, especially Hungary but also Malta and Poland.

–  Substantial  shortcomings  still  exist  in  the  veterinary  and  phytosanitary  field,  most
markedly in the Czech Republic, Hungary and Poland, but also in Latvia and Slovakia.
All  acceding  countries  need  to  take  measures  to  put  in  place  the  EU’s  veterinary
control system (including import controls and animal identification), measures to deal
with  transmissible  spongiform  encephalopathies  (such  as  BSE)  and  animal  by-
products  (particularly  Latvia,  Malta  and  Poland),  structural  and  hygiene  standards  in
meat,  milk  and  fish  processing  plants  (particularly  in  the  Czech  Republic,  Hungary,
Poland  and  Slovakia),  common  measures  in  relation  to  residue  monitoring,  and
phytosanitary control (particularly Poland). Other areas requiring enhanced efforts are:

11

animal  disease  control measures (Latvia); trade in live animals and animal  products;
animal  welfare  (Czech  Republic,  Latvia,  Lithuania  and  Poland)  and  animal  nutrition
(Czech Republic, Estonia, Cyprus, Malta and Poland).

–  In fisheries, increased efforts are required by the seven acceding fishing nations except
Malta and Slovenia to put in place the required resource and fleet management and to
ensure proper inspection and control. The Baltic countries and Poland must accelerate
their preparations for taking part in the EU fisheries market policy; Estonia, Lithuania,
Malta and Poland need to enhance preparations to benefit from EU structural actions.
Poland  is  also  lagging  behind  as  regards  state  aid  rules  and  the  alignment  of
international fisheries agreements.

Although  implementation  of  the  acquis  is  largely  achieved  in  most  countries,  some
specific  issues  remain  in  the  transport  and  energy  sectors.  In  energy,  Cyprus  has  not
implemented  the  acquis  on  oil  stocks  and,  together  with  Latvia,  is  currently  not
regulating the electricity and gas sectors in line with EU requirements. Alignment in the
road and air sectors is delayed in Cyprus, which together with Malta must make serious
efforts  on  maritime  safety.  Other  countries  must  also  enhance  efforts  considerably  in
these  three  sectors:  Slovakia  and  in  particular  the  Czech  Republic  in  the  road  sector,
Estonia and Latvia in air transport, Estonia and Poland in maritime transport. Hungary is
lagging  in  implementing  the  railways  acquis.  All  acceding  countries  must  still  finalise
measures to apply  the recent telecommunications acquis. Except in  the Czech Republic
and  Slovenia,  reinforced  efforts  are  also  required  to  implement  the  acquis  on  postal
services. The Czech Republic, Cyprus, Hungary and Poland must finalise alignment with
the audio-visual acquis; in the case of Poland, particular efforts are still required.

Although the major part of the work has been done in the area of taxation, Latvia, Poland
and Slovakia must accelerate the remaining alignment with the acquis on VAT; Poland
and Slovakia also on excise duties. Enhanced efforts are required on the part of Estonia,
Malta and Slovenia to meet their obligations as far as direct taxation is concerned. Latvia
and Lithuania have not prepared in good time for administrative co-operation and mutual
assistance  in  the  field  of  taxation  and  customs,  although  for  Lithuania  a  temporary
solution has been found. As regards financial control, further efforts are required in the
Czech  Republic,  Cyprus,  Hungary  and  Poland  to  optimise  public  internal  financial
control.  In  Latvia  external  audit  should  be  strengthened.  Further  action  is  needed  in
Estonia,  Latvia,  Hungary,  Poland  and  Slovakia  to  take  by  accession  all  measures  to
ensure the protection of the EU’s financial interests. On economic and monetary union,
Poland must now take the final steps required to ensure the full independence its central
bank.

As regards social policy and employment, while most of the preparations have been made
in good time, the Czech  Republic, Malta  and  Poland must accelerate the completion  of
alignment  with  the  acquis  on  health  and  safety  at  work,  and  Estonia  and  Poland  with
labour  law.  The  acceding  countries  still  need  to  adopt  the  recent  acquis  on  tobacco
products  (except  the  Czech  Republic,  Hungary,  Malta  and  Slovenia)  and  combating  –
discrimination;  Malta  needs  to  make  efforts  as  regards  communicable  diseases.
Preparations  for  actions  under  the  European  Social  Fund  should  be  reinforced  in  all
countries.  In  the  field  of  environment  policy,  Estonia  in  particular  must  now  increase
efforts  to  complete  legal  alignment  with  EU  rules  on  air  quality,  waste  management,
nature  protection,  industrial  pollution  and  radiation  protection.  Other  countries  must

12

enhance  efforts  in  specific  fields:  waste  management  in  Malta;  nature  protection  in  the
Czech  Republic,  Cyprus,  Hungary,  Malta  and  Poland;  industrial  pollution  and  risk
management  in  Hungary,  Poland  and  Slovakia;  and  genetically  modified  organisms  in
Cyprus. As regards external relations, all acceding countries must finalise the steps taken
to  renegotiate  or  terminate  their  bilateral  agreements  to  make  sure  that  they  are
compatible with the acquis upon accession.

Although  the  programming  process  is  proceeding  satisfactorily,  enhanced  efforts  are
required  in  most  acceding  countries  to  implement  the  Structural  and  Cohesion  Funds.
These  efforts  are  particularly  pressing  considering  that  actions  will  be  eligible  for  EU
funding as from 1 January 2004, less than two months from now. A particular problem in
all  acceding  countries  is  the  lack  of  a  sufficient  number  of  quality  projects  ready  to  be
launched.  The  start  of  the  programmes  will  be  delayed  if  the  legislative  framework,
including EU rules on public procurement, state aid and environmental protection, is not
in  place;  the  Czech  Republic,  Estonia,  Latvia,  Hungary,  Malta,  Poland,  Slovenia  and
Slovakia  in  particular  face  this  risk.  Enhanced  efforts  are  also  required  in  all  countries
except  Malta  to  strengthen  the  procedures  and  institutions  set  up  to  implement  the
structural programmes. The same applies to improvements to financial management and
control  in  the  Czech  Republic,  Estonia,  Latvia,  Lithuania,  Hungary,  Malta,  Poland,
Slovenia and Slovakia.

to  accelerate 

Despite significant and broad-based progress in the field of justice and home affairs in all
acceding  countries,  Malta,  Poland  and  Slovakia  still  need 
the
implementation  of  their  Schengen  Action  Plan;  Hungary,  Malta,  Poland  and  Slovakia
need to  continue  to  strengthen  external  borders.  Estonia,  Latvia,  Slovenia  and  Slovakia
need  to  improve  personal  data  protection.  Cyprus,  Poland  and  Slovakia  must  now
complete alignment with EU visa policy, and Latvia and Lithuania with migration policy.
The  acceding  countries,  except  Estonia,  Poland  and  Slovenia,  are  not  yet  properly
implementing  the  acquis  on  asylum,  and  must  now  tackle  this  issue.  Lithuania  must
enhance  preparations  for  police  cooperation  and  related  actions  to  combat  organised
crime. The fight against fraud, corruption and money laundering needs to be given more
attention in the Czech Republic, Estonia, Lithuania and Poland; also Latvia, Slovenia and
Slovakia should step up the fight against fraud and corruption; Latvia and Poland need to
strengthen the fight against drugs.

On  all  these  issues,  corrective  action  is  at  this  moment  feasible  and  expected,  but  the
acceding  countries  are  warned  that  greater  and  enhanced  efforts  are  required  to  solve
them in time for accession. If such efforts are not undertaken as expected, there is a real
risk of delays in transposing and applying the acquis by accession. Clear examples are the
reluctance of  some  acceding  countries  to  remove  already  identified  barriers  to  trade,  or
the inadequate legal alignment and weak supervision in the financial sector. Such cases
would be subject to remedial  action by  the Commission and by the Union as described
below.

Areas of serious concern

The  Commission  has  identified  a  number  of  gaps  in  the  preparation  for  membership
which are of serious concern and where, unless immediate and decisive action is taken,
the country in question will not be in a position to implement the acquis by the date of
accession. This concerns 39 issues involving the ten countries, but often similar gaps are

13

 
found in several countries. They can  be  grouped  broadly  into  two  types  of  cases:  those
affecting the internal market and those affecting the delivery of EU funds to beneficiaries
in the new Member States.

–  Internal market

The  Czech  Republic,  Estonia,  Latvia,  Lithuania,  Poland  and  Slovenia  are
significantly  delayed  in  introducing  the  minimum  training  requirements,  and  mutual
recognition  rules,  for  a  number  of  professions  including  healthcare  professions.
Professionals  from  those  countries  who  would,  as  a  result,  not  meet  the  minimum
requirements, may, as a consequence, not be allowed to benefit from the right to exercise
their profession in other Member States until the gap is filled.

The serious delays in the  restructuring of  Malta’s ship-repair and shipbuilding  industry
are not in accordance with the conditions under which Malta can grant restructuring aid
until  2008.  Slovakia  is  not  complying  with  the  production  limitation  conditions  which
must be fulfilled for granting fiscal aid to one company in the steel sector until the end of
2009  at  the  latest.  These  two  cases  of  non-compliance  give  unfair  advantages  to  the
companies concerned, requiring remedial action by Malta and Slovakia. In the absence of
a satisfactory solution the Commission may be required to take the necessary measures,
and  these  two  countries  and  the  companies  concerned  risk  losing  the  benefit  of  the
transitional arrangements they obtained in the accession negotiations.

Lithuania and Poland are not taking the necessary measures for inspection and control
of  their  fisheries  fleet  and  for  ensuring  the  application  of  EU  resource  and  fleet
management  rules.  The  lack  of  proper  controls  in  one  Member  State  undermines  the
common  fisheries  policy  as  a  whole,  as  its  fishing  vessels  could  land  fish  species  and
quantities  of  fish  which  others  are  not  allowed  to  do.  If  this  is  allowed  to  persist  upon
accession, measures may be needed to protect the single market.

Estonia has persistently delayed the adoption of EU rules in the areas of labour law and
equal  treatment  of  women  and  men.  Urgent  remedial  action  is  required,  as  are  parallel
efforts to set up the necessary institutional (control) structures and to acquaint economic
operators with the new rules so as to ensure their implementation as from accession. The
failure to apply these rules would deny Estonian citizens the benefit of these rules, which
are aimed at improving working conditions and opportunities for men and women alike,
and it would cause unequal competitive conditions between companies in Estonia and in
other Member States.

In  Latvia,  there  are  serious  delays  in  computerisation  and  interconnectivity  with  EC
systems which endanger the correct operation of the customs union, in particular the tariff
and  computerised  transit  systems.  The  same  applies  in  the  area  of  taxation,  where
interconnectivity  to  the  VAT  Information  Exchange  System  might  not  be  fully
operational  by  accession  under  current  circumstances.  There  is  a  need  for  an  urgent
transfer  of  knowledge  and  experience,  and  enhanced  human  resources,  and  no  slippage
must occur in the procurement of equipment. Unless immediate corrective action is taken
to avoid a serious risk of disruption to the smooth operation of EU customs and taxation
systems  at  the  time  of  accession,  appropriate  remedial  management  measures  will  be
required.

14

In the field of veterinary and phytosanitary control, the adoption and implementation of
the necessary veterinary legislation in Poland is an urgent necessity. Insufficient progress
has been made to date in organising the control of the movement of live animals within
the  framework  of  the  overall  veterinary  control  system  in  Poland.  This  would
compromise  the  integration  of  the  Polish  animal  sector  into  the  internal  market.  The
implementation of the acquis in respect of TSEs and animal waste is a cause of serious
concern in Poland and Latvia. Also in Malta, the measures and the infrastructure to deal
with  animal  waste  are  not  yet  in  place  and  may  not  be  ready  by  accession.  Specific
measures may be required to prevent these failures from affecting food safety and animal
health on the EU market. In  the Czech Republic, Hungary, Poland and Slovakia, the
current pace of upgrading will not permit all their agri-food establishments to meet their
obligations  as  agreed  in  the  accession  negotiations.  Specific  measures  will  be  taken  to
deal  with  non-compliant  producers,  for  instance  by  imposing  restrictions  on  the
production and marketing of their products. Poland has not taken the necessary measures
against potato ring rot and wart disease. If this situation is not resolved, measures will be
needed to protect the rest of the EU from this serious plant disease.

