COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Enlargement Strategy and Main Challenges 2011-2012
Date: 2011-10-12
Institutions: European Commission
Subjects: Albania, Bosnia and Herzegovina, Community acquis, Croatia, Iceland, Kosovo, Montenegro, North Macedonia, Türkiye, accession criteria, pre-accession aid

EUROPEAN COMMISSION 

Brussels, 12.10.2011 
COM(2011) 666 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2011-2012 

{SEC(2011) 1200 final} 
{SEC(2011) 1201 final} 
{SEC(2011) 1202 final} 
{SEC(2011) 1203 final} 
{SEC(2011) 1204 final} 
{SEC(2011) 1205 final} 
{SEC(2011) 1206 final} 
{SEC(2011) 1207 final} 

 
 
 
 
  
 
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

Enlargement Strategy and Main Challenges 2011-2012 

1. 

INTRODUCTION 

The  European  Union's  enlargement  process  has  entered  a  new  phase.  The  completion  of 
accession negotiations with Croatia, opening the way to membership in mid-2013, vindicates 
the  policy  adopted  in  the  aftermath  of  the  devastating  Balkan  conflicts  of  the  1990s,  which 
aims to bring peace, stability, democracy and ultimately EU membership to the whole region. 
As fresh evidence for the transformational power of the EU's enlargement policy, it provides 
new momentum for reform in all enlargement countries. 

The EU’s enlargement policy, as enshrined in the Treaty on European Union1, is the response 
to  the  legitimate  aspiration  of  people  of  our  continent  to  join  the  endeavour  of  a  unified 
Europe. The integration of the countries of Central and Eastern Europe over the past decade 
has shown that enlargement benefits the EU as a whole and allows it to be better positioned to 
address global challenges.  

The  enlargement  policy  has  proven  to  be  a  powerful  tool  for  societal  transformation. 
Countries that have already acceded to the EU and those on the road to join have undergone 
impressive  changes 
reforms. 
Commitment,  conditionality  and  credibility  have  been  situated  at  the  core  of  the  accession 
process and its success.  

through  accession-driven  democratic  and  economic 

The  renewed  consensus  on  enlargement,  agreed  by  the  December  2006  European  Council, 
and 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, remains the framework for the EU enlargement policy. 

Through the enlargement policy, the EU extends its zone of peace, stability, democracy, and 
prosperity; concepts that have gained renewed relevance, in the light of recent developments:  

–  The  dramatic  events  in  the  Southern  Mediterranean  and  the  Middle  East,  as  well  as  the 
fragility  of  the  ensuing  situations,  underline  the  importance  of  a  pole  of  stability  and 
democracy in South-East Europe, solidly anchored in the EU’s enlargement process. 

–  The  recent  global  financial  crisis  and  the  present  difficulties  in  the  Eurozone  have 
highlighted  the  interdependence  of  national  economies  both  within  and  beyond  the  EU. 
These  events  underline  the  importance  of  further  consolidating  economic  and  financial 
stability and fostering growth, also in the enlargement countries. The enlargement process 
is a powerful tool to that end.  

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Since the adoption of the last enlargement package, further positive developments have taken 
place in the Western Balkans. The arrest and transfer to the International Criminal Tribunal 
for  the  former  Yugoslavia  (ICTY)  of  Ratko  Mladić  and  Goran  Hadžić  removed  a  major 
stumbling  block  from  the  European  path  of  Serbia  and  marked  an  important  step  towards 
reconciliation.  A  dialogue  between  Belgrade  and  Pristina,  aiming  inter  alia  at  achieving 
progress on the road towards the EU, was established and has yielded first results. Progress in 
EU-related reforms can be reported in most enlargement countries. Visa-free travel has been 
granted  to  the  citizens  of  two  more  Western  Balkan  countries,  Albania  and  Bosnia  and 
Herzegovina. 

Nevertheless,  in a number of  countries important  reforms  were  delayed,  often  as  a  result  of 
internal political developments and conflicts. Delays and blockages were particularly serious 
in  Bosnia  and  Herzegovina  and  Albania.  Good  governance,  the  rule  of  law,  administrative 
capacity,  unemployment,  economic  reform  and  social  inclusion  remain  major  challenges  in 
most countries. There have been a number of concerning developments in the area of freedom 
of expression in the media. Differences over status continue to affect negatively both Kosovo2 
and the region. The recent events in Northern Kosovo are cause of grave concern. The name 
question concerning the former Yugoslav Republic of Macedonia remains unsolved.  

Iceland's accession process has made headway over the past year. Progress in negotiations is 
due to Iceland's already highly  integrated structures through its long established democracy, 
its membership of the European Economic Area and the Schengen zone, and its high calibre 
public administration.  

In Turkey, accession process remains the most effective framework for promoting EU-related 
reforms,  developing  dialogue  on  foreign  and  security  policy  issues,  strengthening  economic 
competitiveness  and  diversifying  supply  of  energy  sources.  In  the  accession  negotiations,  it 
has  regrettably  not  been  possible  to  open  a  new  negotiating  chapter  for  over  a  year.  A  new 
constructive phase in the relations with Turkey needs to be triggered based on concrete steps 
in areas of common interest. 

Croatia's  imminent  accession  demonstrates  that  the  enlargement  process  is  geared  to 
maximise its transformative effects on the countries concerned. Improvements brought to the 
process  by the 2006 renewed  consensus on enlargement were put into practice with Croatia 
and  have  proved  their  value.  Ongoing  and  future  negotiations  with  other  enlargement 
countries should build further on this experience. In particular, difficult negotiating chapters 
such  as  those  on  the  judiciary  and  fundamental  rights  and  on  justice,  freedom  and  security 
should  be  tackled  as  early  as  possible  to  allow  adequate  time  for  the  candidate  country  to 
build the necessary track record of reform. 

The accession of Croatia will be a major step in the historic project of integrating the Western 
Balkans  into  the  EU.  The  EU  has  consistently  proclaimed  the  inclusiveness  of  its  policy 
towards the Western Balkans, starting with the ‘regional approach’ of the mid-1990s and most 
prominently through the Stabilisation and Association process launched in 1999 and the 2003 
Thessaloniki summit which confirmed that the future of the Western Balkans lies within the 
EU.  Far  from  drawing  a  dividing  line  in  the  Balkans,  it  should  serve  as  an  incentive  and 
catalyst for the rest of the region to accelerate its course towards the EU. In view of the EU’s 

2 

Under UNSCR 1244/1999 

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commitments, as well as the history and geography of the region, ‘unfinished business’ will 
remain until the whole of the Western Balkans are included, once the conditions are met. 

Within  this  context,  the  Commission  remains  fully  attached  to  the  principle  of  own  merits. 
The  pace  at  which  each  country  advances  towards  membership  depends  mainly  on  its 
performance in meeting the established criteria and conditions.  

Croatia’s successful experience sends strong messages to other enlargement countries:  

• 

• 

• 

The EU delivers on its commitments once the conditions are met.  

The criteria and conditions for accession are demanding and their implementation is 
monitored with increased attention. This, however, is not an obstacle, but results in 
the  candidate  state  achieving  a  higher  level  of  readiness  which  will  benefit  both  it 
and the EU upon accession. 

Bilateral disputes with neighbours should and can be addressed through dialogue and 
compromise, in line with established principles. 

The  continued  credibility  of  the  enlargement  process  is  an  important  element  for  advancing 
reforms in the enlargement countries and ensuring support of Member States. Developments 
over the past year have confirmed that tangible results along the path towards the EU are also 
achievable  ahead  of  accession,  when  the  respective  conditions  are  met.  The  Commission 
recommendations in this Communication for moving to next stages of the accession process 
and the extension of visa liberalisation to Albania and Bosnia and Herzegovina are eloquent 
examples.  On  the  other  hand,  where  political  will  and  the  commitment  to  achieve  concrete 
results are insufficient or lacking, the accession process has not advanced and risks stalling. 

This communication assesses the current state of the European Union's enlargement agenda, 
comprising the Western Balkans, Turkey, and Iceland. Based on the accompanying in-depth 
country  analyses3,  it  takes  stock  of  what  these  countries  have  achieved  preparing  for 
membership, where they stand today, assesses their prospects for the coming years and in this 
regard  makes  a  number  of  recommendations.  As  in  previous  years,  a  number  of  key 
challenges are given particular attention.  

2. 

KEY CHALLENGES 

2.1. Increased focus on strengthening the rule of law and public administration reform 

Strengthening the rule of law has been identified as a continuing major challenge and a crucial 
condition  for  countries  moving  towards  EU  membership.  This  issue  has  been  given  greater 
attention  in  recent  years  at  all  stages  of  the  accession  process,  in  line  with  the  renewed 
consensus on enlargement. 

This emphasis on the rule of law was reflected in the extensive consideration given to these 
issues  during  the  accession  negotiations  with  Croatia,  particularly  in  the  context  of  the 
negotiating  chapters  on  the  judiciary  and  fundamental  rights  and  on  justice,  freedom  and 

3 

Summaries  and  conclusions  of  the  country  reports  are  included  as  an  annex  to  the  present 
Communication. 

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security.  The  weight  of  rule  of  law  issues  in  the  key  priorities  set  out  as  conditions  for  the 
opening  of  accession  negotiations  with  Albania  and  Montenegro  is  another  example  of 
prioritising this area ahead of the actual negotiations. 

The experience acquired from the accession negotiations with Croatia will put to the benefit 
of the ongoing and future negotiations with other countries. To that end, the Commission will 
propose a new approach with respect to issues related to the judiciary and fundamental rights 
and to justice and home affairs.  These should be tackled early in the accession process and 
the  corresponding  chapters  opened  accordingly  on  the  basis  of  action  plans,  as  they  require 
the establishment of convincing track records. The Commission would report regularly, at all 
stages  of  the  process,  on  progress  achieved  in  these  areas  along  milestones  defined  in  the 
action  plans  with,  where  appropriate,  the  necessary  corrective  measures.  IPA  funds  will  be 
targeted to support this process. 

Within  the  framework  of  the  pre-accession  process,  the  Commission  has  been  encouraging 
countries  to  build  up  independent  and  efficient  judiciaries  and  to  remedy  existing 
shortcomings.  In  this  respect,  Croatia  improved  its  system  of  appointing  judges,  Serbia 
launched  a  review  of  the  re-appointment  procedure  for  judges  and  prosecutors,  Montenegro 
started a revision of key constitutional and legal provisions concerning the judiciary. Kosovo 
completed its vetting process of judges and prosecutors.  

The  fight  against  corruption  is  one  of  the  key  challenges  for  the  rule  of  law  in  most 
enlargement  countries.  Corruption  remains  a  serious  problem,  affecting  not  only  citizens' 
everyday  life  in  vital  areas  such  as  healthcare  and  education.  It  also  has  serious  negative 
impacts  on  investments  and  business  activities  and  damages  national  budgets,  especially 
concerning public procurement and privatisation. The Commission has sharpened its focus on 
the fight against corruption in the enlargement countries in recent years.  

The important experience gained working with the enlargement countries has contributed to 
the  development  of  the  EU's  own  approach  to  fighting  corruption,  across  all  policy  areas, 
internal  as  well  as  external4.  While  the  Commission  is  setting  up  a  corruption  monitoring 
mechanism for the Member States, it will continue to give high priority to the monitoring of 
anti-corruption  policies  in  the  enlargement  countries,  with  an  emphasis  on  results  and 
sustainability,  from  the  early  stages  of  accession  preparations.  The  Commission  will  also 
promote  close  coordination  between  international  donors  to  ensure  an  optimal  use  of 
resources. 

The  fight  against  organised  crime  remains  an  important  priority  for  the  enlargement 
countries.  It  is  closely  linked  with  fighting  corruption  and  establishing  independent 
judiciaries. The cross border nature of many criminal activities poses a major challenge to the 
fight  against  organised  crime.  Regional  cooperation  between  law  enforcement  and  judicial 
bodies,  including  the  creation  of  professional  networks,  is  particularly  important  for 
addressing  this  challenge.  The  Commission  is  supporting  the  creation  of  a  regional 
prosecutors' network that is assisted by seconded experts from Member States, as well as by 
the relevant European agencies. The Commission also assists the establishment of coordinated 
witness protection systems in the region. 

4 

This  is  reflected  in  the  Commission's  recent  Communication  on  fighting  corruption  COM(2011)  308 
final. 

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Over the course of the past year, the Commission has intensified its rule of law dialogue with 
the countries of the Western Balkans. The aim is to strengthen preparations at earlier stages of 
the pre-accession process, based on in-depth analyses of the justice and home affairs sectors. 
To  that  end,  expert  missions  were  carried  out  in  most  of  the  enlargement  countries.  The 
Commission strengthened cooperation and the exchange of information with the relevant EU 
agencies,  including  Europol,  Frontex,  Eurojust,  and  the  European  Monitoring  Centre  for 
Drugs  and  Drug  Addiction,  as  well  as  with  regional  initiatives,  the  Council  of  Europe  and 
other  international  organisations.  Where  appropriate,  benchmarking  was  already  applied 
during early stages of the process. A Structured Dialogue on justice was launched with Bosnia 
and Herzegovina and the Commission proposes a similar dialogue with Kosovo on the rule of 
law with the aim to address the challenges in this area and support judicial reform. 

Public  administration  reform,  aiming  at  enhancing  transparency,  accountability  and 
effectiveness, essential for democracy and the rule of law, continues to be a key priority under 
the  political  criteria  in  most  enlargement  countries.  Adequate  administrative  procedures, 
including with respect to human resource and public financial management, are crucial for the 
implementation of the acquis. Countries need to increase their efforts to improve their public 
administrations on the basis of overall national strategies.  

In some enlargement countries, there is increasing evidence that the distinct roles of the ruling 
parties and of the state are inadequately respected. Such practices risk undermining the rule of 
law and the functioning of democracy. 

2.2. Ensuring freedom of expression in the media 

Freedom of expression is a fundamental right, which is safeguarded by international law and 
forms an integral part of the functioning of pluralistic democracy. For the accession process, 
ensuring  this  freedom  is  a  key  component  of  the  Copenhagen  political  criteria  for 
membership.  

The  enlargement  countries  are  characterised  on  the  whole  by  pluralist  media  landscapes. 
However,  in  a  number  of  countries,  negative  developments  in  this  area  have  recently  been 
observed. This is a source of serious concern. The Commission further examines freedom of 
expression in the accompanying reports, where the situation in each country is outlined. 

Challenges to freedom of expression and the media include: political interference, sometimes 
manifested also through the legal system; economic pressure; using crime and corruption to 
influence  the  media;  and  insufficient  protection  of  journalists  against  harassment  or  even 
violent  attacks.  Economic  challenges  relate  to  a  lack  of  transparency  and  concentration  of 
ownership, lack of fair competition, and the lack of independence of market regulators. In a 
number  of  enlargement  countries,  the  overall  implementation  of  media  legislation  is  not 
satisfactory.  A  number  of  cases  of  attacks  on  journalists,  including  killings,  remain 
unresolved, several years after their occurrence. In Turkey, the legal framework does not yet 
sufficiently  safeguard  freedom  of  expression.  The  high  number  of  legal  cases  and 
investigations against journalists and undue pressure on the media raise serious concern.  

All of these issues place serious restrictions on the expression of views by media critical of 
governments and discourage investigative journalism. Media and journalists are often forced 
into self-censorship.  

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It is essential that the enlargement countries guarantee open and pluralistic media landscapes, 
which allow for a culture of critical and independent journalism. Public Service Broadcasters 
need  to  improve  their  economic  standing  and  autonomy  in  order  to  fulfil  their  role.  At  the 
same  time,  the  media  profession  should  commit  itself  to  self-regulation  on  the  basis  of 
comprehensive codes of ethics and professional standards.  

In  May  2011,  the  Commission  organised  a  conference  on  freedom  of  expression,  which 
brought together media and civil society stakeholders from the Western Balkans and Turkey. 
This  conference  aimed  to  reach  out,  beyond  its  official  government  interlocutors,  to  those 
directly  concerned  and  listen  to  their  views  and  experiences.  The  conclusions  of  the 
conference will continue to feed into the Commission’s work in this area.  

The Commission will closely monitor developments in the framework of existing agreements 
and structured dialogues with the enlargement countries. It will further integrate these issues 
into accession negotiations, notably under the judiciary and fundamental rights chapter. It will 
identify priorities and encourage government efforts to reach European standards in the field 
of  freedom  of  expression.  To  this  end,  cooperation  will  be  strengthened  with  the  relevant 
partner countries and international organisations - in particular the Council of Europe and the 
Organization  for  Security  and  Cooperation  in  Europe.  Dialogue  with  journalists  and  their 
associations will be further developed.  

