COMMUNICATION FROM THE COMMISSION TO  THE EUROPEAN PARLIAMENT AND THE COUNCIL Enlargement Strategy and Main Challenges 2010-2011
Date: 2010-11-09
Institutions: European Commission
Subjects: Albania, Iceland, Türkiye, Western Balkans, accession to the European Union, enlargement of the Union, pre-accession strategy, report

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EUROPEAN COMMISSION 

Brussels, 9.11. 2010 
COM(2010) 660 final 

COMMUNICATION FROM THE COMMISSION TO  
THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2010-2011 

{SEC(2010) 1326 final} 
{SEC(2010) 1327 final} 
{SEC(2010) 1328 final} 
{SEC(2010) 1329 final} 
{SEC(2010) 1330 final} 
{SEC(2010) 1331 final} 
{SEC(2010) 1332 final} 

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COMMUNICATION FROM THE COMMISSION TO  
THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2010-2011 

1.  INTRODUCTION 

The EU's enlargement process has gained new momentum since the Commission adopted its 
last progress  reports, notwithstanding the many  other  challenges  the  Union  faces.  The  entry 
into force of the Lisbon Treaty ensures that the EU can pursue its enlargement agenda, while 
maintaining the momentum of European integration.  

Negotiations  with  Croatia  have  entered  their  final  stage,  demonstrating  to  all  enlargement 
countries that accession can become a reality, provided the necessary conditions are fulfilled. 
Serbia has applied for membership. The Commission today issues its opinions on applications 
from  Montenegro  and  Albania.  Iceland  began  accession  negotiations  in  July.  New  chapters 
have  been  opened  in  the  negotiations  with  Turkey  and  the  country  has  embarked  on  a 
thorough revision of its constitution, moving closer to European standards. Visa liberalisation 
for the Western Balkans has progressed. There have been significant break-throughs in long-
standing  bilateral  differences  between  Slovenia  and  Croatia  and  a  dialogue  is  under 
preparation  between  Serbia  and  Kosovo1.  Post-conflict  reconciliation  among  peoples  has 
advanced and the countries themselves have started to take greater responsibility for regional 
cooperation.  

However, many challenges persist. In some enlargement countries the reform momentum has 
slowed down. All need to focus on good governance, improving the rule of law, speeding up 
economic reform and improving their capacity to adopt and implement the acquis. Upholding 
freedom of expression is a concern in most countries. Several complex problems remain to be 
solved,  including  the  governance  of  Bosnia-Herzegovina  and  the  name  question  concerning 
the  former  Yugoslav  Republic  of  Macedonia.  Open  bilateral  issues  remain  and  differences 
over  Kosovo's  status  have  held  up  regional  cooperation.  As  regards  the  Cyprus  issue, 
negotiations on a comprehensive settlement have progressed but have not yet been concluded.  

The EU's commitment to the enlargement process reflects the Member States' conviction that 
it  is  in  the  mutual  interest  of  the  Union  and  the  aspirant  countries.  This  straight-forward 
message  needs  to  be  presented  and  explained  clearly  to  the  public  in  order  to  strengthen 
understanding  and  support  for  enlargement.  The  EU's  enlargement  process  contributes  to 
stability  in  Europe  and  to  the  security  and  well-being  of  its  citizens.  It  provides  a  unique 
incentive for political and economic reform in the enlargement countries. It is in the mutual 
interest  of  the  EU  and  enlargement  countries  to  open  discussions  on  difficult  negotiating 
chapters  early  in  the  process.  This  process  aims  to  bring  the  enlargement  countries  up  to 
European standards in all areas covered by the EU treaties and thereby help the EU to attain 
its  own  objectives.  These  objectives  today  include  dealing  with  the  economic  crisis  and 
governance, restoring growth for jobs through the 2020 reform agenda, making the EU a safer 

1 

Under UNSCR 1244/99. 

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place and pulling our weight on the world stage. The Commission's 2011 Work Programme 
includes a number of initiatives with these goals in mind. 

Enlargement  needs  to  remain  credible  for  all  involved.  Aspirant  countries  and  their  citizens 
need  a  clear  perspective  of  accession,  once  conditions  are  met,  and  should  see  tangible 
benefits  along  the  way.  Member  States  and  EU  public  opinion  must  be  sure  that  new 
accessions  are  prepared  well  through  rigorous  conditionality.  Making  a  success  of 
enlargement  requires  the  firm  political  commitment  of  all  stakeholders.  The  renewed 
consensus  on  enlargement,  agreed  by  the  December  2006  European  Council,  remains  the 
framework  for  achieving  these  objectives.  This  policy  is  based  on  the  principles  of 
consolidation of commitments, fair and rigorous conditionality and good communication with 
the public, combined with the EU’s capacity to integrate new members. 

The  enlargement  process  provides  mechanisms  and  incentives,  culminating  in  membership, 
that  encourage  enlargement  countries  to  work  together  with  the  EU  in  realising  common 
objectives. As economic governance within the EU is reinforced, economic dialogue with the 
enlargement  countries  will  also  be  intensified,  enabling  us  to  focus  together  on  putting  the 
crisis  behind  us  and  creating  jobs.  The  EU's  global  competitiveness  gains  from  closer 
integration with countries that have a number of comparative advantages. This is one of the 
lasting benefits of the fifth enlargement, which brought the EU from 15 to 27 Member States 
between  2004  and  2007.  Trade  between  'old'  and  'new'  Member  States  tripled  from  around 
€150 billion to €450 billion during the decade leading to 2008. The enlargement process has 
provided  the  financial  means  for  the  EU  to  step in,  together  with  the  international  financial 
institutions,  to  maintain  economic  stability  in  times  of  crisis,  where  necessary.  Small  and 
medium sized enterprises, which generate two out of three private sector jobs in the EU and 
are  a  major  stimulus  for  innovation,  benefit  from  an  enlarged  internal  market  and  are  an 
important focus for pre-accession assistance. 

Closer integration through the enlargement process helps the EU to achieve its objectives in a 
number  of  areas  which  are  key  to  economic  recovery  and  sustainable  growth,  including 
energy,  transport,  the  protection  of  the  environment  and  efforts  to  address  climate  change. 
The  countries  of  the  Western  Balkans  are  entirely  surrounded  by  Member  States.  Turkey 
adjoins  the  European  Union  by  land  and  sea.  The  construction  of  trans-European  transport 
corridors,  the  diversification  of  energy  sources,  the  mitigation  of  and  adaptation  to  climate 
change and the reduction of trans-boundary air and water pollution are among the EU's goals 
whose achievement requires the full commitment of the enlargement countries. 

They, too, benefit from progress in such areas; the accession perspective provides them with 
incentives to give priority to goals shared with the EU. Grants from the Instrument for Pre-
Accession  Assistance  (IPA)  and  loans  from  the  European  Investment  Bank  and  other 
international  financial  institutions,  which  IPA  helps  to  leverage,  provide  practical  means  of 
support.  The  most  recent  candidate  which  has  begun  accession  negotiations,  Iceland,  is  a 
world  leader  in  various  forms  of  renewable  energy  and  has  much  to  contribute  to  EU 
innovation efforts in this and other advanced fields. 

Making  Europe  a  safer  place  is  high  on  the  EU's  agenda  as  defined  in  the  Stockholm 
Programme. Enlargement countries are required to take over the acquis of the Union and to 
demonstrate  their  capacity  to  implement  it  fully.  For  this  reason,  the  Commission  has 
redoubled efforts to support enlargement countries to prevent and tackle organised crime and 

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corruption  and  to  strengthen  their  law  enforcement  capabilities.  EU  prosecutors,  judges  and 
other experts in law enforcement, border management and migration now assist counter-parts 
in the enlargement countries to share their expertise and to check on progress. The fulfilment 
of the benchmarks, which determines the pace at which a candidate country advances towards 
EU membership in accession negotiations, requires a convincing track record in administering 
justice in an independent and effective manner. 

The  experience  of  visa  liberalisation  for  the  Western  Balkans  shows  how  much  can  be 
achieved by combining rigorous conditionality with the delivery of specific benefits, linked to 
progress towards EU membership. It also underlines the importance of continuous efforts by 
the  governments  concerned  to  ensure  that  the  limits  and  conditions  attaching  to  freer 
movement of persons are respected. 

With the entry into force of the Lisbon Treaty, the EU has given itself the means to pull its 
weight  on  the  global  scene.  The  EU's  role  in  the  adoption  of  the  UN  General  Assembly 
Resolution on Kosovo is an example of this potential. In a world where emerging powers are 
playing an increasing role, enlargement gives the EU greater weight and strengthens its voice 
in international fora. The fifth enlargement gave a new impetus to the EU's relations with its 
eastern  and  southern  neighbours  and  led  it  to  explore  ways  of  developing  initiatives  in  the 
Baltic  and  Black  sea  regions.  The  accession  process  with  countries  in  the  Western  Balkans 
and Turkey, gives the EU a still greater interest and influence in the Mediterranean and Black 
Sea  regions  and  in  the  Danube  basin.  Provided  that  Turkey's  role  in  its  own  region  is 
developed as a complement to its accession process and in coordination with the EU, it can 
add  to  both  parties'  weight  in  world  affairs,  not  least  in  the  Middle  East  and  the  Southern 
Caucasus.  By  acting  together,  the  EU  and  Turkey  can  strengthen  energy  security,  address 
regional  conflicts,  and  prevent  cleavages  developing  along  ethnic  or  religious  lines.  Iceland 
and the EU can together play an important role in addressing energy, environmental, maritime 
and security issues in the Arctic. To be sure, the full potential of such synergies can only be 
realised through mutual commitment to a credible enlargement strategy. 

The EU's weight in the world also depends to a considerable extent on the attractiveness of its 
regulatory  model.  The  vitality  of  the  internal  market  and  the  adoption  of  EU  norms  and 
standards by countries around the world are a major stimulus to trade, investment and growth. 
The  single  market  act  presented  by  the  Commission  aims  to  remove  many  remaining 
bottlenecks and release new growth potential. Through the enlargement process, enlargement 
countries  will  progressively  adopt  the  acquis,  widening  the  area  in  which  a  single  set  of 
standards  applies.  This  should  stimulate  new  investment,  innovation  and  social  cohesion  as 
well as strengthen the attractiveness of the EU's regulatory model in neighbouring countries 
and in the wider international system. 

Much is at stake in the enlargement process both for the EU and the aspirant countries. At the 
same time public perceptions of the importance of this agenda are affected by daily concerns 
which  may  often  appear  more  pressing.  This  year's  package  of  reports,  and  accompanying 
conclusions and recommendations, show that the enlargement process is part of the solution 
to many of our citizens' concerns, whether in the prevention and tackling of organised crime 
and  corruption  or  in  the  creation  of  growth  and  jobs.  The  EU  institutions  and  its  Member 
States need to work hand in hand to strengthen understanding and support for the enlargement 
process  and  to  explain  how  it  can  help  us  achieve  our  common  objectives.  By  making  a 

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success  of  further  enlargement,  the  EU  will  be  able  better  to  address  the  many  other 
challenges which it faces. 

2.  KEY CHALLENGES 

2.1.  Overcoming the economic crisis 

The  economic  crisis  has  affected  all  enlargement  countries.  Its  impact,  however,  varied 
depending on each country's economic structure. Albania, Kosovo and the former Yugoslav 
Republic  of  Macedonia  were  least  affected,  as  they  are  less  dependent  on  exports  and  their 
domestic markets kept up well. Croatia, Serbia and Turkey, which are more integrated in the 
global market, were heavily affected. Montenegro was severely hit, due to its dependence on 
external  financing  and  few  sectors.  In  Bosnia  and  Herzegovina  the  impact  of  the  crisis  has 
been  exacerbated  by  pro-cyclical  fiscal  policies  with  a  high  share  of  subsidies  and  social 
transfers in the budget. 

In 2010, there are modest signs of recovery in the Western Balkans. Domestic demand is still 
weak, reflecting tight credit conditions and persistent unemployment. Recovery with a robust 
growth  rate  is  well  on  track  in  Turkey,  which  benefitted  from  fiscal  consolidation  and  the 
restructuring of its banking sector at the start of the decade. Iceland is still suffering from the 
effects of the global financial turmoil and the collapse of its banking system. 

Public  finances  remain  under  pressure  in  a  number  of  countries.  Despite  relatively  low 
average  public  debt  fiscal  expansion  in  the  boom  period  increased  the  vulnerability  and 
exposure of enlargement countries to the global financial crisis, with the exception of Turkey. 
Most  Western  Balkan  countries  lacked  the  fiscal  margin  of  manoeuvre  and  the  capacity 
needed  to  prioritise  public  spending  for  fiscal  stimulus  in  response  to  the  crisis.  Fiscal 
tightening  measures,  involving  budget  rebalancing,  have  been  implemented  in  the  Western 
Balkans. However this has not been sufficient to prevent a widening of fiscal deficits. Iceland, 
Serbia, Kosovo and Bosnia and Herzegovina have made use of IMF support. 

The  EU,  together  with  the  international  financial  institutions,  helped  alleviate  the  impact  of 
the  crisis.  IPA  assistance  was  reprogrammed  to  support  investment  in  infrastructure  and 
competitiveness. Budget support and macro-financial assistance were made available to some 
countries. The Western Balkans Investment Framework plays an important role in mobilising 
funds for large infrastructure projects (see section 3 below). 

Achieving  sustainable  growth  rates  and  real  convergence  will  require  further  structural 
reforms and prudent fiscal policies. Domestic sources of growth need to be more effectively 
exploited in order to improve productive capacity, job creation and competitiveness. Higher 
volumes  of  domestic  and  foreign  investment  are  now  needed  in  greenfield  projects, 
particularly  in  export-oriented  activities.  This  will  contribute  to  raising  output  and 
productivity,  in  turn  leading  to  higher  employment  and  more  sustainable  trade  balances.  It 
will also help in addressing the region’s pressing social problems. 

To  increase  foreign  and  domestic  investment,  governments  need  to  improve  the  business 
environment.  This  means  increasing  the  efficiency  of  public  administration  and  the 
independence of judiciary, removing informal barriers to trade and strengthening the rule of 

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law.  A  functional  regional  market  within  the  Central  European  Free  Trade  Agreement 
(CEFTA)  and  continued  acquis  alignment  are  important  to  attract  investment.  The  planned 
liberalisation of trade in agricultural products and services across the region and the opening 
of public procurement markets will further increase the region's growth potential. 

Ensuring sound and sustainable public finances is crucial for the enlargement countries. It is 
also  a  key  issue  in  preparing  for  EU-membership.  Recent  experience  has  shown  the 
interdependence  of  European  economies  and  the  destabilising  potential  of  large  imbalances 
even in small economies. 

The  Commission  will  continue to  make  full  use  of  pre-accession  instruments  and  economic 
surveillance  to  monitor  the  economic  and  fiscal  performance  of  the  enlargement  countries. 
The EU conducts a regular dialogue with candidate countries, introducing them to the system 
of economic policy coordination and surveillance within the EU. A similar process has been 
established with potential candidates. The economic dialogues between the Commission and 
enlargement  countries  under  the  Association  Agreements  are  likewise  being  used  for 
economic policy surveillance.  

Currently,  steps  are  being  taken  to  enhance  economic  governance  within  the  EU.  Once  this 
reinforced macroeconomic, budgetary and structural reform coordination is fully defined and 
formalised, the Commission will examine how some of its provisions could be extended to the 
enlargement countries.  

In  addition  to  dialogue  and  surveillance,  the  EU  is  actively  supporting  the  enlargement 
countries'  endeavours  towards  economic  recovery,  macroeconomic  stabilisation  and  fiscal 
consolidation.  Substantial  IPA  assistance  is  being  targeted  at  improving  public  finance 
management, increasing the quality of statistics and strengthening banking sector supervision.  

The  enlargement  process  contributes  to  the  objectives  of  the  Europe  2020  strategy  by 
extending the area of the EU's regulatory framework and creating new trading opportunities. 
The Commission welcomes the intention of many enlargement countries to reflect the Europe 
2020 strategy in their national reform priorities. The Commission will associate enlargement 
countries  with  initiatives  taken  at  EU  level  to  meet  the  goals  of  smart,  sustainable  and 
inclusive growth, delivering high levels of employment, productivity and social cohesion. In 
the field of education, the Commission will explore the possibilities to include all enlargement 
countries in the "Education and Training 2020" framework and engage them in peer-learning 
activities.2 

Enlargement countries have started to take up initiatives in regional groups, where they can 
jointly evaluate progress and set region-specific targets. The Small Business Act for Europe, a 
set  of  measures  to  improve  the  business  environment  for  SMEs,  is  an  example  of  such  an 
initiative. The Commission will propose to the Regional Cooperation Council that it sets up 
platforms  for  dialogue  and  peer  review  in  other  areas  in  line  with  Europe  2020  priorities. 
When  programming  IPA  assistance,  the  Commission  will  take  into  account  the  priorities  of 
the Europe 2020 strategy. 

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Croatia, Turkey and Iceland already participate in the "Education and Training 2020" framework. 

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2.2.  Social inclusion 

The economic crisis has had a negative impact on social welfare in the enlargement countries. 
Vulnerable  groups,  including  minorities,  disadvantaged  communities  and  people  with 
disabilities,  have  been  particularly  affected.  High  levels  of  unemployment,  especially  youth 
unemployment,  low  labour  force  participation  rates  and  poverty  are  widespread  throughout 
the region. Roma constitute a particularly vulnerable minority; they are affected by poverty, 
discrimination  and  segregation  in  access  to  education,  employment,  housing  and  social 
services,  including  health  care.  A  significant  number  of  Roma  still  lack  civil  registration  or 
personal  documents.  Many  of  them  still  live  in  camps  as  Internally  Displaced  Persons  as  a 
consequence of the recent wars. 

The Commission is committed to helping the enlargement countries to improve conditions for 
vulnerable  groups,  including  the  social  and  economic  inclusion  of  Roma.  The  Commission 
provides  substantial  IPA  support  for  vulnerable  groups  through  education  and  the 
strengthening  of  social  and  employment  services  with  the  aim  to  integrate  people  at  a 
disadvantage into the labour market. It also finances the upgrading of infrastructure in Roma 
settlements. This support will be reinforced, with a view to improving living conditions in the 
countries most concerned, by helping them to develop a comprehensive approach to problems 
of  social  inclusion.  In  the  case  of  Croatia,  a  Joint  Inclusion  Memorandum  has  already  been 
concluded, providing a policy framework in this field. The enlargement countries have taken 
certain  measures  to  address  the  challenges  outlined  above  but  more  needs  to  be  done.  The 
Commission encourages them to work to reduce poverty and social exclusion, in line with the 
priorities of the Europe 2020 strategy, and to make better use of the opportunities provided by 
the Decade of Roma Inclusion. The enlargement countries should consider setting explicit and 
ambitious  targets  on  employment,  education  and  poverty  reduction  of  disadvantaged 
communities, in particular Roma. 

2.3.  Strengthening the rule of law and public administration 

Strengthening the rule of law, in particular the judiciary and the fight against organised crime 
and  corruption  is  a  crucial  challenge  for  most  of  the  countries  in  the  enlargement  process. 
Tangible results, bringing sustained improvements to the rule of law, are an important element 
in moving to the next stages of the EU accession process. 

The renewed consensus on enlargement, agreed in 2006, calls for issues related to the rule of 
law  to  be  addressed  at  an  early  stage  of  the  accession  process.  The  Commission  has  given 
high  priority  to  tackling  these  issues  and  using  all  available  instruments.  The  use  of 
benchmarks  in  the  accession  negotiations  serves  as  an  important  catalyst  for  reforms  and 
gives  a  clear  message  that  rule  of  law  issues  must  be  addressed  seriously  before  accession. 
The  visa  liberalisation  process  has  demonstrated  the  effectiveness  of  an  approach  which  set 
concrete, specific reform requirements thus allowing the countries to better focus their efforts. 
Peer  assessment  and  other  missions  have  been  intensified,  bringing  judges,  prosecutors  and 
other experts in law enforcement, border management and migration from the Member States 
into direct contact  with their counterparts. Intensified judicial and police cooperation  within 
the  region,  with  EU  Member  States  as  well  as  with  Europol,  Eurojust  and  Frontex,  provide 
means to tackle transnational crime during the pre-accession period. 

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In the light of this experience, the Commission will further step up its work and intensify the 
dialogue on the rule of law with candidate countries and potential candidates. The countries 
should work towards achieving concrete, sustainable results and establishing a convincing and 
credible track-record in the fight against organised crime and corruption and the reform of the 
judiciary.  Achieving  a  stable  legal  framework  and  implementing  it  is  key.  The  use  of  peer 
missions and of benchmarking will be extended. The Commission Opinions on the application 
for membership by Montenegro and Albania set out priorities in the area of the rule of law. 

The Commission is closely monitoring progress, in particular through the joint bodies under 
the  Stabilisation  and  Association  Agreements  or  Interim  Agreements  and  assessment 
missions. The results of this dialogue are reflected in the Progress Reports. IPA assistance has 
a major focus on the rule of law. TAIEX organises more than 100 rule of law-related training 
events per year for the enlargement countries. 

There  have  been  positive  developments  recently  on  judicial  cooperation  in  several  Western 
Balkan  countries.  New  bilateral  agreements  on  police  cooperation,  notably  between  Serbia 
and Albania, on mutual legal assistance and mutual enforcement of sentences in penal matters 
have been concluded. Croatia and Serbia went further, signing an agreement enabling them to 
extradite  their  nationals  to  each  other  for  criminal  proceedings  or  enforcement  of  prison 
sentences  in  cases  of  organised  crime  and  corruption.  The  Commission  encourages  other 
countries in the region to follow this example. Judicial cooperation would be further improved 
by expanding the possibility to extradite nationals in all cases of serious crimes, including war 
crime  cases.  The  Regional  Cooperation  Council  strives  to  enhance  cooperation  between  the 
police, prosecution services and the judiciary. 

A professional and non-politicised civil service is essential for the rule of law and improving 
governance. Public administration reform is a priority in enlargement countries most of which 
are  in  various  stages  of  state-building.  In  order  to  be  sustainable,  reforms  need  to  be 
embedded  within  existing  state  structures  and  take  account  of  the  specific  social  and 
governance context. The Commission will continue to support public governance reforms in 
enlargement countries, in close cooperation with SIGMA3. 

2.4.  Freedom of expression and media 

Freedom of expression and of the media, which is an integral part of any democratic system, 
remains a concern in most enlargement countries. In Turkey, the legal framework does not yet 
sufficiently guarantee freedom of expression. In several Western Balkan countries, threats and 
physical  attacks  against  journalists  continued.  In  some  countries,  defamation  remains  a 
criminal  offence  or  subject  to  disproportionately  high  fines.  In  several  countries  political 
interference  with  the  independence  of  media,  including  public  service  broadcasters,  is  a 
problem.  Editorial  independence  is  undermined  by  undue  political  and  economic  pressures. 
These issues need to be addressed by the countries concerned as a matter of urgency. 

3 

Short-term  assistance  in  the field  of  horizontal  governance  issues  and public  administration  reform  is 
delivered  through  SIGMA  (Support  for  Improvement  of  Governance  and  Management),  an  OECD 
programme supported by the Commission in the enlargement context. 

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The Commission will closely monitor progress in this area. The main focus will be on areas 
such  as  the  legal  framework  and  its  compliance  with  European  standards,  in  particular 
regarding defamation; the responsibility of authorities to duly sanction all cases of attacks on 
journalists;  the  establishment  of  self-regulatory  bodies  and  their  contribution  to  enhanced 
professionalism;  the  role  of  public  service  broadcasters  in  pluralistic  democracies;  cross-
border  networks  for  enhancing  reporting  across  the  region  thereby  contributing  to  better 
mutual understanding. The Commission will organise a conference on freedom of expression 
and the media in the enlargement countries in spring 2011 which will provide an opportunity 
to  take  stock  of  progress  in  these  areas.  IPA  support  will  be  provided  as  a  follow-up  to  the 
conference, where appropriate. 

2.5.  Reconciliation, regional cooperation and bilateral issues in the Western Balkans 

Over  the  last  decade,  the  Western  Balkans  have  made  substantial  progress  towards  stability 
and regional cooperation. However, a number of issues stemming from conflicts in the region 
remain open and affect both the internal functioning of states and relations among them. The 
EU is working with parties in the region to overcome this legacy of the past. 

Progress  on  reconciliation  is  a  key  element  for  stability  in  Kosovo,  where  a  new  phase  has 
opened following  the  Advisory Opinion of the International Court of Justice. Following the 
adoption of the UN General Assembly Resolution, the EU is ready to facilitate a process of 
dialogue  between  Pristina  and  Belgrade  with  the  aim  of  promoting  cooperation,  achieving 
progress on the path to the EU and improving the lives of people. Progress in reconciliation is 
also  essential  in  Bosnia  and  Herzegovina,  not  least  for  the  functioning  of  the  state.  Full 
implementation  of  the  Ohrid  agreement  in  the  former  Yugoslav  Republic  of  Macedonia, 
respect for and protection of ethnic minorities throughout the region, return of refugees and 
cooperation  with  the  International  Criminal  Tribunal  for  the  former  Yugoslavia  (ICTY)  as 
well as the proper conduct of domestic war crimes trials are important for reconciliation. 

Lasting reconciliation requires efforts at all levels – governments, judiciary and civil society. 
It  is  also  linked  to  addressing  poverty  and  social  exclusion.  There  have  recently  been  a 
number  of  positive  signals.  The  Serbian  parliament  adopted  a  declaration  condemning  the 
crime  in  Srebrenica  and  referring  to  the  International  Court  of  Justice  ruling  on  Srebrenica. 
NGOs  have  launched  an  initiative  to  establish  a  regional  commission  for  truth-seeking  and 
truth-telling. This so-called RECOM initiative is supported by the Presidents of Croatia and 
Serbia, by the Montenegrin parliament and religious communities. A wider regional support 
would contribute to reconciliation. The May 2010 summit of the Igman Initiative in Sarajevo 
was attended by the Presidents of Serbia, Bosnia and Herzegovina, Croatia and Montenegro; 
more  than  140  NGOs  are  involved  with  the  aim  of  promoting  and  facilitating  local  and 
regional cooperation. These various efforts must be underpinned by the judicial prosecution of 
war crimes through full cooperation with ICTY and proper and speedy handling of war crimes 
cases  in  domestic  courts.  Full  cooperation  with  ICTY,  in  particular  by  Serbia  and  Croatia, 
remains key. 

There have been positive developments on the refugee return issue as initiated by the Sarajevo 
Process. A ministerial conference, held in March in Belgrade, reopened the dialogue between 
the  governments  concerned.  The  Commission  is  ready  to  consider  additional  EU  financial 
contributions  for  this  process  and  to  support  the  holding  of  a  donors'  conference  once  the 
countries have reached agreement on concrete actions for solving remaining problems. There 

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are still 14,631 (as of August 2010) persons missing as a result of the armed conflicts in the 
region and the process of resolving the remaining cases is very slow. The countries concerned 
need to increase their efforts to solve the remaining cases within a reasonable time limit. 

Regional cooperation contributes to reconciliation, good neighbourly relations and a climate 
conducive  to  addressing  open  bilateral  issues.  In  the  Western  Balkans  it  is  also  crucial  for 
economic  development  and  to  address  joint  problems  such  as  organised  crime,  border 
management, climate change or environmental pollution. Regional cooperation is essential to 
make progress on the EU integration agenda in areas such as security of citizens, energy or 
transport. 

The  region  has  taken  steps  to  strengthen  regionally  owned  structures.  The  Regional 
Cooperation  Council  (RCC)  has  a  key  role  in  guiding  and  monitoring  regional  cooperation. 
The  RCC  adopted  an  ambitious  strategy  and  work  programme  for  2011-2013  which  now 
needs  to  be  implemented,  with  a  focus  on  result-oriented  activities  where  the  RCC  can  add 
real value. The Central European Free Trade Agreement (CEFTA) is essential for completing 
the  regional  free-trade  area.  The  Energy  Community  is  working  towards  a  regional  energy 
market  and  preparing  for  integration  into  the  EU's  energy  market.  The  European  Common 
Aviation Area Agreement will upgrade standards in the areas of safety, security and air traffic 
management and lead to more competitive conditions for air passengers.  

The Commission provides substantial financial support for regional cooperation. In 2011, IPA 
funds  will  be  mobilised  to  facilitate  the  region's  participation  in  major  international 
agreements  such  as  the  Transport  Treaty.  The  Regional  School  of  Public  Administration 
(ReSPA)  is  now  fully  operational  and  currently  delivering  around  2,500  training  days  per 
year. The International Agreement establishing its legal personality was ratified in July 2010. 
The official opening of its premises in Danilovgrad (Montenegro) is expected to take place on 
11 November 2010. 

