Communication from the Commission to the European Parliament and the Council - Enlargement strategy and main challenges 2007-2008 {SEC(2007) 1429} {SEC(2007) 1430} {SEC(2007) 1431} {SEC(2007) 1432} {SEC(2007) 1433} {SEC(2007) 1434} {SEC(2007) 1435} {SEC(2007) 1436}
Date: 2007-11-06
Institutions: European Commission
Subjects: Türkiye, Western Balkans, accession to the European Union, enlargement of the Union, pre-accession strategy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 6.11.2007 
COM(2007) 663 final 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2007-2008 

{SEC(2007) 1429} 
{SEC(2007) 1430} 
{SEC(2007) 1431} 
{SEC(2007) 1432} 
{SEC(2007) 1433} 
{SEC(2007) 1434} 
{SEC(2007) 1435} 
{SEC(2007) 1436} 

EN 

   EN 

 
 
 
  
COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2007-2008 

1. 

INTRODUCTION 

Enlargement  is  one  of  the  EU's  most  powerful  policy  tools.  It  serves  the  EU's  strategic 
interests in stability, security, and conflict prevention. It has helped to increase prosperity and 
growth opportunities and to secure vital transport and energy routes. The present enlargement 
agenda  covers  the  Western  Balkans  and  Turkey,  which  have  been  given  the  perspective  of 
becoming EU members once they fulfil the necessary conditions.  

The  year  ahead  will  be  a  crucial  one  in  consolidating  the  transition  process  in  the  Western 
Balkans.  The  countries  themselves  will  take  over  responsibility  from  the  Stability  Pact  for 
promoting  regional  cooperation,  which  plays  a  key  role  in  reconciliation  and  the 
establishment  of  good  neighbourly  relations.  Accession  negotiations  with  Croatia  are 
advancing well and are entering a decisive phase. This demonstrates to the region as a whole 
that  the  perspective  of  EU  membership  is  a  reality.  In  the  year  ahead  the  Stabilisation  and 
Association Agreements, linking partners in the region more closely to the EU, with a view to 
accession, are expected to near completion. 

At the same time, the region itself faces major problems, beginning with the need to reach a 
status  settlement  for  Kosovo.  Serbia's  European  course,  state-building  in  Bosnia  and 
Herzegovina with local ownership, and better governance in the former Yugoslav Republic of 
Macedonia, Albania and Montenegro will be high on the agenda. A number of these countries 
face  important  challenges  with  regard  to  governance  and  the  fulfilment  of  well-established 
conditions linked to the Stabilisation and Association Process. The EU will need to be ready 
to provide its support during the year ahead, and to respond to developments by making full 
use of its policy instruments. 

Following Parliamentary and Presidential elections, it is important for Turkey to press ahead 
with  key  reforms  which  are  needed  to  consolidate  fundamental  rights  and  freedoms. 
Accession  negotiations  with  Turkey  need  to  continue,  at  a  pace  that  reflects  the  pace  of 
reforms in the country itself as well as Turkey's fulfilment of the relevant conditions. 

Against this background, the consistent implementation of the renewed consensus defined by 
the December 2006 European Council is more important than ever. This consensus is based 
on the principles of consolidation of commitments, fair and rigorous conditionality and better 
communication with the public, combined with the EU's capacity to integrate new members. 
The pace at which a candidate or potential candidate approaches the EU reflects the pace of 
its  political  and  economic  reforms  as  well  as  its  capacity  to  fully  assume  the  rights  and 
obligations  of  membership.  The  Commission  is  improving  the  quality  of  the  enlargement 
process by tackling public administration and judicial reform and the fight against corruption 
at an early stage, by making full use of benchmarks, and by bringing more transparency into 
the  process.  The  Commission  is  preparing  the  first  impact  studies,  analysing  the  effect  of  a 
candidate’s accession in specific policy areas. 

EN 

2 

   EN 

 
The legal basis for enlargement is Article 49 of the Treaty on European Union1, which reads: 
"any  European  State  which  respects  the  principles  referred  to  in  Article  6(1)  may  apply  to 
become a member of the Union (…)"2. 

The December 2006 European Council concluded that "enlargement has been a success story 
for  the  European  Union  and  Europe  as  a  whole.  It  has  helped  to  overcome  the  division  of 
Europe and contributed to peace and stability throughout the continent. It has inspired reforms 
and has consolidated common principles of liberty, democracy, respect for human rights and 
fundamental freedoms and the rule of law as well as the market economy. The wider internal 
market  and  economic  cooperation  have  increased  prosperity  and  competitiveness,  enabling 
the enlarged Union to respond better to the challenges of globalisation. Enlargement has also 
enhanced the EU's weight in the world and made it a stronger international partner." 

The  twelve  Member  States  that  joined  in  the  fifth  enlargement  display  a  good  level  of 
compliance with EU law. This shows the value of rigorous reform efforts combined with EU 
peer  pressure  and  disciplines.  Thanks  to  sound  preparations,  the  EU  continues  to  operate 
smoothly after enlargement. 

Member States in all parts of the EU have benefited from higher levels of economic growth. 
Slovenia  adopted  the  euro  in  January  2007;  Cyprus  and  Malta  will  do  so  in  2008.  Careful 
preparations by the countries concerned and the Commission, combined with rising trade and 
investment  flows  have  helped  the  new  Member  States  to  progressively  converge  with  EU 
average living standards. Between 1998 and 2006, the GDP of the twelve Member States that 
joined in the fifth enlargement has grown by an annual average of 4.3% as compared to 2.2% 
in  the  15  old  Member  States3.  Trade  between  the  old  and  the  new  members  increased 
remarkably in the last decade. Exports and imports between the ten Member States that joined 
in 2004 and the 15 old Member States have quadrupled between 1995 and 2006, while overall 
trade  between  them  doubled  in  that  period.  The  inclusion  in  the  internal  market  of  twelve 
dynamic  economies  of  more  than  100  million  consumers  with  rising  purchasing  power 
increases the Union's competitiveness and its weight in the world economy. Ten months after 
accession,  Bulgaria  and  Romania  are  generating  further  economic  growth  and  investments. 
2007  growth  forecasts  for  Romania  and  Bulgaria  are  much  higher  than  the  expected  EU 
average growth rate. The Commission took safeguard measures at the end of 2006 to address 
certain shortcomings for both countries. In June, the Commission issued its first reports on the 
Cooperation and Verification Mechanism in the area of justice and home affairs as well as on 
the safeguards4. The Commission will review progress in this area and report in early 2008. 

As  regards  the  Cyprus  issue,  the  leaders  of  the  Greek  Cypriot  and  Turkish  Cypriot 
communities  need  to  step  up  their  efforts  to  relaunch  negotiations  on  a  comprehensive 
settlement under UN auspices. The Commission is implementing the instrument of financial 
support  for  encouraging  the  economic  development  of  the  Turkish  Cypriot  community, 

1 
2 

3 
4 

4 

A new treaty was agreed in the October 2007 European Council. 
Article  6(1)  reads  "The  Union  is  founded  on  the  principles  of  liberty,  democracy,  respect  for  human 
rights,  and  fundamental  freedoms,  and  the  rule  of  law,  principles  which  are  common  to  the  Member 
States". 
Based on Eurostat data. 
Reports  on  Bulgaria's  and  Romania's  progress  on  accompanying  measures  following  Accession 
COM(2007) 377 and COM(2007) 378, 27.6.2007. 
Reports  on  Bulgaria's  and  Romania's  progress  on  accompanying  measures  following  Accession 
COM(2007) 377 and COM(2007) 378, 27.6.2007. 

EN 

3 

   EN 

 
                                                 
facilitating  future  re-unification  of  the  island.  Enhanced  use  of  the  Green  Line  Regulation, 
which  allows  for  the  movement  of  persons  and  goods  throughout  Cyprus,  will  serve  the 
interests of both communities. The regulation on direct trade with the northern part of Cyprus, 
proposed  by  the  Commission  to  further  reduce  the  isolation  of  the  Turkish  Cypriot 
community, remains to be adopted by the Council. 

In  the  countries  engaged  in  the  present  enlargement  agenda  –  the  Western  Balkans  and 
Turkey, the pull of the EU is contributing to stability and encouraging important political and 
economic  reforms.  However,  these  still  face  a  number  of  major  challenges.  It  is  crucial  to 
maintain the visibility and credibility of their accession prospects, as well as rallying support 
for enlargement in the Member States. 

The  Commission  will  continue  to  further  improve  the  quality  of  the  enlargement  process. 
Enlargement policy will put more emphasis on the fundamental issues of state-building, good 
governance,  administrative  and  judicial  reform,  rule  of  law,  reconciliation,  compliance  with 
International  Criminal  Tribunal  for  the  Former  Yugoslavia  (ICTY),  and  civil  society 
development. People-to-people contacts need to be promoted; in particular it is time to initiate 
a  dialogue  on  visa  liberalisation  for  citizens  of  the  Western  Balkan  countries.  The 
development  of  regional cooperation in the Western Balkan should be continued, especially 
local ownership of initiatives in this area. 

In  all  enlargement  countries,  the  EU  will  continue  to  make  full  use  of  its  pre-accession 
instruments  for  addressing  key  challenges.  The  track  record  of  implementation  of 
commitments,  notably  under  the  association  agreements,  is  of  particular  importance  for 
moving from one stage to the next on the roadmap towards EU integration and is monitored 
with  rigour.  The  Commission  sets  out  in  this  document  a  number  of  measures  to  raise 
awareness  about  EU  laws  and  policies  and  to  prepare  the  next  steps  in  the  enlargement 
process. 

The Commission is adjusting pre-accession policy tools to current challenges of enlargement 
policy.  Since  January  2007,  it  is  using  a  new  financial  instrument,  the  Instrument  for  Pre-
Accession  Assistance  (IPA).  In  programming  IPA  assistance,  a  tighter  focus  on  reform 
priorities  will  reflect  each  partner's  stage  in  the  transition  process.  The  Commission  is  now 
proposing  a  revision  of  Accession  and  European  Partnerships,  which  will  serve  as  key 
references in setting priorities. It is also proposing a revised Multi-annual Indicative Financial 
Framework for IPA, covering the period 2009-2011. It will introduce a facility to further the 
development of civil society, notably through capacity-building and exchange projects. It will 
give  added  emphasis  to  programmes  which  support  state-building,  good  governance, 
institutional reform and administrative capacity. 

Maximum  leverage  of  grant  support  to  private  sector  development  and  infrastructure 
investment will be sought through intensified cooperation with the European Investment Bank 
(EIB), as well as the European Bank for Reconstruction and Development (EBRD) and other 
International  Financial  Institutions  (IFIs).  The  Commission  will  ensure  closer  coordination 
with  other  donors  across  the  range  of  their  activities  and  encourage  them  to  be  active  in 
priority  fields  identified  in  this  communication.  Implementation  will  also  be  streamlined 
following  the  transfer  of  responsibilities  from  the  European  Agency  for  Reconstruction  to 
Commission delegations and offices.  

Member States are best placed to lead in communicating to the public that enlargement is in 
the EU's interest. The Commission will continue to play its part, by promoting a better flow of 

EN 

4 

   EN 

 
factual information on enlargement issues. Building on the EU's existing strategy, the present 
communication analyses the key challenges on the road towards EU integration. It outlines an 
approach to adjust the enlargement policy instruments and ensure a tighter focus on areas in 
urgent  need  of  progress,  also  taking  into  account  lessons  learned  from  the  previous 
enlargements. 

2. 

PRESENT CHALLENGES IN THE ENLARGEMENT COUNTRIES 

The  countries  of  the  Western  Balkans  and  Turkey  have  been  given  the  perspective  of 
becoming EU members once they fulfil the established conditions. Given the present state of 
preparations  in  these  countries,  their  accessions  are  likely  to  occur  in  the  medium  to  long 
term.  The  focus  is  now  on  thorough  preparations  to  ensure  that  countries  engaged  in  the 
enlargement  process  tackle  fundamental  governance  and  economic  issues,  as  well  as  issues 
related to EU laws and policies. 

2.1. 

The Western Balkans 

EU  engagement  with  the  countries  of  the  Western  Balkans  through  the  Stabilisation  and 
Association Process, leading to eventual membership, has made a crucial contribution to the 
progress achieved in recent years by the countries of the region. 

Stability  has  been  maintained  and  reconstruction  after  the  wars  of  the  1990s  is  almost 
completed. Democratically-elected governments are in place throughout the region. Economic 
growth  has  picked  up,  macro-economic  stability  has  improved  and  living  standards  have 
risen. Important reforms are underway to strengthen the rule of law and modernise economic 
and social structures. Regional cooperation has grown, including in the areas of trade, energy, 
transport and environment. The Western Balkan countries are assuming increasing ownership 
in regional initiatives.  

All  countries  of  the  Western  Balkans  have  been  moving  forward  towards  the  EU,  albeit  at 
different  speeds.  Croatia  is  engaged  in  accession  negotiations  with  the  EU,  and  the  former 
Yugoslav  Republic  of  Macedonia  has  obtained  candidate  status.  The  EU  is  in  the  course  of 
completing  Stabilisation  and  Association  Agreements  with  the  countries  of  the  region  and 
economic integration with the EU is well advanced. The Western Balkan countries have now 
signed visa facilitation and readmission agreements with the EU. 

These  achievements  now  need  to  be  consolidated  and  made  irreversible.  Further  major 
challenges  need  to  be  addressed.  In  a  number  of  countries,  the  overall  reform  process  has 
slowed down. State-building, as well as better governance, remain priority concerns in much 
of  the  Western  Balkans.  The  situation  in  Kosovo5  continues  to  necessitate  a  significant 
international presence. The present status of Kosovo is not sustainable; it needs to be settled 
without further delay to permit Kosovo's political and economic development and to ensure 
regional stability. In Bosnia and Herzegovina, nationalist rhetoric by key political leaders is 
challenging the arrangements established by the Dayton/Paris peace agreement and has stalled 
reforms. Much needed reforms of the police and of the constitutional framework have failed 
to  make  progress.  Bosnia  and  Herzegovina  has  yet  to  assume  full  ownership  of  its 
governance,  which  currently  necessitates  a  significant  international  presence.  In  some  other 
countries the constitutional framework needs to be completed or fully implemented. 

5 

Under UN Security Council Resolution 1244. 

EN 

5 

   EN 

 
                                                 
More dialogue and a greater spirit of tolerance are needed throughout the Western Balkans, 
not least on ethnic-related issues. In Kosovo, relations between Albanians and Serbs remain 
strained. In addition, Kosovo Serbs have by and large not participated in the institutions and 
administration. The functioning of Bosnia and Herzegovina's state institutions continues to be 
compromised  by  ethnic  divisions.  In  Serbia,  despite  the  victory  of  democratic  forces  in  the 
parliamentary elections and the formation of a reform-oriented government, extremist parties 
and  nationalist  rhetoric  remain  strong  and  affect  negatively  the  overall  political  climate. 
Democratic  forces  are  fragile.  In  the  former  Yugoslav  Republic  of  Macedonia,  frequent 
tension  and  insufficient  cooperation  between  political  actors  has  affected  the  normal 
functioning  of  institutions  and  slowed  down  reforms.  The  dispute  between  the  government 
and an opposition party about a constitutional matter led to that party boycotting parliament. 
The highly confrontational political climate in Albania and the lengthy process of adoption of 
a  constitution  in  Montenegro  point  to  other  challenges  in  building  modern  democracies. 
Croatia needs to make further efforts to promote tolerance towards minorities. 

Significant  progress  has  been  made  in  cooperation  with  the  International  Criminal  Tribunal 
for  the  Former  Yugoslavia  (ICTY),  a  key  condition  of  the  Stabilisation  and  Association 
Process. Croatia and the former Yugoslav Republic of Macedonia maintain full  cooperation 
with the Tribunal. Montenegro's cooperation with the Tribunal is satisfactory. Progress made 
in this area by Serbia allowed for the resumption and technical completion of negotiations for 
a  Stabilisation  and  Association  Agreement  (SAA).  Bosnia  and  Herzegovina  has  also  made 
progress in cooperation with ICTY. However, Serbia and Bosnia and Herzegovina still need 
to achieve full cooperation with the Tribunal, leading to the arrest of the remaining indictees. 
Kosovo has made some progress in cooperating with ICTY but the intimidation of witnesses 
in Kosovo remains a source of concern. 

Limited  progress  has  been  made  on  refugee  return.  Many  refugees  and  internally  displaced 
persons are living under very difficult circumstances. Some progress has also been recorded 
in  improving  representation  of  minority  groups  in  the  public  services.  However,  the  Roma 
continue to be the most vulnerable minority in the region. All countries need to encourage a 
spirit  of  tolerance  towards  minorities  and  take  appropriate  measures  to  protect  persons  who 
may  be  subject  to  discrimination,  hostility  or  violence.  This  is  essential  to  achieve 
reconciliation and lasting stability. 

The  enforcement  of  the  rule  of  law,  notably  through  judicial  reform,  and  the  fight  against 
corruption and organised crime are top priorities. Most countries have taken steps to improve 
the  organisation  and  performance  of  their  justice  systems.  Efforts  are  underway  to  intensify 
the fight against organised crime and have yielded first results. Legislation and institutions are 
being  developed  to  fight  corruption;  in  several  countries  investigations  are  underway  and  a 
number  of  prosecutions  have  been  brought.  However,  justice  systems  still  require 
considerable improvement across the region. Wide-ranging reforms need to be conducted in a 
sustained  manner  to  ensure  the  independence,  efficiency  and  accountability  of  the  justice 
system. Corruption remains widespread and is deeply rooted in society. In all Western Balkan 
countries, measures taken are not commensurate with the magnitude of the problem. Strong 
political  will  is  needed  to  root  out  corruption  and  prosecute  offenders,  including  in  high-
profile  cases.  Organised  crime  remains  a  serious  concern.  Criminal  networks  extend  to 
various  socio-economic  sectors  and  into  politics.  They  often  benefit  from  insufficient 
transparency  in  public  procurement,  investment  planning  and  privatisations.  The  region  is  a 
place of origin and transit for human trafficking, as well as for drug smuggling. Considerable 
and sustained efforts are needed in this area.  

EN 

6 

   EN 

 
Administrative capacity is a crucial aspect in fulfilling the Copenhagen membership criterion 
on  the  ability  to  take  on  the  obligations  of  membership,  as  was  stated  by  the  European 
Council in Madrid in 1995. Public administration reform is being pursued across the region 
with  some  positive  results  such  as  framework  strategies  and  legislation.  Croatia  has  shown 
that  it  has  considerable  administrative  capacity  for  implementing  the  Stabilisation  and 
Association  Agreement  (SAA).  Serbia  also  has  considerable  administrative  capacity  for 
implementing a SAA. They now need to build on this capacity and modernise it to align with 
the  EU  laws  and  policies.  Administrative  capacity  elsewhere  remains  weak  and  affects 
implementation  of  reform  and  EU  alignment;  additional  efforts  are  needed  in  this  respect. 
Stronger  commitment  is  needed  in  each  country  to  establish  a  civil  service  that  is  efficient, 
stable  and  accountable,  both  at  central  and  local  level.  In  several  countries  the  recruitment, 
promotion and dismissal of civil servants are not based on objective and transparent criteria. 
Ethical  standards  in  the  civil  service  need  to  be  strengthened.  Reforms  of  the  police  and 
security services remain to be implemented in Bosnia and Herzegovina and other countries. 

Civil society is an essential element of European public life. Western Balkan countries have 
made  efforts  to  adopt  legislation  and  strategies  that  are  more  favourable  to  civil  society 
development.  Some  first  steps  have  been  taken  towards  more  participatory  democracy. 
However,  civil  society  remains  weak  in  the  region.  Wars  and  ethnic  strife  have  done  major 
damage  to  the  social  fabric  of  the  region.  Local  NGOs  need  training  to  adapt  to  present 
conditions. Further efforts are required to deepen the freedom of association, to put in place 
regulatory  frameworks  and  public  incentives  for  the  development  of  civil  society 
organisations. 

Overall,  economic  growth  has  remained  relatively  high  in  the  region  and  average  wages 
increased. Inflation figures are modest and stable. Prudent fiscal and monetary policies have 
been  implemented  in  most  countries  of  the  region.  Financial  systems  further  developed. 
Public finance management systems improved. Steps have been taken to improve the business 
climate.  All  Western  Balkan  countries  are  further  restructuring  and  opening  up  their 
economies.  The  degree  of  economic  integration  with  the  EU  is  already  high  and  growing. 
Stabilisation  and  Association  Agreements  and  the  new  Central  European  Free  Trade 
Agreement  (CEFTA)  agreement  create  together  a  framework  conducive  to  trade  and 
investments  in  the  Balkans,  as  was  the  case  in  Central  and  Eastern  Europe  in  the  1990s. 
Several  countries  have  ambitious  plans  to  upgrade  physical  infrastructure  and  modernise 
social security systems. 

Raising  competitiveness,  reducing  the  high  levels  of  unemployment  and  fostering  human 
development and infrastructures are major challenges throughout the region. Significant fiscal 
risks  persist  and  external  imbalances  are  sizeable  in  a  number  of  countries.  Progress  in  job 
creation is uneven, while some countries in the region register unemployment rates of above 
35% and the gap between available and necessary labour skills is increasing. Labour markets 
continue  to  lack  an  appropriate  combination  of  flexibility  and  security  for  workers  and 
employers and taxes on wages for registered companies are relatively high. Rural economies 
need  further  diversification.  Fiscal  consolidation  and  enterprise  restructuring  need  to  be 
pursued further. The countries' privatisation plans need to be implemented. Investments and 
SME  growth  need  to  be  further  stimulated,  including  through  improved  access  to  finance. 
Governments  need  to  further  improve  the  business  environment  and  stimulate  employment. 
They need to reduce red tape, strengthen the rule of law, ensure reliable land registration and 
transparent procedures for privatisation. In some countries, the legal framework ensuring the 
proper  functioning  of  markets  needs  to  be  completed  and  enforced.  Tax  regimes  need 
simplifying. This will stimulate economic activity and reduce the high levels of informality in 

EN 

7 

   EN 

 
the economy. In addition, measures are needed to facilitate access to finance and the use of e- 
technology. 

Turkey 

Since the December 1999 European Council granted candidate status to Turkey, the country 
has achieved major changes. The European perspective proved one of the main incentives for 
reforms of the political and legal system as well as the economy in Turkey. The death penalty 
was abolished, the functions and composition of the National Security Council were changed 
to  increase  civilian  control  over  the  military,  and  a  series  of  constitutional  amendments 
enhanced democratic freedoms. Progress was made in areas such as women's and children's 
rights, and the fight against torture, with a further overall decline of reported cases of torture 
and ill-treatment. 

In economic terms, after the serious financial crisis of 2001, sound macroeconomic policies 
and structural reforms designed to ensure long-term sustainability of the economy allowed for 
a  fast  recovery  of  the  economy  and  an  improved  investment  climate.  This  resulted  in  high 
GDP growth, which reached 6.1% in 2006. Inflation dropped since 2001 and the Turkish lira 
remained strong. However, Turkey's development is still influenced to a significant extent by 
international  financial  trends.  Since  the  establishment  of  the  Customs  Union  in  1995,  the 
value  of  trade  with  the  European  Union  has  tripled  in  current  prices.  This  reflects  a  strong 
demand for EU products and services combined with good performance of the Turkish export 
industry.  In  addition,  the  level  of  foreign  direct  investment  reached  a  new  record  of  €  16 
billion in 2006, that is 4.9% of the Turkish GDP, originating mainly in the European Union. 

These  reforms  and  the  strategic  importance  of  the  EU’s  relationship  with  Turkey  led  to  the 
start  of  accession  negotiations  in  October  2005.  A  core  principle  of  this  process  is  that  the 
pace of the negotiations depends on the pace of the reforms in Turkey.  

The implementation of reforms has been uneven and has slowed down since 2005. In the past 
year, Turkey went through a constitutional crisis concerning the election of the President of 
the Republic, which led to early parliamentary elections. The military made public statements 
beyond its remit. However, in the run up to the elections open debates took place on a number 
of  traditionally  sensitive  issues  and  a  vibrant  civil  society  proclaimed  its  attachment  to 
democracy and the secular state. The elections for the Grand National Assembly were held in 
full  respect  of  democratic  standards  and  of  the  rule  of  law.  The  new  Parliament  is 
representative of the country's political diversity. The President of the Republic was elected in 
accordance with constitutional rules and democracy prevailed in civil-military relations. The 
government has begun work on a new constitution.  

