Communication from the Commission to the European Parliament and the Council - Implementation of the European Neighbourhood Policy in 2008 {SEC(2009) 511} {SEC(2009) 512} {SEC(2009) 513} {SEC(2009) 514} {SEC(2009) 515} {SEC(2009) 516} {SEC(2009) 517} {SEC(2009) 518} {SEC(2009) 519} {SEC(2009) 520} {SEC(2009) 521} {SEC(2009) 522} {SEC(2009) 523}
Date: 2009-04-23
Institutions: European Commission
Subjects: European neighbourhood policy, the EU's international role

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.4.2009 
COM(2009) 188 final 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Implementation of the European Neighbourhood Policy in 2008 

{SEC(2009) 511} 
{SEC(2009) 512} 
{SEC(2009) 513} 
{SEC(2009) 514} 
{SEC(2009) 515} 
{SEC(2009) 516} 
{SEC(2009) 517} 
{SEC(2009) 518} 
{SEC(2009) 519} 
{SEC(2009) 520} 
{SEC(2009) 521} 
{SEC(2009) 522} 
{SEC(2009) 523} 

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COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Implementation of the European Neighbourhood Policy in 2008 

1. 

THE STRATEGIC CONTEXT – A YEAR OF CRISES 

2008 was a difficult year for implementation of the European Neighbourhood Policy. Its last 
few  months  were  marked  by  crises  that  could  pose  long-term  challenges  for  this  key  EU 
policy. Two violent conflicts broke out: the war between Russia and Georgia in August 2008 
and the Israeli intervention in Gaza in December 2008/January 2009. At the turn of the year 
Eastern  partners  and  the  EU  suffered  disruptions  of  gas  supplies  as  a  result  of  a  dispute 
between  Ukraine and  Russia. Finally,  the whole of the ENP area, particularly the East, was 
affected  by  the  deepening  global  financial  and  economic  crisis.  This  unfavourable  context 
underscores the need for even more active and tangible EU support for the Neighbourhood to 
promote mutual prosperity, stability and security. 

Despite 
the  difficult  overall  environment,  partners  made  significant  progress  on 
implementation of the ENP in several key areas, reflecting the policy's role as a catalyst for 
reforms.  A  number  of  partners  advanced  in  trade  negotiations,  tax  and  customs  reform  and 
competition  policy.  The  business  environment  also  improved  in  a  number  of  countries,  in 
some cases linked to achievements in the fight against corruption. Yet corruption remains a 
significant issue in several countries. Overall the pace of reforms has slowed particularly in 
democratic reforms and human rights standards. This Communication provides an overview 
of  these  developments.  It  also  highlights  the  impact  of  the  financial  and  economic  crisis  on 
the partner countries and proposes a number of ways ENP instruments could contribute to the 
recovery process. 

The gradual deepening of the ENP continued throughout 2008, based upon the proposals by 
the Commission in December 20071 and also with the development of two new initiatives: in 
July the Union for the Mediterranean was launched following a Commission Communication, 
and  in  December  the  Commission  tabled  its  proposal  for  an  ambitious  Eastern  Partnership. 
These major initiatives further reinforce the ENP and complement existing initiatives such as 
the Black Sea Synergy. 

More detailed information can be found in the country-by-country Progress Reports and the 
Sectoral Progress Report, annexed. The ENP framework provides an objective and coherent 
approach. The reports reflect differences in sequencing and prioritisation of reforms under the 
bilaterally agreed Action Plans2, as well as the diversity between partners.  

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COM(2007) 774: ’A Strong European Neighbourhood Policy’. 
The  ENP  covers  Algeria,  Armenia,  Azerbaijan,  Belarus,  Egypt,  Georgia,  Israel,  Jordan,  Lebanon, 
Libya, Republic of Moldova, Morocco, the occupied Palestinian territory, Syria, Tunisia and Ukraine. 
Action Plans have been adopted with twelve of the partners, namely all but Algeria, Belarus, Libya and 
Syria. 

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2. 

DEVELOPMENTS IN BILATERAL RELATIONS 

Armenia  made  progress  on  implementation  of  the  ENP  Action  Plan.  It  is  however  still 
struggling with the consequences of an internal crisis in the aftermath of presidential elections 
in  February  2008  that  led  to  a  state  of  emergency  and  resulting  concerns  about  democratic 
standards and human rights, notably in the area of media freedom. This crisis occurred in a 
context of steady progress in reform during recent years. Important steps were taken in 2008 
towards improving the transparency of the government decision-making process, notably the 
government’s  cooperation  with  NGOs  and  civil  society,  although  more  remains  to  be  done. 
Armenia made progress on regional cooperation and dialogue with neighbouring countries. It 
also widely aligned itself with common foreign and security policy (CFSP) declarations and is 
generally very active in cooperating on CFSP-related issues. Progress was made on reforms of 
tax and customs, financial services, competition policy, social policy and poverty reduction. 
Armenia continued its cooperation with the EU on trade-related issues, including preparations 
for a possible future deep and comprehensive free trade agreement (DCFTA). The opening of 
a Delegation of the European Commission in Yerevan in February 2008 further contributed to 
the strengthening of bilateral relations with Armenia.  