The Commission will continue to support the rehabilitation of cultural heritage, in the context 
of  the  Ljubljana  process.  The  RCC  will  establish  a  Task  Force  on  Culture  and  Society, 
supported by a permanent secretariat benefitting from EU pre-accession financial assistance. 
Its task will be to manage the Ljubljana Process, in co-operation with the Council of Europe 
and the Commission. 

The Commission is currently finalising a Danube Strategy, bringing together Member States, 
enlargement  and  eastern  partnership  countries.  The  inclusion  and  active  participation  of  the 
Western Balkan countries sharing the Danube basin with their EU neighbours is essential for 
the success of the strategy. The strategy is an opportunity for mutually beneficial investments 
in the transport, energy and environment sectors and for socio-economic development. 

Regional  cooperation  has  been  held  back  by  differences  over  Kosovo.  In  particular,  the 
functioning  of  CEFTA,  the  extension  of  the  Pan-Euro-Med  system  of  diagonal  cumulation 
and the signing of the Transport Community agreement have been affected. It has sometimes 
proved  impossible  to  hold  meetings  with  the  participation  of  all  regional  actors.  The 
Commission  strongly  encourages  all  parties  concerned  to  seek  practical  and  pragmatic 
solutions  to  ensure  the  inclusiveness  of  regional  cooperation,  without  prejudice  to  differing 
positions over the status of Kosovo. 

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Slovenia and Croatia signed and ratified a Border Arbitration Agreement which paves the way 
for a final settlement. This agreement shows that bilateral issues can be solved in the spirit of 
good neighbourliness. The former Yugoslav Republic of  Macedonia and  Kosovo  completed 
the  demarcation  of  their  border.  However,  a  number  of  other  bilateral  issues,  in  particular 
regarding borders, remain unresolved, as does the name issue between Greece and the former 
Yugoslav Republic of Macedonia. 

Open bilateral issues, including border disputes, need to be solved by the parties concerned, in 
a  good  neighbourly  spirit  and  taking  into  account  overall  EU  interests.  They  require  a 
renewed political will by the parties concerned. The Commission expects them to make every 
effort  towards  solving  outstanding  border  disputes  in  line  with  the  principle  of  peaceful 
settlement of disputes in accordance with the United Nations Charter, including if necessary 
jurisdiction  of  the  International  Court  of  Justice.  Bilateral  issues  should  not  hold  up  the 
accession  process.  The  EU  stands  ready  to  facilitate  the  creation  of  the  necessary  political 
impetus in the search for solutions and to support related initiatives. 

3.  PRE-ACCESSION INSTRUMENTS SERVING ENLARGEMENT POLICY 

Financial Assistance – strategic approach 

Financial  assistance  under  the  Instrument  of  Pre-accession  Assistance  (IPA)  is  designed  to 
help candidate countries and potential candidates in their efforts to meet accession criteria, to 
align  with  EU  policies  and  standards  and  to  foster  socio-economic  development.  Such 
assistance  through  the  EU  budget  provides  clear  added  value.  Assistance  to  enlargement 
countries is an investment in the future of the EU; by supporting its future members to prepare 
adequately for accession, the EU itself will be better placed to meet its strategic goals. €11.6 
billion  is  available  under  IPA  for  2007-2013  to  help  enlargement  countries  prepare  for 
accession. An indicative breakdown is given in the revised multi-annual indicative financial 
framework for 2011-2013. 

IPA is designed to allow for strategic planning of assistance through three-year multi-annual 
indicative  planning  documents  (MIPDs).  These  documents  set  out  the  main  priorities  for 
assistance over the coming years and form the basis for annual or multi-annual programming. 
The MIPDs are based on the needs identified in the partnerships and progress reports.  

The Commission has taken a number of steps to enhance the strategic nature of this process 
and  to  strengthen  the  link  between  the  priorities  established  in  the  Accession  or  European 
Partnerships and the progress reports and the programming of assistance. This has led to an 
increased focus on key fundamental areas such as good governance and the rule of law. To 
better  illustrate  this  focus,  and  to  strengthen  ownership  by  the  beneficiary  countries,  the 
Commission  will  increasingly  use  a  more  sector-based  approach  in  its  planning  of  pre-
accession assistance.  

Enlargement countries are therefore encouraged to develop detailed, strategic programmes in 
key sectors that have been identified as essential for progressing towards the EU. Accession 
priorities should be fully integrated into these country owned programmes. The next MIPDs 
covering  the  years  2011-2013  will  set  out  the  objectives  for  IPA  assistance  within  these 
sectors.  

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Other areas that will continue to be included in the MIPDs as priorities will be those linked to 
regional  development,  human  resource  development  and  rural  development,  particularly  for 
candidate countries. By learning how to manage pre-accession aid effectively and in line with 
the principles of sound financial management, the governments of the enlargement countries 
can prepare themselves for the management of EU funds as future Member States. 

However, challenges remain when it comes to effective implementation of IPA programmes 
in  some  countries.  Beneficiary  countries  need  to  increase  their  efforts  to  ensure  sufficient 
administrative capacity and expertise in the development and implementation of sustainable, 
results-oriented projects in order to optimise the absorption of available pre-accession funds. 
The Commission will support beneficiaries to improve their capacity and will monitor the IPA 
financial cycle, identifying deficiencies at an early stage. 

The  Commission  will  also  increasingly  programme  on  a  multi-annual  basis  allowing  better 
prioritisation and sequencing of planned measures, as well as more predictability of financial 
assistance for the beneficiary countries.  

A  sector  approach  will  facilitate  cooperation  among  donors  and  beneficiaries,  eliminating 
duplication of efforts and leading to greater efficiency and effectiveness. This in turn should 
allow  all  stakeholders  to  focus  increasingly  on  the  expected  results  and  impact  of  our 
combined efforts.  

The magnitude of investment needed in the enlargement countries to prepare for membership 
and  real  convergence  requires  significant  contributions  from  national  budgets,  support  from 
other  donors,  the  International  Financial  Institutions  (IFIs),  and  the  mobilisation  of  private 
investors.  Public–private  partnerships  are  particularly  valuable  in  bringing  together  grants 
from  public  budgets  and  loans  from  private  banks.  The  Western  Balkans  Investment 
Framework  (WBIF),  the  European  Fund  for  South-East  Europe  (EFSE)  and  the  Green  for 
Growth  Fund  (GGF)  are  good  examples  of  leveraging  a  high  level  of  capital  in-flow  with 
limited public resources.  

The WBIF was set up in December 2009 as a joint initiative of the Commission and partner 
IFIs. It is a key tool for channelling investments into infrastructure in the region. It leverages 
significant loans from the IFIs with IPA grants. €137 million of grants have been attributed 
that could leverage investments for an estimated value of €6.6 billion. The WBIF will focus 
on increasing the number of water and waste water projects in the region, stimulating support 
for energy efficiency, accelerating investments in the core transport network, and supporting 
the development of SMEs and mechanisms to encourage economic growth in the aftermath of 
the  financial  crisis.  Projects  under  the  WBIF  cover  a  number  of  countries  in  the  Western 
Balkans  and  strengthen  regional  cooperation.  The  WBIF  will  favour  major  investments  of 
regional importance such as the South-east Europe core regional transport network, which can 
be considered to be the precursor of the future trans-European transport network (TEN-T) in 
the region. 

Financial  assistance  under  IPA  for  regional  cooperation  aims  to  ensure  regional  stability, 
increase intra-regional trade flows, and support regional cooperation initiatives and structures 
in the Western Balkans, including the Regional Cooperation Council and the Regional School 

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for  Public  Administration.  The  Regional  Cooperation  Council  has  an  important  role  in 
monitoring whether IPA and other donor funding reflects regional cooperation priorities. 

Participation in EU Programmes and Agencies  

Participation  of  enlargement  countries  in  EU  programmes  and  agencies  aims  to  enhance 
cooperation  with  Member  States  and  familiarise  countries  with  EU  policies  and  working 
methods. Candidate countries and potential candidates are able to take part in EU programmes 
on the basis of framework agreements and can participate in EU agencies on a case-by-case 
basis.  Participation  may  be  partially  funded  through  IPA  financial  assistance.  Countries  are 
encouraged  to  focus  their  participation  on  programmes  or  agencies  where  involvement 
supports key sectors for reform and where they can get the most benefit. 

Information and communication 

A  successful  enlargement  policy  requires  solid  public  support.  Member  States  and 
enlargement countries have a central role in the information and communication efforts that 
can help maintain this public support. The Commission is committed to improving the flow of 
objective information about the enlargement process, presented in user-friendly form, through 
the  different  media  of  communication  now  available.  It  is  particularly  important  that  this 
information  reaches  young  people  whose  life  experience  may  not  give  them  a  sense  of  the 
importance of reinforcing security and stability in Europe. It is up to political leaders at EU, 
national,  regional  and  local  level  to  make  use  of  this  information  in  ways  which  are  most 
meaningful to their own constituents. 

Experience  from  the  fifth  enlargement  has  shown  that  a  gap  in  communication  is  quickly 
filled  by  misleading  information.  The  gap  needs  to  be  overcome  by  freely  available  and 
accurate information. This is essential if the public is to understand fully what is at stake. In 
2010 the Union is facing new challenges linked to the economic crisis, the environment, jobs, 
safety  of  the  citizen,  climate  change  and  migration.  These  are  the  issues  that  concern  the 
public in both the Member States and the enlargement countries. The challenge for leaders is 
to explain how the pursuit of the enlargement agenda can help the EU attain its objectives in 
these crucial areas, and can accelerate the reform agenda and improve living conditions in the 
enlargement countries. Tangible and real results of the process are the best advertisements for 
enlargement. Visa liberalisation for the Western Balkans is one powerful example. 

Civil society development 

Civil society activities are essential for a mature democracy, the respect for human rights and 
the  rule  of  law.  Such  activities  enhance  political  accountability,  stimulate  and  expand  the 
space for discourse on societal choices and strengthen the consensus for a pluralistic society. 
By  contributing  to  a  more  open,  participatory  and  dynamic  democracy,  a  lively  and  vibrant 
civil  society  is  also  conducive  to  tolerance  and  reconciliation.  The  involvement  of  civil 
society  organisations  in  the  pre-accession  process  contributes  to  the  quality  of  and  public 
support for accession-related reforms.  

A culture of acceptance and appreciation of the role played by civil society need to be in place 
to  allow  civil  society  organisations  to  engage  in  an  effective  policy  dialogue.  Public 

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consultation  on  policy  initiatives  and  draft  laws  should  become  the  general  principle.  The 
access of civil society to government support is frequently hindered by a lack of transparency 
and poorly developed allocation criteria. 

The  civil  society  facility  helps  civil  society  organisations  to  strengthen  their  capacities  and 
professionalism,  allowing  them  to  engage  in  an  effective  dialogue  with  public  and  private 
actors  and  to  monitor  developments  in  areas  such  as  the  rule  of  law  and  respect  for 
fundamental  rights.  The  facility  finances  initiatives  at  local  level,  regional  networking  and 
short-term visits to the EU. 

taking 

The  Commission  has  reviewed  the  facility  to  better  reach  out  to  local  community-based 
into  account  feed-back  from  civil  society  organisations.  The 
organisations, 
Commission will better target needs in each country and provide longer-term seed-funding to 
NGOs.  Stronger,  well-established  organisations  could  become  mentors  and  facilitators  for 
smaller organisations. 

4.  PROGRESS IN THE ENLARGEMENT COUNTRIES AND AGENDA FOR 2010-2011  

4.1.  Steering the Western Balkans towards EU membership 

At the Sarajevo EU-Western Balkans ministerial meeting on 2 June 2010, the EU reiterated its 
unequivocal commitment to the European perspective of the Western Balkans. The future of 
the Western Balkans lies in the European Union. 

The  Western  Balkans  have  moved  closer  to  the  EU  over  the  past  year,  as  the  region  made 
progress, albeit unevenly, in reforms and in meeting established criteria and conditions. The 
progress  of  Croatia  confirms  that  the  Stabilisation  and  Association  Process  for  the  Western 
Balkans  is  a  policy  leading  to  EU  accession.  Progress  of  the  other  countries  of  the  Western 
Balkans  towards  EU  membership  depends  likewise  on  the  pace  of  their  political  and 
economic reforms.  

Substantial  progress  was  made  towards  visa  liberalisation.  Over  the  past  year,  the  EU  has 
lifted  visa  requirements  for  Serbia,  Montenegro  and  the  former  Yugoslav  Republic  of 
Macedonia, when they demonstrated their capacity to meet the benchmarks which had been 
set  in  areas  like  the  security  of  travel  documents,  border  management,  migration,  asylum, 
public order and security, as well as respect for human rights. Visa requirements will shortly 
be lifted for Bosnia and Herzegovina and Albania, on the basis of clear evidence that they too 
have met these benchmarks. It is important that the countries concerned intensify their efforts 
to inform their citizens about the scope and limits of the visa-free regime. Kosovo adopted a 
law on readmission and stepped up efforts on reintegration of repatriated persons, thus paving 
the way for the visa liberalisation dialogue. 

Croatia 

Croatia has made steady progress towards meeting the criteria for membership since starting 
accession  negotiations  in  October  2005.  Croatia  meets  the Copenhagen political  criteria.  As 
regards the economic criteria, Croatia is a functioning market economy. It should be able to 
cope  with  competitive  pressures  and  market  forces  within  the  Union,  provided  that  it 

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implements  its  comprehensive  reform  programme  with  determination  in  order  to  reduce 
structural weaknesses.  

Regarding the acquis criteria, Croatia has made good progress in the accession negotiations. 
33  chapters  were  opened,  and  25  have  been  provisionally  closed.  Croatia  has  made  good 
progress  towards  meeting  the  conditions  for  the  closure  of  the  negotiating  chapters  with 
financial implications (agriculture and rural development; regional policy and coordination 
of structural instruments; financial and budgetary provisions). Croatia needs to sustain efforts 
to fully establish the administrative structures required for the management and control of EU 
funds. 

Croatia  needs  to  meet  outstanding  closing  benchmarks  in  the  field  of  judiciary  and 
fundamental  rights,  in  particular  building  up  the  necessary  track  records  as  regards  the 
independence and efficiency of the judiciary, the fight against corruption and organised crime, 
respect  for  and  protection  of  minorities,  including  refugee  return,  war  crimes  trials  and  full 
cooperation  with  the  ICTY  including  settling  the  issue  of  access  for  ICTY  to  documents. 
Regarding  competition,  Croatia  needs  to  adopt  restructuring  plans  for  the  shipyards,  in  line 
with the acquis. Croatia is expected to continue to play an active role in regional cooperation 
in the Western Balkans and to support the other countries of the region on their path towards 
EU membership. 

Bearing  in  mind  Croatia's  track  record  in  meeting  benchmarks  and  in  implementing  the 
commitments  given  in  the  accession  negotiations,  Croatia  is  well  on  its  way  to  meeting  the 
acquis  criteria.  This  is  demonstrated  in  the  monitoring  tables  which  the  Commission 
establishes for provisionally closed chapters. 

The  Commission  will  continue  to  monitor  the  implementation  of  commitments  until 
accession, by using all available instruments, including peer assessments and structures under 
the Stabilisation and Association Agreement. Monitoring Reports will be presented regularly 
by the Commission. 

The former Yugoslav Republic of Macedonia 

The  former  Yugoslav  Republic  of  Macedonia  continues  to  sufficiently  fulfil  the  political 
criteria. Following substantial reforms in 2009, further progress has been made, although at an 
uneven  pace,  as  regards  the  reform  of  the  parliament,  the  police,  the  judiciary,  public 
administration and respect for and protection of minorities. The country needs to make further 
progress  in  relation  to  dialogue  among  political  actors,  judiciary  and  public  administration 
reform,  the  fight  against  corruption,  freedom  of  expression  and  improving  the  business 
environment. Implementation of the legislation is essential.  

The  country  continued  to  fulfil  its  commitments  under  the  Stabilisation  and  Association 
Agreement. The Commission has proposed moving to the second stage of the association as 
provided for by the SAA. 

The Council has not yet taken a position on the Commission's recommendation from October 
2009 to open accession negotiations.  

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The  name  issue  with  Greece  remains  unresolved.  The  two  countries  are  engaged  in  talks 
under the auspices of the UN on resolving it and a number of bilateral contacts, including at 
prime minister level, have  taken  place, although this  momentum has not  yet led to concrete 
results.  Actions  and  statements  which  could  adversely  affect  good  neighbourly  relations 
should  be  avoided.  Maintaining  good  neighbourly  relations,  including  a  negotiated  and 
mutually accepted solution to the name issue, under the auspices of the UN, is essential. 

Montenegro 

In parallel to this Strategy Paper, the Commission has adopted its Opinion on Montenegro's 
application for EU membership. The conclusions and recommendations of the Opinion are set 
out in the Annex to this Communication. 

Albania 

In  parallel  to  this  Strategy  Paper,  the  Commission  has  adopted  its  Opinion  on  Albania's 
application for EU membership. The conclusions and recommendations of the Opinion are set 
out in the Annex to this Communication. 

Bosnia and Herzegovina 

Bosnia and Herzegovina has made limited progress in addressing key reforms. The elections 
of October 2010 were generally in line with international standards. Incompatibilities between 
Bosnia and Herzegovina's Constitution and the European Convention on Human Rights were 
not  removed,  despite  the  ruling  of  the  European  Court  of  Human  Rights.  Respect  for 
democratic principles and the right to equal treatment without discrimination, as embodied in 
the ECHR, constitutes an essential element of the Interim Agreement. 

Developing a shared vision by the leaders on the overall direction of the country and on key 
EU-related  reforms  remains  essential  for  further  progress  towards  EU  membership.  The 
country needs to increase efforts to establish a satisfactory track record in implementing the 
provisions of the Interim Agreement. 

Initial steps should be taken, as a matter of urgency, by Bosnia and Herzegovina to align its 
Constitution  with  the  European  Convention  of  Human  Rights  (ECHR)  and  to  improve  the 
efficiency  and  functioning  of  its  institutions.  The  country  must  be  in  a  position  to  adopt, 
implement  and  enforce  the  laws  and  rules  of  the  EU.  Regarding  international  obligations, 
making progress towards meeting the objectives and conditions which have been set for the 
closure of the Office of the High Representative (OHR) remains essential. The EU, through a 
reinforced presence, will assist Bosnia and Herzegovina in implementing the objectives of the 
EU agenda. 

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Serbia 

Serbia  applied  for  EU  membership  in  December  2009  and  has  demonstrated  a  renewed 
commitment towards meeting the Copenhagen criteria. In October 2010, the Council invited 
the  Commission  to  submit  its  Opinion  on  this  application.  In  February  2010  the  Interim 
Agreement  entered  into  force  and  in  June  2010  the  Member  States  agreed  to  submit  the 
Stabilisation and Association Agreement to their parliaments for ratification.  

Serbia  has  continued  to  implement  its  political  reform  agenda.  Some  positive  results  have 
been achieved in the fight against organised crime. Additional efforts are required regarding 
judicial  and  public  administration  reform  as  well  as  the  fight  against  organised  crime  and 
corruption.  Serbia  has  continued  to  build  a  track  record  in  implementing  the  Interim 
Agreement  and  is  well  placed  to  fulfil  the  requirements  under  the  SAA.  Serbia  has  taken 
important steps towards reconciliation in the region, in particular with Croatia and Bosnia and 
Herzegovina.  Serbia  has  continued  to  cooperate  actively  with  the  International  Criminal 
Tribunal for the former Yugoslavia. However, the two remaining ICTY fugitives are still at 
large. Full cooperation with the Tribunal remains an essential condition for membership of the 
EU, as set out in the Council conclusions of 25 October 2010. 

Serbia  needs  to  demonstrate  a  more  constructive  attitude  towards  Kosovo’s  participation  in 
regional trade and cooperation. It should recognise Kosovo's customs stamps which UNMIK 
has twice certified as in compliance with UNSCR 1244. Cooperation with the EULEX rule of 
law mission with respect to the north of Kosovo needs to be strengthened. Following the UN 
General  Assembly  Resolution,  the  EU  is  ready  to  facilitate  a  process  of  dialogue  between 
Belgrade  and  Pristina  to  promote  cooperation,  achieve  progress  on  the  path  to  the  EU  and 
improve the lives of people. 

Kosovo 

In Kosovo local elections at the end of 2009 were conducted in an orderly manner and with 
participation  of  all  communities.  Voter  turnout  was  very  low  in  northern  Kosovo.  The 
decentralisation process has advanced significantly. Cooperation with EULEX increased. The 
government  has  improved  its  capacity  to  implement  Kosovo's  European  agenda  and  reform 
policy. However, major challenges remain as regards the public administration reform and the 
rule  of  law,  including  the  judiciary.  More  needs  to  be  done  to  tackle  corruption,  organised 
crime  and  money-laundering.  Dialogue  and  reconciliation  between  communities  and  the 
protection  and  integration  of  minorities,  particularly  the  Kosovo  Serbs,  are  still  areas  of 
concern.  The  authorities  need  to  ensure  a  constructive  approach  towards  Kosovo's 
participation in regional cooperation fora, in order to keep pace with regional developments. 

In  December  2009,  the  Council  welcomed  the  Commission's  Communication  'Kosovo  - 
Fulfilling  its  European  Perspective'4.  The  Council  invited  the  Commission  to  take  the 
necessary measures to support Kosovo's progress towards the EU, in line with the European 
perspective of the region to report back on progress in this regard. The Council underlined the 

4 

COM(2009) 534 final, 14.10.2009. 

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importance  to  measures  related  to  trade  and  visas,  without  prejudice  to  Member  States' 
positions on status. 

In  February,  the  Commission  proposed  the  extension  of  the  autonomous  trade  measures  for 
Kosovo.  In  July  it  undertook  an  expert  mission  to  assess  Kosovo's  preparedness  to  meet 
requirements  relevant  to  a  possible  trade  agreement  with  the  EU.  Efforts  will  be  necessary 
concerning  technical  regulation  of  products,  control  of  origin,  intellectual  property, 
competition  rules  and  public  procurement.  The  Commission  will  step  up  efforts  to  assist 
Kosovo to address the shortcoming identified. Once Kosovo meets the relevant requirements, 
the Commission will propose negotiating directives for a trade agreement.  

The  Commission  will  take  forward  Kosovo's  participation  in  relevant  Union  programmes. 
Together  with  the  Kosovo  authorities,  the  Commission  launched  the  Stabilisation  and 
Association  Process  dialogue  with  Kosovo  in  January.  A  full  cycle  of  meetings  has  been 
completed. 

The  Commission  supports  Kosovo's  participation 
in  IPA  cross-border  cooperation 
programmes  with  the  former  Yugoslav  Republic  of  Macedonia  and  Albania.  As  of  2011, 
support will also include programmes with Montenegro. 

The Commission will continue to take forward the initiatives it outlined in its communication 
on Kosovo, in line with the Council conclusions. 

4.2.  Furthering accession negotiations with Turkey 

Turkey  has  continued  its  political  reform  process.  Turkey  amended  its  constitution 
introducing key reforms to its political and legal system which address a number of priorities 
in the areas of judiciary and fundamental rights. The reforms limit the competence of military 
courts;  restructure  the  constitutional  court;  widen  the  composition  of  the  high  council  of 
judges  and  public  prosecutors,  making  it  more  representative  of  the  judiciary  as  a  whole; 
broaden trade union rights in the public sector; provide the basis for the adoption of special 
measures protecting the rights of women and children; guarantee protection of personal data; 
and  grant  the  right  to  apply  to  an  ombudsman,  thus  providing  the  legal  basis  for  the 
establishment of the ombudsman institution. 

The constitutional  amendments are an important step in the right direction. However, broad 
public consultation involving all political parties and civil society, with their full engagement, 
is needed to strengthen support for constitutional reform. It is now essential to ensure proper 
implementation  of  these  reforms  through  relevant  legislation.  A  new  civilian  constitution 
would provide a solid base for a further strengthening of democracy in Turkey, in line with 
European standards and the EU accession criteria. 

Regarding  fundamental  rights,  freedom  of  expression  and  of  the  media  needs  to  be 
strengthened in Turkey both in law and in practice. A number of shortcomings remain in the 
exercise  of  the  freedom  of  religion.  Progress  is  also  needed  regarding,  women's  rights  and 
gender equality and ensuring full trade union rights. The 'democratic opening' aimed notably 
at addressing the Kurdish issue has produced only limited results. The security situation in the 

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South-East  has  worsened,  with  a  resurgence  of  attacks  by  the  terrorist  organisation 
PKK/Kongra-Gel. Some progress has been made in the fight against corruption. 

Accession negotiations advanced, albeit rather slowly. They have reached a demanding stage 
requiring Turkey to step up its efforts in meeting established conditions. By advancing in the 
fulfilment  of  benchmarks  and  of  the  requirements  specified  in  the  Negotiating  Framework, 
Turkey  will  be  able  to  accelerate  the  pace  of  negotiations.  During  the  next  months,  Turkey 
should give particular priority to the competition policy, public procurement and social policy 
and employment chapters.  

Turkey's foreign policy has become more active in its wider neighbourhood. This is an asset 
for  the  European  Union,  provided  it  is  developed  as  a  complement  to  Turkey's  accession 
process and in coordination with the EU. Turkey has made a number of proposals for closer 
EU-Turkey  foreign  policy  cooperation.  Considerable  progress  has  been  made  in  the 
negotiations towards a readmission agreement with Turkey. 

Turkey  has  continued  to  express  public  support  for  the  negotiations  under  UN  auspices 
between  the  leaders  of  the  Greek  Cypriot  and  Turkish  Cypriot  communities  to  reach  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 
its  obligation  of  full  non-discriminatory 
Cyprus.  It 
implementation  of  the  Additional  Protocol  and  makes  progress  towards  normalisation  of 
bilateral relations with the Republic of Cyprus. The EU will continue to follow up and review 
progress  made  on  issues  covered  by  the  Declaration  of  21  September  2005,  in  accordance 
with the Council Conclusions, including the December 2006 and December 2009 conclusions. 
In the absence of progress, the Commission recommends that the EU maintains its measures 
from 2006, which will have a continuous effect on overall progress in the negotiations.  

that  Turkey  fulfils 

is  urgent 

Turkey needs to step up efforts to solve open bilateral issues, including border disputes, with 
its neighbours. There is a renewed impetus to improve relations with Greece. A considerable 
number of formal complaints were made by Greece about continued violations of its airspace 
by  Turkey,  including  flights  over  Greek  islands.  Greece  also  made  complaints  about 
violations  of  its  territorial  waters.  The  protocols  on  the  normalisation  of  relations  with 
Armenia signed in 2009 have not been ratified. 

4.3.  Launching the accession process with Iceland 

The  accession  process  with  Iceland  has  been  launched.  Following  the  Commission's 
recommendation  in  its  Opinion  of  February  2010  and  the  decision  of  the  June  European 
Council, accession negotiations were opened in July 2010 and the screening of the EU acquis 
with Iceland is about to start. Iceland is now entitled to IPA assistance which is available to 
support the country's efforts towards becoming fully prepared for EU membership.  

Good  progress  was  made  to  further  improve  the  legal  framework  related  to  conflict  of 
interests and the  financing of political parties. The rules on the appointment of judges were 
amended  with  the  aim  of  further  strengthening  the  independence  of  the  judiciary.  The 
Important  steps  of  economic  stabilisation  have  been  taken.  Progress  has  been  made  in 

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consolidating public  finances and  restoring the  financial  system.  The  IMF  programme  is  on 
track. However, economic uncertainties and challenges remain. Iceland will need to address 
existing  obligations,  such  as  those  identified  by  the  EFTA  Surveillance  Authority  (ESA) 
under the European Economic Area Agreement. Substantial efforts are needed to ensure that 
citizens in Iceland are properly informed about what EU membership entails. 

5.  CONCLUSIONS AND RECOMMENDATIONS  

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

1. 

2. 

3. 

4. 

5. 

6. 

Enlargement  reinforces  peace  and  stability  in  Europe.  It  is  in  the  EU's  strategic 
interest to take the enlargement process forward on the basis of the agreed principles 
and conditions and the renewed consensus on enlargement approved by the European 
Council  in  December  2006.  The  firm  political  commitment  of  all  stakeholders  is 
required to make a success of enlargement. Enlargement must remain credible for all 
involved. Aspirant countries need to be well prepared through rigorous conditionality 
and to have a clear and tangible European perspective, once conditions are met. 

The  enlargement  process  helps  the  EU  to  better  achieve  its  policy  objectives  in  a 
number  of  areas,  which  are  key  to  economic  recovery  and  sustainable  growth, 
including  regulatory  convergence  and  the  internal  market,  energy,  transport,  the 
protection of the environment and efforts to limit climate change as well as making 
the EU a safer place.  