Turkey now needs to renew the momentum of political reforms. Significant further efforts are 
needed  in  particular  on  freedom  of  expression,  and  the  rights  of  non-Muslim  religious 
communities. Further progress is needed in particular on the fight against corruption, judicial 
reform,  trade  union  rights  and  women's  and  children's  rights,  and  the  accountability  of  the 
public administration needs to be strengthened. In the South-East, Turkey needs also to create 
the  conditions  for  the  predominantly  Kurdish  population  there  to  enjoy  full  rights  and 
freedoms. The Commission will continue monitoring closely the process of political reform, 
including civilian oversight of the security forces.  

In  response  to  a  series  of  PKK  armed  attacks  that  caused  multiple  casualties,  parliament 
adopted  in  October  2007  a  motion  authorising  the  government  to  intervene  militarily  in  the 

EN 

8 

   EN 

 
northern  part  of  Iraq.  The  EU  Presidency  reiterated  on  22  October  the  Union's  total 
condemnation  of  PKK  terrorist  violence  in  Turkey.  It  further  stated  that  "the  international 
community, in particular all the main stakeholders in the region, must support Turkey's efforts 
to protect its population and fight terrorism, while respecting the rule of law, preserving the 
international and regional peace and stability and refraining from taking any disproportionate 
military action". 

Further structural economic reforms and fiscal consolidation are needed to address remaining 
risks  to  macroeconomic  stability.  Major  challenges  include  structural  weaknesses  and 
rigidities in the labour market, the quality of skills of the labour force, low employment rates 
especially for women, a large informal sector and reforms in the social security system and in 
the energy sector. The diversification of the rural economy remains limited. The vulnerability 
of the Roma needs to be addressed. Turkey still needs to develop a comprehensive approach 
to economic and social development in the Southeast. 

Good  neighbourly  relations  remain  key.  Turkey  is  also  expected  to  ensure  full,  non 
discriminatory implementation of the Additional Protocol to the Association Agreement. 

3. 

THE ENLARGEMENT STRATEGY: ADDRESSING THE PRESENT AGENDA 

3.1. 

The renewed enlargement consensus 

The EU enlargement process contributes to peace and stability, reforms, and the promotion of 
European  values.  The  effectiveness  of  conditionality  in  driving  reforms  depends  on 
maintaining a credible prospect of eventual integration into the Union. This needs to be even 
more visible to the people of the countries concerned. The prospect of membership has never 
been more important than today to help the countries to overcome crisis, state weaknesses and 
challenges to democracy. 

Rigorous conditionality at all stages of the enlargement process helps consolidating reforms in 
all  candidate  and  potential  candidate  countries  and  preparing  future  Member  States  to  fulfil 
their  obligations  upon  accession.  Each  country's  progress  towards  the  European  Union 
depends on its individual efforts to comply with the Copenhagen criteria and, for the Western 
Balkans, with the conditionality of the Stabilisation and Association Process. 

Full attention is paid to the EU's integration capacity at key stages of the accession process. 
Improvements  in  the  quality  of  the  enlargement  process,  decided  at  the  December  2006 
European Council, ensure that the progress of candidates and potential candidates towards EU 
membership is determined by their success in addressing key requirements. Benchmarks for 
opening  and  closing  negotiation  chapters,  impact  studies  at  key  stages  of  the  enlargement 
process on key policies of the EU, and linkages with political reform play an increasing role 
in that process.  

3.2. 

Focusing on core issues 

The challenges identified above warrant greater focus on key reform priorities which relate to 
state-building, governance, and socio-economic reforms. The Commission is now proposing 
revised  Accession  Partnerships  and  European  Partnerships  that  mirror  those  priorities.  The 
partnerships  guide  the  countries  in  their  European  course  and  establish  priorities  for  pre-
accession  financial  support.  They  will  give  higher  priority  from  an  early  stage  to  basic 
governance  issues,  including  institution  building,  judicial  and  administrative  reform  and  the 

EN 

9 

   EN 

 
prevention  of  organised  crime  and  corruption.  Greater  emphasis  will  be  placed  on  such 
difficult  issues,  in  particular  in  the  context  of  the  political  and  economic  dialogues.  More 
cooperation is needed between Western Balkan countries, EU institutions and agencies, and 
the  Member  States  to  fight  trans-national  crime.  Issues  related  to  the  implementation  of  the 
EU  laws  and  policies  need  to  be  sequenced  according  to  the  countries'  capacities  and 
depending on progress achieved in undertaking basic reforms. 

The  pre-accession  fiscal  surveillance  mechanism  which  is,  since  2006,  also  in  place  for 
potential candidate countries, will continue to support economic reform in all candidate and 
potential candidate countries. 

Regional  cooperation  and  good  neighbourly  relations  remain  key  to  European  integration. 
Progress in these areas strengthens confidence and brings concrete benefits through regional 
stability,  better  cross  border  links,  and  improved  infrastructure.  These  also  bring  economic 
benefits in terms of faster growth and increased foreign direct investment. 

Mutual  knowledge  and  understanding  require  further  development  of  civil  society  and  of 
dialogue  between  the  citizens  of  EU  Member  States  and  the  enlargement  countries.  Since 
2005, the Commission has granted financial support to dialogue projects with and between the 
Western Balkan countries, as well as with Turkey. Support for civil society is key to mutual 
understanding and to strengthening the fabric of democracy across society. The Commission 
will now take additional measures to promote civil society development and dialogue using 
the Instrument for Pre-Accession Assistance (IPA). 

3.3. 

Furthering the accession negotiations 

Accession  negotiations  with  Croatia  and  Turkey  opened  in  October  2005,  upon  unanimous 
decision  of  the  Member  States,  following  a  series  of  major  political  and  legal  reforms.  The 
negotiation  process  brings  both  countries  closer  to  the  EU  and  serves  its  strategic  interests. 
Negotiations  are  conducted  on  the  basis  of  the rigorous  frameworks  agreed  by  the  Council. 
They  advance  hand  in  hand  with  progress  in  political  and  economic  reform  as  well  as  in 
transposing and implementing EU legislation.  

The  December  2006  European  Council  took  decisions  regarding  the  conduct  and  quality  of 
the accession process. Significant steps have been taken to implement the European Council 
conclusions. The Commission has made full use of the possibility to propose benchmarks to 
determine  the  conditions  for  opening  and  closing  of  chapter  negotiations  in  the  light  of 
progress on the ground. It is issuing its first impact studies as key chapters come to the fore in 
the negotiations. In the Autumn, the Commission will issue an impact study on the Croatia's 
future  entry  into  the  EU's  road  cabotage  sector.  Subject  to  progress  in  negotiations,  further 
impact studies will be presented in the coming  year,  covering  free  movement  of  workers  in 
relation to Croatia, and energy supply in relation to Turkey. The Union is engaged in intense 
political and economic dialogues, the results of which are fed into the negotiation process. In 
this  context,  particular  attention  is  paid  to  settling  outstanding  bilateral  issues  between 
candidates  and  Member  States,  as  well  as  to  developing  good  neighbourly  relations.  Issues 
related to the judiciary and fundamental rights are addressed in detail in a specific negotiation 
chapter. It should be recalled that negotiations may be suspended in the event of a serious and 
persistent  breach  of  the  principles  of  liberty,  democracy,  respect  for  human  rights  and 
fundamental freedoms and the rule of law on which the Union is founded.  

EN 

10 

   EN 

 
Croatia's  progress  towards  membership  sends  a  strong  signal  to  other  Western  Balkan 
countries  on  their  own  membership  prospects,  once  they  fulfil  the  necessary  conditions. 
Croatia's accession process contributes to addressing bilateral and regional issues and fosters 
reconciliation.  It  serves  the  EU's  strategic  interests  in  security  and  conflict  prevention  in  a 
region which is bordered by Member States.  

The  current  stage  of  the  accession  negotiations  in  the  specific  EU  policy  chapters  requires 
tackling technical issues related to alignment. The Commission has submitted to the Council 
all screening reports for Croatia. Attention is now shifting to the fulfilment by Croatia of the 
benchmarks for opening the relevant chapters. Provided that benchmarks are met, substantial 
progress  in  accession  negotiations  with  Croatia  is  possible  in  the  coming  year.  Croatia  still 
needs  to  make  further  progress  in  judicial  and  administrative  reforms,  minority  rights,  and 
refugee return as well as restructuring in heavy industries.  

Turkey's continued commitment to reform holds major strategic importance for the EU’s own 
security and stability. Turkey is a unique interface between the West and the Muslim world. 
This has been brought out clearly by the Alliance of Civilisations initiative to foster dialogue 
under  UN  auspices.  Turkey's  accession  to  the  EU,  based  on  profound  democratic 
transformation,  is  followed  with  interest  in  the  Middle  East  and  the  wider  Muslim  world. 
Turkey  also  supports  the  Middle  East  peace  process  as  well  as  a  dialogue  with  Iran  on  the 
nuclear issue. It holds important security assets and has provided them in a number of EU and 
NATO missions, from the Western Balkans to the Democratic Republic of Congo, and from 
Darfur  to  Afghanistan.  Turkey  has  the  potential  of  becoming  a  major  energy  route  between 
the  EU  and  the  world's  biggest  oil  and  gas  sources, and thus a key actor  for  the  security of 
Europe's energy supply. Its alignment with EU policies will bring particular benefits in areas 
such  as  migration  control  and  environment.  Turkey  consistently  records  high  and  steady 
economic growth and is among the EU's leading trade and investment partners. 

Such strategic considerations have been present since the origins of the relationship between 
the EU and Turkey, in 1959. Turkey's EU membership prospect dates back to 1963, when it 
signed  an  association  agreement  with  the  European  Economic  Community.  This  agreement 
explicitly envisages accession, both in its preamble and in Article 28. This reflects Turkey's 
major  strategic  role  from  the  early  foundations  of  the  European  Union.  Turkey  is  now  the 
only country with which the EU has established a customs union, agreed in 1995. It received 
the  status  of  a  candidate  country  in  1999.  The  shared  objective  of  the  negotiations  is 
accession, as agreed by all Member States in October 2005. The negotiations with Turkey are 
an open-ended process, the outcome of which cannot be guaranteed beforehand. Progress in 
the negotiation proceeds hand in hand with progress in implementing reforms and in aligning 
with EU laws and policies. 

It  is  essential  that  the  European  Union  honours  its  commitments  and  keeps  the  negotiation 
process on track and that chapters are opened as soon as the technical conditions are met, in 
line  with  the  Negotiating  Framework  of  October  2005  and  the  Council  decision  of  11 
December  2006.  The  screening  process  with  Turkey  has  reached  its  final  phase,  and  the 
Commission will have submitted most reports to the Council by the end of this year. Turkey 
needs to engage the necessary efforts to meet the opening benchmarks defined by the Council 
for  most  chapters.  Turkey's  renewed  momentum  in  the  political  reform  process  will  have  a 
direct  impact  on  the  pace  of  the  accession  negotiations.  Provided  that  benchmarks  are  met, 
progress is possible in accession negotiations with Turkey in the coming year.  

EN 

11 

   EN 

 
Good  neighbourly  relations  remain  key.  In  line  with  the  Declaration  of  the  EU  of  21 
September 2005 and the Council conclusions of 11 December 2006, Turkey needs to fulfil its 
obligation of full non-discriminatory implementation of the Additional Protocol to the Ankara 
agreement and to remove all obstacles to the free movement of goods, including restrictions 
on the means of transport vis-à-vis the Republic of Cyprus. Turkey is also expected to make 
progress towards normalisation of bilateral relations with the Republic of Cyprus. 

3.4. 

Enhancing  the  European  perspective  of  the  Western  Balkans  and  promoting 
regional cooperation 

All the Western Balkan countries share a perspective of eventual EU membership. The future 
of  the  Western  Balkans  is  within  the  European  Union.  The  Stabilisation  and  Association 
Process  and  the  2003  Thessaloniki  agenda  continue  to  form  the  framework  of  EU  policy 
towards this region. Regional cooperation brings tangible benefits for citizens in the Western 
Balkans and helps to promote reform and reconciliation. 

The  EU  will  continue  to  apply  strict  conditionality  for  the  progress  of  the  Western  Balkan 
countries  towards  the  EU.  A  satisfactory  track  record,  particularly  in  implementing 
obligations  under  the  Stabilisation  and  Association  Agreements  (SAA),  including  trade-
related  provisions,  is  an  essential  element  on  the  way  towards  eventual  membership.  Solid 
institutions  are  crucial  to  implementation  of  provisions  under  the  SAA,  and  to  the  smooth 
functioning of the various joint institutions. 

The Commission continues to support all Western Balkan countries on their European course, 
as  they  make  progress  along  the  road-map  put  forward  in  2005.  It  will  give  full  priority  to 
Kosovo's stability and EU perspective. 

The  May  2007  summit  of  the  South-East  Europe  Cooperation  Process  (SEECP)  in  Zagreb 
heralded  a  move  towards  regional  ownership  of  the  process  of  regional  cooperation.  The 
Stability  Pact  has  largely  accomplished  its  mission  and  will  be  replaced  by  a  new  Regional 
Cooperation  Council  (RCC)  linked  to  the  SEECP.  A  Secretary-general  of  the  RCC  was 
appointed,  and  Sarajevo  was  designated  as  the  seat  of  its  secretariat.  Under  the  Bulgarian 
Chairmanship in office, the host country agreement was signed with Bosnia and Herzegovina 
and  the  Secretariat  is  being  set  up.  It  is  expected  that  the  last  meeting  of  the  Stability  Pact 
Regional Table and the first meeting of the RCC will be held in Sofia in early 2008, when the 
Special  Coordinator  of  the  Stability  Pact  will  hand  over  to  the  RCC  Secretary-general.  The 
new  structures  need  to  become  operational  swiftly,  in  particular  the  secretariat  and  its 
Brussels liaison office. The SEECP and the RCC will provide a general umbrella for regional 
cooperation.  The  Commission  will  participate  in  the  RCC  and  encourages  all  parties 
concerned to play an active role. Building on the relevant experience of the Stability Pact, the 
Commission  intends  to  co-operate  with  SEECP  and  RCC  on  the  implementation  of  the 
implementation  of  the  EC  Disaster  Risk  Reduction  Initiative,  as  well  as  the  Disaster 
Prevention  and  Preparedness  Initiative  (DPPI)  launched  under  the  Stability  Pact.  The 
Commission also intends to further associate the Western Balkans countries with work related 
to the Community Civil Protection Mechanism dealing with n emergency situations such as 
floods, forest fires or earthquakes. 

In  July  the  new  Central  European  Free  Trade  Agreement  (CEFTA)  entered  into  force. 
Ratification by all signatories has recently been completed and this regional free trade area is 
now effective throughout the region. The European Commission intends to support CEFTA, 
both  through  technical  assistance  and  through  initial  three-year  funding  of  the  CEFTA 

EN 

12 

   EN 

 
secretariat.  All  countries  cooperate  in  the  framework  of  the  European  Charter  for  Small 
Enterprises. The implementation of the Energy Community Treaty has advanced. Ratification 
of  the  European  Common  Aviation  Area  is  underway.  Remaining  signatories  now  need  to 
proceed  with  ratifying  these  instruments.  These  agreements  allow  early  integration  into  the 
EU internal market for energy and aviation. Detailed roadmaps and action plans on electricity 
and gas have been drawn up.  

In order to raise awareness of the EU laws and policies, the Commission's TAIEX6 office will 
organise technical information sessions in the potential candidate countries for the benefit of 
stakeholders  in  government,  business  and  society.  The  Regional  School  of  Public 
Administration will contribute to the strengthening of administrative capacity in the Western 
Balkans. EU funds have been mobilised to transform the existing network into a school based 
in the Western Balkan region. 

The citizens of the Western Balkans need to feel tangible improvements resulting from their 
countries'  European  integration.  This  is  essential  for  them  to  assume  ownership  of 
reconciliation  and  of  necessary  reforms.  People-to-people  contacts  should  be  maximised 
between the Member States and the countries in the region, and across the region itself.  

Easier  travel  to  the  European  Union  is  an  issue  of  utmost  importance  to  the  peoples  and 
governments  of  the  Western  Balkans.  In  Thessaloniki,  the  EU  recognised  this  fact  and 
committed to steps for achieving this goal. Steps towards liberalising travel need to take into 
account the internal security and migration interests of the EU. A visa-free regime has been in 
place  with  Croatia  for  many  years.  The  Commission  recently  negotiated  visa  facilitation 
agreements  together  with  readmission  agreements  with  the  other  countries  of  the  region. 
These were signed in September and are expected to be approved by the Council shortly, so 
that they can enter into force on 1 January 2008. The agreements will improve substantially 
the  conditions  for  obtaining  visas  for  travel  to  the  EU.  It  is  important  that  Member  States 
ensure their proper implementation.  

The  facilitation  agreements  are  an  important  step  towards  full  liberalisation  of  the  visa 
regime.  The  Commission  considers  that  it  is  now  time  to  gradually  move  towards  visa 
liberalisation  with  the  Western  Balkan  countries  through  further  concrete  steps.  To  that  end 
the Commission proposes to open a dialogue with each of the countries concerned with a view 
to  establishing  a  road-map  on  the  conditions  to  be  met.  These  would  cover  effective 
implementation of readmission agreements, as well as progress on key areas such as border 
management,  document  security,  or  the  fight  against  organised  crime.  Such  road-maps  will 
allow the countries concerned to better focus their reform efforts, while also reinforcing the 
visibility of the EU’s commitment to the peoples of the region. 

Measures  aimed  at  improving  people-to-people  contacts  also  include  the  expansion  of 
education  cooperation  and  mobility  opportunities  for  undergraduate  and  graduate  students 
under  the  Tempus  and  Erasmus-Mundus  and  Tempus  programmes.  A  further  100  students 
from the region may undertake postgraduate  studies  in  EU  in  2007/2008.  From  2008,  up  to 
500 undergraduate students will benefit annually from exchange programmes between the EU 
Member  States  and  the  region.  The  Commission  will  explore,  together  with  the  Member 
States  and  other  bilateral  donors,  possibilities  for  further  scholarship  opportunities.  Pre-
accession financial support will also be provided for participation of Western Balkan young 

6 

Technical Assistance and Information Exchange. 

EN 

13 

   EN 

 
                                                 
people, youth organisation, cultural operators, civil society organisations and researchers into 
EU programmes. The Commission will encourage initiatives and projects related to the 2008 
European Year for Inter-cultural Dialogue. Under the Commission's new civil society facility, 
measures will be taken to support networking and exchange between civil society groups and 
their counterparts in the region and at European level. 

Active  involvement  of  parliaments  is  key  to  countries'  progress  on  the  way  to  the  EU. 
Parliamentary  cooperation  has  further  grown  both  within  the  Western  Balkans  and  with  the 
EU. In cooperation with the European Parliament, the Commission will encourage activities 
focusing on European integration. 

3.5. 

Strengthening support for reforms 

On 1 January, the Instrument for Pre-Accession Assistance (IPA) was introduced. The aim is 
to  provide  a  coherent  framework  for  assistance  to  the  candidate  and  potential  candidate 
countries.  The  Community  will  continue  to  support  these  countries  in  their  efforts  to 
strengthen democratic institutions and the rule of law, to reform public administration and to 
establish functioning market economies. Support will take the form of institution-building and 
cross-border  cooperation  projects,  as  well  as,  subject  to  the  countries'  level  of  preparations, 
support to regional, human resources and rural development measures.  

Progress  has  been  made  in  preparing  a  smooth  transition  in  aid  implementation  from  the 
European  Agency  for  Reconstruction  (EAR)  to  Commission  delegations  and  offices  in 
Belgrade, Podgorica, Pristina and Skopje. The process will be completed by the end of 2008. 
The  Agency  has  been  instrumental  in  delivering  reconstruction  assistance  to  the  countries 
after  conflict.  With  the  introduction  of  IPA,  beneficiary  authorities  have  more  ownership  in 
the  programming  of  pre-accession  assistance.  They  need  to  prepare  themselves  to  take  over 
responsibility for the management of the EU funds. 

Kosovo  merits  particular  attention.  Its  important  external  financing  needs  will  have  to  be 
largely shouldered by donors. The EU and the Member States will need to take the lead in the 
international community in line with the EU's crucial role in a post-status Kosovo.  

IPA  will  help  beneficiaries  strengthen  their  capacities  through  institution  building,  good 
governance, SME development. Special attention will be given to administrative and judicial 
reform and the rule of law. Efforts will also be made to enhance the partners' public finance 
management as well as their capacity to make full use of pre-accession support. TAIEX offers 
rapid-response  assistance  from  public  sector  officials  to  enlargement  countries’  public 
institutions.  Building  on  results  from  SIGMA7  and  TAIEX,  twinning  between  public 
administrations  will  provide  medium-term  support  for  governance,  in  addition  to  the 
traditional twinning projects related to EU laws or policies. 

The  Commission  will  establish  a  new  financing  facility  under  IPA  to  promote  civil  society 
development and dialogue. National and multi-beneficiary projects will be programmed in a 
coordinated manner to stimulate civil society development in each country. The goal will be 
to strengthen civil society bodies and their role in the political process, enhance the capacity 
of civil society organisations to develop cross-border projects and networks, and familiarise 
civil society representatives and opinion leaders with EU affairs. The facility will enhance the 

7 

SIGMA - Support for Improvement in Governance and Management – OECD programme supported by 
the Commission in the enlargement context. 

EN 

14 

   EN 

 
                                                 
capacity  of  local  civil  society  organisations  for  civic  mobilisation,  advocacy,  project 
development and management to encourage networking, and will support their dialogue with 
corresponding bodies in the EU. Sectors covered will include human rights, gender equality, 
social  inclusion,  health,  environment,  business  advocacy  and  representation,  and  consumer 
protection. The facility will promote cooperation and transfer of know-how between business, 
trade union, and professional organisations in the partner countries and the corresponding EU-
level  organisations.  A  visitors'  programme  will  be  set  up  to  familiarise  with  EU  affairs  key 
opinion makers active in national and local politics, religion, journalism, trade union, business 
associations, and to bring them together with their EU counterparts.  

Closer  donor  coordination  is  an  important  element  of  the  new  IPA  Regulation,  notably  in 
view of budgetary limitations. The Commission will coordinate closely IPA support with that 
of International Financial Institutions and of other donors in order to address basic needs in 
terms  of  economic  and  social  development.  The  Commission  is  setting  up  an  Infrastructure 
Facility,  funded  by  IPA  as  from  2008,  that  will help prepare  infrastructure projects. Sectors 
covered will include transport, energy and environment infrastructure, but also investments in 
the  social  sector,  such  as  health,  education,  housing,  and  refugees.  Other  initiatives  include 
the  European  Fund  for  South  East  Europe  (EFSE),  geared  towards  private  sector 
development, and the energy efficiency facility. In this way, IPA support will seek to achieve 
the most cost-effective mix of grants and loans. This concerted effort will notably involve the 
EIB,  as  well  as  the  EBRD  and  other  international  financial  institutions  such  as  the  World 
Bank and the Bank of the Council of Europe. 

3.6. 

Ensuring public support for enlargement  

Communication  is  a  cornerstone  of  the  EU's  enlargement  strategy.  The  benefits  and 
challenges of enlargement need to be better communicated to the public. EU public opinion 
on  future  enlargement  is  influenced  by  perceptions  of  past  enlargements.  It  is  essential  to 
listen  to  citizens,  address  their  concerns,  and  provide  further  information.  The  EU  needs  to 
present  further  factual  information  about  enlargement  so  that  the  public  can  see  both  the 
benefits and the challenges clearly. 

The EU faces challenges to communicate enlargement both in the Member States and in the 
candidate and potential candidate countries. 

In  the  Member  States,  the  main  challenges  are  to  provide  facts  on  the  fifth  enlargement,  in 
particular its impact in terms of economic success and strengthening the EU's global role and 
to  highlight  the  benefits  and  challenges  of  the  current  enlargement  process.  EU  institutions 
and Member States need to provide the EU public with information about the candidate and 
potential candidate countries and explain how enlargement works as a gradual and carefully 
managed  process.  We  need  to  promote  debate  at  all  levels  of  society  on  issues  related  to 
enlargement. 

In the candidate and potential candidate countries, the main challenges are to emphasise the 
Union's commitment to their European perspective and to explain the conditions for progress 
of each country towards the EU, each being judged on its own merits. People need to see that 
progress towards the EU depends on the pace of reforms in each country. The faster and more 
effective the reform process within the countries, the more rapid will be their progress on the 
road to membership and  all its  benefits. The EU  needs to  support the governments of these 
countries in their efforts to explain the nature of the EU and to demonstrate how their citizens 
benefit from  closer relations with the EU while preparing for membership. Citizens need to 

EN 

15 

   EN 

 
know more about benefits such as pre-accession financial assistance and technical advice, visa 
facilitation, scholarships. 