The  Czech  Republic  is  not  adequately  implementing  and  enforcing  the  social  and
technical acquis relating to road transport, including that on access to the profession and
the market, working, driving and rest periods, speed limitation devices, driving licences,
safety advisers for the transport of dangerous goods, vehicle registration documents and
in  particular  roadside 
insufficient  administrative  capacity,
organisation  and  training,  there  are  too  few  checks  on  driving  and  rest  periods  and  in
inadequate  follow-up  to  these  checks.  As  a  consequence,  unless  corrective  action  is
taken, Czech hauliers may not be operating safely and Czech operators will enjoy more
favourable  conditions  than  their  competitors  elsewhere  in  the  EU,  in  which  case
appropriate  measures  would  be  required  to  guarantee  safety  and  to  re-establish  a  level
playing field.

inspections.  Due 

to 

In  the  area  of  maritime  safety,  Cyprus  and  Malta  both  remain  on  the  blacklist  of  the
Paris Memorandum of understanding. Both have failed to allocate sufficient resources to
the tasks arising from their obligation to carry out Flag State control on the safety of sea-
going ships. In the case of Cyprus, there are also serious concerns as regards Port State
the
control,  including  resources  allocated  to  it.  For  both  Cyprus  and  Malta, 
implementation  of  these  tasks  requires  urgent  attention.  If  this  is  not  remedied  by
accession,  measures  may  be  required  to  protect  other  Member  States  from  the  damage
which lax enforcement in these two countries may cause.

–  Delivery of EU funds

All  acceding  countries  must  reinforce  efforts  to  set  up  the  necessary  procedures  and
institutions to apply the market interventions and direct payment to farmers in the context
of  the  common  agricultural  policy,  but  there  are  serious  concerns  in  particular  for
Cyprus, Hungary, Malta, Poland and Slovakia that functioning systems will not be in
place  by  accession.  This  applies  to  the  setting-up  of  a  Paying  Agency  and  (except  in
Cyprus) to the implementation of the Integrated Administration and Control Syste, which
are central elements for payments of common agricultural policy funds to farmers. Unless
this  situation  is  remedied,  new  Member  States  run  the  risk  that  they  will  not  be  fully
reimbursed by the EU for the payments made to their farmers.

15

Cyprus  and  Malta  have  not  made  sufficient  progress  yet  in  establishing  the  necessary
mechanisms for external trade in agricultural products.  If  this is  not  resolved, problems
will arise in several areas, including the management of export refunds for exports from
these  countries  and  the  management  of  import  licences.  Such  problems  could  have
implications as regards reimbursement from EU funds, as described above.

There  are  serious  concerns  about  Hungary’s  preparations  for  implementing  rural
development programmes, in particular due to the number of activities that remain to be
completed and to the unclear definition of responsibilities and weak co-ordination. As a
result,  Hungary’s  programme  may  not  be  able  to  start  as  planned,  delaying  access  of
beneficiary farmers to the support measures.

As for the fisheries market policy, there are serious concerns about Poland’s wish to put
in  place  producers’  organisations,  as  it  needs  to  have  the  necessary  control  measures
available and the administrative capacity in place. Poland’s fishermen will not be able to
benefit from EU market intervention until this situation is remedied.

C.

DEALING WITH GAPS

It is clear that a failure to implement the acquis in one or other area after accession would
affect the citizens and economic actors in that country, and deny them the full benefit of
membership.  As  guardian  of  the  Treaties,  the  Commission  would  act  to  enforce  the
obligations  of  that  Member  State  under  the  acquis,  and  help  to  restore  the  benefits  of
membership.

Because  of  the  deep  integration  in  the  Union,  such  a  failure  would  in  many  cases  also
affect  negatively  citizens  and  actors  in  other  Member  States.  Therefore,  in  addition  to
enforcing the acquis, the Commission may also in certain cases need to take measures to
remedy  or  neutralise  such  negative  cross-border  effects.  The  basis  for  such  action  is
found in a number of specific provisions of the Treaty of Accession.

Action by the Commission and by the Union can take the form of remedial measures, but
can  also  involve  support  measures  to  help  a  new  Member  State  to  overcome  initial
difficulties.

1. Remedial measures

When  the  acquis  is  not  properly  applied  in  a  Member  State,  both  private  and  public
parties  can  take  legal  action  to  enforce  EC  law.  Citizens  and  companies  in  the  new
Member  States  will  be  able  to  refer  to  national  courts  and,  in  the  final  stage,  to  the
European Court of Justice, and their Government risks being condemned. This applies to
the acquis which is directly applicable from the date of accession, but also to some extent
to directives when they are not transposed or are transposed incorrectly.

The  Commission  itself  also  takes  steps  to  deal  with  infringements  of  Community
obligations. If a situation cannot be settled through the infringement procedure, involving
a formal written exchange with the Member State in question, the Commission may refer
the matter to the Court of Justice.

16

The  Commission  also  intervenes  directly  in  its  capacity  as  executive  authority,  e.g.  in
cases of violation of competition law, or in its capacity to execute the budget, e.g. in the
implementation  of  the  structural  funds.  In  particular,  if  a  new  Member  State  does  not
respect the  procedural or substantive rules  concerning  payments  in  agriculture  (be  they
direct payments to farmers or other interventions) or payments for projects and measures
under the Cohesion Fund or Structural Funds, the Commission will not be able to release
funds  from  the  Community  budget.  Even  if  such  difficulties  are  only  of  a  temporary
nature,  they  could  have  very  serious  consequences  on  the  livelihood  of  citizens  and
economic  operators  in  the  new  Member  States,  as  well  as  on  the  overall  balance  of
financial  transfers  between  a  new  Member  State  and  the  Community  budget.  These
consequences would result not from a specific decision by the Commission, but from the
application  of  the  existing  rules  and  regulations  applying  to  all  present  and  future
Member States.

In  some  cases,  specific  measures  may  be  necessary  to  prevent  or  deal  with  the
(immediate) negative consequences of non-compliance with the acquis. The possibility of
taking  such  safeguard  or  management  measures  is  already  envisaged  within  the  acquis
itself in certain fields, e.g. in  the field of food  safety:  as  has  been  done  in  a  number  of
cases in the  past, the  Commission can  take  measures to stop the  sale  or  export  of  food
products  from  a  certain  region  or  Member  State.  Another  example  is  the  area  of  road
transport. The conditions and procedures for adopting such measures are laid down in the
specific legal instruments covering the sector in question. Typically, they can be invoked
by the Commission, sometimes after consultation of the Member States, and require the
existence, or threat of, an immediate problem causing serious damage.

As  a  last  resort,  the  Accession  Treaty  contains  three  safeguard  clauses.  The  first  one
(contained  in  Article  37)  allows  both  present  and  new  Member  States  to  request  the
Commission  to  take  measures  to  deal  with  serious  and  persisting  difficulties  in  one  or
other  economic  sector.  Although  this  safeguard  is  intended  to  deal  with  unforeseen
economic  shocks  resulting  from  enlargement,  it  does  not  exclude  cases  where  such
shocks  would  be  enhanced  by  a  failure  by  the  public  administration  to  implement  the
acquis properly.

A second safeguard clause (Article 38) is specifically designed to deal with cases where a
new  Member  State  fails  to  fulfil  its  commitments  undertaken  in  the  accession
negotiations,  including  the  proper  application  of  the  acquis.  If  such  a  failure  causes  or
risks causing a serious breach of the functioning of the internal market, the Commission
may  take  appropriate  measures  to  deal  with  the  situation.  Such  measures  may  seek  to
ensure the proper application of the acquis despite the failure of the administration of the
new Member State to do so. They may result in temporarily excluding this new Member
State or its citizens and economic operators from the benefits of certain internal market
legislation and from the benefits of membership in specific areas, in order to protect the
integrity of the internal market and prevent damage  to  others. Such  safeguard  measures
will stay in place until the new Member State has met its commitments. This safeguard
can be applied to cases involving the internal market in the broad sense, i.e. not only the
acquis  covered  in  negotiating  chapters  1  to  6  (goods,  persons,  services  and  capital
movements;  company  and  competition  law),  but  also  the  sectoral  policies  covered  by
other  negotiating  chapters  (e.g.  agriculture,  transport,  telecommunications,  energy,  etc.)
insofar as they have cross-border effects.

17

The  third  safeguard  clause  (Article  39)  is  similar  to  the  second  one  but  covers  issues
relating to mutual recognition in criminal and civil law matters.

The three types of safeguard measures based on the Accession Treaty can be taken until
1 May 2007. Where needed, measures relating to the safeguarding of the internal market
(based on Article 38) and to mutual recognition in criminal and civil law matters (Article
39) can be taken already before accession and can enter into force as from accession. The
Commission  will  not  hesitate  to  make  use  of  such  safeguards  when  circumstances
require.

Although the safeguard or management measures which are taken must be proportional to
the  extent  of  the  problem  and  must  be  designed  to  cause  the  least  disruption,  in  most
cases their inevitable effect will be temporarily to deny the new Member States and their
citizens the full benefits of membership. It is therefore in the interest of all parties to do
their utmost to avoid such a situation arising by tackling the remaining gaps quickly and
effectively.

2. Support measures

Beyond  remedial  or  legal  action,  in  a  number  of  cases  specific  support  measures  may
help  to  improve  or  speed  up  alignment  with  the  acquis.  The  Commission  is  willing  to
explore  all  available  means  to  assist  the  new  Member  States  both  before  and  after
accession. Depending on the nature of the problem, this support could  take  the form  of
peer  assistance,  TAIEX  training  seminars,  SIGMA  support,  twinning  (light)  projects  or
similar instruments, which can be mobilised quickly and can be focussed on well targeted
issues, as foreseen by the Transition Facility.

Financing can be sought from the remaining unallocated Phare funds, as well as – from
accession  –  from  the  additional  funds  available  under  the  Transition  Facility  (see  also
section  0  below.  Equally,  a  number  of  existing  specialised  mechanisms  (such  as  the
Customs 2007, Fiscalis, and other programmes) can be used to address gaps in the new
Member States.

D

NEXT STEPS

1 Between now and accession

The  acceding  countries  and  the  Commission’s  departments  have  co-operated  well  in
identifying the remaining gaps in preparedness. All efforts must now focus on resolving
the outstanding issues in the transposition and implementation of the acquis, so that all
remaining  gaps  may  be  closed  by  the  time  of  accession.  Although  the  Commission’s
departments  will  work  constructively  with  the  acceding  countries  in  order  to  identify
ways  and  means  of  achieving  this  aim,  it  is  the  task  and  responsibility  of  the  acceding
countries themselves. There are only a few months left.

In view of its role as guardian of the Treaties, the Commission will continue monitoring
until accession. This has also been requested by the Council. The Commission intends to
concentrate  on  the  issues  requiring  enhanced  efforts  and  the  specific  issues  of  serious
concern identified in this report, and to check with the acceding countries progress made

18

since  the  30  September  cut-off  date  that  was  used  for  the  Comprehensive  Monitoring
Reports.  This  follow-up  to  the  findings  of  the  present  report  must  take  place  before  1
May 2004 and will be an essential step enabling the Commission to make proposals and
take  decisions  on  policy  measures,  where  needed  still  before  accession.  Where
circumstances  require,  the  Commission  will  take  the  necessary  policy  measures,
including  safeguard  measures,  infringement  proceedings  or  financial  management
measures.

Support  measures,  as  referred  to  in  point  0  above,  must  be  mobilised  quickly  on  the
basis of the concrete findings of the Comprehensive Monitoring Reports so that they can
produce  tangible  results  where  necessary  still  before  accession.  The  Commission’s
departments will actively pursue this task.