Azerbaijan made, like last year, only limited progress in the area of democratic governance. 
The  Presidential  Elections  in  October  2008  showed  progress  towards  meeting  OSCE 
(Organisation  for  Security  and  Cooperation  in  Europe)  commitments  but  there  were 
shortcomings in the electoral process. Some progress was made in the area of the judiciary, 
whose  independence  nevertheless  remains  a  cause  for  concern.  There  were  negative 
developments on protection of human rights and fundamental freedoms. The December 2008 
decision  of  the  National  TV  and  Radio  Council  not  to  extend  the  licences  of  foreign 
broadcasters  to  transmit  on  local  frequencies  further  restricted  media  pluralism.  In  the 
business field, Azerbaijan was assessed by the World Bank as one of the top reformers in the 
world.  The  macroeconomic  environment  was  favourable  with  strong  economic  growth, 
mainly  due  to  the  high  oil  and  gas  prices,  particularly  in  the  first  half  of  2008.  Azerbaijan 
continued  negotiations  on  its  accession  to  the  World  Trade  Organisation  (WTO).  Good 
progress was made in the context of the 2006 Memorandum of Understanding on a strategic 
partnership in the field of energy and in strengthening its role as energy producer. After the 
reporting period, in 2009, some encouraging signs were seen, notably with the ratification of 
the Optional Protocol to the UN Convention against Torture and the withdrawal of the libel 
charges  against  a  human  rights  defender.  The  opening  of  a  Delegation  of  the  European 
Commission  in  Baku  in  February  2008  further  contributed  to  the  strengthening  of  bilateral 
relations with Azerbaijan.  

A  positive  step  on  the  Nagorno-Karabakh  conflict  was  taken,  despite  the  prevailing  high 
tensions, with the first document jointly signed by the Presidents of Azerbaijan and Armenia 
since 1994. The EU maintains its support for the solution of the conflict in the framework of 
the OSCE Minsk group. 

A stronger commitment to implementation of the Egypt-EU Action Plan was seen in the areas 
of social, economic and sector reforms, though with less commitment to political reform. In 
the  area  of  human  rights  and  fundamental  freedoms,  good  progress  was  made  on  women’s 
and children’s rights while much remains to be done on other aspects. Progress was achieved 
on economic reform, particularly on harmonising fiscal and monetary policy and on general 
economic liberalisation, backed up by the establishment of fast-track economic courts. Trade 
negotiations have been launched on the gradual liberalisation of trade in services and the right 
of establishment and have been concluded on agricultural products, processed agricultural and 

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fisheries products. On market and regulatory reform progress has been limited, concentrating 
mainly  on  improvements  to  the  business  environment  for  SMEs  and  the  customs 
administration  and  its  operational  capacity.  Egypt  also  joined  the  ‘Enterprise  Europe 
Network’.  Progress  was  made  on  cooperation  in  the  energy  sector  with  the  signature  of  an 
Egypt-EU Memorandum of Understanding on a strategic partnership on energy. In the area of 
employment  and  social  affairs,  limited  progress  could  be  noted  on  labour  laws.  Significant 
progress could be seen in promoting access to primary education. Progress was also reported 
on the reform of the health sector, including access to primary healthcare and the introduction 
of health insurance for the entire population. At the 4th meeting of the EU-Egypt Association 
Council in April 2008 Egypt submitted proposals to enhance relations with the EU.  