To help communicate enlargement more effectively, the Commission invites the governments 
of  the  Member  States  and  the  candidate  and  potential  candidate  countries  to  draw  up 
communication  plans.  These  plans  should  target  opinion  formers  in  politics,  the  media, 
academics,  business  community,  social  partners,  youth.  The  Commission's  new  facility  to 
promote civil society development and dialogue will also contribute to this effort.  

Member states must take the lead in explaining and defending the policies they have agreed, 
promoting  dialogue  and  explaining  the  benefits  of  enlargement.  Members  of  the  European 
Parliament  and  of  national  parliaments,  as  well  as  regional  and  local  authorities  and  civil 
society, also have a crucial role to play. These actors, who are closest to the public, have a key 
role in generating informed debate about enlargement. 

The  Commission  will  complement  these  efforts  by  communicating  the  EU's  enlargement 
policy, including pre-accession support. It will tackle myths by providing facts. It will make 
full  use  of  its  representations  in  the  Member  States  and  its  delegations  in  the  enlargement 
countries.  The  Commission  will  seek  to  engage  in  a  dialogue  on  enlargement  with  key 
opinion  formers  and  will  build  on  experience  gained  in  2007  from  a  number  of  successful 
communication  projects,  in  particular  those  with  chambers  of  commerce  and  with  student 
organisations.  

4. 

CONCLUSIONS AND RECOMMENDATIONS 

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

1) 

2) 

3) 

Enlargement  has  contributed  to  peace,  democracy  and  stability  throughout  the 
continent and brought concrete benefits in terms of increased trade, investment and 
economic growth. The Union is now more competitive and better able to respond to 
the  challenges  of  globalisation.  Enlargement  has  enhanced  the  EU's  weight  in  the 
world. 

The  EU  enlargement  process  is  carefully  managed  in  line  with  the  renewed 
consensus defined by the December 2006 European Council. This consensus is based 
on  the  principles  of  consolidation  of  commitments,  fair  and  rigorous  conditionality 
and  better  communication  with  the  public,  combined  with  the  EU's  capacity  to 
integrate new members. The present enlargement agenda covers the Western Balkans 
and Turkey, which have been given the prospect of EU membership once they fulfil 
the conditions. 

The Commission has taken steps to improve the quality of the enlargement process. 
Difficult  reform  issues  are  now  being  addressed  at  an  early  stage.  Feedback  is 
ensured between the political and economic dialogues and the enlargement process. 
In the accession negotiations, full use is now made of benchmarks as conditions for 
opening  and  closing  chapters.  The  Commission  is  promoting  greater  transparency, 
for example by making screening reports publicly available, and is preparing the first 
impact  studies.  Each  country  progresses  from  one  stage  to  the  next  in  its  course 
towards  the  EU,  when  it  has  fulfilled  the  necessary  conditions,  in  accordance  with 
the 2005 road-map for the Western Balkans. 

EN 

16 

   EN 

 
4) 

5) 

6) 

7) 

8) 

The  enlargement  countries  still  face  major  challenges.  It  is  crucial  to  maintain  the 
visibility and credibility of their accession prospects. Each country will be judged on 
its own merits. More remains to be done to address fundamental issues, such as state-
building, rule of law, reconciliation, administrative and judicial reform, and to fight 
corruption and organised crime. Good neighbourly relations remain key.  

Accession negotiations with Croatia are advancing well and are  entering a  decisive 
phase.  This  demonstrates  to  the  region  as  a  whole  that  the  European  perspective  is 
real.  Croatia  still  needs  to  make  further  progress  particularly  in  judicial  and 
administrative reform, minority rights, and refugee return, as well as in restructuring 
of steel and shipbuilding industries. 

Turkey has introduced major reforms since becoming a candidate country in 1999. In 
the  past  year,  Turkey  went  through  a  constitutional  crisis  which  led  to  early 
parliamentary  elections.  These  were  free  and  fair,  and  the  new  parliament  is 
representative of the country's political diversity. The President of the Republic was 
elected  in  accordance  with  constitutional  rules,  and  democracy  prevailed  in  civil- 
military relations. Turkey now needs to renew the momentum of its political reforms. 
Significant  further  efforts  are  needed  without  delay  in  particular  on  freedom  of 
expression  (article  301  of  the  Penal  Code  and  other  relevant  legislation)  and  the 
rights of non-Muslim religious communities. Further improvements are also needed 
in  particular  on  judicial  reform,  in  the  fight  against  corruption,  strengthened  rights 
for women, children and trade unions, cultural rights, as well as on civilian oversight 
of the security forces.  

Turkey  has  not  fulfilled  its  obligation  of  full  non-discriminatory  implementation  of 
the  Additional  Protocol  to  the  Association  Agreement  nor  made  progress  towards 
normalisation  of  bilateral  relations  with  the  Republic  of  Cyprus.  The  Commission 
will continue reporting in its forthcoming annual reports, in accordance with the 11 
December 2006 Council Conclusions endorsed by the European Council. 

Clarity needs to be reached as rapidly as possible on the status of Kosovo. EU unity 
is  essential  in  this  respect.  The  Commission  fully  supports  the  work  of  the  Troïka. 
There  is  a  need  for  a  sustainable  solution  that  will  ensure  a  democratic  and  multi-
ethnic Kosovo and contribute to regional stability. 

The former Yugoslav Republic of Macedonia has made progress but it still needs to 
accelerate  the  pace  of  reforms  in  key  areas.  Albania  and  Montenegro  have  made 
progress  in  a  number  of  areas  but  still  face  major  challenges.  Bosnia  and 
Herzegovina has yet to assume full ownership of its governance and needs to move 
ahead  in  reforms,  in  particular  of  the  police.  Serbia  has  shown  that  it  has  the 
administrative  capacity  to  make  substantial  progress  towards  realising  its  European 
perspective. This was proven by its efficient conduct of the technical negotiations on 
the Stabilisation and Association Agreement. However, to sign the SAA, Serbia still 
has to achieve full cooperation with the ICTY. The region as a whole needs to move 
forward  in  building  modern  democracies  and  developing  a  political  culture  of 
dialogue and tolerance. 

EN 

17 

   EN 

 
 
Accordingly: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

(h) 

The Commission expects substantial progress in accession negotiations with Croatia 
in  the  course  of  the  year  ahead,  leading  to  a  significant  number  of  chapters  being 
opened and to several chapters being provisionally closed, provided that the country 
maintains the necessary reform momentum and meets benchmarks. 

The  Commission  expects  progress  in  the  accession  negotiations  with  Turkey  in  the 
course  of  the  year.  Chapters  for  which  technical  preparations  have  been  completed 
should be opened in accordance with established procedures.  

The pace of negotiations depends on the results of the reforms in Turkey. Turkey's 
progress could gather momentum if it succeeds in meeting opening benchmarks.  

The Commission has proposed to the Council that revision of freedom of expression 
provisions in the Turkish Penal Code (article 301 and other relevant articles) should 
be a benchmark for opening the key chapter on judiciary and fundamental rights. 

fulfil 

Turkey  should 
full  non-discriminatory 
implementation  of  the  Additional  Protocol  to  the  Association  Agreement  in 
accordance  with  the  Council  conclusions  of  11  December  2006,  and  until  Turkey 
does so, eight chapters will not be opened. 

the  commitments 

related 

to 

The  EU  stands  ready  to  provide  further  support  for  stability  in  Kosovo  and  in  the 
region, and to respond to developments by making full use of its policy instruments. 

Provided  the  conditions  are  fulfilled,  the  Stabilisation  and  Association  Agreements 
can be completed with all Western Balkan countries in 2008, with agreements either 
signed or in force. 

The Western Balkan countries will take over responsibility for regional cooperation 
with the transition from the Stability Pact to the new Regional Co-operation Council 
within  the  framework  of  the  South-East  Europe  Cooperation  Process.  The  EU  will 
continue to support local ownership of initiatives in regional cooperation. 

Priority attention will be given to promoting people-to-people contacts between the 
Western  Balkans  and  the  EU.  The  Commission  will  initiate  a  dialogue  on  visa 
liberalisation for citizens of the Western Balkan countries as the next step following 
visa facilitation and readmission agreements.  

Early in 2008, the Commission will adopt a communication which will take stock of 
developments and point the way forward in following up on the Thessaloniki agenda 
and  the  Salzburg  Communication  on  promoting  the  course  of  the  Western  Balkans 
towards the EU. 

The Commission is now proposing revised Accession and European Partnerships that 
set  out  updated  reform  priorities.  Fundamental  issues  related  to  state-building, 
governance  and  administrative  and  judicial  reform  need  to  be  tackled  at  an  early 
stage. 

EN 

18 

   EN 

 
 
 
 
(i) 

(j) 

These priorities will be reflected in programming financial assistance under the new 
Instrument for Pre-Accession Assistance (IPA). The Commission will also establish 
under  IPA  a  financing  facility  to  promote  dialogue  and  civil  society  development, 
notably  through  capacity-building  and  exchange  projects.  It  will  ensure  closer 
coordination  with  other  donors,  and  intensify  cooperation  with  the  EIB,  as  well  as 
with the EBRD and other international financial institutions. 

It remains essential to ensure public support for enlargement. It is important to listen 
to citizens and to respond to their concerns through the provision of clear and factual 
information.  Communicating  enlargement  is  a shared  responsibility.  It  needs  active 
involvement  of  the  Member  States.  The  Commission  will  continue  to  play  its  part 
together  with  the  European  Parliament,  national,  regional  and  local  authorities  and 
civil society. 

EN 

19 

   EN 

 
ANNEX 

Conclusions on Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav 
Republic of Macedonia, Montenegro, Serbia, Kosovo8, Turkey 

Albania 

As regards political criteria, Albania has made some progress on democracy and the rule of 
law. Albania has continued to play a positive role in maintaining regional stability. However, 
democratic  culture  and  in  particular  constructive  dialogue  between  parties  need  to  be 
developed  to  enable  the  political  system  to  function  effectively  and  transparently.  The 
parliament needs to make considerable further progress in pushing forward reform. The fight 
against corruption and organised crime represents a major challenge. 

Some  progress  has  been  made  on  democracy  and  the  rule  of  law.  Albania's  parliament 
fulfilled its constitutional role in the election of a new president. However, political parties' 
lack  of  will  to  co-operate  continued  to  hold  back  reforms,  particularly  in  the  electoral  and 
judicial fields. Albania has made some progress in strengthening its government structures to 
implement  its  EU  commitments  and  to  address  its  development  needs.  Co-ordination  and 
capacity  remain  weak  and  strategic  planning  needs  improvement.  There  has  been  less  turn-
over  in  Albania's  public  administration.  However,  major  efforts  are  needed  to  ensure 
efficiency  and  impartiality,  including  by  fully  implementing  the  civil  service  law.  The 
authority of the Department of Public Administration needs to be strengthened. There remain 
widespread weaknesses in human resources management in the public administration. 

There  has  been  limited  progress  on  reforming  the  judicial  system.  The  procedures  for 
evaluating  judges  have  improved,  the  court  system  rationalised  and  the  execution  of 
judgements  somewhat  accelerated.  However,  the  judiciary  has  continued  to  function  poorly 
due  to  corruption  and  shortfalls  in  independence,  transparency  and  efficiency.  Legislation 
planned to address these issues is delayed. 

The government is taking a more strategic approach to the fight against corruption, which is a 
key  European  Partnership  priority.  Legislation  has  improved  in  the  field  of  public 
procurement.  Anti-corruption  investigations  led  to  the  arrest  of  a  number  of  high-level 
officials.  However,  corruption  is  widespread  and  constitutes  a  very  serious  problem.  Much 
work  is  still  needed  on  all  aspects  of  the  issue,  including  judicial  accountability  and 
transparency of political party funding. 

Some progress has been achieved regarding human rights and the protection of minorities. 
Albania  has  now  abolished  the  death  penalty  in  all  circumstances.  A  new  law  targets 
instigators  of  blood  feuds.  Formal  instructions  to  prosecutors  and  judicial  police  have 
underlined  the  need  to  respect  human  rights  in  criminal  proceedings.  Detention  standards 
remain  poor.  Some  improvements  have  been  made  to  conditions  in  detention  facilities  and 
most pre-trial detainees have been transferred to new dedicated sections in prisons. However, 
prisons  remain  overcrowded.  Considerably  better  enforcement  of  human  rights  rules  and 
systematic prosecution of abusers are still required. Legislation on provision of free legal aid 
remains inadequate.  

8 

Under UN Security Council Resolution 1244. 

EN 

20 

   EN 

 
                                                 
Albania  has  made  some  progress  on  freedom  of  expression,  a  key  European  Partnership 
priority. An action plan to develop new broadcasting legislation was agreed. The public radio 
and television steering committee now includes civil society representatives. The framework 
for  competition  in  the  sector  strengthened.  However,  government  decisions  on  media 
licensing and tax enforcement led to accusations of bias. More consensual and  co-ordinated 
reform  is  necessary,  in  particular  on  broadcasting  and  transparency  of  media  ownership. 
Better implementation of existing legislation is required. 

There is a favourable legal framework for civil society organisations. However, civil society 
groups remain weak. They are not sufficiently involved in policy-making and lack resources, 
organisational capacity, advocacy skills and regional links. 

There  has  been  some  progress  on  strengthening  women's  rights.  New  legislation  addressed 
domestic  violence  and  allowed  the  creation  of  a  ministry  section  specifically  for  gender 
equality issues. However, the protection of women against all forms of violence still remains 
insufficient.  Legislation  needs  to  be  strengthened  and  fully  implemented.  There  has  been 
some  progress  on  children's  rights.  Juvenile  justice,  child  rights  monitoring  and  primary 
education have been strengthened. Further progress is hindered by delays in key legislation, 
especially  on  birth  registration,  and  by  lack  of  resources.  Social  services  have  somewhat 
improved,  with  increased  resources  for  people.  However,  measures  to  support  socially 
vulnerable  people  and  people  with  disabilities  remain  limited.  Better  co-ordination  of 
government agencies could improve results. 

There  has  been  progress  on  strengthening  property  rights,  a  key  European  Partnership 
priority.  The  government  has  adopted  a  strategy  which  links  the  processes  of  initial 
registration of real estate, restitution, compensation and legalisation of informally constructed 
buildings. Better management of restitution and compensation has somewhat accelerated the 
processing  of  claims,  but  it  remains  slow.  Proper  co-ordination  of  registration,  restitution, 
compensation  and  legalisation  and  further  acceleration  of  the  handling  of  related  claims  are 
needed. 

Albania took some measures to fulfil its commitments on the protection of minorities, notably 
to support the use of minority languages and traditional place names. Further improvement is 
hindered by the lack of sound data on the size and situation of minorities. Some steps have 
been  taken  to  improve  the  situation  of  Roma  people,  but  the  impact  of  these  measures  has 
been 
living  conditions  and 
discrimination, especially in the areas of education, social protection, health care, housing and 
employment. 

limited.  The  Roma  minority  still  faces  very  difficult 

Regarding  regional  issues  and  international  obligations,  Albania  has  continued  to  foster 
good relations with other Western Balkan and neighbouring EU countries, both multilaterally 
and  bilaterally.  The  country  continues  to  participate  actively  in  regional  co-operation 
including the South East Europe Cooperation Process (SEECP) and the Regional Cooperation 
Council (RCC), as well as the amended Central European Free Trade Agreement (CEFTA). 
Albania  has  maintained  its  constructive  stance  on  the  Kosovo  status  process.  This  has 
contributed to stability in the region. As regards the International Criminal Court, the bilateral 
immunity  agreement  with  the  United  States  is  not  in  line  with  the  relevant  EU  common 
position and guiding principles. 

Albania’s  economy  has  continued  to  expand  strongly.  Overall  macroeconomic  stability  has 
been maintained, but external deficits widened further, mainly due to the crisis in the energy 

EN 

21 

   EN 

 
sector.  Inadequate  implementation  of  the  rule  of  law  continues  to  impede  the  smooth 
functioning of the market economy and affects the business climate. Poor infrastructure and 
unreliable energy supply continued to hinder economic development. 

As regards economic criteria, Albania has made progress towards establishing a functioning 
market economy. Major reforms are still needed to enable it to cope over the long term with 
competitive pressures and market forces within the Union. 

Political  consensus  on  the  essentials  of  economic  policy  has  generally  been  maintained. 
Macroeconomic  stability  was  largely  maintained.  Economic  growth  continued  to  be  strong 
despite  energy  shortages.  Monetary  policy  remained  credible,  ensuring  very  low  inflation. 
The level of registered unemployment, though still high, continued to decline. Fiscal revenue 
performance  was  broadly  in  line  with  targets  and  budget  implementation  improved.  Public 
finance reforms have further advanced but fiscal risks remain. In general, the macroeconomic 
policy mix was broadly adequate. Following significant delays in 2006, privatisation gained 
new momentum in 2007. The privately-owned banking sector is growing and generally sound. 
Credit expansion remained strong. The regulatory framework for banking supervision is well 
developed. Trade integration with the EU remained fairly high. 

However,  external  deficits  widened  further,  mainly  due  to  difficulties  in  the  energy  sector. 
Some progress was made as regards the enforcement of court rulings and the establishment of 
property rights, but the shortcomings in the judicial system and law implementation affect the 
business  climate.  While  company  registration  procedures  have  started  to  improve, 
administrative inefficiencies hamper market entry and exit. Some progress has been achieved 
in  the  area  of  supervising  financial  actors  other  than  banks,  but  there  remains  scope  for 
strengthening  it,  in  particular  regarding  the  pension  industry.  Structural  unemployment 
persists. Shortages of qualified staff and poor infrastructure  hold back the development of a 
private sector that can make a sustained contribution to the country's development. The large 
informal  sector,  fuelled  by  persistent  weaknesses  in  law  enforcement  and  the  regulatory 
framework, reduces the tax base, hampers the government's capacity to implement economic 
policies and affects negatively the business environment. 

Albania  has  made  progress  in  aligning  its  legislation,  policies  and  capacity  with  European 
standards  and  is  implementing  its  Interim  Agreement  trade  commitments.  In  some  areas, 
such as customs, competition and fighting organised crime, progress made in previous years 
has been sustained. In other areas, such as energy, transport and intellectual property rights, 
progress  has  remained  limited.  Pushing  forward  reform  in  areas  such  as  veterinary  and 
phytosanitary  control  is  vital  to  making  full  use  of  the  Stabilisation  and  Association 
Agreement  (SAA).  Administrative  capacity  for  the  non-trade-related  provisions  of  the  SAA 
and  effective  implementation  of  laws  present  a  challenge  in  terms  of  achieving  a  sustained 
track record of SAA implementation. 

There has been progress in some internal market fields, but further efforts are needed to fulfil 
Albania's SAA obligations. Progress in adopting standards and in accreditation has been good. 
Capacity  for  metrology  and  market  surveillance  is  being  strengthened,  but  legislative 
improvements are needed. On consumer protection improvements are needed in the handling 
of  complaints  and  the  settlement  of  disputes.  Uncertainties  related  to  property  rights 
discourage establishment. Certain restrictions on capital movement remain in place. 

Progress  was  made  on  customs  computerisation.  This  helped  Albania  to  implement  trade-
related provisions of the SAA more effectively. Customs revenue continued to rise. Albania 

EN 

22 

   EN 

 
implemented  the  tariff  reductions  provided  for  in  the  Interim  Agreement.  However, 
improvements  in  infrastructure  and  alignment  with  EU  practices  are  required.  The 
administration  of  taxation  has  been  rationalised  and  progress  has  been  made  on 
computerisation and on handling of taxpayers' appeals. However, tax collection remains low. 
A  comprehensive  tax  collection  and  control  strategy  and  further  alignment  with  EU 
legislation and practices are needed. 

There  has  been  progress  in  the  area  of competition.  The  Competition  Authority  (ACA)  was 
strengthened.  It  assessed  several  merger  notifications  and  imposed  fines  for  violation  of 
competition  rules.  However,  further  efforts  are  needed  to  provide  training  to  ACA  staff. 
Albania  has  made  progress  towards  its  SAA  obligations  regarding  state  aid.  The  State  Aid 
Department has been given independence from the Ministry of Economy as regards reporting. 
The State Aid Department continued to assess and update the inventory of state aid schemes. 

New  public  procurement  legislation  which  is  more  in  line  with  EU  standards  has  been 
approved.  The  Public  Procurement  Agency  is  being  strengthened  but  its  administrative 
capacity requires further upgrading to ensure  it can implement the new legislation properly. 
The  impartiality  of  the  review  procedures  needs  to  be  guaranteed.  Regarding  intellectual 
property  rights  (IPR),  the  copyright  office  has  become  operational  and  Albania  ratified 
international  instruments  on  registration  of  industrial  designs.  However,  IPR  enforcement 
remains  weak.  Both  the  Directorate  General  for  Patents  and  Trademarks  and  the  copyright 
office lack adequate resources and expertise. New industrial property legislation in line with 
European  standards  is  required.  Considerable  further  efforts  are  required  to  fulfil  Interim 
Agreement obligations on IPR. 

There  has  been  some  progress  concerning  European  standards  on  employment  and  social 
policies. Programmes have been put in place to foster the employment of vulnerable groups 
and the institutional and regulatory framework has been improved with the adoption of a law 
on  labour  inspection.  However,  the  capacity  of  the  labour  inspectorate  remains  limited  and 
occupational  health  and  safety  remains  poor.  Deficient  information  and  administrative 
systems  hamper  the  diagnosis  of  the  social  development  and  employment  situation  and  the 
development  of  appropriate  employment  and  social  inclusion  strategies.  Some  progress  has 
been  made  concerning  European  standards  on  education.  Budget  provisions  for  education 
have  been  markedly  increased.  Implementation  of  the  national  strategies  for  pre-university 
education  and  vocational  training  has  started  and  a  new  law  on  higher  education  has  been 
approved. 

Progress can be reported on some sectoral policies. Regarding industry and SMEs, a National 
Registration  Centre  has  been  established  to  facilitate  business  registration.  A  strategy  to 
promote SME competitiveness was approved. An updated action plan to address the informal 
economy  and  to  remove  administrative  barriers  to  investment  is  in  place.  Export  guarantee 
funds  have  been  established.  An  updated  action  plan  to  remove  administrative  barriers  to 
investment is in place. However, further progress is needed on tackling the informal economy 
and  improving  the  business  environment.  Progress  on  agriculture  has  been  limited.  Some 
incentives  to  increase  production  have  been  introduced,  but  the  competitiveness  of  the 
farming  sector  remains  low.  Compliance  with  EU  veterinary  and  phytosanitary  standards, 
required to benefit from SAA and Interim Agreement trade concessions, remains poor. There 
has  been  some  progress  in  the  area  of  fisheries  control  and  inspection,  although  over-
exploitation and illegal fishing continue. 

EN 

23 

   EN 

 
Regarding  environment,  some  progress  has  been  made  on  horizontal  legislation,  but 
implementation remains weak. Further efforts are required in the areas of waste management 
and  water  quality.  Administrative  capacity  needs  to  be  strengthened  in  order  to  implement 
already  transposed  legislation.  Progress  in  the  field  of  transport  has  been  limited.  Albania 
ratified  the  European  Common  Aviation  Area  Agreement  and  is  working  towards  the 
implementation  of  its  first  transitional  phase.  Albania  is  actively  participating  in  the 
development of the Core Regional Transport Network and in the South East Europe Transport 
Observatory, particularly by approving the second rolling five year Multi-Annual Plan 2007-
2011  (MAP).  Substantial  improvements  are  required  as  regards  the  safety  of  maritime 
transport. 

In  the  energy  sector,  Albania  has  not  been  able  to  ensure  security  of  electricity  supply. 
Considerable efforts are required to meet the requirements of the Energy Community Treaty 
(ECT). Being a party to the ECT, Albania is obliged to implement the relevant EU legislation, 
in particular on energy, as from July 2007. Despite some progress, including new legislation 
on  hydroelectric  generation  concessions  and  a  limited  increase  in  bill  collection,  the  energy 
sector remains in a critical state. This is hampering the social and economic development of 
the country. 

Work  towards  fulfilling  Albania's  SAA  commitments  on  information  society  and  media  is 
lagging  behind.  Market  liberalisation  in  the  areas  of  electronic  communications  and 
information  technologies  remains  at  an  early  stage.  The  regulatory  framework  is  not  yet  in 
line  with  the  acquis  and  the  telecommunications  regulator  needs  to  develop  its  capacity. 
Regarding  financial  control,  a  new  law  on  internal  audit  was  adopted.  An  appropriate 
inspection  service  remains  to  be  developed.  Progress  has  been  reasonable  in  the  field  of 
statistics. Most major statistical classifications are in place and comply with EU standards. 