2 From accession

From accession,  the  Commission  will  assume  its  normal  role  vis-à-vis  a  Member  State
but  its  monitoring  of  the  fulfilment  of  the  new  Member  States’  obligations  will  not
diminish. It will follow different procedures and manifest itself differently, e.g. using the
“internal market scoreboard” on the transposition of internal market directives instead of
“regular reports”. Where possible, this will be based on the on-going pre-notification of
the transposition of directives through the TAIEX  office.  The  Commission will assume
its  normal  task  of  co-ordinating  and  enforcing  the  rules  of  the  acquis  and,  where
necessary, will take administrative and legal action. Citizens and economic operators will
have a more direct relationship with the Commission than in the past; they will have the
right  to  lodge  complaints  when  they  feel  their  national  administration  does  not  comply
with  the  acquis  and  have  them  investigated.  Moreover,  as  described  above  certain
specific  procedures  such  as  the  safeguards  provided  for  in  the  Accession  Treaty  will
remain applicable after accession.

The Phare programme and the support programmes for Cyprus and Malta will come to
an  end  in  the  new  Member  States,  together  with  the  Union’s  two  other  main  pre-
accession  assistance  programmes,  ISPA  and  Sapard,  by  31  December  2003,  although
implementation will continue after accession.

Nevertheless, implementation of Phare programmes and their equivalents for Cyprus and
Malta, decided before 1 January 2004, will continue over the following three years. This
implementation  will  be  carried  out  under  the  full  authority  and  responsibility  of  the
National  Fund  and  the  implementing  agencies  of  the  new  Member  States.  The
Commission  will  waive  ex-ante  control  for  tendering  and  contracting  after  having
verified that those structures in the acceding countries comply with the criteria laid down
in the Regulation for co-ordination of pre-accession aid1. The Accession Treaty (Article
33 of the Act) stipulates that acceding countries have to obtain this waiver by accession at
the latest; failure to meet this target could result in the suspension or even loss of funds.

1 Council Regulation (EC) No 1266/1999 of 21 June 1999 on coordinating aid to the applicant countries in
the framework of the pre-accession strategy and amending Regulation (EEC) No 3906/89 (OJ L
161, 26.6.1999, p. 68).

19

                                                
As  from  accession,  further  targeted  assistance  to  improve  implementation  and
enforcement  of  the  acquis  will  be  available  to  the  public  administrations  of  the  new
Member  States  through  the  Transition  Facility.  The  Transition  Facility  is  a  new
temporary  instrument  to  continue  assisting  the  new  Member  States  to  develop  and
strengthen their administrative capacity to implement and enforce Community legislation
in  a  number  of  key  areas  and  to  foster  exchange  of  best  practice  among  peers.  A  total
amount of € 426 million (2004 prices) is available for the first three years after accession.
The  Transition  Facility  resembles  Phare  institution-building  actions  not  only  in  its
objective, but – in the interest of continuity, simplicity and efficiency – also in the rules
for its implementation by the  new  Member  States,  which  will  follow  those  of  Phare  as
closely as possible.

The ISPA and Sapard programmes (and the economic and social cohesion component of
the Phare programme) will be succeeded by the larger Cohesion Fund and the European
Agricultural  Guidance  and  Guarantee Fund (EAGGF) respectively. A  smooth  transition
will be assured by on-going actions in the fields of transport and environment under ISPA
and  on  rural  development  under  Sapard  being  subsumed  into  these  programmes.  In
addition, projects in new Member States will be eligible for EU structural funding from
the European Regional Development Fund and the European Social Fund as of 1 January
2004.

With the entry into force of the Amsterdam Treaty in  May  1999, the  Schengen acquis,
including  the  (two-stage)  implementation  mechanisms  provided  for  in  the  Schengen
Agreement, is integrated into the framework of the European Union. However, accession
to the EU will not immediately lead to the lifting of internal border controls, but will be
subject to a separate Council decision. The decision confirming the capacity of each new
Member State to implement the Schengen acquis will take into account all conditions and
procedures  applied  to  the  Schengen  cooperation,  on  the  same  basis  as  for  the  current
Member States.

A Schengen Facility was created for the purpose of addressing shortcomings identified in
the preparation for participating in Schengen. It aims at strengthening infrastructure and
equipment  for  implementing  the  Schengen  acquis,  with  special  emphasis  on  enhancing
external  border  control.  The  Schengen  Facility,  which  amounts  to  €  963  million  (2004
prices)  will  be  available  for  seven  beneficiary  new  Member  States  over  the  first  three
years after their accession.

The  ten  acceding  countries  will  be  quickly  and  fully  integrated  into  the  existing  EU
procedures of budgetary surveillance and economic policy co-ordination, applying the
same rules as for existing Member States.  In particular, they will be already included in
the 2004 update of the Broad Economic Policy Guidelines, with a two-year horizon for
2004-5.  There will be country-specific recommendations and the acceding countries will
for the first time be included in the Implementation Report on the Broad Economic Policy
Guidelines in January 2005.

With  respect  to  budgetary  surveillance,  the  reporting  deadlines  (before  1  March  and
before 1 September) on fiscal notifications are expected to be complied with in 2004.  As
from  accession,  where  necessary,  the  Commission  could  start  an  Excessive  Deficit
Procedure.

20

The new Member  States  are  invited  to  submit  by  15  May  2004  their  first  Convergence
Programmes, which may be an update of the Pre-Accession Economic Programmes.  The
new Convergence  Programmes should  be  submitted,  in  line  with  the  Code  of  Conduct,
between mid-October and 1 December 2004.

With  respect  to  the  exchange  rate,  which  is  an  important  aspect  of  the  EU  policy  co-
ordination  framework,  upon  accession,  new  Member  States  are  to  treat  their  exchange
rate policy as a matter of common interest as required by the EC Treaty. A new Member
State  may  join  the  exchange  rate  mechanism  ERM-II  upon  request  after  accession,
subject to agreement on the central parity and fluctuation band. However, exchange rate
regimes  should  not  be  looked  at  in  isolation  and  participation  in  ERM-II  should
contribute to achieve real and nominal convergence. Although ERM-II provides a degree
of flexibility, staying outside the ERM-II for some time may be useful in the light of large
and volatile capital flows, large fiscal imbalances, or risks of large economic shocks.

The  acceding  countries  will  participate  from  accession  in  the  economic  and  monetary
union  “with  a  derogation”,  meaning  that  they  have  not  yet  fulfilled  the  criteria  for
adopting the single currency. The acceding countries have presented strategies to achieve
the  objective  of  joining  the  euro  area  as  the  ultimate  goal.  These  plans  vary  from  one
country  to  the  other,  reflecting  different  initial  economic  conditions  and  exchange-rate
regimes.  The  EC  Treaty  does  not  specify  a  timetable,  but  requires  Member  States  to
pursue  policies  geared  at  a  high  degree  of  sustainable  convergence.  This  will  be
examined at least every two years, or at the request of a Member State with a derogation.
It is the intention to present such an assessment in a so-called convergence report for the
first time at the end of 2004.

E.

CONCLUSIONS

The  Commission  has  continuously  monitored  the  progress  made  by  the  acceding
countries to meet  the  requirements of membership over a  number  of  years.  Findings  of
this  thorough  monitoring  exercise  were  last  publicly  summed  up  in  the  2002  regular
reports  and  strategy  paper.  Two  monitoring  exercises  were  presented  to  the  Council  in
February and May 2003 in the context of the follow-up of negotiations. The Commission
concludes this process with a set of Comprehensive Monitoring Reports for each of the
acceding countries, looking in particular at their ability to meet the obligation of applying
the full acquis from the first day of membership.

These reports confirm that acceding countries have made special efforts over the last year
to  complete  their  long-standing  preparations  for  membership,  demonstrating  their
commitment to apply the acquis from 1 May 2004. They have reached a very high degree
of  alignment,  and  generally  deserve  to  be  commended  for  these  achievements.  The
monitoring exercise has proven to be an effective tool in this context and has contributed
to an acceleration of preparations.

In this comprehensive exercise, the Commission has not been confronted with any major
surprises or last minute discoveries. The monitoring exercise confirms previous analyses
and  records  the  overall  progress  made  since  the  last  Regular  Reports  published  in
October 2002.

21

In the light of the detailed findings described in this report, it can be concluded that, on
the whole, the acceding countries are expected to be ready for accession in the very large
majority of areas, even if minor adjustments are still needed in some cases. At the same
time, a number of issues remains to be tackled which  require  enhanced  efforts  between
now and accession.

issuing  warning 

letters  and  organising 

There  are  a  limited  number  of  issues  of  serious  concern.  Following  this  report  the
Commission  will  individually  alert  each  of  the  acceding  countries  to  the  specific
the  appropriate
identified  concerns  by 
consultations. Without immediate and decisive action, the countries in question will most
likely  not  be  able  to  fulfil  their  obligations  of  membership  in  those  specific  areas  and
their citizens and economic operators will not enjoy the full benefits of EU membership.
Such specific issues have been found in all acceding countries, affecting between one and
four acquis chapters depending on the countries. All efforts must now focus on resolving
the outstanding issues in the transposition and implementation of the acquis, so that all
remaining  gaps  may  be  closed  by  the  time  of  accession.  This  can  be  achieved.  Where
appropriate, the Commission is ready to support the acceding countries’ administrations
with targeted assistance that can be mobilised quickly.

Together  with  the  acceding  countries,  the  Commission  will  continue  to  monitor  the
remaining  issues  in  the  months  leading  up  to  accession.  Where  it  is  found  that
outstanding  tasks  are  not  completed  as  necessary  before  accession,  the  Commission  is
determined to take the necessary measures,  where needed  still  before accession,  to deal
with such a situation.

The  preparation  of  the  acceding  countries  has  reached  an  advanced  stage.  The
Commission  is  confident  that  enlargement  will  take  place  on  1  May  2004  under  good
conditions. It will, however, not hesitate to use all means it has at its disposal to ensure
the proper implementation of the Union’s rules and policies as is its role as guardian of
the treaty to the benefit of all Member States of the Union.

22

ANNEXES

23

ANNEX:  CONCLUSIONS  OF  THE  COMPREHENSIVE  MONITORING  REPORTS  ON  THE
CZECH  REPUBLIC,  ESTONIA,  CYPRUS,  LATVIA,  LITHUANIA,  HUNGARY,  MALTA,
POLAND, SLOVENIA AND SLOVAKIA

Czech Republic

The  Czech  Republic  has  broadly  maintained  macroeconomic  stability.  However,  public
finances  have  deteriorated.  The  Czech  Republic  continued  on  its  reform  path,  albeit
hesitantly.

As regards the areas, where last year’s report suggested improvements, some progress has
been made, but challenges remain. The continued deterioration of the general government
deficit  led  the  government  to  undertake  steps  towards  the  consolidation  of  the  public
finances and to present a set of measures aiming at bringing the deficit down to 4%  by
2006.  A  deeper  and  a  more  comprehensive  reform  affecting  the  social  benefits  and  the
pension system and healthcare is needed. The Czech Consolidation Agency resumed the
selling off  of  bad assets  to  private  investors.  This  process  should  accelerate  in  order  to
free the economy from misallocated resources.

As regards overall administrative and judicial capacity, sufficient conditions are in place
for  the  implementation  of  the  acquis  by  the  Czech  public  administration  and  judiciary,
but  there  is  room  for  further  improvements.  In  the  field  of  public  administration,
sufficient resources should be allocated to the  implementation of  the Civil Service Act,
which will enter into force on 1 January 2005. As regards the judicial system, a key area
for further improvement is the reduction in length of court proceedings. The fight against
corruption should continue to receive high priority, in particular the actual prosecution of
corruption cases needs to be stepped up.

As regards the implementation of the acquis in specific policy areas, the findings of this
report are set out below.