In  Georgia,  implementation  of  the  ENP  Action  Plan  was  seriously  affected  by  exceptional 
events. In the course of 2008, Russia took a number of unilateral steps aimed at strengthening 
its relations with Georgia’s separatist regions Abkhazia and South Ossetia, notably building 
up  its  military  presence.  A  sequence  of  military  incidents  and  provocations  culminated  in 
August  2008  in  the  outbreak  of  an  armed  conflict  with  Russia  over  the  control  of  South 
Ossetia, causing hundreds of casualties, the displacement of about 192,000 people and serious 
environmental  damage,  leaving  7,000  Russian  troops  on  Georgian  territory.  The  ensuing 
recognition by Russia of the self-declared independence of the two separatist entities violated 
Georgia’s sovereignty and complicated peaceful and sustainable settlement of the conflicts. A 
ceasefire agreement was concluded with EU help, and the European Council expressed firm 
support  for  Georgia’s  territorial  integrity.  At  the  same  time,  two  rounds  of  contested  early 
elections have highlighted the need to inject new momentum into democratic reforms and to 
encourage political pluralism, in line with the ambitious agenda of reforms pursued since the 
“Rose  Revolution”.  In  spite  of  this  difficult  context,  Georgia  made  some  progress  on 
implementation  of  the  ENP  Action  Plan,  with  notable  achievements  in  fighting  corruption, 
facilitating access to justice and improving the business and investment climate and customs 
administration. Concrete measures are needed with respect to labour law, rights at work and 
social dialogue. Georgia continued to cooperate with the EU on trade-related issues, including 
preparations for a possible DCFTA. Georgia also continued cooperation in the area of justice, 
freedom  and  security  as  the  basis  for  EU-Georgia  negotiations  on  visa  facilitation  and 
readmission agreements.  

Following  a  request  by  Israel  to  upgrade  bilateral  relations,  cooperation  on  the  basis  of  the 
current  Action  Plan  was  extended  in  April  2008.  This  provided  more  time  to  discuss  the 
content of a successor document. Israel has made progress on a large number of priorities of 
the  Action  Plan.  Further  efforts  are  needed  to  address  the  widening  poverty  gap  and  to 
improve  the  situation  of  the Arab  minority  by  adopting  adequate  measures  on  employment, 
women’s  rights,  social  inclusion,  education  and  public  administration.  Trade  negotiations 
were launched on the gradual liberalisation of trade in services and the right of establishment 
and were concluded on agricultural products, processed agricultural and fisheries products. In 
the  case  of  transport,  the  European  Community  and  Israel  signed  a  horizontal  aviation 
agreement and started negotiations on a comprehensive aviation agreement. The Commission 
and  Israel  also  signed  a  Joint  Declaration  on  co-operation  and  dialogue  in  education  and 
training  and,  in  April  2008,  a  Protocol  on  the  general  principles  governing  Israel’s 
participation in Community programmes. 

Any review of bilateral EU-Israel relations, including in the context of the ENP Action Plan, 
must  take  into  account  the  persisting  Israeli-Arab  conflict  and  the  overall  political 
developments in the Middle East. Continued and even accelerated expansion of settlements in 
2008 had a negative impact both on the peace process and on access and movement for the 

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Palestinian population and economy. This was further compounded by the lack of progress on 
a number of commitments made in the framework of the Action Plan, such as on facilitating 
Palestinian  trade.  Demolition  of  Palestinian  houses  without  a  building  permit  in  Area  C 
(which comprises areas under exclusive Israeli control) of the West Bank resumed in the last 
quarter of 2008 after a de-facto moratorium of six months. The launch of Operation Cast Lead 
in  Gaza  at  the  end  of  the  reporting  period  has  further  exacerbated  the  political  context  and 
dramatically  worsened  the  situation  of  the  Palestinian  population,  which  was  already 
impoverished prior to the offensive due to the full blockade of the Gaza Strip. 

Jordan is an active and constructive ENP partner. Progress was made on penitentiary reform, 
transparency  and  the  fight  against  corruption.  However,  no  significant  advances  were 
observed on the independence of the judiciary or freedom of association. Good progress was 
made  towards  liberalising  the  economy  and  increasing  competition  in  sectors  such  as 
electronic communications and energy and in environmental governance. Further legislation 
is required to improve the business environment. Limited progress was made, however, on the 
trade  agenda.  Moreover,  a  comprehensive  poverty  reduction  strategy  has  yet  to  be 
implemented  and  the  gap  between  rich  and  poor  has  been  widening.  In  November  2008 
Jordan  expressed  the  desire  to  come  to  a  qualitative  and  quantitative  intensification  of  the 
political exchanges with the EU on a wide range of common political and security challenges.  

After the end of the military conflict between Israel and Hezbollah in 2006, Lebanon entered 
a long political stalemate. In May 2008 an agreement was finally reached between the rival 
factions, ending an 18-month crisis. A government of national unity was formed in July 2008. 
The  difficult  political  situation  throughout  the  year  slowed  down  implementation  of  the 
Action  Plan.  Despite  the  institutional  improvements  a  legislative  deadlock  meant  that  no 
legislative proposals could be debated. Several reforms (including of competition policy and 
VAT)  were  agreed  by  the  Council  of  Ministers  but  could  not  be  enacted.  Progress  in  other 
fields (human rights, judicial reform, social sector reform, and regulatory and administrative 
reforms) was also slow. This situation has had an impact on the overall social, economic and 
political situation in the country and on the dialogue in the framework of the ENP. The first 
step  towards  normalisations  of  relations  with  Syria  was  taken  in  October  2008  by  the 
establishment of diplomatic relations. The work of the International Independent Investigation 
Commission continued throughout the reporting period. The European Commission provided 
support to the creation of the Special Tribunal for Lebanon in The Hague. 