The Commission will further strengthen the monitoring of macro-economic policies 
of  the  enlargement  countries,  also  taking  into  account  new  developments  in  EU 
economic governance. The Commission expects the enlargement countries to pursue 
EU-related  reforms,  and  to  improve  the  business  environment,  thereby  helping  to 
overcome  the  economic  crisis  and  to  achieve  sustainable  growth.  The  Commission 
will associate enlargement countries with initiatives taken at the EU level to meet the 
goals of the Europe 2020 strategy. It invites the enlargement countries to reflect the 
2020 targets in their national political priorities, to engage in regional policy groups 
with  the  aim  of  reviewing  regularly  the  results  of  these  reforms  and  to  set  region-
specific targets, where appropriate. 

The  Commission  encourages  the  enlargement  countries  to  work  on  improving 
conditions  for  vulnerable  groups,  including  the  social  and  economic  inclusion  of 
Roma. The Commission is committed to support them in this endeavour. 

The Commission will give continued priority to judiciary and public administration 
reform,  the  fight  against  organised  crime  and  corruption  and  further  intensify  the 
rule of law dialogue with enlargement countries. Most enlargement countries need 
to  make  substantial  progress  to  consolidate  the  rule  of  law  and,  in  particular,  to 
establish credible track-records in the fight against organised crime and corruption. 

Freedom  of  expression  and  of  the  media  remains  a  concern  in  most  enlargement 
countries  and  the  problems  identified  must  be  addressed  as  a  matter  of  priority. 
Progress in this area is essential and will be closely monitored by the Commission. 
The  Commission  will  continue  to  support  civil  society  organisations  and  make  full 
use of its civil society facility. 

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7. 

8. 

9. 

10. 

11. 

12. 

13. 

Regional  cooperation  is  an  essential  element  of  the  Stabilisation  and  Association 
process. The Western Balkans have made important progress in regional cooperation, 
which  should  not  be  undermined  by  divergences  over  Kosovo.  The  Regional 
Cooperation  Council  needs  to  focus  on  the  implementation  of  its  results-oriented 
strategy. 

Substantial progress has been made towards visa liberalisation. The visa obligation 
for  citizens  from  the  former  Yugoslav  Republic  of  Macedonia,  Montenegro  and 
Serbia  was  lifted.  Visa  requirements  will  shortly  be  lifted  for  Bosnia  and 
Herzegovina and Albania, on the basis of clear evidence that they too have met the 
benchmarks.  Further  efforts  are  needed  by  the  countries  concerned  to  inform  their 
citizens  about  the  scope  and  limits  of  the  visa-free  regime,  to  monitor  closely  its 
implementation and, where required, take adequate corrective measures. 

Bilateral  issues need  to  be solved by  the  parties concerned, in a good  neighbourly 
spirit  and  taking  into  account  overall  EU  interests.  They  should  not  hold  up  the 
accession process. The EU stands ready to facilitate the  search for solutions and to 
support related initiatives. The time has come for the region to overcome the legacy 
of  the  conflicts  of  the  past,  building  on  recent  positive  momentum  regarding 
reconciliation. Good neighbourly relations remain key. 

The  Commission  recalls  that  negotiating  chapters  for  which  technical  preparations 
have  been  completed  should  be  opened  or  provisionally  closed  on  the  basis  of  the 
acquis concerned, in line with the Negotiating Frameworks, and subject to measures 
agreed  by  the  Council.  It  is  in  the  EU's  interest  to  open  discussions  on  difficult 
chapters early in the negotiations, including the chapter on judiciary and fundamental 
rights, which requires the establishment of convincing and credible track records 
and hence is likely to be among the last chapters to be closed. 

Pre-accession  assistance  forms  an  integral  part  of  the  enlargement  strategy  and  is 
designed  to  help  meet  the  priorities  identified  in  the  partnerships  and  progress 
reports.  Beneficiary  countries  need  to  strengthen  their  capacity  to  use  EU  funds 
effectively. 

The  Commission  invites  Member  States  to  work  with  the  EU  institutions  to 
strengthen understanding and support for the enlargement process and to explain how 
it  can  help  us  achieve  our  common  objectives.  The  Commission  is  committed  to 
improving  the  flow  of  objective  information  about  the  enlargement  process, 
presented in user-friendly form, through the different media of communication now 
available. 

Croatia  has  made  good  progress  towards  meeting  the  criteria  for  membership  and 
the  accession  negotiations  have  reached  the  final  phase.  Full  cooperation  with  the 
International Criminal Tribunal for the former Yugoslavia remains a requirement for 
Croatia's  progress  throughout  the  accession  process,  in  line  with  the  Negotiating 
Framework. The Commission considers that negotiations should be concluded once 
Croatia has met outstanding closing benchmarks, in particular in the field of judiciary 
and  fundamental  rights,  including  the  fight  against  corruption,  thus  removing  the 
need  for  the  EU  to  consider  a  cooperation  and  verification  mechanism  after 
accession.  The  Commission  will  closely  monitor  Croatia's  progress  in  the  field  of 

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14. 

15. 

16. 

17. 

18. 

judiciary and fundamental rights and take stock of the situation in the first quarter of 
2011. 

Turkey has continued its political reform process, in particular through the reform of 
its  constitution.  Further  results  are  needed  regarding  fundamental  rights,  the 
'democratic opening' and the involvement of all stakeholders in the reform process. 
Assuring  freedom  of  expression  in  practice  is  particularly  challenging.  Accession 
negotiations  advanced,  albeit  rather  slowly.  By  advancing  in  the  fulfilment  of 
benchmarks and of the requirements specified in the Negotiating Framework, Turkey 
will be able to accelerate the pace of negotiations. It is now urgent that Turkey fulfils 
its obligation of full non-discriminatory implementation of the Additional Protocol to 
the  Association  Agreement  and  makes  progress  towards  normalisation  of  bilateral 
relations with the Republic of Cyprus. The EU will continue to follow up and review 
progress  made  on  issues  covered  by  the  Declaration  of  21  September  2005,  in 
accordance  with  the  Council  Conclusions,  including  the  conclusions  of  December 
2006 and December 2009. In the absence of progress, the Commission recommends 
that the EU maintains its measures from 2006, which will have a continuous effect 
on overall progress in the negotiations. 

As  regards  the  Cyprus  issue,  the  leaders  of  the  Greek  Cypriot  and  of  the  Turkish 
Cypriot  communities  are  continuing  negotiations  on  a  comprehensive  settlement 
under the auspices of the United Nations. The Commission supports their efforts and 
provides technical advice on issues within EU competence. It calls on both leaders to 
strengthen  their  efforts  to  bring  the  settlement  talks  to  a  successful  conclusion  as 
soon as possible  and reiterates its  call  on Turkey to contribute in concrete terms to 
such a comprehensive settlement of the Cyprus issue. 

The accession process with Iceland has been launched. Following the Commission's 
recommendation  in  its  Opinion  of  February  2010  and  the  decision  of  the  June 
European  Council,  accession  negotiations  were  opened  in  July  2010  and  the 
screening of the EU acquis with Iceland is about to start. Iceland will need to address 
existing  obligations,  such  as  those  identified  by  the  EFTA  Surveillance  Authority 
(ESA)  under  the  EEA  Agreement.  Substantial  efforts  are  needed  to  ensure  that 
citizens in Iceland are properly informed about what EU membership entails. 

The  former  Yugoslav  Republic  of  Macedonia  continues  to  sufficiently  fulfil  the 
political criteria. Further progress has been made in key reform areas, although at an 
uneven  pace.  Efforts  are  needed  in  particular  as  regards  judiciary  and  public 
administration  reforms.  The  Commission  reiterates  its  recommendation  that 
negotiations for accession to the European Union should be opened with the former 
Yugoslav Republic of Macedonia. Maintaining good neighbourly relations, including 
a negotiated and mutually accepted solution to the name issue, under the auspices of 
the UN, is essential. 

In  its  Opinions  adopted  today  the  Commission  recommends  that  accession 
negotiations should be opened with Montenegro and Albania once these countries 
have achieved the necessary degree of compliance with the membership criteria set 
out  by  the  1993  Copenhagen  European  Council.  In  particular,  Montenegro  and 
Albania  need  to  meet  the  specific  key  priorities  set  out  in  each  Opinion.  The 
Commission  recommends that the Council grant the status of candidate country to 
Montenegro. It urges Albania to make further efforts to build on the progress made to 

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19. 

20. 

21. 

date.  The  Commission's  progress  report  on  both  countries  in  the  2011  enlargement 
package  will  focus  in  particular  on  the  implementation  of  the  key  priorities  which 
need to be addressed with a view to the opening of accession negotiations. 

Serbia  applied  for  EU  membership  in  December  2009  and  in  October  2010  the 
Council  invited  the  Commission  to  submit  its  Opinion.  Serbia  has  continued  to 
implement its political reform agenda and to build a track record in implementing the 
Interim Agreement. It is well placed to fulfil the requirements under the SAA. Serbia 
has taken important steps towards reconciliation in the region. Additional efforts are 
required  regarding  judicial  and  public  administration  reform  as  well  as  the  fight 
against organised crime and corruption. Serbia has continued its cooperation with the 
International  Criminal  Tribunal  for  the  former  Yugoslavia.  However,  the  two 
remaining  ICTY  fugitives  are  still  at  large.  Full  cooperation  with  the  Tribunal 
remains an essential condition for membership of the EU, as set out in the Council 
conclusions  of  25  October  2010.  Serbia  needs  to  demonstrate  a  more  constructive 
trade  and  cooperation. 
attitude 
Cooperation  with  the  EULEX  rule  of  law  mission  with  respect  to  the  north  of 
Kosovo needs to be strengthened. 

towards  Kosovo’s  participation 

in  regional 

Following the UN General Assembly Resolution, the EU will facilitate a process of 
dialogue between Belgrade and Pristina to promote cooperation, achieve progress on 
the path to the EU and improve the lives of people. 

The  decentralisation process  in Kosovo has advanced significantly and cooperation 
with EULEX has increased. The government has improved its capacity to implement 
Kosovo's European agenda and reform policy. However, major challenges remain as 
regards  the  rule  of  law,  including  the  reform  of  public  administration  and  the 
judiciary,  as  well  as  tackling  corruption,  organised  crime  and  money-laundering. 
Dialogue and reconciliation between communities and the protection and integration 
of  minorities,  particularly  the  Kosovo  Serbs,  are  still  areas  of  concern.  The 
authorities need to ensure a constructive approach towards Kosovo's participation in 
regional cooperation fora, in order to keep pace with regional developments. 

The  Commission  is  taking  forward  the  initiatives  outlined  in  its  October  2009 
Communication  on  Kosovo,  in  line  with  the  December  2009  Council  conclusions. 
The  Commission  welcomes  the  recent  progress  Kosovo  made  in  adopting  the 
legislation on readmission, in devising an Action Plan on reintegration of returnees 
underpinned with earmarked resources. Subject to its continued implementation, the 
Commission  is  committed  to  launch  a  visa  liberalisation  dialogue  shortly.  The 
Commission  is  assisting  Kosovo  to  put  into  place  the  conditions  needed  for  a 
possible trade agreement with the EU. Once Kosovo meets the relevant requirements, 
the  Commission  will  propose  negotiating  directives  for  a  trade  agreement.  The 
Commission  will  propose  the  opening  to  Kosovo's  participation  of  relevant  Union 
programmes,  such  as  Europe  for  Citizens  and  Culture.  The  Commission  will 
propose negotiating directives for a framework agreement to this effect. 

22. 

Bosnia  and  Herzegovina  needs  to  form  a  government  committed  to  the  country's 
EU future and to speed up relevant reforms. Initial steps should be taken, as a matter 
of urgency, by Bosnia and Herzegovina to align its Constitution with the European 
Convention of Human Rights and to improve the functioning of its institutions. The 
country must be in a position to adopt, implement and enforce the laws and rules of 

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the  EU.  Regarding  international  obligations,  making  progress  towards  meeting  the 
objectives  and  conditions  which  have  been  set  for  the  closure  of  the  Office  of  the 
High  Representative  (OHR)  remains  essential.  The  EU,  through  a  reinforced  EU 
presence, will assist Bosnia and Herzegovina in implementing the objectives of the 
EU agenda. 

23. 

Overall,  the  2010  progress  reports  indicate  that  the  EU's  enlargement  process  is 
moving forward at a pace which is largely determined by the proven capacity of the 
aspirant  countries  to  take  on  the  obligations  of  membership.  This  requires  durable 
reforms  as  well  as  legislative  and  institutional  adaptations  which  are  credible  and 
convincing.  As  the  countries  concerned  meet  the  standards  which  have  been  set, 
including notably those linked to democracy, the rule of law and fundamental rights 
and  freedoms,  the  EU  is  committed  to  working  with  them  to  advance  to  the  next 
steps in the process. 

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ANNEX 1 

Conclusions and Recommendations of the Commission's Opinions on the membership 
applications by Montenegro and Albania 

Montenegro 

Montenegro  has  made  progress  towards  fulfilling  the  criteria  related  to  the  stability  of 
institutions  guaranteeing  democracy,  the  rule  of  law,  human  rights  and  respect  for  and 
protection  of  minorities,  set  by  the  Copenhagen  European  Council  in  1993,  as  well  as  the 
conditions  of  the  Stabilisation  and  Association  Process.  Nonetheless,  further  efforts  are 
needed. 

As  regards 
the  economic  criteria,  Montenegro  has  achieved  a  certain  degree  of 
macroeconomic stability. However, to become a  functioning market  economy, as set out by 
the 1993 Copenhagen European Council, Montenegro needs to address internal and external 
imbalances, as well as existing weaknesses, notably in the financial sector and the functioning 
of labour markets, and strengthen the rule of law. In order to enable it to cope in the medium 
term  with  competitive  pressure  and  market  forces  within  the  Union,  Montenegro  needs  to 
strengthen  its  physical  infrastructure  and  human  capital  and  to  continue  implementing 
structural reforms. 

Montenegro's  track  record  in  implementing  its  obligations  under  the  Stabilisation  and 
Association Agreement is positive overall. 

Montenegro would be in a position to take on the obligations of membership in the medium 
term,  in  most  of  the  acquis  fields,  provided  that  the  alignment  process  continues  and  that, 
considerable  and  sustained  further  efforts  are  made  to  ensure  the  implementation  and 
enforcement of legislation. Particular attention needs to be paid to the areas of free movement 
of goods, intellectual property law, agriculture and rural development, food safety, veterinary 
and  phyto-sanitary  policy,  fisheries,  statistics,  social  policy  and  employment,  regional  policy 
and coordination of structural instruments, judiciary and fundamental rights, justice, freedom 
and  security  and  financial  control.  Full  compliance  with  the  acquis  in  the  field  of  the 
environment could be achieved only in the long term and would necessitate increased levels 
of investment; efforts in this area need to be accelerated. 

Montenegro's accession would have a limited overall impact on European Union policies and 
would not affect the Union's capacity to maintain and deepen its own development. 

The Commission considers that negotiations for accession to the European Union should be 
opened with Montenegro once the country has achieved the necessary degree of compliance 
with the membership criteria and in particular the Copenhagen political criteria requiring the 
stability of institutions guaranteeing notably the rule of law. In this regard Montenegro needs 
in particular to meet the following key priorities:  

–  Improve  the  legislative  framework  for  elections  in  line  with  the  recommendations  of  the 
OSCE-ODIHR  and  the  Venice  Commission;  strengthen  the  Parliament’s  legislative  and 
oversight role.  

–  Complete essential steps in public administration reform including amendments to the law 
on general administrative procedure and the law on civil servants and state employees and 

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the  strengthening  of  the  Human  Resources  Management  Authority  and  the  State  Audit 
Institution,  with  a  view  to  enhancing  professionalism  and  de-politicisation  of  public 
administration  and  to  strengthening  a  transparent,  merit-based  approach  to  appointments 
and promotions. 

–  Strengthen rule of law, in particular through de-politicised and merit-based  appointments 
of  members  of  the  judicial  and  prosecutorial councils  and  of  state  prosecutors  as  well  as 
through  reinforcement  of  the  independence,  autonomy,  efficiency  and  accountability  of 
judges and prosecutors.  

–  Improve  the  anti-corruption  legal  framework  and  implement  the  government's  anti-
corruption  strategy  and  action  plan;  establish  a  solid  track  record  of  proactive 
investigations, prosecutions and convictions in corruption cases at all levels. 

–  Strengthen  the  fight  against  organised  crime  based  on  threat  assessment  and  proactive 
investigations, increased cooperation with regional and EU partners, efficient processing of 
criminal intelligence and enhanced law enforcement capacities and coordination. Develop 
a solid track-record in this area.  

–  Enhance media freedom notably by aligning with the case-law of the European Court for 

Human Rights on defamation and strengthen cooperation with civil society. 

–  Implement  the  legal  and  policy  framework  on  anti-discrimination  in  line  with  European 
and  international  standards;  guarantee  the  legal  status  of  displaced  persons,  in  particular 
Roma,  Ashkali  and  Egyptians,  and  ensure  respect  for  their  rights.  This  will  include  the 
adoption and implementation of a sustainable strategy for the closure of the Konik camp. 

Montenegro  is  encouraged  to  continue  its  constructive  engagement  in  regional  cooperation 
and  in  strengthening  bilateral  relations  with  neighbouring  countries.  Outstanding  bilateral 
issues need to be addressed. The SAA needs to continue to be implemented smoothly; in this 
context, due attention to addressing identified gaps in areas such state aids and transit traffic 
is  required.  In  addition,  the  country  is  strongly  encouraged  to  continue  enhancing  its 
administrative  capacity  across  the  board.  Particular  efforts  are  required  as  regards  the 
effectiveness  and  impartiality  of  the  state  administration  in  sensitive  areas  such  as 
environmental  protection.  Cases  of  violence  and  intimidation  against  journalists  and  NGO 
activists  need  to  be  properly  prosecuted.  The  issues  of  domestic  violence,  ill-treatment  and 
sub-standard prison conditions need to be addressed. 

In the light of the progress made so far, the Commission recommends that the Council should 
grant Montenegro the status of candidate country.  

The  Commission  will  monitor  progress  of  the  necessary  reforms  within  the  institutional 
framework  of  the  Stabilisation  and  Association  Agreement  and  continue  to  support  efforts 
through the IPA financial instrument. The Commission will present a report on Montenegro's 
progress  in  the  2011  enlargement  package.  This  report  will  focus  in  particular  on  the 
implementation of the key priorities which need to be addressed with a view to the opening of 
accession negotiations. 

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Albania 

Albania has made progress towards fulfilling the criteria related to the stability of institutions 
guaranteeing  democracy,  the  rule  of  law,  human  rights  and  respect  for  and  protection  of 
minorities, set by the Copenhagen European Council in 1993, as well as the conditions of the 
Stabilisation and Association Process. Nonetheless, considerable further efforts are needed. 

As  regards  the  economic  criteria,  Albania  has  achieved  a  certain  degree  of  macroeconomic 
stability.  However,  to  become  a  functioning  market  economy,  as  set  out  by  the  1993 
Copenhagen European Council, Albania needs to further strengthen governance, improve the 
performance of the labour market, ensure the recognition of property rights and strengthen the 
rule of law. In order to enable it to cope over the medium term with competitive pressure and 
market  forces  within  the  Union,  Albania  needs  to  strengthen  its  physical  infrastructure  and 
human capital and pursue further structural reforms. 

Albania's track record in implementing its obligations under the Stabilisation and Association 
Agreement is positive overall. 

Albania would be in a position to take on the obligations of membership in the medium term 
in  most  of  the  acquis  fields,  provided  that  the  alignment  process  continues  and  that 
considerable  and  sustained  further  efforts  are  made  to  ensure  the  implementation  and 
enforcement of legislation. Particular attention should be paid to the areas of free movement 
of  goods,  intellectual  property  law,  information  society  and  media,  agriculture  and  rural 
development,  food  safety,  veterinary  and  phyto-sanitary  policy,  fisheries,  transport  policy, 
social  policy  and  employment,  regional  policy  and  coordination  of  structural  instruments, 
judiciary  and  fundamental  rights,  justice,  freedom  and  security  and  financial  control.  Full 
compliance with the acquis in the field of the environment could be achieved only in the long 
term  and  would  require  substantial  levels  of  investment;  efforts  in  this  area  should  be 
accelerated. 

Albania's  accession  would  have  a  limited  overall  impact  on  European  Union  policies  and 
would not affect the Union's capacity to maintain and deepen its own development. 

The Commission considers that negotiations for accession to the European Union should be 
opened with Albania once the country has achieved the necessary degree of compliance with 
the  membership  criteria  and  in  particular  the  Copenhagen  political  criteria  requiring  the 
stability  of  institutions  guaranteeing  notably  democracy  and  the  rule  of  law.  In  this  regard, 
Albania needs in particular to meet the following key priorities: 

–  Ensure  the  proper  functioning  of  Parliament  on  the  basis  of  a  constructive  and  sustained 

political dialogue among all political parties.  

–  Adopt pending laws requiring a reinforced majority in Parliament.  

–  Appoint the Ombudsman, and ensure an orderly hearing and voting process in Parliament 

for constitutional and high court appointments. 

–  Modify 

the 

legislative 

framework 

for  elections 

in 

line  with  OSCE-ODIHR 

recommendations. 

–  Ensure elections are conducted in line with European and international standards. 

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–  Complete essential steps in public administration reform including amendments to the civil 
service law and strengthening of the Department of Public Administration, with a view to 
enhancing  professionalism  and  de-politicisation  of  public  administration  and 
to 
strengthening a transparent, merit-based approach to appointments and promotions.  

–  Strengthen rule  of  law through adoption  and implementation of a reform strategy for the 
judiciary, ensuring the independence, efficiency and accountability of judicial institutions.  

–  Effectively  implement  the  government's  anti-corruption  strategy  and  action  plan,  remove 
obstacles to investigations,  in particular of judges, ministers and Member of Parliaments; 
develop  a  solid  track  record  of  proactive  investigations,  prosecutions  and  convictions  in 
corruption cases at all levels. 

–  Strengthen  the  fight  against  organised  crime,  based  on  threat  assessment  and  proactive 
investigation, increased cooperation with regional and EU partners and better coordination 
of law enforcement agencies. Develop a solid track record in this area.   

–  Prepare,  adopt  and  implement  a  national  strategy  and  action  plan  on  property  rights 
following  broad  stakeholder  consultation  and  taking  ECtHR  case  law  into  account;  this 
should cover restitution, compensation and legalisation processes. 

–  Take  concrete  steps  to  reinforce  the  protection  of  human  rights,  notably  for  women, 

children and Roma, and to effectively implement anti-discrimination policies.  

–  Take  additional  measures  to  improve  treatment  of  detainees  in  police  stations,  pre-trial 
detention  and  prisons.  Strengthen  the  judicial  follow-up  of  cases  of  ill-treatment  and 
improve the application of recommendations of the Ombudsman in this field.  

Albania is encouraged to continue its constructive engagement in regional cooperation and in 
strengthening bilateral relations with neighbouring countries. The SAA needs to continue to 
be  implemented  smoothly;  in  this  context,  due  attention  to  the  respect  of  deadlines  for  its 
commitments  is  required.  In  addition,  the  country  is  strongly  encouraged  to  continue 
strengthening  its  administrative  capacity  across  the  board.  Cooperation  with  civil  society 
needs to be upgraded. Albania needs to allocate appropriate resources to guarantee effective 
functioning of its human rights institutions and upgrade its efforts in the field of protection of 
minorities.   Strengthening  media  freedom  and  its  independence,  and  addressing  the 
prevalence of political influences is required. 

The  Commission  will  monitor  progress  of  necessary  reforms  within  the  institutional 
framework  of  the  Stabilisation  and  Association  Agreement  and  continue  to  support  efforts 
through  the  IPA  financial  instrument.  The  Commission  will  present  a  report  on  Albania's 
progress  in  the  2011  enlargement  package.  This  report  will  focus  in  particular  on  the 
implementation  of  the  key  priorities  that  need  to  be  addressed  for  the  opening  of  accession 
negotiations. 

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ANNEX 2 

Conclusions of the Progress Reports on Croatia, the former Yugoslav Republic of 
Macedonia, Bosnia and Herzegovina, Serbia, Kosovo, Turkey and Iceland 

Croatia 

Croatia  continues  to  meet  the  political  criteria.  Progress  has  been  made  in  many  areas, 
including in the field of rule of law. However, efforts must continue and further intensify in 
particular  in  the  field  of  judicial  and  administrative  reform,  the  fight  against  corruption  and 
organised crime, respect for and protection of minorities and refugee return.  

Democracy  and  the  rule  of  law  have  been  further  strengthened.  The  government  and  the 
parliament have continued to function effectively. However, the capacity of the parliament to 
scrutinise  the  legislative  process  needs  enhancing.  Judicial  reform  has  continued  but 
significant  challenges  remain,  especially  relating  to  judicial  efficiency,  independence  and 
accountability. 

There  has  been  limited  progress  in  the  area  of  public  administration  reform.  The  law  on 
general  administrative  procedures  entered  into  force  and  a  human  resources  development 
strategy and action plan for the civil service was adopted. However, the public administration 
continues  to  suffer  from  shortcomings,  including  complex  administrative  procedures, 
politicisation  and  weak  human  resources  management.  In  order  to  achieve  tangible  results, 
stronger  political  commitment  and  improved  co-ordination  between  the  key  stakeholders  at 
central, regional and local levels are required.  

Judicial  reform  has  continued.  Case  backlogs  were  reduced  in  the  courts  and  judicial 
independence  was  strengthened  through  constitutional  amendments.  However,  the  main 
expected results of the reform process are yet to be seen. Challenges remain in particular with 
regard to the application of transparent criteria for the appointment of judges and prosecutors, 
the further reduction of the backlog of cases, the length of proceedings and the enforcement of 
decisions.  Some  progress  was  made  with  the  handling  of  war  crimes  cases,  including  the 
review of questionable verdicts from the 1990s. However, the problem of impunity remains, 
especially for crimes committed against ethnic Serbs, many of which have not been properly 
investigated.  

There  has  been  good  progress  in  the  fight  against  corruption.  Implementation  and  overall 
coordination  of  anti-corruption  efforts  has  improved.  The  office  for  the  fight  against 
corruption  and  organised  crime  continued  to  be  active  and  issued  indictments  in  some 
important cases. The number of court verdicts has increased. A right of access to information 
from  public  bodies  has  been  included  in  the  constitution.  However,  corruption  remains 
prevalent in many areas. The recently upgraded legal and administrative structures have yet to 
be fully tested in practice, particularly the courts’ ability to handle the increasing number and 
complexity of cases. A track record of effective investigation, prosecution and court rulings 
remains to be established, especially for high level corruption. There has been little progress 
in preventing conflicts of interest. There has been limited improvement in the application of 
access  to  information  legislation.  Shortcomings  remain  with  regard  to  the  financing  of 
political parties and election campaigns. 

Some progress has been made in the area of human rights and the protection of minorities. 
Human rights protection is ensured overall but certain important challenges remain in terms of 

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implementation.  As  for  access  to  justice,  substantial  reform  of  the  system  of  administrative 
justice has begun. State funded free legal aid is now being provided. However, procedures are 
complicated  and  the  overall  level  of  aid  provided  is  low.  With  regard  to  the  prison  system, 
legislative  measures  have  been  taken  to  improve  prison  conditions  through  the  foreseen 
introduction  of  a  probation  system.  Prisons  remain  overcrowded  and  provide  inadequate 
health protection. As regards ill treatment, the Ombudsman continued to receive complaints 
regarding the excessive use of force by the police. 

Freedom of expression, including freedom and pluralism of the media, is provided for by law 
and  is  generally  respected.  However,  editors  and  journalists  continue  to  report  on  political 
pressure. Problems with the independence of local media remain. 

There  has  been  limited  progress  with  regard  to  women's  rights  and  gender  equality.  The 
position of women in the labour market has not significantly changed and the level of female 
unemployment  remains  high.  The  Ombudsman  for  Children  has  become  more  active  in 
promoting and protecting children rights. However, this body lacks appropriate resources to 
carry out fully its mandate.  

There has been some progress as regards the socially vulnerable and persons with disabilities. 
The  capacity  of  the  Office  of  the  Ombudsman  for  Persons  with  Disabilities  is  being 
strengthened, notably in view of extending representation in the regions. There is, however, a 
lack  of  information  on  rights  and  entitlements  in  the  area  of  social  welfare,  health  care  and 
pensions.  Criteria  for  the  establishment  of  entitlements  are  not  consistently  applied  and 
legislative  provisions  regulating  specific  rights  are  fragmented.  The  transition  from 
institutional care to community-based care services has progressed slowly.  

Some steps have been taken to raise awareness of the new anti-discrimination law. However, 
knowledge of its scope among the authorities and citizens is limited and only a small number 
of discrimination complaints reach the courts. There has been some progress as regards hate 
crime legislation, though implementation is at an early stage.  