Firstly, it should be noted that the Czech Republic has reached a high level of alignment
with the acquis in most policy areas.

It  is  expected  to  be  in  a  position  to  implement  the  acquis  as  required  in  the  following
areas by accession: horizontal and procedural measures, new approach legislation and the
non-harmonised  area  in  the  free  movement  of  goods  chapter;  citizens’  rights,  free
movement  of  workers  and  co-ordination  of  social  security  systems,  in  terms  of  free
movement of persons; the banking sector, investment services, securities markets and the
protection of personal data in the area of freedom to provide services; capital movements
and  payments,  and  payment  systems  related  to  the  free  movement  of  capital;  company
law and accounting; and anti-trust rules in competition policy. In the area of agriculture,
the Czech Republic is expected to be in a position by accession to implement the acquis
in a number of horizontal areas, in most common market organisations, as regards animal
disease control in the veterinary area, and in rural development; and in fisheries.

The  Czech  Republic  is  also  expected  to  be  in  a  position  to  implement  the  acquis  by
accession in: most areas in the transport sector; taxation; economic and monetary union;
statistics; labour law, equal treatment of women and men, social dialogue, public health,

24

employment policy, social inclusion and social protection in the area of social policy and
employment;  the  energy  sector;  industrial  policy;  small  and  medium-sized  enterprises;
science  and  research;  education  and  training;  the  postal  services  sector  in  the  area  of
telecommunications  and  information  technologies;  culture  in  the  area  of  culture  and
audio-visual  policy;  territorial  organisation  and  programming  in  the  area  of  regional
policy  and  co-ordination  of  structural  instruments;  horizontal  legislation,  air  quality,
waste  management,  industrial  pollution  and  risk  management,  water  quality,  chemicals
and genetically modified organisms, noise and nuclear safety and radiation protection in
the  area  of  environment  policy;  safety-related  measures,  non-safety  measures  and
consumer organisations in terms of consumer and health protection; almost all aspects of
justice  and  home  affairs;  customs  union;  the  common  commercial  policy,  and
humanitarian  aid  and  development  policy  in  the  external  relations  acquis;  common
foreign and security policy; external audit and protection of the EC financial interests in
the area of financial control; and financial and budgetary provisions.

Secondly,  in  certain  areas  the  Czech  Republic  partially  meets  the  commitments  and
requirements and needs to make enhanced efforts in order to complete its preparations
for accession.

This includes the old approach sectoral legislation and public procurement in the area of
free movement of goods; in the area of free movement of services, the fields of insurance,
information society services,  and  the right  of  establishment and  the  freedom  to  provide
non-financial services; in the fields of free movement of capital, the fight against money
laundering; within the area of company law, the protection of intellectual and industrial
property  rights;  and  state  aid  rules  in  competition  policy.  In  the  agriculture  area  it
concerns  the  Paying  Agency,  the  Integrated  Administration  and  Control  System,  trade
mechanisms,  the  common  market  organisations  for  sugar,  wine  and  alcohol,  and
beefmeat, and nearly all phytosanitary and veterinary issues.

This  also  includes  the  fields  of:  health  and  safety,  the  European  Social  Fund  and  anti-
discrimination  in  the  area  of  social  policy  and  employment;  the  telecommunications
sector;  audio-visual  policy  in  the  area  of  culture  and  audio-visual  policy;  institutional
structures, the legislative framework and financial management and control in the area of
regional policy and co-ordination of structural instruments; nature protection in the area
of  environment  policy;  market  surveillance  in  the  area  of  consumer  and  health
protection; the fight against fraud, corruption and money laundering, and asylum in  the
area of justice and home affairs; external relations, as regards bilateral agreements with
third  countries;  and  public  internal  financial  control  and  control  over  structural  action
expenditure in the area of financial control.

Thirdly,  the  Czech  Republic  must  take  immediate  and  decisive  action  to  address  three
issues of serious concern in three chapters of the acquis if it is to be ready by the date of
accession.

This  concerns  the  field  of  free  movement  of  persons,  relating  to  the  Czech  Republic’s
preparations for mutual recognition of qualifications of certain professions, including in
the healthcare sector. In the field of agriculture, it concerns progress in the upgrading of
agri-food establishments in order to meet public health requirements. Finally, it concerns
the field of road transport, where the implementation of the social and technical acquis
should be considerably reinforced.

25

Estonia

Against  the  background  of  weak  external  demand,  macroeconomic  performance  in
Estonia  remained  solid  but  the  current  account  deficit  widened  appreciably.  The
authorities adhered to their reform path,  particularly  in the  areas  of  pension  reform  and
financial supervision.

As regards the areas, where last year’s report suggested improvements, some progress has
been made, but challenges remain.  The expansionary fiscal policy, notably during  2002
and  2003,  at  the  level  of  the  local  and  central  governments  poses  a  risk  to
macroeconomic  stability,  particularly  in  the  light  of  a  widening  current  account  deficit.
Active labour market  policies  are  being  pursued  to  address  the  unemployment  problem
and  progress  to-date  has  been  satisfactory.  The  restructuring  of  the  oil-shale  sector  is
advancing, but there has been no further liberalisation of the energy market.

As regards overall administrative and judicial capacity, sufficient conditions are in place
for the implementation of the acquis by the Estonian public administration and judiciary,
but  there  is  room  for  further  improvements.  In  the  field  of  public  administration,
weaknesses in the conditions of service and career structures should be improved, as well
as  co-ordination across the civil service. A number of further reforms remain to be made
to the judicial system, and will partly result from the new Code of Criminal Procedure,
due to enter into force in July 2004. Estonia should continue to improve the effectiveness
of its anti-corruption measures.

As regards the implementation of the acquis in specific policy areas, the findings of this
report are set out below.

Firstly, it should be noted that Estonia has reached a high level of alignment with the
acquis in most policy areas.

It  is  expected  to  be  in  a  position  to  implement  the  acquis  as  required  in  the  following
areas by accession: horizontal and procedural measures, and new approach legislation in
the free movement of goods chapter; citizens’ rights, free movement of workers and co-
ordination of social security systems, in terms of free movement of persons; the banking
sector and insurance in the area of freedom to provide  services; capital  movements and
payments,  and  payment  systems  related  to  the  free  movement  of  capital;  company  law
and accounting; and competition policy. In the area of agriculture, Estonia is expected to
be in a position by accession to implement the acquis in a number of horizontal areas, in
most common market organisations, in rural development, and in the veterinary field in
areas such as animal disease control, zootechnics and animal welfare; and in fisheries, in
the areas of state aid and international agreements.

Estonia is also expected to be in a position to implement the acquis by accession in : the
majority  of  the  transport  sector;  most  areas  in  the  field  of  taxation;  economic  and
monetary union; statistics; health and safety, social dialogue, employment policy, social
inclusion and social protection  in the area  of social policy and employment;  the  energy
sector;  industrial  policy;  small  and  medium-sized  enterprises;  science  and  research;
education  and  training;  culture  and  audio-visual  policy;  programming  for  regional
policy and co-ordination of structural instruments; horizontal legislation, industrial risk
management, water  quality, chemicals,  genetically  modified  organisms  and noise in  the

26

environment  chapter;  safety-related  measures  and  consumer  organisations  in  terms  of
consumer and health protection; almost all aspects of justice and home affairs; customs
union; the common commercial policy, and humanitarian aid and development policy in
the  external  relations  acquis;  common  foreign  and  security  policy;  most  aspects  of
financial control; and the area of financial and budgetary provisions.

Secondly, in certain areas Estonia partially meets the commitments and requirements and
needs to make enhanced efforts in order to complete its preparations for accession.

This includes the old approach sectoral legislation on the free movement of goods, as well
as  public  procurement  and  the  non-harmonised  area;  in  the  area  of  free  movement  of
services, the fields of investment services and securities markets, protection of personal
data,  information  society  services,  and  the  right  of  establishment  and  the  freedom  to
provide  non-financial  services;  in  the  fields  of  free  movement  of  capital,  the
reinforcement of its efforts in the fight against money laundering; and, within the area of
company  law,  the  protection  of  intellectual  and  industrial  property  rights.  In  the
agriculture  area  it  concerns  the  Paying  Agency,  the  Integrated  Administration  and
Control  System  (IACS),  trade  mechanisms,  the  common  market  organisation  for  milk,
TSEs  and  animal  by-products,  the  veterinary  control  system,  trade  in  live  animals  and
animal  products,  public  health  in  agri-food  establishments,  common  measures,  animal
nutrition and phytosanitary issues; and most areas of the fisheries policy.

the 

legislative  framework, 

This also includes the fields of: air and maritime transport, direct taxation; public health,
the  European  Social  Fund,  and  anti-discrimination  in  the  area  of  social  policy  and
employment;  telecommunications  and  information  technologies,  including  the  postal
services  sector; 
institutional  structures  and  financial
management and control for regional policy and co-ordination of structural instruments;
legislative alignment and implementation in the air quality, waste management, industrial
pollution,  nature  protection,  and  nuclear  safety  and  radiation  protection  areas  of
environment policy; market surveillance and non-safety measures in the area of consumer
and health protection; data protection, and the fight against fraud, corruption and money
laundering in the area of justice and home affairs; external relations, as regards bilateral
agreements with third countries; and the protection of EC financial interests in the area of
financial control.

Thirdly,  Estonia  must  take  immediate  and  decisive  action  to  address  three  issues  of
serious concern in two chapters of the acquis if it is to be ready by the date of accession.

This concerns the field of free movement of persons, relating to Estonia’s preparations for
mutual  recognition  of  qualifications  for  certain  professions  in  the  healthcare  sector.  It
also concerns the field of social policy and employment, as regards labour law, and equal
treatment of women and men.

Cyprus

The  Cyprus  economy  slowed  down  in  2002  -  although  remaining  resilient  -  while
inflation, the  current  account and the government deficit  deteriorated. Structural reform
has continued slowly but some long-term issues remain.

27

As regards the areas where last year’s report suggested improvements, some progress has
been made, but challenges remain. Liberalisation of the telecom, energy, air transport and
postal services by 2003 has been implemented in some sectors, but remains to be put into
practice in others. Fiscal consolidation went markedly off target and the current account
deficit  widened.  Progress  has  been  achieved  in  financial  supervision  but  further
improvements remain necessary. As regards overall administrative and judicial capacity,
sufficient  conditions  are  in  place  for  the  implementation  of  the  acquis  by  the  Cypriot
public  administration  and  judiciary,  but  there  is  room  for  further  improvements.  In  the
field  of  public  administration,  the  impartial  character  of  the  civil  service  needs  to  be
strengthened  and  weaknesses  as  regards  training  and  staffing  concerning  a  number  of
bodies  implementing  the  acquis  need  to  be  addressed.  In  the  field  of  the  judiciary,  the
length  of  court  proceedings  should  be  reduced  to  ensure  the  proper  enforcement  of  the
acquis. Cyprus should continue to fight corruption on the basis of a comprehensive anti-
corruption policy, including regulations on the funding of political parties.

As regards overall administrative and judicial capacity, sufficient conditions are in place
for the implementation of the acquis by the Cypriot public administration and judiciary,
but  there  is  room  for  further  improvements.  In  the  field  of  public  administration,  the
impartial  character  of  the  civil  service  needs  to  be  strengthened  and  weaknesses  as
regards  training  and  staffing  concerning  a  number  of  bodies  implementing  the  acquis
need to be addressed. In the field of the judiciary, the length of court proceedings should
be  reduced  to  ensure  the  proper  enforcement  of  the  acquis.  Cyprus  should  continue  to
fight  corruption  on  the  basis  of  a  comprehensive  anti-corruption  policy,  including
regulations on the funding of political parties.

As regards the implementation of the acquis in specific policy areas, the findings of this
report are set out below.

Firstly, it should be noted that Cyprus has  reached a high level of  alignment  with  the
acquis in most policy areas.