2.3. Enhancing regional cooperation and reconciliation in the Western Balkans  

Regional  cooperation  and  good  neighbourly  relations  are  essential  elements  of  the 
Stabilisation and Association process and, as such, are closely monitored by the Commission 
at  all  stages  of  the  accession  process.  Regional  cooperation  underpins  and  enhances 
reconciliation in a region that suffered major conflicts in the recent past. Regional cooperation 
and trade can bring further economic benefits to the region. It is also an integral part of the 
process  of  integration  into  the  EU,  which  often  necessitates  regional  approaches  and 
measures.  

Significant  progress  has  been  achieved  in  this  respect  over  the  past  decade  and  further 
important steps can be reported in the past year. Visits by leaders of the region, in particular 
those  of  Serbia  and  Croatia,  to  neighbouring  countries,  as  well  as  statements  made  on  the 
conflicts of the 1990s have contributed substantially to regional reconciliation. The Sarajevo 
process  on  refugee  return  involving  Serbia,  Croatia,  Bosnia  and  Herzegovina  and 
Montenegro, is about to be successfully completed in the coming days. Initiatives by NGOs 
and civil society, such as the Youth Initiative for Human Rights, the Truth and Reconciliation 
Commission  (RECOM),  and  the  Igman  Initiative  play  an  important  role  in  enhancing 
reconciliation beyond governments among the citizens of the region.  

Cooperation  within  specific  sectors  is  functioning  well  and  is  advancing,  including  through 
the Energy Community, the European Common Aviation Area, and joint training at the now 
fully  operational  Regional  School  of  Public  Administration  (ReSPA).  In  December  2010,  a 
strategy to boost the development of the Danube region was proposed by the Commission and 
subsequently  endorsed  by  the  Member  States5.  Regional  trade  within  the  Central  European 

5 

The  strategy  implies  cooperation  among  the  Danube  basin  countries  in  the  areas  of  environment, 
transport,  energy,  socio-economic  development,  education  research  and  innovation,  and  safety  and 
security. Among the enlargement countries, Croatia, Serbia, Bosnia and Herzegovina and Montenegro 
participate in this strategy. See COM(2010) 715 final and Council conclusions of 13 April 2011. 

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Free Trade Agreement (CEFTA) framework is growing and the agreement is being extended 
to  areas  such  as  competition  policy,  further  abolition  of  tariff  barriers  and  liberalisation  of 
services.  The  Regional  Cooperation  Council  (RCC)  has  started  implementing  its  three-year 
strategy and work programme, working towards more result-oriented action. 

At  the  same  time,  issues  stemming  from  past  conflicts,  together  with  other  open  bilateral 
issues  remain  key  challenges  to  stability  in  the  Western  Balkans  that  affect  regional 
cooperation,  relations  between  countries,  as  well  as  their  internal  functioning  and  reform 
process. It is urgent to address these remaining issues. Resolving these issues will remove a 
major impediment to the Western Balkans’ course towards the EU. 

In  particular,  disputes  related  to  inter-ethnic  or  status  issues,  notably  in  Bosnia  and 
Herzegovina and Kosovo, continue to obstruct the normal functioning of institutions, act as a 
brake  to  the  reform  process  and  the  European  agenda  and  can  sometimes  have  broader 
regional implications. The Commission holds that pursuing their EU path is the best way for 
the  countries  to  address  these  problems.  Recent  developments,  in  particular  progress  in  the 
EU-facilitated  Belgrade-Pristina  dialogue  is  key  in  this  context.  The  10th  anniversary  of  the 
signing  of  the  Ohrid  Framework  Agreement,  celebrated  this  August,  is  a  reminder  that 
difficult  ethnic-related 
through  dialogue  and 
issues  can  be  successfully  addressed 
compromise. 

Positive  results  were  recently  achieved  in  overcoming  problems  concerning  the  inclusive 
functioning  of  regional  initiatives  resulting  from  differences  of  views  over  the  status  of 
Kosovo,  but  more  needs  to  be  done.  An  agreement  was  reached  in  the  framework  of  the 
Belgrade-Pristina  dialogue  on  the  acceptance  by  Serbia  of  the  Kosovo  customs  stamps;  this 
should  allow  for  regional  trade  to  be  restored  within  the  framework  of  CEFTA.  Previously, 
the  holding  of  CEFTA  and  RCC  meetings with participation of all parties was  restored and 
the  Pan-Euro-Med  Convention  on  Preferential  Rules  of  Origin  was  signed.  However, 
differences over the status of Kosovo have continued to obstruct the finalisation and signing 
of the Transport Community Treaty and the extension of the Autonomous Trade Measures for 
Kosovo  and  other  Western  Balkan  partners.  These  differences  remain  an  obstacle  to  the 
development of contractual relations between the EU and Kosovo. 

A  comprehensive  settlement  of  issues  related  to  regional  cooperation  is  pending  in  the 
Belgrade-Pristina  dialogue.  The  Commission  calls  upon  all  parties  involved  to  continue  to 
seek  practical  and  pragmatic  solutions  to  ensure  the  inclusiveness  of  regional  cooperation, 
without prejudice to differing positions over the status of Kosovo. Progress made in the past 
year shows that this is possible.  

Completing  the  process  of  rendering  justice  for  crimes  committed  during  the  wars  in  the 
former  Yugoslavia  is  essential  for  lasting  reconciliation.  Full  cooperation  with  the  ICTY 
remains an essential condition for the accession process in the Western Balkans. The recent 
arrests  and  transfers  to  The  Hague  of  the  last  two  ICTY  indictees  were  major  steps  in  that 
direction. The Commission also calls upon the governments concerned to pursue with greater 
vigour the proper conduct of domestic war crime trials.  

The Commission takes very seriously the report endorsed by the Parliamentary Assembly of 
the Council of Europe in January (Marty report) concerning crimes, including human organ 
harvesting, allegedly committed in the period during and after the conflict in Kosovo. It fully 
supports the investigation conducted by EULEX, notes the importance of witness protection 

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in  this  context  and  welcomes  the  establishment  of  a  Brussels-based  EULEX  Task  Force,  as 
well as the cooperation of the relevant governments with this Task Force.  

Overall, it is important that governments and civil society organisations in the region do more 
to explain to citizens that reconciliation is an integral part of their European future and that 
justice with respect to war crimes is an indispensable element of this process. Political leaders 
should avoid statements and measures that could call these important principles into question.  

With respect to open bilateral issues, these need to be solved by the parties concerned as early 
as possible during the enlargement process, with determination, in a good neighbourly spirit 
and taking into account the overall EU interests. The Commission urges them to make every 
effort  towards  solving  outstanding  border  disputes  in  line  with  established  principles  and 
means, including referring issues to the International Court of Justice if appropriate. Bilateral 
issues should not hold up the accession process. The Commission stands ready to facilitate the 
creation of the  necessary  political  impetus in the search for  solutions and to support related 
initiatives. 

The border arbitration agreement between Slovenia and Croatia, the implementation of which 
is due to begin later this year, paves the way for addressing bilateral issues. The Commission 
strongly encourages the parties to the dispute over the name of the former Yugoslav Republic 
of Macedonia to employ a similarly constructive spirit in the ongoing UN-led talks.  

2.4. Achieving sustainable economic recovery and embracing Europe 2020 

All  enlargement  countries  have  now  embarked  upon  a  path  of  recovery,  though  at  varying 
paces: Turkey has emerged from the crisis with a bigger economy and its growth continues to 
be impressive, but there are increasing signs of overheating. The Western Balkan economies 
are also beginning to recover, though it will take some time for them to reach pre-crisis levels. 
Iceland's economy continues to emerge from the major economic disturbances it experienced 
during the crisis. 

the  enlargement  countries  are  confronted  with 

important  socio-economic 
However, 
challenges.  Unemployment  remains  high  and  rising  in  most  countries.  Unemployment  in 
Kosovo,  Bosnia  and  Herzegovina  and  the  former  Yugoslav  Republic  of  Macedonia  remains 
the highest in Europe. Labour force participation rates are low, especially for women and the 
young and widespread informal employment remains a challenge. Exports from the Western 
Balkans,  which  are  contributing  to  the  recovery,  remain  dominated  by  low  added  value 
products, including commodities, which are exposed to price volatility and strong competition 
from emerging markets.  

Most enlargement countries have maintained overall prudent macroeconomic policies. Fiscal 
consolidation and the reform of labour markets remain the most urgent short-term priorities, 
reflecting  largely  similar  challenges  to  those  presently  faced  in  the  EU.  More  structural 
reforms  are  needed  to  boost  competitiveness  and  improve  the  investment  climate,  thus 
attracting  foreign  direct  investment,  fostering  job  creation  and  ensuring  the  sustainability  of 
growth.  In  the  Western  Balkans,  improving  the  capacity  of  public  administration,  and 
strengthening the rule of law, including by reforming the judiciary and combating widespread 
corruption present particular challenges. Progress in these areas would also be conducive to 
the  business  environment.  Public  services  to  the  business  and  investment  in  infrastructure 
remain scarce. 

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Labour  market  reforms,  including  a  review  of  transfer-benefit  systems,  taxation  issues  and 
overhauls of education systems, should contribute to addressing a major structural weakness 
in the Western Balkans and an impediment to achieving stronger, sustainable, and inclusive 
growth. 

Embracing the objectives of the Europe 2020 strategy  

Europe 2020 is the EU's growth strategy for the  present decade,  guiding the Union towards 
becoming a smart, sustainable and inclusive economy in a changing world. The enlargement 
countries are encouraged to associate to the Europe 2020 strategy and its flagship initiatives6. 
This provides a useful anchor for reform.  

The Europe 2020 objectives are reflected, as appropriate, in the dialogues on economic policy 
and on employment and social policies between the Commission and enlargement countries. 
The Commission has guided the programming of financial assistance towards the objectives 
of Europe 2020, especially  with  respect to socio-economic  development.  The  Commission's 
cooperation  with  the  international  financial  institutions  (IFIs)  takes  these  objectives  into 
account.  

The ongoing debt crisis in Europe has underlined the importance of sound public finances and 
the Commission is sharing some of its peer review mechanisms with the candidate countries 
and potential candidates. Multilateral fiscal surveillance by the EU is an important tool to this 
end. It will be progressively adapted to the upcoming strengthened economic governance in 
the EU. 

In the area of private sector development, policy coordination with the Western Balkans and 
Turkey is guided by the provisions of the EU's Small Business Act7. This coordination, based 
on regular evaluations against established EU benchmarks, has resulted in the emergence of 
well-tested  recommendations  reflecting  the  national  particularities  of  the  enlargement 
countries. The Commission proposes that the results of the Small Business Act be used as a 
reference  tool  for  future  Small  and  Medium  Enterprises  (SME)  -related  activities  in  the 
region. 

Within  the  Western  Balkans  Investment  Framework,  the  Commission  encourages  partner 
International financial Institutions (IFIs) to support new forms of SME financing, in particular 
equity,  venture  capital  and  guarantee  mechanisms.  The  Commission  will  co-finance  a 
Western Balkan SME platform, which aims to improve access to finance for SMEs through 
guarantees and venture capital.  

In the area of research and innovation, the cooperation of enlargement countries with the EU 
is  already  advanced  in  terms  of  eligibility  for  participation  in  EU  initiatives.  Enlargement 
countries  participate  in  the  7th  Framework  Programme  for  Research  and  Technological 
Development  and  the  Competitiveness  and  Innovation  programme.  Current  indicators, 
however,  show  that  in  most  cases  they  are  significantly  below  the  EU  average  in  terms  of 
investments and development of research and innovation policies. Regional leaders, including 

6 

7 

The  Europe  2020  flagship  initiatives  are  digital  agenda  for  Europe,  innovation  union,  youth  on  the 
move, resource efficient Europe, industrial policy for the globalisation era, agenda for new skills and 
jobs, European platform against poverty. 
COM(2008) 394 final. 

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at the upcoming ministerial conferences, are encouraged to commit to increase investment in 
research, innovation and human capital.  

Enlargement countries need to become better prepared to withstand climate change and align 
with  the  EU's  efforts  to  address  this  challenge,  including  through  awareness  raising. 
Progressive climate action will bring benefits through low-carbon development and can create 
jobs. 

The nascent economic recovery has yet to be reflected in an improved social situation. The 
share of the population living below the poverty line remains high and in the Western Balkans 
continues  to  grow.  High  informal  employment  impacts  negatively  on  the  social  situation, 
particularly concerning young people. 

Securing jobs and the social inclusion of vulnerable groups is a priority. However, little real 
investment  has  occurred  in  the  social  sector  and  cooperation  with  international  donors  has 
faced  obstacles  in  strategic  planning.  The  Commission  emphasises  employment  and  social 
policies  in  its  policy  dialogue  and  encourages  countries  to  set  clear  and  realistic  targets  in 
these  two  areas  and  to  better  target  and  prioritise  social  spending.  The  objectives  of  the 
European Platform against Poverty and Social Exclusion should be taken up as appropriate by 
the enlargement countries. 

Sustained measures for the inclusion of all vulnerable groups into mainstream society should 
be  adopted.  Concerning  the  particularly  disadvantaged  Roma  minority,  the  Commission  has 
invited the Western Balkans and Turkey to cooperate within the EU Roma platforms, which 
systematically  monitor  inclusion  and  propose  related  actions.  The  Commission  has  held  a 
series  of  seminars  on  Roma  issues  to  encourage  the  countries  of  the  region  to  review  and 
strengthen  the  relevant  national  action  plans  and  their  implementation  on  fighting 
discrimination  and  improving  Roma  integration,  particularly  in  the  areas  of  education, 
employment,  housing  and  health.  Strong  efforts  should  be  made  by  the  countries  of  the 
Western Balkans to facilitate the civil registration of displaced persons. 

Improved  education  and  training  are  key  factors  of  structural  change  for  sustainable  and 
inclusive growth. So far, investments into education, skills  and qualifications have typically 
been  low  and  regional  recognition  of  national  qualifications  is  insufficient.  State  education 
systems  and  infrastructure  need  to  be  reformed  and  internationally  comparable  vocational, 
education and training programmes are needed to address the existing skills mismatch.  

The  Commission  has  opened  the  Education  and  Training  2020  strategic  framework  for 
participation  of  the  candidate  countries  which  the  former  Yugoslav  Republic  of  Macedonia 
and Montenegro are yet to join. The Commission has proposed to develop a Western Balkans 
Platform on education and training, based on the open method of coordination, to allow for 
the  participation  of  all  enlargement  countries.  This  will  enhance  dialogue  on  main  policy 
challenges and secure implementation and monitoring. The countries of the Western Balkans 
have  been  invited  to  participate  in  the  centralised  activities  of  the  EU's  Lifelong  Learning 
Programme. 

2.5. Extending transport and energy networks  

Improved  transport  and  energy  cooperation  with  the  enlargement  countries  directly  benefits 
European citizens and businesses. Transport and energy interconnection are key elements in 
the  EU's  cooperation  with  all  neighbouring  countries  aimed  at  promoting  sustainable 
economic  growth,  trade  and  cultural  exchange,  employment,  as  well  as  at  improving  living 

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conditions.  In  the  case  of  the  enlargement  countries  this  cooperation  also  aims  at  preparing 
them to fully take on and implement the transport and energy acquis.  

With  its  strategic  location  at  the  crossroads  between  Europe,  the  Middle  East  and  the 
Caucasus,  Turkey  has  steadily  developed  and  strengthened  its  links  with  the  EU  –  as 
illustrated by recent developments in the aviation sector or its role in the establishment of the 
Southern  Gas  Corridor.  Further  development  of  these  links  would  benefit  both  sides.  The 
Southern Gas Corridor would contribute to Europe's security of supply for natural gas, as it 
would make a considerable contribution in expanding supply routes and stimulate competition 
in  the  international  gas  market.  The  Commission  supports  Turkey  financially  in  the  further 
development  of  its  transport  networks,  in  particular  concerning  high  speed  rail  connections 
and  the  modernisation  of  port  facilities.  At  the  same  time,  Turkey  should  be  encouraged  to 
deepen its gas market, increasing liquidity and contract flexibility. Such a process would lead 
to  the  emergence  of  an  'energy  hub',  the  existence  of  which  would  achieve  greater  energy 
security. 

In the Western Balkans, a regional transport network has been defined within the framework 
of  the  South  East  Europe  Transport  Observatory  (SEETO)  identifying  priority  projects  of 
regional  interest.  The  Western  Balkan  countries  participate,  together  with  the  EU  Member 
States  and  other  European  countries,  in  the  European  Common  Aviation  Area  Agreement, 
which  was  signed  in  2006.  Cooperation  in  the  field  of  transport  is  also  foreseen  under  the 
Danube Strategy. 

Since  2008,  the  Commission  has  been  negotiating  the  creation  of  a  Transport  Community 
with  the  Western  Balkan  countries,  establishing  an  integrated  market  for  infrastructure  and 
land, inland waterway and maritime transport. Negotiations have been almost completed, but 
are  held  back  by  differences  over  the  denomination  of  Kosovo.  The  Commission  urges  the 
parties  concerned  to  take  the  necessary  steps  that  will  allow  for  a  rapid  conclusion  of  the 
negotiations and the signing of the Treaty.  