There  has  been  some  progress  with  regard  to  respect  for  and  protection  of  minorities  and 
cultural  rights.  Greater  focus  on  minority  issues  can  be  reported  in  a  context  of  improved 
relations in the region, particularly between Croatia and Serbia. Constitutional provisions on 
minorities  were  strengthened.  The  Roma  minority  has  continued  to  receive  attention,  with 
improvements  particularly  in  pre-school  education.  The  level  of  funding  available  for 
minority  organisations  has  only  been  marginally  reduced,  despite  the  financial  austerity 
measures. However, many problems remain for minorities. Croatia needs to continue to foster 
a  spirit  of  tolerance  towards  the  Serb  minority.  Croatia  also  needs  to  take  appropriate 
measures  to  protect  those  who  may  still  be  subject  to  threats  or  acts  of  discrimination, 
hostility  or  violence.  The  Roma  minority  faces  particularly  difficult  living  conditions  and 
challenges  remain  in  the  areas  of  education,  social  protection,  health  care,  employment  and 
access  to  personal  documents.  Minorities  continue  to  face  difficulties  in  the  area  of 
employment, both in terms of under-representation in state administration, the judiciary and 
the police as well as in the wider public sector.  

There  has  been  some  progress  regarding  refugees.  Refugees  continued  to  return  to  Croatia. 
Provision of housing care to former occupancy and tenancy rights holders has continued. A 
revised  action  plan  has  been  adopted  for  accelerated  implementation  of  the  government's 
delayed 2009 housing care plans, with the aim of full implementation in 2011. Some progress 
was  made  with  the  reconstruction  of  damaged  houses.  The  substantial  backlog  of  appeals 

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against rejected applications for reconstruction assistance was reduced. Implementation of the 
decision on validating pension rights has continued. However, progress towards meeting the 
2009 housing targets has been slow. Several thousand applications for housing care remain to 
be fully processed and housing units made available to returning refugees. A high number of 
appeals for housing reconstruction remain pending. Efforts to create the necessary conditions 
for the permanent return of refugees need to be made. 

As  regards  regional  issues  and  international  obligations,  Croatia  continues  to  cooperate 
with the International Criminal Tribunal for the former Yugoslavia (ICTY). The special task 
force set up by the government needs to continue its work to locate or determine the fate of 
missing  artillery  documents  requested  by  the  Office  of  the  ICTY  Prosecutor.  Fresh  impetus 
was  given  to  the  Sarajevo  declaration  process  following  the  Ministerial  meeting  held  in 
Belgrade  in  March  2010.  This  brought  together  Bosnia  and  Herzegovina,  Croatia, 
Montenegro  and  Serbia  which  agreed  to  work  together  to  clarify  refugee  statistics.  The 
countries  also  committed  themselves  to  work  towards  solutions  to  a  number  of  outstanding 
issues by the end of the year. 

Croatia  continued  to  participate  actively  in  regional  initiatives,  including  the  South-East 
European  Cooperation  Process  (SEECP),  the  Regional  Cooperation  Council  (RCC)  and  the 
Central  European  Free  Trade  Agreement  (CEFTA).  The  Croatian  President  has  assumed  a 
pro-active approach regarding regional cooperation. Bilateral relations with other enlargement 
countries  and  neighbouring  EU  Member  States  continue  to  develop,  including  with  Serbia. 
Relations  with  Slovenia  have  improved  with  the  signing  of  the  Agreement  on  international 
Arbitration of the Border.  

The  economy  of  Croatia  has  been  severely  affected  by  the  global  economic  and  financial 
crisis. The country fell into recession in the first quarter of 2009 and there were no clear signs 
of  a  recovery  by  mid-2010.  Unemployment,  public  deficit  and  debt  have  increased 
significantly.  External  indebtedness  rose  further  and  remains  a  key  vulnerability  of  the 
economy.  Monetary  stability  was  preserved  by  the  policies  of  the  central  bank  and  the 
financial sector weathered the crisis relatively well.  

As regards the economic criteria, Croatia is a functioning market economy. Croatia should 
be able to cope with competitive pressures and market forces within the Union, 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  was  maintained.  The 
Economic Recovery Programme has given economic policy a medium-term orientation. The 
programme's  benefit  for  growth  and  international  competitiveness  depends  on  its  effective 
implementation. Given the existing constraints, macroeconomic policy has, by and large, been 
appropriate to address the consequences of the global economic and financial crisis. Monetary 
policy succeeded to preserve exchange rate and financial stability while alleviating liquidity 
pressures.  The  current  account  deficit  narrowed  as  a  consequence  of  the  recession  and 
inflationary pressures subsided further. The banking sector remained resilient to shocks.  

However, structural reforms generally advanced at a very slow pace, not least with respect to 
privatisation  and  the  restructuring  of  loss-making  enterprises.  The  labour  market  remained 
highly rigid, with low employment and participation rates which declined further during the 
recession. In the fiscal area, the  authorities made limited efforts to contain the rising deficit 
and to increase the efficiency of public spending. Social transfer payments remained high and 

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not  well-targeted  and  a  large  number  of  state-owned  enterprises  continued  to  receive  State 
support  through  direct  and  indirect  subsidies  and  guarantees.  For  achieving  medium-term 
fiscal  sustainability,  it  remains  a  key  challenge  to  improve  the  budgetary  process  and 
discipline and to enhance the efficiency of public spending. The investment climate continued 
to suffer from a heavy regulatory burden and numerous para-fiscal taxes.  

Croatia has improved its ability to take on the obligations of membership. Preparations for 
meeting  EU  requirements  have  continued  to  progress  well  and  there  is  a  good  degree  of 
alignment  with  EU  rules  in  most  sectors.  In  most  areas  there  has  been  further  progress 
including in those chapters where the level of alignment is already high. Additional efforts are 
needed  in  certain  areas  to  strengthen  the  administrative  capacity  necessary  for  proper 
implementation of the acquis. 

Good progress has been made in the field of free movement of goods and alignment with the 
acquis in this chapter is well advanced. However, further efforts are necessary, particularly on 
conformity  assessment,  metrology  and  market  surveillance.  Croatia  needs  to  complete 
alignment with the acquis and to strengthen implementation capacity. Good progress can be 
reported in the area of free movement of workers, and a satisfactory level of legal alignment 
has been achieved. Additional efforts are needed to strengthen, in particular, the coordination 
of social security systems. 

Progress has been made in the field of right of establishment and freedom to provide services, 
in  particular  on  mutual  recognition  of  professional  qualifications  and  on  postal  services. 
Overall  alignment  with  the  acquis is  satisfactory.  Increased  efforts  are  required  to  complete 
alignment, in particular in the area of mutual recognition of professional qualifications and to 
transpose  the  Services  Directive.  Work  on  improving  administrative  capacity  needs  to  be 
continued.  

Further progress has been made in aligning with the acquis in the field of free movement of 
capital. Continued efforts are needed to complete liberalisation of capital movements and to 
consolidate the enforcement of anti-money laundering legislation.  

Good progress can be reported in public procurement, in particular on improving the capacity 
of the main stakeholders to co-ordinate and implement public procurement policy. The ability 
to apply the law efficiently still needs to be further enhanced at all levels of the procurement 
system.  

Some progress can be reported in the company law chapter. Alignment with the acquis is on 
track. Further efforts are needed in the area of auditing.  

Progress can be reported in the field of intellectual property law. Alignment with the acquis 
has  reached  a  very  high  level  and  progress  can  be  reported  with  enforcement.  Overall 
awareness of intellectual property rights remains to be strengthened.  

Significant progress has been achieved in competition policy, in particular towards finalisation 
of the tendering procedure for restructuring the shipyards. Overall, a good level of alignment 
has been achieved. However, further efforts are still required to adopt restructuring plans in 
line  with  the  State  aid  acquis  for  the  shipyards  in  difficulty,  to  improve  the  Croatian 
Competition  Agency’s  enforcement  record  against  cartels  and  to  improve  its  administrative 
capacity further, in particular in the area of antitrust. Alignment of the Croatian Broadcasting 

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Act needs to be completed. The National Restructuring Plans for the steel industry also need 
updating.  

Substantial  progress  can  be  reported  in  the  area  of  financial  services,  both  on  alignment  of 
legislation and on strengthening administrative resources. However, further strengthening of 
the administrative capacity of the regulators is needed.  

Croatia has made significant progress in  the field of information society and media and has 
achieved a high level of alignment with the acquis. However, continued efforts are needed to 
strengthen the capacity of the two national regulators to apply the legal framework correctly. 
Liberalisation of all segments of electronic communications markets needs to be sustained.  

Good progress can be reported in the field of agriculture and rural development, in particular 
on  establishment  and  implementation  of  the  paying  agency  and  of  the  integrated 
administration  and  control  system  and  on  the  common  market  organisation.  However, 
considerable  efforts  in  these  key  areas  of  the  Common  Agricultural  Policy  need  to  be 
sustained. Croatia also needs to align the agricultural support system fully with the acquis and 
to increase absorption capacity for rural development funds.  

Good  progress  has  been  made  in  alignment  in  the  field  of  food  safety,  veterinary  and 
phytosanitary  policy,  in  particular  with  the  adoption  and  implementation  of  secondary 
legislation.  Transposition  of  the  acquis  is  well  advanced  in  all  sectors.  Significant  progress 
has been made through the adoption of the national programme for upgrading establishments 
for food of animal origin and animal by-products. Continued efforts are required regarding the 
programme's implementation, as well as on strengthening administrative and control capacity, 
and setting up border inspection posts.  

Croatia  has  made  good  progress  in  aligning  with  the  acquis  in  the  field  of  fisheries. 
Preparations  for  applying  fisheries  policy  are  well  advanced.  Croatia  needs  to  improve 
implementation  of  the  legislation,  in  particular  with  regard  to  fleet  management,  inspection 
and control and structural policy.  

Further progress has been achieved in the field of transport. Overall, the level of alignment is 
good. However the completion of the alignment is needed in the aviation sector. Additional 
efforts are still needed to implement and enforce the acquis. 

Further  progress  has  been  achieved  in  the  energy  chapter,  where  the  level  of  alignment  is 
high.  However,  significant  efforts  are  needed  to  increase  the  performance  of  the 
administration and independence of the energy sector regulatory authorities.  

Progress  was  made  in  taxation,  in  particular  on  operational  capacity  and  computerisation. 
Croatia's  legislation  in  the  field  of  direct  and  indirect  taxation  is  largely  in  line  with  the 
acquis. Nevertheless, some further alignment is required, most notably in the fields of VAT 
and  excise  duties.  Efforts 
including  on  IT 
interconnectivity, need to continue. 

to  strengthen  administrative  capacity, 

There has been further progress in the area of economic and monetary policy where, overall, 
alignment with the acquis is effectively complete.  

On statistics, substantial progress has been made on modernising the statistical infrastructure. 
A  good  level  of  alignment  has  been  achieved.  Efforts  need  to  continue  in  order  to  align 
Croatian statistics fully with EU requirements.  

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Good  progress  has  been  made  on  social  policy  and  employment.  There  is  a  good  level  of 
alignment  with  the  acquis.  However,  some  gaps  remain  in  alignment  of  the  legislation, 
notably  on  transposing  labour  law  directives,  and  in  the  field  of  anti-discrimination  and 
gender equality. Administrative capacity requires further strengthening.  

Croatia  has  made  progress  on  enterprise  and  industrial  policy,  particularly  with  regard  to 
policy  principles  and  instruments.  Alignment  with  the  acquis  is  very  advanced.  Further 
sustained efforts need to focus on improving the business environment. Efforts to restructure 
the steel and, particularly, shipbuilding industries need to be pursued.  

Croatia  made  further  progress  with  the  development  of  the  trans-European  networks. 
Alignment with the acquis has been completed. 

Good  progress  was  made  under  regional  policy  and  coordination  of  structural  instruments, 
notably on preparing strategic documents and designating the institutions and mechanisms to 
implement  EU  cohesion  policy,  recruit  and  train  further  staff.  Croatia's  preparations  for 
applying  EU  cohesion  policy  are  relatively  advanced.  Croatia  needs  to  complete  its 
preparations  by  focusing  on  establishment  of  a  mature  project  pipeline  and  absorption  of 
funds. 

Croatia has made good progress on judiciary and fundamental rights. Reform of the judiciary 
has continued with the adoption of new legislation strengthening judicial independence and a 
further reduction of the case backlog. However, judicial reform remains a major undertaking 
and significant challenges remain, especially relating to judicial efficiency, independence and 
accountability.  Anti-corruption  efforts  have  been  stepped  up  with  some  positive  results  but 
corruption  remains  prevalent  in  many  areas.  A  track  record  of  effective  investigation, 
prosecution and court rulings remains to be established, especially for high level corruption. 
Preventive  measures  such  as  improved  transparency  of  public  spending  need  to  be 
strengthened. Protection of fundamental rights has been strengthened but need to be improved 
in practice, especially for minorities and refugees. 

Croatia  made  substantial  progress  in  the  field  of  justice,  freedom  and  security.  The  asylum 
system has been significantly improved, but attention needs to be paid to integrating persons 
granted  protection  in  Croatia  and  to  protecting  minors  among  irregular  migrants.  Good 
progress  has  been  made  in  the  field  of  visas.  However,  alignment  with  the  acquis  on  visas 
needs to continue. Progress has been made in the field of external borders. However, several 
aspects  of  the  integrated  border  management  action  plan  need  to  be  amended  and  the 
upgrading of equipment needs to be stepped up. Significant progress was made in the field of 
judicial  cooperation  in  civil  and  criminal  matters.  Progress  also  continued  in  the  counter-
narcotics policy. 

Progress  in  science  and  research  has  continued,  but  has  slowed  down  as  a  result  of  the 
economic  and  financial  crisis.  Efforts  are  needed  to  further  strengthen  research  capacity, 
provide  training,  and  increase  investment  in  research  by  industry  and  small  and  medium 
enterprises. Further progress has been made regarding the acquis in the area of education and 
culture. There is a good level of alignment. Croatia needs to continue its efforts to prepare for 
the management of the Lifelong Learning and Youth in Action Programmes. 

Good  progress  has  been  made  in  the  environment  chapter  as  regards  both  alignment  and 
implementation of the legislation. Legislative alignment in the field of water quality and also, 
to a certain extent, climate change needs to be completed. Implementation of the horizontal 

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acquis  and  cooperation  with  non-governmental  organisations  active  in  the  field  of 
environment  needs  to  be  improved.  Overall,  Croatia's  preparations  are  nearing  completion. 
Croatia needs to continue strengthening administrative capacity, especially at local level.  

There has been good progress in the area of consumer and health protection. A good level of 
alignment  has  been  achieved.  Sustained  efforts  are  necessary  to  strengthen  further 
administrative capacity.  

Good progress has been made with regard to customs union. Croatia's customs legislation is 
aligned with the acquis to a very large extent. Croatia has continued to make progress in the 
area  of  IT,  notably  in  interconnectivity.  Further  progress  towards  removing  the  last 
discrepancies  in  Croatia's  legislation,  implementing  the  Anti-Corruption  Strategy  and 
preparing for IT interconnectivity is required.  

Some  progress  has  been  made  in  the  field  of  external  relations.  Croatia  has  reached  an 
advanced  level  of  alignment  and  is  continuing  to  coordinate  and  align  its  positions  in 
international  fora.  However,  Croatia  needs  to  pay  attention  to  fully  complying  with  its 
international obligations when resorting to safeguards. Further resources need to be allocated 
to development policy and humanitarian aid.  

Croatia  has  made  further  progress  in  the  area  of foreign,  security  and  defence  policy. It  has 
continued  to  participate  in  several  EU  military  and  civilian  missions.  Overall,  Croatia  has 
reached  a  high  level  of  alignment.  Croatia  needs  to  continue  strengthening  implementation 
and enforcement of arms control, including the transparency of arms-related information. 

Progress  can  be  reported  in  the  field  of  financial  control.  Independence  of  the  State  Audit 
Office was strengthened. Efforts should now focus on the sustainability of the reforms. The 
bodies  involved  in  the  Anti-Fraud  Coordination  Structure  need  to  enhance  their  efforts  for 
efficient implementation of the anti-fraud strategy.  

There  has  been  further  progress  in  the  field  of  financial  and  budgetary  provisions.  The 
institutional  capacity  for  applying  the  rules  on  own  resources  has  been  further  developed. 
Croatia has reached a good level of alignment with the acquis and capacity to implement it, 
except in the case of sugar levies. Croatia needs to further enhance its coordination capacity. 

The former Yugoslav Republic of Macedonia 

The  former  Yugoslav  Republic  of  Macedonia  continues  to  sufficiently  fulfil  the  political 
criteria. Following substantial reforms in 2009 further progress has been made although at an 
uneven  pace.  Overall,  the  governing  coalition  is  stable  and  there  is  cooperation  between 
political forces. Some progress has been achieved as regards the reform of the parliament, the 
police,  the  judiciary,  public  administration  and  respect  for  and  protection  of  minorities. 
However, further efforts are needed in most areas related to the political criteria, in particular 
important  ongoing  concerns  as  regards  independence  of  the  judiciary,  reform  of  public 
administration  and  freedom  of  expression  in  the  media.  Political  dialogue  needs  to  be 
strengthened. 

The  Ohrid  Framework  Agreement  remains  an  essential  element  for  democracy  and  rule  of 
law in the country. There has been some progress on implementing the law on languages, on 
decentralisation  and  equitable  representation.  Continuous  efforts,  through  dialogue,  are 
needed to fulfil the objectives of the Agreement and ensure its full implementation. 

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There has been further progress in the reform of the parliament. Amendments to the rules of 
procedure  were  adopted  which  safeguard  the  rights  of  the  opposition.  The  parliament  took 
measures to strengthen its institutional capacity, in particular through the establishment of the 
Parliamentary  Institute.  However,  dialogue  on  inter-ethnic  relations  was  hampered  by  the 
failure of the relevant parliamentary committee to meet regularly.  

The partners in the government coalition are maintaining constructive cooperation. They are 
committed to reforms to prepare the country for accession to the European Union. However, 
more  dialogue  is  required  on  issues  concerning  inter-ethnic  relations.  Additional  efforts  are 
necessary  to  take  forward  the  decentralisation  process  in  line  with  the  Ohrid  Framework 
Agreement. The financial framework for local government needs to be more transparent and 
equitable. The government's cooperation with the National Council for European Integration 
needs to be developed further. 

There  was  some  progress  as  regards  the  functioning  of  public  administration.  The  Law  on 
public  servants  was  adopted.  The  Law  on  internal  affairs  regarding  reform  of  the  police 
entered into force and most implementing legislation has been adopted. However, significant 
further efforts are needed to ensure the transparency, professionalism and independence of the 
civil service. There has been undue political interference in recruitments and promotions at all 
levels  in  the  public  administration.  The  legal  framework  needs  to  be  further  improved,  in 
particular as regards merit-based staff recruitment. The process of converting a large number 
of  temporary  posts  into  permanent  ones  in  many  cases  did  not  provide  for  competitive  and 
merit-based recruitment. 

improved  budgetary  management.  However, 

There  was  limited  progress  on  judicial  reform.  The  efficiency  of  courts  was  strengthened 
through 
the 
independence and impartiality of the judiciary: no further progress was made in ensuring that 
existing  legal  provisions  were  implemented  in  practice.  In  this  context  it  is  important  that 
graduates from the Academy for Training of Judges and Prosecutors be given priority in new 
recruitments. 

there  are  concerns  about 

Progress  was  made  in  the  field  of  anti-corruption  policy.  Large  scale  police  operations 
making  use  of  special  investigative  measures  were  carried  out.  Whilst  the  legislative  and 
institutional framework is broadly in place, the track-record of successful convictions on cases 
of high level corruption needs to be strengthened. Existing provisions on asset declarations, 
conflict  of  interest  and  financing  of  political  parties  are  not  implemented  effectively.  The 
resource base of the State Commission for Anti-Corruption needs to be ensured. Corruption 
remains prevalent in many areas and continues to be a serious problem. . 

The legal and institutional framework for human rights and the protection of minorities is in 
place and civil and political rights are broadly respected. However, existing legal guarantees 
need to be fully enforced. 

The semi-open ward of Idrizovo prison, where conditions were degrading and inhumane, was 
closed down. However, the strategy to address the remaining serious shortcomings in prison 
conditions is progressing slowly. Oversight of law enforcement agencies remains incomplete. 
With regard to freedom of expression there are growing concerns about political interference 
in the media and undue pressure on journalists. The involvement of civil society in the policy 
development process remains limited. 

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The  Ombudsman  continued  to  be  the  main  focal  point  for  the  protection  and  promotion  of 
human rights. His workload increased over the reporting period. However, the proportion of 
recommendations accepted by public bodies decreased. The authority and the resources of the 
Ombudsman need to be strengthened. 

The legal provisions on the protection of social and economic rights are largely in place. The 
implementation of the strategy against domestic violence has continued. The membership of 
the  Economic  and  Social  Council  has  been  agreed,  thus  facilitating  a  social  dialogue.  A 
framework anti-discrimination law has been adopted. However, sexual orientation as a ground 
for discrimination has been omitted. A strategic approach to equal opportunities needs to be 
developed.  Additional  efforts  are  needed  to  implement  the  juvenile  justice  law  and  the  UN 
Convention on the Rights of the Child. 

Progress  was  achieved  in  the  area  of  respect  for  and  protection  of  minorities  and  cultural 
rights.  There  has  been  some  progress  on  equitable  representation  and  the  government 
undertook  steps  to  foster  inter-ethnic  integration  in  the  education  system.  Nonetheless,  the 
integration  of  ethnic  communities  remains  limited  and  greater  dialogue  is  needed  to  foster 
trust especially in the areas of culture and language. As regards the rights of Roma the number 
of persons lacking personal documents was reduced. Measures were adopted to avoid undue 
placement of children in special schools. However, Roma continue to face very difficult living 
conditions and discrimination. 

Regarding  regional  issues  and  international  obligations,  the  former  Yugoslav  Republic  of 
Macedonia  maintained  full  co-operation  with  the  International  Criminal  Tribunal  for  the 
former  Yugoslavia  (ICTY).  The  domestic  legal  system  is  processing  cases  referred  by  the 
ICTY back to the national authorities. 

As regards the International Criminal Court, the bilateral immunity agreement with the United 
States does not comply with the EU Common Positions and guiding principles. The country 
needs to align with the EU position. 

The country has continued to participate actively in regional cooperation initiatives, including 
the  South  East  European  Cooperation  Process  (SEECP),  the  Regional  Cooperation  Council 
(RCC) and the Central European Free Trade Agreement (CEFTA). 

The former Yugoslav Republic of Macedonia is an active partner in the region and its bilateral 
relations with neighbours are generally good. With the completion of the demarcation of its 
border with Kosovo, the former Yugoslav Republic of Macedonia has no outstanding border 
issues. However, relations with Greece continued to be adversely affected by the unresolved 
name  issue.  The  country  is  engaged  in  talks  under  the  auspices  of  the  UN  on  resolving  it. 
Actions and statements which could negatively impact on good neighbourly relations should 
be avoided. The direct meetings at the highest political levels are positive steps, although this 
momentum  has  not  yet  led  to  concrete  results.  Maintaining  good  neighbourly  relations, 
including a negotiated and mutually acceptable solution to the name issue, under the auspices 
of the UN, remains essential. 

The economy of the former Yugoslav Republic of Macedonia contracted only slightly due to 
the  financial  sector's  low  exposure  to  toxic  international  assets,  resilient  private  capital 
inflows  and  a  stable  public  sector.  Structural  reforms  have  continued.  However,  high 
structural  unemployment,  in  particular  among  young  and  poorly  educated,  remains  a  major 
cause of concern. Some minor improvements have been achieved with respect to addressing 

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institutional  weaknesses,  but  deficiencies  in  the  rule  of  law  continue  to  have  a  negative 
bearing on the business climate.  

As regards the economic criteria, the former Yugoslav Republic of Macedonia continues to 
be well advanced. In some areas, it has made further progress towards becoming a functioning 
market  economy,  notably  by  reducing  barriers  to  market  entry  and  exit  and  improving  the 
capacity  of  the  courts  to  handle  economy-related  cases.  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  reform  programme  in  order  to  reduce  significant  structural 
weaknesses. 

The  country  has  maintained  a  broad  consensus  on  the  essentials  of  economic  policies. 
Monetary  policy,  based  on  the  de  facto  peg  to  the  euro,  contributed  to  macro-economic 
stability.  After  an  expansionary  approach  in  2008,  fiscal  policy  became  more  stability 
oriented during 2009. The country's external balances improved, reflecting a slight recovery 
in  exports,  a  drop  in  imports  due  to  weak  domestic  demand,  and  strong  private  capital 
inflows.  Privatisation  is  largely  completed.  Price  and  trade  liberalisation  has  been  largely 
accomplished.  Some  further  progress  has  been  achieved  in  improving  market  entry  and 
registration  and  in  simplifying  the  regulatory  framework.  The  duration  of  bankruptcy 
procedures  has  been  further  reduced  and  property  registration  is  largely  completed.  The 
financial sector weathered the crisis well and the independence of some of its supervisory and 
regulatory agencies has been strengthened.  

As  a  result  of  widening  fiscal  deficits,  public  sector  debt  increased.  The  quality  of  public 
spending  deteriorated,  partly  due  to  a  decrease  of  medium-term  oriented  capital  spending. 
Unemployment remained very high. FDI inflows continued to decelerate from an already low 
level.  The  functioning  of  the  market  economy  remained  hampered  by  institutional 
weaknesses, lack of stability in the administration and weaknesses in the rule of law. Lack of 
consultations  with  stakeholders  prior  to  government  decisions  hampers  the  predictability  of 
the  business  environment.  The  judiciary  is  still  a  bottleneck  and  regulatory  and  supervisory 
agencies sometimes continue to lack the necessary independence and resources to fulfil their 
functions effectively. The degree of legal certainty remains low, which has a negative bearing 
on  the  country's  attractiveness  for  foreign  investment.  The  informal  sector  remains  an 
important challenge. 

The  former  Yugoslav  Republic  of  Macedonia  has  made  some  progress  in  improving  its 
ability to assume the obligations of membership, in particular as regards the free movement 
of  goods,  company  law,  financial  services  and  justice,  freedom  and  security.  Less  progress 
has been achieved in certain other areas such as public procurement, information society and 
media  as  well  as  social  policy  and  employment.  Overall,  there  was  further  progress  in  the 
fulfilment  of  the  priorities  of  the  Accession  Partnership.  However,  sustained  efforts  are 
needed  to  strengthen  administrative  capacity  for  the  implementation  and  enforcement  of 
legislation.  Commitments  undertaken  in  the  Stabilisation  and  Association  agreement  have 
been implemented.  

There has been good  progress in the area of free movement of goods. Part  of the horizontal 
and sector acquis has been transposed. The administrative capacity of the market surveillance 
authorities  is  insufficient  to  ensure  the  enforcement  of  technical  legislation.  Little  progress 
can be reported in the area of freedom of movement of workers. There was some progress in 
the  area  of  right  of  establishment  and  freedom  to  provide  services,  more  particularly  in  the 
area of postal services. The preparations for mutual recognition of professional qualifications 

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38 

   EN 

 
are  at  an  early  stage.  There  was  overall  progress  in  the  area  of  free  movement  of  capital. 
Restrictions remain on short-term capital movements and on cross-border payment transfers. 
The  legislative  framework,  the  administrative  capacity  and  the  enforcement  record  in 
combating money laundering are moderately advanced.  

Progress has been made in the area of public procurement. The Public Procurement Bureau 
adopted a strategy for the development of the public procurement system. The legislation on 
concessions and public-private partnerships is not in line with the acquis. The administrative 
capacity  to  apply  procurement  rules  at  the  operational  level  is  still  not  satisfactory.  Good 
progress  has  been  made  in  the  area  of  company  law.  However,  alignment  with  the  auditing 
acquis  remains  at  an  early  stage.  Some  progress  has  been  made  in  enhancing  the  legal 
framework in the area of intellectual property. The National Strategy on Intellectual Property 
is being implemented. However, further efforts are needed as regards enforcement.  

Some progress was made in the area of competition. In the area of state aid, the number of ex- 
ante  decisions  increased  moderately.  However  the  human  and  financial  resources  of  the 
Commission for Protection of Competition need to be strengthened in the sector of antitrust.  

There was overall good progress in the area of financial services. Efforts have been made to 
ensure  regulation  and  supervision  of  the  insurance  sector.  Some  financial  services,  such  as 
leasing, remain to be regulated or supervised.  

There has been uneven progress in the field of information society and media. Alignment with 
the  EU  acquis  and  market  liberalisation  are  improving.  However,  the  sustainability  of  the 
public service broadcaster is yet to be ensured. Media legislation is not yet aligned with the 
Audiovisual Media Services Directive. 

Progress  has  been  achieved  in  the  field  of  agriculture  and  rural  development.  The  rural 
development  policy  is  gradually  being  aligned  with  EU  requirements.  While  AFSARD  and 
IPARD  operational  structures  have  been  strengthened,  the  capacity  of  other  administrative 
bodies  in  the  sector  needs  to  be  improved.  Alignment  with  the  acquis  requires  further 
sustained  efforts.  There  has  been  some  progress  in  the  area  of  food  safety,  veterinary  and 
phytosanitary policy, in particular with respect to legislative preparedness and implementation 
by food business operators. Administrative capacity needs to be strengthened, in particular as 
regards the effectiveness of monitoring and control systems.  