It  is  expected  to  be  in  a  position  to  implement  the  acquis  as  required  in  the  following
areas by accession : horizontal and procedural measures, new approach legislation, public
procurement and the non-harmonised area in the free movement of goods chapter; mutual
recognition of professional qualifications, citizens’ rights, free movement of workers and
co-ordination  of  social  security  systems,  in  terms  of  free  movement  of  persons;  the
banking  sector  and  insurance  sector,  the  protection  of  personal  data,  the  right  of
establishment and the freedom to provide non-financial services in the area of freedom to
provide  services;  free  movement  of  capital,  including  money  laundering;  company  law
and accounting; and competition policy. In the area of agriculture, Cyprus is expected to
be  in  a  position  by  accession  to  implement  the  acquis  in  a  number  of  horizontal  areas
including  the  Integrated  Administration  and  Control  System,  in  the  common  market
organisations,  in  rural  development,  and  in  the    veterinary  issues  of  animal  disease
control, trade in live animals and animal products, animal welfare and zootechnics; and
in  fisheries,  in  the  areas  of  structural  actions,  market  policy,  state  aid  and  international
agreements.

Cyprus is also expected to be in a position to implement the acquis by accession in: trans-
European  transport  networks  in  the  area  of  transport  policy;  taxation;  economic  and
monetary  union;  statistics;  labour  law,  equal  treatment  of  women  and  men,  health  and

28

safety at work, social dialogue, employment policy, social inclusion and social protection
in  the  area  of  social  policy  and  employment;  efficiency  and  renewable  energy,  nuclear
energy and nuclear safety in the energy sector; industrial policy; small and medium-sized
enterprises; science and research; education and training; culture in the area of culture
and  audio-visual  policy;  the  legislative  framework,  programming  and  financial
management and control for regional policy and co-ordination of structural instruments;
horizontal  legislation,  air  quality,  waste  management,  industrial  pollution  and  risk
management, water quality, chemicals, noise and nuclear safety and radiation protection
in the environment chapter; safety-related measures and consumer organisations in terms
of  consumer  and  health  protection;  most  aspects  of  justice  and  home  affairs;  customs
union; the common commercial policy, humanitarian aid and development policy in the
external  relations  acquis;  common  foreign  and  security  policy;  external  audit,  control
over structural action expenditure and the protection of EU financial interests in financial
control; and financial and budgetary provisions.

Secondly, in certain areas Cyprus partially meets the commitments and requirements and
needs to make enhanced efforts in order to complete its preparations for accession.

This includes the old approach sectoral legislation relating to the free movement of goods;
in the area of free movement of services, the fields of investment services and securities
markets,  and  information  society  services;  and,  within  the  area  of  company  law,  the
protection of intellectual and industrial property rights. In the agriculture area it concerns
the  Farm  Accountancy  Data  Network,  the  veterinary  control  system,  transmissible
spongiform encephalopathies (TSEs) and animal by-products, public health in agri-food
establishments,  common  measures,  animal  nutrition  and  some  aspects  of  phytosanitary
legislation;  and  as  regards  fisheries  policy,  the  resource  and  fleet  management,  and
inspection and control.

This also includes the fields of: road transport and air transport in the area of transport
policy;  public  health,  the  European  Social  Fund  and  anti-discrimination  in  the  area  of
social  policy  and  employment;  security  of  supply  and  competitiveness  and  the  internal
energy market in the  area of energy; telecommunications and information technologies,
including  postal  services;  audio-visual  policy  in  the  area  of  culture  and  audio-visual
policy;  institutional  structures  in  the  field  of  regional  policy  and  co-ordination  of
structural instruments; nature protection and genetically modified organisms in the area
of environment policy; market surveillance and non-safety related measures in the area of
consumer and health protection; visa policy and asylum policy in the area of justice and
home  affairs; external relations, as  regards screening  of  bilateral  agreements  with  third
countries; and public internal financial control in the area of financial control.

Thirdly,  Cyprus  must  take  immediate  and  decisive  action  to  address  three  issues  of
serious concern in two chapters of the acquis if it is to be ready by the date of accession.

This concerns the field of agriculture, in particular Cyprus's preparations to put in place
its  Paying  Agency,  and  to  prepare  for  the  application  of  external  trade  mechanisms.  It
also concerns the field of transport policy, as regards maritime safety.

Latvia

Economic activity has remained firm despite a weak external environment. The economic

29

reform path has been sustained.

As regards the areas, where last year’s report suggested improvements, some progress has
been  made,  but  challenges  remain.  Positive  developments  have  taken  place  as  regards
active labour market policies, but several structural rigidities remain. Fiscal policy turned
into a more expansionary phase in 2002. Overall, appropriate conditions to attract foreign
investment have been established, but the environment for the creation of new enterprises
remains  somewhat  problematic.  Some  progress  has  been  made 
improving
administrative and judicial capacity as regards to the business community.

in 

As regards overall administrative and judicial capacity, sufficient conditions are in place
for the implementation of the acquis by the Latvian public administration and judiciary,
but  there  is  room  for  further  improvements.  In  the  field  of  public  administration,  it  is
important to harmonise the civil service management structure on the basis of transparent
rules  and  practices  in  staff  matters,  and  to  reinforce  accountability  of  public  agencies.
Particular attention needs to be paid to the reform of the judiciary, and in particular the
completion of the legislative framework, especially the urgent need to adopt the new Law
on Judicial Power, as well as the Law on Criminal Procedure, and to the implementation
of  legislation  on  Court  administration.  The  fight  against  corruption  should  continue  to
receive high priority. In particular, further efforts are needed to complete the legislative
basis and to consolidate the new Anti-Corruption Bureau.

As regards the implementation of the acquis in specific policy areas, the findings of this
report are set out below.

Firstly,  it  should  be  noted  that  Latvia  has  reached  a  high  level  of  alignment  with  the
acquis in most policy areas.

It  is  expected  to  be  in  a  position  to  implement  the  acquis  as  required  in  the  following
areas by accession : horizontal and procedural measures, new approach legislation in the
free  movement  of  goods  chapter;  citizens’  rights,  free  movement  of  workers  and  co-
ordination of social security systems, in terms of free movement of persons; the banking
sector in the area of freedom to provide services; payment systems and the fight against
money laundering related to the free movement of capital; company law and accounting;
and state aid rules in competition policy. In the area of agriculture, Latvia is expected to
be in a position by accession to implement the acquis in some horizontal areas, in most
common  market  organisations,  in  rural  development,  and  in  some  veterinary  issues,
notably  zootechnics  and  animal  nutrition;  and  in  fisheries,  in  the  areas  of  structural
actions, state aid and international agreements.

Latvia is also expected to be in a position to implement the acquis by accession in : most
areas of the transport sector; excise duties and direct taxation; economic and monetary
union; statistics; most  areas of social policy  and  employment;  most  areas  in  the  energy
sector;  industrial  policy;  small  and  medium-sized  enterprises;  science  and  research;
education  and  training;  culture  and  audio-visual  policy;  programming  in  relation  to
regional  policy  and  co-ordination  of  structural  instruments;  the  environment  chapter;
safety-related  measures  and  consumer  organisations  in  terms  of  consumer  and  health
protection;  most  aspects  of  justice  and  home  affairs;  customs  legislation;  the  common
commercial  policy,  humanitarian  aid  and  development  policy  in  the  external  relations

30

acquis;  common  foreign  and  security  policy;  public  internal  financial  control;  and
financial and budgetary provisions.

Secondly, in certain areas Latvia partially meets the commitments and requirements and
needs to make enhanced efforts in order to complete its preparations for accession.

This includes the old approach sectoral legislation on the free movement of goods, as well
as  public  procurement  and  the  non-harmonised  area;  in  the  area  of  free  movement  of
services,  the  fields  of  insurance,  investment  services  and  securities  markets,  the
protection  of  personal  data  and  information  society  services,  and  the  right  of
establishment  and  the  freedom  to  provide  non-financial  services;  in  the  fields  of  free
movement  of  capital,  the  remaining  restrictions  regarding  capital  movements  and
payments;  within  the  area  of  company  law,  the  protection  of  intellectual  and  industrial
property  rights;  and  anti-trust  rules  in  competition  policy.  In  the  agriculture  area  it
concerns    the  Paying  Agency,  the  Integrated  Administration  and  Control  System  and
trade mechanisms,  the  common  market  organisations  for  milk,  sugar  and  beefmeat,  the
veterinary control system, public health in agri-food establishments, trade in live animals
and  animal  products,  animal  disease  control,  common  measures  including  residues,
animal  welfare  and  phytosanitary  issues;  and  resource  and  fleet  management  and
inspection and control, and market policy in the fisheries area.

This also includes the fields of: air transport; VAT, including administrative capacity, in
taxation; public health, the European Social Fund, and anti-discrimination in the area of
social  policy  and  employment;  competitiveness  and  the  internal  energy  market;
telecommunications  and  information  technologies,  including  the  postal  services  sector;
legislative  framework,  financial  management  and  control  as  well  as  institutional
structures regarding regional policy and co-ordination of structural instruments; market
surveillance and non-safety measures in the area of consumer and health protection; data
protection,  migration,  asylum,  the  fight  against  fraud  and  corruption,  and  drugs  in  the
area of justice and home affairs; external relations, as regards bilateral agreements with
third  countries;  and  external  audit,  control  over  structural  action  expenditure  and  the
protection of EC financial interests in the area of financial control.

Thirdly, Latvia must take immediate and decisive action to address four issues of serious
concern in four chapters of the acquis if it is to be ready by the date of accession.

This concerns the field of free movement of persons, relating to Latvia’s preparations for
the general system of mutual recognition of qualifications and the mutual recognition and
training  for  certain  professions,  including  in  the  healthcare  sector.  It  also  concerns  the
field  of  agriculture, 
(transmissible  spongiform
encephalopathies) and animal by-products. It concerns taxation as regards administrative
co-operation and mutual assistance in the field of VAT, in particular the interconnectivity
system. Finally, it concerns administrative and operational capacity in the customs union
area, as regards certain information technology systems.

the  area  of  TSE 

regarding 

Lithuania

In  spite  of  lacklustre  growth  in  the  EU,  macroeconomic  performance  in  Lithuania
remained  particularly  strong  during  2002.  The  authorities  actively  pursued  their  reform

31

path,  although  a  number  of  areas  —  including  pensions  and  fiscal  structural  reform  —
still require progress.

As regards the areas, where last year’s report suggested improvements, some progress has
been  made,  but  challenges  remain.  Although  fiscal  policy  remains  firmly  committed  to
further consolidation, several factors could put at risk the government’s fiscal objective,
and  hence  call  for  the  formulation  of  a  comprehensive  fiscal  strategy  that  takes  into
account  all  pending  financial  obligations  of  the  central  and  local  governments.  The
problem of  high and  persistent  unemployment is being  addressed  through  active  labour
market  policies  but  implementation  of  these  policies  is  crucial.  Pension  reform  has
advanced  with  the  adoption  of  legislation  by  parliament,  but  the  current  plans  fail  to
address  the  problem  of  an  impending  social  security  deficit.  Considerable  progress  has
been  achieved  in  improving  administrative  and  judicial  capacity,  specifically  pertaining
to the legal framework for bankruptcy and enterprise restructuring and market entry, but
the authorities must proceed to complete their reform programme without delay.

As regards overall administrative and judicial capacity, sufficient conditions are in place
for  the  implementation  of  the  acquis  by  the  Lithuanian  public  administration  and
judiciary but there is room for further improvements. In the field of public administration,
a number of areas should receive particular attention. These include the recruitment and
retention  of  both  skilled  professionals,  and  lower-ranking  and  local  civil  servants,  to
implement  the  acquis  including  the  management  of  the  Structural  Funds.  Additional
staff, training  and  equipment are  needed  to  complement  recent  reforms  of  the  judiciary
and legal system, which are now nearing completion. The fight against corruption should
continue to receive high  priority.  While  the  legal  framework  and  institutional  setting  is
being strengthened, efforts should be maintained to tackle corruption in a systematic and
effective way and to ensure adequate prevention. As far as translation of the acquis into
Lithuanian is concerned, the number of revised texts prepared by Lithuania must increase
greatly in the coming period up to accession.