In the field of justice, freedom and security progress has been made in some areas. Further 
improvement  is  needed  overall.  Technology  for  visa  issuing  and  for  security  of  diplomatic 
and  service  passports  has  been  improved.  An  EU-Albania  visa  facilitation  agreement  was 
signed. Biometric passports in line with EU standards need to be issued. Further amendments 
are required to the Law on foreigners for it to reach EU standards. 

New infrastructure, extension of IT links and better inter-agency and cross-border police co-
operation have improved border control. An integrated border management strategy has been 
adopted  by  the  government.  Border  crossing  point  infrastructure  nonetheless  remains  below 
EU standards.  Laws on  asylum comply  with international  standards but no coherent asylum 
strategy  is  yet  in  place  and  implementation  remains  weak.  A  unit  to  oversee  the 
implementation  of  the  national  migration  strategy  was  established.  Migration  checks  at 
borders  are  now  somewhat  more  effective,  but  there  is  still  considerable  room  for 
improvement.  Albania  has  signed  a  readmission  protocol  with  Austria  under  the  2006  EC-
Albania  Readmission  Agreement.  However,  more  effective  data  management  and  better  co-
operation  with  neighbouring  countries  are  needed.  Border  police  staffing  needs  to  be  more 
stable, in particular to implement the EC-Albania Readmission Agreement properly. 

The  banking  system  is  better  used  to  fight  money  laundering;  most  public  administration 
salaries are now paid through banks. Handling of stolen goods is now a criminal offence. A 
joint  investigation  unit  links  the  Ministries  of Interior and Finance, the General  Prosecution 
Office and the State Intelligence Service. However, concrete results in the fight against money 
laundering  remain  poor.  Legislation,  investigative  resources  and  expertise,  technological 
support and inter-institutional co-operation need to be improved. 

EN 

24 

   EN 

 
Greater  use  is  being  made  of  cross-service  anti-narcotics  task  forces.  Co-operation  with 
foreign  partners  is  improving.  Proper  storage  infrastructure  for  seized  drugs  is  being  built. 
However,  drug  trafficking  remains  a  serious  concern.  Significant  quantities  of  drugs  were 
seized  but  were  still  low  compared  with  the  amounts  which  are  estimated  to  be  trafficked 
through Albania. More determination and improved co-operation between the police and the 
judiciary  is  required  to  prosecute  suspected  drug  traffickers  and  corrupt  officials  on 
appropriate charges. Detection measures and equipment at borders need to be improved. 

A  new  state  police  law  has  been  adopted  which  should  help  de-politicise  the  police.  The 
South East Europe Police Co-operation Convention, now ratified, and  a strategic agreement 
with  Europol  provide  for  intensified  international  co-operation.  However,  police  staff  have 
been  reduced  without  due  attention  to  maintaining  the  capacity  and  continuity  of  key  units. 
Success in investigation and prosecution remains hampered by poor communication between 
police  and  prosecutors.  Police  management  and  internal  control  structures  need  to  be 
strengthened. 

Organised crime remains a very serious problem. A number of high-profile organised crime 
arrests  were  made.  Police  response  to  serious  crimes  has  improved.  New  tactical  and 
investigative  equipment  has  been  introduced.  Co-operation  with  Interpol  has  improved, 
allowing  a  number  of  international  arrest  warrants  to  be  executed.  However,  many 
international  arrest  requests  have  not  yet  been  acted  upon.  Efforts  against  organised  crime 
remain hampered by corruption and weak witness protection. IT problems hinder the use of 
criminal intelligence. Although co-operation with neighbouring countries on vehicle theft has 
improved, domestic inter-agency co-operation is poor, reducing efficiency. 

Albania  has  continued  to  investigate  and  prosecute  trafficking  in  human  beings  vigorously. 
Border  controls  have  become  somewhat  more  effective  and  international  co-operation  has 
improved. However, Albania is still a significant transit country and levels of sex trafficking 
within  the  country  have  risen.  Few  victims  are  willing  to  testify  against  traffickers,  due  to 
weak  witness  protection.  Poor  co-ordination  hampers  implementation  of  the  national  anti-
trafficking strategy. 

Counter-terrorism structures in the police and the intelligence service now co-operate better. 
Co-operation with international actors has been good. Albania adopted an export control law 
for military equipment which is in line with the acquis. However, equipment and training for 
counter-terrorist analysts and investigators remain insufficient. 

The  law  on  protection  of  personal  data  is  being  revised  to  bring  it  into  line  with  European 
standards.  However,  an  independent  data  protection  supervisory  authority  with  sufficient 
powers resources is not yet in place. 

Bosnia and Herzegovina 

As  regards  the  political  criteria,  Bosnia  and  Herzegovina's  progress  has  slowed  down. 
Complex  institutional  arrangements,  disregard  for  the  Dayton/Paris  peace  agreement  and 
nationalist rhetoric have undermined the country's reform agenda. Key European Partnership 
priorities remain to be addressed. Bosnia and Herzegovina's political leaders failed to achieve 
police reform. Lack of progress on this and other important issues is delaying the conclusion 
of the Stabilisation and Association Agreement (SAA). 

EN 

25 

   EN 

 
Limited  progress  has  been  made  in  the  area  of democracy  and  the  rule  of  law.  Bosnia  and 
Herzegovina's  system  of  governance  continues  to  involve  significant  international  presence. 
The  Office  of  the  High  Representative/EU  Special Representative  (OHR)  has been working 
closely  with  the  European  Commission  to  bring  Bosnia  and  Herzegovina  closer  to  the  EU. 
However,  the  authorities  of  Bosnia  and  Herzegovina  have  not  demonstrated  the  capacity  to 
take  further  political  ownership  and  responsibility.  Urgent  measures  are  needed  to  ensure 
effective  functioning  of  the  state  level  institutions.  The  Peace  Implementation  Council 
decided  to  postpone  the  closure  of  OHR  to  30  June  2008  and  to  review  the  situation  in 
February 2008. 

The  elections  in  October  2006  were  generally  in  line  with  international  standards.  The 
government  of  Republika  Srpska  was  formed  in  November,  but  the  state-level  government 
and  that  of  the  Federation  of  Bosnia  and  Herzegovina  needed  more  than  four  months  to  be 
constituted. Some progress has been made in improving the technical and human resources of 
the State-level parliamentary assembly, but important committees such as the committee for 
European integration require further strengthening. No progress has been made in improving 
state-entity  co-ordination.  Overall  performance  of  the  executive  and  legislative  institutions 
has remained poor. Discussions on constitutional reform have stalled. 

Some  progress  has  been  made  in  the  area  of  public  administration  but  significant  further 
efforts  are  needed.  The  public  administration  reform  co-ordinator's  office  has  been 
strengthened and initial steps have been taken to implement the public administration reform 
strategy,  which  is  a  key  European  Partnership  priority.  An  EU  supported  public 
administration  reform  fund  has  been  set  up.  The  civil  service  agencies  have  improved  their 
efficiency and there have been further steps towards equipping the state-level ministries and 
institutions, especially in terms of staffing and office space. Sustained efforts are necessary to 
ensure the proper implementation of the national strategy for the public administration and to 
progress towards an efficient, professional, stable, transparent and accountable civil service. 

As  regards  the  judicial  system,  Bosnia  and  Herzegovina  has  made  progress  in  reducing  its 
dependence  on  the  international community  through  the  replacement  of  international  judges 
and  prosecutors  by  local  ones.  However,  the  fragmentation  of  the  judicial  system  and 
disparities  in  the  legal  framework  continue  to  hamper  the  operation  of  the  judiciary.  The 
independence  and  efficiency  of  the  judicial  system  need  to  be  further  enhanced.  The  state 
level  war  crime  chamber  continued  to  function  effectively.  However,  criminals  need  to  be 
prosecuted more vigorously at entity-level. 

Bosnia  and  Herzegovina  has  achieved  little  progress  in  the  fight  against  corruption,  which 
remains widespread and constitutes a serious problem. The National Anti-Corruption Strategy 
has not been properly implemented. More determined action against corruption is necessary. 

Little  progress  has  been  made  in  relation  to  human  rights  and  protection  of  minorities. 
Overall  implementation  of  international  human  rights  conventions  needs  to  improve;  full 
compatibility  of  Bosnia  and  Herzegovina's  legislation  with  the  European  Convention  of 
Human  Rights  is  yet  to  be  achieved.  There  is  also  room  for  improvement  as  regards  the 
prevention of ill-treatment by law enforcement bodies and the fight against impunity, as well 
as access to justice and equality before the law. Further efforts are necessary to address the 
functioning of the prisons system in general, including the poor living conditions of inmates. 
Religious intolerance remains an issue. In the field of freedom of expression and media, the 
Federation  public  broadcasting  law  has  not  been  adopted;  this  is  necessary  to  meet  a  key 
European Partnership priority. Bosnia and Herzegovina has made progress in addressing the 

EN 

26 

   EN 

 
backlog  of  human  rights-related  cases,  but  court  rulings  have  not  always  been  properly 
implemented. 

Bosnia and Herzegovina's legal framework includes provisions to protect the rights of women, 
children  and  socially  vulnerable  people,  but  implementation  is  poor  overall.  There  is  no 
comprehensive anti-discrimination law. There has been no progress on the registration of the 
trade-union  confederation.  The  complex  system  of  government  and  the  fragmentation  of 
legislation  across  the  country  continue  to  hamper  social  dialogue.  Some  progress  has  been 
made  as  regards  the  support  provided  by  the  authorities  to  civil  society  development,  even 
though the sector remains weak overall. 

In the area of protection of minorities further efforts are necessary to combat intolerance and 
ethnic  discrimination,  as  well  as  to  improve  the  implementation  of  legislation  concerning 
minorities.  The  state-level  Council  of  National  Minorities  and  corresponding  entity-level 
bodies  are  not  operational.  Many  refugees  and  internally  displaced  persons  do  not  benefit 
from basic pension and health provisions. Socio-economic integration of returnees remains a 
problem.  The  Roma  minority  still  faces  very  difficult  living  conditions  and  discrimination, 
especially in the areas of education, social protection, health care, housing and employment. 
Concrete action is required to implement the national strategy for the Roma. 

Some progress has been achieved in relation to regional issues and international obligations. 
Bosnia  and  Herzegovina  participates  actively  in  regional  co-operation  and  has  given  its 
support  to  the  South  East  Europe  Co-operation  Process  (SEECP)  and  the  Regional  Co-
operation  Council  (RCC).  It  has  concluded  a  number  of  regional  agreements,  including  the 
amended  Central  European  Free  Trade  Agreement  (CEFTA),  which  now  require  proper 
implementation.  Bosnia  and  Herzegovina's  co-operation  with  the  International  Criminal 
Tribunal  for  the  former  Yugoslavia  (ICTY)  has  improved  and  is  now  at  a  generally 
satisfactory  level.  However,  full  co-operation  with  the  ICTY  remains  necessary  to  sign  the 
SAA and meet a key European Partnership priority. While Bosnia and Herzegovina has met 
most of the Council of Europe post-accession requirements, their  implementation  is lagging 
behind.  As  regards  the  International  Criminal  Court,  the  bilateral  immunity  agreement  with 
the United States is not in line with the relevant EU common position and guiding principles. 

On  the  whole  Bosnia  and  Herzegovina's  relations  with  its  neighbours  have  been  good, 
although  certain  strains  have  appeared  in  particular  in  relation  to  the  ruling  of  the 
International  Court  of  Justice  on  Bosnia  and  Herzegovina's  lawsuit  against  Serbia  and 
Montenegro for genocide. Little progress has been made in addressing the outstanding trade 
and border-related matters. 

Bosnia and Herzegovina’s economy has continued to expand rapidly. Overall macroeconomic 
stability  has  been  maintained,  but  threats  to  fiscal  sustainability  persist.  The  persistence  of 
very high unemployment remains a major cause of concern. The deterioration of the overall 
political climate in the country was reflected in a slow-down in structural reform and in the 
business environment. Country-wide economic integration across entities has still to be fully 
achieved. 

As  regards  economic  criteria,  Bosnia  and  Herzegovina  has  made  little  progress  towards 
establishing  a  functioning  market  economy.  Major  reforms  are  needed  to  enable  it  to  cope 
over the long term with competitive pressure and market forces within the Union. 

EN 

27 

   EN 

 
Economic  growth  remained  high  and  accelerated,  while  the  external  balance  improved 
markedly  in  2006.  The  currency  board  arrangement  continued  to  underpin  macroeconomic 
stability and inflation receded to the low levels recorded before the introduction of the VAT in 
January 2006. The introduction of VAT has increased fiscal revenue in 2006. The Federation 
took  steps  to  replicate  the  January  2007  reform  of  direct  taxation  in  the  Republika  Srpska, 
which  simplified  the  tax  system  and  reduced  the  fiscal  burden.  Privatisation  progressed  in 
Republika Srpska, led by major sales in the telecommunication and oil sectors. Foreign direct 
investment (FDI) increased significantly in 2007 and helped finance the external deficit. The 
financial  sector  developed  rapidly  while  price  competitiveness  was  to  a  large  extent 
preserved. 

However, the overall political climate and weak domestic consensus on the fundamentals of 
economic policy led to a slow-down of reforms both at entity and other levels of government. 
The  lack  of  coherence  and  consensus  in  the  implementation  of  reforms  was  manifest  in 
particular  in  the  Federation  where  the  privatisation  and  restructuring  of  publicly-owned 
enterprises slowed down. Despite robust economic growth, unemployment remains very high. 
Public spending, and in particular social spending, rose significantly, weakening the quality of 
fiscal  adjustment  and  adding  to  fiscal  risks.  Significant  structural  rigidities  hamper  the 
functioning  of  the  labour  market.  The  restructuring  of  state-owned  enterprises  advanced 
slowly  and  progress  in  the  liberalisation  of  network  industries  was  limited.  The  business 
environment is still affected by significant administrative inefficiencies, weak enforcement of 
creditor and property rights and sizeable intervention of the state in the productive sector. The 
large  informal  sector,  fuelled  by  weaknesses  in  law  enforcement  and  the  regulatory 
framework, reduces the tax base, hampers the government's capacity to implement economic 
policies and affects negatively the business environment. 

Overall,  Bosnia  and  Herzegovina  has  made  limited  progress  in  aligning  its  legislation  and 
policies  with  European  standards.  In  areas  such  as  competition,  transport,  energy  visa 
management and asylum, some progress has been made. In other areas, such as social policies 
and  employment,  little  has  been  achieved.  Bosnia  and  Herzegovina's  administration 
conducted  the  SAA  negotiations  in  a  professional  and  efficient  manner;  however,  the 
country's overall administrative capacity needs strengthening. 

Regarding  the  internal  market,  some  developments  have  taken  place  in  the  area  of  free 
movement  of  goods.  Preparations  in  the  field  of  standardisation,  certification  and  market 
surveillance  have  advanced,  though  slowly.  A  lack  of  conformity  assessment  bodies  and 
procedures  continues  to  hinder  export  capacity.  The  establishment  of  a  market  surveillance 
structure based on appropriate product legislation and the phasing out of pre-market controls 
remain pending. 

Limited progress has been made as regards services, right of establishment and company law. 
Registering  businesses  and  obtaining  licenses  remain  burdensome.  Banking  supervision  has 
not been brought to the State level and remains an Entity responsibility. 

No  significant  further  development  has  taken  place  in  the  area  of free  movement  of  capital, 
but  Bosnia  and  Herzegovina's  preparations  in  this  area  are  on  track.  Limited  additional 
progress has been made in relation to customs rules. Issues which deserve particular attention 
are rules of origin, valuation and free zones. As for taxation, VAT collection has been higher 
than expected, but no system for the reallocation of the collected revenue to the Entities and 
the Brčko District has been agreed. Some action has been taken regarding harmonization of 
direct taxation. 

EN 

28 

   EN 

 
As  regards  competition,  Bosnia  and  Herzegovina  is  progressing  steadily  in  the  area  of  anti-
trust  control.  Some  progress  has  also  been  made  with  regard  to  state  aid  through  the 
establishment  of  a  preliminary  state  aid  inventory.  However,  an  adequate  regulatory 
framework for state aid is still missing. Some developments have taken place in the field of 
public  procurement,  in  particular  as  regards  improved  operation  of  the  Public  Procurement 
Agency  and  the  Procurement  Review  Body.  Little  progress  has  been  made  regarding  the 
enforcement of intellectual property rights. 

No  progress  has  been  made  as  regards  the  European  standards  on  social  policies  and  few 
developments  have  occurred  in  meeting  the  European  standards  on  employment  policies. 
Social  and  employment  legislation  and  policies  remain  extremely  fragmented.  The 
institutional set-up of the country continues to be a serious handicap to the development of the 
necessary  co-ordinated  approaches.  Some  progress  has  been  made  with  the  European 
standards  in  the  field  of  education,  notably  through  the  adoption  of  a  higher  education  law 
supporting  the  participation  in  the  Bologna  process.  Efforts  are  needed  to  increase  co-
ordination  between  the  authorities  involved  in  education  at  all  levels  of  government. 
Separation of children in schools along ethnic lines remains an issue. 

Little  additional  progress  has  been  made  towards  ensuring  the  existence  of  a  real  internal 
market within Bosnia and Herzegovina, which is a key European Partnership priority. In this 
context,  the  State  laws  on  obligations,  leasing  and  pharmaceutical  products  have  not  been 
adopted. 

As far as sectoral policies are concerned, no significant developments can be reported in the 
area of industry and small and medium enterprises (SME). The industry policy strategy and 
the SME Development strategy have not been adopted. 

Little  progress  has  been  made  in  the  field  of  agriculture.  Policy  is  still  being  developed  at 
Entity  level  and  co-ordination  is  insufficient.  The  development  of  a  comprehensive 
agricultural  strategy  is  delayed,  although  some  steps  have  been  taken  to  establish  the 
necessary  State-level  legal  framework.  Implementation  of  the  food  safety,  veterinary  and 
phytosanitary legislation is poor, mainly due to inadequate human and financial resources and 
weak co-ordination between State and Entity services. Bosnia and Herzegovina's preparations 
in the field of environment remain at an early stage. A State-level environmental law to create 
the framework for a nationwide, harmonised environmental protection has not been adopted 
and the state environment agency has not been set up. 

Sustained,  albeit  slow,  progress  continues  regarding  Bosnia  and  Herzegovina’s  involvement 
in  developing  the  trans-European  transport  network  as  it  is  actively  participating  in  the 
development of the Core Regional Transport Network and in the South East Europe Transport 
Observatory (SEETO). Bosnia and Herzegovina is working towards the implementation of the 
first transitional phase the European Common Aviation Area Agreement (ECAA). 

Little  additional  progress  has  been  made  in  the  field  of  energy.  As  a  party  to  the  Energy 
Community  Treaty,  Bosnia  and  Herzegovina  needs  to  implement  the  relevant  EU  energy 
legislation, in particular that related to the gas sector. In the electricity sector, transmission has 
been  unbundled,  and  the  independent  system  operator  (ISO)  and  the  transmission  company 
(Transco) are in place. Some problems persist with the transfer of liabilities between ISO and 
Transco with an adverse impact in the operation of the system. Reforms in the gas sector are 
particularly delayed. A country-wide energy strategy has not yet been developed. 

EN 

29 

   EN 

 
As  regards  information  society  and  media,  some  progress  has  been  made  in  terms  of 
liberalisation  of  the  telecommunication  sector  and  approximation  of  audiovisual  legislation 
with the acquis by the Communications Regulatory Agency. No progress has been made on 
public broadcasting and the establishment of a State-level information agency. Some limited 
progress has been made in the area of financial control. 

In  the  field  of  statistics,  the  co-operation  agreement  between  the  country's  statistics 
institutions  at  State  and  Entity  level  has  not  been  properly  implemented.  Significant  efforts 
are  necessary  to  establish  an  effective,  EU-compliant  statistical  system  in  Bosnia  and 
Herzegovina. 

In the area of justice, freedom and security, some progress has been made in the fields of visa 
administration, border management, asylum and  migration. The lifting of visa requirements 
for  all  EU  citizens  has  been  confirmed.  The  readmission  and  visa  facilitation  agreements  at 
EU-level  have  been  signed.  Further  progress  has  been  made  in  establishing  a  functioning 
asylum  system.  There  have  been  better  results  in  preventing  illegal  migration,  even  though 
there  is  still  considerable  room  for  improvement  as  regards  overall  border  management. 
Biometric passports in line with EU standards need to be issued.  

Some progress has been made on fighting money laundering. The Financial Intelligence Unit 
is better staffed and enforcement has improved. Money laundering remains a serious problem 
which  requires  sustained  efforts.  Some  steps  have  been  taken  as  regards  the  fight  against 
drugs through the establishment of an office for the prevention of the abuse of narcotics. A 
State-level drug policy in line with EU standards remains to be developed. 

Some progress has been made with regard to the operation of the police. Implementation of 
tools  such  as  computer-based  investigations,  criminal  analysis  systems  and  forensics  has 
continued.  A  strategic  agreement  with  Europol  has  been  concluded.  However,  lack  of 
progress on police reform undermines prospects for a unified and more effective police. 

Bosnia  and  Herzegovina  has  made  little  additional  progress  as  regards  the  fight  against 
organised  crime  and  trafficking  in  human  beings  which  remain  matters  of  concern.  The 
implementation  of  the  strategy  to  combat  organised  crime  has  been  insufficient.  The  legal 
framework to fight organised crime is in place, but law implementation needs to improve. The 
State Investigation and Protection Agency has conducted more investigations and made more 
arrests.  It  now  needs  to  reach  its  full  capacity,  notably  in  terms  of  staff.  The  2005-2007 
national action plan for combating trafficking in human beings has been implemented, but no 
follow-up  strategy  has  been  prepared.  Inconsistencies  between  state-  and  entity-level 
legislation  continue  to  hinder  prosecution  of  serious  crimes.  Bosnia  and  Herzegovina  has 
continued its efforts to counter terrorism, but resources remain insufficient. The State agency 
for data protection has not yet been established. 

Croatia 

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

Democracy  and  the  rule  of  law  have  been  further  strengthened.  Both  Government  and 
Parliament  have  continued  to  function  without  significant  difficulties.  However,  there  is 

EN 

30 

   EN 

 
considerable scope for further improvement in the judiciary, in the public administration and 
in the fight against corruption. Significant improvements in these areas are essential to create 
a solid basis for full implementation of the acquis. 

Progress  on  public  administration  reform  has  been  limited.  A  policy  paper  covering  the 
underlying principles for the revision of the Law on General Administrative Procedures was 
adopted,  as  were  two  further  implementing  regulations  for  the  Civil  Service  Law.  Some 
improvements in civil service training and in human resources management have been made. 
However,  an  overall  strategic  framework  for  reform,  as  well  as  the  adoption  of  regulations 
necessary  for  implementation  of  the  Civil  Service  Law  have  been  further  delayed.  The 
administrative  system  remains  inefficient.  Widespread  weaknesses  in  human  resources 
management remain. The civil service also continues to suffer from high staff turnover and a 
lack of qualified personnel as well as undue political influence at all levels. Further sustained 
efforts are needed. 

Some  progress  has  been  made  on  implementing  the  strategy  to  reform  the  judicial  system. 
Legislative  and  organisational  steps  have  been  taken  to  improve  the  functioning  of  the 
judiciary.  Further  progress  has  been  made  in  reducing  the  case  backlog.  However,  these 
improvements are as yet insufficient. Little progress has been made with regard to improving 
the  accountability,  impartiality,  professionalism  and  competence  of  the  judiciary.  The  case 
backlog  remains  large.  Little  progress  has  been  made  on  the  rationalisation  of  the  court 
network.  Despite  some  progress,  war  crimes  proceedings  in  Croatia  need  to  be  further 
improved.  Bias  against  Serb  defendants  still  needs  to  be  fully  addressed,  as  does  witness 
protection.  Reform  is  moving  forward  but  considerable  efforts  are  needed  to  overcome  the 
weaknesses of the judicial system. 

Some  first  results  are  appearing  in  the  fight  against  corruption.  The  anti-corruption 
programme 2006-2008 is being implemented. The legal framework to combat corruption has 
been  further  improved.  The  Office  for  the  Fight  against  Corruption  and  Organised  Crime 
(USKOK)  has  become  more  active  and  is  involved  in  the  investigation  of  some  important 
corruption cases. However, corruption remains widespread. There is a need for greater efforts 
to prevent, detect and prosecute corruption. No indictment or verdict has been issued in any 
high-level  corruption  case.  The  concept  of  conflict  of  interest  is  little  understood. 
Implementation  of  the  anti-corruption  programme  lacks  strong  co-ordination  and  efficient 
non-partisan monitoring. 