The Republic of Moldova (hereinafter "Moldova") has made progress in a number of areas 
of the ENP Action Plan, with the continuing reform of the judicial system, the publication of 
the  reports  of  the  European  Committee  for  the  Prevention  of  Torture  and  the  positive 
cooperation  with  the  EU  Border  Assistance  Mission  (EUBAM).  Moldova  also  continued  to 
cooperate with the EU on all questions related to the Transnistria settlement efforts, including 
on confidence-building measures geared to improving grass-roots dialogue and has ensured a 
correct  implementation  of  the  conditions  for  benefiting  from  the  EU  Autonomous  Trade 
Preferences.  An  EU-Moldova  mobility  partnership  was  signed.  In  November  2008 
negotiations  were  launched  on  Moldova’s  accession  to  the  Energy  Community  Treaty, 
reflecting substantial progress in energy sector reform. However, no or limited progress was 
made  on  certain  key  priorities,  such  as  the  respect  for  human  rights,  including  freedom  of 
expression.  The  same  goes  for  market  and  regulatory  issues,  implementation  of  national 
strategies  against  corruption,  drugs  and  trafficking  in  human  beings,  and  in  sectors  such  as 
transport.  The  adoption  of  a  modified  electoral  law  constitutes  a  regression.  The  elections, 
held in April 2009, will be reported upon next year. 

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Morocco continues to be an active and constructive ENP partner and made progress in a large 
number of areas covered by the Action Plan. Although the reforms to advance democracy and 
human  rights  could  be  more  ambitious,  progress  has  nevertheless  been  made,  for  example 
with the adoption of a new electoral code reinforcing the participation of women, measures to 
fight corruption and accession to UN conventions. Nevertheless, persisting deficiencies in the 
functioning of the judiciary pose a risk to the reforms that have been launched. Obstacles to 
freedom of the press remain. The dialogue with the EU in certain sensitive sectors has further 
intensified,  notably  on  the  fight  against  organised  crime  and  cooperation  on  border 
management issues. Negotiations on a readmission agreement have not progressed as much as 
expected.  There  has  been  progress  on  negotiations  on  the  gradual  liberalisation  of  trade  in 
services and on the right of establishment, and on trade in agricultural, processed agricultural 
products and fish and fishery products. The government formed following the 2007 elections 
has  gradually  initiated  a  number  of  structural  economic  reforms,  despite  an  unfavourable 
economic climate. In terms of social policies, there are signs of improvement: the proportion 
of  the  population  living  below  the  poverty  line  has  slightly  diminished,  and  education  and 
health care budgets have been raised and there have been substantial improvements in water 
supply  and  sanitation  infrastructure.  But  child  labour  persists  and  youth  unemployment 
remains  a  matter  of  concern.  At  the  meeting  of  the  Association  Council  in  October  2008, 
Morocco and the EU adopted a joint document, prepared by the ad hoc working group, on the 
strengthening of bilateral relations in the form of an “Advanced Status road map” that will be 
implemented in the coming years. The working group will report to the next meeting of the 
Association Council. 

For the Palestinian Authority 2008 saw some progress in several of the areas covered by the 
Action  Plan  and  the  PA  also  took  credible  steps  to  implement  its  "Palestinian  Reform  and 
Development  Plan".  The  most  notable  progress  was  on  budget  consolidation  and  security 
sector reform. In the economic sphere, a dramatic regression for development of the private 
sector was observed in Gaza, with only minimum humanitarian aid allowed to pass crossings 
under  an  otherwise  complete  blockade.  Economic  development  on  the  West  Bank  was  also 
severely  hampered  by  the  ongoing  Israeli  occupation  and  the  persisting  restrictions  on 
movement  and  access.  Therefore,  overall  economic  growth  in  the  occupied  Palestinian 
territory remained weak (below 2%) and well below demographic growth, despite a massive 
injection of donor funding. Political reform and institution-building also suffered a setback as 
a  result  of  the  split  between  the  West  Bank  and  Gaza.  Several  attempts  at  factional 
reconciliation failed and led to a deterioration of the human rights situation in both parts of 
the territory. Legislative activity was limited, since the Palestinian Legislative Council could 
not convene. 