Some  progress  can  be  reported  in  the  area  of  transport  policy.  The  process  of  opening  the 
market  for  rail  transport  faced  challenges  Further  efforts  are  needed  to  improve  the 
functioning of the safety authorities, in particular the Air Accident Investigation Committee. 

Some  progress  has  been  made  in  the  energy  sector.  New  energy  strategies  were  adopted. 
However, the new comprehensive energy law remains to be enacted. Electricity tariffs do not 
fully reflect costs. Whilst there has been good progress, a final resolution of the dispute with 
the  distribution  system  operator,  a  major  EU  investor,  is  still  outstanding.  The  energy 
regulator and the radiation protection regulator need to become functionally independent.  

No progress was made in harmonising direct and indirect taxation legislation with the acquis. 
Some progress can be reported in the area of operational capacity for the tax administration as 
regards taxpayers' services and audit efficiency. Audit and tax investigation capacity to fight 
fiscal evasion remain weak.  

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39 

   EN 

 
Limited progress has been made in the area of economic and monetary policy. Alignment with 
the  acquis  is  incomplete  and  administrative  capacity  for  policy  implementation  diverges 
widely. There was good progress in the field of statistics. However, the resource situation of 
the State Statistical Office remains weak and equitable representation needs to be ensured. It 
is  essential  that  funds  are  secured  for  the  population  and  housing  census  2011.  Efforts  to 
improve sector statistics need to continue, in particular for economic statistics.  

Little  progress  has  been  made  in  alignment  to  the  acquis  in  the  area  of  social  policy  and 
employment.  A  framework  anti-discrimination  law  has  been  adopted  but  with  some 
substantial  gaps  and  without  the  support  of  the  relevant  civil  society  groups.  Tripartite  and 
bipartite social dialogue continues to be weak. Inclusion of people with disabilities and other 
socially excluded people is slow.  

There has been some progress in the field of enterprise and industrial policy. Good progress 
has  been  achieved  in  reducing  the  administrative  barriers  and  costs  for  operation  of 
businesses. New bodies have been established and significant resources have been devoted to 
their  operation.  However,  strategies  to  support  enterprises  and  the  SME  sector  need  more 
financial support.  

Some progress was made in the area of trans-European networks. The country is continuing 
to  participate  actively  in  the  South-East  Europe  Transport  Observatory  and  the  Energy 
Community. However, progress on corridor X is significantly delayed.  

Some  uneven  progress  was  made  in  the  area  of  regional  development  and  coordination  of 
structural funds. The implementation of the operational programme for regional development 
is  significantly  delayed.  The  administrative  capacity  in  the  line  ministries,  in  particular 
technical  expertise,  needs  to  be  strengthened.  It  is  also  necessary  to  strengthen  project 
preparation  and  implementation  in  order  to  ensure  future  absorption  of  IPA  funds.  Overall, 
alignment  with  the  acquis  in  the  area  of  regional  policy  and  coordination  of  structural 
instruments is at an early stage.  

There has been limited progress in reform of the judiciary and in safeguarding fundamental 
rights and some progress in addressing corruption. The Judicial Council and the Council of 
Public  Prosecutors  need  to  ensure  high  standards  of  independence  and  impartiality  of  the 
judiciary  in  practice.  Large  scale  anti-corruption  operations  were  carried  out  by  the  police 
using special investigative measures. However, the track record on high-level corruption cases 
remains  to  be  strengthened.  The  new  legislation  on  conflict  of  interest  and  financing  of 
political parties needs to be effectively implemented. As regards fundamental rights, while the 
legal and institutional framework is broadly in place the existing legal guarantees need to be 
fully enforced. 

In  the  area  of  justice,  freedom  and  security,  good  progress  can  be  reported  on  asylum,  visa 
policy, external borders and Schengen. The increase in asylum seekers in the EU that arose in 
the first period of implementation of the visa-free regime was addressed. However, a new rise 
in  asylum  applications  was  registered  in  August  and  September.  The  authorities  need  to 
continue  addressing  this  issue  and  .informing  citizens  about  the  rights  and  obligations 
stemming  from  visa-free  travel.  The  implementation  of  police  reform  has  continued  and 
international  police  cooperation  has  improved.  However,  the  role  of  the  Ministry  for  the 
Interior in authorising interception orders needs to be addressed, as does the effectiveness of 
the external oversight mechanism. 

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40 

   EN 

 
Some progress can be reported in the area of science and research. The rate of participation in 
the  Seventh  EU  Research  Framework  Programme  has  increased.  Some  progress  has  been 
made  in  alignment  to  the  acquis  in  the  areas  of  education,  training,  youth  and  culture. 
However,  management  of  the  Lifelong  Learning  and  Youth  in  Action  programmes  remains 
poor.  

Further progress has been made as regards the environment. Alignment of national legislation 
has progressed in particular in the air quality and waste sectors. However, efforts to align with 
the  EU  acquis  in  the  water  sector  need  to  be  significantly  strengthened.  Administrative 
capacity and investments need to be considerably increased. Some progress has been made in 
the  area  of  consumer  and  health  protection.  As  regards  public  health,  good  progress  was 
made in the field of tobacco control.  

There was some progress in the area of customs union, in particular as regards administrative 
and  operational  capacity.  Alignment  of  the  customs  legislation  with  the  acquis  is  well 
advanced,  except  in  the  case  of  transit.  The  administrative  capacity  of  the  customs 
administration to implement legislation and to tackle cross-border crime and corruption needs 
strengthening.  

Progress  was  made  in  the  area  of  external  relations,  in  particular  as  regards  the  common 
commercial  policy.  There  has  been  progress  in  the  area  of  foreign,  security  and  defence 
policy. The country aligned with most EU declarations and common positions and showed a 
continued  commitment  to  participate  in  CSDP  operations.  Sustained  efforts  are  needed  to 
reduce the number of illegal weapons.  

As  regards  financial  control,  some  progress  has  been  made.  The  SAO's  functional  and 
financial  independence  has  been  strengthened;  however,  its  constitutional  anchoring  is 
missing.  Efforts  are  needed  for  the  establishment  of  Financial  Management  and  Control 
systems.  In  the  field  of  financial  and  budgetary  provisions  some  progress  has  been  made 
towards improving the operational capacity of the customs and tax authorities, and the state 
statistical office. Further efforts are needed to combat customs duty and VAT fraud.  

Bosnia and Herzegovina 

Bosnia and Herzegovina has made limited progress in addressing the political criteria. Some 
progress related to the rule of law, notably in areas such as border management and migration 
policy,  was  made  through  reforms  aimed  at  meeting  visa  liberalisation  requirements. 
Important steps were also taken to promote regional reconciliation and cooperation, notably in 
terms of refugee return. Nevertheless, overall implementation of reforms was insufficient and 
the domestic political climate during the pre-electoral period was dominated by nationalistic 
rhetoric.  The  lack  of  a  shared  vision  by  political  leaders  on  the  direction  of  the  country  is 
blocking key EU-related reforms and impeding further progress towards the EU.  

The  general  elections  were  assessed  by  the  OSCE/ODIHR  as  being  generally  in  line  with 
international  standards  for  democratic  elections.  However,  they  were  held  once  again  with 
ethnicity  and  residency-based  limitations  to  suffrage  rights  due  to  provisions  established  by 
the Dayton/Paris Peace Agreement. Respect for democratic principles and the right to equal 
treatment without discrimination, as embodied in the European Convention on Human Rights 
(ECHR),  constitutes  an  essential  element  of  the  Interim  Agreement  (IA).  Delays  in 
harmonising  the  Constitution  with  the  ECHR,  as  required  by  the  December  2009  European 

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Court  of  Human  Rights  (ECtHR)  judgment  in  the  Sejdić-Finci  vs.  Bosnia  and  Herzegovina 
case, remain a fundamental issue of concern.  

Regarding  international  obligations,  making  progress  towards  meeting  the  conditions  which 
have  been  set  for  the  closure  of  the  Office  of  the  High  Representative  (OHR)5,  remains 
essential.  Bosnia  and  Herzegovina's  system  of  governance  continues  to  involve  an 
international  presence.  The  country  has  made  very  little  progress  towards  meeting  the 
requirements  for  the  closure  of  the  OHR.  Primary  among  these  are  the  apportionment  of 
property between the state and the other levels of government, the defence property issue and 
fulfilling the obligations on the Brčko Final Award. Overarching all these issues is the need 
for a stable and constructive political environment in the country. 

Regarding  democracy  and  the  rule  of  law,  there  has  been  little  progress  towards 
constitutional  reform  and  towards  creating  functional  and  effective  institutional  structures. 
The Council of Ministers adopted an Action Plan for the implementation of the ECtHR ruling, 
but without results.  

The  functioning  of  the  state-level  executive  and  legislative  bodies  has  continued  to  be 
negatively affected by the prevalence of ethnically oriented considerations. The administrative 
capacity of the Parliament improved but coordination with the Council of Ministers and with 
the  Entities  remained  poor.  The  functioning  of  government  institutions,  at  different  levels, 
continued  to  be  affected  by  fragmented,  uncoordinated  policy-making.  Steps  were  taken  to 
improve administrative capacity with the appointment of some high-level officials including 
at the Directorate for European Integration. However, other key positions remain vacant. The 
state-level  census  law,  which  is  required  for  further  progress  on  the  EU  agenda  and  for  the 
country’s social and economic development remains to be adopted as a matter of urgency. 

Little progress has been made in the area of public administration, where the reform strategy 
is  being  implemented,  albeit  slowly.  Coordination  between  the  various  administrations 
remains weak. Sustained efforts remain necessary to prevent political interference and to limit 
the role played by political affiliation in appointments. Progress towards the establishment of 
a  professional,  accountable,  transparent  and  efficient  civil  service  based  on  merit  and 
competence also needs further attention. A single State-level Ombudsman is functioning, but 
budgetary constraints hamper its effectiveness and need to be addressed.  

Bosnia  and  Herzegovina  has  made  limited  progress  in  improving  the  judicial  system.  New 
legislation has been adopted on the criminal procedures code, but little has been achieved to 
reduce  the  backlog  of  cases.  Implementation  of  the  Justice  Sector  Reform  Strategy  and  the 
War  Crimes  Strategy  remained  minimal.  The  complexity  of  the  legal  framework,  the 
fragmentation  of  the  judicial  system  and  the  absence  of  a  single  budget  continue  to  delay 
progress towards an independent judiciary. Mandates of international judges and prosecutors 
dealing with war crimes were extended by the High Representative, following the inability of 
the  authorities  to  reach  an  agreement.  Prosecution  of  war  crimes  by  the  State  Court  has 
continued to be satisfactory, but needs to improve in the Entities and Cantons.  

5 

These cover five objectives: 1) Acceptable and sustainable resolution of the issue of apportionment of 
property  between  State  and  other  levels  of  government;  2)  Acceptable  and  sustainable  resolution  of 
defence  property;  3)  Completion  of  the  Brcko  final  awards;  4)  Fiscal  sustainability  ;  and  5) 
Entrenchment  of  the  rule  of  law  (demonstrated  by  adoption  of  a  National  War  Crimes  Strategy,  of  a 
Law on aliens and asylum and of a National Justice Sector Reform Strategy), as well as two specific 
conditions: 1) signing of the Stabilisation and Association Agreement 2) a stable political situation. 

EN 

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Bosnia and Herzegovina has achieved limited progress in tackling corruption, which remains 
a serious problem and is prevalent in many areas. The implementation of the anti-corruption 
strategy and action plan started. The agency responsible for monitoring its implementation has 
been established and an acting director has been appointed. Some progress has been made in 
meeting  the  recommendations  formulated  by  the  Group  of  States  against  Corruption 
(GRECO).  The  judicial  follow-up  of  corruption  cases  remained  slow  and  only  a  limited 
number of high-level cases led to prosecution. Insufficient implementation of legislation and 
problems of coordination between entities remain issues of concern. Bosnia and Herzegovina 
needs strengthened commitment and determined action against corruption. 

There has been limited progress regarding human rights and protection of minorities. Bosnia 
and Herzegovina has ratified the major international human rights conventions, but sustained 
efforts  are  necessary  to  ensure  better  implementation.  Enforcement  of  domestic  rulings, 
including  those  of  the  Constitutional  Court  of  Bosnia  and  Herzegovina,  needs  to  be 
strengthened.  

Civil  and  political  rights  are  broadly  respected.  Some  progress  has  been  made  towards 
harmonising criminal sanctions across the country. However, adoption of the Framework law 
on free legal aid, needed to comply with the ECHR, is pending. Access to justice in civil and 
criminal  trials  needs  to  be  ensured.  Prison  conditions  improved  but  overcrowding  and  ill-
treatment of detainees remain issues of concern.  

The  state  and  the  entity  constitutions  provide  for  the  freedom  of  expression  and  media,  the 
freedom  of  assembly  and  association  and  the  freedom  of  religion.  However,  existing 
legislation  is  not  fully  implemented.  Political  pressure  on  the  media  increased,  as  did  its 
ethnic  bias.  Cases  of  intimidation  against  journalists  also  increased.  The  implementation  of 
the public broadcasting reform has been delayed. The independence of the Communications 
Regulatory  Agency  continued  to  be  undermined.  The  Entities’  governments  adopted 
cooperation  agreements  with  civil  society.  However,  further  efforts  are  needed  to  enhance 
dialogue with civil society and to support its development.  

There has been little progress in the area of economic and social rights. They are protected by 
the existing legal framework, but fragmentation remains and implementation continued to be 
poor.  A  comprehensive  state-level  anti-discrimination  law  is  in  place  but  its  scope  remains 
limited. The protection of women against all forms of violence needs to improve, as does the 
social  protection  of  children.  The  predominantly  rights  based  system  of  social  benefits  has 
adverse  affects  on  the  conditions  of  vulnerable  groups,  including  the  mentally  disabled. 
Social dialogue and the exercise of labour rights are hampered by the lack of recognition of 
State-level social partners and a fragmented legislative framework.  

There  has  been  some  progress  regarding  the  respect  for  and  protection  of  minorities  and 
cultural rights6. In terms of inter-ethnic relations, the number of divided schools ('2 schools 
under 1 roof') has decreased and a common nine-year curriculum has been introduced in most 
schools. However, separation of children within schools along ethnic lines remains an issue. 
Despite an increase  in  financial resources  for the implementation  of  the Roma strategy,  this 
minority  continues  to  face  very  difficult  living  conditions  and  discrimination.  The  lack  of 

6 

According to the Law on the protection of rights of persons belonging to national minorities, there are 
17 national minorities in Bosnia and Herzegovina. The three constituent peoples – Bosniaks, Croats and 
Serbs – do not constitute national minorities. 

EN 

43 

   EN 

 
                                                 
birth registration continues to hinder their access to basic social and economic rights. Further 
steps are needed in order to improve the implementation of the Law on national minorities.  

Some progress has been achieved concerning refugees and internally displaced persons. The 
country-wide  strategy  aimed  at  supporting  the  return  process  and  ensuring  proper 
implementation of Annex VII of the Dayton/Paris Peace Agreement (DPA) has been adopted. 
However, little progress has been achieved in ensuring local integration and sustainability of 
return.  

As  regards  regional  issues  and  international  obligations,  implementation  of  the  DPA  has 
continued.  Cooperation  with  the  International  Criminal  Tribunal  for  the  former  Yugoslavia 
has  remained  satisfactory.  However,  during  the  pre-election  period,  Republika  Srpska 
frequently  challenged  the  territorial  integrity  of  the  country.  Furthermore,  statements  by 
Republika Srpska's political leadership denying the gravity of war-time massacres involving 
the civilian population have continued.  

Cooperation  between  the  courts  and  prosecutors  from  Bosnia  and  Herzegovina,  Croatia  and 
Serbia  improved.  Bilateral  agreements  were  signed  on  the  mutual  recognition  and 
enforcement of court rulings in criminal matters. Further efforts are needed to strengthen the 
capacity  to  deal  with  war  crimes  cases,  particularly  at  cantonal  and  district  courts,  and  to 
ensure  adequate  financial  resources.  Regional  cooperation  and  adequate  witness  protection 
will be key in this regard.  

As regards the International Criminal Court, the bilateral immunity agreement with the United 
States does not comply with the EU Common Positions and guiding principles. The country 
needs to align with the EU position. 

Fresh  impetus  was  given  to  the  Sarajevo  declaration  process  following  the  Ministerial 
meeting  held  in  Belgrade  in  March  2010.  This  brought  together  Bosnia  and  Herzegovina, 
Croatia, Montenegro and Serbia who agreed to cooperate in order to clarify refugee statistics. 
The countries also committed themselves to work towards finding solutions for a number of 
outstanding issues by the end of the year.  

Bosnia  and  Herzegovina  has  continued  to  participate  actively  in  regional  cooperation 
initiatives,  including  the  South  East  European  Cooperation  Process  (SEECP),  the  Regional 
Cooperation  Council  (RCC)  and  the  Central  European  Free  Trade  Agreement  (CEFTA). 
Bosnia  and  Herzegovina's  relations  with  its  neighbours  have  developed  further  due  to  some 
important regional initiatives to promote reconciliation. However, some border-related issues 
with  neighbouring  countries  remain  open.  Difficulties  for  Kosovo  passport  holders  in 
obtaining visas to attend regional meetings in Bosnia and Herzegovina persist.  

The  economy  of  Bosnia  and  Herzegovina  made  a  moderate  recovery  in  2010  being  in 
recession  in  2009.  The  recovery  is  mainly  driven  by  external  demand.  Unemployment 
remained  at  very  high  levels.  The  fiscal  situation  worsened  significantly  in  2009  as  public 
finances  came  under  severe  stress  due  to  both  declining  revenues  and  high  spending 
commitments.  The  commitment  to  structural  reforms  and  sound  public  finances  remained 
uneven  across  the  country.  Some  fiscal  and  structural  reform  measures  have  been  enacted 
recently under the pressure of budgetary imbalances and the IMF programme. Nevertheless, 
budgets are still not self-sustaining and the quality of public finances remains weak.  

EN 

44 

   EN 

 
As  regards  the  economic  criteria,  Bosnia  and  Herzegovina  has  made  little  further  progress 
towards  a  functioning  market  economy.  Considerable  further  reform  efforts  need  to  be 
pursued with determination to enable the country to cope over the long term with competitive 
pressure and market forces within the Union. 

Implementation of the Stand-By Arrangement with the International Monetary Fund has been 
broadly  satisfactory.  Financial  and  monetary  stability  was  preserved.  The  currency  board 
arrangement  continued  to  enjoy  a  high  degree  of  credibility.  Confidence  in  local  banks  has 
returned  and  households  redirected  their  savings  to  the  banking  sector  throughout  2010. 
Industrial  production  slightly  increased  in  the  first  half  of  2010.  Mainly  influenced  by 
international  price  developments,  inflation  returned  to  positive  yet  low  rates  in  early  2010. 
Due to soaring exports, external imbalances have decreased. Some limited improvements in 
the business environment can be reported, in particular regarding business registration.  

However, the fiscal situation in Bosnia and Herzegovina remained difficult, especially in the 
Federation.  Commitment  to  the  agreed  fiscal  adjustment  and  structural  reform  measures,  as 
well as their implementation, was uneven across the country. The quality of public finances 
remained low with high shares of current expenditures to GDP. Privatisation, restructuring of 
public enterprises and the liberalisation of network industries did not advance. Upgrading of 
infrastructure  has  proceeded,  though  at  slow  pace.  The  productive  capacity  and  the 
competitiveness  of  the  economy  remained  weak  as  domestic  sources  of  growth  were  not 
adequately  exploited.  Structural  rigidities  such  as  the  high  rates  of  social  contributions  and 
low  labour  mobility  continue  to  hamper  job  creation  and  labour  market  participation.  The 
high and poorly targeted social transfers reduce the propensity to work,  further highlighting 
the need for reform of the social benefits system. Unemployment continued to be very high 
and the informal sector remains an important challenge. The business environment is affected 
by administrative inefficiencies and the weak rule of law.  

Bosnia and Herzegovina has made limited progress in aligning its legislation and policies with 
European  standards.  Some  progress  has  been  made  in  areas  such  as  free  movement  of 
capital,  intellectual  property,  education  and  research,  transport,  financial  control,  and  a 
number of justice, freedom and security-related matters. Particular efforts remain necessary as 
regards free movement of goods, persons and services, customs and taxation, competition and 
state  aid,  public  procurement,  employment  and  social  policies,  agriculture  and  fisheries, 
environment, energy and information society and media.  

On  the  whole,  the  implementation  of  the  Interim  Agreement  (IA)  has  been  uneven.  The 
country is in breach of the IA due to non-compliance with the ECHR regarding the right of 
equal  treatment  without  discrimination7  and  the  failure  to  establish  a  state  aid  authority. 
Further strengthening of administrative capacity is required in order to achieve a satisfactory 
track record of SAA implementation.  

Bosnia and Herzegovina has made some progress in areas of the internal market. As regards 
free movement of goods, preparations are moderately advanced. Some progress has been made 
in  the  area  of  consumer  protection.  Continued  efforts  remain  necessary  in  order  to 
approximate  the  legal  framework  to  EU  legislation  and  to  develop  the  necessary 
administrative capacity. 

7 

Article  14  in  conjunction  with  Article  3  of  Protocol  1  of  the  ECHR,  which  provide  for  a  prohibition  on 
discrimination  with  regard  to  the  right  to  free  elections;  and  Article  1  of  protocol  12  of  the  ECHR,  which 
establishes a right to equal treatment without discrimination.  

EN 

45 

   EN 

 
                                                 
In the area of movement of persons, services and right of establishment limited progress has 
been made, including towards the creation of a single economic space. Further simplification 
of court procedures and company registration remain to be achieved.  

There has been some progress in the area of free movement of capital. Further legal alignment 
with the acquis is essential to ensure the proper functioning of capital markets in Bosnia and 
Herzegovina. Little progress can be reported in the areas of customs and taxation.  

Bosnia and Herzegovina made some progress vis-à-vis the enforcement of competition rules. 
However, no progress has been made in the field of state aid due to the failure to establish a 
state aid authority. There has been limited progress in the area of public procurement. Some 
progress was made in adopting intellectual property rights laws.  

There  was  little  progress  in  the  area  of  social  and  employment  policies  and  public  health 
policy. Country-wide strategic documents are under preparation, but legislation and policies 
remain  fragmented.  Good  progress  was  made  in  the  field  of  research.  Framework  laws  and 
strategies  are  in  place  in  the  field  of  education  and  culture  but  implementation  is  pending. 
Negotiations  to  join  the  World  Trade  Organisation  have  continued,  but  the  process  has  not 
been completed. 

Bosnia and Herzegovina has made some limited progress in meeting European standards on a 
number  of  sectoral  policies.  Preparations  in  the  area  of  industry  and  small  and  medium 
enterprises (SMEs) remain at an early stage. A comprehensive industrial strategy remains to 
be  developed  and  the  State-level  SME  development  strategy  to  be  implemented.  There  has 
been little progress in the area of agriculture and rural development, food safety, veterinary, 
phytosanitary policy and fisheries. Implementing legislation was adopted, however there has 
been  no  progress  on  setting  up  the  state-level  Ministry  of  Agriculture.  Insufficient 
implementation  of  the  State-level  veterinary,  food  safety  and  phytosanitary  legislation  is 
preventing Bosnia and Herzegovina from meeting EU standards.  

Bosnia and Herzegovina's preparations in the field of environment and climate change remain 
at  an  early  stage.  A  harmonised  legal  framework  for  environmental  protection  and  a  State 
Environmental  Agency  need  to  be  established.  Bosnia  and  Herzegovina  has  made  uneven 
progress  in  the  transport  sector.  There  have  been  some  developments  regarding  the  trans-
European transport networks, rail and inland waterways sectors, but progress has been limited 
in  the  road  sector.  The  upgrading  of  transport  infrastructure  remains  an  outstanding  issue. 
Preparations  in  the  field  of  energy  are  not  very  advanced.  As  a  party  to  the  Energy 
Community  Treaty,  Bosnia  and  Herzegovina  needs  to  implement  the  relevant  EU  energy 
legislation.  To  guarantee  the  security  of  electricity  supply  a  fully  functioning  national 
transmission company needs to be ensured and a comprehensive energy strategy adopted. 

Progress in the areas of information society and media has been limited. Harmonisation of the 
legal  framework  for  public  broadcasting  remains  outstanding.  The  continuing  challenges  to 
the  independence  of  the  Communications  Regulatory  Authority  and  the  slow  pace  of 
implementation of the public broadcasting reform remain serious issues of concern. 

Some  progress  can  be  reported  in  the  area  of  financial  control.  Internal  audit  is  being 
introduced,  but  the  Financial  Management  and  Control  systems  need  further  development. 
The independence of external audit remains to be ensured. Some progress has been made in 
the area of statistics with regard to classifications and registers. However, the State-level law 
on the population and household census was not adopted. Statistics on national accounts, on 

EN 

46 

   EN 

 
business  and  on  agriculture  need  to  be  improved.  Co-operation  between  the  country's 
statistical institutions at state and entity level remains insufficient.  

In the area of justice, freedom and security, progress has been made, albeit unevenly, in the 
different areas. In the framework of the visa liberalisation dialogue, steps have been taken to 
fulfil all the benchmarks set in the roadmap. In the area of visa policy, priorities continued to 
be addressed. Biometric passports are being issued. The visa facilitation agreement between 
the  EU  and  Bosnia  and  Herzegovina  and  the  readmission  agreement  have  continued  to  be 
implemented smoothly.  

The  country's  preparations  in  the  fields  of  border  management,  asylum  and  migration  have 
advanced. The asylum and international protection system, the monitoring of migration flows 
and  inter-agency  cooperation  have  improved.  However,  the  infrastructure  at  some  border 
crossing points requires strengthening. Limited progress has been made on preventing money 
laundering.  Further  efforts  are  needed,  particularly  as  regards  the  enforcement  of  legal 
provisions.  There  has  been  some  progress  in  the  fight  against  drugs.  However,  a  lack  of 
effective  judicial  follow-up  impedes  the  fight  against  drug  trafficking,  which  remains  a 
serious problem. 

Bosnia and Herzegovina’s preparations in the area of police are advancing, albeit unevenly. 
The  fragmentation  of  Bosnia  and  Herzegovina's  police  forces  continues  to  undermine 
efficiency, results, cooperation and information exchange. The fight against organised crime 
remains  insufficient  due  to  the  lack  of  a  coherent  institutional  framework.  Organised  crime 
remains an issue of serious concern that affects the rule of law and the business environment. 
Some progress has been made in the fight against trafficking in human beings with respect to 
identification  of  victims.  More  efforts  are  needed  regarding  support  to  victims  and  witness 
protection.  Bosnia  and  Herzegovina  has  started  to  tackle  the  issue  of  fighting  terrorism  by 
adopting a comprehensive strategy.  

As  regards  personal  data  protection,  preparations  for  the  protection  of  personal  data  have 
continued,  but  further  efforts  are  necessary  regarding  law  enforcement.  Well  functioning 
personal  data  protection  is  crucial  in  order  for  Bosnia  and  Herzegovina  to  conclude 
agreements with Europol and Eurojust. 

Serbia 

Serbia  has  made  progress  towards  meeting  the  political  criteria.  Serbia  applied  for  EU 
membership in December 2009. The Interim Agreement entered into force in February 2010 
and  Serbia  has  further  progressed  in  complying  with  the  Stabilisation  and  Association 
Agreement  (SAA)  requirements.  The  ratification  process  of  the  SAA  was  launched  in  June 
2010.  Judicial  reform  has  continued  but  there  were  serious  shortcomings  in  the  re-
appointment procedure of judges and prosecutors. Despite the active on-going cooperation of 
Serbia  with  the  International  Criminal  Tribunal  for  the  former  Yugoslavia  (ICTY),  the  two 
remaining ICTY fugitives, Ratko Mladić and Goran Hadžić, are still at large. 

The  UN  General  Assembly  adopted  on  9  September  a  joint  resolution  tabled  by  Serbia  and 
co-sponsored by the EU as a follow-up to the International Court of Justice advisory opinion 
on  Kosovo.  The  resolution  acknowledged  the  content  of  the  ICJ  advisory  opinion  and 
welcomed the readiness of the European Union to facilitate a process of dialogue between the 
parties; the process of dialogue in itself would be a factor for peace, security and stability in 
the region, and that dialogue would be to promote cooperation, achieve progress on the path 

EN 

47 

   EN 

 
to the European Union and improve the lives of the people. Determined efforts are needed by 
all parties for the inclusive and effective functioning of regional fora.  