Some progress has been made in the area of human rights and the protection of minorities. 
Legal  provisions  on  human  rights  protection  are  in  general  adequate,  but  a  number  of 
important challenges remain in terms of implementation. 

Some progress has been made with regard to the implementation of the Constitutional Law on 
National  Minorities  (CLNM).  A  recruitment  plan  for  2007  for  minorities  in  the  State 
administration  was  adopted  and  funding  for  minorities  further  increased.  There  have  been 
fewer  reports  of  ethnically-motivated  attacks  against  the  Serb  minority  and  the  Orthodox 
Church. Greater attention is being paid to the Roma minority. 

However,  serious  problems  remain  for  minorities.  Croatia  needs  to  encourage  a  spirit  of 
tolerance towards the Serb minority and take appropriate measures to protect those who may 
still be subject to threats or acts of discrimination, hostility or violence. Serbs face particular 
difficulties  in  the  area  of  employment.  The  Roma  minority  still  faces  difficult  living 
conditions  and  discrimination,  especially  in  the  areas  of  education,  social  protection,  health 

EN 

31 

   EN 

 
care,  housing  and  employment.  Legal  provisions  and  programmes  need  to  be  implemented 
with more determination, especially in the area of employment. A comprehensive strategy and 
action plan on all forms of discrimination has not yet been adopted. 

Progress  on  refugee  return  has  been  limited.  Reconstruction  of  housing  has  continued. 
However,  implementation  of  housing  care  programmes  for  former  tenancy  rights  holders 
remains  extremely  weak.  Implementation  in  the  urban  areas  is  little  changed,  with  no  more 
than 2% of cases resolved. Moreover, no progress has been made on validating pension rights. 
Efforts to create the economic and social conditions necessary for the sustainability of refugee 
return need to be accelerated. 

Access to justice is still hampered by the limits of the existing system of legal aid, as well as 
by high lawyers' fees and weaknesses in the judicial system. There continues to be room for 
improvement  in  prison  conditions.  There  is  a  shortage  of  prison  staff  and  capacity. 
Overcrowding continues. 

Freedom of expression including freedom and pluralism of the media continue to be provided 
for in Croatia. However, occasional political pressure on the media remains. 

Plans  aimed  at  improving  women’s  and  children’s  rights  have  raised  awareness.  However, 
further improvements in implementation need to be made. The protection of women against 
all  forms  of  violence  needs  to  be  further  improved.  Implementation  measures  regarding  the 
protection of children's rights have to be accelerated. 

As  regards  regional  issues  and  international  obligations,  full  co-operation  with  the 
International Criminal Tribunal for the former Yugoslavia (ICTY) has continued and overall 
compliance  with  the  Dayton/Paris  and  Erdut  agreements  has  been  ensured.  Impartial 
prosecution of cases transferred from ICTY to Croatian jurisdiction as well as of domestically 
initiated cases needs to be ensured. 

There  has  been  continued  general  progress  in  the  area  of  regional  co-operation.  Croatia's 
chairmanship  of  the  South-East  Europe  Co-operation  Process  (SEECP)  was  successful, 
allowing  good  progress  to  be  made  in  the  transition  from  the  Stability  Pact  to  a  more 
regionally owned framework with a strengthened SEECP and the new Regional Co-operation 
Council. Croatia ratified the new Central European Free Trade Agreement (CEFTA). 

Little progress has been made more generally towards finding definitive solutions to various 
open bilateral issues between Croatia and its neighbours, particularly as regards borders. The 
informal  agreement  between  the  Prime  Ministers  of  Croatia  and  Slovenia  to  request  third 
party involvement on open border issues constitutes progress and needs to be followed up. In 
December  2006  the  Croatian  Parliament  decided  that  the  Croatian  ecological  and  fishing 
protection zone would be applied to EU Member States as from 1 January 2008. This decision 
deviates from the political agreement reached between the countries concerned in June 2004, 
referred  to  in  the  European  Council  conclusions  of  16-17  June  2004;  this  issue  needs  to  be 
resolved. Efforts are needed to further develop co-operation and good neighbourly relations. 

Croatia’s  economy  registered  strong  and  accelerated  growth.  Macroeconomic  stability, 
including  low  inflation,  was  maintained.  However,  external  imbalances  may  affect 
macroeconomic  stability.  Fiscal  consolidation  continued  and  needs  to  be  further  pursued. 
Structural  reforms  as  well  as  privatisation  moved  forward  slowly.  The  overall  business 

EN 

32 

   EN 

 
environment improved but inefficiencies in public administration and the judiciary continued 
to hamper private sector development. 

As regards economic criteria, Croatia is a functioning market economy. It should be able to 
cope  with  competitive  pressures  and  market  forces  within  the  Union  in  the  medium  term, 
provided that it implements its comprehensive reform programme with determination in order 
to reduce structural weaknesses. 

Broad  political  consensus  on  the  fundamentals  of  a  market  economy  has  been  maintained. 
Stability-oriented  macroeconomic  policies  have  contributed  to  low  inflation,  exchange  rate 
stability and a significant reduction of the general government deficit. Economic performance 
remained  strong  and  private  investment  picked  up  further.  Employment  rose  and 
unemployment,  though  still  high,  declined.  The  business  environment  improved  and  some 
important  privatisation  deals  were  prepared  or  concluded.  The  government's  capacity  to 
design medium-term economic policy frameworks was further strengthened. New prudential 
regulations led to a stronger recapitalisation of banks, conducive to financial sector stability. 
Further  progress  was  made  in  enhancing  competition  in  the  telecommunication  sector. 
Reforms  of  the  loss-making  railway  system  continued.  Croatia's  economy  is  well  integrated 
with the EU. 

However,  economic  policy  coordination  remained  weak.  Rising  external  imbalances  imply 
potential risks to macroeconomic stability and the need for stronger fiscal consolidation. The 
benign economic environment and strong revenues were not fully used to reduce the budget 
deficits, but led to an expansion of spending instead. Subsidies to loss-making enterprises and 
a high level of current spending continued to slow down structural change and to put a strain 
on public finances. Progress on the restructuring of the enterprise sector was uneven and state 
intervention remained significant. Private sector initiative was hampered by inefficiencies in 
public administration and the judiciary, partly undermining market entry and exit procedures 
and  the  enforcement  of  property  and  creditor  rights.  Labour  mobility  remained  limited.  In 
order  to  improve  prospects  for  sustained  growth  and  real  convergence,  Croatia  needs  to 
reinforce and deepen structural reforms. 

Croatia has improved its ability to take on the obligations of membership. Preparations for 
meeting EU requirements are moving forward at a steady pace and alignment with EU rules is 
high in some sectors. However, significant efforts lie ahead in order to reach full alignment. 
In most areas there has been some progress, principally in terms of legislative alignment but 
also  as  regards  administrative  capacity  building.  In  some  chapters  such  as  transport  and 
environment, good progress made in previous years has been sustained. In other chapters such 
as  public  procurement  and  taxation,  progress  has  remained  limited.  As  regards  the  overall 
level of alignment and administrative capacity, much remains to be done. 

Some  progress  has  been  made  on  alignment  of  legislation  on  the  free  movement  of  goods. 
However,  many  elements  of  the  acquis  are  not  yet  in  place.  Considerable  efforts  are  still 
required to align legislation and to implement and enforce it effectively. 

As  regards  EU  rules  on  the  free  movement  of  workers  there  has  been  some  progress  but 
increased  efforts  will  be  needed  to  align  legislation  and  to  enforce  and  implement  it 
effectively. 

EN 

33 

   EN 

 
Some  progress  has  been  made  on  the  right  of  establishment  and  the  freedom  to  provide 
services.  Overall  alignment  is  reasonable,  although  considerable  efforts  are  still  required  in 
some areas. 

Croatia made some progress on the free movement of capital. Overall alignment is reasonable. 
However  further  efforts  are  needed,  especially  as  regards  fighting  money  laundering  and 
procedures for acquisition of real estate by EU nationals. 

Croatia  has  made  some  limited  progress  in  the  area  of  public  procurement.  However, 
administrative  capacity  remains  inadequate  at  all  levels  of  the  procurement  system.  Very 
considerable efforts are needed to design an overall strategy for alignment and to strengthen 
the institutional set-up. 

As regards company law some progress can be reported. Alignment with the acquis is on track 
and a reasonable timetable and detailed plan for further work are in place. 

Good progress has been made on intellectual property law, both on legislative transposition 
and  on  enforcement.  Alignment  with  the  acquis  is  well  on  track,  but  continued  efforts  are 
required, particularly on enforcement. 

In  the  field  of  competition  policy,  Croatia  has  continued  to  make  some  progress.  However, 
there is a need for further legislative alignment and for strengthening administrative capacity, 
particularly  at  the  Competition  Agency.  Alignment  with  the  acquis  in  this  chapter  is 
underway, but considerable efforts are still required, in particular on restructuring of the steel 
sector and of the shipyards in difficulty. 

Croatia has made some progress on financial services and alignment with the acquis is well 
underway.  However,  increased  efforts  are  required,  particularly  to  strengthen  banking 
supervision and the Financial Sector Supervisory Authority in the non-banking sector. 

Some progress has been made in the area of information society and media. However, further 
efforts are needed for effective liberalisation of the telecoms market, including introduction of 
a  new  primary  law  and  further  strengthening  of  the  Agency.  Overall,  Croatia  has  reached  a 
good level of alignment with the acquis in this chapter. 

Croatia  has  continued  to  make  progress  in  agriculture  and  rural  development.  Preparations 
are well advanced with regard to quality policy and organic farming. Good progress has been 
achieved  on  rural  development,  although  preparations  need  to  be  intensified  with  IPARD. 
Considerable efforts are required for the establishment of administrative structures to ensure 
the correct implementation of the Common Agricultural Policy. 

Concerning  fisheries,  Croatia  has  made  some  progress.  Gaps  remain  in  the  areas  of  fleet 
management, inspection and control, structural actions and state aid. 

Good progress has been made as regards food safety, veterinary and phytosanitary policy, in 
particular  with  the  adoption  of  framework  and  secondary  legislation.  Considerable  further 
efforts are however required, including to strengthen administrative capacity and to adopt and 
implement a food safety strategy. 

As regards transport, Croatia has continued to make good progress on alignment, in particular 
in  the  areas  of  rail  and  maritime  transport.  It  is  working  towards  the  implementation  of  the 
first transitional phase of the European Common Aviation Area. It is actively participating in 

EN 

34 

   EN 

 
the  development  of  the  Core  Regional  Transport  Network  and  in  the  South  East  Europe 
Transport Observatory (SEETO). Considerable efforts are still needed however, including to 
ensure adequate administrative capacity for most transport sectors. 

There has been good progress on energy. However, continued efforts are needed on alignment 
with the acquis, especially in the area of energy efficiency and building enforcement capacity. 
As  a  party  to  the  Energy  Community  Treaty,  Croatia  needs  to  implement  the  relevant  EU 
energy legislation as from July 2007. 

There  has  been  very  limited  progress  on  taxation.  Alignment  of  tax  legislation  is  far  from 
complete  and  the  de  facto  discrimination  in  excise  duty  on  cigarettes  needs  to  be  removed. 
Substantial efforts are required to strengthen administrative capacity, in  particular  regarding 
IT interconnectivity. 

There  has  been  significant  progress  in  the  area  of  economic  and  monetary  policy.  Overall 
alignment with the acquis is well advanced. However, further efforts are needed, especially to 
ensure full independence of the Central Bank. 

Good progress has been made on statistics and the basic legal framework is to a large extent 
aligned.  However,  continued  efforts  are  necessary,  especially  in  terms  of  strengthening 
administrative capacity. 

Some  progress  has  been  made  concerning  the  acquis  on  social  policy  and  employment. 
Increased efforts are needed to complete alignment and especially to strengthen administrative 
and enforcement capacity. 

On enterprise and industrial policy Croatia has made good but uneven progress. A reasonable 
level  of  alignment  has  been  achieved.  In  sectors  such  as  shipbuilding,  progress  has  been 
limited. 

Good progress has been made in aligning with the acquis on Trans European Networks. 

There  has  also  been  some  progress  on  regional  policy  and  co-ordination  of  structural 
instruments.  However,  continued  efforts  are  needed  to  set  up  the  administrative  structures 
necessary for the management of EU funding. 

As regards the judiciary and fundamental rights some progress has been made. Reform of the 
judiciary is moving forward but significant challenges remain, especially to improve judicial 
efficiency.  Some  progress  has  been  made  in  the  fight  against  corruption,  with  further 
legislative  strengthening  and  first  results  in  some  important  cases  handled  by  USKOK. 
However,  corruption  remains  widespread  and  efforts  need  to  be  intensified  and  sustained. 
Measures are generally in place to guarantee fundamental rights. However, further efforts are 
required, especially as regards implementation of minority rights, including refugee return. 

In the area of justice, freedom and security Croatia has made progress, particularly on border 
management, migration and asylum. However, the integrated border management action plan 
remains  to  be  implemented  and  equipment  upgraded.  Considerable  efforts  are  needed  to 
ensure  administrative  and  enforcement  capacity,  particularly  in  terms  of  inter-agency  co-
operation as well as to prevent corruption and to fight organised crime. 

Good progress has been made in the chapter science and research and education and culture. 
In both cases, a good overall level of alignment has been reached. 

EN 

35 

   EN 

 
As regards the environment good progress has been made, especially in the areas of horizontal 
legislation,  air  quality,  waste  management  and  chemicals.  Administrative  capacity  needs 
significant  strengthening,  especially  at  local  level.  A  comprehensive  plan  in  this  regard  as 
well as financial resources to implement and enforce the acquis needs to be developed. 

There has been good progress in the area of consumer and health protection. A good level of 
legal alignment has already been achieved. However, continued efforts are required to align 
legislation in a number of areas and to implement and enforce it effectively. 

Croatia  has  made  further  progress  in  the  area  of  the  Customs  union,  and  legislation  is  well 
aligned  with  the  acquis.  However,  preparations  to  improve  administrative  capacity  and 
develop IT systems are still at an early stage, in particular with regard to IT interconnectivity. 

Progress has continued in the area of external relations. 

Progress has also continued as regards Foreign, Security and Defence Policy, and a good level 
of  alignment  has  been  reached.  However,  implementation  and  enforcement  of  arms  control 
needs to be strengthened. 

There  has  been  some  progress  on  financial  control,  notably  as  regards  public  internal 
financial control. Continued efforts are needed, however. In the case of protection of the EU's 
financial interests, the anti-fraud co-ordination service needs to become fully operational. 

There has been some progress on financial and budgetary provisions. 

The former Yugoslav Republic of Macedonia 

The  former  Yugoslav  Republic  of  Macedonia  has  made  some  progress  in  addressing  the 
political criteria. However, frequent tension and problems in achieving constructive dialogue 
between  major  political  actors  undermined  the  effective  functioning  of  the  political 
institutions  and  led  to  a  slowdown  in  reforms.  The  short-term  priorities  of  the  European 
Partnership have been partially fulfilled. 

The  implementation  of  the  Ohrid  Framework  Agreement  continues  to  contribute  to  the 
consolidation of democracy and the rule of law. However, further efforts are needed to fully 
implement  the  agreement  and  to  consolidate  confidence  between  the  political  parties 
representing  the  different  ethnic  communities.  A  consensual  approach  and  readiness  to 
compromise are necessary and the spirit of the agreement should be more consistently upheld. 
The boycott of Parliament by one of the major opposition parties as well as the poor quality of 
cooperation between the President and the Prime Minister hindered the effective functioning 
of the political institutions. The recent clash in parliament and the attack on journalists are a 
grave cause for concern and should be thoroughly investigated. 

As  regards  public  administration  reform,  the  law  on  civil  servants  is  being  gradually 
implemented. Decentralisation has been steadily pursued and the second phase which relates 
to  fiscal  decentralisation  has  begun.  Public  bodies  are  co-operating  better  with  the 
Ombudsman. Preparations are underway for the implementation of the police law. However, 
the  full  and  effective  implementation  of  the  police  reform  –  a  key  European  Partnership 
priority - remains a serious challenge. Public administration remains weak and inefficient and 
civil service legislation is little used. Arbitrary dismissals of officials at all levels took place 
without transparency and disrupted the functioning of the administration. Significant further 
efforts are needed to create a stable and professional civil service. 

EN 

36 

   EN 

 
Some progress has been made in implementing the strategy on reform of the judicial system, a 
key  European  Partnership  priority.  One  of  the  five  newly  established  specialised  court 
departments on organised crime is fully operational. The academy for the training of judges 
and  prosecutors  has  begun  operations  and  new  IT  systems  are  being  introduced.  Moreover, 
the  implementation  of  the  laws  on  litigation  procedure  and  enforcement  are  starting  to 
increase  judicial  efficiency.  However,  the  overall  impact  of  the  reforms  has  so  far  been 
limited. The  political deadlock over  the remaining  appointments to  the Judicial Council has 
reduced  the  Council's  capacity  to  strengthen  the  independence  and  impartiality  of  the 
judiciary.  It  has  also  delayed  key  aspects  of  the  reform,  such  as  the  setting  up  of  the 
administrative  court.  The  laws  on  the  public  prosecution  remain  to  be  adopted  and  courts’ 
budgets are insufficient. Further efforts are needed to ensure full independence, efficiency and 
accountability of the judiciary. A track record of implementation of the recent reforms needs 
to be established.  

Implementation of the new legal and institutional framework for the fight against corruption 
has  yielded  some  results.  There  have  been  a  number  of  high  level  prosecutions  and 
convictions.  Co-operation  between  law  enforcement  agencies  is  improving.  However, 
corruption is widespread and constitutes a very serious problem. A comprehensive approach 
across all sectors and the full implementation of anti-corruption legislation are required. 

Overall, human rights and the protection of minorities, including inter-ethnic relations have 
improved. Further steps have been taken to implement the Ohrid Framework Agreement, such 
as  the  adoption  of  a  strategy  on  equitable  representation  of  ethnic  communities  in  the 
administration. However, trust between ethnic communities needs to be further developed, in 
particular by addressing the socio-economic difficulties facing all minorities. There has been 
little  progress  concerning  the  situation  of  the  Roma  minority,  which  continues  to  face  very 
difficult  living  conditions  and  discrimination  especially  in  the  areas  of  education,  social 
protection, health care, housing and employment. 

Measures have been taken against ill treatment of detainees, notably in co-operation between 
the Ombudsman and the Ministry of Interior. Interception of communications is now subject 
to a legislative framework. As regards freedom of religion, a new law has been adopted which 
allows  registration  of  religious  institutions.  As  regards  women’s  rights,  some  further  steps 
have  been  taken  towards  creating  equal  opportunities.  However,  the  protection  of  women 
against all forms of violence needs to be strengthened. Implementation of measures to protect 
children's rights should be accelerated. Inclusive social dialogue needs to be developed. 

Regarding  regional  issues  and  international  obligations,  the  former  Yugoslav  Republic  of 
Macedonia has continued to participate actively in regional co-operation and given its support 
to the South East Europe Co-operation Process (SEECP), the Regional Co-operation Council 
and  the  amended  Central  European  Free  Trade  Agreement  (CEFTA).  The  country  has 
maintained  full  co-operation  with  the  International  Criminal  Tribunal  for  the  former 
Yugoslavia  (ICTY).  A  law  on  co-operation  with  the  ICTY  has  been  enacted.  Better 
functioning of the judicial institutions remains essential to prepare for handling the files to be 
returned to the national jurisdiction by the ICTY. The country has maintained a constructive 
position throughout the Kosovo status process. As  regards  the International Criminal  Court, 
the  bilateral  immunity  agreement  with  the  United  States  is  not  in  line  with  the  relevant  EU 
common position and guiding principles. 

The former Yugoslav Republic of Macedonia has fostered good relations with countries in the 
Western  Balkans.  Renewed  efforts  are  needed,  with  a  constructive  approach,  to  find  a 

EN 

37 

   EN 

 
negotiated  and  mutually  acceptable  solution  on  the  name  issue  with  Greece,  under  the 
auspices  of  the  UN,  within  the  framework  of  UN  Security  Council  Resolutions  817/93  and 
845/93, thereby contributing to regional co-operation and good neighbourly relations. Actions 
which could negatively affect good neighbourly relations should be avoided. 

The  economy  of  the  former  Yugoslav  Republic  of  Macedonia  registered  a  markedly 
accelerated growth. Macroeconomic stability has been maintained and structural reforms have 
further progressed, but the persistence of very high unemployment remains a major cause of 
concern. Institutional weaknesses and deficiencies in the rule of law still hamper the smooth 
functioning of the market economy and affect the business climate. 

As  regards  the  economic  criteria,  the  former  Yugoslav  Republic  of  Macedonia  is  well 
advanced  in,  and  has  further  moved  towards  establishing  a  functioning  market  economy.  It 
should be able to cope with competitive pressures and market forces within the Union in the 
medium term, provided that it vigorously implements its comprehensive reform programme in 
order to reduce significant structural weaknesses. 

The  country  has  maintained  a  broad  consensus  on  the  essentials  of  economic  policies.  As  a 
result  of  an  appropriate  policy  mix,  macroeconomic  stability  and  predictability  have  been 
maintained. The country's growth performance has improved although there remains scope for 
more  robust  growth.  Inflation  has  remained  low.  The  current  account  was  close  to  balance. 
However, unemployment has remained particularly high. FDI remained relatively low, after a 
substantial  privatisation  related  inflow  in  2006.  The  authorities  intervened  more  actively  in 
the  economy,  by  lowering  the  tax  burden,  improving  revenue  collection  and  increasing 
expenditures.  However,  overall,  fiscal  accounts  were  maintained  close  to  balance.  Tax 
collection  rates  increased  due  to  higher  revenues  and  better  collection  rates.  The  relatively 
low level of public sector debt has been reduced further, which also led to a further lowering 
of  the  country's  external  vulnerability.  Price  and  trade  liberalisation  are  largely  completed, 
and  the  privatisation  of  state  property  has  continued.  Bankruptcy  procedures  have  been 
shortened  and  property  registration  has  been  accelerated.  Financial  intermediation  has 
increased  and  supervision  of  the  financial  sector  has  been  strengthened.  Furthermore, 
measures  have  been  taken  to  improve  the  quality  of  human  capital  and  to  modernise  the 
country's infrastructure. Economic integration with the EU is well advanced. 

However,  the  functioning  of  the  market  economy  is  still  hampered  by  institutional 
weaknesses.  The  judiciary  continues  to  be  a  bottleneck  and  regulatory  and  supervisory 
agencies  sometimes  lack  the  necessary  independence  and  resources  to  fulfil  their  functions 
effectively. The degree of legal certainty is still low and administrative inefficiencies impede 
the  proper  functioning  of  the  public  administration  and  hamper  the  business  environment. 
Labour  markets  are  still  functioning  poorly.  The  large  informal  sector,  fuelled  by  persistent 
weaknesses in law enforcement and the regulatory framework, reduces the tax base, hampers 
the government's capacity to implement economic policies and affects negatively the business 
environment. 

The former Yugoslav Republic of Macedonia has made further efforts to improve its ability 
to assume the obligations of membership. There was some progress in the fulfilment of the 
short term priorities of the European partnership. The country still faces major shortcomings 
in  implementing  and  effectively  enforcing  legislation.  Adequate  human  and  financial 
resources to fully implement the SAA are lacking. Large scale replacement of qualified staff 
following political changes hampered efforts to improve administrative capacity. 

EN 

38 

   EN 

 
In  the  area  of  free  movement  of  goods,  there  was  some  progress  in  strengthening 
administrative  capacity  and  on  alignment  of  legislation  with  the  acquis,  which  remains, 
however,  at  an  early  stage.  The  same  is  true  in  the  areas  of  free  movement  of  workers  and 
right of establishment and freedom to provide services. Progress in the area of free movement 
of capital  has  been very limited. Legislative alignment is lagging behind  and  administrative 
capacity to implement anti-money laundering legislation is not adequate. 

There  has  been  progress  in  the  area  of  public  procurement,  where  alignment  of  legislation 
with  the  acquis  is  moving  forward.  However,  administrative  capacity  at  the  level  of 
contracting authorities is not sufficiently developed. Substantial progress has been made in the 
area of company law, where alignment is now moderately advanced. On intellectual property 
law,  there  has  been  some  progress  especially  with  regard  to  alignment  of  legislation  in  the 
area  of  industrial  property  rights  and  interception  of  counterfeit  goods  at  the  border. 
However,  administrative  capacity  is  still  insufficient  to  achieve  proper  enforcement  and 
strong political will is needed to crack down on piracy. 