The Commission has proposed a review of the EU's Trans-European Networks in the field of 
transport  (TEN-T)  with  a  view  to  improving  connections  with  the  countries  covered  by  the 
enlargement and neighbourhood policies8. 

In  the  field  of  energy,  the  EU  is  also  pursuing  the  integration  of  networks,  notably  through 
support for the Energy Community which encompasses the EU and its Member States, all the 
Western Balkans as well as some neighbourhood countries9. The Energy Community, based 
on EU energy rules, establishes an open, transparent and competitive regional market which 
helps to attract investments. The Energy Community acquis already covers the internal energy 
market, energy efficiency and renewable energies, as well as selected parts of environmental, 
social and competition acquis. It will be extended to cover mandatory oil stocks, in addition to 
the electricity and gas markets.  

8 
9 

COM(2011) 415 final. 
Turkey  is  an  observer.  The  neighbourhood  countries  involved  are  Ukraine  and  Moldova  as  full 
members, and Georgia and Armenia as observers. 

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3. 

PROGRESS IN THE ENLARGEMENT COUNTRIES AND AGENDA FOR 2011-2012 

3.1. Western Balkans 

Croatia  

The accession  negotiations with Croatia were closed in June. This was the result of Croatia 
meeting  the  closing  benchmarks  in  the  remaining  areas  over  the  past  year,  including  in 
difficult chapters such as judiciary and fundamental rights and competition policy. Croatia has  
achieved  substantial  results  in  the  fight  against  corruption,  introduced  a  new  objective  and 
transparent  system  for  appointing  judges  and  prosecutors,  and  has  much  improved 
implementation  of  housing  care  programmes  for  returning  refugees.  The  restructuring  of  its 
shipyards in difficulty has progressed substantially. 

The  result  of  the  accession  negotiations  will  be  embodied  in  an  accession  treaty  which,  as 
foreseen by the June European Council, should be signed by the end of the year. This should 
enable  Croatia  to  join  the  EU  on  1  July  2013  provided  that  the  necessary  ratification 
procedures  have  been  completed.  Croatia  has  achieved  a  very  high  level  of  preparation  to 
assume the responsibilities of membership upon accession. It meets the Copenhagen political 
criteria.  It  is  expected  to  meet  the  economic  and  acquis  criteria  by  1  July  2013.  This 
momentum needs to be maintained.  

Croatia  needs  to  continue  building  on  the  reforms  implemented  and  capacities  developed 
during  the  course  of  the  accession  negotiations.  The  Commission  will  closely  monitor 
Croatia's  fulfilment  of  all  the  commitments  undertaken  and  its  continued  preparations  to 
assume  the  responsibilities  of  membership  upon  accession.  The  monitoring  will  focus  in 
particular  on  commitments  undertaken  by  Croatia  in  the  following  areas:  judiciary  and 
fundamental rights; justice, freedom and security; as well as competition policy.  

The  monitoring  will  consist  of  regularly  updated  monitoring  tables,  the  dialogue  under  the 
Stabilisation  and  Association  Agreement,  peer  assessment  missions,  the  pre-accession 
economic  programme  and  fiscal  notifications.  The  Commission  will  issue  six-monthly 
assessments  up  to  Croatia’s  accession  on  the  implementation  of  commitments  taken  by  the 
country  in  these  chapters.  A  Comprehensive  Monitoring  Report  will  be  presented  to  the 
European Parliament and the Council in autumn 2012. 

If  issues  of  concern  are  identified  during  the  monitoring  process  and  are  not  remedied  by 
Croatia,  the  Commission  will,  if  necessary,  address  early  warning  letters  to  the  Croatian 
authorities and may propose to the Council to take all appropriate measures already prior to 
accession. In addition, as in the fifth enlargement, the accession treaty will contain a general 
economic safeguard clause, an internal market safeguard clause and a safeguard clause in the 
area of justice, freedom and security.  

Croatia is expected to continue playing an active role in regional cooperation in the Western 
Balkans.  The  Commission  looks  forward  to  the  implementation  of  the  border  arbitration 
agreement between Slovenia and Croatia. It will support the establishment and functioning of 
the  Arbitral  Tribunal,  as  foreseen  in  the  said  agreement.  The  Commission  welcomes  the 
Statement  by  the  Croatian  Government  to  support  the  other  countries  of  the  region  on  their 
path  to  EU-membership,  and  encourages  Croatia  to  address  the  remaining  open  bilateral 
issues with its neighbours ahead of accession. At the same time, political leaders should avoid 

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statements  and  measures  that  could  call  into  question  the  importance  of  reconciliation  or 
neglect the seriousness of war crimes. 

The former Yugoslav Republic of Macedonia  

The June parliamentary elections in the former Yugoslav Republic of Macedonia were mostly 
in line with international standards and the country has continued accession-related reforms. 
The  governing  coalition  has  been  stable.  The  country  continues  to  sufficiently  meet  the 
political criteria. Some progress has been made as regards  the reform of  the parliament,  the 
judiciary,  public  administration  and  respect  for  and  protection  of  minorities,  though  core 
challenges remain. Further efforts are needed in particular as regards freedom of expression in 
the  media,  independence  of  the  judiciary,  reform  of  public  administration  and  fighting 
corruption. The efforts of the political forces to cooperate need to be strengthened. 

The  country  continues  to  fulfil  its  commitments  under  the  Stabilisation  and  Association 
Agreement (SAA). The Commission maintains its proposal to move to the second stage of the 
association  as  provided  for  by  the  SAA  and  encourages  the  Council  to  act  on  this  without 
further delay. 

The  Commission  notes  that  the  Council  has  not  been  able  to  follow  up  on  the  Commission 
recommendation  dating  from  2009  for  opening  accession  negotiations  with  the  former 
Yugoslav  Republic  of  Macedonia.  Moving  the  accession  process  of  this  country  to  its  next 
stage will benefit the momentum of reforms and the climate of inter-ethnic relations, and will 
impact positively on the region. 

The dispute between Greece and the former Yugoslav Republic of Macedonia over the name 
of the latter has remained unresolved for almost two decades. A dialogue under the auspices 
of the UN has been ongoing since the 1990s and it is complemented since 2009 by bilateral 
contacts,  including  at  Prime  Ministerial  level.  However,  these  processes  have  yet  to  yield 
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 
Commission  underlines  the  need  for  a  redoubling  of  efforts  for  a  solution  without  further 
delay.  It  also  recalls  that  actions  and  statements  that  could  negatively  impact  on  good 
neighbourly relations should be avoided. A solution to the name issue is long overdue. 

Montenegro 

In December 2010, the European Council granted candidate country status to Montenegro and 
endorsed  the  seven  key  priorities  for  the  opening  of  accession  negotiations  identified  in  the 
Commission's Opinion on Montenegro's application for EU membership.  

Since  the  adoption  of  the  Opinion,  Montenegro  has  made  good  progress  in  meeting  the 
Copenhagen  political  criteria,  achieving  overall  satisfactory  results,  in  particular  in  the 
identified key priorities. The legislative and institutional framework has been improved with a 
view  to  strengthening  the  work  of  the  parliament,  the  electoral  framework,  professionalism 
and  de-politicisation  of  public  administration,  the  independence  and  accountability  of  the 
judiciary, fight against corruption and organised crime, media freedom and cooperation with 
civil society. Sustained efforts are needed, however, in further developing a track record in the 
area  of  rule  of  law,  in  particular  with  respect  to  high-level  corruption  and  organised  crime 
cases. Positive steps have also been made in anti-discrimination policies and in improving the 

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situation  of  displaced  persons.  This  now  needs  to  translate  into  reducing  discrimination  in 
practice towards vulnerable groups, including displaced persons. 

The Commission will place particular attention on monitoring Montenegro’s progress in the 
areas of rule of law and anti-discrimination in view of maintaining the momentum of reforms 
in these areas and will continue to support Montenegro in implementing EU-related reforms.  

Albania  

Albania's  domestic  political  scene  has  been  largely  dominated  by  the  continuation  of  the 
political  stalemate  and  further  confrontational  developments.  Violent  clashes  between  anti-
government protestors and police led to the death of four persons and amplified the climate of 
mistrust  between  political  forces,  as  well  as  vis-à-vis  certain  State  institutions.  The  local 
elections in May, although assessed as competitive and transparent, were decisively marked 
by  shortcomings  which  need  to  be  addressed.  In  particular,  the  controversy  surrounding  the 
vote count of misplaced ballots for the Tirana mayor increased polarisation between the ruling 
majority and the opposition.  

It  is  now  urgent  that  the  political  forces  in  Albania  re-establish  and  maintain  a  level  of 
political  dialogue  that  would  allow  the  proper  functioning  of  key  democratic  institutions, 
notably the parliament, and progress on the EU integration path. The significant shortcomings 
identified  in  the  last  two  elections  warrant  a  comprehensive  electoral  reform  that  would 
benefit from external independent advice and consensus among political parties.  

The two main political parties have taken up the EU's offer for reengaging constructively with 
the country's European integration priorities. It is essential now for Albania's political parties 
to  commit  to  a  structured  and  sustained  process  of  working  together  on  European  reforms. 
The  way  forward  should  include  a  process  of  joint  review  and  adoption  of  the  Action  Plan 
addressing the Opinion recommendations and a  schedule for essential reforms, including on 
parliamentary work and elections.  

Overall,  Albania  has  made  limited  progress  in  meeting  the  political  criteria  for  membership 
and  the  twelve  key  priorities  for  the  opening  of  accession  negotiations,  as  identified  in  the 
Commission’s  Opinion  endorsed  by  the  Council  in  December  2010.  There  has  been  some 
progress in fighting organised crime, improving the treatment of detained persons in prisons, 
and  on  rights  of  the  child,  but  progress  remains  insufficient  regarding,  the  judiciary,  anti-
corruption  policy,  property  rights  and  improving  the  living  conditions  of  the  Roma 
community in addition to the work needed on parliamentary procedure and elections. Albania 
has started implementing an action plan to address the recommendations of the Commission’s 
Opinion. However, further efforts are required to ensure the effectiveness and completeness 
of  the  actions  envisaged,  including  through  close  cooperation  with  the  opposition.  Albania 
will need to make sustained efforts and achieve demonstrable progress on all of these matters 
before  the  Commission  can  recommend  candidate  status  and  the  opening  of  EU  accession 
negotiations.  

Albania  has continued to smoothly implement the  Stabilisation and Association  Agreement. 
In  December  2010,  the  country  was  granted  visa-free  access  to  the  Schengen  area  for  its 
citizens, as a result of its satisfactory achievements in the visa liberalisation dialogue.  

The  Commission  is  committed  to  continue  supporting  Albania  in  achieving  EU-oriented 
reforms and meeting the Opinion’s key priorities. 

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Bosnia and Herzegovina 

In  Bosnia  and  Herzegovina,  the  actions  of  its  political  representatives  continue  to  reflect  a 
lack  of  a  common  understanding  on  the  overall  direction  and  future  of  the  country  and  its 
institutional setup. No consensus has been found for ensuring and improving the functioning 
of  the  institutions,  while  safeguarding  the  interests  of  its  constituent  peoples,  especially  in 
view of the country's widely shared EU aspirations. The process of establishing executive and 
legislative authorities following the October 2010 elections still has to be completed with the 
formation  of  the  State-level  Government.  This  long  delay  has  been  hampering  Bosnia  and 
Herzegovina's much needed reforms which would allow the country to make further progress 
towards the EU. The EU accession process requires functional institutions at all levels and an 
effective coordination mechanism for dealing with the EU, allowing the country to speak with 
one voice.  

As  a  result,  the  overall  pace  of  reforms  has  been  very  limited.  Some  results  were  achieved, 
notably concerning achievements which led to the country being granted visa-free access to 
the EU for its citizens in December 2010. In June, the country's leadership agreed to engage 
with  the  EU  on  a  Structured  Dialogue  on  Justice  under  the  Stabilisation  and  Association 
process,  aiming  at  ensuring  an  independent,  effective,  impartial  and  accountable  judicial 
system. 

Compliance with  the European  Convention on Human Rights is an essential requirement of 
the Interim Agreement and the Stabilisation and Association Agreement. In this respect, the 
persistent  delay  in  harmonising  the  Constitution  with  a  European  Court  of  Human  Rights' 
ruling  on  ethnic  discrimination  regarding  representation  in  the  institutions  of  the  country 
remains an issue of serious concern10. A credible process must be put in place for addressing 
the  ECtHR  decision  and  a  State  Aid  Law  adopted  at  state  level.  Progress  is  also  needed 
towards  adoption  of  a  state  level  census  law  and  speeding  up  reforms  to  facilitate  the 
country’s EU integration process. The adoption of the Global Fiscal Framework is a priority 
for fiscal sustainability. 

Bosnia and Herzegovina's governance continues to involve an international presence with an 
executive  mandate.  Regarding  the  Brčko  Final  Award,  one  of  the  objectives  and  conditions 
for the closure of the Office of the High Representative11, progress was made in resolving the 
electricity  issue.  Further  efforts  are  needed  to  meet  remaining  outstanding  objectives,  to 
facilitate the transition from a country with an international system of governance and security 
towards a country with domestic institutions in full ownership of their political and legislative 
process- in line with the requirements for a country aspiring to become a member of the EU. 
Overarching these issues is the need for a stable political environment. 

The  establishment  of  the  Structured  Dialogue  on  Justice,  as  well  as  experience  from  the 
reforms that were carried out under the visa liberalisation process show the way forward: by 
adopting a European approach of dialogue and compromise and focusing on the EU agenda, 

10 
11 

Sejdić-Finci vs. Bosnia and Herzegovina case, December 2009. 
These  cover  5  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  Brčko  Final  Award;  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. 

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the country will be able to gradually move from paralysis and confrontation to cooperation, 
and from international supervision to its EU future. 

The  EU  has  reinforced  its  role  in  Bosnia  and  Herzegovina,  with  the  EU's  first  single 
representative  in  Bosnia  and  Herzegovina  having  taken  up  office.  The  EU  will  continue  to 
strengthen its support for the country's institutions in implementing the objectives of the EU 
agenda, in line with the March 2011 Council conclusions.  

Serbia  

In  parallel  to  this  Communication,  the  Commission  has  adopted  its  Opinion  on  Serbia's 
application for EU membership. The conclusions and recommendation of the Opinion are set 
out in annex to this Communication.  

Kosovo 

In  a  period  of  early  parliamentary  elections  and  lengthy  elections  of  a  new  President  by 
parliament, little progress took place as regards the reform agenda. The elections themselves 
were marked by serious shortcomings, which need to be addressed. The constitutional court 
played a positive role through the way it exercised its responsibilities.  

The  new  government  has  demonstrated  commitment  to  Kosovo's  European  perspective, 
including through sustained efforts in areas such as visa and trade and the establishment of a 
National  Council  for  EU  Integration.  The  new  parliament  has  recently  started  to  pass  the 
relevant  legislation  for  launching  key  reforms.  Much  more  needs  to  be  done  to  tackle 
organised  crime  and  corruption.  Public  administration  is  weak  and  the  implementation  of 
judicial reform remains a challenge. 

Following  the  UN  General  Assembly  Resolution  of  September  2010,  an  EU  facilitated 
dialogue  between  Pristina  and  Belgrade  was  launched.  The  dialogue  aims  at  promoting 
cooperation, achieving progress on the path to the EU and improving the lives of people. It 
was conducted in a generally constructive spirit until September and has led to agreements on 
several issues: freedom of movement of goods and persons, civil registry and cadastre. These 
constructive efforts need to continue and lead to further steps in normalising their relations. 
Agreements reached need to be implemented in good faith.  

The integration of Kosovo Serbs south of the Ibër/Ibar river has improved. Kosovo Serbs took 
part in the Kosovo census and their participation in the recent general elections increased. On 
the other hand, in northern Kosovo inter-ethnic tensions and incidents persist. Separate Serb 
structures,  supported  by  Belgrade,  opposed  the  census  and  encouraged  the  boycott  of  the 
elections  organised  by  the  Kosovo  authorities.  The  Commission  urges  all  concerned  in 
Kosovo to defuse tensions and to fully cooperate with EULEX. 

Pursuit of solutions through dialogue, and rejection of unilateral actions and violence, is the 
only possible basis for moving ahead in Kosovo. The Commission calls on all actors to reject 
violence and to refrain from taking any measures which threaten stability. 

Kosovo shares the European perspective of the Western Balkans. In March, the Commission 
issued  its  proposal  for  a  framework  agreement  allowing  Kosovo  to  participate  in  EU 

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programmes, one of the key initiatives announced in the 2009 Kosovo communication.12 The 
Commission  will  continue  supporting  Kosovo's  efforts  in  reaching  the  other  two  key 
objectives – eventual visa liberalisation and a trade agreement with the EU, as well as other 
reform  efforts  enhancing  its  European  perspective.  The  Commission  will  review  its  2009 
Communication to ensure that Kosovo can further benefit from the EU accession process. The 
Commission  proposes  to  launch  a  structured  dialogue  with  Kosovo  on  the  rule  of  law.  The 
Commission also underlines the importance of Kosovo launching a comprehensive agenda for 
the north. 