As regards the implementation of the acquis in specific policy areas, the findings of this
report are set out below.

Firstly, it should be noted that Lithuania has reached a high level of alignment with the
acquis in most policy areas.

It  is  expected  to  be  in  a  position  to  implement  the  acquis  as  required  in  the  following
areas by accession: horizontal and procedural measures, new approach sectoral legislation
as  well  as  public  procurement  and  the  non-harmonised  area  in  the  free  movement  of
goods  chapter;  citizens’  rights,  free  movement  of  workers  and  co-ordination  of  social
security  systems  in  terms  of  free  movement  of  persons;  the  banking  sector,  the  right  of
establishment and the freedom to provide non-financial services as well as the protection
of  personal  data  and  information  society  services  in  the  area  of  freedom  to  provide
services;  capital  movements  and  payments  in  the  field  of  free  movement  of  capital;
company  law  and  accounting;  and  competition  policy.  In  the  area  of  agriculture,
Lithuania  is  expected  to  be  in  a  position  by  accession  to  implement  the  acquis  in  a
number of horizontal areas. It is also expected to be in a position to implement the acquis
in  most  common  market  organisations,  in  rural  development  and  in  certain  veterinary
issues,  notably  animal  disease  control  measures,  trade  in  live  animals  and  animal

32

products, zootechnics and animal nutrition; and in fisheries, in the areas of state aid and
international agreements.

Lithuania is also expected to be in a position to implement the acquis by accession in :
the transport sector; in most areas in the field of taxation; economic and monetary union;
statistics;  labour  law,  equal  treatment  of  women  and  men,  health  and  safety  at  work,
social dialogue, employment policy, social inclusion and social protection in the field of
social policy and employment; in the energy sector; industrial policy; small and medium-
sized enterprises; science and research; education and training; culture and audio-visual
policy; the legislative framework and programming in the field of regional policy and co-
ordination  of  structural  instruments;  the  environment  chapter;  safety-related  measures
and consumer organisations in terms of consumer and health protection; many aspects of
justice and home affairs; customs legislation in the field of customs union; the common
commercial policy, the humanitarian aid and development policy in the external relations
acquis,  the  common  foreign  and  security  policy;  most  aspects  of  financial  control;
financial and budgetary provisions.

Secondly, in certain areas, Lithuania partially meets the commitments and requirements
and needs to make enhanced efforts in order to complete its preparations for accession.

This includes the old approach sectoral legislation on the free movement of goods; in the
area  of  free  movement  of  services,  the  fields  of  insurance,  investment  services  and
securities markets; in the field of free movement of capital, the completion of alignment
in the area of payment systems and the reinforcement of efforts in the fight against money
laundering;  and,  within  the  area  of  company  law,  the  protection  of  intellectual  and
industrial  property  rights.  In  the  agriculture  area,  it    concerns  the  Paying  Agency,  the
Integrated  Administration  and  Control  System  (IACS),  trade  mechanisms,  the  common
market organisations for milk and beefmeat, transmissible spongiform encephalopathies
(TSEs) and animal by-products, the veterinary control system, public health in agri-food
establishments,  common  measures,  animal  welfare  and  the  phytosanitary  field;  and
structural actions and market policy in the fisheries policy.

This  also  includes  the  fields  of:  taxation,  as  regards  administrative  co-operation  and
mutual  assistance;  public  health,  European  Social  Fund  and  anti-discrimination  in  the
area of social policy and employment; telecommunications and information technologies,
including  the  postal  sector;  finalising  the  delivery  system  of  its  institutional  structures
and finalising its procedures for financial management and control in the field of regional
policy  and  co-ordination  of  structural  instruments;  market  surveillance  and  non-safety
measures  in  the  area  of  consumer  and  health  protection;  migration,  asylum,  police  co-
operation  and  the  fight  against  organised  crime,  money  laundering,  and  fraud  and
corruption in the area of justice and home affairs; operational and administrative capacity
in the field of customs union; external relations as regards bilateral agreements with third
countries; and control over structural action expenditure in the area of financial control.

Thirdly,  Lithuania  must  take  immediate  and  decisive  action  to  address  two  issues  of
serious concern in two chapters of the acquis if it is to be ready by the date of accession.

This concerns the field of free movement of persons, relating to Lithuania’s preparations
for mutual recognition of qualifications. It also concerns the area of fisheries, as regards
inspection and control in relation to resource and fleet management.

33

Hungary

The overall macro-economic equilibrium of the Hungarian economy has deteriorated, in
particular  as  regards  the  composition  of  GDP,  external  accounts  and  exchange  and
interest rate stability. A significant budget deficit in 2002 has been addressed by a tighter
albeit  very  ambitious  fiscal  policy  stance  in  2003,  while  inconsistent  monetary  and
exchange rate policies added to the strain in the policy mix. The economic reform path is
being  pursued  in  a  credible  manner,  through  the  privatisation  of  some  remaining  state-
owned  companies,  a  stepwise  liberalisation  of  administered  prices  and  the  broad
completion of the progressive pension reform.

As regards the areas, where last year’s report suggested improvements, some progress has
been  made,  but  challenges  remain.  The  general  government  deficit  is  on  a  downward
trend,  following  a  redirection  of  fiscal  policy  since  2003,  but  more  progress  is  needed,
also as regards the structure of fiscal reform. Health care sector reform is being addressed
in  the  framework  of  a  ten  years’  programme,  which  received  a  boost  through  the
admission of private general practitioners’ practices  in 2002, and  a  new law  adopted in
2003  opening  the  way  for  large-scale  privatisation  of  healthcare  assets,  including
hospitals. Wage developments in 2003 have started to moderate, coming down from the
high growth rates of 2001 and 2002, especially in the corporate sector, with the economy
slowly  adapting  to  the  new  low-inflation  environment.  Nevertheless,  even  in  2003  real
wage growth continues to exceed productivity growth by a considerable margin.

As regards overall administrative and judicial capacity, sufficient conditions are in place
for  the  implementation  of  the  acquis  by  the  Hungarian  public  administration  and
judiciary,  but  there  is  room  for  further  improvements.  In  the  field  of  public
administration,  the  general  reform  should  be  continued  in  the  fields  of  regional
development,  local  self-government  and  state  administration,  and  transparency  in
personnel matters should be improved. A number of further steps remain to be taken as
regards  the  judicial  system,  such  as  to  ensure  an  adequate  financing  of  the  judiciary  to
establish  further  regional  courts  and  to  improve  the  legal  aid  system.  The  fight  against
corruption  should  continue  to  receive  high  priority,  in  particular  through  the  rapid
implementation of the “glass-pocket” programme that was adopted in April 2003.

As regards the implementation of the acquis in specific policy areas, the findings of this
report are set out below.

Firstly, it should be noted that Hungary has reached a high level of alignment with the
acquis in most policy areas.

It  is  expected  to  be  in  a  position  to  implement  the  acquis  as  required  in  the  following
areas by accession: horizontal and procedural measures and new approach legislation in
the free movement of goods chapter; the free movement of persons chapter; the banking
and insurance services sectors, investment services and securities markets, the protection
of  personal  data,  the  right  of  establishment  and  the  freedom  to  provide  non-financial
services in the area of freedom to provide services; the free movement of capital chapter,
including money laundering; company law and accounting; and competition policy. In the
area of agriculture, Hungary is expected to be in a position by accession to implement the
acquis in a number of horizontal areas, in most common market organisations  and, in the
veterinary field, as regards the requirements in the areas of animal disease control, trade

34

in  live  animals  and  animal  products,  animal  welfare,  zootechnics  and  animal  nutrition;
and in fisheries in general.

Hungary is also expected to be in a position to implement the acquis by accession in: the
transport sector except for rail transport; all areas in the field of taxation; economic and
monetary union  and statistics; most areas of social policy and employment; the energy
sector;  industrial  policy;  small  and  medium-sized  enterprises;  science  and  research;
education and training; culture in the culture and audio-visual policy chapter; in relation
to  programming  within  the  regional  policy  and  co-ordination  of  structural  instruments
chapter;  horizontal  legislation,  air  and  water  quality,  waste  management,  industrial  risk
management,  chemicals  and  genetically  modified  organisms,  noise,  and  nuclear  safety
and  radiation  protection  in  the  environment  chapter;  safety-related  measures  and
consumer  organisations  in  terms  of  consumer  and  health  protection;  most  aspects  of
justice and home  affairs; customs union; the  common  commercial  policy,  humanitarian
aid  and  development  policy  in  the  external  relations  acquis;  common  foreign  and
security  policy;  financial  and  budgetary  provisions;  and  external  audit  in  the  area  of
financial control.

Secondly,  in  certain  areas  Hungary  partially  meets  the  commitments  and  requirements
and needs to make enhanced efforts in order to complete its preparations for accession.

This includes the old approach sectoral legislation on the free movement of goods, as well
as  public  procurement  and  the  non-harmonised  area;  in  the  area  of  free  movement  of
services, the field of information society services; and, within the area of company law,
the  protection  of  intellectual  and  industrial  property  rights.  In  the  agriculture  area  it
concerns trade mechanisms, the common market organisations for sugar and wine and, in
the  veterinary  field,  transmissible  spongiform  encephalopathies  (TSEs)  and  animal  by-
products,  the  veterinary  control  system,  common  measures,  and  certain  phytosanitary
issues.

This  also  includes  the  fields  of:  rail  transport;  the  European  Social  Fund  and  anti-
discrimination  in  the  area  of  social  policy  and  employment;  telecommunications  and
information technologies, including postal  services; the audio-visual area  in  the  chapter
on culture and audio-visual policy; the legislative framework, institutional structures and
financial management and control in the chapter on regional policy and co-ordination of
structural instruments; legislative alignment and implementation in the nature protection
and industrial pollution areas of environment policy; market surveillance and non-safety
related  measures  in  the  area  of  consumer  and  health  protection;  external  borders  and
asylum  in  the  area  of  justice  and  home  affairs;  external  relations,  as  regards  bilateral
agreements  with  third  countries;  and  public  internal  financial  control,  control  over
structural  action  expenditure  and  the  protection  of  EC  financial  interests  in  the  area  of
financial control.

Thirdly,  Hungary  must  take  immediate  and  decisive  action  to  address  four  issues  of
serious concern in one chapter of the acquis if it is to be ready by the date of accession.

This  concerns  the  agriculture  chapter,  relating  to  Hungary’s  preparations  to  set  up  its
Paying  Agency,  to  implement  the  Integrated  Administration  and  Control  System,  to
prepare  for  the  implementation  of  rural  development  measures  and  to  ensure  public
health standards in agri-food establishments.

35

Malta

Economic activity remained weak, affected by low external demand and the downturn in
the tourism sector. Progress with structural reforms has been mixed.

As regards the areas, where last year’s report suggested improvements, some progress has
been made, but challenges remain. Very substantial efforts are necessary to guarantee the
sustainability  of  public  finances  in  the  medium  term.  Although  restructuring  of  public
enterprises is under way, more far-reaching measures need to be implemented, leading to
higher  productive  efficiency  and  supporting  fiscal  consolidation.  The  level  of  non-
performing  loans  in  the  banking  sector  remains  high,  although  several  steps  have  been
taken to improve supervision and credit assessment.

As regards overall administrative and judicial capacity, sufficient conditions are in place
for the implementation of the acquis by the Maltese public administration and judiciary,
but  there  is  room  for  further  improvements.  In  the  field  of  public  administration,  the
current efforts to bring about more efficiency and accountability across the public service
need to be continued. The reform of the judiciary needs to be pursued in order to further
decrease the backlog of pending judiciary cases and improve the functioning of the small
claims  tribunal.  As  regards  the  fight  against  corruption,  Malta  should  adopt  a
comprehensive anti-corruption strategy, taking into account the recommendations of the
Council  of  Europe's  Group  of  States  against  Corruption.  As  far  as  translation  of  the
acquis  into  Maltese  is  concerned,  the  number  of  revised  texts  prepared  by  Malta  must
increase greatly in the coming period up to accession.