Progress can be reported in the area of competition including state aid policy. The legislation 
is  now  mostly  in  line  with  the  acquis,  and  the  capacity  and  the  independence  of  the 
competition authority have been strengthened. Further efforts are needed in order to increase 
public  awareness  of  the  benefits  of  competition  policy  and  understanding  of  the  state  aid 
control  system  among  state  aid  providers.  The  law  on  technological  industrial  development 
zones must be amended to bring it into line with the acquis. 

There  was  some  progress  in  the  area  of  financial  services.  However,  the  legislation  needs 
further improvement, in particular as regards the insurance and securities sector. The problem 
of uninsured vehicles requires further attention. Administrative capacity and the guarantees of 
operational independence of non-financial sector supervisors are insufficient. 

Progress  has  been  made  in  aligning  the  legislation  with  the  acquis  and  in  strengthening 
competition in the area of information society and media. However, in the field of electronic 
communications,  the  country  is  still  in  breach  of  its  obligations  under  the  Stabilisation  and 
Association  Agreement.  In  all  sectors,  implementation  and  enforcement  of  the  legislation 
remains weak, while the independence of the regulators is not sufficiently ensured. 

In  the  area  of  agriculture  and  rural  development  there  has  been  some  progress  in  policy 
development,  but  alignment  is  still  at  an  early  stage.  Progress  in  the  area  of  food  safety, 
veterinary  and  phytosanitary  policy  has  been  modest.  Administrative  capacity,  in  terms  of 
both number and competence of staff, is not adequate to ensure proper implementation of the 
acquis. 

Progress  has  been  made  in  the  alignment  with  transport  policy.  The  former  Yugoslav 
Republic  of  Macedonia  has  ratified  the  European  Common  Aviation  Area.  It  is  actively 
participating  in  the  development  of  the  Core  Regional  Transport  Network  and  in  the  South 
East Europe Transport Observatory (SEETO). However, administrative capacity in all sectors 
remains weak. There has been some progress in alignment of the internal energy market and 
renewable energy legislation. As a party to the Energy Community Treaty, the country needs 
to  implement  the  relevant  EU  energy  legislation.  Administrative  capacity  to  enforce  energy 
efficiency  and  radiation  protection  regulations  is  not  sufficient.  The  independence  of  the 
energy regulator should be strengthened. 

EN 

39 

   EN 

 
In  the  area  of  taxation,  indirect  tax  legislation  is  well  aligned  but  there  are  significant 
discrepancies  regarding  direct  taxation.  Progress  was  made  in  strengthening  administrative 
capacity. However further efforts to ensure effective implementation and enforcement of the 
legislation are necessary. 

Progress  with  alignment  in  the  area  of  economic  and  monetary  policy  has  been  limited. 
However, preparations in this area are on track. In the area of statistics, significant steps have 
been  taken  in  priority  areas.  However,  more  efforts  are  needed  to  strengthen  administrative 
capacity. 

the  development  of  strategies.  However,  because  of 

As  regards  the  acquis  on  social  policy  and  employment,  some  progress  has  been  made  as 
regards 
insufficient  political 
determination  and  administrative  capacity,  actual  progress  in  implementing  these  policies 
remains limited. There has been progress in certain areas of enterprise and industrial policy, 
notably  as  regards  support  to  small  enterprises.  As  regards  Trans-European  networks,  the 
country participates in the regional initiatives and alignment is well advanced. Upgrading of 
infrastructure  remains  a  major  challenge.  Progress  can  be  reported  in  the  area  of  regional 
policy  and  co-ordination  of  structural  instruments.  However,  substantial  efforts  are  still 
needed to establish the necessary institutional and administrative capacity at central and local 
levels. 

Some progress has been made in the area of judiciary and fundamental rights. The authorities 
have made further efforts to fight corruption, and this has started to show results. However, 
ensuring  the  independence  and  efficiency  of  the  judiciary  remains  a  major  challenge.  The 
approach  to  tackling  corruption  is  not  yet  comprehensive.  In  this  area,  enactment  of 
legislation  is  satisfactory,  but  further  implementation  and  specific  allocation  of  resources  is 
necessary and will require continued political commitment. 

In  the  area  of  justice,  freedom  and  security,  the  basic  legislation  is  in  place,  and  the 
implementing  legislation  has  been  largely  adopted.  Further  efforts  are  needed  to  ensure  an 
active return policy, and bring the asylum procedures in line with European standards. There 
was  uneven  progress  in  the  area  of  police  co-operation  and  fight  against  organised  crime, 
which remains a serious concern. Seizures of large quantities of drugs were recorded. There 
was insufficient progress in the area of human trafficking. An integrated intelligence system 
for  inter-agency  use  in  combating  organised  crime  is  not  yet  in  place.  Inter-agency  co-
operation needs to be strengthened also with respect to the fight against terrorism. 

In  several  areas,  the  authorities  strengthened  their  operational  capacity,  although  mainly  at 
central  level.  At  local  level,  administrative  capacity  remains  generally  weak.  In  the  area  of 
border  management  and  Schengen,  there  is  a  need  for  communication  networks,  technical 
equipment  and  training.  Good  progress  was  made  with  the  introduction  of  biometric 
passports.  Overall,  a  track  record  of  implementation  and  enforcement  still  needs  to  be 
developed,  in  particular  as  regards  the  fight  against  organised  crime  and  corruption,  which 
remains  a  serious  concern.  The  former  Yugoslav  Republic  of  Macedonia  is  not  yet 
sufficiently prepared to implement the acquis on justice, freedom and security. 

In the field of science and research there was little progress in alignment and the capacity of 
the  scientific  institutions  remains  weak.  The  country  adopted  policy  measures  which 
enhanced  alignment  in  the  area  of  education  and  culture.  However,  the  resources  to 
implement the policy reforms are not sufficient. The country should continue its preparations 
with  a  view  to  future  participation  in  the  community  programmes  Lifelong  Learning  and 

EN 

40 

   EN 

 
Youth in Action. Progress has been made on developing the legislative framework in the field 
of environment, but implementation of the legislation remains in an early stage, especially in 
areas  which  require  major  investment.  Administrative  capacity  and  financial  resources  are 
still inadequate. On consumer and health protection, some progress has been made, regarding 
both  legislative  alignment  and  building  institutional  capacity  for  consumer  protection  and 
healthcare.  More  human  and  financial  resources  are  needed  to  allow  full  implementation  of 
legislation, strategies and action plans. 

Progress has been substantial in the area of customs union. As regards administrative capacity, 
significant  progress  has  been  made  in  fighting  illegal  trade  and  corruption  and  in  collecting 
revenues. Overall, the Customs Administration needs to continue its modernisation efforts. 

There has been some progress in the areas of external relations and of foreign, security and 
defence policy. However, the institutional and administrative capacity is not yet sufficient to 
enable the country to participate fully in the EU policies in these areas. 

Progress  in  the  area  of  financial  control  has  been  limited  to  the  public  internal  financial 
control. The administrative capacity of the responsible institutions remains inadequate to meet 
the obligations arising from the acquis. There has been no particular progress in the area of 
financial and budgetary provisions. Appropriate coordination structures, implementing rules 
and administrative strengthening will need to be established in due course. 

Montenegro 

As regards political criteria, Montenegro has made some progress. It has addressed further 
key  priorities  of  the  European  Partnerships,  but significant results remain to be produced in 
particular  in  relation  to  administrative  capacity  and  anti-corruption.  Montenegro  has  made 
good  progress  in  establishing  the  necessary  legal  framework  and  institutions  following 
independence.  In  October  2007,  parliament  adopted  a  constitution  broadly  in  line  with 
European  standards.  Efforts  to  build  broader  consensus  on  basic  features  of  state  building 
need to continue. 

Some  progress  was  made  in  the  area  of  democracy  and  rule  of  law.  Montenegro  has 
continued  making  progress  in  administrative  and  legal  reform.  Montenegro  has  made  some 
progress in addressing the key priorities of the European Partnership and in strengthening its 
administrative capacity. However results have been rather limited so far as and Montenegro 
has not yet established a sustained track record of reforms. Judicial reform is just beginning. 

The  parliament  and  the  government  adapted  to  the  requirements  of  independence.  They 
continued  improving  their  efficiency.  The  parliament  has  started  implementing  the  rules  of 
procedure adopted in 2006, better streamlining its work, and strengthening its administrative 
capacity.  The  control  functions  of  the  parliament  have  improved.  The  parliamentary 
committee for European Integration has been slightly strengthened but it still lacks efficiency 
and focus. The overall capacity of the parliament needs to be improved. The government was 
reorganised  and  the  strengthening  of  new  institutions  continued,  with  a  focus  on  defence 
reform,  foreign  affairs  and  justice  home  affairs.  However  the  government's  efficiency,  in 
particular as regards implementation of legislation, needs to be further enhanced. 

The public administration reform continued but the public administration remains weak and 
inefficient. Further efforts will be needed to ensure impartiality of public administration and 
strengthen its capacity. Coordination on European matters has improved. Preparations for the 

EN 

41 

   EN 

 
implementation of the SAA have continued. Personnel including new staff in key government 
bodies  and  other  agencies  need  to  be  well-trained  in  order  to  tackle  not  only  coordination 
tasks  but  also  the  implementation  of  all  priorities  of  the  European  Partnership  and  SAA 
obligations. 

Some  progress  in  the  reform  of  the  judicial  system  has  been  achieved.  The  constitution 
enhances  the  judiciary's  independence  by  establishing  a  new  body,  the  Judicial  Council,  in 
charge  of  the  appointment  and  dismissal  of  judges.  Τhe  government  adopted  a  Judicial 
Reform Strategy for the period 2007-2012. The training of judges and prosecutors has been 
strengthened. However, legislation now needs to be adopted to ensure the independence and 
accountability  of  judges  and  prosecutors.  Parliament  still  has  undue  influence  on  the 
appointment and promotion of prosecutors. The pre-trial procedure concerning the deportation 
and  disappearance  of  more  than  80  Bosnian  civilians  in  1992  is  still  ongoing,  which  raises 
concerns about the length of the case. The efficiency of the judiciary is not satisfactory and 
the significant backlog in both civil and criminal cases was only slightly reduced. 

Corruption  is  widespread  and  constitutes  a  very  serious  problem.  The  adoption  of  the  first 
Report  of  the  National  Commission  established  to  address  corruption  can  be  considered  a 
step,  however  enforcement  remains  a  problem. The  funding  of  political  parties  and  election 
campaigns lacks transparency. Loopholes in the legislation on conflict of interests for public 
officials persist. In the areas of construction and land use planning, privatisation, concessions 
and public procurement, there is a significant risk of corruption. The situation calls for urgent 
action in order to achieve results in the fight against corruption, especially in the area of high-
level corruption. International cooperation capabilities in the area of the judiciary and police 
cooperation need to be enhanced. 

As regards human rights and protection of minorities, there has been progress in establishing 
the necessary framework following independence. In May 2007, Montenegro was admitted to 
the Council of Europe. In the constitution, it recognises the supremacy of international human 
rights law. There are commitments on the retroactive application of human rights legislation, 
but their exact legal status needs to be clarified. Legislation and practice in the field of social 
rights  are  largely  in  line  with  the  provisions  of  the  revised  European  Social  Charter.  Some 
progress  has  been  achieved  on  improving  women's  and  children's  rights.  However,  the 
protection  of  women  against  all  forms  of  violence  needs  to  be  strengthened.  Restitution  of 
nationalised property has continued, but there are still numerous complaints on the manner of 
implementation. The work of  the  Ombudsman in  defending  human  rights  and  exercising  its 
watch-dog function over the public administration has to be strengthened. 

In  May  2007  Montenegro  acceded  to  the  Framework  Convention  for  the  Protection  of 
National Minorities as well as to the European Charter on Regional and Minority Languages. 
The complex issue of the definition of the minorities and the minority protection is only partly 
covered  by  the  2006  Law  on  the  Rights  of  National  Minorities.  The  constitution  provides  a 
solid legal basis for the protection of minority rights. The conditions of refugees and displaced 
persons, including Roma, give cause for serious concern. In particular the Roma population 
continues to face very difficult living conditions and discrimination, especially in the areas of 
education, social protection, health care, housing and employment. 

Civil society remains fragile and tensions between government bodies and non-governmental 
organisations persist. 

EN 

42 

   EN 

 
Concerning  regional  issues  and  international  obligations,  the  country  continues  to 
participate  actively  in  regional  co-operation.  Co-operation  with  ICTY  continues  to  be 
satisfactory.  Montenegro  has  continued 
international  obligations  since 
independence. In January 2007, Montenegro became a member of key international financial 
institutions.  Negotiations  for  the  accession  to  World  Trade  Organisation  are  progressing 
smoothly.  Montenegro  is  committed  to  regional  cooperation  in  South-East  Europe  and 
became a member of the South-East Europe Cooperation Process (SEECP) in May 2007 and 
participates in the Regional Co-operation Council (RCC). It has ratified the amended Central 
European Free Trade Agreement (CEFTA) and has good relations with its neighbours. Most 
issues with Serbia following independence were settled. 

taking  up 

In October 2006, Montenegro notified its ratification of the Rome Statute of the International 
Criminal Court. However, the bilateral immunity agreement signed in April with the United 
States is not in line with the relevant EU common position and guiding principles. 

Montenegro’s  economy  has  continued  to  expand  rapidly  and  macroeconomic  stability  has 
improved, though risks subsist, in particular from the large current account deficit, at present 
largely  compensated  by  important  FDI  inflows.  Though  structural  reforms  were  pursued, 
weak institutional capacities and deficiencies in the rule of law continue to hamper the proper 
functioning of the market economy. 

As regards economic criteria, Montenegro has made further progress towards establishing a 
functioning market economy, though at a slower pace. Major reforms are needed to enable it 
to cope over the long term with competitive pressure and market forces within the Union. 

Macroeconomic  stability  overall  improved.  The  rapid  economic  growth  helped  create  jobs 
while  inflation  remained  subdued.  Large  inflows  of  foreign  investment  supported  economic 
activity.  A  prudent  fiscal  consolidation  policy  stance  was  pursued,  resulting  in  a  continued 
budget surplus. The reform of the pension system continued. There was a rapid growth in the 
activities  of  financial  intermediaries.  New  mechanisms  to  enhance  the  transparency  of  the 
privatisation  process  have  been  established.  New  legislation  on  company  insolvency 
facilitated  market  exit.  Subsidies  remained  limited  to  some  post  privatisation  arrangements. 
Reform of the utilities continued. Trade openness and the alignment process with WTO rules 
supported further economic integration with the EU. 

However,  there  are  some  risks  to  macroeconomic  stability,  in  particular  from  the  large 
external deficit. Energy price increases led to a debate within the country, including within the 
government,  about  the  Montenegrin  energy  policy  and  the  planned  privatisation  of  energy 
suppliers.  Growth  of  industrial  production  has  been  very  modest.  It  is  still  expensive  and 
time-consuming to obtain business licenses and enforce contracts. More needs to be done to 
improve  the  financial  services  sector,  including  revision  and  implementation  of  the  banking 
law,  the  establishment  of  an  insurance  supervisory  agency  and  supervision  of  leasing 
companies.  Moreover,  the  very  high  growth  of  consumer  credit  and  of  asset  prices  signal 
widening  macroeconomic  and  financial  imbalances.  Though  unemployment  declined,  it 
remained  high.  At  the  same  time,  increasing  labour  costs  continued  to  erode  the  country's 
competitiveness.  The  large  informal  sector,  fuelled  by  persistent  weaknesses  in  law 
enforcement  and  the  regulatory  framework,  reduces  the  tax  base,  hampers  the  government's 
capacity to implement economic policies and affects negatively the business environment.  

The  country  has  made  some  progress  in  alignment  with  European  standards  and  in 
strengthening  its  administrative  capacity,  leading  to  the  signature  of  the  Stabilisation  and 

EN 

43 

   EN 

 
Association  Agreement  with  the  EU.  Good  progress was achieved in areas such as customs 
and  taxation,  competition,  public  procurement,  free  movement  of  capital,  and  agriculture, 
whereas it remained limited in social and employment policies, energy, environment as well 
as justice, freedom and security. The process of approximation of legislation and checking of 
the  compatibility  of  new  legislation  with  the  EU  legislation  needs  to  be  strengthened.  The 
overall administrative capacity of the country remains weak. 

Regarding  internal  market,  the  institutional  framework  addressing  free  movement  of  goods 
was improved but not yet completed. Human and physical resources are not up to European 
standards and alignment of consumer protection law is at an early stage. 

Montenegro  is  pursuing  a  liberal  policy  towards  movement  of  services  but  financial 
supervision  needs  to  be  considerably  reinforced.  The  legal  framework  regulating  financial 
sector  presents  deficiencies  in  corporate  governance  and  risk  management.  There  was  little 
progress  on  the  right  of  establishment;  there  are  still  excessive  administrative  barriers  to 
business  creation  and  the  licensing  system  is  restrictive.  Preparations  for  implementing  the 
SAA are on track in the area of free movement of capital. 

Customs  legislation  is  now  largely  in  line  with  SAA  commitments.  Further  alignment  is 
needed  on  rules  of  origin,  transit  procedures,  customs  valuation  and  the  fight  against 
corruption  and  smuggling.  Montenegro  has  adopted  legislation  providing  for  the  closing  of 
duty-free shops at land borders by the end of 2007. Implementation of this measure needs to 
be  closely  monitored.  Customs  fees  have  been  reduced  and  brought  in  line  with  WTO 
requirements. Some progress was registered in the area of direct taxation but alignment is still 
lagging  behind  in  companies  and  indirect  taxation.  There  is  considerable  room  to  improve 
administrative capacity. 

Overall  preparations  in  the  area  of  competition  are  advancing.  Montenegro  needs  to  further 
improve  its  legislative  framework  and  establish  independent  competition  and  state  aid 
authorities. 

There has been progress on public procurement system, but capacity and organisation need to 
be strengthened, in order to efficiently support and monitor the sector. 

Overall,  progress  still  need  to  be  made  in  intellectual  property  rights  protection,  especially 
given  the  weak  institutional  capacity,  poor  level  of  enforcement,  high  level  of  piracy  and 
counterfeiting, and the low level of awareness among public bodies and stakeholders. 

Concerning the European standards on social policies, legislation and strategies are necessary 
to  enhance  the  protection  of  vulnerable  groups.  Compliance  with  European  standards  on 
employment policies need to be stepped up, in particular with respect to labour legislation and 
vocational training. Some progress was achieved in relation with tripartite social dialogue in 
the  framework  of  the  Economic  and  Social  Council,  but  its  mandate  and  rules  on 
representation need to be clarified. 

Progress has been made in the field of education, notably in terms of the legal framework, and 
first  attempts  to  devolve  the  highly  centralised  education  system.  Efforts  are  needed  to 
involve civil society and increase the availability of training. 

Concerning  sectoral  policies,  Montenegro  has  made  little  progress  in  implementing  the 
European  Partnership  priorities  in  the  area  of  industry  and  SME.  A  strategic  assessment  is 

EN 

44 

   EN 

 
needed  on  where  competitive  advantages  and  restructuring  needs  lie  as  well  as  about 
legislation,  energy  and  environmental  policies, 
necessary  developments 
administrative simplification and transparency. 

labour 

in 

Progress  in  the  area  of  agriculture  and  food  safety  as  well  as  veterinary  and  phytosanitary 
issues should be stepped up. In the area of fisheries, inspection and control capacity need to 
be strengthened. 

Some progress has been achieved in terms of alignment with the EU environmental standards 
and  further  harmonisation  is  on  track.  However,  further  efforts  are  needed  for  improving 
implementation and enforcement. Strengthening of administrative capacity requires particular 
attention. 

Montenegro  has  made  progress  in  the  area  of  transport.  It  is  working  towards  the 
implementation of the first transitional phase of the European Common Aviation Area. It is 
actively participating in the development of the Core Regional Transport Network and in the 
South  East  Europe  Transport  Observatory  (SEETO).  However,  the  new  national  transport 
development  strategy  remains  to  be  adopted  by  the  government.  Also  in  this  area,  the 
administrative capacity requires further strengthening. 

Some  progress  can  be  reported  in  the  energy  sector  but  it  remained  uneven.  There  are  still 
significant gaps in the energy infrastructure and legal and institutional framework. Electricity 
supply  remains  a  serious  problem.  Further  efforts  will  be  needed  to  finalise  and  adopt  the 
energy  strategy  and  complete  reforms  in  the  sector.  As  a  party  to  the  Energy  Community 
Treaty, Montenegro needs to implement the relevant EU energy legislation. 

There  has  been  some  progress  in  the  area  of  information  society  and  media.  Legislative 
measures  are  needed  to  effectively  liberalise  the  electronic  communications  market  and  to 
align  with  the  acquis  on  information  society  services.  While  the  broadcasting  agency  has 
become fully operational and has an independent status, its capacity needs to be strengthened. 
Montenegro  has  not  yet  ratified  the  UNESCO  Convention  on  cultural  diversity  and  has  not 
signed and ratified the European Convention on Transfrontier Television. Preparations in this 
area are at an early stage. 

Regarding financial control, PIFC and external audit are in the early stages of development 
and  the  independence  of  the  State  Audit  Institution  remains  to  be  strengthened  by  adequate 
means. 

There has been limited progress in statistics. Capacity remains weak and there are still major 
shortcomings  in  the  coordination  and  resources  of  the  statistical  infrastructure.  The 
development of reliable official statistics needs to become a priority. 

In the area of justice, freedom and security, Montenegro has started to create the necessary 
legal and institutional framework but much more needs to be done. The visa facilitation and 
readmission  agreements  between  Montenegro  and  the  European  Community  have  been 
signed. Montenegro has still to upgrade its implementation capacities concerning its own visa 
following  independence  and  gradually  introduce  EU  standards.  Biometric  passports  in  line 
with  EU  standards  need  to  be  issued.  Little  progress  has  been  noted  in  the  areas  of  border 
police, asylum and migration and further efforts are needed. 

EN 

45 

   EN 

 
Money laundering remains an area of serious concern. Police capacities are limited and there 
is not yet a proper monitoring of financial transactions beyond the banking system, especially 
in relation to real estate and foreign investment. Some progress can be reported in the fight 
against drugs smuggling, but it remains a serious concern. 

There  has  been  progress  in  the  area  of  police  reorganisation.  However,  there  is  a  need  to 
further  strengthen  the  professional  capacity  of  the  police,  specialised  training,  and 
development  of  intelligence  and  risk  analysis  tools.  In  the  fight  against  organised  crime, 
Montenegro is still lagging behind. Organised crime continues to pose a serious problem and 
major  efforts  are  needed  to  address  it.  Legislative  reforms  are  ongoing  in  the  area  of 
combating  the  trafficking  of  human  beings.  Montenegro  remains  mainly  a  country  of 
destination and transit. 

The  situation  in  the  area  of  data  protection  is  a  matter  of  serious  concern.  The  Law  on 
Personal  Data  Protection  has  not  yet  been  adopted.  Current  legislation  does  not  fulfil  the 
relevant European Partnership priority and there is still no independent supervisory authority 
in place. 

Serbia 

Serbia  has  made  some  progress  in  addressing  political  criteria  in  line  with  the  European 
Partnership.  Parliamentary  elections  took  place  in  January  2007  and  were  conducted  in 
accordance  with  international  standards.  However,  the  ensuing  period  highlighted  sharp 
divisions among political parties. This led to a slow-down in the overall pace of reform. The 
Kosovo  issue  has  continued  to  dominate  the  political  agenda.  Nationalist  rhetoric  remains 
strong  and  has  negatively  affected  the  political  climate.  Following  several  months  of 
uncertainty  a  new  reform-oriented  government  was  formed  in  May  2007.  It  achieved  early 
positive  results  on  cooperation  with  the  ICTY,  which  enabled  the  Commission  to  finalise 
negotiations on a Stabilisation and Association Agreement (SAA). Serbia has still to meet its 
international obligation to fully cooperate with the ICTY before the SAA can be signed. 

Democracy and the rule of law in Serbia have still to be further strengthened. There has been 
some  progress  in  implementing  the  new  constitution  which  entered  into  force  in  November 
2006. A constitutional law has been adopted, however several provisions, in particular, on the 
judiciary still need to be implemented in line with European standards. 