3.2. Turkey  

With its dynamic economy, important regional role and its contribution to EU's foreign policy 
and energy security, Turkey is a key country for the security and prosperity of the European 
Union.  It  is  already  integrated  to  a  large  extent  into  the  EU  in  terms  of  trade  and  foreign 
investment  through  the  Customs  Union.  The  country  has  become  an  important  industrial 
platform for a number of leading European companies, and is therefore a valuable component 
of Europe's competitiveness. Turkey's  high  GDP growth, which reached almost 9% in 2010 
and  is  expected  to  attain  6.1%  this  year,  as  well  as  its  membership  to  the  G-20,  further 
increases the economic significance of the country. 

Turkey’s contribution to the European Union in a number of crucial areas will only be fully 
effective  with  an  active  and  credible  accession  process.  This  process  must  respect  the  EU's 
commitments and the established conditionality. 

It  remains  essential  that  Turkey  continues  its  reforms  concerning  the  political  accession 
criteria.  The  creation  of  a  specific  Ministry  for  EU  affairs  is  an  encouraging  signal  in  this 
regard. While substantial progress has been made over the past ten years, significant further 
efforts  are  required  to  guarantee  fundamental  rights  in  practice,  in  particular  freedom  of 
expression, women's rights and freedom of religion. Turkey's recent adoption of legislation on 
Religious  Foundations  facilitating  the  recovery  of  confiscated  property  of  religious 
foundations  is  a  significant  step  forward.  The  Commission  stands  ready  to  further  assist 
Turkey  in  advancing  the  necessary  reforms,  including  an  inclusive  constitutional  reform 
process.  

Turkey  is  further  increasing  its  diplomatic  activity  following  developments  across  Northern 
Africa and the Middle East. It also remains a constructive partner in the Western Balkans. As 
a  stable  state  with  democratic  institutions,  a  fast  growing  economy  and  a  candidate  country 
negotiating its accession to the EU, Turkey can play an important role in projecting stability 
and  supporting  reforms  in  its  neighbourhood,  which  is  also  the  neighbourhood  of  the 
European Union. The EU is further developing its political dialogue with Turkey on foreign 
policy  issues  of  mutual  interest.  In  the  present  context,  it  is  important  that  such  dialogue 
further  develops  as  a  complement  to  the  accession  process  and  with  the  aim  of  increased 
coordination. 

In the light of progress achieved between the leaders of the two communities under the good 
offices  of  the  UN  Secretary-General  to  find  a  comprehensive  settlement  to  the  Cyprus 
problem, Turkey is encouraged to increase in concrete terms its commitment and contribution 
to these talks. A comprehensive settlement is in the interest of all sides since it would enhance 

12 COM (2009) 534 final 

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stability in the Southeast Mediterranean, offer new economic opportunities and give a strong 
boost to its EU accession negotiations, which have reached a critical stage.  

The  Commission  is  concerned  about  the  recent  tensions  in  relations  between  Turkey  and 
Cyprus.  It  recalls  that  the  Council  has  urged  the  avoidance  of  any  kind  of  threat,  source  of 
friction or action that could damage good neighbourly relations and the peaceful settlement of 
disputes.  The  EU  has  also  stressed  all  the  sovereign  rights  of  EU  Member  States  which 
include entering into bilateral agreements, in accordance with the EU acquis and international 
law, including the UN Convention on the Law of the Sea. In line with the repeated Council 
and  Commission  positions  from  previous  years,  the  Commission  reiterates  that  it  is  urgent 
that  Turkey  fulfils  its  obligation  of  fully  implementing  the  Additional  Protocol  and  makes 
progress  towards  normalisation  of  bilateral  relations  with  the  Republic  of  Cyprus.  It  also 
urges the avoidance of any kind of threat, source of friction or action that could damage good 
neighbourly relations and the peaceful settlement of disputes. The EU will continue to follow 
up  and  review  progress  made  on  these  issues  in  accordance  with  the  relevant  Council 
decisions.  

Turkey needs to step up efforts to solve open bilateral issues, including border disputes, with 
its  neighbours.  A  substantial  number  of  formal  complaints  about  violations  of  its  territorial 
waters and airspace by Turkey were made by Greece, including flights over Greek islands. 

The  Commission  will  work  to  launch  a  new  virtuous  circle  in  the  accession  process  with 
Turkey. Based on a pragmatic approach and incorporating concrete steps in areas of common 
interest, a joint understanding of constraints and a search for progress in Turkey's alignment 
with the EU, a fresh and positive agenda should be developed, to enable a more constructive 
and positive relationship. 

This  agenda  should  cover  a  broad  range  of  areas,  including  intensified  dialogue  and 
cooperation  on  political  reforms,  visa,  mobility  and  migration,  energy,  the  fight  against 
terrorism, the further participation of Turkey in Community programmes such as "Europe for 
citizens", town twinning, as well as trade and the Customs Union with the aims of eliminating 
ongoing  trade  irritants,  seeking  closer  coordination  in  the  negotiations  on  free  trade 
agreements  and  exploring  new  avenues  to  make  full  use  of  the  EU's  and  Turkey's  joint 
economic potential. Alongside the accession negotiations, the Commission intends to enhance 
its  cooperation  with  Turkey,  in  support  of  the  country's  efforts  to  pursue  reforms  and  align 
with the acquis, including on chapters where accession negotiations cannot be opened for the 
time being. The Commission will continue informing the Council as soon as it considers that 
Turkey has met relevant benchmarks.13  

3.3. Iceland  

Iceland  continues  to  recover  from  the  2008/2009  financial  and  economic  collapse.  The 
political  situation  has  remained  stable,  though  the  coalition  government  has  been  tested  on 
several occasions and seen its majority in Parliament reduced. 

Iceland's  accession  process  continued  and  screening  of  the  Icelandic  legislation  is  being 
completed. The country's already high level of integration with the EU across a wide range of 
policy  areas  is  a  considerable  advantage  in  this  process.  The  Commission  takes  Iceland's 

13 

Examples of this are chapter 20-Enterprise and industrial policy, chapter 21-trans-European networks. 

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specificities  and  expectations  into  account,  within  the  existing  approach  on  accession 
negotiations  and  fully  safeguarding  the  principles  and  acquis  of  the  Union.  Continued  open 
and constructive work will produce solutions, reflecting the high level of cooperation between 
the EU and the Icelandic authorities. 

On this basis, the accession negotiations on specific negotiating chapters have been launched. 
Four  chapters  were  opened  of  which  two  have  been  provisionally  closed.  With  an  overall 
good level of alignment in particular in the chapters covered by the European Economic Area 
(EEA) and Schengen agreements, the negotiations should be able to proceed well. Iceland will 
still need to address existing obligations, such as those identified by the EFTA Surveillance 
Authority under the EEA Agreement. 

Communication  activities  promoting  an  informed  debate  about  Iceland's  accession  process 
have  started.  EU  accession  remains  a  controversial  issue  in  Iceland.  The  Commission  will 
continue to provide support in the field of information and people-to-people contacts. 

4. 

SUPPORTING THE ENLARGEMENT PROCESS 

4.1. Financial assistance  

The  Commission  provides  financial  and  technical  support  to  the  enlargement  countries  for 
their  preparation  for  accession.  Assistance  is  provided  essentially  under  the  Instrument  for 
Pre-Accession Assistance (IPA), under which total allocation over the period 2007-2013 is € 
11.6 billion14.  

Since 2010 the Commission has been gradually shifting financial assistance from support to 
individual  projects  to  a  more  global,  sector-wide  approach,  focusing  on  key  areas  of  the 
reform  agenda  of  the  beneficiary  countries.  Governments  in  the  enlargement  countries  are 
encouraged to adopt comprehensive and sustainable policies in priority sectors such as justice 
and  home  affairs,  public  administration,  private  sector  development,  transport,  energy, 
environment and climate change, social development, agriculture and rural development. 

The Multi-Annual Indicative Planning Documents (MIPDs) for the period 2011-2013 identify 
for each country the key sectors, according to the specific situation in each country and the 
progress in the accession process. Special attention is devoted to the fight against corruption, 
development  of  civil  society  and  freedom  of  expression.  Around  10%  of  the  available  IPA 
funds will be allocated to multi-country projects across the Western Balkans and Turkey. The 
Commission  adopted  today  its  annual  revised  Multi-annual  Indicative  Financial  Framework 
for assistance under IPA, covering the period 2012-13. 

In  line  with  its  Communication  of  June  2011  on  "A  budget  for  Europe  2020"15,  the 
Commission  is  now  preparing  the  legal  framework  for  providing  pre-accession  assistance 
under the next  multi-annual financial framework which will cover the period 2014-2020, as 
part of a package of instruments in the domain of external action.  

Assistance  under  the  current  IPA  Regulation  has  proved  to  be  efficient  and  effective.  The 
proposal  for  a  new  financial  instrument  to  be  presented  in  December  2011  will  draw 

14 
15  

Regulation (EC) No 1085/2006. 
COM(2011) 500 

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experience  from  the  implementation  of  the  current  instrument.  Building  on  this,  the  new 
instrument  will  cover  both  support  for  meeting  the  accession  criteria  and  support  for  socio-
economic development.  

In  dialogue  with  the  beneficiary  countries,  the  other  donors  and  civil  society  and  drawing 
from  the  experience  to  date,  the  Commission  has  been  reflecting  on  ways  to  strengthen  the 
link between financial assistance and the priorities identified in the enlargement strategy, as 
well  as  to  make  financial  assistance  more  strategic,  more  focussed,  more  flexible  and  to 
simplify  procedures.  In  this  context,  elements  considered  include  longer  term  and 
comprehensive planning of the assistance covering all policy areas, greater focus on the needs 
and  priorities  of  the  recipient  countries,  rewarding  progress  in  the  accession  process,  using 
IPA funds to leverage more funds from other donors and the private sector and enhancing the 
role of civil society. 

4.2. Visa liberalisation and mobility 

Achieving  visa-free  travel  to  the  EU  is  of  the  highest  importance  to  the  citizens  of  all  the 
enlargement  partners  and  is  part  of  the  accession  process.  However,  steps  towards 
liberalisation  are  subject  to  the  countries  concerned  meeting  conditions  that  safeguard  the 
internal security and migration policy interests of the EU.  

Iceland is already part of the Schengen area. In the Western Balkans, Croatian citizens have 
always  travelled  to  the  EU  without  visas.  Citizens  of  the  former  Yugoslav  Republic  of 
Macedonia,  Montenegro  and  Serbia  were  granted  visa-free  travel  to  the  Schengen  Area  in 
December 2009 and the same status was granted one year later to the citizens of Albania and 
Bosnia and Herzegovina. 

The recent decisions to drop the visa requirement for citizens of the Western Balkan countries 
were based on these countries fulfilling the benchmarks of roadmaps that were set out in the 
context  of  Commission-led  visa  liberalisation  dialogues.  The  dialogues  acted  as  a  strong 
incentive  for  reforms  towards  reaching  EU-standards  in  the  justice  and  home  affairs  areas, 
notably  in  strengthening  administrative  capacity  in  border  management  and  the  security  of 
documents,  but  also  in  strengthening  the  rule  of  law  and  combating  transnational  organised 
crime, corruption and illegal migration. 

However,  following  the  lifting  of  the  visa  requirement,  some  EU  Member  States  witnessed 
significantly  increased  numbers  of  asylum  applications  by  citizens  from  the  countries 
concerned,  in  particular  Serbia  and  the  former  Yugoslav  Republic  of  Macedonia,  pointing 
towards  abuse  of  the  visa-free  regime.  In  response,  the  Commission  set  up,  as  of  January 
2011,  a  post-visa  liberalisation  monitoring  mechanism  under  the  framework  of  the 
Stabilisation and Association Process, engaging with the countries concerned in a dialogue to 
assess  the  consistent  implementation  of  the  reforms  and  effective  remedial  measures.  The 
countries concerned have since strengthened controls on the ground and launched information 
campaigns  to  inform  the  citizens  on  the  rights  and  obligations  of  visa  free  travel.  The 
Commission invites the authorities of the countries concerned to take all the necessary further 
measures  to  allow  for  the  visa  free  regime  to  function  smoothly.  The  success  of  such 
measures will also need to be complemented by increased support and better living conditions 
for the most vulnerable groups concerned, including the Roma.  

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In a broader revision of the EU's visa policy, the Commission has presented to the Council a 
draft amendment to the visa regulation which would allow for a temporary suspension of an 
existing visa free regime with a third country in case of a sudden influx of persons16.  

Visa  liberalisation  for  Kosovo  would  complete  this  process  for  the  Western  Balkans.  In 
December 2010, the Council affirmed this perspective once all conditions are met. To address 
these conditions, Kosovo has adopted a legal framework for readmission and signed bilateral 
readmission agreements with 13 Schengen area states. It has adopted reintegration plans and 
continued their implementation. The Commission will therefore launch a visa dialogue with 
Kosovo towards the end of the year. 

The  EU  and  Turkey  started  to  intensify  their  cooperation  on  visa  issues,  while  the 
Commission entered into a dialogue with Turkey on visa, mobility and migration, in line with 
the Council conclusions of February 2011. This process started delivering results on both the 
issuance  of  visas  for  Turkish  travellers  and  the  tackling  of  irregular  immigration  to  the  EU 
and  will  help  identify  concrete  steps  required  from  Turkey  in  view  of  a  future  visa 
liberalisation.  In  this  context,  an  important  step  would  be  that  Turkey  take  the  necessary 
action for the swift conclusion of the readmission agreement.  

4.3. Information and communication  

Public support is key to the success of enlargement policy. The authorities of Member States 
and enlargement countries at national, regional and local level have a central role to play in 
information and communication efforts to this end. 

The Commission is committed to facilitating an informed public debate about the enlargement 
process,  based  on  user-friendly,  factual  information  provided  through  all  types  of  media. 
These need to address as a priority young people and key opinion formers such as journalists 
and representatives of civil society organisations and business. Parliamentary exchanges can 
also  play  an  important  role  in  fostering  informed  debate  and  mutual  understanding  of  the 
enlargement process.  

In  the  period  ahead,  next  steps  in  the  accession  process  with  enlargement  countries  will  be 
under  discussion.  Tangible  results  are  the  best  advertisements  for  the  EU's  enlargement 
policy. The successful outcome of negotiations with Croatia can be a powerful example, as is 
economic  resilience  in  South-East  Europe  and  concrete  achievements  on  key  issues  such  as 
energy supply or transport networks. It is essential to explain to the public how pursuing the 
enlargement agenda can help the EU attain its objectives linked to the economic crisis, jobs, 
the environment and climate change, safety, and migration while at the same time accelerating 
the reform agenda and improving living conditions in the enlargement countries.  

5. 

CONCLUSIONS AND RECOMMENDATIONS 

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

1. 

Enlargement  aims  to  extend  the  EU's  zone  of  peace,  stability,  democracy  and 
prosperity.  Enlargement  benefits  the  EU  as  a  whole  and  allows  it  to  be  better 

16 

COM(2011) 290. 

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2. 

3. 

4. 

5. 

6. 

7. 

8. 

positioned  to  address  global  challenges.  With  the  completion  of  accession 
negotiations  with  Croatia  in  June,  the  European  Union's  enlargement  process  has 
entered a new phase.  

The enlargement policy has proven to be a powerful tool for societal transformation. 
Countries  that  have  already  acceded  to  the  EU  and  those  on  the  road  to  join  have 
undergone  impressive  changes  through  accession-driven  democratic  and  economic 
reforms.  Croatia's  development  since  it  embarked  on  its  accession  path  provides 
fresh evidence for this transformative power of the EU.   

Through  its  enlargement  policy,  based  on  the  renewed  consensus  approved  by  the 
European  Council  in  December  2006,  the  EU  applies  a  demanding  conditionality 
and  monitors  progress  with  increased  attention.  This  results  in  the  aspiring  states 
achieving a high level of readiness which will benefit both them and the EU. 

Experience acquired from the negotiations with Croatia will be put to the benefit of 
ongoing  and  future  negotiations.  To  that  end,  the  Commission  will  propose  a  new 
approach with respect to issues related to the judiciary and fundamental rights and to 
justice, freedom and security. These should be tackled early in the accession process 
and  the  corresponding  chapters  opened  accordingly  on  the  basis  of  action  plans,  as 
they require the establishment of convincing track records. The Commission would 
report  regularly,  at  all  stages  of  the  process,  on  progress  achieved  in  these  areas 
along milestones defined in the action plans with, where appropriate, the necessary 
corrective measures. IPA funds will be targeted to support this process. 