Democracy  and  the  rule  of  law  have  been  further  strenghtened.  Implementation  of  new 
Constitutional  provisions  such  as  those  referring  to  the  Statute  of  Vojvodina  has  advanced. 
Additional  efforts  are  needed  to  ensure  the  compatibility  of  some  constitutional  provisions 
with European standards, particularly on the judiciary.  

Further steps were taken to improve the functioning of the parliament through the adoption of 
a  new  Law  on  the  National  Assembly  and  new  rules  of  procedure.  However,  efforts  are 
necessary to further improve the quality of legislative output. The electoral legislation needs 
to be brought fully into line with European standards.  

The  coalition  government  remained  stable  and  continued  to  demonstrate  a  high  degree  of 
consensus  on  EU  integration  as  a  strategic  priority.  However,  the  preparation  and 
implementation of new legislation need to become more effective.  

The capacity of the public administration is overall good but reform in this area is advancing 
at  a  slow  and  uneven  pace.  A  stronger  commitment  to  respect  the  mandate  of  independent 
regulatory bodies and provide them with adequate resources is needed.  

There was good progress towards adopting the legislation providing for civilian oversight of 
security  forces  and  implementing  constitutionally  guaranteed  rights.  However,  civilian 
oversight, including by the relevant parliamentary committee, needs to be reinforced.  

Serbia  continued  the  reform  of  its  judicial  system  with  the  re-appointment  procedure  of  all 
judges  and  prosecutors  and  the  introduction  of  a  new  court  network.  However,  the  re-
appointment procedure had major shortcomings and  was non-transparent. The two Councils 
responsible were elected under a transitory composition and did not apply objective criteria. 
Judges  and  prosecutors  were  not  heard  during  the  procedure  and  did  not  receive  adequate 
explanations for the decisions. This puts into question the independence of the judiciary and 
may give room for political influence. The two Councils still need to be elected in their final 
composition. The substantial backlog of pending cases remains a matter of concern. Overall, 
Serbia’s judicial system only partially meets its priorities. 

Progress in the fight against corruption continued with the Anti-Corruption Agency starting 
its  work  in  January  2010.  A  majority  of  public  officials  submitted  asset  declarations  to  the 
new Agency as required. However, corruption remains prevalent in many areas and continues 
to be a serious problem. In the absence of a new law, control of the funding of political parties 
and financing of election campaigns remains weak. The Anti-Corruption Agency still has to 
establish  a  track  record  of  verifying  asset  declarations  and  carrying  out  its  role  effectively. 
The  number  of  final  convictions,  especially  in  high  level  cases,  remains  low.  Public 
procurement,  privatisation  and  public  expenditure  remain  areas  of  concern.  Protection  of 
whistleblowers needs to be improved. 

Concerning  human  rights  and  the  protection  of  minorities,  the  necessary  legislation  is  in 
place. The Constitution guarantees civil and political rights which are broadly respected but 
their  enforcement  remains  to  be  fully  ensured.  Relevant  legislation  remains  to  be  further 
brought in line with European standards. 

EN 

48 

   EN 

 
There has been little progress concerning the prevention of torture, ill-treatment and impunity 
where  a  number  of  cases  continued  to  be  recorded.  Access  to  justice  is  generally  ensured. 
However,  legislation  and  funding  for  a  more  effective  system  of  free  legal  aid  are  still 
missing. Serbia made little progress in the reform of its prison system. A strategy to prevent 
overcrowding was adopted but poor conditions in prisons remain a matter of concern.  

Constitutional  and  legislative  provisions  for  the  protection  of  freedom  of  expression  are  in 
place.  The  legislation  allowing  the  media  to  operate  freely  is  in  place.  However,  incidents 
involving  hate  speech,  threats  and  attacks,  in  particular  against  journalists,  have  continued. 
Freedom  of  assembly  and  association  is  guaranteed  by  the  Constitution  and  in  general 
respected.  

Civil society organisations continued to be active in the social, economic and political life of 
Serbia and remain important in promoting democratic values. An Office for Cooperation with 
Civil Society was recently established. 

Constitutional  guarantees  allowing  for  freedom  of  religion  are  in  place.  Inter-faith  relations 
have improved. However, the lack of transparency and consistency in the registration process 
remains the main obstacle to some smaller religious groups exercising their rights.  

The  legislation  for  the  protection  of  social  and  economic  rights  is  broadly  in  place.  The 
protection  of  women  and  children  against  violence  needs  to  be  strengthened.  The  law  on 
gender equality, aiming at improving the position of women, was adopted. However, follow-
up of cases of domestic violence remains inadequate. In relation to children’s rights, there has 
been  progress  in  strengthening  the  protection  of  children  from  abuse  and  negligence.  The 
legislative  framework  prohibiting  any  kind  of  discrimination  in  the  workplace  and 
establishing  a  mechanism  for  protection  against  discrimination  is  in  place.  However,  in 
practice,  discrimination  continues,  particularly  against  the  Roma,  the  LGBT  community, 
women, national minorities and persons with disabilities.  

There  has  been  no  progress  with  regard  to  property  rights  as  an  adequate  legal  basis  for 
property restitution is still missing. 

The legislation providing for the respect for and protection of minorities and cultural rights, 
is in place. Elections for the 19 National Minority Councils were held in June 2010 and were 
on the whole well organised. The Councils are yet to become operational.  

The  inter-ethnic  situation  in  Vojvodina  has  been  stable.  The  implementation  of  the  newly 
adopted  Statute  and  of  the  Law  on  Determination  of  Competencies,  which  provides  for  an 
extensive autonomy of the province in the areas of local finances and economic development 
has started. Further legislation needs to be adopted. The situation in southern Serbia is on the 
whole stable but tense. Clashes between ethnic groups and within the Muslim community in 
Sandžak have on the whole decreased. However, tensions persist in particular between the two 
existing  Islamic  organisations  and  in  connection  to  the  constitution  of  the  Bosniak  National 
Minority Council. 

Some  progress  was  made  in  addressing  the  issue  of  the  status  of  refugees  and  internally 
displaced  persons  (IDPs)  but  further  substantial  efforts  are  needed.  Despite  a  number  of 
positive  developments,  the  majority  of  the  Roma  population  continues  to  live  in  extreme 
poverty.  They  also  face  discrimination,  in  particular  as  regards  access  to  education,  social 
protection, health care, employment and adequate housing.  

EN 

49 

   EN 

 
As  regards  regional  issues  and  international  obligations,  Serbia  has  demonstrated  a 
constructive  approach  in  connection  to  developments  in  Bosnia  and  Herzegovina.  The 
Prosecutor of the International Criminal Tribunal for the former Yugoslavia (ICTY) noted in 
his  latest  report  to  the  UN  Security  Council  that  Serbia’s  responses  to  the  Office  of  the 
Prosecutor’s requests for access to documents, archives and witnesses have been timely and 
adequate  and  that  no  requests  remain  outstanding.  He  also  stressed  the  professionalism  and 
commitment  of  the  operational  services  working  on  the  search  for  fugitives.  However,  he 
made a number of operational recommendations. Despite the active on-going cooperation of 
Serbia  with  the  ICTY,  the  two  remaining  ICTY  fugitives  are  still  at  large.  Full  cooperation 
with  the  ICTY  remains  an  essential  condition  for  membership  of  the  EU,  in  line  with  the 
Council conclusions of 25 October 2010.  

Good  cooperation  with  EULEX  has  been  established  in  relation  to  war  crimes  in  Kosovo. 
However, problems of extradition and recognition of sentences continued to exist with some 
countries of the region.  

Fresh  impetus  was  given  to  the  Sarajevo  declaration  process  following  the  Ministerial 
meeting held in Belgrade in March 2010, at Serbia’s initiative. This brought together Bosnia 
and  Herzegovina,  Croatia,  Montenegro  and  Serbia,  all  of  which  agreed  to  work  together  in 
order  to  clarify  notably  refugee  statistics  and  remaining  open  issues.  The  countries  also 
committed themselves to work towards solutions to a number of outstanding issues by the end 
of the year. 

Serbia  has  continued  to  actively  participate  in  regional  initiatives  such  as  the  South  East 
European  Cooperation  Process  (SEECP),  the  Regional  Cooperation  Council  (RCC)  and  the 
Central European Free Trade Agreement (CEFTA). Serbia held the Chairmanship of CEFTA 
in  2010.  It  has  been  actively  participating  in  the  preparations  for  the  upcoming  Danube 
Strategy.  Serbia  made  significant  progress  in  its  bilateral  relations  with  other  enlargement 
countries,  particularly  Croatia  and  Bosnia  and  Herzegovina,  and  continued  to  have  good 
relations  with  neighbouring  EU  member  states.  An  extradition  agreement  on  cooperation  in 
criminal matters was signed with Croatia. Regional cooperation was, however, affected by a 
lack  of  agreement  between  Serbia  and  Kosovo  on  the  latter's  participation  in  regional 
meetings.  An  acceptable  and  sustainable  solution  for  the  participation  of  both  Serbia  and 
Kosovo in regional fora needs to be agreed as soon as possible. This is essential for inclusive 
and functioning regional cooperation. Serbia still does not accept the Kosovo customs stamps 
notified by UNMIK. In Kosovo, Serbia maintained parallel structures and organised parallel 
municipal by-elections. 

Following  a  severe  recession  in  the  wake  of  the  global  crisis,  Serbia's  economy  gradually 
recouped  stability  as  a  result  of  an  adjustment  programme  agreed  with  the  IMF  and  also 
supported by the EU and the World Bank. As of the first half of 2010, economic activity has 
been  picking  up  but  recovery  remains  slow  and  fragile.  Public  finances  continued  to 
deteriorate  despite  a  number  of  fiscal  adjustment  measures  put  in  place  to  contain  the 
budgetary  slippage.  Adoption  by  government  of  amendments  to  the  budget  system  law  and 
the pension law was an important step towards improving the quality of public finances. Other 
structural  reforms,  especially  privatisation  and  enterprise  restructuring,  have  been  again 
delayed due to protracted unfavourable market conditions.  

As regards the economic criteria, further progress towards establishing a functioning market 
economy has been limited. Serbia needs to make more efforts in restructuring its economy so 

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as  to  cope  in  the  medium-term  with  the  competitive  pressures  and  market  forces  within  the 
European Union.  

There is broad consensus on the fundamentals of a market economy. The adoption of timely 
and  appropriate  measures  in  agreement  with  the  IMF  was  key  in  re-establishing 
macroeconomic stability. Serbia's external position improved during the recession. The pick-
up in economic activity in 2010 led to a widening of the current account deficit which was, 
however, limited on the back of strong export and subdued import growth. Foreign exchange 
reserves  remained  relatively  high  despite  regular  interventions  by  the central  bank  to  buffer 
volatility of the exchange rate. Inflation was broadly maintained within the target band as the 
central  bank  reverted  to  restrictive  monetary  policy.  The  banks  continued  to  be  adequately 
capitalised  and  liquid.  Amending  the  budget  system  law  and  the  pension  law  commits  the 
government to fiscal consolidation over the medium-term. 

However,  Serbia  has  further  postponed  the  reforms  to  tackle  the  biggest  structural 
shortcomings.  Despite  a  gradual  economic  recovery,  the  labour  market  has  continued  to 
deteriorate, with decreasing employment and increasing unemployment. Notwithstanding the 
corrective  measures  to  limit  the  fiscal  slippage  during  the  crisis  and  the  amended  budget 
system and pension legislation to enhance fiscal discipline, the public finance sustainability in 
the medium term needs to be strengthened by reforms in the areas of healthcare system and 
public  administration.  Privatisation  of  the  socially-owned  companies  has  back-paddled 
following repeal of numerous sale contracts. Privatisation of the state-owned companies has 
been further delayed. The business environment continues to be constrained by red tape and 
weak  legal  predictability,  in  particular  with  respect  to  effective  enforcement  of  property 
rights,  which  hamper  market  entry  and  exit.  Furthermore,  deficiencies  in  competition  and 
infrastructure bottlenecks remain barriers to doing business. The informal sector remains an 
important challenge. 

Serbia  has  made  further  progress  towards  aligning  its  legislation  to  European  Standards. 
Serbia has also continued to implement the Interim  Agreement  provisions  and  made  further 
progress  towards  complying  with  the  Stabilisation  and  Association  Agreement  (SAA) 
requirements. Administrative capacity is good. However, further efforts are necessary to bring 
the legislation and the policies in line with the acquis. Implementation as well as enforcement 
of the adopted EU-related legislation needs to be ensured.  

With  regard  to  internal market,  Serbia  has  made  progress  in  meeting  EU  standards  on  free 
movement  of  goods.  Legislation  on  metrology  and  on  certain  new  approach  directives  has 
been adopted. However, a new legal framework for market surveillance is still lacking. The 
administrative  capacity  and  cooperation  between  the  State  institutions  need  to  be  further 
strengthened. Further efforts are required to continue the transposition of the product-specific 
acquis into Serbian legislation. 

Serbia  is  moderately  advanced  towards  meeting  EU  standards  in  the  areas  of  movement  of 
persons, services, right of establishment and company law. A number of acts are still pending 
approval. In the area of free movement of capital, Serbia remains moderately advanced. Non-
residents  are  free  to  make  direct  investments  with  certain  restrictions.  Serbia  needs  to 
continue its efforts to meet the gradual liberalisation requirements laid down in the SAA. 

Serbia is already well on track to meeting the EU acquis and remains committed to reforms in 
the  areas  of  customs  and  taxation.  Obligations  stemming  from  the  Interim  Agreement  were 
respected.  Further  efforts  are  needed  as  regards  procedures  and  administrative  capacity. 

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Enforcement  capacity  of  the  tax  administration  and  tax  collection  has  improved,  although 
further progress is required in this respect. Serbia needs to take follow-up action to ensure that 
its tax legislation complies with the Code of Conduct for business taxation.  

Serbia  made  some  progress  in  meeting  European  standards  in  the  area  of  competition. 
Implementing  legislation  of  the  competition  law  was  adopted.  Moreover  Serbia  should 
continue to work on its enforcement records. Knowledge of competition law and economics 
in the judiciary remains weak. Some progress has been made in the area of state aid. A State 
aid authority was established. However, the administrative capacity of the State aid Authority 
has to be strengthened. Effective implementation of the law needs to be ensured. 

Serbia's preparations for establishing an effective and fully independent public procurement 
system  with  streamlined  award  procedures  are  moderately  advanced.  Significant  efforts 
remain necessary to strengthen the capacity to implement the requirements of the EU acquis. 
Progress has been made in the area of intellectual property but further efforts are needed in 
terms  of  alignment  with  the  acquis.  Concerning  enforcement,  better  co-ordination  among 
relevant agencies is required, as well as substantial investment in judicial training. 

Preparations are continuing towards meeting European standards in the areas of employment 
and social policy. Progress has been made in the area of public health. The strategic "Health 
Protection  Development  Plan"  for  2010-2015  prepared  by  the  National  Health  Council  of 
Serbia prepared adopted by the Government. 

Serbia has made some progress to align with European standards in the area of education. An 
overall  strategy  involving  all  levels  of  education,  including  lifelong  learning,  remains  to  be 
developed.  Good  progress  has  been  made  on  alignment  in  science  and  research.  However 
further  efforts  are  needed  to  facilitate  Serbia’s  integration  into  the  European  Research  Area 
and to strengthen its national research capacity. 

Negotiations for Serbia’s accession to the World Trade Organisation (WTO) are nearing their 
end; the bilateral track of negotiations has already been completed with most WTO partners. 

With respect to sectoral policies, in the area of industry and SMEs, Serbia is well advanced 
and fulfils European standards. Preparation of an industrial strategy is at a very early stage.  

Serbia  is  advancing  well  towards  meeting  European  standards  in  the  areas  of  agriculture, 
rural  development,  food  safety,  veterinary  and  phytosanitary  policy.  The  legal  framework 
continues  to  improve.  However,  implementation  and  enforcement  needs  to  be  upgraded, 
especially in the food safety area. Administrative capacity is weak and resources need to be 
more efficiently allocated. Inspection services need further training. Recruitment of qualified 
staff needs to take place in the newly established bodies. Progress has been made concerning 
official control of laboratories. 

In  the  area  of  environment,  Serbia  remains  moderately  advanced  towards  fulfilling  the 
European standards. The National Programme for Environmental Protection 2010–2019 and a 
number of laws on air and water quality as well as on nature protection and climate change 
were  adopted.  The  new  Chemicals  Agency  became  operational.  However,  the  capacity  to 
implement and enforce legislation still needs to be strengthened.  

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Serbia  has  made  some  progress  in  the  area  of  transport.  The  market  access  provisions  of  the 
European Civil Aviation Agreement are now applied. However, framework legislation remains 
to be adopted in the railways sector. Administrative capacity needs to be strengthened.  

In  the  energy  sector,  Serbia  has  made  some  progress  in  terms  of  alignment  with  European 
standards.  However,  progress  remains  uneven.  Further  efforts  are  needed  to  achieve 
unbundling and real market opening together with a pricing policy offering a sustainable tariff 
reflecting costs. . Further efforts need to be made to strengthen the nuclear regulator. 

Some  progress  has  been  made  in  the  information  society  and  media  area.  The  legislative 
framework  has  been  strengthened,  but  implementation  remains  slow  and  inadequate  market 
and regulatory developments in the electronic communication sector are of particular concern. 
Preparations  in  the  field  of  information  society  services  are  moderately  advanced.  In  the 
audiovisual  sector,  media  legislation  needs  to  be  aligned  with  the  acquis,  and  a  number  of 
provisions of the Law on Public Information continue to raise concerns.  

While Serbia is still at the early stages in the introduction of good practices in public internal 
financial control and external audit, some progress can be reported with the establishment of 
financial  control Central  Harmonisation Unit and the first audit  of  the state accounts  by the 
State Audit Institution.  

Serbia has made good progress in advancing towards meeting European standards in the area 
of  statistics  by  adopting  laws  on  statistics  and  the  censuses  of  population  and  agriculture. 
Preparations  for  the  population  census  are  well  advanced  but  its  funding  remains  to  be 
ensured.  However,  further  progress  is  needed  in  several  statistical  domains  and  additional 
efforts are needed to strengthen the capacity of the statistical office.  

Progress in the area of justice freedom  and security has continued.  Visa-free  travel  entered 
into force in December 2009 for Serbian citizens holding biometric passports.  

There has been some progress in the area of border management, mainly through upgrading 
of  equipment  and  infrastructure.  However,  further  efforts  are  needed  to  eliminate  the 
disparities  between  individual  border  crossing  points  and  to  improve  control  at  the  borders 
with the former Yugoslav Republic of Macedonia, Montenegro, Bosnia and Herzegovina and 
Croatia and in particular at the administrative boundary line with Kosovo. 

Little  progress  has  been  made  in  the  area  of  asylum.  A  list  of  safe  countries  for  asylum 
seekers was adopted. However, the Asylum Office, the first instance body for asylum claims, 
has not been established. Many cases are closed because applicants leave Serbian territory or 
disappear.  Serbia  has  made  some  progress  in  the  area  of  migration.  Implementation  of  the 
readmission agreement between Serbia and the European Union continued without significant 
problems.  However,  effective  implementation  of  the  migration  management  strategy  is 
lacking. Efforts are needed to improve the coordination between the responsible bodies and to 
strengthen their capacities.  

Some progress has been achieved to prevent money laundering. An action plan was adopted 
and a coordination body established. Efforts to improve national and international cooperation 
in  the  investigation  and  processing  of  offences  continued.  However,  practical  results  have 
remained  weak.  The  Administration  for  Prevention  of  Money  Laundering  lacks  capacity  to 
systematically identify suspicious cases. Reporting needs to be improved, in particular outside 

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the banking sector. The judiciary and law enforcement services lack the necessary expertise in 
money laundering cases and financial investigations. Final convictions remain rare. 

Good progress can be reported in the area of fight against drugs. Law enforcement agencies 
continued  investigations  and  improved  international  cooperation,  leading  to  seizure  of  large 
quantities  of  illicit  drugs.  However,  weaknesses  continue  to  exist  in  surveillance  of  the 
borders  with  the  former  Yugoslav  Republic  of  Macedonia,  Montenegro,  Bosnia  and 
Herzegovina and Croatia and the Administrative Boundary Line with Kosovo. 

Capacity building within the police has continued with the upgrading of specialised services 
of the criminal police. Cooperation between various police structures, as well as regional and 
international  cooperation,  has  improved.  However,  strategic  planning  and  human  resource 
management need to be upgraded and recruitment procedures made more transparent. Internal 
control needs to be strengthened. 

Good  progress  has  been  made  in  fighting  organised  crime.  Cooperation  between  relevant 
agencies  has  improved  within  the  country,  in  the  region  and  internationally;  this  has  led  to 
good results in high-profile investigations and the arrest of a number of suspects. Confiscation 
of assets started in a more systematic way and confiscations were carried out in a number of 
cases. However, a new and substantially revised Criminal Procedure Code has still not been 
adopted.  The  capacities  of  the  law  enforcement  agencies  to  use  modern  investigative 
techniques,  in  particular  in  the  area  of  financial  investigations,  need  to  be  further 
strengthened. 

Procedures  to  identify  victims  of  trafficking  of  human  beings  have  been  adopted  and  the 
number of identified victims continued to increase. However, the strategic framework needs 
to be amended to allow a better policy response to emerging trends and improved cooperation 
between  the  police,  prosecution  and  courts.  Serbia  has  made  some  progress  in  the  fight 
against terrorism with the adoption of the Law on military security and military intelligence 
agencies. However, prevention policies need to be improved. A database on terrorist suspects 
has not yet been established.  

There has been little progress on protection of personal data. The strategy for implementing 
the  Law  on  personal  data  protection  was  adopted  in  August  2010.  Despite  some 
improvements,  the  office  of  the  Commissioner  for  Information  of  Public  Importance  and 
Personal  Data  Protection  continues  to  lack  financial  and  human  resources.  Personal  data 
protection  is  a  key  precondition  for  Serbia  to  conclude  an  agreement  with  Eurojust  and  an 
operational agreement with Europol. 

Kosovo 

Kosovo  has  made  progress  as  regards  the  political  criteria.  It  has  strengthened  its 
commitment  to  the  European  agenda  and  policy  reform  and  established  a  Ministry  for 
European Integration. The government has ensured the successful conduct of the Stabilisation 
and Association Process (SAP) dialogue with the European Union. The authorities now need 
to step up the pace of reform. The capacity of the public administration remains weak and the 
judiciary is not functioning effectively.  Rule of law  remains a serious concern. Cooperation 
with the EU rule of law mission (EULEX) has improved and the authorities have launched a 
number  of  anti-corruption  operations  with  EULEX  support.  These  efforts  need  to  continue 
and  cover  organised  crime,  drugs  and  money-laundering.  Elections  have  been  called 
following the resignation of the President of Kosovo.  

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Kosovo has made significant progress in decentralisation. Four new municipalities have been 
established  and  are  now  operational.  Local  elections  were  held  at  the  end  of  2009. 
A European Parliament mission considered that the election process took place in a peaceful 
environment  with  considerable  voter  participation,  including  among  the  Kosovo  Serb 
community.  However,  concerns  remain  with  regard  to  northern  Kosovo.  There  have  been 
a number of violent incidents. Decentralisation can only be completed with the participation 
of the local population. More needs to be done to ensure the integration of all communities 
and  the  delivery  of  public  services  in  all  municipalities.  Support  from  local  communities  is 
important in this regard, including a constructive role in consolidating the rule of law. Parallel 
structures continue to operate hampering the decentralisation process.  

In July, the International Court of Justice (ICJ) issued an advisory opinion, which concluded 
that  Kosovo's  declaration  of  independence  did  not  violate  general  international  law  or  UN 
Security Council resolution 1244 (1999). Following the UN General Assembly resolution of 9 
September  the  EU  has  confirmed  its  readiness  to  facilitate  a  process  of  dialogue  between 
Pristina and Belgrade to promote cooperation, achieve progress on the path to the European 
Union and improve the lives of the people. Determined efforts are needed by all parties for the 
inclusive and effective functioning of regional fora. 

Regarding democracy and the rule of law, there has been progress in strengthening executive 
and  parliamentary  structures,  in  particular  as  concerns  European  integration.  However,  the 
rule of law is in need of further strengthening and is an issue of serious concern. 

In  September,  the  Constitutional  Court  ruled  that  it  is  unconstitutional  to  hold  at  the  same 
time  the  office  of  President  of  Kosovo  and  of  Chairman/President  of  a  political  party. 
Following  the  ruling,  the  President  of  Kosovo  resigned.  The  LDK  then  withdrew  from  the 
governing coalition. Elections have been called for 12 December 2010. 

The  assembly  has  established  a  public  accounts  committee.  The  Committee  on  European 
Integration  has  streamlined  its  rules  and  procedures.  However,  capacity  to  scrutinise  draft 
legislation  and  to  monitor  its  implementation  after  adoption  remains  weak.  Parliamentary 
oversight of the government needs to be further strengthened.  

The main structures of government are in place and continue to function in line with relevant 
constitutional  provisions.  The  Ministry  for  European  Integration  has  made  a  good  start  and 
now needs to strengthen its capacity and consolidate its role in coordinating other government 
departments.  

Public administration reform in Kosovo remains a major challenge. The legal framework has 
been  developed  further  with  the  adoption  of  the  laws  on  civil  service  and  on  salaries.  The 
capacity of the public administration to deliver the necessary services to all people in Kosovo 
needs to be substantially strengthened. Kosovo’s public administration remains weak. 

Kosovo has made progress as regards reform of the judicial system. Major judicial reform has 
been  launched  by  adoption  of  four  reform  laws  on  courts,  on  prosecution,  on  the  Kosovo 
Judicial  Council  and  on  the  Kosovo  Prosecutorial  Council.  The  law  on  courts  introduces  a 
new salary system, which significantly improves the situation of judges. The vetting of judges 
and  prosecutors  has  also  been  completed.  Over  340  judges  and  prosecutors  have  been 
appointed  by  the  President  to  positions  at  all  levels  of  the  judiciary.  This  includes  the 
appointment of local members of the Kosovo Judicial Council who have elected the Council's 
president.  After  passing  the  bar  exam,  the  first  prospective  judges  and  prosecutors  have 

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graduated  from  the  Kosovo  Judicial  Institute  in  December  2009.  However,  there  have  been 
cases of political interference in the judicial system, notably in the reappointment process of 
judges  and  prosecutors.  There  is  still  a  significant  backlog  of  cases,  particularly  in  civil 
matters, including property rights. Kosovo institutions need to attach sufficient importance to 
support investigations and judicial follow-up of war crimes. Plans to implement the reform of 
judiciary  need  to  be  prepared  and  resources  allocated.  Kosovo  is  still  at  an  early  stage  in 
addressing priorities in the area of justice. 

The legal framework on anti-corruption has improved with the adoption of laws on the anti-
corruption  agency  and  on  declaration  and  origin  of  the  property  and  gifts  to  senior  public 
officials.  The  law  on  preventing  conflict  of  interest  in  exercising  public  functions  has  been 
amended. The law on financing political parties is not fully in line with European standards. 
However,  results  in  the  fight  against  corruption  are  limited.  The  main  areas  of  concern 
continue  to  be  the  procurement  process  and  the  judicial  and  law  enforcement  systems. 
EULEX has had to continue exercising its executive mandate in high profile cases. There are 
a number of ongoing anti-corruption investigations. In April, searches were undertaken at the 
ministry  of  transport;  in  July,  the  Kosovo  Police  arrested  the  central  bank  governor  in 
cooperation  with  EULEX.  The  government  has  cooperated  with  these  investigations. 
Corruption remains prevalent in Kosovo and is a very serious problem. The legal framework 
remains incomplete and does not fully comply with European standards. 

The  constitution  guarantees  human  rights  and  the  respect  for  and  protection  of  minorities 
and  lists  the  main  international  agreements  and  instruments  directly  applicable  in  Kosovo. 
However,  the  institutional  set-up  and  the  lack  of  political  will  hamper  the  effective 
implementation of legal standards in this area. The process of integrating the Serb community 
is  ongoing.  The  authorities  need  to  do  more  to  address  key  concerns  such  as  access  to 
property, missing persons, returns and education.  

There has been some progress on civil and political rights. The government needs to do more 
as regards the prevention of torture, allegations of ill-treatment and excessive use of force by 
police  and  prison  staff.  Conditions  in  prisons  are  still  a  concern.  There  has  been  limited 
progress as regards access to justice. 

Freedom of expression is still not guaranteed in practice. The independence and impartiality 
of  the  public  broadcaster  need  strengthening.  Journalists  continue  to  receive  threats  in 
response  to  their  reporting.  They  also  face  difficulties  in  accessing  official  documents.  The 
legislation  on  freedom  of  association  does  not  facilitate  the  sustainable  development  and 
funding  of  non-governmental  organisations.  The  capacity  of  civil  society  to  monitor  and 
assess  the  government's  performance  is  increasing.  However,  civil  society  is  still  weak  and 
not systematically consulted by the municipalities and the government within the legislative 
process.  