The year ended with one of the gravest chapters in the Israeli-Palestinian conflict. This will, 
however, be covered in more detail in the next Progress Report.  

Overall,  Tunisia  is  participating  actively  in  the  ENP.  In  the  area  of  democracy  and  human 
rights,  the  dialogue  in  relevant  sub-committee  has  been  further  developed,  but  challenges 
remain  on  the  ground  in  the  implementation  of  objectives  agreed,  notably  on  freedom  of 
association and expression. Reform of the justice system is needed in order to strengthen the 
rule  of  law,  an  element  that  will  be  essential  to  bring  Tunisia  truly  closer  to  the  EU.  The 
dialogue  that  has  been  initiated  in  the  frame  of  the  subcommittee  on  Justice  and  Security 
should open the way for closer cooperation on the fight against terrorism and organised crime, 
on  border  management  and  on  migration  issues.  Significant  progress  has  been  made  on 
economic  and  regulatory  reforms,  which  has  lead  to  significant  growth  of  the  Tunisian 
economy and of trade with the EU. As Tunisia has continued its efforts in the area of social 

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policy, results in terms of health care, schooling, fight against poverty and the protection of 
women’s rights are encouraging but more needs to be done. Tunisia is the first partner in the 
region to have entered into a free trade area for industrial products, on 1 January 2008, two 
years  in  advance  of  the  original  timetable.  It  is  also  the  first  one  to  have  concluded 
negotiations  on  a  dispute  settlement  mechanism  in  the  framework  of  the  Association 
agreement, and initialled the Protocol in July 2008. Negotiations have started on the gradual 
liberalisation  of  trade  in  services,  on  the  right  of  establishment,  as  well  as  on  trade  in 
agricultural, processed agricultural products and fish and fishery products. At the Association 
Council meeting in November, Tunisia expressed interest in a strengthened partnership in the 
same  spirit  as  the  Advanced  Status  with  Morocco.  The  EU  has  indicated  its  willingness  to 
work actively on this. 

Ukraine  made  progress  in  many  areas  covered  by  the  Action  Plan.  However,  the  pace  of 
reform slowed down as a consequence of continuing domestic political instability and, in the 
second part of the year, the deepening global financial and economic crisis. Ukraine made no 
or  only  limited  progress  in  the  implementation  of  some  key  political  reform  measures 
including  constitutional  and  judicial  reform  and  combating  corruption.  Major  achievements 
during the reporting period were Ukraine’s accession to the World Trade Organisation in May 
2008,  the  good  progress  in  the  negotiations  on  the  EU-Ukraine  Association  Agreement, 
including those aspects related to a deep and comprehensive Free Trade Area, the launch in 
October  of  a  visa  dialogue  with  the  aim  of  establishing  a  visa  free  regime  as  a  long  term 
perspective and the continuing positive cooperation with the EU Border Assistance Mission 
(EUBAM). Co-operation on CFSP matters was also positive, with Ukraine aligning itself on 
nearly  all  CFSP  positions  open  for  alignment.  In  December  2008  Ukraine  and  the 
Commission  services  signed  a  new  administrative  arrangement  on  closer  cooperation  in  the 
field of civil protection. In November negotiations were launched on the country’s accession 
to the Energy Community Treaty. Cooperation on energy was further enhanced in the context 
of the Memorandum of Understanding on Energy. 

Relations with other countries covered by the ENP evolved positively during 2008. A road-
map  for  the  implementation  of  the  Association  Agreement  with  Algeria  was  agreed  by  the 
Association Committee in September. Following the release of remaining political prisoners, 
the  visa  ban  for  some  members  of  Belarus  government  was  suspended  for  a  period  of  6 
months. Negotiations on a Framework Agreement with Libya started in November 2008, and 
an updated Association Agreement with Syria was initialled in December 2008. 

3. 

NEW FRAMEWORKS TO STRENGTHEN THE ENP 

through  new  frameworks  which  complement 

In  2008,  the  European  Union  continued  to  substantially  strengthen  its  relations  with  its 
neighbours 
the  differentiated  bilateral 
relations.Equally,  the  continued  implementation  of  the  Africa-EU  Joint  Strategy,  which 
covers five of the ENP countries, contributes to the same goals by its own result-oriented and 
focused partnerships. 

Union for the Mediterranean: towards a more visible partnership  

The  July  2008  Paris  Summit  launched  the  Union  for  the  Mediterranean  (UfM)  with  the 
objectives  of  providing  new  political  impetus  for  the  EU’s  critical  relationship  with  its 
Mediterranean  partners,  providing  greater  co-ownership  and  making  this  relationship  more 

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concrete and visible through regional and sub-regional projects, building on the achievements 
of  the  Barcelona  Process.  As  regards  the  detailed  design,  the  UfM3  proposed  setting  up  a 
project-oriented  Secretariat.  At  the  UfM  Ministerial  Meeting  in  November,  its  location  was 
decided  (Barcelona)  and  agreement  was  reached  on  the  participation  of  the  League  of  Arab 
States, in all meetings at all levels. It was also agreed to set up an EU-Arab League Liaison 
Office in Malta. 