A credible enlargement process, providing a clear accession perspective based on 
strict  conditionality,  is  key  for  enhancing  reforms  in  the  enlargement  countries  and 
provides the citizens of the enlargement countries with tangible results already along 
their  path  towards  the  EU.  Conditionality  for  advancing  towards  the  EU  provides 
strong incentives to embark on difficult reforms. It is also key in ensuring support for 
enlargement in the Member States.  

Croatia's  successful  European  course  shows  the  way  to  the  other  enlargement 
countries. As the first Western Balkan country enters the EU, the region's European 
future is becoming a reality.  

Strengthening  the  rule  of  law  remains  a  major  challenge  for  most  enlargement 
countries  and  is  a  crucial  condition  for  moving  towards  EU  membership.  The 
Commission  continues  to  prioritise  judiciary  and  public  administration  reform,  the 
fight  against  organised  crime  and  corruption,  including  through  its  regular 
monitoring,  structured  dialogues,  peer  reviews,  institution  building,  twinning,  and 
financial assistance. 

In a number of enlargement countries, there have been negative developments in the 
area  of  freedom  of  expression.  It  is  essential  that  the  enlargement  countries 
guarantee  open  and  pluralistic  media  landscapes,  which  allow  for  critical  and 
independent journalism. The Commission will closely monitor developments in this 
area and further integrate these issues into accession negotiations, notably under the 
judiciary and fundamental rights chapter. 

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9. 

10. 

11. 

12. 

13. 

Regional  cooperation,  underpinning  reconciliation  and  integration  into  the  EU, 
remains an essential element of the Stabilisation and Association process. While this 
cooperation  has  marked  further  progress  in  a  number  of  areas,  issues  mostly 
stemming  from  past  conflicts  continue  to  have  negative  effects  and  to  challenge 
stability  in  the  Western  Balkans.  It  is  urgent  to  address  these  issues.  Achieving  in 
particular inclusiveness in regional cooperation is a pressing priority. This should be 
possible, irrespective of differences over the status of Kosovo, by all parties adopting 
a constructive and pragmatic approach. 

Bilateral issues need to be solved by the parties concerned, with determination, in a 
good neighbourly spirit and taking into account overall EU interests. They should be 
tackled as early as possible and not hold up the accession process. Blockages linked 
to  bilateral  issues  can  compromise  the  transformative  power  of  the  enlargement 
process.  The  Commission  urges  parties  concerned  to  make  every  effort  towards 
solving  outstanding  border  disputes  in  line  with  established  principles  and  means, 
including  referring  issues  to  the  International  Court  of  Justice  if  appropriate.  Good 
neighbourly  relations  remain  key.  The  EU  stands  ready  to  facilitate  the  search  for 
solutions and to support related initiatives.  

Achieving visa-free travel to the EU is of the highest importance to the citizens of all 
the  enlargement  partners.  Visa  liberalisation,  as  part  of  the  accession  process,  has 
seen further progress with the lifting of the visa obligation for citizens from Bosnia 
and  Herzegovina  and  Albania  in  December  2010,  once  both  countries  had  met  the 
established  conditions.  The  Commission  urges  the  authorities  of  Western  Balkan 
countries  to  take  all  the  necessary  measures  against  abuse  of  the  visa-free  travel 
regime.  For  its  part,  the  Commission  has  strengthened  the  post  visa  liberalisation 
monitoring  by  setting  up  a  dialogue  mechanism  with  the  countries  concerned, 
including measures to remedy abuse. 

Considering Kosovo's progress on readmission and reintegration of returnees and in 
line  with  the  December  2010  Council  conclusions,  the  Commission  will  launch  a 
visa  dialogue  with  Kosovo  towards  the  end  of  the  year.  With  Turkey,  the  EU  has 
intensified  cooperation  on  visa  issues  and  the  Commission  has  entered  into  a 
dialogue with Turkey on visa, mobility and migration and will identify concrete steps 
required from Turkey in view of a future visa liberalisation. An important step would 
be  that  Turkey  takes  the  necessary  action  for  the  swift  conclusion  and  entry  into 
force of the readmission agreement. 

Following the global economic crisis, the enlargement countries have now embarked 
upon  a  path  of  economic  recovery,  though  at  varying  pace.  Turkey  has  emerged 
from  the  crisis  with  a  bigger  economy  and  its  growth  continues  to  be  impressive. 
However,  all  enlargement  countries  are  confronted  with  important  challenges. 
Unemployment  remains  high  and  rising  in  most  countries.  Fiscal  consolidation, 
structural  reform  and  improvement  of  the  business  environment,  including  through 
strengthening  the  rule  of  law  and  labour  market  reform,  are  major  priorities  for 
ensuring  the  sustainability  of  the  recovery  and  achieving  inclusive  growth.  In  this 
context,  the  Commission  invites  the  enlargement  countries  to  use  the  objectives  of 
Europe 2020 as a reform anchor. 

14. 

In  December  2011,  the  Commission  will  present  the  framework  for  providing  pre-
the  2014-2020  multi-annual  financial 
accession  financial  assistance  under 

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15. 

16. 

17. 

framework,  based  on  the  positive  experience  from  the  current  instrument.  Drawing 
from  this  experience,  the  Commission  will  strengthen  the  link  between  assistance 
and 
the  enlargement  strategy,  emphasising  socioeconomic 
development, increasing the flexibility of assistance and simplifying procedures.  

the  priorities  of 

Public  support  is  key  to  the  success  of  enlargement  policy.  The  authorities  of 
Member States and enlargement countries at national, regional and local level have a 
central  role  to  play  in  information  and  communication  efforts  to  this  end.  The 
Commission  is  committed  to  facilitating  an  informed  public  debate  about  the 
enlargement  process,  based  on  user-friendly,  factual  information.  The  Commission 
encourages  the  development  of  an  active  civil  society  as  an  essential  element  of 
democracy, also as a facilitator of an informed debate on EU enlargement. 

The Commission adopted a favourable Opinion on Croatia's accession to the EU, as 
of 1 July 2013. The completion of the accession negotiations has been made possible 
by Croatia meeting the remaining closing benchmarks, including in difficult chapters 
such  as  judiciary  and  fundamental  rights  and  competition  policy.  Croatia  needs  to 
continue consolidating its reforms, in line with the commitments undertaken during 
the  accession  negotiations.  The  Commission  will  closely  monitor  Croatia's  further 
preparations to assume the responsibilities of membership upon accession. Croatia is 
expected  to  continue  to  support  the  accession  process  of  the  other  Western  Balkan 
countries. 

With its dynamic economy and its important regional role, Turkey is a key country 
for the European Union. This has been highlighted by the current regional and global 
political  and  economic  developments.  Turkey  has  continued  EU-relevant  reforms, 
but  significant  further  efforts  are  required,  including  on  guaranteeing  core 
fundamental rights. Regrettably, accession negotiations have not moved on for more 
than  one  year.  The  Commission  will  work  for  a  renewed  positive  agenda  in  EU-
Turkey relations, one that will continue to support reforms, in particular an inclusive 
constitutional reform process, and economic integration. This agenda could cover a 
broad range of areas of common interest including political reforms, foreign policy 
dialogue,  alignment  with  the  EU  acquis,  visas,  mobility  and  migration,  energy,  the 
fight  against  terrorism,  trade  and  participation  in  EU  programmes.  The  country's 
contribution  to  the  EU  will  only  be  fully  effective  within  a  credible  and  active 
accession perspective. 

The Commission is concerned about the recent tension in relations between Turkey 
and  Cyprus.  The  Commission  recalls  that  the  Council  has  urged  Turkey  to  refrain 
from any kind of threat, sources of friction or action, which could negatively affect 
good  neighbourly  relations  and  the  peaceful  settlement  of  border  disputes. 
Furthermore,  the  EU  has  stressed  all  the  sovereign  rights  of  EU  Member  States 
which include entering into bilateral agreements, in accordance with the EU acquis 
and international law, including the UN Convention on the Law of the Sea.  

The EU has repeatedly underlined the urgency of Turkey's fulfilment of its obligation 
of  full  non-discriminatory  implementation  of  the  Additional  Protocol  to  the 
Association Agreement and progress towards normalisation of bilateral relations with 
the  Republic  of  Cyprus.  This  could  provide  a  significant  boost  to  the  accession 
process.  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  relevant 

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18. 

19. 

20. 

21. 

Council Conclusions. In the absence of progress, the Commission recommends that 
the EU maintains its measures from 2006.  

As regards the Cyprus issue, the leaders of the Greek Cypriot and Turkish Cypriot 
communities have intensified the negotiations on a comprehensive settlement under 
the auspices of the United Nations. The Commission strongly supports their efforts 
and  provides  technical  advice  on  issues  within  EU  competence.  The  Commission 
urges both leaders to now make the necessary compromises to bring the negotiations 
to a successful conclusion and urges all actors involved to focus all efforts and minds 
on  the  comprehensive  settlement  in  Cyprus.  During  the  ongoing  intensive  phase  of 
Cyprus  talks,  it  is  essential  that  all  parties  concerned  exert  restraint  and  do  their 
utmost to ensure a positive climate that will facilitate a successful completion of the 
process, contributing in concrete terms to a comprehensive settlement. 

The  accession  process  with  Iceland  is  gaining  momentum  and  negotiations  on 
specific acquis chapters have been launched. The country's high level of integration 
with the EU across a wide range of policy areas is proving a considerable advantage. 
The  Commission  takes  Iceland's  specificities  and  expectations  into  account,  while 
fully respecting the established approach on accession negotiations and safeguarding 
the principles and the acquis of the Union, as well as the negotiating framework. The 
Commission will continue to supply the public debate on accession in Iceland with 
factual information about EU membership. 

The  former  Yugoslav  Republic  of  Macedonia  continues  to  sufficiently  fulfil  the 
political criteria. Some progress has been made on core reforms. The implementation 
of  adopted  legislation,  as  well  as  guaranteeing  the  freedom  of  expression  in  the 
media, strengthening independence of the judiciary, reform of public administration, 
and fighting corruption continue, however, to represent significant challenges.  

The Commission reiterates its recommendation that negotiations for accession to the 
European  Union  should  be  opened  with  the  former  Yugoslav  Republic  of 
Macedonia. The Commission also reiterates its proposal to move to the second stage 
of association as provided by the Stabilisation and Association Agreement, without 
further delay. 

Maintaining  good  neighbourly  relations,  including  a  negotiated  and  mutually 
accepted  solution  to  the  name  issue,  under  the  auspices  of  the  UN,  is  essential. 
Another year should not be lost. 

Montenegro has successfully addressed the key priorities set out in 2010 by the EU 
as  a  pre-requisite  to  opening  accession  negotiations.  The  country  has  consolidated 
national  consensus  on  European  Integration.  In  view  of  the  progress  made,  the 
Commission  considers  that  Montenegro  has  achieved  the  necessary  degree  of 
compliance with the membership criteria and in particular the Copenhagen political 
criteria.  Yet,  maintaining  the  reform  momentum,  with  particular  focus  on 
implementation  of  legislation  and  policies  in  the  area  of  rule  of  law,  remains 
essential.  To  that  aim,  the  Commission  intends  to  propose  to  apply  in  the  case  of 
Montenegro  the  new  approach  for  the  negotiating  chapters  on  judiciary  and 
fundamental rights and justice, freedom and security referred to under point 4 above. 

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In  light  of  these  considerations  and  taking  into  account  the  Council  conclusions  of 
December 2010, the Commission recommends that accession negotiations be opened 
with Montenegro. 

22. 

23. 

Over the past year, Albania's domestic political scene has been largely dominated by 
the  political  stalemate  between  the  ruling  majority  and  opposition  and  further 
confrontational developments. It is now urgent that, building on recent encouraging 
signals,  the  political  forces  in  Albania  re-establish  and  sustain  a  level  of  political 
dialogue  allowing  the  functioning  of  key  democratic  institutions,  improving  the 
electoral framework, and the implementation of essential reforms. The Commission 
encourages the key actors to jointly establish concrete methods for bridging domestic 
differences in order to realising the country's European perspective. 

The  Commission  presented  its  Opinion  on  Serbia's  membership  application  today. 
The  Commission  recommends  that  the  European  Council  should  grant  Serbia  the 
status of candidate country, taking into account progress achieved so far and on the 
understanding  that  Serbia  re-engages  in  the  dialogue  with  Kosovo  and  is  moving 
swiftly to the implementation in good faith of agreements reached to date.  

Serbia is well on its way towards sufficiently fulfilling the political criteria set by the 
Copenhagen  European  Council  in  1993  and  the  conditions  of  the  Stabilisation  and 
Association process, provided that progress continues and that practical solutions are 
found to the problems with Kosovo. 

The  Commission  therefore  recommends  that  negotiations  for  accession  to  the 
European  Union  should  be  opened  with  Serbia  as  soon  as  it  achieves  further 
significant progress in meeting the following key priority:  

-  Further steps to normalise relations with Kosovo in line with the conditions of the 
Stabilisation  and  Association  Process  by:  fully  respecting  the  principles  of 
inclusive  regional  cooperation;  fully  respecting  the  provisions  of  the  Energy 
Community  Treaty;  finding  solutions  for  telecommunications  and  mutual 
acceptance of diplomas; by continuing to implement in good faith all agreements 
reached; and by cooperating actively with EULEX in order for it to exercise its 
functions in all parts of Kosovo. 

The Commission will present a report on Serbia's implementation of the above key 
priority as soon as sufficient progress has been achieved. 

24. 

25. 

The EU will continue to facilitate the dialogue between Belgrade and Pristina to 
promote cooperation, achieve progress on the path to the EU and improve the lives of 
people.  The  dialogue  has  proved  to  date  a  valuable  means  to  address  differences 
between the two parties and has led to several agreements in areas including freedom 
of movement of goods and persons, civil registry and cadastre.  

In a year marked by lengthy electoral processes in Kosovo, progress achieved with 
the  reform  agenda  was  limited.  The  President  and  government  have  demonstrated 
commitment  to  Kosovo's  European  perspective.  This  has  produced  some  initial 
reforms.  Major  challenges  remain  concerning  organised  crime  and  corruption,  as 
well  as  the  strengthening  of  public  administration.  The  Commission  proposes  to 

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launch a structured dialogue with Kosovo on the rule of law with the aim to address 
these challenges and support judicial reform. 

While  the  integration  of  Kosovo  Serbs  has  improved  in  the  South,  tensions  in 
northern  Kosovo  have  increased.  People  in  the  north  also  need  to  benefit  from  the 
European  perspective.  To  that  end,  the  Commission  underlines  the  importance  of 
Kosovo launching a comprehensive agenda for the north. 

The  Commission  will  continue  to  support  Kosovo's  efforts  to  further  fulfil  its 
European  perspective,  notably  as  regards  visas,  a  trade  agreement,  and  Kosovo's 
participation in EU programmes, in line with its 2009 Communication. To this end, 
the  Commission  will  review  its  2009  Communication  to  ensure  that  Kosovo  can 
further benefit  from the EU accession process. The Commission encourages efforts 
for  overcoming  obstacles  to  the  development  of  relations  between  the  EU  and 
Kosovo caused by differences on Kosovo's status.  

26. 

In  Bosnia  and  Herzegovina  the  political  and  institutional  deadlock  has  continued, 
prolonging the blockages in the functioning of the state and in the implementation of 
EU-related reforms. The formation of a State-level government is an urgent priority 
to  ensure  effective  state-level  governance.  To  advance  towards  the  EU  the  country 
still needs to amend its Constitution in line with a European Court of Human Rights 
ruling,  for  eliminating  ethnic  discrimination  regarding  representation  in  state 
institutions,  as  well  as  adopting  a  Law  on  State  Aid.  A  Census  Law  remains  to  be 
adopted.  The  country's  engagement  on  a  Structured  Dialogue  on  Justice  under  the 
Stabilisation  and  Association  process  shows  the  way  ahead,  through  dialogue  and 
compromise as well as focus on the EU agenda.  

Making further progress towards meeting the objectives and conditions which have 
been set for the closure of the Office of the High Representative remains essential. 
The  appointment  of  the  EU's  first  single  representative  in  Bosnia  and  Herzegovina 
reinforces the EU presence and support to the country on its way from international 
supervision to its European future, in line with the March 2011 Council conclusions.  

27. 

The  EU's  enlargement  policy  has  brought  about  deep  democratic  and  economic 
transformations  in  countries  seeking  to  join.  The  past  year's  record  underlines  the 
value of a credible enlargement policy. At the same time, where political will and the 
commitment  to  achieve  concrete  results  are  insufficient  or  lacking,  the  accession 
process will not advance and risks stalling. Tackling difficult reforms brings stable, 
better prepared, and more prosperous enlargement countries closer to the EU.  