Economic  and  social  rights  are  still  not  fully  guaranteed.  The  legal  framework  for  the 
protection  of  women  has  been  strengthened.  There  has  been  some  progress  in  the  area  of 
juvenile justice. However, the protection of children's rights remains weak. The government 
needs to tackle child labour and child trafficking more effectively. The social integration and 
protection of vulnerable groups, in particular abandoned children, returnees and people with 
disabilities,  needs  to  be  improved.  Kosovo  has  launched  an  anti-discrimination  awareness-
raising  campaign  with  special  emphasis  on  discrimination  based  on  age  and  sexual 
orientation.  The  implementation  of  anti-discrimination  legislation  remains  inadequate.  The 
implementation  of  court  orders  guaranteeing  the  exercise  of  property  rights  has  improved. 

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However, the significant backlog of cases and other long-standing issues seriously hamper the 
re-possession of property. 

There  has  been  limited  progress  as  regards  respect  for  and  protection  of  minorities  and 
cultural  rights.  The  Ministry  of  Culture  has  set  up  a  directorate  for  cultural  heritage.  The 
reconstruction  of  religious  sites  has  continued.  Kosovo  Police  has  taken  over  responsibility 
from  KFOR  for  the  protection  of  certain  religious  and  cultural  sites.  However,  the  law  on 
cultural heritage is not fully implemented. The monitoring council envisaged in the 2008 law 
on  special  protective  zones  is  still  to  be  established.  The  Ministry  for  Communities  and 
Return  increased  its  efforts  to  assist  minority  returns  of  refugees  and  internally  displaced 
persons. The number of voluntary returnees is increasing across Kosovo.  

In December 2009, Kosovo adopted an action plan for the implementation of the strategy for 
integration of Roma, Ashkali and Egyptian communities. The government has established the 
structures  to  implement  this  strategy.  The  process  of  relocating  families  from  lead-
contaminated  areas  in  northern  Kosovo  has  begun'  allowing  the  closure  of  Cesmin 
Llug/Česmin  Lug  camp.  This  process  needs  to  be  completed  as  soon  as  possible.  Living 
conditions for Roma, Ashkali and Egyptian communities and their access to education, health 
care and social protection are still issues of very serious concern. The participation of Kosovo 
in the Roma Decade needs to be consolidated. 

Concerning  regional  and  international  obligations,  during  the  reporting  period  Kosovo 
continued  to  cooperate  with  the  International  Criminal  Tribunal  for  the  former  Yugoslavia 
(ICTY).  More  than  ten  years  after  the  end  of  the  armed  conflict,  there  are  estimated  to  be 
1,800  missing  persons.  The  authorities  need  to  demonstrate  greater  efforts  in  this  area. 
Kosovo attended the EU-Western Balkans High-Level Meeting in Sarajevo in June. However, 
Kosovo needs to adopt a constructive approach in order to ensure its effective participation in 
cooperation initiatives, such as the Regional Cooperation Council and the Central European 
Free  Trade  Agreement  (CEFTA).  Concerning  CEFTA,  Kosovo  needs  to  be  pragmatic  and 
seek  a  constructive  way  forward  to  ensure  the  effective  implementation  of  this  agreement. 
The Kosovo customs stamps, which the Special Representative of the UN Secretary General 
has confirmed to be in compliance with UNSCR1244/99, have not been recognised by Serbia 
and Bosnia and Herzegovina. An acceptable and sustainable solution for the participation of 
both Kosovo and Serbia in key regional fora needs to be agreed as soon as possible. This is 
essential for inclusive and functioning regional cooperation.  

The  impact  of  the  economic  crisis  on  the  economy  of  Kosovo  has  been  limited.  Real  GDP 
continued  growing  mainly  driven  by  public  expenditure.  There  are  growing  risks  to  the 
sustainability  of  this  growth  profile.  Unemployment  remains  very  high.  Inflation  has  been 
volatile,  reflecting  fluctuating  food  and  fuel  prices.  Policy  formulation  and  implementation 
continued  to  lack  predictability.  An  agreement  has  been  reached  with  the  IMF  on  a 
programme with the aim to limit fiscal risks and revert to fiscal sustainability. Firms continue 
to  face  weak  rule  of  law,  the  lack  of  a  reliable  electricity  supply,  poor  infrastructure  and 
limited  access  to  financing.  These  are  barriers  to  effective  business  and  economic 
development. 

As regards the economic criteria, Kosovo has achieved limited progress towards establishing 
a functioning market economy. Considerable reforms and investments are needed to enable it 
to cope over the long term with competitive pressure and market forces within the Union.  

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A  broad  consensus  on  the  fundamentals  of  market-oriented  economic  policies  has  been 
maintained. The use of the euro, the low levels of external debt and the narrow exports' base 
have limited the economy's exposure to external financial and demand shocks. The banking 
sector continued to expand and remained stable and  profitable. The Privatisation Agency of 
Kosovo  has  continued  the  privatisation  of  socially  owned  enterprises.  The  first  successful 
public  private  partnership  project  has  been  concluded  and  an  international  consortium  has 
been  selected  to  develop  the  Pristina  International  Airport  under  a  concession  for  twenty 
years.  

However,  the  policy  mix  is  increasingly  vulnerable  as  a  result  of  strong  government 
expenditure growth. In particular, the building of a new motorway weighs heavily on public 
finances.  Deficiencies  in  policy  formulation  and  implementation  have  increased  the  already 
high  uncertainty  in  the  economy.  Economic  statistics  improved  somewhat,  but  still  remain 
inadequate.  Unemployment  remains  very  high  particularly  among  the  young.  The  current 
account  deficit  has  widened  due  to  strong  domestic  demand  and  an  underdeveloped 
production base. The public electricity company has continued to receive substantial subsidies 
from  the  state  budget  for  the  import  of  electricity  and  loans  for  financing  of  its  investment 
programme.  The  weak  rule  of  law,  uncertainty  over  property  rights  and  high  interest  rates 
continue  to  impact  negatively  on  the  business  environment  and  on  economic  development. 
The informal sector remains an important challenge. 

Progress in aligning Kosovo's legislation and policies with European standards continues to 
be mixed. The legal framework has been developed further in the areas of customs, taxation, 
free movement of goods, statistics, migration, education and anti-terrorism. Approximation is 
at  an  early  stage  as  regards  competition,  intellectual  property,  environment,  agriculture  and 
food  safety,  integrated  border  management,  asylum,  money-laundering  and  personal  data 
protection.  Alignment  with  European  standards  remains  limited  in  the  areas  of  employment 
and  social  policies,  financial  control,  drug-trafficking,  trafficking  in  human  beings  and 
organised crime. 

In the area of the EU internal market there has been some progress, in developing the legal 
framework  for  free  movement  of  goods,  including  consumers'  protection.  However,  the 
overall  legal  framework  needs  to  be  reinforced.  Alignment  with  European  standards  in  the 
areas  of  free  movement  of  persons,  as  well  as  freedom  to  provide  services  and  the  right  of 
establishment  is  limited.  The  area  of  free  movement  of  capital  is  already  well  advanced. 
However, further efforts are necessary as regards effective regulation.  

Legal provisions for customs are generally compatible with European standards and efforts to 
fight  corruption  have  been  undertaken.  Efforts  to  tackle  smuggling  need  to  be  enhanced. 
Customs  controls  need  to  be  strengthened  in  northern  Kosovo.  Administrative  capacity  has 
improved,  but  remains  insufficient.  There  have  been  positive  developments  as  regards 
legislation  and  capacity-building  in  the  area  of  taxation.  Further  efforts  are  necessary  to 
ensure  the  effective  implementation  of  the  laws  in  force,  to  enforce  payment  of  taxes,  to 
widen  the  tax  base  and,  as  a  consequence,  to  reduce  the  sizeable  informal  economy.  The 
backlog  of  cases  against  decisions  of  the  Customs  Service  and  the  Tax  Administration  has 
increased.  

In the area of competition, there has been no progress on anti-trust policy or state aids rules. 
Administrative capacity has improved but the implementation of competition policy is overall 
at an early stage. Cooperation among the institutions involved in competition issues needs to 

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be  strengthened.  The  Competition  Commission  needs  to  be  more  closely  involved  in  large 
privatisation and restructuring initiatives. 

Kosovo  is  still  to  adopt  a  new  procurement  law.  The  government  has  undertaken  efforts  in 
this regard. The implementation in practice of the existing law gives rise to concerns. The role 
of public procurement officers needs to be strengthened with a view to reinforce monitoring 
of  the  implementation  of  procurement  contracts.  Independence  and  professionalism  in  the 
public  procurement  system  need  to  be  enhanced.  The  authorities  need  to  do  more  to  tackle 
corruption  in  this  area.  Kosovo's  provisions  on  concessions  diverge  significantly  from 
European standards. 

Key legislation still needs to be put in place on intellectual property rights. Significant efforts 
are  needed  on  enforcement  and  awareness-raising.  Kosovo’s  intellectual  property  rights 
regime is at an early stage and implementation is very weak. 

There has been limited progress in alignment in the areas of employment and public health. 
Poor administrative capacity and an inadequate legal framework are issues of concern. Social 
protection and inclusion in Kosovo, as well as social dialogue, need to be improved. The legal 
framework in the area of education has been brought closer to European standards; increased 
administrative capacity is necessary to implement the reforms. Kosovo has developed a five-
year  research  programme  expected  to  improve  capacities  in  this  sector.  This  area  has  been 
made a priority. 

As  regards  sectoral  policies,  development  and  SMEs  need  to  be  promoted  more  effectively 
and  different  strategies  affecting  this  area  should  be  better  co-ordinated.  Efforts  should  be 
stepped  up  in  the  areas  of  agriculture  and  food  safety,  in  particular  as  regards  the 
implementation  of  adopted  legislation  and  upgrading  agrifood  establishments.  A  number  of 
environment laws have been adopted. However, implementation of EU environment standards 
is still at an early stage.  

The  transport  infrastructure  remains  underdeveloped.  Kosovo  has  embarked  on  a  road-
building programme that does not reflect planned traffic flows, and the size of the programme 
crowds  out  investments  in  other  modes  of  transport,  particularly  railways.  Alignment  with 
European standards in the area of aviation has improved. In December 2009, Kosovo adopted 
the aviation security and quality control programmes. 

In the energy sector, there are major challenges with respect to enforcing electricity payments 
and managing an unsustainable growth in power demand. In April, Kosovo adopted an energy 
strategy  covering  the  period  2009-2018.  In  October  2010,  after  considerable  delay,  the 
package of key laws in this area (on energy, on electricity and on the energy regulator) was 
adopted.  

There  has  been  limited  progress  in  the  area  of  information  society  and  media.  The 
independence  and  resources  of  the  Telecommunications  Regulatory  Authority  needs  to  be 
strengthened  and  the  independence  of  the  Independent  Media  Council  guaranteed  in  the 
current revision of the IMC law. A long-term solution needs to be found for the funding of the 
public service broadcaster. 

There  has  been  some  progress  as  regards  financial  control.  However,  Kosovo  is  still  at 
an  early  stage  in  introducing  international  standards.  The  lack  of  financial  independence  of 
the  Office  of  the  Auditor-General  is  still  a  concern.  In  July,  Kosovo  adopted  the  law  on 

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official  statistics.  However,  administrative  capacity  remains  weak  and  further  efforts  are 
needed  to  improve  sectoral  statistics  and,  in  particular,  business  and  macro-economic 
statistics.  

Progress  has  been  mixed  in  the  area  of  justice,  freedom  and  security.  Kosovo  has  made 
some  progress  as  regards  integrated  border  management.  Kosovo  has  taken  over 
responsibilities  from  KFOR  for  managing  the  border  with  Albania.  However,  considerable 
efforts  are  needed  to  ensure  management  of  borders  in  line  with  EU  standards.  The  north 
remains a particular challenge. EULEX has intensified its activities at gates 1 and 31. Kosovo 
has  achieved  limited  progress  in  the  area  of  asylum.  The  number  of  asylum  requests  has 
considerably  increased,  but  overall  has  remained  low.  Most  asylum-seekers  leaving  Kosovo 
for other destinations did so without adequate control by the Kosovo authorities. 

There  has  been  progress  on  alignment  with  European  standards  on  migration.  Kosovo  has 
adopted a readmission law, which is broadly in line with EU requirements. Kosovo has signed 
a  number  of  bilateral  readmission  agreements.  The  authorities  have  continued  to  deal 
efficiently  with  readmission  requests  from  European  countries.  This  needs  to  continue. 
A revised strategy for integration of repatriated persons has been adopted as well as an action 
plan for its implementation.  

Money-laundering  remains  an  issue  of  serious  concern.  Kosovo  has  adopted  a  law  against 
money-laundering and financing of terrorism. Cooperation between the Customs Service and 
the Financial Intelligence Centre has improved. The Centre has also improved its cooperation 
with  banks.  However,  Kosovo  is  still  at  an  early  stage  in  adopting  and  implementing 
European  standards  in  this  area.  Capacity  to  investigate  and  prosecute  money-laundering 
cases is still weak. Kosovo authorities do not have sufficient capacity to assume responsibility 
for the management of money-laundering cases. Overall, limited progress has been made in 
addressing economic and financial crime.  

There has been limited progress in preventing drug-trafficking. Security of storage rooms for 
seized  drugs  has  been  upgraded.  The  authorities  have  conducted  a  number  of  successful 
operations.  However,  seizures,  arrests  and  prosecutions  remain  at  a  low  level.  Efforts  in 
tackling drug-trafficking are still at an early stage.  

Kosovo  has  made  some  progress  in  policing.  Public  order  has  been  maintained.  The 
enthronement  ceremony  of  the  patriarch  of  the  Serbian  Orthodox  Church  took  place  in  a 
peaceful  atmosphere.  The  new  organisational  structure  of  the  Kosovo  Police  has  been 
approved, including job descriptions for senior management. The strategy and action plan on 
small  and  light  arms  control  and  collection  have  been  adopted.  The  collection  of  illegal 
weapons  has  increased.  However,  the  Kosovo  Police  needs  to  build  an  intelligence-led 
policing capability in order to tackle serious crime more effectively.  

There has been limited progress in tackling organised crime. Kosovo has adopted a strategy 
on crime prevention. Special prosecutors have been appointed to deal with organised crime. 
A series of bilateral agreements with third countries have been signed in this area. However, 
Kosovo needs to put in place an effective witness protection framework. There have been no 
high-level  convictions.  There  have  been  cases  of  intimidation  of  judges  and  prosecutors. 
Organised crime continues to be a very serious concern. The authorities need to step up their 
efforts to tackle organised crime operating in Western Balkans and Europe, notably through 
investigations,  arrests,  confiscation  of  assets  and  convictions.  Kosovo  needs  to  deliver 
concrete results in this area.  

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There  has  been  limited  progress  as  regards  trafficking  of  human  beings.  There  have  been 
a number of arrests in a case of smuggling of human beings. Kosovo has adopted international 
standards  of  care  for  victims  of  trafficking.  However,  the  number  of  detected  cases  and 
identified  victims  of  trafficking  remains  low  and  does  not  fully  reflect  the  scale  of  the 
phenomenon. The level of punishment of perpetrators is not always adequate. The capacity of 
Kosovo institutions to investigate, prosecute and convict trafficking in human beings needs to 
be strengthened. As regards the anti–terrorism measures, some progress has been made. The 
capacity of the counter-terrorism unit within the Kosovo Police has been enhanced.  

Kosovo  has  made  limited  progress  in  personal  data  protection.  A  law  on  the  protection  of 
personal  data  has  been  adopted.  The  data  protection  supervisory  authority  is  yet  to  be 
established. Individuals in Kosovo are not sufficiently informed about their rights regarding 
protection  of  their  personal  data.  Progress  in  this  area  is  key  for  Kosovo's  international 
cooperation in the area of justice and home affairs. 

Turkey 

Turkey continues to sufficiently fulfil the political criteria. The recent constitutional reforms 
created  the  conditions  for  progress  in  a  number  of  areas,  such  as  the  judiciary  and 
fundamental rights. They now need to be implemented in line with European standards. The 
democratic  opening,  aimed  notably  at  addressing  the  Kurdish  issue,  did  not  yet  meet  the 
expectations.  

The  package  of  constitutional  amendments  approved  in  a  referendum  on  12  September  is  a 
step in the right direction. It addresses a number of priorities of the Accession Partnership in 
the area of the judiciary, fundamental rights and public administration. However, the drafting 
and  adoption  of  the  constitutional  reforms  was  not  preceded  by  a  consultation  process 
involving  political  parties  and  civil  society  at  large.  Implementation  of  the  package,  in  line 
with  European  standards  and  in  a  transparent  and  inclusive  way,  will  be  key.  Significant 
efforts are still needed on fundamental rights. The quantity of legal actions against journalists 
and undue pressure on the media undermine freedom of the press in practice. The democratic 
opening, announced by the government in August 2009 to address notably the Kurdish issue, 
was only partly followed through by the government. The decision of the Constitutional Court 
to close down the Democratic Society Party (DTP) and a surge in PKK terrorist attacks also 
undermined this policy.  

As regards democracy and the rule of law in Turkey, the investigation of the alleged criminal 
network Ergenekon continued. This investigation and the probe into several other coup plans 
remains  an  opportunity  for  Turkey  to  strengthen  confidence  in  the  proper  functioning  of  its 
democratic  institutions  and  the  rule  of  law.  However,  there  are  concerns  as  regards  judicial 
guarantees for all suspects. Turkey still needs to align its legislation as regards procedure and 
grounds for closures of political parties with European standards.  

As regards, public administration reform, some progress has been made with the adoption of 
the  constitutional  amendments,  in  particular  towards  the  establishment  of  an  Ombudsman 
institution, protection of personal data and access to information. Further efforts are needed in 
particular on reforming the civil service. 

Progress has been made as regards the civilian oversight of security forces. The constitutional 
package  limits  the  competence  of  military  courts  and  opens  the  decisions  of  the  Supreme 
Military  Council  to  judicial  review.  However,  senior  members  of  the  Armed  Forces  have 

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continued to make statements beyond their remit, in particular on judicial issues. No progress 
was made in terms of parliamentary oversight over the defence budget.  

In the area of the judiciary progress was achieved in the implementation of the judicial reform 
strategy.  The  adoption  of  the  constitutional  amendments  on  the  composition  of  the  High 
Council  of  Judges  and  Prosecutors  is  a  positive  step.  However,  the  Minister  of  Justice  still 
chairs the High Council and has the last word on investigations. During the preparation and 
adoption process  of the implementing legislation, the establishment of  an effective  dialogue 
with  all  stakeholders  will  be  needed.  This  would  contribute  to  an  implementation  of  these 
reforms in line with European standards, in a transparent and inclusive way. 

Progress  has  been  made  as  regards  the  development  of  a  comprehensive  anti-corruption 
Strategy  and  Action  Plan.  However,  corruption  remains  prevalent  in  many  areas.  Turkey 
needs to develop a track record of investigations, indictments and convictions.  

Concerning human rights and the protection of minorities, some progress has been made, in 
particular  with  respects  to  freedom  of  assembly  and  women's,  children's  and  cultural  rights. 
However,  significant  efforts  are  still  needed  in  particular  concerning  freedom  of  expression 
and freedom of religion.  

As  regards  the  observance  of  international  human  rights  law,  the  human  rights  institutions 
need to be brought fully in line with the UN principles. 

The positive trend on the prevention of torture and ill-treatment continues. Some high profile 
cases of human rights violations have resulted in convictions. However, disproportionate use 
of force by law enforcement authorities continues to be reported and is of concern. 

The implementation of the prison reform programme continues. However, the high proportion 
of  prisoners  in  pre-trial  detention  remains  one  of  the  most  significant  problems.  Health 
services in prison need to be improved. 

Turkish law does not sufficiently guarantee freedom of expression in line with the ECHR and 
the  ECtHR  case  law.  The  high  number  of  cases  initiated  against  journalists  is  of  concern. 
Undue political pressures on the media and legal uncertainties affect the exercise of freedom 
of the press in practice. The frequent website bans are a source of concern.  

As  regards  freedom  of  assembly,  there  has  been  some  progress.  Demonstrations  which  had 
stirred  unrest  in  the  past,  such  as  the  Newroz  celebrations  (the  Kurdish  new  year)  or  1st  of 
May, took place peacefully this year and were well coordinated with the authorities. However, 
some demonstrations in the Southeast related to the Kurdish issue continued to be marked by 
excessive use of force by security forces. 

The  legal  framework  on  freedom  of  association  is  broadly  in  line  with  EU  standards. 
However,  the  authorities  exercise  excessive  controls  and  continue  to  launch  closure  cases 
against LGBT associations.  

As regards freedom of religion, freedom of worship continues to be generally respected. The 
implementation of the law on foundations has been continuing, albeit with some delays and 
procedural  problems.  The  dialogue  with  the  Alevis  and  non-Muslims  continued  but  has  not 
yet  produced  results.  Members  of  minority  religions  continue  to  be  subject  to  threats  by 
extremists. A legal framework in line with the ECHR has yet to be established, so that all non-

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Muslim religious communities and Alevi community can function without undue constraints, 
including the training of clergy.  

The  legal  framework  guaranteeing  women's  rights  and  gender  equality  is  broadly  in  place. 
This framework has been strengthened  through the constitutional amendment permitting the 
adoption of positive discrimination measures for women. However, sustained further efforts 
are needed to turn this legal framework into a political, social and economic reality. Ensuring 
women's  rights  and  gender  equality  in  practice  remain  key  challenges  for  Turkey.  Honour 
killings,  early  and  forced  marriages  and  domestic  violence  remain  serious  problems. 
Legislation  needs  to  be  implemented  consistently  across  the  country.  Further  education  and 
awareness raising efforts on women's rights and gender equality are needed. 

There has been progress with regards to children's rights. Turkey aligned its legal framework 
on  juvenile  justice  with  international  standards.  The  gender  gap  in  primary  education 
continued to decrease, but persists in certain parts of the country. Drop-outs of children from 
schools  remain  a  source  of  concern.  Efforts  need  to  be  further  strengthened  in  all  areas 
including  education,  child  labour,  health,  administrative  capacity  and  coordination,  and  to 
build an effective juvenile justice system throughout the country 

The Constitutional amendments broaden trade union rights in Turkey, notably for the public 
service. However, there are restrictive provisions in the current legal framework which are not 
in line with EU standards and ILO Conventions. Lack of consensus between social partners 
and government is an obstacle to the adoption of new legislation. 

Turkey's  approach  to  respect  for  and  protection  of  minorities  and  cultural  rights  remains 
restrictive.  Full  respect  for  and  protection  of  language,  culture  and  fundamental  rights,  in 
accordance  with  European  standards  have  yet  to  be  fully  achieved.  Turkey  needs  to  make 
further efforts to enhance tolerance and promote inclusiveness vis-à-vis minorities. 

Some  positive  steps  were  taken  to  strengthen  cultural  rights,  in  particular  in  relation  to 
Turkey's broadcasting policy in languages other than Turkish. However, restrictions remain, 
particularly on the use of such languages in political life, education and contacts with public 
services.  

The issue of Roma has become more publicly debated and concrete measures to address some 
of  their  concerns  are  underway.  However,  in  the  absence  of  a  comprehensive  policy  to 
advance social inclusion of Roma, the latter still frequently face discriminatory treatment in 
access to education, housing, health services and public services.  

As  concerns  the  East  and  Southeast,  the  government's  democratic  opening  fell  short  of 
expectations  as  few  measures  have  been  put  into  practice.  It  is  important  that  efforts 
addressing  the  Kurdish  issue  are  sustained  through  broad  consultation.  The  anti-terror 
legislation  needs  to  be  amended  to  avoid  undue  restrictions  on  the  exercise  of  fundamental 
rights.  The  existence  of  numerous  landmines  continues to raise  concerns.  The  village  guard 
system still needs to be phased out.  

There was a surge of PKK terrorist attacks since June, which claimed many lives. The PKK is 
on  the  EU  list  of  terrorist  organisations.  Turkey  and  the  EU  enhanced  dialogue  on  counter-
terrorism. 

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internally  displaced  persons 

Compensation  of 
(IDPs)  has  continued.  However, 
implementation  is  not  effective.  The  government  has  not  developed  an  overall  national 
strategy to address the IDP issue and needs to step up efforts to address IDPs' needs. The legal 
framework  for  refugees  and  asylum  seekers  and  the  implementation  of  circulars  regarding 
procedures  for  applications  need  to  be  strengthened.  Further  improvements  of  the  general 
conditions in foreigners’ detention centres is important. 

With  regard  to  regional  issues  and  international  obligations,  Turkey  continued  to  express 
public  support  for  the  negotiations  between  the  leaders  of  the  two  communities  under  the 
good offices of the UN Secretary-General to find a comprehensive settlement of the Cyprus 
problem.  However,  despite  repeated  calls  by  the  Council  and  the  Commission,  Turkey  still 
has  not  complied  with  its  obligations  as  outlined  in  the  declaration  of  the  European 
Community  and  its  Member  States  of  21  September  2005  and  in  the  Council  conclusions, 
including the December 2006 and December 2009 conclusions. It does not meet its obligation 
of  full,  non-discriminatory  implementation  of  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. There is no progress towards normalisation 
of bilateral relations with the Republic of Cyprus.  

As regards relations with Greece, there is renewed impetus to improve bilateral relations. This 
has yielded some positive results in the area of trade, education, transport, energy, culture and 
environment.  Bilateral  exploratory  talks  have  intensified.  A  considerable  number  of  formal 
complaints  were  made  by  Greece  about  continued  violations  of  its  airspace  by  Turkey, 
including  flights  over  Greek  islands.  Greece  also  made  complaints  about  violations  of  its 
territorial waters. 

The  EU  and  Turkey  held  a  dialogue  on  areas  of  common  concern  in  the  Western  Balkans. 
Turkey  took  a  number  of  initiatives  in  the  region,  including  tripartite  talks  with  Serbia  and 
Bosnia and Herzegovina. Relations with Bulgaria remain positive.  

The  Turkish  economy  was  hit  hard  by  the  global  financial  crisis,  but  quickly  recouped  its 
losses, as it started growing across the board at robust rates since the second quarter of 2009. 
The government budget and the central bank have successfully provided substantial support 
for aggregate demand, particularly via a significant easing of the fiscal and monetary stance. 
High  growth  rates  are  accompanied  by  rapidly  widening  trade  and  current  account  deficits, 
falling  unemployment  –  though  still  higher  than  pre-crisis  levels  -  and  rising  inflationary 
pressures. The exiting strategy from crisis-related intervention policies focuses on achieving 
strong, sustained and balanced growth. The design of a fiscal rule has been completed and has 
the  potential  of  considerably  improving  the  fiscal  performance  over  time.  However,  its 
adoption by the Parliament has been delayed. Progress with respect to structural reform was 
mixed, but lower real interest rates and stronger economic fundamentals should provide scope 
for an acceleration of structural reforms.  

As regards the economic criteria, Turkey is 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 continues implementing its comprehensive structural reform programme. 

In  the  aftermath  of  the  crisis,  consensus  on  economic  policy  essentials  has  been  preserved. 
The anti-crisis measures have cushioned the economic downturn although they have increased 
Turkey's fiscal deficit and debt stock. They are being phased out gradually. A timely, targeted 
and  well  anchored  withdrawal  of  the  stimuli  remains  a  challenge  in  order  to  maximise  the 

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benefits  from  previous  years  of  fiscal  consolidation  and  overall  medium-term  fiscal 
sustainability,  and  to  achieve  strong,  sustained  and  balanced  growth.  Privatisation  has 
advanced,  albeit  at  a  slower  pace  due  to  the  global  economic  environment.  The  financial 
sector has shown remarkable strength thanks to earlier reforms. Investment picked up strongly 
and some limited progress was made in upgrading the country's human and physical capital. 
Turkey  was  able  to  partly  diversify  its  trade  towards  new  markets,  thereby  alleviating  to  a 
certain extent the impact of the crisis. Trade and economic integration with the EU remained 
high. 

However,  external  imbalances  and  financing  needs  have  been  growing  significantly  on  the 
back  of  resuming  growth  and  although  access  to  external  finance  remained  unproblematic. 
Inflationary  pressures  increased  considerably,  chiefly  because  of  pressures  stemming  from 
energy inputs and buoyant economic activity. Making more progress with fiscal transparency, 
strengthening the inflation targeting framework and preserving financial stability remain key 
conditions  in  order  to  minimize  the  risks  of  a  boom-bust  scenario.  The  unemployment  rate 
remains  higher  than  its  pre-crisis  levels  and  demographic  factors  are  expected  to  keep 
unemployment high in coming years. The low capacity to create new jobs is clearly linked to 
a  skills-mismatch  between  labour  demand  and  supply,  as  well  as  excessive  labour  market 
regulation.  There  are  obstacles  to  market  exit  and  bankruptcy  proceedings  are  relatively 
cumbersome.  The  crisis  has  further  complicated  the  access  of  SMEs  to  finance.  The  legal 
environment,  and  in  particular  court  procedures,  continue  to  pose  practical  challenges  and 
create obstacles to a better business environment. The current product market regulation and 
the  persisting  lack  of  transparency  on  the  allocation  of  state  aids  are  not  conducive  to 
improving the business climate. The informal economy remains an important challenge. 