The  first  set  of  projects  to  be  developed  under  this  initiative  include  de-pollution  of  the 
Mediterranean Sea, establishment of maritime and land highways, civil protection initiatives 
to  combat  natural  and  man-made  disasters,  a  Mediterranean  solar  energy  plan,  the 
inauguration  of  the  Euro-Mediterranean  University  in  Slovenia  and  the  Mediterranean 
Business Development Initiative focusing on micro, small and medium-sized enterprises.  

The Black Sea Synergy: first year of implementation4 

A  Foreign  Ministers’  meeting  took  place  in  Kyiv  in  February,  2008.  The  Joint  Statement 
adopted  identifies  fields  requiring  action  at  the  regional  level  including  energy,  transport, 
communications, 
law 
enforcement and the fight against organised crime. 

the  environment,  maritime  policy,  fisheries,  migration, 

trade, 

The  Black  Sea  Synergy  has  also  attracted  considerable  interest  from  NGOs.  The  first  of  a 
series of Black Sea Synergy civil society seminars on human rights issues took place in May 
2008 in Moldova. A platform on migration has been established. 

The  Commission  has  launched  exploratory  talks  with  the  countries  of  the  region  about  the 
extension  of  the  trans-European  transport  networks,  and  a  ministerial  meeting  on  transport 
was  held  in  Baku  in  December  2008.  The  Commission  has  increased  its  focus  on  maritime 
safety  and  security  and  has  begun  to  implement  the  Motorways  of  the  Sea  concept  in  the 
Black Sea. Work has also started on extending the Common Aviation Area to the Black Sea 
countries.  The  Commission  has  started  preparing  for  the  accession  by  the  European 
Community to the Convention on the Protection of the Black Sea against Pollution (Bucharest 
Convention). Bulgaria and Romania have made formal proposals to amending the Convention 
in order to allow the European Community to become a party.  

Proposal for an Eastern Partnership5 

In  response  to  the  Union’s  strategic  interest  in  seeing  stability,  better  governance  and 
economic  development  at  its  Eastern  borders,  to  the  need  to  help  the  Union’s  partners  to 
consolidate  their  statehood  and  sovereignty,  including  through  democratic  reforms,  and  to 
their stated choice to intensify their relations with the EU, in December 2008 the Commission 
made  a  proposal  for  an  Eastern  Partnership.  In  this  proposal  the  Commission  drew  a 
distinction from the regional cooperation initiated in the Black Sea Synergy, in order to obtain 
maximum complementarity with the Synergy, which is just entering its operational phase. 

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COM(2008) 319 - Communication from the Commission to the Council and the European Parliament - 
Barcelona Process: Union for the Mediterranean UfM Communication. 
COM(2008) 391 - Communication from the Commission to the Council and the European Parliament - 
Report on the first year of implementation of the Black Sea Synergy. 
COM(2008) 823 – Communication of the Commission to the Council and the European Parliament – 
Eastern Partnership. 

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The  Eastern  Partnership  Communication  contains  an  ambitious  set  of  policy  proposals  for 
deeper relations with the Eastern European and South Caucasus countries, to advance political 
association, further economic integration and gradually promote mobility, having a full visa 
liberalisation  as  a  long-term  goal.  The  Partnership  would  have  both  a  bilateral  and  a 
multilateral  dimension.  At  multilateral  level,  it  would  introduce  “cooperation  platforms”  on 
democracy,  good  governance  and  stability;  economic  integration  and  approximation  to  EU 
policies; energy security; and contacts between people. The European Council welcomed the 
proposals in March 2009.  

The Eastern Partnership will be launched at a Summit on 7 May 2009 and structured through 
annual meetings of Foreign Ministers and biennial summit meetings. The first meetings of the 
thematic platforms are foreseen shortly after the launch. 

4. 

IMPACT OF THE GLOBAL FINANCIAL AND ECONOMIC CRISIS 

The global financial crisis has affected the partner’s real economies to different degrees.  