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ANNEX 1 

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

In  the  light  of  substantial  reforms  over  the  last  years,  Serbia  has  considerably  progressed 
towards  fulfilling  the  political  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.  Serbia  has  a  comprehensive  constitutional,  legislative  and  institutional 
framework which overall corresponds to European and international standards. Parliament has 
become far more effective in its legislative activity under the current legislature. The legal and 
institutional  framework  for  the  rule  of  law  is  comprehensive,  including  in  the  areas  of  the 
fight  against  corruption  and  organised  crime  where  initial  results  were  achieved.  The  legal 
framework for the protection of human rights and minorities is well developed and has started 
being implemented. Serbia has reached a fully satisfactory level in its cooperation with ICTY 
and has taken an increasingly active role in fostering reconciliation in the region. Serbia has 
agreed to and participated in a process of dialogue with Kosovo to facilitate the lives of the 
people  which  has  led  to  several  agreements  (free  movement  of  persons  and  goods,  civil 
registry and cadastre) and Serbia has taken initial steps for implementation.  

As  regards  the  economic  criteria,  Serbia  has  taken  important  steps  towards  establishing  a 
functioning  market  economy  and  achieved  a  certain  degree  of  macroeconomic  stability  in 
spite of the global economic and financial crisis. However,  further efforts will be  necessary 
for  restructuring  the  economy  and  improving  the  business  environment,  in  particular  by 
strengthening the rule of  law and removing  red tape, enhancing competition and the role of 
the private sector as well as tackling rigidities on the labour market. In order to enable it to 
cope  in  the  medium  term  with  competitive  pressure  and  market  forces  within  the  Union, 
Serbia needs to pursue structural reforms to upgrade the productive capacity of the economy 
and create a climate conducive to increased foreign investment. 

Serbia  has  built  up  a  positive  track  record  in  implementing  its  obligations  under  the 
Stabilisation and Association Agreement and the Interim Agreement. 

Serbia would be in a position to take on the obligations of membership in the medium term, in 
nearly all acquis fields, provided that the alignment process continues and that further efforts 
are  made  to  ensure  the  implementation  and  enforcement  of  legislation.  Particular  attention 
needs to be paid to the areas of agriculture and rural development, judiciary and fundamental 
rights, justice, freedom and security and financial control. Full compliance with the acquis in 
the field of the environment and climate change could be achieved only in the long term and 
would necessitate increased levels of investment. 

Based  on  preliminary  estimates,  Serbia'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  recommends  that  the  Council  should  grant  Serbia  the  status  of  candidate 
country, taking into account progress achieved so far and on the understanding that Serbia re-
engages  in  the  dialogue  with  Kosovo  and  is  moving  swiftly  to  the  implementation  in  good 
faith of agreements reached to date.  

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Serbia  is  well  on  its  way  towards  sufficiently  fulfilling  the  political  criteria  set  by  the 
Copenhagen  European  Council  in  1993  and  the  conditions  of  the  Stabilisation  and 
Association process, provided that progress continues and that practical solutions are found to 
the problems with Kosovo. 

The Commission therefore recommends that negotiations for accession to the European Union 
should be opened with Serbia as soon as it achieves further significant progress in meeting the 
following key priority:  

-  Further  steps  to  normalise  relations  with  Kosovo  in  line  with  the  conditions  of  the 
Stabilisation  and  Association  Process  by:  fully  respecting  the  principles  of  inclusive 
regional  cooperation;  fully  respecting  the  provisions  of  the  Energy  Community  Treaty; 
finding  solutions  for  telecommunications  and  mutual  acceptance  of  diplomas;  by 
continuing to implement in good faith all agreements reached; and by cooperating actively 
with EULEX in order for it to exercise its functions in all parts of Kosovo. 

The Commission will present a report on Serbia's implementation of the above key priority as 
soon as sufficient progress has been achieved. 

Serbia is encouraged to maintain the momentum of reforms in pursuing the necessary degree 
of compliance with the membership criteria, with particular attention to the rule of law, and to 
continue  its  constructive  engagement  in  regional  cooperation  and  in  strengthening  bilateral 
relations with neighbouring countries. Implementation of the Interim Agreement, and from its 
entry into force, the Stabilisation and Association Agreement, are expected to continue. The 
Commission will continue to support these efforts through the IPA financial instrument. 

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ANNEX 2 

Conclusions on Croatia, the former Yugoslav Republic of Macedonia, Montenegro, 
Albania, Bosnia and Herzegovina, Kosovo17, Turkey and Iceland  

Croatia 

After Croatia met the remaining closing benchmarks, accession negotiations were concluded 
in June 2011. Croatia now needs to build on the high degree of alignment achieved and focus 
on  the  remaining  work  before  accession.  This  Progress  Report  is  part  of  the  Commission's 
monitoring of Croatia's fulfilment of all the commitments taken in the accession negotiations 
and its continued preparations to assume the responsibilities of membership upon accession. 

Croatia  continues  to  meet  the  political  criteria.  Substantial  progress  has  been  made  in  all 
areas,  including  rule  of  law,  and  results  are  becoming  tangible.  Efforts  must  continue  to 
consolidate these results.  

Democracy  and  the  rule  of  law  have  been  further  strengthened.  The  government  and  the 
parliament have continued to function effectively. In the area of public administration reform, 
further  efforts  are  needed  to  consolidate  efficient  implementation  of  the  legal  framework  in 
order  to  complete  building  a  modern,  reliable,  de-politicised  and  citizen-oriented  public 
service. 

Croatia has made good progress regarding the judiciary. New legislation further strengthened 
judicial  independence  and  many  measures  have  been  taken  to  improve  the  efficiency  of  the 
judiciary.  A  new  system  for  appointing  judicial  officials  has  been  established.  Some 
challenges remain, especially the need to further increase judicial efficiency, and to ensure the 
practical  implementation  of  new  measures  relating  to  independence,  impartiality  and 
accountability  of  the  judiciary.  Progress  has  been  made  with  the  impartial  handling  of  war 
crimes  trials.  The  four  specialised  war  crimes  chambers  have  been  made  exclusively 
competent for all new cases and their role should be further strengthened for pending cases. 
The Ministry of Justice adopted a strategy for addressing impunity, especially in cases where 
the  victims  were  ethnic  Serbs  or  the  alleged  perpetrators  were  members  of  the  Croatian 
security forces.  

There  has  been  substantial  progress  in  the  fight  against  corruption.  Anti-corruption  efforts 
have  been  accelerated  with  positive  results;  legislation  has  been  improved  and  the  relevant 
authorities strengthened. The track record of effective handling of corruption cases needs to 
be  further  developed,  especially  covering  high  level  corruption,  local  level  corruption  and 
including cases related to public procurement and the judiciary. Further experience is needed 
on  implementing  the  newly  adopted  preventive  legal  framework  in  practice  and  the 
implementing structures remain to be further strengthened.  

Human rights continue to be generally well respected and further progress has been made in 
the  areas  of  human  rights  and  the  protection  of  minorities.  Croatia  has  continued  to  take 
various  measures  to  raise  public  awareness  and  improve  protection  of  human  rights.  As  for 
access to justice, implementation of the Law on Legal Aid has continued to improve, notably 
by  simplifying  procedures.  With  regard  to  the  prison  system,  work  on  the  expansion  of 

17 

Under UN Security Council Resolution 1244. 

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existing  detention  and  treatment  facilities  has  continued,  but  Croatian  prisons  remain 
overcrowded.  As  regards  ill  treatment,  the  Ombudsman  continued  to  receive  complaints 
regarding excessive use of force by the police which need to be followed up adequately. 

Freedom  of  expression,  including  freedom  and  pluralism  of  the  media,  is  provided  for  in 
Croatian  law  and  is  generally  respected.  There  has  been  further  progress  regarding 
transparency of media ownership, but limited progress with investigating cases, from previous 
years, of intimidation of journalists working on cases of corruption and organised crime. Few 
new cases have been reported, however. Economic pressures in particular are hampering the 
development  of  investigative  reporting.  Problems  with  political  interference  at  local  level 
remain.  Freedom  of  assembly  requires  continued  attention  in  terms  of  handling  of 
demonstrations.  

There has been some progress with regard to women's rights and gender equality. However, 
the position of women on the labour market has not changed significantly and the percentage 
of unemployed women remains high. There has been limited progress with children's rights. 
The Ombudsperson for Children became more active in cases where violence against children 
was not being properly addressed by the relevant authorities.  

There  has  been  limited  progress  as  regards  the  inclusion  of  socially  vulnerable  groups  and 
persons  with  disabilities.  The  capacity  of  the  Office  of  the  Ombudsman  for  Persons  with 
Disabilities  is  being  strengthened.  Criteria  for  establishing  entitlements  are  not  equally 
applied  and  legislation  regulating  specific  rights  is  fragmented.  The  transition  from 
institutional care to community-based care services has progressed slowly. Labour and trade 
union rights are generally respected. 

Croatia  has  begun  developing  a  track  record  of  implementation  of  the  Anti-Discrimination 
Law and legislation on hate crimes. Various awareness-raising measures were taken and the 
Office of the Human Rights Ombudsman is being reinforced. Law enforcement bodies have 
started a number of cases under hate crime legislation. However, the track record needs to be 
developed further and societal homophobic and xenophobic sentiment addressed.  

There has been some progress with the respect for and protection of minorities and cultural 
rights.  High-level  public  expressions  of  commitment  to  the  rights  of  minorities,  reaffirming 
their  place  in  Croatian  society,  have  continued.  Funding  has  been  secured  for  minority 
organisations.  Police  investigations  into  incidents  against  minorities  have  improved.  Steps 
have  been  taken  to  improve  implementation  of  the  employment  provisions  of  the 
constitutional act on the rights of national minorities and a plan for minority employment was 
adopted  and  now  needs  to  be  implemented.  However,  Croatia  needs  to  continue  to  foster  a 
spirit  of  tolerance  towards  minorities,  in  particular  Croatian  Serbs.  Cases  of  discrimination 
continue,  particularly  in  the  public  sector  at  local  level.  Improvements  have  been  made  in 
education  for  the  Roma  minority,  particularly  in  pre-school  education.  Infrastructure 
improvements to some Roma settlements have continued. Problems remain with participation 
by the Roma community in the education system. There is scope for improved take-up by the 
Roma  of measures in their favour. Access to adequate housing,  social protection and health 
care remain problems for Roma and unemployment remains extremely high.  

There  has  been  good  progress  on  refugee  return  issues.  Refugees  continued  to  return  to 
Croatia.  Progress  was  made  with  housing  issues,  in  particular  by  providing  accommodation 
under housing care programmes for returnees. The backlog of appeals against refused housing 
reconstruction  applications  has  also  been  reduced.  Progress  has  been  made  with  the 

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reconstruction  of  the  remaining  properties.  Implementation  of  the  decision  on  validating 
pension  rights  has  continued.  However,  Croatia  needs  to  make  progress  in  providing 
accommodation  to  the  estimated  2,500  remaining  housing  care  applicants.  Efforts  to  create 
the  economic  and  social  conditions  necessary  for  sustainable  returns  of  refugees  need  to  be 
accelerated. 

As regards regional issues and international obligations, Croatia continues to cooperate with 
the International Criminal Tribunal for the former Yugoslavia (ICTY). The government's inter 
agency task force has explored important new avenues in its investigations aimed at locating 
or  determining  the  fate  of  missing  artillery  documents  requested  by  the  Office  of  the  ICTY 
Prosecutor.  Croatia  has,  however,  been  unable  to  fully  account  for  the  missing  military 
documents.  Political  leaders  should  also  avoid  statements  and  measures  that  could  call  into 
question the importance of reconciliation and the need to serve justice through the prosecution 
of war crimes. 

Significant  progress  was  made  with  regard  to  the  Sarajevo  Declaration  Process.  Following 
the meetings in June and September 2011, Bosnia and Herzegovina, Croatia, Montenegro and 
Serbia, agreed on a number of issues, including on the text of a joint declaration to be signed 
at a ministerial conference in November 2011 in Belgrade. 

In  July,  the  Croatian  government  adopted  and  transmitted  to  parliament  for  adoption  a 
declaration  on  promoting  European  values  in  Southeast  Europe  stating  a  firm  commitment 
from  Croatia  that  bilateral  issues,  such  as  border  issues,  must  not  obstruct  the  accession  of 
candidate countries to the EU from the beginning of the accession process until the Accession 
Treaty comes into effect. 

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). Bilateral relations with other enlargement 
countries  and  neighbouring  EU  Member  States  continue  to  develop,  including  with  Serbia, 
but  some  issues  require  continued  attention,  notably  regarding  cooperation  on  the 
investigation and prosecution of war crimes. Relations with Slovenia have further improved, 
with the entry into force of the Border Arbitration Agreement.  

The economy of Croatia was still in recession in 2010 and the first quarter of 2011 in spite of 
the recovery in the economies of the EU and other trading partners. There are, however, signs 
of  increasing  economic  activity  since  the  spring.  Unemployment,  public  deficit  and  debt 
continued  to  increase.  The  high  external  indebtedness  remains  a  key  vulnerability  of  the 
economy.  

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. Given 
the existing constraints, macroeconomic policy has, by and large, been appropriate to address 
the  challenges  of  the  recession.  The  central  bank  succeeded  to  preserve  exchange  rate  and 
financial  stability  while  maintaining  an  accommodative  monetary  policy  as  underlying 
inflationary  pressures  stayed  low.  The  banking  sector  remained  resilient  to  shocks.  In  the 
fiscal area, the authorities made efforts to contain the rising deficit by reining in expenditures. 

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The budgetary framework for achieving fiscal sustainability over the medium term has been 
improved.  The  current  account  deficit  continued  to  narrow  as  exports  expanded  while 
subdued domestic demand kept imports low. Some progress, albeit limited, was achieved on 
structural reforms within the framework of the Economic Recovery Programme. 

However,  in  overall  terms  the  speed  of  structural  reforms  remained  slow,  not  least  with 
respect  to  privatisation  and  the  restructuring  of  loss-making  enterprises.  The  investment 
climate continued to suffer from a heavy regulatory burden, unpredictability of administrative 
decisions in particular at local level and numerous non-tax fees. Planned reforms of the highly 
rigid  labour  market  were  narrowly  circumscribed  and  the  already  low  employment  and 
participation rates declined further. Social transfer payments, which represent a relatively high 
share of public budgets, remained not well-targeted. Considering the need to achieve medium-
term  fiscal  sustainability,  the  budgetary  process  could  be  improved  further.  Enhancing  the 
efficiency of public spending remains a key challenge. 

Regarding  Croatia's  ability  to  take  on  the  obligations  of  membership,  preparations  for 
meeting  EU  requirements  have  continued  to  progress  well  and  there  is  a  high  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. Implementation of the Stabilisation and Association Agreement 
has progressed smoothly. 

Good  progress  has  been  made  in  the  field  of  free  movement  of  goods.  Alignment  with  the 
acquis in this chapter is well advanced. However, further efforts are necessary, particularly on 
the  remaining  revisions  of  the  horizontal  legislation  and  on  the  New  and  Old  Approach 
product legislation in order to bring national legislation fully into line with the acquis.  

Continued  progress  has  been  made  in  the  field  of  freedom  of  movement  for  workers  and 
preparations  to  apply  the  acquis  are  on  track.  Continued  attention  must  be  paid  to 
strengthening  administrative  capacity  with  regard  to  the  coordination  of  social  security 
systems. 

Further progress has been made in the field of right of establishment and freedom to provide 
services  where,  in  general,  alignment  with  the  acquis  is  satisfactory.  Continued  work  on 
mutual recognition of professional qualifications and on transposition and implementation of 
the  Services  Directive  in  order  to  achieve  complete  alignment  is  needed  as  well  as  further 
strengthening of the administrative capacity of the postal services regulator. 

Further progress has been made in the field of free movement of capital as regards the acquis 
on  payment  services,  liberalisation  of  capital  movements  and  anti-money-laundering. 
Legislative alignment is almost completed.  

Progress  has  continued  in  the  field  of  public  procurement.  Alignment  with  the  acquis  is  on 
track  and  nearing  completion.  Special  attention  should  be  paid  to  aligning  the  secondary 
legislation with the new public procurement law, and to strengthening the institutions in this 
sector through continuous training and professional development of their staff. 

Progress can be reported in the field of company law. Alignment with the acquis is well on 
track.  Further  progress  has  been  achieved  in  the  field  of  intellectual  property  law  and 

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alignment  with  the  acquis  has  reached  a  very  high  level.  Public  awareness  of  intellectual 
property rights remains to be further strengthened. 

Substantial progress has been achieved in competition policy, in particular by the approval of 
restructuring  plans  for  the  shipyards.  However,  none  of  the  privatisation  contracts  has  been 
signed. A high level of legislative alignment has been achieved. Further efforts are required to 
continue  developing  the  Croatian  Competition  Agency's  enforcement  record  against  cartels 
following the entering into force of the new Competition Act.  

Good  progress  has  been  made  in  financial  services,  both  on  aligning  legislation  and  on 
strengthening administrative capacity. Alignment is at a high level.  

Croatia  has  made  good  progress  on  information  society  and  media  and  has  achieved  a  high 
level  of  alignment  with  the  acquis.  Further  efforts  are  needed  to  sustain  liberalisation  of  all 
segments  of  electronic  communications  markets  and  to  promote  the  independence  of  the 
public service broadcaster.  