As regards the implementation of the acquis in specific policy areas, the findings of this
report are set out below.

Firstly,  it  should  be  noted  that  Malta  has  reached  a  high  level  of  alignment  with  the
acquis in most policy areas.

It  is  expected  to  be  in  a  position  to  implement  the  acquis  as  required  in  the  following
areas by accession: horizontal and procedural measures, new approach and old approach
legislation  in  the  free  movement  of  goods  chapter;  citizens’  rights,  free  movement  of
workers  and  co-ordination  of  social  security  systems,  in  terms  of  free  movement  of
persons;  banking,  insurance,  investment  services  and  securities  markets,  protection  of
personal data and information society services in the area of freedom to provide services;
the free movement of capital, including money laundering; company law and accounting;
anti-trust  legislation  in  the  area  of  competition.  In  the  area  of  agriculture,  Malta  is
expected  to  be  in  a  position  by  accession  to  implement  the  acquis  as  regards  quality
policy  and  state  aid;  in  common  market  organisations  as  regards  arable  crops,  milk,
sheepmeat  and  pigmeat,  and  eggs  and  poultry,  and  in  some  veterinary  issues  including
animal disease control and trade in live animals and animal products, animal welfare and
zootechnics; and in fisheries, in the areas of resource and fleet management, inspection
and control, market policy, state aid and international agreements.

Malta  is also expected to be in a position  to  implement  the  acquis  by  accession  in:  the
transport sector as regards the trans-European transport networks, road and air transport;
VAT, excise duties, and administrative co-operation and mutual assistance in the field of
taxation; economic and monetary union; statistics; labour law, equal treatment of women

36

and  men,  social  dialogue,  employment  policy,  social  inclusion  and  social  protection  in
the area of social policy and employment; the energy sector; industrial policy; small and
medium-sized  enterprises;  science  and  research;  education  and  training;  culture  and
audio-visual  policy;  regional  policy  and  co-ordination  of  structural  instruments  as
regards institutional structures and  programming; in  the environment chapter as regards
industrial  pollution  and  risk
horizontal 
management,  chemicals  and  genetically  modified  organisms,  noise,  and  nuclear  safety
and radiation protection; safety-related measures and consumer organisations in terms of
consumer and health protection; almost all aspects of justice and home affairs; customs
union; the common commercial policy and humanitarian aid and development policy in
the external relations acquis; common foreign and security policy; financial control; and
financial and budgetary provisions .

legislation,  air  quality,  water  quality, 

Secondly, in certain areas Malta partially meets the commitments and requirements and
needs to make enhanced efforts in order to complete its preparations for accession.

This includes public procurement and the non-harmonised area on the free movement of
goods; requirements for mutual recognition of professional qualifications in terms of free
movement of persons; the right of establishment and the freedom to provide non-financial
services in the area of free movement of services; and, within the area of company law,
the  protection  of  intellectual  and  industrial  property  rights.    In  the  agriculture  area,  it
concerns  organic  farming  and  the  farm  accountancy  data  network;  the  common  market
organisations  for  wine  and  alcohol,  beefmeat,  fruit  and  vegetables  and  olive  oil;  rural
development; in the veterinary field, as regards veterinary control systems, public health
in  agri-food  establishments,  common  measures,  animal  nutrition;  phytosanitary  issues;
and as regards structural actions in the fisheries policy.

This also includes the fields of: direct taxation; health and safety at work, public health,
the  European  Social  Fund,  and  anti-discrimination  in  the  area  of  social  policy  and
employment; telecommunications and information technologies including postal services;
the legislative framework and financial management and control for regional policy and
co-ordination  of  structural  instruments;  legislative  alignment  and  implementation  in
waste  management  and  nature  protection  as  concerns  environment  policy;  market
surveillance and non-safety measures in the area of consumer and health protection; the
Schengen  Action  Plan,  and  asylum  in  the  area  of  justice  and  home  affairs;  external
relations, as regards bilateral agreements with third countries.

Thirdly, Malta must take immediate and decisive action to address six issues of serious
concern in three chapters of the acquis if it is to be ready by the date of accession.

This concerns the field of state aid in the competition policy chapter, where Malta must
enhance  its  efforts  to  implement  its  commitments  regarding  the  restructuring  of  its
shipyards. It also concerns the field of agriculture, as regards the setting up of a Paying
Agency,  the  implementation  of  the  Integrated  Administration  and  Control  System,
external  trade  mechanisms,  and  transmissible  spongiform  encephalopathies  (TSEs)  and
animal  waste  treatment.  Finally,  it  concerns  the  transport  field,  as  regards  maritime
safety.

37

Poland

Poland  has  maintained  a  stable  macroeconomic  situation  and  is  experiencing  a  gradual
recovery, mainly driven by external demand. The reform path has nearly come to a halt
since last year's Report.

As regards the areas, where last year’s report suggested improvements, some progress has
been  made,  but  challenges  remain.  The  Polish  authorities  have  shown  so  far  some
reluctance to tackle the needed fiscal adjustment. A deep restructuring and reduction of
public  expenditure  are,  however,  crucial  in  order  to  further  improve  the  policy  mix,
reverse the rapid rise in public debt, and prepare Poland's public finances for accession.
The  Polish  authorities  should  ensure  that  any  decision  on  the  use  of  the  revaluation
reserve does  not  undermine  the  financial  independence  of  the  central  bank.  Progress  in
restructuring heavy industries, energy distribution and agriculture has been modest since
last year and considerable efforts still need to be made to advance the reform agenda in
this  area.  The  new  insolvency  law  adopted  in  February  upgrades  the  bankruptcy  and
liquidation framework and brings it into line with the requirements of a modern market
economy.  Little  progress  has  been  achieved  as  regards  the  functioning  of  the  land
registry, and the authorities need to pursue their efforts at modernising the system.

As regards overall administrative and judicial capacity, sufficient conditions are in place
for  the  implementation  of  the  acquis  by  the  Polish  public  administration  and  judiciary,
but  there  is  room  for  further  improvements.  In  the  field  of  public  administration,  the
number  of  civil  servants  appointed  from  open  competitions  should  increase,  while  co-
ordination  across  the  civil  service  should  be  improved  and  structures  dealing  with
European  integration  need  strengthening.  Efforts  are  still  needed  to  improve  the
efficiency  and  transparency  of  the  judiciary,  with  particular  attention  to  further
developing  and  organising  the  system  of  legal  aid.  The  fight  against  corruption  should
continue  to  receive  high  priority,  in  particular  through  strengthening  co-ordination
structures and  administrative  support to ensure an  effective  implementation  of  the  anti-
corruption strategy.

As regards the implementation of the acquis in specific policy areas, the findings of this
report are set out below.

Firstly, it  should be noted  that  Poland  has  reached  a  high  level  of  alignment  with  the
acquis in most policy areas.

It  is  expected  to  be  in  a  position  to  implement  the  acquis  as  required  in  the  following
areas by accession: horizontal and procedural measures as well as new approach sectoral
legislation  in  the  free  movement  of  goods  chapter;  citizens’  rights,  free  movement  of
workers  and  co-ordination  of  social  security  systems,  in  terms  of  free  movement  of
persons; personal data protection and information society services in the area of freedom
to provide services; capital movements and payments, and payment systems related to the
free  movement  of  capital;  company  law  and  accounting;  and  the  anti-trust  area  in  the
competition  policy  chapter.  In  the  area  of  agriculture,  Poland  is  expected  to  be  in  a
position by accession to implement the acquis in a number  of horizontal areas, in most
common market organisations, and in veterinary issues as regards animal disease control
and zootechnics.

38

Poland is also expected to be in a position to implement the acquis by accession in: most
areas  of  the  transport  sector;  the  areas  of  direct  taxation  as  well  as  administrative  co-
operation and mutual assistance in the field of taxation; most areas related to economic
and  monetary  union;  statistics;  equal  treatment  of  women  and  men,  social  dialogue,
employment policy, social inclusion and social protection in the area of social policy and
employment; the energy sector; industrial strategy in the industrial policy chapter; small
and  medium-sized  enterprises;  science  and  research;  education  and  training;  culture
policy; programming as far as regional policy and co-ordination of structural instruments
is  concerned;  horizontal  legislation,  air  quality,  waste  management,  water  quality,
industrial  risk  management,  chemicals,  genetically  modified  organisms,  noise,  and
nuclear  safety  and  radiation  protection  in  the  environment  chapter;  safety-related
measures and consumer organisations in terms of consumer and health protection; many
aspects in justice and home affairs; customs union; the common commercial policy, and
humanitarian  aid  and  development  policy  in  the  external  relations  acquis;  common
foreign and security policy; external audit in terms of financial control; and financial and
budgetary provisions.

Secondly, in certain areas Poland partially meets the commitments and requirements and
needs to make enhanced efforts in order to complete its preparations for accession.

This includes the old approach sectoral legislation on the free movement of goods, as well
as  the  non-harmonised  area  and  public  procurement;  the  area  of  free  movement  of
services, as regards the right of establishment and the freedom  to  provide non-financial
services, as well as banking, insurance, investment services and securities markets; in the
field  of  free  movement  of  capital,  the  reinforcement  of  its  efforts  in  the  fight  against
money  laundering;  within  the  field  of  company  law,  the  protection  of  intellectual  and
industrial  property  rights;  and  in  the  state  aid  area  of  competition  policy.  In  the
agriculture  area  it  concerns  trade  mechanisms,  the  common  market  organisations  for
milk, beefmeat, and eggs and poultry, rural development, trade in live animals and animal
products,  common  measures,  animal  welfare  and  animal  nutrition;  and  as  regards  the
areas of structural actions, state aid and international fisheries agreements  in  relation  to
fisheries policy.

This also includes the fields of: maritime transport; VAT and excise duties in the area of
taxation;  the  independence  of  the  national  central  bank  in  terms  of  economic  and
monetary union; labour law, health and safety at work, public health, the European Social
Fund  (ESF)  and  anti-discrimination  in  the  area  of  social  policy  and  employment;
privatisation  and  restructuring  in  the  industrial  policy  chapter;  telecommunications  and
information technologies, including in particular the postal services sector; audio-visual
policy; the legislative framework, institutional structures, and financial management and
control  in  terms  of  regional  policy  and  co-ordination  of  structural  instruments;    the
industrial  pollution  and  nature  protection  areas  of  environment  policy;  market
surveillance and non-safety measures in the area of consumer and health protection; the
Schengen  Action  Plan,  visa  policy,  external  borders,  the  fight  against  fraud  and
corruption, the fight against drugs, and money laundering in the area of justice and home
affairs; external relations, as regards bilateral agreements with third countries; and public
internal financial control, control over structural action expenditure and the protection of
EC financial interests in the area of financial control.

39

Thirdly,  Poland  must  take  immediate  and  decisive  action  to  address  nine  issues  of
serious  concern  in  three  chapters  of  the  acquis  if  it  is  to  be  ready  by  the  date  of
accession.

This concerns the field of free movement of persons, relating to Poland’s preparations for
mutual  recognition  of  qualifications,  in  particular  as  regards  training  for  certain
professions in the healthcare sector.  It also concerns the field of agriculture, as regards
Poland's  preparations  to  set  up  its  Paying  Agencies,  to  implement  the  Integrated
Administration and Control System and to upgrade agri-food establishments in line with
public  health  requirements.  Furthermore,  it  concerns,  in  the  area  of  veterinary  and
phytosanitary  control,  measures  relating  to  transmissible  spongiform  encephalopathies
(TSEs) and animal by-products, movement controls of animals, and the control of potato
ring  rot  and  wart  disease.  Finally,  it  concerns  the  areas  of  resource  management  and
inspection and control, and market policy in the fisheries chapter.