So far the Eastern neighbourhood countries have been more seriously affected by the changed 
global economic conditions. These countries, whose buoyant growth in the previous years had 
been driven essentially by foreign capital inflows (in the form of FDI, bank credits or, in some 
cases,  remittances)  are  now  suffering  from  the  drying  up  of  international  capital  and  credit 
markets.  For  several  countries  in  the  region  the  financial  meltdown  is  compounded  by  the 
dramatic  drop  in  the  prices  of  export  commodities  on  which  several  countries  in  the  region 
rely  heavily:  energy,  metals  and  agricultural  commodities.  The  social  impact  is  likely  to 
unfold  with  risks  of  increased  vulnerabilities  and  poverty  making  social  responses  and 
reforms more urgent and challenging. 

The  largest  economy  in  the  Eastern  neighbourhood,  Ukraine,  suffered  a  sharp  economic 
downturn  in  late  2008:  trade  conditions  with  the  decline  in  export  prices  for  steel  and  the 
global financial crisis exposed the banking and corporate sectors' vulnerability to the face of a 
cut off from external financing. Real GDP decreased significantly, bringing overall economic 
growth  down  to  some  2.5%  for  the  whole  year.  The  downturn  of  the  Ukrainian  economy, 
expected  to  continue  in  2009,  has  also  adversely  affected  countries  for  which  it  is  an 
important trading partner, such as Moldova and Belarus. 

The Ukrainian authorities quickly agreed on a stand-by arrangement with the IMF for about 
EUR 12.8 billion under a comprehensive economic stabilisation programme. The first tranche 
has  been  disbursed,  with  discussions  ongoing  on  the  implementation  of  IMF  conditions  for 
the second tranche. Ukraine's public and publicly guaranteed debt remained at a sustainable 
level during 2008. The main concern is the refinancing of banking and corporate short-term 
external debt. The legal framework to resolve the situation of banks was amended under the 
anti-crisis  legislation  of  November  2008;  implementation  of  this  legislation  is  a  top  priority 
for the authorities in 2009 so that viable banks can continue lending and thereby support the 
resumption of economic growth.  

Ukraine was not the only country in the region to obtain financial support from the Bretton-
Woods Institutions. The IMF has already put in place financing arrangements with Georgia, 
Belarus and Armenia. Moldova is likely to follow later this year. 

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In  the  Mediterranean  region,  the  low  international  integration  of  the  financial  sector  and 
prudent  lending  policies,  combined  with  the  relatively  low  reliance  on  external  financial 
flows,  have  largely  buffered  financial  institutions  from  the  consequences  of  the  sub-prime 
fallout  and  over-leveraging.  Domestic  banks  have  not  been  affected  by  the  global  credit 
crunch and have kept credits flowing into the economy, even if the limited access to external 
borrowing is a constraint for future credit growth and deeper financial intermediation.  

For the entire ENP area, the global financial and economic crisis nevertheless poses risks to 
some  key  sectors  of  the  economy  in  2009,  such  as  remittances,  export-oriented  industries, 
tourism  and  construction.  The  poor  outlook  for  European  growth,  in  particular,  poses 
significant risks since the EU is the main export market and employs a large proportion of the 
expatriate workers who are a source of remittances. Exports are also likely to be affected by 
competition from lower-wage countries. Inward investment is likely to suffer because of the 
European slowdown. FDI volumes are also likely to be affected since European firms might 
decide to postpone investments. The drying-up of liquidity in the banking sector in developed 
countries  could  hamper  the  privatisation  process  in  partner  countries.  SMEs  could  face  an 
even more difficult access to finance which could severely affect their economic activities. A 
spill-over of the crisis to EU neighbours would aggravate the already high unemployment of 
youth in particular and further challenge employment and social reforms.  

In a situation of an economic crisis, the trade and trade-related priorities from the ENP Action 
Plans become more important than ever. The regional economic integration processes in the 
Neighbourhood need also to be continued.  

As  an  early  response  to  the  London  G20  Summit,  the  Commission  set  out,  in  a  recent 
Communication6, timely, targeted and coordinated measures to be taken as of this year by the 
EU as a whole, with a view to supporting partner countries in their efforts to cope with the 
impact of the global financial crisis. With this in mind, the European Commission will, inter 
alia,  accelerate  the  Mid-Term  Review  of  its  external  assistance  programmes  in  2009  and 
2010, with a view to reflect new needs and priorities.  

5. 

CONCLUSIONS 

A growing partnership based on mutual interdependence 

The  EU’s  relations  with  its  neighbours  have  thus  on  balance  continued  to  intensify,  despite 
the difficult international context. This trend is reflected in the overall progress made with the 
ENP “front-runners” identified in the 2008 Communication just as much as in developments 
with the other countries, including those that are not, at present, full participants in this policy. 
It is reflected both in the depth of bilateral relations and in the  growing  web  of  multilateral 
initiatives.  The  crises  in  2008  and  the  remaining  challenges  in  partner  countries  have  only 
reinforced  the  strategic  rationale  for  an  intensified  ENP  providing  tangible  and  credible 
support to create mutual security and prosperity dividends. 