Good  progress  can  be  reported  in  agriculture  and  rural  development,  in  particular  on  the 
establishment and implementation of the paying agency and of the integrated administration 
and  control  system  and  on  the  common  market  organisation.  Overall,  preparations  are  on 
track.  Croatia  needs  to  sustain  considerable  efforts  in  all  these  areas  in  order  to  have  fully 
operational and compliant systems in place. Continued efforts are also necessary on alignment 
of  the  agricultural  support  system  with  the  acquis.  Croatia  needs  to  increase  its  absorption 
capacity for rural development funds without delay. 

Good  progress  can  be  reported  in  the  fields  of  food  safety,  veterinary  and  phytosanitary 
policy,  in  particular  on  transposition  of  EU  legislation  and  adoption  of  implementing 
legislation.  Transposition  of  legislation  is  reaching  completion  in  several  sectors.  Croatia 
needs  to  maintain  its  efforts  on  upgrading  and  monitoring  establishments,  setting  up  border 
inspection  posts,  monitoring 
its 
administrative and control capacity. 

the  animal  by-products  sector  and  strengthening 

Croatia continued to make good progress in aligning with the acquis in the field of fisheries. 
Overall  preparations  are  well  advanced.  Croatia  needs  to  continue  its  efforts  regarding 
implementation of  legislation, in particular with regard to fleet management, inspection and 
control and structural policy.  

Further progress has been achieved and the level of alignment in the field of transport policy 
is good. Additional efforts are needed, in particular to continue work on the second phase of 
the  European  Common  Aviation  Area  Agreement,  to  complete  alignment  of  the  aviation 
legislation  and  to  ensure  full  functioning  of  the  railway  safety  authority  and  of  the  vessel 
traffic monitoring information system.  

Some  progress  has  been  made  in  the  field  of  energy,  where  the  level  of  alignment  is  high. 
Further  efforts  are  needed,  in  particular  on  opening  the  electricity  and  gas  markets  and 
meeting the EU's targets for renewable energy sources and energy efficiency. Administrative 
procedures  related  to  renewable  energy  projects  need  to  be  simplified  and  administrative 
capacity strengthened. 

EN 

35 

   EN 

 
Some  progress  was  made  in  the  field  of  taxation.  Croatia's  level  of  legislative  alignment  is 
very high, but some further efforts are needed, most notably in the field of VAT and excise 
duties. Croatia should continue working on preparations for IT interconnectivity. 

There  has  been  some  progress  in  the  area  of  economic  and  monetary  policy  and  alignment 
with  the  acquis  in  this  area  is  complete.  Continued  efforts  to  improve  economic  policy 
coordination would be beneficial.  

Good  progress  has  been  made  in  the  area  of  statistics.  A  good  level  of  alignment  has  been 
achieved.  Efforts  need  to  continue  in  order  to  align  Croatian  statistics  fully  with  the  EU 
requirements.  

Some progress has been made in the area of 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 outside the scope of the Labour Act, 
and in the fields of anti-discrimination and gender equality. Due attention should be paid to 
addressing structural weaknesses on the labour market, as well as to the functioning of social 
dialogue and capacity-building of social partners. Administrative capacity requires continuous 
strengthening across all areas.  

Croatia made some progress in the field of enterprise and industrial policy. Alignment with 
the  acquis  in  this  chapter  is  very  advanced.  Further  sustained  efforts  need  to  focus  on 
improving  the  business  environment,  by  reducing  the  administrative  burden,  and  on 
innovation  and  skills.  Alignment  of  the  definition  of  SMEs  with  the  acquis  needs  to  be 
completed. Efforts to restructure the shipbuilding industry need to be further pursued.  

Croatia has made further progress in the field of trans European networks, where alignment 
with the acquis has been completed. 

Good  progress  was  made  in  the  field  of  regional  policy  and  coordination  of  structural 
instruments.  Croatia  is  at  an  advanced  stage  of  preparations  for  implementation  of  the 
cohesion  policy  in  all  areas.  Further  sustained  efforts  need  to  focus  on  increasing  Croatia's 
administrative  capacity  for  future  implementation  of  cohesion  policy  and  on  developing  a 
mature project pipeline. 

Croatia  has  made  substantial  progress  on  judiciary  and  fundamental  rights.  Reform  of  the 
judiciary  has  continued  with  the  adoption  of  new  legislation  further  strengthening  judicial 
independence  and  a  further  reduction  of  the  case  backlog.  Judicial  reform  requires  constant 
attention,  especially  concerning  judicial  efficiency  and  the  practical  implementation  of  new 
measures  relating  to  independence,  impartiality  and  accountability  of  the  judiciary.  Croatia 
has continued to improve the handling of domestic war crimes cases. The issue of impunity 
needs to be thoroughly addressed. Anti-corruption efforts have been accelerated with positive 
results,  in  particular  as  regards  improved  legislation  and  the  strengthening  of  the  relevant 
authorities.  The  track  record  of  effective  handling  of  corruption  cases  needs  to  be  further 
developed, especially in relation to high level corruption, local level corruption, and including 
cases  related  to  public  procurement  and  the  judiciary.  Further  experience  is  needed  with 
implementing  the  newly  adopted  preventive  legal  framework  in  practice.  Protection  of 
fundamental  rights  has  been  strengthened,  but  it  needs  to  be  further  improved  in  practice, 
especially for minorities and refugees.  

EN 

36 

   EN 

 
Good progress can be reported in the field of justice, freedom and security, where the overall 
level  of  alignment  with  the  acquis  is  advanced.  On  asylum,  the  legal  framework  was 
strengthened.  Attention  needs  to  be  paid  to  improving  the  integration  of  persons  granted 
protection in Croatia, and to the protection of irregular minors migrants. Alignment with the 
EU  acquis  on  visas  needs  to  continue.  Progress  has  been  made  as  regards  external  borders. 
Strengthening  of  the  Border  Police  has  continued  with  regard  to  staffing  and  equipment. 
Croatia  needs  to  focus  on  the  timely  implementation  of  the  revised  Integrated  Border 
Management Action Plan. Progress has been made in the field of judicial cooperation in civil 
and criminal matters. Good progress can also be reported in the fight against organised crime 
and against drugs. 

Progress in the field of science and research has continued, the level of alignment is high, but 
efforts  remain  necessary  with  respect  to  the  level  of  investment  in  research  and  to  quality 
researchers and their rights. Preparations for the Innovation Union should be duly considered. 

Good progress has been made in the areas of education, training, youth and culture. There is a 
good level of alignment with the acquis. Croatia has been fully participating in the Lifelong 
Learning  and  Youth  in  Action  programmes  since  January  2011.  Vocational  education  and 
training and adult education require continuous attention. 

There  has  been  progress  in  the  area  of  environment.  Overall,  Croatia's  preparations  are 
nearing  completion  with  regard  to  both  alignment  and  implementation  of  legislation,  in 
particular  in  the  areas  of  water  quality  and  chemicals.  Implementation  of  the  horizontal 
acquis, and in particular effective public participation and access to justice in environmental 
matters,  need  to  be  improved.  Significant  efforts  are  still  required  to  further  strengthen 
administrative capacity, especially as regards nature protection and climate change. Regarding 
climate  change,  significant  further  efforts  are  still  necessary  to  complete  the  legislative 
alignment and to ensure implementation, in particular in the areas of aviation, free allocation, 
registries and auctioning.  

There has been some progress in the area of consumer and health protection. Alignment with 
the acquis and preparations in the area of consumer protection are well advanced. Sustained 
efforts are necessary in order to address the remaining outstanding issues in the area of public 
health.  

Croatia continued to make good progress in the field of customs union. Legislative alignment 
in  this  field  is  very  high  and  further  alignment  was  achieved  during  the  period.  Croatia  has 
continued to reinforce its administrative and operational capacity by upgrading its equipment 
for  physical  checks  and  improving  its  risk  analysis  capability.  Preparations  are  also  well 
advanced  in  the  area  of  IT  interconnectivity  and  should  proceed.  Efforts  are  needed  to 
reinforce  administrative  capacity  in  the  areas  of  internal  controls,  post-clearance  and  risk 
management. 

Croatia continued to make progress in the field of external relations, where it has reached an 
advanced level of alignment and is continuing to coordinate and align its positions with those 
of the EU in international organisations. However, Croatia should step up its efforts to bring 
its  international  agreements  into  line  with  the  EU  acquis  and  to  continue  strengthening  its 
administrative capacity in the areas of development policy and humanitarian aid.  

Croatia has made further progress in foreign, security and defence policy. It has continued to 
participate in several EU CSDP missions. Croatia has reached a high level of alignment in this 

EN 

37 

   EN 

 
area.  Croatia  needs  to  continue  strengthening  enforcement  of  arms  control,  including  the 
transparency of arms-related information. 

Croatia  has  made  further  progress  in  the  field  of  financial  control,  where  it  has  reached  an 
advanced level of alignment. Continuous efforts are needed in order to improve overall public 
internal financial control and external audit in Croatia at central and local levels. 

Good  progress  can  be  reported  in  the  field  of  financial  and  budgetary  provisions.  The 
administrative  infrastructure  and  procedures  for  managing  the  own  resources  system  upon 
accession are largely in place.  

The former Yugoslav Republic of Macedonia 

The  former  Yugoslav  Republic  of  Macedonia  continues  to  sufficiently  meet  the  political 
criteria. The country has continued accession-related reforms, though core challenges remain. 
The parliamentary elections in June were generally in line with international standards. The 
new governing coalition was formed swiftly. Some progress has been made in the fields of the 
judiciary  and  public  administration,  notably  as  regards  the  legal  framework.  Further  efforts 
are needed to ensure effective implementation, in particular concerning freedom of expression 
in  the  media,  judicial  and  administrative  reform  and  fighting  corruption.  Dialogue  between 
the  government  and  the  opposition  needs  to  be  strengthened  in  order  to  ensure  the  smooth 
functioning of institutions. 

The Ohrid Framework Agreement (OFA), which has reached its tenth anniversary, continues to 
be  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  on  equitable 
representation. Continued efforts are needed to address ongoing challenges such as education 
and to ensure harmonious relations between all communities.  

There has been an improvement in the conduct of elections which were competitive and well-
administered  throughout  the  country.  The  government  needs  to  address  the  gaps  and 
implement  fully  the  conclusions  and  recommendations  of  the  OSCE/ODIHR  election 
observation mission. The resources of the parliament need to be increased to allow it to fulfil 
its role. The boycott by the opposition hampered the functioning of parliament from January 
until  the  elections.  Following  the  elections  the  opposition  is  present  in  the  new  parliament. 
Some  progress  has  been  made  on  the  reform  of  parliament.  Implementation  of  the  Law  on 
languages  and  the  rules  of  procedure  has  moved  forward.  Political  dialogue  needs  to  be 
further strengthened. 

The government coalition has overcome difficulties and strengthened its internal cooperation. 
The  new  government  has  given  fresh  impetus  to  the  EU  reform  process.  As  regards  local 
government, the financial framework for local service delivery needs to be more transparent 
and equitable. 

improve  services 

There was progress as regards the framework for public administration with the creation of a 
Ministry responsible for public administration reform. E-government services have advanced 
to 
limited  progress  on  overall 
implementation  of  the  reforms.  Significant  further  efforts  are  needed,  notably  as  regards 
recruitment  policy  and  respect  for  the  principles  of  transparency,  professionalism  and 
independence  of  the  civil  service.  The  amendments  to  the  Law  on  general  administrative 

to  citizens.  However, 

there  was 

EN 

38 

   EN 

 
procedures  do  not  ensure  effective  provision  of  administrative  services  and  protection  of 
citizens.  

A wide-ranging legal package was adopted to strengthen the efficiency of the judiciary, parts 
of which will enter into force between 2012 and 2015. A High Administrative Court has been 
created, filling a gap in the judicial system. The voting rights of the Minister of Justice in the 
Judicial  Council  have  been  abolished  in  order  to  strengthen  independence  of  the  judiciary. 
Further  steps  are  needed  to  improve  independence  and  professionalism  in  practice,  in 
particular  through  recruitment  practices.  Implementation  of  previous  reforms  needs  to  be 
strengthened.  

Further  amendments  were  made  to  the  legal  framework  for  anti-corruption  policy.  GRECO 
recommendations were addressed and systematic verification of asset declarations has begun. 
A  track  record  on  handling  high-level  corruption  cases  has  yet  to  be  established  and 
verification  of  conflict  of  interest  declarations  needs  to  be  systematised.  Transparency  of 
public  expenditure  and  of  the  funding  of  political  parties  remains  insufficient.  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 
broadly  in  place.  Civil  and  political  rights  are  respected  in  general  and  limited  further 
progress  was  made.  Certain  prisons  were  renovated  but  the  country  has  yet  to  develop  an 
effective  national  strategy  for  the  prison  system.  Deficiencies  with  regard  to  combating 
impunity  within  the  law  enforcement  agencies  remain.  A  dialogue  has  begun  regarding 
serious  concerns  about  lack  of  freedom  of  expression  in  the  media.  Editors  and  journalists 
reported increasing political pressure and intimidation. The closure, on charges of tax evasion, 
of a major television channel and three newspapers which are critical of the government has 
raised  concerns  about  the  proportionality  and  selectivity  of  the  procedure,  reducing  the 
diversity of the media landscape. In this context, journalists and editorial policies are easily 
influenced, resulting in widespread self-censorship. The public broadcaster is failing to play 
its statutory role.  

Economic and social rights are broadly in place, and some further progress was made. New 
criteria for representative participation of social partners were applied. The National Council 
for  Prevention  of  Juvenile  Delinquency  and  the  Commission  for  Protection  against 
Discrimination have come into operation. The Law on anti-discrimination remains to be fully 
aligned  with  the  acquis,  notably  as  regards  discrimination  on  grounds  of  sexual  orientation. 
The capacity of the Anti-discrimination Commission needs to be strengthened.  

Some  progress  was  achieved  in  the  area  of  cultural  rights  and  minorities.  The  10th 
anniversary  of  the  Ohrid  Framework  Agreement  provided  a  good  opportunity  for  enhanced 
dialogue  between  the  communities  in  the  country.  The  President  of  the  Republic  and  the 
Prime  Minister  both  participated  in  events  marking  this  milestone.  In  parliament, 
implementation  of  the  Law  on  languages  moved  forward.  Representation  of  the  ethnic 
Albanian community in the civil service is in line with its proportion of the population and the 
representation  of  the  Roma  and  Turkish  communities  increased.  Integration  of  the  Roma  in 
the  education  system  improved,  with  increased  enrolment  in  secondary  and  university 
education. Continued efforts are necessary to foster trust, especially in the areas of education, 
culture  and  language.  Roma  continue  to  face  very  difficult  living  conditions  and 
discrimination.  

EN 

39 

   EN 

 
Regarding  regional  issues  and  international  obligations,  the  country  maintained  full 
cooperation  with  the  International  Criminal  Tribunal  for  the  former  Yugoslavia  (ICTY).  In 
July the Parliament adopted an Authentic Interpretation of the Amnesty Law which stated that 
the amnesty should cover the suspects of all cases that will not be processed by the ICTY. 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 Area (CEFTA).  

The former Yugoslav Republic of Macedonia is an active partner in the region and continued 
to  develop  relations  with  neighbouring  and  other  enlargement  countries.  Relations  with 
Greece continued to be adversely affected by the unresolved name issue. The country remains 
engaged in talks, under the auspices of the UN as well as through direct meetings of the prime 
ministers,  in  order  to  resolve  it.  Actions  and  statements  which  could  negatively  impact  on 
good  neighbourly  relations  should  be  avoided.  Maintaining  good  neighbourly  relations, 
including a negotiated and mutually acceptable solution to the name issue, under the auspices 
of the UN, remains essential.  

The  former  Yugoslav  Republic  of  Macedonia  has  improved  its  ability  to  assume  the 
obligations  of  membership.  It  made  some  progress  on  fulfilling  the  priorities  of  the 
Accession  Partnership.  However,  the  country  continues  to  face  major  shortcomings  in 
implementing and effectively enforcing legislation. Adequate human and financial resources 
for full implementation of the acquis are lacking.  

The economy of the former Yugoslav Republic of Macedonia started to recover in the second 
half  of  2010,  benefitting  from  external  demand  and  increased  investment,  in  particular  in 
construction.  In  late  2010,  the  government  agreed  with  the  IMF  on  a  pre-cautionary  credit 
line.  This  should  strengthen  international  markets  confidence.  Structural  reforms  have 
continued. However, high structural unemployment, in particular among the young and poorly 
educated,  remains  a  major  cause  of  concern.  Institutional  capacities  of  the  public 
administration and of regulatory and supervisory agencies are still inadequate.  