Slovenia

Slovenia has exhibited a relatively robust macroeconomic performance. The restructuring
process  has  continued  to  move  forward  on  the  reform  path,  albeit  slowly  and  with  a
mixed picture in a number of sectors.

As regards the areas, where last year’s report suggested improvements, some progress has
been  made,  but  challenges  remain.  Although  decreasing  slowly,  the  relatively  high  and
persistent inflation remains a key policy concern. In order to support competitiveness of
the economy, the Government should apply  further structural reforms, such as the final
liquidation  of  the  Slovene  Development  Corporation,  set  for  2004,  and  further
privatisation in the finance sector.

As regards overall administrative and judicial capacity, sufficient conditions are in place
for  the  implementation  of  the  acquis  by  the  Slovenian  public  administration  and
judiciary,  but  there  is  room  for  further  improvements.  In  the  field  of  public
administration,  the  new  legislation  improving  the  independence  and  professionalism  of
public  administration  should  now  be  implemented  and  the  provisions  on  restricting  the
involvement of  civil servants in  economic and  political  activities  should  be  widened  to
cover all civil servants. A number  of further  reforms  remain  to  be  made  to  the  judicial
system,  in  particular  in  order  to  reduce  the  backlogs  of  court  cases.  Slovenia  should
continue its efforts to fight corruption. As far as translation of the acquis into Slovenian
is concerned, the number of revised texts produced by Slovenia must increase greatly in
the coming period up to accession.

As regards the implementation of the acquis in specific policy areas, the findings of this
report are set out below.

Firstly, it should be noted that Slovenia has reached a high level of alignment with the
acquis in most policy areas.

It  is  expected  to  be  in  a  position  to  implement  the  acquis  as  required  in  the  following
areas  by  accession:  almost  all  aspects  of  free  movement  of  goods;  citizens’  rights,  free
movement  of  workers  and  co-ordination  of  social  security  systems,  in  terms  of  free
movement of persons; banking, insurance, investment services and securities markets  in

40

the  area  of  freedom  to  provide  services;  free  movement  of  capital,  including  money
laundering; most areas in the company law chapter and accounting;  and state  aid  in the
area  of  competition  policy.    In  the  area  of  agriculture,  Slovenia  is  expected  to  be  in  a
position by accession to implement the acquis on all horizontal issues, in most common
market  organisations  and  in  rural  development;  in  the  veterinary  area  as  regards  TSE,
animal disease control measures, animal welfare, zootechnics and animal nutrition; in the
phytosanitary area; and in fisheries.

Slovenia is also expected to be in a position to implement the acquis by accession in: the
transport  sector;  VAT,  excise  duties  and  administrative  co-operation  in  the  field  of
taxation; economic and monetary union; statistics; most areas in the field of social policy
and  employment;  the  energy  sector;  industrial  policy;  small  and  medium-sized
enterprises; science and research; education and training; postal services in the area of
telecommunications  and  information  technologies;  culture  and  audio-visual  policy;
programming  in  regional  policy  and  co-ordination  of  structural  instruments;  the
environment  chapter;  safety-related  measures  and  consumer  organisations  in  terms  of
consumer and health protection; almost all aspects of justice and home affairs; customs
union;  the  common  commercial  policy  and  humanitarian  aid  policy  in  the  external
relations  acquis;  common  foreign  and  security  policy;  financial  and  budgetary
provisions; financial control.

Secondly,  in  certain  areas  Slovenia  partially  meets  the  commitments  and  requirements
and needs to make enhanced efforts in order to complete its preparations for accession.

This  includes  old  approach  sectoral  legislation  in  the  area  of  free  movement  of  goods,
protection of  personal  data,  the  right  of  establishment  and  the  freedom  to  provide  non-
financial  services,  and  information-society  services  in  terms  of  freedom  to  provide
services,  protection  of  intellectual  and  industrial  property  rights  in  the  company  law
chapter, and anti-trust in the area of competition.  In the agriculture area it concerns the
common market organisation for sugar and milk, veterinary control systems, trade in live
animals  and  animal  products,  upgrading  of  agri-food  establishments,  and  common
measures as regards residues.

This  also  includes  the  fields  of:  direct  taxation,  the  European  Social  Fund  and  anti-
discrimination  in  the  area  of  social  policy  and  employment;  the  telecommunications
sector; the  legislative framework, institutional structures and  financial  management  and
control  for  regional  policy  and  co-ordination  of  structural  instruments;  market
surveillance and non-safety measures in the area of consumer and health protection; the
acquis on data protection and the fight against fraud and corruption in the area of justice
and home affairs; external relations, as regards bilateral agreements with third countries
and development policy.

Thirdly,  Slovenia  must  take  immediate  and  decisive  action  to  address  one  issue  of
serious concern in one chapter of the acquis if it is to be ready by the date of accession.

This  concerns  the  mutual  recognition  of  professional  qualifications  in  the  area  of  free
movement of persons, in particular alignment on the general system of recognition and on
certain professions in the health care sector.

41

Slovakia

Slovakia’s  macroeconomic  performance  has  been  improving  considerably,  although
some imbalances remain significant. Slovakia's progress on the  reform path, also in the
public  finance  area,  has  received  strong  new  impetus.  Various  measures  have  been
decided on and some have already become effective.

As regards the areas, where last year’s report suggested improvements, some progress has
been made, but challenges remain. The government has been reversing the expansionary
fiscal  policy  stance.  The  restrictive  fiscal  policy  stance  supports  a  narrowing  of
Slovakia’s high current account deficit. The preparation of additional public expenditure
reforms, which are necessary to underpin the envisaged fiscal consolidation, has gained
very strong momentum. However, most of the necessary measures still need to be further
specified,  appropriately  sequenced  and  implemented.  The  Slovak  government  has  been
moving  more  decisively  to  tackle  the  deep-seated    structural  unemployment  problem.
Progress has been made as regards financial sector supervision, but the authorities need
to  continue  to  safeguard  the  expanding  financial  sector  against  stability  risks.  Further
measures to improve the legal framework for a market economy have been instituted. Its
effective  implementation  is  also  being  enhanced.  Nevertheless,  additional  vigorous
efforts in the area need to be pursued.

As regards overall administrative and judicial capacity, sufficient conditions are in place
for the implementation of the acquis by the Slovak  public administration and judiciary,
but  there  is  room  for  further  improvements.  In  the  field  of  public  administration,  the
number of staff in sectors dealing with issues related to European integration should be
increased, accompanied by a long-term strategy for training. With respect to the ongoing
decentralisation of the public administration, it is important that the transfer of functions
and  fiscal  decentralisation  go  hand  in  hand.  As  regards  the  judicial  sector,  the
administrative capacities of the Judicial Council need to be strengthened and its financial
independence  ensured.  Further  efforts  are  necessary  to  reduce  the  duration  of  court
proceedings  in  civil  and  commercial  cases,  and  as  regards  judicial  training.  The  fight
against corruption should continue to receive high priority, in particular as regards strict
enforcement of existing rules. Further legislative measures should be taken in the areas of
conflict of interests, financing of political parties and lobbying.

As regards the implementation of the acquis in specific policy areas, the findings of this
report are set out below.

Firstly, it should be noted that Slovakia has reached a high level of alignment with the
acquis in most policy areas.

It  is  expected  to  be  in  a  position  to  implement  the  acquis  as  required  in  the  following
areas  by  accession:  horizontal  and  procedural  measures,  new  approach  legislation  and
public  procurement  in  the  free  movement  of  goods  chapter;  citizens’  rights,  free
movement  of  workers  and  co-ordination  of  social  security  systems,  in  terms  of  free
movement  of  persons;  the  banking  sector  and  the  investment  services  and  securities
markets  in  the  area  of  free  movement  of  services;  free  movement  of  capital,  including
money laundering; company law and accounting; and anti-trust in the competition policy
chapter. In the area of agriculture, Slovakia is expected to be in a position by accession to
implement  the  acquis  in  a  number  of  horizontal  areas,  in  most  common  market

42

organisations, in rural development, and in the veterinary field as regards animal disease
control measures, trade in live animals and animal products, animal welfare, zootechnics
and animal nutrition as well as in the phytosanitary field in general; and in fisheries.

Slovakia  is also expected to  be in a position to implement  the  acquis  by  accession  in  :
trans-european  transport  networks,  rail  transport,  inland  waterways,  air  transport  and
maritime  transport,  as  regards  transport  policy;  direct  taxation  and  administrative  co-
operation as regards taxation; economic and monetary union; statistics; as regards social
policy  and  employment,  labour  law,  equal  treatment  of  women  and  men,  health  and
safety, social dialogue, employment policy, social inclusion and social protection; energy
policy;    industrial  policy;  small  and  medium-sized  enterprises;  science  and  research;
education  and  training;  culture  and  audio-visual  policy;  programming  in  the  area  of
regional  policy  and  co-ordination  of  structural  instruments;  horizontal  legislation,  air
quality,  waste  management,  water  quality,  nature  protection,  chemicals  and  genetically
modified  organisms,  noise,  and  nuclear  safety  and  radiation  protection  in  the  area  of
environment;  safety-related  measures  and  consumer  organisations  in  the  field  of
consumer  and  health  protection;  many  areas  in  the  field  of  justice  and  home  affairs;
customs  union;  common  commercial  policy  and  humanitarian  aid  and  development
policy  in  the  external  relations  chapter;  common  foreign  and  security  policy;  public
internal financial control and external audit; and financial and budgetary provisions.

Secondly,  in  certain  areas  Slovakia  partially  meets  the  commitments  and  requirements
and needs to make enhanced efforts in order to complete its preparations for accession.

This  includes  the  old  approach  legislation  and  the  non-harmonised  area  in  the  field  of
free  movement  of  goods;  mutual  recognition  of  professional  qualifications  in  the  free
movement  of  persons  chapter;  in  the  area  of  free  movement  of  services,  insurance,
information  society services, protection of personal  data,  right  of  establishment  and  the
freedom  to  provide  non-financial  services;  protection  of  intellectual  and  industrial
property  rights  in  the  field  of  company  law.  In  the  agricultural  area,  it  concerns  trade
mechanisms,  the  common  market  organisations  for  sugar,  wine,  and  beefmeat,  in  the
veterinary field the veterinary control system, transmissible spongiform encephalopathies
(TSEs)  and  animal  by-products,  and  common  measures,  and  in  the  phytosanitary  field
controls on maximum residue limits for pesticides.

This  also  includes  the  fields  of:  road  transport;  VAT  and  excise  duties  in  the  field  of
taxation; public health, the European Social Fund, and anti-discrimination in the area of
social  policy  and  employment;  telecommunications  and  information  technologies
including  postal  services;  legislative  framework,  institutional  structures  and  financial
management  and  control  as  regards  regional  policy  and  co-ordination  of  structural
instruments; industrial pollution in the area of environment; market surveillance and non-
safety-related  measures  in  the  field  of  consumer  and  health  protection;  in  the  field  of
justice and home affairs with respect to the Schengen Action Plan, data protection, visa
policy,  external  borders,  asylum  and  the  fight  against  fraud  and  corruption;  external
relations,  as  regards  bilateral  agreements  with  third  countries;  control  over  structural
action  expenditure  and  protection  of  the  EC  financial  interests  in  the  area  of  financial
control.

Thirdly,  Slovakia  must  take  immediate  and  decisive  action  to  address  four  issues  of
serious concern in two chapters of the acquis if it is to be ready by the date of accession.

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This  concerns  the  competition  policy  field  as  regards  the  fulfilment  of  the  conditions
specified  in  the  Accession  Treaty  for  the  transitional  arrangement  granted  in  the  steel
sector.  It  also  concerns  the  field  of  agriculture,  as  regards  Slovakia’s  preparations  for
setting  up  the  Paying  Agency,  for  implementing  the  Integrated  Administration  and
Control  System  and  for  upgrading  the  agri-food  establishments  in  the  area  of  public
health protection.

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