The work of the parliament has been hindered by the political situation. The first sitting of the 
parliament after its inauguration was adjourned for almost three months due to the protracted 
negotiations  to  form  a  government.  Delays  in  the  formation  of  the  government  and  sharp 
political divisions have had a negative impact on parliamentary activities. 

In  the  months  following  the  parliamentary  elections,  there  was  little  activity  from  the 
caretaker government. The new government placed emphasis in its programme on European 
integration,  but  the  results  have  been  mixed.  In  August  2007  the  government  adopted  an 
action plan on harmonisation with the acquis in an attempt to accelerate the reform process. 
The Serbian administration participated in SAA negotiations in a professional manner and this 
helped  to  improve  coherence  among  the  various  Ministries  and  agencies.  Policy  co-
ordination,  however,  needs  to  be  further  improved.  As  regards  local  governance,  the  legal 
framework has still to be fully developed. 

EN 

46 

   EN 

 
Capacity in the area of public administration is in general good. The state Ombudsman was 
appointed  and  the  government  now  needs  to  take  all  necessary  measures  to  ensure  the  full 
functioning of the Ombudsman's office. Regulatory bodies need to be strengthened to ensure 
the necessary oversight and enforcement of legal obligations. Reforms need to be continued in 
order  to  build,  at  both  governmental  and  sub-national  levels,  an  impartial,  accountable  and 
efficient civil service, based on professional career development criteria. 

Civilian oversight of the military, a key Partnership priority, has improved, and the emphasis 
in this area needs to be on ensuring the effectiveness of  parliamentary  control and financial 
oversight.  More  generally,  a  new  revised  legislative  framework  in  the  field  of  defence, 
required by the constitution, is still pending and a number of laws have to be adopted. 

Judicial  reform,  which  is  also  a  key  Partnership  priority,  is  lagging  behind  and  a  new  legal 
framework is pending. At present, the constitution and the constitutional law leave room for 
political  influence  over  judicial  appointments.  Appellate  and  administrative  courts  have  not 
yet been established and the constitutional court has not been operational since October 2006. 
Further  legal  and  management  measures  need  to  be  undertaken  to  ensure  the  independence 
and efficiency of the judiciary. 

Measures  that  have  been  taken  in  the  fight  against  corruption  include  the  adoption  of  an 
action  plan  to  implement  the  national  strategy  against  corruption.  There  have  been  some 
successful  prosecutions  for  corruption-related  offences.  However,  corruption  is  widespread 
and constitutes a serious problem. An anti-corruption agency needs to be established and the 
anti-corruption plan has still to be fully implemented. A more systemic approach is needed to 
fight  corruption,  including  financial  control,  transparent  public  procurement  procedures  and 
effective parliamentary oversight. 

The  overall  conditions  for  respect  of  human  rights  and  the  protection  of  minorities  have 
improved  and  Serbia  is  relatively  well  advanced  in  meeting  its  obligations.  The  new 
constitution contains several provisions on human and minority rights, but a track record of 
judicial  enforcement  needs  to  be  developed,  including  constitutional  appeal.  The  new 
constitution prohibits discrimination but a comprehensive anti-discrimination law has not yet 
been  adopted.  Progress  has  been  achieved  on  improving  women's  and  children's  rights. 
However, their protection against all forms of violence needs to be strengthened and a gender 
equality law remains to be adopted. Problems relating to property restitution have not yet been 
resolved. 

There  have  been  improvements  in  minority  representation  in  public  services  and  the  use  of 
minority  languages.  However  legislation  necessary  to  regulate  the  election  of  national 
councils  and  their  duties  has  not  been  adopted.  The  inter-ethnic  situation  in  Vojvodina  has 
continued to improve. The situation in South Serbia has remained stable but tense. There have 
been  improvements  in  the  work  of  the  multi-ethnic  police  force.  However  tensions  persist 
within the ethnic Albanian community and in their relations with the Serbian population. The 
situation  in  Sandžak  has  deteriorated,  and  there  has  been  a  deepening  of  religious  divisions 
within the Muslim community and outbreaks of violence. 

Steps  have  been  taken  to  strengthen  the  coordination of activities with a  view to improving 
the  situation  of  the  Roma  population.  However,  the  Roma  people  continue  to  face  very 
difficult  living  conditions  and  discrimination,  especially  in  the  areas  of  education,  social 
protection,  health  care,  housing  and  employment.  Many  Roma  continue  to  experience 
difficulties in obtaining personal documents which in turn hinders access to basic services. 

EN 

47 

   EN 

 
As regards regional issues and international obligations, Serbia has played a positive role in 
improving  regional  co-operation,  including  notably  the  South  East  Europe  Co-operation 
Process  (SEECP),  the  Regional  Co-operation  Council  (RCC)  and  the  amended  Central 
European  Free  Trade  Agreement  (CEFTA).  However,  Serbia  needs  to  show  a  more 
constructive  approach  towards  the  participation  of  Kosovo  under  UNSCR  1244  in  regional 
cooperation  and  other  fora.  In  general  bilateral  relations  with  neighbouring  countries  are 
good. 

The  new  government,  in  its  programme,  gave  a  clear  commitment  to  fulfil  its  international 
obligations.  The  Serbian  authorities  subsequently  improved  co-operation  with  the  ICTY, 
leading  to  the  arrest  of  two  indictees  and  their  transfer  to  The  Hague.  A  National  Security 
Council was established, chaired by the President of the Republic, and is responsible for co-
ordinating the work of military and civilian security services. The National Council for Co-
operation  with  ICTY  was  also  reinstated.  However,  Serbia  has  not  yet  achieved  full  co-
operation  with  the  ICTY  that  should  lead  to  the  arrest  of  the  remaining  fugitives.  Full 
cooperation  remains  a  condition  for  the  signature  of  the  Stabilisation  and  Association 
Agreement. 

In  February  2007,  the  International  Court  of  Justice  found  that  acts  of  genocide  had  been 
committed  in  Srebrenica.  The  Court  ruled,  in  its  case  of  Bosnia  and  Herzegovina  versus 
Serbia and Montenegro, that Serbia had not committed genocide in violation of its obligations 
under  the  relevant  convention.  However,  the  Court  found  that  Serbia  had  failed  to  take  all 
measures necessary to prevent the Srebrenica genocide and to bring the perpetrators to justice. 

Serbia participated in discussions under the auspices of the UN Secretary General's Envoy for 
Kosovo on the future status of Kosovo. Serbia however rejected its recommendations and has 
maintained  that  Kosovo  should  remain  an  integral  part  of  the  country,  whilst  offering 
substantial  autonomy.  The  Serbian  authorities  are  currently  participating  in  political  talks 
under the aegis of the international Troika of the EU, US and Russia on the future status of 
Kosovo.  Serbia  has  continued  to  discourage  Kosovo  Serbs  from  participating  in  the 
provisional institutions of self-government and elections in Kosovo. Serbia called on Kosovo 
Serbs not to participate in elections to the Kosovo provisional assembly and municipalities. 

Serbia’s  economy  has  continued  to  grow  strongly  but  progress  in  macroeconomic 
stabilisation  was  mixed.  The  reversal  of  fiscal  consolidation  added  to  fiscal  and 
macroeconomic risks. Much needed structural reforms continued slowly and the high level of 
unemployment remained a major challenge. 

As  regards  the  economic  criteria,  Serbia  has  made  some  progress  towards  establishing  a 
functioning market economy. Further reform efforts must be pursued to enable Serbia to cope 
in the medium term with the competitive pressures and market forces within the Union. 

The  authorities  have  to  a  large  extent  maintained  the  main  elements  of  a  sound  economic 
policy.  The  economy  continued  to  expand  strongly.  The  inflow  of  foreign  capital  remained 
significant. Declining inflation contributed to a stable environment for economic actors. The 
budget remained in surplus and investment activity has improved markedly. 

The  privatisation  of  state-owned  banks  is  well  advanced  and  competition  among  banks  is 
strong.  The  new  government  has  shown  limited  willingness  to  revive  the  process  of 
privatising state-owned companies. The SME sector has grown in importance. Foreign trade 
and investment continued to grow and economic integration with the EU has advanced. 

EN 

48 

   EN 

 
However,  despite  strong  economic  performance,  unemployment  remains  very  high.  Further 
progress in privatisation is needed and a competitive and dynamic private sector has not yet 
been  fully  established.  Fiscal  policy  turned  expansionary  in  the  second  half  of  2006  and  in 
2007. Public sector wages increased substantially. This contributed to a sizeable increase in 
expenditures  as  a  percentage  of  GDP  in  2007  and  added  to  external  imbalances  and 
inflationary  pressures.  The  lack  of  flexibility  in  the  labour  market  and  high  social  security 
contributions remain an obstacle for job creation. Investment has been hampered by excessive 
bureaucratic  requirements  and  complex  legislation.  Commercial  courts  continued  to  suffer 
from limited capacity and expertise. The large informal sector, fuelled by weaknesses in law 
enforcement  and  the  regulatory  framework,  reduces  the  tax  base,  hampers  the  government's 
capacity to implement economic policies and affects negatively the business environment 

As  regards  European  Standards,  SAA  negotiations  have  shown  that  Serbia  has  the 
administrative capacity to progress towards the EU. Serbia will be well placed to implement a 
future SAA if this capacity is properly utilised. 

Serbia has made some progress in addressing Partnership priorities in the areas of the internal 
market. In the field of free movement of goods, Serbia established a new accreditation body 
and  made  progress  in  the  publication  of  national  standards,  however  the  administrative 
capacity  and  legislative  framework  has  still  to  be  further  developed.  Serbia  has  advanced 
towards the goal of membership of the WTO. In the fields of customs and taxation there have 
been  administrative  and  legislative  improvements.  Serbia  amended  legislation  on  excise 
duties  and  harmonised  its  customs  tariff  law  to  the  Combined  Nomenclature  of  the  EU. 
However,  enforcement  capacities  are  still  limited.  Some  progress  was  made  in  the  area  of 
competition following the establishment of the commission for the protection of competition. 
The  independence  of  the  commission  needs  to  be  ensured.  There  has  been  little  progress, 
however,  in  the  area  of  state  aid  control  and  an  independent  state  aid  authority  has  not  yet 
been established. There has been little progress in the area of public procurement and efforts 
are  still  needed  both  in  terms  of  amending  legislation  and  strengthening  administrative 
capacity. Some progress has been made in the area of intellectual property rights especially 
due to the clarification of the status of the intellectual property rights institute which ended a 
year-long  institutional  stalemate.  There  has  been  little  progress  in  employment,  while  work 
had continued in the area of social policies through the development of the legal framework 
for  health  and  safety  at  work.  There  has  been  little  progress  in  the  area  of  education  and 
efforts  are  needed  to  increase  administrative  capacity,  coordination  between  responsible 
institutions and links with the labour market. 

Serbia has shown progress in approximating with European standards  on  a number  sectoral 
polices.  In  the  area  of  industry  and  SME  Serbia  is  fully  committed  to  the  process  of  the 
European Charter for Small Enterprises. Serbia's preparations are progressing well in the area 
of agriculture. However, efforts need to be maintained and expanded into a number of more 
specific areas such as veterinary and phytosanitary issues and food safety. Progress has been 
made  on  improving  the  quality  and  reliability  of  statistics  on  labour  market  and  business 
activities,  whilst  further  progress  is  needed  on  agriculture  statistics  and  strengthening 
administrative capacity. 

Some  progress  has  been  made  in  meeting  European  Partnership  priorities  in  the  area  of 
transport. Serbia is working towards the implementation of the first transitional phase of the 
European Common Aviation Area Agreement. However, it does not apply this agreement in 
practice.  Serbia  is  actively  participating  in  the  development  of  the  Core  Regional  Transport 
Network and in the South East Europe Transport Observatory. Further efforts are required in 

EN 

49 

   EN 

 
the areas of road, rail and combined transport and a national strategy is required for the entire 
transport  sector.  There  have  been  some  improvements  in  the  energy  sector,  notably  in 
liberalising  the  internal  energy  market.  Energy  policy  is  still  however  at  an  early  stage  of 
development and particular emphasis will have to be placed on improving energy efficiency, 
renewable energy, and radiation protection. As a member of the Energy Community Treaty, 
Serbia needs to implement the relevant EU energy legislation. 

There  has  been  little  progress  in  the  area  of  information  society  and  media.  The  national 
Broadcasting  Agency  needs  to  improve  overall  transparency  and  accountability.  There  has 
been  little  progress  in  adopting  legislation  on  environment  in  line  with  the  European 
Partnership.  Efforts  have  been  made  to  develop  inspection  bodies  but  they  do  not  have 
sufficient capacity to ensure the consistent enforcement of environment legislation. 

Serbia  is  not  sufficiently  advanced  in  the  area  of  financial control  and  there  have  been  few 
developments  in  the  reporting  period.  A  number  of  steps  need  to  be  taken  to  establish  a 
comprehensive and effective system of public internal financial control. 

There has been some progress in the field of justice, freedom and security. Visa facilitation 
and  readmission  agreements  have  been  concluded  between  the  European  Union  and  Serbia 
and the law on travel documents has been adopted. However, the current visa regime is not in 
full compliance with European standards. Also, biometric passports in line with EU standards 
need to be issued. The Law on Foreigners has not yet been adopted. There have been some 
improvements in the area of border control including the handover of state borders from the 
Serbian military to the Ministry of Interior. Further efforts are needed to develop an integrated 
border  management  system.  There  have  been  improved  results  in  tackling  illegal  migration 
but there has been little progress in the area of asylum. 

Money  laundering  constitutes  a  serious  problem  in  Serbia.  Implementation  of  the  new 
legislative  framework  has  been  slow  and  legislation  and  a  strategy  on  prevention  of  money 
laundering and financing terrorism have still to be adopted. Effective measures to enforce and 
audit  declarations  of  assets  are  not  in  place. Co-operation  between  relevant  state  authorities 
remains to be improved. 

Legislation  in  the  area  on  the  fight  against  drugs  is  largely  in  line  with  international 
conventions and Serbian enforcement authorities have made some progress in combating drug 
smuggling,  with  the  limited  resources  at  their  disposal.  Geographically  placed  on  a  Balkan 
transit route, Serbia is a transit point for various kinds of drugs. There has been little progress 
in addressing the problem of drug abuse in the country and in adopting a national strategy. 

The  Law  on  Police  is  in  the  process  of  being  implemented  and  most  regulations  have  now 
been  adopted.  Further  efforts  are  needed  to  strengthen  the  overall  administrative  and 
professional capacity of the police force and to increase transparency. 

Some  progress  has  been  made  in  fighting  organised  crime  and  important  cases  have  been 
brought to a conclusion, including the convictions and sentencing of those found guilty of the 
murder  of  former  Prime  Minister  Djindjic.  However,  organised  crime  continues  to  pose  a 
serious  problem  for  Serbia  and  more  concerted  efforts  are  needed.  The  action  plan  to 
implement  the  national  strategy  on  fighting  organised  crime  has  not  been  adopted  and  the 
specialised  police  services  lack  the  necessary  capacity  to  fully  carry  out  their  duties. 
Provisions for  the confiscation  of  proceeds of crime have not been adequately implemented 
and further legislation on seizure of assets is required. 

EN 

50 

   EN 

 
Progress  has  been  made  in  combating  trafficking  human  beings  through  improved  regional 
co-operation and the adoption of a national strategy. Serbia has been recognised as a source, 
transit and destination country. Serbia is still at an early stage in developing a comprehensive 
approach  to  combating  terrorism.  A  special  department  has  been  established  in  the  criminal 
police  services.  The  ratification  of  a  number  of  international  conventions  is  still  pending. 
There has been little progress in the area of protection personal data and current legislation is 
not in line with European standards. 

Kosovo under UNSCR 1244 

As regards political criteria, Kosovo has made progress in addressing some key partnership 
priorities.  The  provisional  institutions  of  self-government  (PISG)  have  fulfilled  their  core 
roles  in  their  areas  of  competence.  However,  the  United  Nations  Interim  Administration 
Mission  in  Kosovo  (UNMIK)  still  bears  ultimate  legislative  and  executive  responsibility. 
Relations between Kosovo Albanians and Kosovo Serbs remained strained. Strengthening the 
rule  of  law,  anti-corruption  policy,  the  fight  against  organised  crime  and  enhancing  the 
dialogue between the communities are Kosovo's major political challenges. 

Regarding  democracy  and  the  rule  of  law,  overall  stability  is  being  maintained,  despite 
delays in the status settlement process and a number of incidents. Further progress was made 
in  the  transfer  of  responsibilities  to  the  PISG.  However,  the  status  issue  has  continued  to 
dominate  Kosovo's  politics.  Kosovo's  political  leaders  participated  in  the  process  of 
determining  Kosovo's  status  and  co-operated  with  the  international  community  and  the  EU 
planning teams in preparations for status implementation in line with the Special Envoy of the 
UN Secretary General's package9. They are currently participating in political talks under the 
aegis of the international Troika of the EU, US and Russia on the future status of Kosovo. In 
general, Kosovo Serbs do not participate in the PISG. The authorities exercise limited control 
over  certain  areas  where  parallel  institutions,  including  parallel  courts  which  apply  Serbian 
law, continue to function. This is particularly the case in the northern municipalities. Kosovo 
institutions require strengthening at all levels. 

The  assembly  has  participated  more  actively  in  the  legislative  process  with  an  improved 
administrative and law making capacity. For the first time, the assembly based its work on an 
annual work programme. However, the assembly's law-making and administrative capacities 
need further strengthening. 

The coalition government has remained stable. The central co-ordination capacity of the prime 
minister's  office  has  improved.  The  government  is  giving  high  priority  to  European 
integration matters. It actively participated in meetings in the framework of the Stabilisation 
and Association Process Tracking Mechanism (STM). The government increased its outreach 
activities to ethnic minorities and in particular Kosovo Serbs. One Kosovo Serb minister was 
appointed. Municipalities have better observed budgetary constraints. However, co-operation 
between  government  departments  and  between  central  and  municipal  authorities  remained 
difficult. The government's target for minority representation in the administration has not yet 
been met. 

The efficiency of the public administration improved. The government has approved a public 
administration reform action plan. The independent oversight board is now working to ensure 

9 

S/2007/168/Add.1. 

EN 

51 

   EN 

 
                                                 
a  professional,  impartial  and  accountable civil  service.  However, Kosovo's  central  and local 
public  administration  remains  weak  and  inefficient.  Civil  servants  are  still  vulnerable  to 
political influence. The reform needs to be put into practice. 

The  judicial  system  remains  weak  and  unstable,  but  initial  legislative  steps  towards 
establishing the necessary structures have been taken and now need to be implemented. The 
Ministry of Justice and the Kosovo Judicial Council are building up capacities to exercise the 
powers transferred to them by UNMIK. Both adopted reform strategies. The ministry adopted 
an operational plan for 2007. The Special Prosecutor's Office became operational. However, 
the judicial system remains weak and vulnerable operating in a complex legal environment in 
which  there  is  considerable  uncertainty.  There is  a  considerable  backlog  of  cases,  including 
cases related to the March 2004 riots. 

The Anti-corruption Agency became operational in February 2007. Under the anti-corruption 
law  and  action  plan  politicians  and  senior  civil  servants  declared  their  assets.  However, 
corruption is widespread and constitutes a very serious problem. 

In  the  area  of  human  rights  and  the  protection  of  minorities,  little  progress  was  achieved. 
Whilst  institutional  and  legal  framework  to  protect  freedom  of  expression  improved,  undue 
pressures  on  the  media  persist,  seriously  limiting  open  public  debate.  Minorities  and  other 
vulnerable  groups  face  restrictions  in  exercising  their  freedom  of  assembly  and  association. 
Religious  freedom  is  not  fully  respected,  attacks  on  religious  sites  have  persisted  and 
investigations  are  not  always  conclusive.  The  legal  aid  system  is  not  yet  fully  functional. 
Some progress was made in improving the penitentiary system, but infrastructure and security 
standards need further upgrading. 

Awareness of women's rights in society remains low. Legislation on gender equality needs to 
be  further  developed  and  implementation  stepped-up.  Women  need  to  be  further  protected 
against  all  forms  of  violence.  Children's  rights  are  not  fully  respected  and  protection 
mechanisms are inadequate. The infant mortality rate in Kosovo is still high. The integration 
and  protection  of  socially  vulnerable  groups  is  not  fully  guaranteed.  Anti-discrimination 
legislation has been developed in line with EU standards but little progress was achieved in its 
implementation. Property rights are not always guaranteed and are subject to ambiguities and 
legal uncertainties. The enforcement of decisions and judgements is weak. 

Very  little  progress  has  been  achieved  in  relation  to  returnees,  refugees  and  internally 
displaced people. The integration and protection of returnees and internally displaced persons 
is not fully guaranteed. 

The rights of minorities in Kosovo are guaranteed by law, but restricted in practice because of 
security  concerns.  The  government  leaders  have  made  efforts  to  reach  out  to  the  minority 
communities, but these need to be enhanced and followed up by concrete actions. Minorities 
show increasing confidence in the institution of the ombudsman. However, the enjoyment of 
minority rights is restricted in light of the overall situation. The Roma, Ashkali and Egyptian 
communities  still  face  very  difficult  living  conditions  and  discrimination,  especially  in  the 
areas of education, social protection, health care, housing and employment. There is still no 
comprehensive integration strategy for the Roma, Ashkali and Egyptian communities. 

Concerning regional issues and international obligations, Kosovo participates actively and 
constructively, to the extent its present status permits, in regional co-operation initiatives. The 
Central Europe Free Trade Area Agreement (CEFTA) was signed. Kosovo participates in the 

EN 

52 

   EN 

 
South  East  Europe  Transport  Observatory  (SEETO).  Kosovo  continues  to  implement  the 
provisions arising from the Energy Community Treaty and the European Common Aviation 
Area Agreement. 

As  regards  co-operation  with  the  International  Criminal  Tribunal  for  the  former  Yugoslavia 
(ICTY), some progress was achieved but witness intimidation continues to be a problem. 

Kosovo’s  economic  development  continues 
impeded  by  political 
uncertainties,  insufficient  rule  of  law,  limited  production  capacity  and  weak  infrastructure. 
The very high level of unemployment remains a major cause of concern. Economic policies 
remained  broadly  sound  and  some  reforms  were  pursued  but  economic  growth  was  again 
modest and external balances remained precarious. 

to  be  seriously 

As  regards  economic  criteria,  Kosovo  has  made  limited  progress  towards  establishing  a 
functioning market economy. Further considerable reform efforts must be pursued to enable it 
to cope over the long term with competitive pressure and market forces within the Union. 

Overall,  economic  policies  remained  broadly  sound  and  market-oriented.  Inflation  was  low 
and the price level of domestic goods and services fell. Budget implementation in 2006 and 
the first half of 2007 led to a significant surplus. This was largely due to an extraordinary and 
larger than expected increase in revenues as well as to the fact that the government investment 
spending  fell  short  of  budgeted  figures.  Kosovo  did  not  assume  any  public  external  debt. 
Privatisation of formerly socially owned enterprises accelerated significantly although much 
remains  to  be  done.  The  incorporation  of  publicly-owned  enterprises  is  close  to  completion 
but restructuring needs to continue. The financial sector further expanded and consolidated in 
a context of increased foreign ownership. 

However,  growth  was  relatively  modest  and  unemployment  very  high.  Inadequate 
implementation  of  the  rule  of  law,  status-related  uncertainties  and  fiscal  risks  continued  to 
affect the functioning of market mechanisms and the business climate. Economic policy co-
ordination  remained  weak,  making  it  difficult  to  ensure  a  policy  consensus  and  to  respect 
policy commitments. The external accounts remained precarious, as the trade deficit widened 
further. Kosovo still lacks export capacity and competitiveness. The development of a viable 
private sector was hampered by limited access to finance, legal uncertainty, insufficient skills 
and  training,  the  weak  technology  base  and  the  poor  state  of  the  transport,  energy  and 
communication  infrastructure.  Financial  intermediation  continued  to  be  hampered  by  high 
interest  rate  spreads.  The  large  informal  sector,  fuelled  by  persistent  weaknesses  in  law 
enforcement  and  the  regulatory  framework,  reduces  the  tax  base,  hampers  the  government's 
capacity to implement economic policies and affects negatively the business environment. 

Kosovo  has  made  further  progress  in  approximating  its  legislation  and  policies  with 
European standards. In some areas, such as customs and free movement of goods, progress 
made  in  previous  years  has  been  sustained.  However,  little  progress  has  been  made  on  the 
effective implementation and enforcement of legislation. More efforts are needed to create the 
administrative  capacity  that  will  ensure  further  approximation  and  implementation  of 
European standards, in particular in fighting organised crime, protecting the external borders 
and boundary, taxation and energy. 