Turkey continued improving its ability to take on the obligations of membership. Progress, 
at times uneven, was made in most areas. Alignment is advanced in certain areas, such as the 
free movement of goods, intellectual property rights, anti-trust policy, energy, enterprise and 
industrial policy, consumer protection, statistics, Trans-European Networks, and science and 
research. Efforts need to continue to pursue alignment in areas such as environment, company 
law,  public  procurement  and  right  of  establishment  and  freedom  to  provide  services.  As 
regards  the  Customs  Union,  alignment  needs  to  be  completed.  A  number  of  longstanding 
trade irritants remain unresolved, such as conformity assessments checks, import and export 
licensing  requirements,  IPR  effective  enforcement,  requirements  for  the  registration  of  new 
pharmaceutical  products  and  tax  discriminatory  treatment.  It  is  essential  that  Turkey  fully 
implements  the  Customs  Union  and  removes  a  large  number  of  obstacles  affecting  EU 
products  that  are  in  free  circulation.  For  most  areas  it  is  crucial  that  Turkey  improves  its 
administrative capacity to cope with the acquis. 

With regards to free movement of goods legislative alignment is quite advanced, but limited 
progress  can  be  reported.  Technical  barriers  to  trade  continue  to  exist  hampering  free 
circulation of goods and new barriers have been added. Little progress has been made in the 
area of freedom of movement for workers, for which alignment is at an early stage. Alignment 
in  the  areas  right  of  establishment  and  the  freedom  to  provide  services  is  at  an  early  stage. 
Very  limited  progress  can  be  reported  as  regards  mutual  recognition  of  professional 
qualifications. No progress has been recorded in the fields of services and establishment. On 
free movement of capital progress was made, in particular on alignment with the acquis in the 
area  of  the  fight  against  money  laundering.  The  legal  framework  against  financing  of 
terrorism is still incomplete. Turkey made no progress on capital movement and payments or 
on payment systems.  

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Some  progress  can  be  reported  in  the  area  of  public  procurement,  in  particular  on  the 
institutional  set-up  and  administrative  capacity.  The  alignment  strategy  needs  to  be  adopted 
and  Turkey  needs  to  further  align  its  legislation,  particularly  on  utilities,  concessions  and 
public-private  partnerships.  On  company  law  limited  progress  can  be  noted.  The  new 
Commercial Code has not been adopted. Administrative capacity needs further strengthening 
and  the  legal  and  institutional  framework  for  auditing  is  not  yet  in  place.  Alignment  on 
intellectual  property  law  is  relatively  advanced.  Turkey's  agreement  to  establish  an 
Intellectual Property Rights (IPR) Dialogue with the Commission addresses a key element of 
the accession negotiations. However, the adoption of necessary IPR legislation, including on 
deterrent  criminal  sanctions,  is  pending.  Coordination  and  cooperation  on  IPR  needs  to  be 
improved. 

On competition policy, alignment in the field of anti-trust is at a high level. Turkey enforces 
the  competition  rules  effectively.  In  the  area  of  state  aid,  the  adoption  of  a  State  aid  law 
establishing  a  monitoring  authority  is  an  important  step  forward.  Now,  this  monitoring 
authority needs to become operational as soon as possible.  

There  has  been  some  progress  on  financial  services,  as  supervisory  authorities  introduced 
further  prudential  measures.  Overall,  Turkey’s  alignment  with  the  acquis  remains  partial. 
With regard to information society and the media in the area of electronic communication and 
information  technologies  significant  work  has  been  achieved  by  the  Telecommunications 
regulator as regards implementing regulations. In the area of audiovisual policy some progress 
can  be  reported.  However,  several  obstacles  to  market  development  remain  in  place.  The 
legislation on electronic communications, information society services and audiovisual policy 
require further adjustments. 

On  agriculture  and  rural  development  there  has  been  limited  progress.  Agriculture  support 
policies showed only minor transition towards the Common Agricultural Policy (CAP). Initial 
steps  have  been  taken  for  the  development  of  an  Integrated  Administration  and  Control 
System.  However,  Turkey  failed  to  fully  remove  technical  barriers  to  trade  in  bovine 
products. Slippage in the timetable for accreditation of the IPARD structures also represent a 
shortcoming.  Further  progress  is  required  on  agricultural  statistics,  farm  accountancy  data 
network,  quality  policy  and  organic  farming.  Regarding  food  safety,  veterinary  and 
phytosanitary  policy  progress  has  been  achieved,  notably  through  the  adoption  of  key 
framework  legislation.  The  new  alignment  strategy  should  facilitate  transposition  and 
implementation of the relevant acquis. Concerning fisheries, some progress has been made on 
resource  and  fleet  management,  inspection  and  control  and  implementation  of  international 
agreements.  Further  progress  needs  to  be  made  on  legislative  alignment,  administrative 
structures and market policy, structural action and state aid. 

Some progress has been achieved in alignment of the transport sector. Legislative alignment 
has  reached  an  advanced  level  in  the  aviation,  maritime  and  road  sectors.  No  progress  has 
been made regarding rail market opening and safety. The lack of communications between air 
traffic  control  centres  in  Turkey  and  the  Republic  of  Cyprus  continues  to  seriously 
compromise  air  safety.  In  the  maritime  sector,  no  progress  has  been  made  on  becoming  a 
party  to  international  conventions.  Administrative  and  implementation  capacity  remains 
limited.  

In  the  energy  sector,  there  has  been  good  progress  in  alignment  on  electricity,  renewable 
energy and energy efficiency, as well as on security of supply. Further efforts are needed in 
the fields of natural gas, nuclear energy, nuclear safety, radiation protection and state aid. 

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On  taxation,  there  has  been  some  progress  on  alignment,  particularly  towards  eliminating 
discriminatory  practices  on  tobacco.  However,  the  increases  in  excise  duty  on  alcoholic 
beverages  contradict  the  action  plan  agreed  with  the  Commission,  a  key  requirement  for 
making  further  progress  in  the  accession  negotiations.  Efforts  for  reinforcing  the  tax 
administration,  combating  informal  economy  and  increasing  voluntary  compliance  were 
pursued. Hardly any progress can be reported on direct and indirect taxation.  

On economic and monetary policy, the preparations are well on track. Efforts are needed for 
further alignment. This concerns in particular the full independence of the Central Bank and 
the prohibition of privileged access of the public sector to financial institutions. 

There has been good progress in the area of statistics, in which the overall level of alignment 
is  advanced.  TurkStat  further  improved  the  coordination  of  the  statistical  system.  Good 
progress has been made on the business register and on sector statistics. Further alignment is 
needed in national accounts and in agriculture statistics. 

Turkey  made  some  progress  in  aligning  to  the  acquis  in  the  field  of  social  policy  and 
employment. The Constitutional amendment package brings significant improvements in the 
area  of  social  dialogue  in  the  public  sector  and  paves  the  way  for  positive  discrimination 
towards  women,  children,  elderly  and  disabled  people.  However,  overall  alignment  remains 
limited  and  the  administrative  capacity  needs  strengthening.  A  reform  to  achieve  full  trade 
union  rights  in  line  with  EU  standards  and  ILO  conventions  is  still  pending.  There  are  a 
number of concerns regarding undeclared work, low female employment rates, enforcement 
of  the  health  and  safety  legislation.  A  general  policy  framework  to  combat  poverty  is  also 
lacking.  

Further progress was made in the area of enterprise and industrial policy, in which the level 
of  alignment  is  sufficient.  This  progress  relates  to  the  Industrial  Strategy  and  Action  Plan, 
wider  availability  of  enterprise  and  industrial  policy  instruments  and  adoption  of  sectoral 
strategies and roadmaps. Limited improvements can be reported on the business environment 
and continuing efforts on monitoring and evaluation.  

Progress was made on trans-European networks. In particular, Turkey reached an advanced 
stage in negotiations for the future Trans-European Network for Transport. Some progress can 
be reported on energy networks.  

Progress,  albeit  uneven,  was  made  in  the  field  of  regional  policy  and  co-ordination  of 
structural  instruments.  In  particular,  the  legislative  and  institutional  framework  for 
implementation  of  IPA  components  III  and  IV  has  been  finalised.  The  involvement  of  sub-
national stakeholders in preparing the project pipeline improved. At national level there is still 
a  need  to  improve  the  administrative  capacity  of  the  institutions  involved  in  the 
implementation  of  the  pre-accession  funds  in  order  to  achieve  a  more  efficient  use  of  pre- 
thereby also preparing Turkey for the use of structural funds.  

Overall, there has been progress in the area of the judiciary. The adoption of the constitutional 
amendments on the composition of the High Council of Judges and Prosecutors is a positive 
step.  This  is  also  true  for  the  limitation  of  the  competence  of  military  courts.  During  the 
preparation and adoption process of the enacting legislation, the establishment of an effective 
dialogue  with  all  stakeholders  and  the  civil  society  at  large  will  be  needed.  The 
implementation of these reforms in line with European standards will be key. With respect to 
anti-corruption,  progress  was  made  as  regards  the  development  of  a  comprehensive  anti-

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corruption  strategy  and  an  action  plan.  The  development  of  a  body  to  oversee  and  monitor 
their  implementation  also  progressed.  However,  effective  implementation  is  necessary  and 
Turkey needs to develop a track record of investigation, indictments, and convictions.  

Progress,  albeit  uneven,  was  made  in  the  area  of  justice,  freedom  and  security.  Substantial 
progress was made towards finalising negotiations on an EU-Turkey readmission agreement. 
There is a necessity for clear institutional arrangements and sufficient resources on migration 
and  asylum.  Some  progress  can  be  reported  in  the  area  of  drugs  and  customs  cooperation. 
Limited progress can be reported in the area of external borders and Schengen and organised 
crime and terrorism. Little progress has taken place in the area of visa policy. No progress to 
be reported on judicial cooperation in criminal and civil matters. Overall, urgent adoption of 
draft legislation and ratification of signed international agreements is key. 

towards 

Turkey  is  well  prepared  in  the  area  of  science  and  research  and  good  progress  has  been 
achieved 
the  European  Research  Area.  Overall,  Turkey’s 
participation and success rate in Framework Programmes are on the rise. Further efforts are 
required to maintain these rates all through the 7th Framework Programme for Research and 
Technological Development (FP7). 

integration 

into 

For education and culture there has been some progress, in particular in the area of education. 
The overall school enrolment continued to increase with slight gender-related improvements 
and Turkey continued to improve its performance against the EU common benchmarks. There 
has been some progress in the area of culture but no progress on legislative alignment. 

Regarding  environment,  progress  was  made  on  further  alignment.  Turkey  has  made  good 
progress  on  waste  management  whereas  limited  progress  can  be  reported  on  horizontal 
legislation, air and water quality, industrial pollution, chemicals and administrative capacity. 
However, Turkey has made very limited progress as regards climate change and no progress 
in the area of nature protection. Turkey made progress on administrative capacity by putting 
in place coordinating mechanisms. Investments need to be increased.  

Some  progress  was  made  on  aligning  to  the  acquis  on  consumer  and  health  protection. 
However,  administrative  capacity  needs  to  be  increased.  More  efforts  are  necessary  on 
consumer protection, to strengthen the consumer movement and to ensure due enforcement. 
Coordination and cooperation between stakeholders remain weak. There is good progress at 
the level of alignment as concerns public health. However, enforcement remains insufficient.  

On customs, the level of alignment is high, both with regards to legislation and administrative 
capacity. However, duty free shops at entry points and requirements for importers of products 
in  free  circulation  in  the  EU  to  submit  information  on  origin  prior  to  customs  clearance 
contradict  the  acquis.  Legislation  on  free  zones,  surveillance  and  tariff  quotas  still  need 
alignment.  Further  efforts  are  required  to  improve  risk-based  controls  and  simplified 
procedures in order to facilitate legitimate trade and reduce physical controls. Commitments 
to enforce effectively intellectual property rights and the fight against counterfeit goods need 
to be respected. 

Turkey  has  achieved  a  high  level  of  alignment  in  the  area  of  external  relations.  However, 
further  work  remains  to  be  done  in  many  areas,  in  particular  on  the  general  system  of 
preferences with regard to its geographical coverage.  

Alignment  with  the  EU’s  common  foreign  and  security  policy  has  continued.  Turkey  has 
sought dialogue and consultation with the EU on foreign policy issues. It did not align with 

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the EU in the UN Security Council for additional sanctions against Iran. Turkey made efforts 
to improve further relations with neighbouring countries such as Iraq, including the Kurdish 
regional government, and Syria. Relations with Israel significantly deteriorated following the 
Gaza flotilla incident. The protocols signed with Armenia to normalise relations are still not 
ratified. 

Turkey is contributing substantially to the Common Security and Defence Policy (CSDP) and 
seeking  greater  involvement  in  CSDP  activities.  The  issue  of  EU-NATO  cooperation 
involving all EU Member States beyond the 'Berlin plus arrangements' remains to be resolved. 
Turkey has not aligned with the EU position on membership of the Wassenaar Arrangement.  

Limited progress can be reported in the area of financial control, which already shows a fairly 
advanced level of alignment. Legislation implementing the PFMC Law is in place, whilst the 
PIFC policy paper and action plan require revision. The revised law on the Turkish Court of 
Accounts,  bringing  external audit into line with relevant international standards, has not yet 
been  adopted.  The  Turkish  AFCOS  has  not  yet  evolved  into  an  operational  network. 
Permanent structures are required for contacts with the Commission on the protection of the 
euro  against  counterfeiting.  Turkey's  alignment  with  the  basic  principles  and  institutions  of 
the  acquis  in  the  area  of  financial  and  budgetary  provisions  is  well  advanced,  although 
preparedness in the area of the own resources acquis is at an early stage. 

Iceland 

The first progress report on Iceland confirms the assessment of the Commission's Opinion of 
February  2010  that  Iceland  meets  the  political  criteria.  Iceland  is  a  functioning  democracy 
with  strong  institutions  and  deeply  rooted  traditions  of  representative  democracy.  The 
country's judicial system is well established and the judiciary is of a high standard. As regards 
human  rights  and  the  protection  of  minorities,  Iceland  continues  to  safeguard  fundamental 
rights  and  to  ensure  a  high  level  of  cooperation  with  international  mechanisms  for  the 
protection of human rights.  

However,  the  Opinion  also  identified  a  number  of  shortcomings.  The  report  confirms  that 
Iceland has taken some measures to address them. 

As far as  the political criteria is concerned, the  coalition  government remained stable over 
the  reporting  period  despite  the  difficult  economic  background  and  diverging  views  among 
the  Icelandic  political  forces  and  population  on  the  prospect  of  EU  accession  However, 
support  for  the  accession  process  has  increased  at  the  end  of  the  reporting  period  with  a 
majority in favour of conducting accession negotiations.  

Some  progress  has  been  achieved  in  identifying  those  responsible  actors  for  the  collapse  of 
the Icelandic banking system and in addressing its political and administrative consequences. 
This is a notable feature of the functioning of Icelandic democratic institutions. The report of 
the independent Special Investigation Commission, published in April 2010, led to a number 
of  recommendations  to  stabilize  the  financial  system  and  to  increase  its  supervision.  In 
parallel, the Office of the Special Prosecutor continued to conduct a number of investigations 
in the aftermath of the financial crisis.  

Good  progress  was  made  to  further  improve  the  legal  framework  related  to conflict  of 
interests and the financing of political parties. The Judiciary Act was amended to change the 
rules on the appointment of judges with the aim of further strengthening the independence of 

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the judiciary. Implementation of the Special Investigation Commission recommendations, the 
amended  framework  on  conflict  of  interests  as  well  as  the  revised  procedures  on  judicial 
appointments is underway. The impact of these measures will need to be reviewed at a later 
stage. 

Both government and parliament have continued to function well. The government took steps 
to  further  strengthen  the  public  administration.  The  negotiating  committees  in  charge  of 
coordinating the overall accession process work smoothly.  

The  Council  of  Europe  Framework  Convention  for  the  Protection  of  National  Minorities 
remains to be ratified. 

The economy of Iceland went into a deep and long recession and prospects for even a mild 
recovery remain uncertain. Unemployment has increased and public finances have suffered a 
marked  deterioration  with  higher  fiscal  deficits  and  a  significant  rise  in  the  already  high 
public  debt.  On  the  other  hand,  inflation  has  been  gradually  and  steadily  coming  down.  A 
prudent  macroeconomic  policy  mix  focuses  one  exchange  rate  stabilisation  and  fiscal 
consolidation.  A  still  dysfunctional  financial  sector  and  widespread  private  sector  balance 
sheet  imbalances  as  well  as  a  very  high  external  debt  represent  key  challenges.  The  IMF 
programme has been on track. 

As regards the economic criteria, Iceland can be considered a functioning market economy. 
However,  financial  sector  weaknesses  and  capital  movement  restrictions  still  impede  an 
efficient  allocation  of  resources.  Iceland  could  regain  the  capacity  to  cope  with  competitive 
pressures and market forces within the single market over the medium term, provided that it 
continues  to  address  current  structural  weaknesses  through  appropriate  macroeconomic 
policies and structural reforms.  

The policy response has by and large been appropriate and supportive to re-establish a higher 
degree  of  macroeconomic  stability,  although  prospects  for  a  swift  resumption  of  economic 
growth remain uncertain. Fiscal consolidation continued; fiscal deficits have started to decline 
and  public  debt  has  been  restructured  with  a  view  to  smoothing  its  profile  and  reducing 
exchange  rate  risks.  Inflation  has  come  down  and  key  policy  interest  rates  have  been 
gradually lowered. A higher trade surplus has supported a slight appreciation of the domestic 
currency.  Foreign  exchange  reserves  have  increased,  however  this  was  achieved  largely  on 
the basis of official external financing. The labour market remained flexible and participation 
rates  relatively  high.  The  country  enjoys  good  basic  infrastructure,  abundant  natural 
resources, and a well-educated population. 

However,  the  economy  is  still  struggling  with  the  effects  of  the  financial  meltdown.  Public 
finances remain confronted with the challenge to implement severe spending cuts and suffer 
from significant contingent liabilities related to financial sector distress, with a gross general 
government debt level of almost 90% of GDP. Despite real wage adjustments, unemployment 
has  risen  markedly.  The  reconstruction  of  the  banking  sector  has  progressed,  but  banks  are 
still suffering from weak asset quality which undermines their ability to finance the economy. 
Widespread  private  sector  balance  sheet  imbalances  pose  threats  to  financial  stability.  In 
addition,  Supreme  Court  rulings  declaring  foreign  exchange  indexed  loans  illegal  created 
uncertainty, notably on the treatment of corporate sector loans. This could  further erode the 
financial  situation  of  domestic  banks  as  they  would  have  to  shoulder  the  additional  burden 
instead of borrowers. The process of corporate sector debt restructuring has progressed slowly 
and  the  debt  overhang  is  limiting  the  scope  for  new  investment,  holding  back  the  recovery. 

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Investment in large infrastructure projects is currently still under review because of political 
discussions  and  lack  of  funding.  The  business  environment  remained  hampered  by  capital 
controls, relatively high interest rates and difficult access to financing, especially for SMEs.  

In this first progress report, Iceland's ability to assume the obligations of membership was 
assessed  in  light  of  its  participation  in  the  European  Economic  Area  (EEA)  and  taking  into 
account the exemptions granted under the EEA. The overall level of preparedness to meet EU 
acquis requirements remains good, in particular due to Iceland's participation in the European 
Economic Area. 

The  Icesave  dispute  remains  unresolved.  The  bill  authorizing  a  state  guarantee  on  the  loans 
granted  by  the  governments  of  the  UK  and  the  Netherlands  for  the  compensation  they 
provided to their citizens holding saving accounts in Icesave was rejected by referendum in 
March  2010.  The  EFTA  Surveillance  Authority  (ESA)  send  a  letter  of  formal  notice  to  the 
Iceland  government  in  May  2010,  hereby  taking  the  first  step  in  an  infringement  procedure 
against  Iceland  arguing  that  Iceland  acted  in  breach  of  the  Deposit  Guarantee  Scheme 
Directive by leaving the depositors in Icesave's Dutch and UK branches without the minimum 
guarantee.  The  European  Commission  shares  the  legal  analysis  of  ESA.  Negotiation  efforts 
between the representatives of the three governments did not yield a result yet. 

Preparations to take on the obligations of membership in the medium term continued in areas 
partly covered by the EEA as well as in chapters not covered by the EEA. Iceland continues 
to be largely aligned and applies a substantial part of the acquis in the fields covered by the 
EEA  such  as  free  movement  of  goods,  freedom  of  movement  of  workers,  right  of 
establishment and freedom to provide services, free movement of capital, public procurement, 
company  law,  intellectual  property  law,  competition,  financial  services  and  information 
society and media.  

However, efforts to further align with the EU acquis, in particular in areas not covered by the 
EEA, and to ensure its implementation and enforcement  need  to continue. It should also be 
noted that the following areas are likely to pose challenges in the accession process: financial 
services,  agriculture  and  rural  development,  fisheries,  free  movement  of  capital  as  well  as 
environment. 

The  government's  efforts  to  address  the  fallout  of  the  economic  and  financial  crisis  led  to 
significant  budgetary  cuts.  Attention  is  needed  to  ensure  that  resources  remain  available  for 
the necessary preparations associated with the process of EU accession. 

Iceland continues to be largely in line with the acquis in the area of free movement of goods. 
However, some elements are not yet fully in place as far as horizontal measures and the old 
approach product legislation are concerned. 

A satisfactory level of alignment has been reached in the field of free movement of workers. 
Preparations  for  the  coordination  of  social  security  systems  remain  to  be  completed. 
Legislation  on  the  right  of  establishment  and  freedom  to  provide  services  is  broadly  in  line 
with the exception of the services and postal directives.  

Iceland  applies  the  acquis  on  free  movement  on  capital,  with  some  exceptions  In  close 
cooperation  with  the  IMF,  the  Icelandic  authorities  have  committed  to  gradually  remove 
restrictions on capital movements and payments. Nevertheless, capital flow restrictions were 
meanwhile extended until August 2011; the maximum amount of foreign currency that can be 

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bought for travel was reduced. Significant and sustained efforts are still needed to remove the 
existing restrictions on capital movements, including foreign investment in fisheries. 

Iceland  has  implemented  the  main  body  of  the  acquis  on  public  procurement  and  overall 
alignment is very good. However, the administrative capacity remains to be further enhanced 
to ensure proper implementation of public procurement policies.  

Good  progress  was  made  on  company  law.  However,  full  alignment  with  accounting 
standards is not achieved. Iceland continues to be largely in line with the acquis in the field of 
intellectual property law but a comprehensive enforcement policy is needed. 

Iceland  has  reached  a  high  level  of  alignment  regarding  the  competition  acquis  and  the 
relevant administrative structures are in place. The state aid measures taken in response to the 
financial crisis remain to be assessed. 

Full  implementation  of  the  acquis  on  financial  services,  together  with  a  reinforced 
supervisory framework, remains to be ensured. Implementation is not complete in some key 
areas including insurance and securities markets. 

Iceland  has  already  reached  a  high  level  of  alignment  and  applies  a  substantial  part  of  the 
acquis  in  the  field  of  the  information  society  and  media  However,  the  provisions  of  the 
telecom  reform,  the  audiovisual  media  services  directive  and  the  policies  derived  from  the 
recent adoption of the European Digital Agenda remain to be implemented. 

Preparations  in  the  field  of  agriculture  and  rural  development  have  not  started  yet.  The 
establishment of structures to address changes in the administration, in particular the setting-
up  of  an  EU-compliant  paying  agency  and  an  integrated  administration  and  control  system 
(IACS) remains to be addressed. 

Some  progress  has  been  made  on  food  safety,  veterinary  and  phytosanitary  policy,  in 
particular in transposing the legislation on general food safety. However, efforts are required 
to strengthen the administrative and laboratories' capacities. Substantial differences from the 
EU system remain as regards the hygiene package, plant protection products, novel food and 
genetically modified food.  

No  new  development  can  be  reported  in  aligning  with  the  EU  common  fisheries  policy. 
Particular  attention  needs  to  be  paid  to  the  internal  market  acquis  regarding  the  right  of 
establishment, the freedom to provide services as well as the free movement of capital in the 
fisheries production and processing sectors where the restrictions in place are not in line with 
the acquis. Mechanisms for implementing and controlling Community support measures have 
yet to be set up.  

On  transport,  the  restrictions  to  foreign  investment  in  air  and  maritime  transport  remain  in 
force. Iceland has already reached a high level of alignment and applies a substantial part of 
the  acquis  in  the  field  of  energy.  Alignment  with  the  acquis  in  the  areas  of  oil  stocks, 
independence of regulatory authority and energy efficiency is moderately advanced. 

No  legislative  developments  can  be  reported  in  the  area  of  taxation.  Iceland  has  already 
achieved  a  good  level  of  administrative  capacity.  Nevertheless,  liaison  offices  and  IT 
interconnectivity are still to be established. 

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Iceland is already highly in line with the acquis in economic and monetary policy. However, 
several shortcomings still exist, in particular regarding full independence of the central bank 
and the prohibition of monetary financing of the public sector. 

As regards statistics, the availability of statistical data in line with EU methodology needs to 
be  improved  in  particular  in  business,  macroeconomic  and  agriculture  statistics.  The 
implementation of major planned statistical operations such as the farm structure survey and 
the population  and  housing census  is not guaranteed as human and financial resources have 
been further cut down.  

Iceland  already  implements  substantial  parts  of  the  acquis  related  to  social  policy  and 
employment. However, a comprehensive employment strategy remains to be elaborated. 

Against  the  difficult  economic  background,  preparations  in  the  area  of  enterprise  and 
industrial policy are well on track. Better access to finance for SMEs is an issue. Alignment 
with EU standards on trans-European networks is high.  

As regards regional policy and coordination of structural instruments, Iceland is at an early 
stage  of  preparations  for  the  implementation  of  the  cohesion  policy  instruments.  An 
appropriate needs analysis, including the identification of the institutions responsible for the 
implementation of the cohesion policy, remains to be performed. 

Iceland's judiciary is of a high standard and Iceland provides for a high level of protection on 
fundamental rights. Iceland has taken some measures to address the shortcomings identified 
in the February 2010 Opinion in particular as regards the procedure of judicial appointments 
and  conflict  of  interest.  However,  implementation  of  these  recommendations  needs  to  be 
further assessed. The legislation on citizens' rights and data protection is not yet in line with 
the acquis. 

Iceland applies the Schengen Agreement and has reached an advanced level of alignment with 
the acquis in the field of justice, freedom and security. The legislation in some areas remains 
to be brought fully in line with the acquis and relevant international instruments need to be 
signed or ratified.  

Iceland is well advanced for EU accession and integration into the European Research Area. 
Alignment with EU standards in the field of education and culture is high. Iceland continued 
to  participate  actively  in  the  Open  Method  of  Coordination  in  education  as  well  as  in 
community programmes including Lifelong Learning, Youth in Action and Erasmus Mundus 
programmes. 

Environmental policy in Iceland is, to a large extent, aligned with the EU acquis through the 
EEA agreement and further progress can be reported in the areas of air quality and sustainable 
development. However, compliance with the climate change as well as the nature protection 
acquis  in  particular  as  regards  protection  of  whales,  seals  and  wild  birds  as  well  as 
conservation  of  natural  habitats  and  of  wild  fauna  and  flora  remains  to  be  achieved.  The 
ratification of key multilateral environmental agreements is pending.  

Iceland has already implemented a significant part of the acquis in the field of consumer and 
health  protection.  However,  the  transposition  of  new  acquis  in  the  area  of  consumer 
protection remains to be completed and the processing of RAPEX notifications needs further 
streamlining. 

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The  customs  legislation  of  Iceland  is,  to  a  large  extent,  in  line  with  the  acquis.  Significant 
further approximation is needed in duty-free legislation and practices. Interconnectivity with 
the EU IT systems remains to be ensured. 

Some progress has been made in the field of external relations. Iceland started preparations to 
assess its obligations relating to the need to amend or renounce its international agreements; it 
also  began  preparations  related  to  the  common  commercial  policy.  Measures  remain  to  be 
taken  to  ensure  that  Iceland's  Official  Development  Assistance  does  not  decline  further. 
Iceland has made good progress and reached an overall good level of alignment in the area of 
foreign, security and defence policy. 

As regards financial control, a gap assessment needs to be carried out in the areas of financial 
management  and  control  systems  and  internal  and  external  audit  to  take  into  account 
internationally accepted standards in force in the EU. Preparations regarding the protection of 
the EU´s financial interests remain to be enhanced. There has been some progress in the area 
of financial and budgetary provisions as Iceland has started to identify the required alignment 
with the acquis. 

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