A number of countries have asked that these developments be reflected in a formal upgrading 
of  their  relations  with  the  EU.  This  demonstrates  the  ENP’s  force  of  attraction  and  the 
positive  incentives  provided  by  a  performance-based,  differentiated  policy.  Such  upgrading 
would institutionalise and increase political exchanges, intensify the country’s participation in 

6 

COM(2009) 160, 8.4.2009: Supporting Developing Countries in Coping with the Crisis. 

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the  EU  economic  area,  and  bring  about  greater  integration  in  various  policy  areas.  The 
Commission  considers  that  the  EU  should  be  open  to  such  requests,  not  least  to  sustain  the 
momentum  of  reforms  in  partner  countries.  Formal  upgrading  would  be  based  on  the 
commitment  to  shared  values  and  interests  and  when  Action  Plan  implementation 
demonstrates  the  ambition  of  the  partner  concerned  to  go  further,  notably  as  concerns 
democratic practice, respect of human rights and fundamental freedoms, and the rule of law.  

Addressing the challenges of governance and the economy 

The  EU’s  toolbox  for  implementation  of  the  ENP  is  becoming  increasingly  sophisticated. 
While continuing to pursue a differentiated policy, tailored to the situation of each partner, the 
Commission  will  ensure  that  successful  approaches  and  instruments  developed  for  one 
country or region will be replicated, as appropriate, in other parts of the Neighbourhood. In 
particular,  a  number  of  proposals  made  in  the  Communication  on  the  Eastern  Partnership, 
such  as  a  stronger  comprehensive  approach  to  institution-building  or  national  policies 
supporting social and economic cohesion could also be considered to support relations with 
the Union’s Southern neighbours.  

The  financial  support  accompanying  the  partners’  reforms  must  also  be  adapted  to  new 
priorities  emerging  from  the  challenges  that  the  Neighbourhood  faces.  The  Commission’s 
proposals for ENPI programming for the period 2011-13 will duly reflect this.  

The overall lack of progress on governance issues observed in 2008 underlines the need for 
the EU and its partners to redouble their efforts, both with intensified political dialogue and 
with  tailored  assistance,  including  the  Governance  Facility  which  remains  an  important 
political incentive. The Commission will decide on the next allocations under this facility in 
the light of the analysis in this Communication and the annexed country reports.  

While  the  deepening  global  financial  and  economic  crisis  underscores  the  need  for  partner 
countries to keep up the pace of economic reforms and refrain from protectionist and trade-
distorting  measures,  it  also  calls  for  tangible  EU  support.  In  that  respect  the  Commission 
proposes to:  

•  Ensure, in its regular contacts with the partners, an intensive dialogue on the response to 
the financial crisis and its economic and social consequences and in particular on the way 
to  cushion  the  impact  on  the  most  vulnerable  whilst  further  promoting  decent  work 
conditions and securing a sustainable economic and social development; 

•  Contribute  to  addressing  the  short  term  liquidity  problems  stemming  from  the  financial 
crisis  by  further  mobilising  community  macro-financial  assistance  loans  provided  in 
cooperation with the International Monetary Fund and in coherence with IMF programme 
conditions. If other means of provisioning the guarantee fund for external actions prove to 
be insufficient to meet the needs, setting aside part of future ENPI grant funding could be 
considered.  In  addition,  the  Commission  urges  Member  States  to  consider  providing 
bilateral macro-economic assistance to ENP countries, similarly coordinated with the IMF; 

•  Strengthen  the  regulatory  environment  of  the  financial  sector  and  institutions  that  can 
ensure  appropriate  supervision  of  financial  markets  (central  banks,  banking  and  financial 
sector supervisory authorities, security exchange commissions, etc), by means of technical 
assistance, and where appropriate, twinning, programmes over the next two years. Within 
this  additional  support,  the  possibility  of  the  European  Central  Bank  and  the  national 

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central  banks  of  the  Eurosystem  further  extending  technical  assistance  programmes  to 
partner countries’ central banks will also be explored; 

•  Encourage  the  EIB  and  EBRD  to  accelerate  their  lending  operations,  including  in  the 

Eastern Neighbourhood; 

•  Address the impact of the economic crisis by means of trade and investment support. This 
may include  prioritising  the SME  Facility foreseen under the Eastern Partnership,  and, if 
additional funds are available, providing an additional contribution to the Facility for Euro-
Mediterranean Investment and Partnership (FEMIP) and/or the Neighbourhood Investment 
Facility (NIF). 

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