Some progress was achieved in implementing the European Partnership priorities in the area 
of the EU internal market,  but Kosovo is  still  at  a very early  stage  in  its  efforts  to  comply 
with  European  standards.  Some  progress  has  been  made  regarding  free  movement  of  goods, 

EN 

53 

   EN 

 
particularly in putting in place necessary legislation and horizontal infrastructure. As regards 
horizontal  measures  and  standardisation,  there  was  little  progress.  The  legal  framework  for 
the freedom to provide services and the right of establishment is still fragmented. Regarding 
free movement of capital, the transfer of Serbian dinars to the areas predominantly inhabited 
by Kosovo Serbs needs to be more transparent. 

Good progress can be reported in the field of customs. The customs service has increased its 
capacity  and  the  customs  compliance  unit,  intelligence  unit  and  investigations  sector  have 
been  strengthened  and  are  now  operational.  Little  progress  was  achieved  in  the  field  of 
taxation. Tax administration is ineffective. The capacity of the administration to enforce tax 
legislation is still weak. In the area of competition, few developments can be reported. In the 
field  of  public  procurement,  a  law  amending  the  2004  public  procurement  law  was 
promulgated.  However,  further  efforts  are  needed  to  improve  the  compliance  of  Kosovo’s 
procurement activities with European standards. Little progress can be reported in the area of 
intellectual property law. Counterfeiting and piracy remain widespread. 

No  particular  progress  can  be  reported  in  European  standards  on  social  policy  and 
employment  policies.  There  is  no  comprehensive  employment  strategy  and  the  Labour 
Inspectorate  remains  without  adequate  capacity  to  monitor  the  implementation  of  essential 
labour legislation. Concerning European standards on education and research, some progress 
has  been  made  in  the  field  of  education,  but  the  capacities  of  the  education  and  training 
system are still very rudimentary and efforts are needed to set standards and unify the higher 
education system. 

As regards the development of sectoral policies, some progress can be reported in the field of 
industry  and  SMEs  to  allow  faster  und  cheaper  business  start-up.  However,  preparations  in 
this area are still at an early stage. 

There  has  been  little  progress  in  the  area  of  agriculture,  veterinary,  phytosanitary  and 
fisheries. 

Some progress was made in the field of environment. A number of important laws have been 
adopted  and  most  of  the  water  and  waste  public  utilities  have  been  consolidated  and 
incorporated.  However,  the  water  and  waste  public  utilities  face  problems  with  revenue 
collection. Most administrative structures are still fragile and need to be strengthened to allow 
Kosovo  to  meet  the  environmental  challenges  it  is  facing.  The  population's  awareness  of 
environmental issues remains very poor. 

Some progress was made in the field of transport generally. UNMIK signed the Agreement 
on the European Common Aviation Areas on behalf of Kosovo. It is actively participating in 
the  development  of  the  Core  Regional  Transport  Network  and  in  the  South  East  Europe 
Transport  Observatory  (SEETO).  However  progress  in  the  railway  sector  is  limited.  In  the 
area of energy, Kosovo is bound to apply the relevant EU energy legislation as a member of 
the  Energy  Community  Treaty.  The  remaining  challenges  in  this  area  are,  however,  very 
significant. The institutional and legislative capacity of the relevant administrative structures 
remains weak. Reliable supply of electricity is not ensured. This affects rural and remote areas 
in particular. Revenue collection remains a challenge. 

There  has  been  little  progress  in  the  area  of  information  society  and  media.  Effective 
liberalisation  and  enhancement  of  competition  in  the  electronic  communications  market 
remain  to  be  achieved.  Progress  was  made  in  media  reform,  but  the  stable  and  sustainable 

EN 

54 

   EN 

 
funding  of  the  public  service  broadcaster,  the  independent  media  commission  and  the 
minority media fund needs to be addressed. 

There has been some progress in the field of financial control. Little progress can be reported 
in  the  field  of  statistics.  The  statistical  infrastructure  and  the  management  capacity  at  the 
statistical office remain weak. 

As  regards  justice,  freedom  and  security,  uneven  progress  was  made  in  approximating 
Kosovo's  legislation  and  practices  with  European  standards.  Kosovo  does  not  have  a  visa 
regime. Work towards introducing biometric passports in line with EU standards is necessary. 
While UNMIK retains the ultimate responsibility for border and boundary management and 
KFOR continues to be in charge of the green border, the Kosovo Police Service border and 
boundary police is in charge of managing the flow of persons through Kosovo. Agreements 
on cooperation and mutual support have been signed between the border and boundary police, 
the customs service, the veterinary and food agency as well as the Ministry of Culture, Youth 
and  Sport.  However,  controls  on  the  movement  of  persons  into  and  out  of  Kosovo  do  not 
always correspond with European standards. 

There is no law on asylum. There are no shelters and housing facilities for the accommodation 
of asylum seekers. Very few persons apply for asylum in Kosovo. Concerning readmission, 
the PISG have to enhance preparations for increasing returns in line with European standards; 
there are no specific laws, strategies or action plans, and no budgetary provisions yet. 

Responsibilities in the field of fighting money laundering have only been partly transferred to 
the PISG. Uneven progress can be reported in combating money laundering. Investigations on 
a number of cases were concluded, but no court sentences have yet been handed down. The 
wide  range  of  actors  dealing  with  money  laundering  and  the  lack  of  a  clear  distribution  of 
competencies hinders investigations and prosecution of money laundering offences. The lack 
of  specialised  prosecutors  to  deal  with  money  laundering  and  economic  crimes  remains  a 
major challenge. 

Kosovo is one of the main traffic routes for drugs to Western Europe. Some progress has been 
made in adopting new legislation and in strengthening relevant administrative structures. The 
seizure  of  narcotics  has  increased.  However,  there  is  no  strategy  to  prevent  and  combat  the 
illegal transport and use of drugs. Drug trafficking remains a serious concern. 

Some  progress  can  be  reported  in  the  field  of  police.  The  Kosovo  Police  Service  generally 
carries  out  its  tasks  in  a  professional  and  competent  manner,  particularly  as  regards  minor 
crimes.  Investigations  in  cases  of  serious  crime,  however,  are  still  ineffective.  Inter-agency 
and  international  co-operation  are  not  always  satisfactory.  There  is  no  law  on  the  police. 
Police  detention  facilities  do  not  meet  international  standards.  There  are  no  uniform 
procedures  and  associated  forms  of  police  detention.  Kosovo  still  lacks  a  crime  reduction 
strategy at both central and regional levels. 

The  fight  against  organised  crime,  including  the  fight  against  trafficking  in  human  beings, 
remains  a  major  challenge.  The  number  of  cases  of  organised  crime  investigated  increased 
substantially  in  the  first  half  of  2007.  Relevant  administrative  structures  were  strengthened, 
but  remain  ineffective  due  to  a  lack  of  skills  and  equipment.  The  legislative  framework  to 
tackle  organised  crime  is  still  incomplete,  particularly  in  the  area  of  witness  protection, 
undercover agents, confiscation of assets, the anti-mafia law and the law on organised crime 
itself.  There  is  still  no  weapons  collection  strategy.  Kosovo  is  still  a  destination  and  transit 

EN 

55 

   EN 

 
area for victims of trafficking in human beings. No special legislation on trafficking in human 
being exists. 

There  are  no  developments  in  the  protection  of  personal  data.  There  is  still  no  general 
legislation  on  data  protection  and  no  independent  data  protection  supervisory  authority  has 
been set up. 

Turkey 

Turkey  continues  to  sufficiently  fulfil  the  Copenhagen  political  criteria.  Following  the 
constitutional  crisis  in  spring,  early  parliamentary  elections  were  held  in  full  respect  of 
democratic  standards  and  of  the  rule  of  law.  However,  limited  progress  was  achieved  on 
political  reforms  in  2007.  Significant  further  efforts  are  needed  in  particular  on  freedom  of 
expression,  on  civilian  control  of  the  military,  and  on  the  rights  of  non-Muslim  religious 
communities.  Further  progress  is  also  needed  on  the  fight  against  corruption,  the  judicial 
reform, trade union rights, and women's and children's rights. 

As regards democracy and the rule of law, parliamentary elections were free and fair, turnout 
was  high  and  the  new  Parliament  is  now  more  representative  of  the  country's  political 
diversity. The election of the President by Parliament in August took place in accordance with 
the  Constitution.  A  new  government  was  formed  and  presented  an  EU-oriented  reform 
agenda. 

There  has  been  some  progress  in  legislative  reform  of  the  public  administration  and  civil 
service. 

As  regards  civilian  oversight  of  the  security  forces,  the  outcome  of  the  spring  2007 
constitutional  crisis  reaffirmed  the  primacy  of  the  democratic  process.  Nonetheless,  the 
military  has  taken  public  positions  on  issues  going  beyond  its  remit  and  full  civilian 
supervision of the military and parliamentary oversight of defence expenditures still needs to 
be established. 

Some progress has been made in improving the efficiency of the judiciary. Training of judges, 
prosecutors  and  court  staff,  as  well  as  modernisation  have  continued.  Concerns  remain 
regarding the independence and impartiality of the judiciary. 

There has been little progress in the fight against corruption. Corruption is widespread. The 
continuing  absence  of  an  overall  anti-corruption  strategy,  action  plan  and  coordination 
mechanism is a cause for concern. 

Concerning human rights and the protection of minorities, Turkey has made progress on the 
ratification of international human rights instruments and in carrying out European Court of 
Human  Rights  (ECtHR)  judgements.  However,  further  efforts  are  needed.  The  institutional 
framework for human rights needs to be upgraded. 

The Turkish legal framework includes a comprehensive set of safeguards against torture and 
ill-treatment. The downward trend in the number of reported cases of torture and ill-treatment 
continued.  However,  cases  still  occur  especially  before  detention  starts.  Turkey  needs  to 
investigate  more  thoroughly  allegations  that  there  have  been  human  rights  violations  by 
members of the security forces. 

EN 

56 

   EN 

 
As concerns freedom of expression, prosecutions of journalists, intellectuals and human rights 
activists for the expression of non-violent opinions increased in 2007. This has led to cases of 
self-censorship.  Article  301  and  other  provisions  of  the  Turkish  Criminal  Code  that  restrict 
freedom of expression need to be brought into line with the European Convention for Human 
Rights and case law of the ECtHR. 

As regards freedom of religion, a legal framework has yet to be established in line with the 
ECHR so that all religious communities can function without undue constraints. There was no 
progress  on  the  difficulties  encountered  by  non-Muslim  religious  communities  and  by  the 
Alevis.  The  authorities  need  to  make  more  strenuous  efforts  to  prevent  discrimination, 
intolerance and related acts of violence. 

Public attention to gender issues has continued to increase, and more action has been taken to 
improve women's rights. In particular, progress has been achieved on protecting women from 
violence.  However  these  efforts  need  to  be  further  strengthened.  The  legal  framework  is  in 
place but it needs to be fully implemented. 

On children's rights there has been progress in several areas, including registration of children 
at birth and education. However, further efforts are needed in these areas, as well as to prevent 
violence  against  children  and  to  improve  the  overall  implementation  of  the  relevant 
legislation. 

On trade unions' rights, Turkey has not ensured that full trade union rights are respected in 
line  with  EU  standards  and  the  relevant  International  Labour  Organisation  (ILO) 
Conventions, in particular  as  regards the right to organise, to strike  and the right to bargain 
collectively. New legislation is needed to strengthen trade union rights. 

The situation in Turkey with regard to minority rights remains unchanged. There has been no 
progress  on  alignment  of  Turkish  practices  with  European  standards.  Restrictions  on  the 
exercise  of cultural  rights  continue,  in  particular  as  regards  the  use  of  languages other than 
Turkish  in  broadcasting,  in  political  life  and  when  accessing  public  services.  There  are  no 
opportunities  to  learn  Kurdish  in  the  public  or  private  schooling  systems.  The  Roma 
experience  discriminatory  treatment  in  access  to  adequate  housing,  education,  social 
protection, health and employment. Forced evictions remain a serious problem. 

As concerns the East and Southeast, a comprehensive approach is needed to the economic and 
social  difficulties  facing  the  region,  and  to  creating  the  conditions  for  the  predominantly 
Kurdish  population  to  enjoy  full  rights  and  freedoms.  Compensation  of internally  displaced 
persons (IDPs) has continued and measures were taken to improve the implementation of the 
relevant law. However, the government lacks an overall national strategy to address the IDP 
issue, including return. 

There has been a further increase of terrorist attacks by the PKK, which is on the EU list of 
terrorist organisations. 

With  regard  to  regional  issues  and  international  obligations,  Turkey  has  expressed 
continued support for UN efforts to find a comprehensive settlement of the Cyprus problem. 
However,  there  has  been  no  progress  towards  normalisation  of  bilateral  relations  with  the 
Republic  of  Cyprus.  Turkey  has  not  fully  implemented  the  Additional  Protocol  to  the 
Association  Agreement  and  has  not  removed  all  obstacles  to  the  free  movement  of  goods, 
including restrictions on direct transport links with Cyprus. 

EN 

57 

   EN 

 
Relations with Greece have evolved positively. Further confidence-building steps have been 
taken, but no agreement was reached on border disputes. Turkey continued to play a positive 
role in the Western Balkans. Good neighbourly relations remain key. 

The  Turkish  economy  continued  to  grow  rapidly,  with  high  inflows  of  foreign  investment. 
The  monetary  and  fiscal  policy  mix  was  broadly  adequate.  Inflationary  pressures,  growing 
external imbalances and weaker fiscal discipline in 2007 may affect macroeconomic stability. 
Structural reforms have slowed down and labour market rigidities hamper job creation. 

As regards economic criteria, Turkey can be regarded as a functioning market economy. It 
should be able to cope with competitive pressure and market forces within the Union in the 
medium  term,  provided  that  it  implements  its  comprehensive  reform  programme  to  address 
structural weaknesses. 

Economic  growth  remained  robust,  in  large  part  due  to  higher  exports,  and  business 
confidence  was  strong.  The  new  government  expressed  strong  commitment  to  fiscal 
consolidation and structural reform. A strong lira and fiscal discipline have reduced the public 
debt,  despite  high  borrowing  costs  and  some  financial  market  turbulence.  The  central  bank 
has been conducting a cautious and responsible monetary policy. FDI grew sharply, notably in 
the form of purchases of Turkish companies by foreign entities, and has played a greater role 
in reducing risks related to macroeconomic imbalances. 

However,  tax  relief  and  higher  infrastructure  spending  led  to  fiscal  loosening  in  2007. 
Corrective measures are needed to reach the budget target in 2007. Inflationary pressures have 
increased  –  in  particular  due  to  food  and  services  prices  and  wages  -  and  in  the  absence  of 
major policy changes the inflation target for end 2007, set by the government and the central 
bank, might not be met. 

A  large  part  of  the  widening  current  account  deficit  is  still  financed  by  short-term  capital 
inflows. The fiscal pressure on labour remains very high and deters job creation in the formal 
sector. Structural rigidities in the labour market hamper job creation, and hamper an increase 
in employment of women. 

The  pace  of  privatisation  has  slowed  down.  Human  capital  remained  to  a  large  extent  ill-
adapted to the needs of a rapidly growing and developing economy, in  particular  in export-
oriented  sectors.  Regional  disparities  remain  high.  The  lack  of  transparency  in  state  aid 
remains  detrimental  to  effective  economic  policy  making.  Planned  reforms  in  the  social 
security  system  and  in  the  energy  sector  have  been  postponed.  The  large  informal  sector, 
fuelled  by  weaknesses  in  law  enforcement  and  the  regulatory  framework,  reduces  the  tax 
base,  hampers  the  government's  capacity  to  implement  economic  policies  and  affects 
negatively the business environment. 

Turkey improved its ability to take on the obligations of membership. Progress was made 
in  most  areas,  in  particular  in  the  chapters  on  free  movement  of  goods,  financial  services, 
trans-European Networks, and science and research. Alignment is advanced in certain areas, 
such  as  free  movement  of  goods,  intellectual  property  rights,  anti-trust  policy,  energy, 
statistics,  enterprise  and  industrial  policy,  consumer  and  health  protection,  and  science  and 
research.  However,  alignment  needs  to  be  pursued,  in  particular  in  areas  such  as,  free 
movement  of  services,  state  aid,  agriculture,  fisheries,  food  safety,  veterinary  and 
phytosanitary  policies,  and  environment.  A  number  of  obligations  by  Turkey  under  its 

EN 

58 

   EN 

 
Customs  Union  with  the  EU  remain  unfulfilled.  Turkey's  administrative  capacities  to  cope 
with the acquis need further improvement. 

With regard to free movement of goods, the level of alignment is generally advanced, with the 
exception  of  notification  procedures  and  mutual  recognition.  Turkey  made  progress  in  most 
areas such as accreditation, standardisation, conformity assessment, and market surveillance. 
However,  certain  technical  barriers  to  trade  continue  to  persist.  Progress  on  the  right  of 
establishment  and  the  freedom  to  provide  services  was  very  limited;  the  level  of  alignment 
remained  low.  As  regards  the  free  movement  of  capital,  Turkey  made  progress  on  capital 
movements  and  the  prevention  of  money  laundering.  Good  progress  was  made  on  financial 
services,  in  particular  in  banking,  insurance  and  occupational  pensions,  as  well  as  some 
progress on securities markets and investment services. 

In  the  area  of  public  procurement,  progress  was  limited.  The  administrative  capacity 
improved.  However,  responsibilities  for  policy  making  and 
implementation  remain 
fragmented.  On  company  law,  Turkey  made  little  progress.  The  draft  commercial  code  was 
not  adopted.  With  regard  to  intellectual  property  law,  alignment  is  well  advanced.  Some 
further  progress  took  place.  However,  implementation  and  enforcement  need  substantial 
strengthening.  With  regard  to  information  society  and  media,  Turkey  made  some  progress. 
Market  liberalisation  in  the  electronic  communications  and  information  technologies 
continued. 

Progress  in  the  field  of  competition  was  achieved  as  regards  anti-trust;  alignment  is  well 
advanced. However, there was no progress concerning the adoption of the state aid legislation 
and  the  establishment  of  the  state  aid  monitoring  authority.  Finalising  the  National 
Restructuring  Programme  for  the  steel  industry  remains  a  priority.  Turkey  has  not  reported 
state aid schemes to the Commission. 

In the area of agriculture and rural development, alignment remained limited. Some progress 
was  made  on  organic  farming.  Initial  progress  was  made  in  drafting  a  rural  development 
programme  and  with  the  adoption  of  implementing  legislation  to  make  use  of  Community 
funding.  However,  preparations  for  operational  structures  are  lagging  behind  considerably. 
Turkey has not removed technical barriers to trade of beef meat and live bovine animals. In 
fisheries, progress was achieved on resource and fleet management. However, Turkey made 
no  progress  with  regard  to  legislative  alignment.  In  both  agriculture  and  fisheries, 
implementing  capacities  are  at  an  early  stage.  Little  progress  was  made  concerning  food 
safety, veterinary and phytosanitary policy. Effective control of animal diseases, in particular 
foot and mouth disease, remained a major cause for concern. Alignment is at an early stage.  

Some progress was made in transport policy. Alignment in the road, air and maritime sectors 
continued.  However,  Turkey  made  no  progress  in  the  railway  sector.  It  refuses  to  bring  its 
bilateral air service agreements with Member States in line with Community Law. The lack of 
communication  between  air  control  centres  in  Turkey  and  the  Republic  of  Cyprus 
compromises  air  safety.  In  the  area  of  Trans  European  Networks  good  progress  was  made. 
The  transport  infrastructure  needs  assessment  With  regard  to  infrastructure,  significant 
progress  was  made  on  the  Turkey-  Greece  gas  interconnector  which  is  near  to  completion. 
Turkey's participation in the Nabucco pipeline remains key to the success of the project. In the 
field of energy, there was some progress. A framework law on energy efficiency was adopted. 
However,  Turkey  did  not  address  the  need  for  ambitious  targets  on  renewable  energy. 
Overall, legislative alignment is moderately advancing. 

EN 

59 

   EN 

 
On taxation there was some progress. However, Turkey did not address the scope and rates of 
VAT, the structure and rates of excise duties, nor direct taxation. Discriminatory taxation of 
alcoholic and tobacco products continued. 

In  statistics  progress  was  made,  in  particular  on  infrastructure,  classifications,  and  sector 
statistics. Overall, alignment is well advanced. However, alignment is incomplete as regards 
registers, agricultural statistics and economic and monetary statistics. 

Some  progress  was  made  was  made  in  the  area  of  economic  and  monetary  policy.  Overall 
alignment in this area is well advanced. However, cooperation amongst policy making bodies 
needs to be enhanced. Concerning the acquis on employment and social policy, Turkey made 
little  progress  in  aligning  with  the  acquis.  Social  dialogue  needs  to  be  enhanced  and  the 
informal sector curbed. 

Progress  was  made  on  enterprise  and  industrial  policy:  the  Investment  Support  and 
Promotion Agency became operational, a tourism strategy was adopted. Overall, Turkey has a 
high level of alignment. Good progress was achieved in aligning with EU policies on science 
and research. However, the number of researchers and private sector involvement in research 
both remain limited. Progress was made the field of education and culture, notably through 
participation  in  Community  programmes.  Turkey  has  reached  a  good  overall  level  of 
alignment in these areas. 

Progress  has  been  made  on  regional  policy  and  coordination  of  structural  instruments, 
particularly in designating implementing structures for the regional development components 
of  the  new  Community  Instrument  for  Pre-Accession  Assistance  (IPA).  However,  overall 
alignment  remained  limited.  Administrative  capacity  at  central  level  is  lagging  behind.  At 
regional level, the process of establishing structures for the implementation of regional policy 
measures stalled. 

As regards the judiciary, some progress can be reported, in particular, on training and in the 
use  of  IT  technology  in  case  management;  further  efforts  are  needed  to  strengthen  the 
independence of the judiciary, in particular as regards the composition of the High Council of 
Judges  and  Prosecutors.  As  regards  the  fight  against  corruption,  little  progress  was  made. 
There is no overall strategy or action plan. 

With  regard  to  fundamental  rights,  there  was  little  progress  in  legislation  and  in  practice. 
Considerable further efforts are needed in this area. 

Concerning justice, freedom and security, Turkey continued making progress, particularly in 
fighting organised crime, drug trafficking and human trafficking. However, considerable and 
sustained  efforts  are  required  in  areas  such  as  police  cooperation,  asylum,  migration  and 
external borders. 

On  environment,  Turkey  made  substantial  progress  in  strengthening  the  administrative 
capacity  at  central  level.  However,  there  was  little  progress  on  horizontal  legislation,  air 
quality,  chemicals,  noise  and  waste.  Turkey  made  no  progress  in  the  area  of  industrial 
pollution and risk management. The overall level of alignment remained low. 

As regards consumer protection, alignment is in an advanced stage. Some progress was made, 
however  implementation  is  lagging  behind.  The  consumer  movement  in  Turkey  remained 

EN 

60 

   EN 

 
weak.  Turkey  made  some  progress  in  the  area  of  health  protection.  Alignment  is  also 
moderately advanced. The administrative capacity started to improve. 

As  regards  the  customs  Union,  Turkey  has  reached  a  high  level  of  alignment.  However, 
alignment  is  not  complete  with  regard  to  free  trade  zones,  customs  duty  relief,  the  fight 
against counterfeit goods, and post clearance. Turkey's duty free shops at arrival points are not 
in line with the acquis. Turkey has also reached an advanced level of alignment in the area of 
external relations but has not aligned fully with EU positions in the WTO and in the OECD. 

Turkey’s close alignment with EU Common Foreign and Security Policy continued. Turkey 
maintained its efforts to promote regional stability in line with EU policies. Turkey's desire to 
continue contributing to ESDP is welcome. However, Turkey objects to the inclusion of the 
Republic of Cyprus and Malta in EU-NATO cooperation. Turkey has not aligned with the EU 
position on membership of certain suppliers' groups. Turkey has not signed the International 
Criminal Court statute. Turkey has kept its land border with Armenia closed. 

Preparations  on  financial  control  are  well  advanced.  Some  additional  implementing 
legislation  was  issued.  However,  adoption  of  the  revised  law  of  the  Turkish  Court  of 
Accounts  is  pending.  Turkey  has  not  updated  public  internal  financial  control  policy  and 
legislation. Preparations for permanent structures to cooperate with the European Anti-Fraud 
Office are at an early stage. With regard to financial and budgetary provisions, there were no 
particular developments. En plus, les modifications suivantes ont été retenues: 

EN 

61 

   EN