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  facilitating  company  registration,  accelerating  judiciary 
procedures, improving the functioning of financial markets, further simplifying the regulatory 
framework and improving communication with the business community. The country 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.  The 
economic  dialogue  with  the  business  community  has  improved.  The  stance  of  monetary 
policy,  based  on  the  de  facto  peg  to  the  euro,  supported  growth  and  contributed  to  macro-
economic  stability.  Fiscal  policy  maintained  its  stability  orientation.  Some  further  progress 
has  been  achieved  in  facilitating  market  entry  and  in  simplifying  the  regulatory  framework. 
The duration of bankruptcy procedures has been further reduced and real estate registration is 
practically completed. The financial sector started to recover from the global financial crisis. 

EN 

40 

   EN 

 
Competition  in  this  sector  has  slightly  improved,  as  well  as  the  level  of  financial 
intermediation 

Weaknesses  in  the  rule  of  law  continue  to  impede  the  proper  functioning  of  the  market 
economy.  Public  administration  efficiency  is  still  low,  reflecting  heavy  procedures, 
weaknesses  in  staffing  and  a  high  turnover  of  officials.  Some  regulatory  and  supervisory 
agencies  continue  to  lack  the  necessary  independence  and  resource  allocation  to  fulfil  their 
functions  effectively.  Contract  enforcement  is  still  difficult,  which  hampers  the  business 
environment, in particular for small and medium sized enterprises. The quality of education 
and of the human capital is low. Physical capital needs further modernisation and deepening. 
The  quality  of  fiscal  governance  has  remained  low,  partly  due  to  a  strong  short-term 
orientation  of  public  spending.  As  a  result,  progress  with  reducing  the  very  high  structural 
unemployment  has  remained  very  limited.  Public  sector  debt  has  increased,  reflecting 
continued  fiscal  deficits  and  increased  external  lending.  The  informal  sector  remains  an 
important challenge.  

There  has  been  some  progress  in  the  area  of  free  movement  of  goods.  The  budget  for  the 
implementation  of  the  comprehensive  strategy  on  the  horizontal  institutions  has  increased 
however the framework legislation is still not fully aligned with the horizontal acquis. There 
was  little  progress  in  the  area  of  freedom  of  movement  for  workers  and  alignment  with  the 
acquis  is  still  at  an  early  stage.  In  the  area  of  the  right  of  establishment  and  freedom  to 
provide services the country is on track, particularly in the area of postal services. The level of 
coordination among the various bodies responsible for authorising cross-border services has 
also improved. On mutual recognition of professional qualifications, the country is at an early 
stage.  Progress  on  free  movement  of  capital  was  focused  on  enforcement  in  the  area  of 
combating money laundering and financing of terrorism. There are restrictions on short-term 
portfolio  investments  and  on  cross-border  payment  transfers,  pending  the  passage  to  the 
second stage of the Stabilisation and Association Agreement.  

There has been progress in the area of public procurement. Procurement procedures are more 
transparent  and  enforcement  was  stepped  up.  The  legislation  on  concessions  and  Public 
Private  Partnerships  remains  to  be  aligned  with  the  acquis.  Administrative  capacity  in  the 
field of remedies and concessions, as well as at the level of contracting authorities, remains 
weak.  

Good  progress  was  made  in  the  area  of  Company  law,  especially  on  further  legislative 
alignment with the acquis. The legal framework in the area of auditing remains only partially 
aligned. Some progress was made in enhancing the legal framework for intellectual property. 
The  track  record  on  investigation,  prosecution  and  judicial  handling  of  piracy  and 
counterfeiting  is  not  satisfactory  and  the  level  of  awareness  of  intellectual  property  rights 
among the public remains low.  

Some  progress  was  made  in  the  area  of  competition.  The  enforcement  record  has 
quantitatively improved in the field of mergers and State aid, but remains weak in the field of 
cartels. The quality of the decisions in the area of State aid needs to be further improved. The 
Commission  for  Protection  of  Competition does not have adequate budgetary resources and 
staff in the area of anti-trust and mergers. 

There was overall good progress in the area of financial services. Risk based supervision is 
gradually applied. New legislation has been introduced  regulating financial services such as 
leasing and non-banking financial companies. 

EN 

41 

   EN 

 
Progress  was  made  in  the  field  of  information  society  and  media.  Alignment  with  the  EU 
acquis  is  advancing  and  most  of  the  key  competitive  safeguards  were  introduced.  The 
capacity of the Broadcasting Council to monitor the market effectively remains inadequate.  

Further progress was achieved in the field of agriculture and rural development. Key support 
policies  for  agricultural  and  rural  development  are  gradually  being  aligned  with  EU 
requirements. Alignment with the acquis requires continuing sustained efforts. Administrative 
capacity remains a concern throughout the sector. There was good progress in the area of food 
safety, veterinary and phytosanitary policy, in particular with respect to the adoption of new 
framework  legislation.  Administrative  capacity  of  the  Food  and  Veterinary  Agency  remains 
however insufficient to ensure proper implementation of the acquis.  

In the area of transport policy, progress was noted in particular regarding use of tachographs. 
Remaining challenges are related in particular to the still insufficient administrative capacity 
of the regulatory and safety transport authorities. The safety certification procedures need to 
be introduced. 

Good  progress  was  made  in  the  energy  sector,  in  particular  the  enactment  of  the  new 
framework  legislation  and  the  resolution  of  the  long-standing  dispute  with  the  distribution 
system operator, a major EU investor. An effectively functioning electricity market has yet to 
be  established,  and  conditions  for  competition  ensured.  The  financial  independence  of  the 
radiation protection regulator is still not secured.  

Limited progress can be reported in the field of harmonisation of taxation legislation with the 
acquis. Operational capacity  for  the  administration of taxes  continued  to improve. Effective 
means  to  combat  tax  fraud  have  yet  to  be  introduced  and  a  code  of  conduct  for  business 
taxation is not yet in place. 

There  was  significant  progress  in  the  area  of  economic  and  monetary  policy,  especially  in 
adoption  of  the  relevant  central  bank  legislation.  The  quality  of  the  pre-accession  economic 
programme has improved. There was good progress in several areas of statistics; substantial 
efforts are still needed to improve in particular economic statistics.  

Limited progress was noted in aligning with the acquis on social policy and employment. The 
implementation of the framework law on anti-discrimination has commenced. Full alignment 
with  the  acquis  remains  to  be  achieved.  The  high  unemployment  rate  and  the  low  labour 
market participation remain worrying. Inclusion of Roma, people with disabilities and other 
socially  excluded  people  is  slow.  Effective  employment  and  social  inclusion  policies  are 
should  be  further  implemented,  and  the  social  dialogue  should  be  further  strengthened.  The 
overall administrative capacity is not sufficient.  

Progress  was  good  but  uneven  in  the  field  of  enterprise  and  industrial  policy.  There  have 
been some achievements in simplification of the legislation and administrative procedures for 
business  operation  and  reduction  of  business  costs.  Enterprise  support  measures  remain 
scattered within several programmes.  

In  the  area  of  trans-European  networks  further  progress  was  made.  The  country  continues 
developing its transport, energy and telecommunications networks and participates actively in 
the  South  East  Europe  Transport  Observatory  and 
the  Energy  Community.  The 
implementation of corridor X remains delayed as additional time was needed to establish the 
financial framework.  

EN 

42 

   EN 

 
Some progress was noted in the area of regional development and coordination of structural 
funds.  There  has  been  some  progress  in  the  implementation  of  the  IPA  components 
concerning  operational  programme  for  the  regional  development  and  human  resources 
development.  Inadequate  expertise  and  insufficient  institutional  coordination  has  led  to 
the  programme 
considerable  delays.  It 
implementation by the authorities.  

to  strengthen  ownership  of 

is  necessary 

Some  limited  progress  can  be  reported  on  independence  and  efficiency  of  the  judiciary, 
including  the  amendment  of  the  Minister  of  Justice's  role  on  the  Judicial  Council  and  the 
establishment  of  the  High  Administrative  Court.  Further  efforts  are  needed  as  regards  the 
evaluation  and  security  of  tenure  of  judges.  Some  limited  progress  was  made  on  anti-
corruption  policy.  Legislative  alignment  has  continued  and  systematic  verification  of  asset 
declarations was introduced. A track record in handling high level corruption cases has yet to 
be established. As regards fundamental rights, while the legal and institutional framework is 
broadly in place, better implementation is needed. A dialogue has been launched  to address 
serious concerns regarding freedom of expression in the media. Some progress was made as 
regards cultural rights and minorities. The Ohrid Framework Agreement remains an essential 
element for democracy and rule of law in the country. 

In the area of justice, freedom and security, good progress can be reported on external borders 
and  Schengen,  judicial  cooperation  and  customs  cooperation.  The  border  police  still  lack 
adequate  technical  equipment,  budgetary  means.  Some  progress  has  been  achieved  on 
migration,  visa  policy,  police  cooperation  and  the  fight  against  organised  crime.  The 
the  police  reform  has  continued,  however  structural  problems, 
implementation  of 
understaffing  and  lack  of  budgetary  provision  still  persist.  Implementation  in  the  field  of 
asylum remains insufficient, including on the provision of legal aid, interpretation and access 
to social rights.  

Concerning  European  standards  on  science  and  research  progress  was  noted.  The  national 
strategy for 2011 – 2020 was adopted. The participation rate in the Seventh EU Framework 
Research  Programme  has  further  increased.  The  administrative  capacity  to  support 
participation  in  the  framework  programmes  is  weak.  Some  progress  can  be  reported 
concerning  European  standards  in  the  areas  of  education,  training,  youth  and  culture.  The 
country  improved  its  performance  in  relation  to  the  Education  and  Training  2020  common 
benchmarks.  The  Lifelong  Learning  and  Youth  in  Action  programmes  remained  suspended. 
Increasing interaction between the ethnic communities in education remains a challenge.  

Some  progress  can  be  reported  in  the  field  of  the  environment,  especially  as  regards 
transposing the EU acquis into national legislation and in ratifying multilateral environmental 
agreements. Significant efforts to implement the national legislation are required especially in 
the  areas  of  water  management  and  industrial  pollution  control.  Regarding  climate  change, 
little  progress  has  been  made  on  aligning  with  and  implementing  the  EU  climate  change 
acquis. Further efforts are required to strengthen institutional capacities and inter-institutional 
cooperation. There was some progress in the area of consumer and health protection. Efforts 
are still hampered by the limited financial resources and weak operational structures.  

Good  progress  was  made  in  the  area  of  customs  union,  both  on  customs  legislation  and  on 
administrative and operational capacity.  

Progress  was  made  in  the  area  of  external  relations,  notably  in  the  alignment  towards  the 
common commercial policy.  

EN 

43 

   EN 

 
to  ensure  better  coordination  between 

There was also progress in the area of foreign, security and defence policy. The country took 
the 
measures 
implementation of international restrictive measures. It aligned with all EU declarations and 
Council decisions and showed continued commitment to participate in civil and military and 
crisis management operations.  

the  competent  authorities 

in 

Progress  in  the  area  of  financial  control  was  related  mainly  to  legislative  alignment,  and 
efforts are called for to ensure its implementation, especially in relation to the establishment 
of  Financial  Management  and  Control  systems.  The  State  Audit  Office's  administrative 
capacity has been further strengthened; however its independence remains to be anchored in 
the  Constitution.  There  is  no  particular  progress  to  report  under  financial  and  budgetary 
provisions.  Overall  there  are  no  significant  divergences  between  the  systems  in  the  country 
and  the  EU  in  terms  of  basic  principles  and institutions  for  the  underlying  policy  areas  that 
might  affect  the  correct  application  of  the  rules  on  own  resources.  The  administrative 
framework for the application of the own resources framework is still not in place.  

Montenegro 

Montenegro has made good progress in meeting the political criteria for membership of the 
EU,  achieving  overall  satisfactory  results,  in  particular  in  addressing  the  key  priorities 
identified  in  the  Commission  Opinion  released  in  201018.  The  legislative  and  institutional 
framework has  been improved with a view to strengthening the  work of  the  parliament, the 
electoral  framework,  the  professionalism  and  de-politicisation  of  public  administration,  the 
independence and accountability of the judiciary, anti-corruption policy, media freedom and 
cooperation  with  the  civil  society.  Montenegro  has  stepped  up  efforts  to  develop  its  track 
record  in  combating  corruption  and  organised  crime.  Steps  have  been  made  to  improve  the 
implementation of anti-discrimination policies and to guarantee the legal status of displaced 
persons  and  ensure  that  the  respect  of  their  rights.  Yet,  vulnerable  groups  still  face 
discrimination  in  practice.  Montenegro  continued  to  play  its  constructive  role  in  the  region 
and to implement smoothly the Stabilisation and Association Agreement.  

As  regards  democracy  and  rule  of  law,  legislation  on  minority  rights  and  freedoms  and  on 
elections was harmonised with the Constitution.  

The  legislative  and  institutional  framework  for  elections,  an  Opinion  key  priority,  has  been 
considerably enhanced, in line with the main recommendations made by OSCE/ODIHR and 
Venice  Commission.  The  new  election  bill  implements  the  constitutional  commitment  to 
authentic representation of minorities by introducing affirmative action for representation in 
parliamentary elections for all minorities. It also improves administration and strengthens the 
transparency  of  the  election  process.  Progress  has  been  made  in  strengthening  parliament's 
legislative  and  oversight  role,  also  an  Opinion  key  priority,  through  enhanced  support  to 
parliamentary  committees,  better  planning  of  parliamentary  work  and  closer  oversight, 
particularly in the areas of defence and security. Parliament's overall capacity and means to 
scrutinise draft legislation against the EU acquis remain to be improved. Further efforts are 
needed to consolidate parliament's oversight role and to enhance its administrative capacity. 

18 

The  key  priorities  concern  the  following  areas:  legislative  framework  for  elections  and  Parliament's 
legislative  and  oversight  role;  public  administration  reform;  judicial  reform;  fight  against  corruption; 
fight against organised crime; media freedom and cooperation with civil society; implementation of the 
anti-discrimination  framework  and  the  situation  of  displaced  persons.  For  the  full  text  of  the  key 
priorities, please see COM (2010) 670. 

EN 

44 

   EN 

 
                                                 
The  EU  integration  process  is  given  high  priority  by  the  new  government.  Coordination  of 
Government  work  and  policy-making  have  further  improved,  particularly  the  quality  of 
consultations with civil society. Government work on the action plan on addressing the key 
priorities set out in the Commission Opinion has been systematic and efficient. The capacity 
of  ministries  to  ensure  consistency  and  monitor  the  effective  implementation  of  laws  has 
improved to a certain extent, but remains to be further developed. The administrative capacity 
involved in European integration coordination, including on financial assistance, needs to be 
substantially strengthened. Legislative amendments with a view to establishing a transparent, 
efficient and accountable administration at local level are still pending. 

Montenegro  has  taken  important  steps  to  address  the  main  challenges  posed  by  the  public 
administration reform, which is a key priority identified in the Opinion. The Government has 
adopted and started to implement a public administration reform strategy aimed at introducing 
European  standards  on  recruitment  and  promotion  and  enhancing  efficiency.  An  improved 
legal framework in the area of civil service and state administration aiming at efficiency, de-
politicisation  and  merit-based  recruitment  has  been  adopted.  Legislation  regulating 
administrative  procedures  has  been  amended  and  a  further  comprehensive  reform  has  been 
launched. The Human Resources Management Authority has been strengthened. Preparations 
for implementation of the adopted legislation have to be stepped up and focus on ensuring in 
the 
practice 
impartiality  of 
administration, 
and  promotion.  The 
implementation  of  this  strategy  needs  to  take  due  account  of  the  need  to  rationalise 
administrative  structures  and  strengthen  administrative  capacity,  notably  in  areas  related  to 
European integration, while ensuring the financial sustainability of public administration. The 
capacity of the Ombudsman office and the State Audit Institution is to be further enhanced.  

the  de-politicisation,  professionalism,  effectiveness  and 
through  merit-based 

recruitment 

including 

As  regards  the  judicial  system,  Montenegro  has  made  progress  in  reinforcing  the 
independence,  autonomy,  efficiency  and  accountability  of  judges  and  prosecutors,  which  is 
one  of  the  key  priorities  set  out  in  the  Opinion.  The  legal  framework  has  been  improved  at 
sub-constitutional  level  regarding  the  independence  of  the  judiciary  and  the  autonomy  of 
public prosecution, and the process of constitutional reform has advanced. Provisions on the 
accountability  of  judges  and  prosecutors  have  been  strengthened.  Significant  efforts  will  be 
needed  in  the  period  ahead  to  ensure  completion  of  the  legal  reform  and  effective 
implementation  of  the  newly  adopted  legislation,  including  through  convincing  results  on 
corruption and organised crime cases at all levels. A country-wide single recruitment system 
based  on  anonymous  tests  for  first-time  judicial  appointments  remains  to  be  established. 
Systematic  training  for  all  judges  and  prosecutors,  in  particular  on  new  legislation  and  EU 
law,  has  yet  to  be  put  in  place.  Efforts  to  reduce  the  case  backlog  before  courts  have  been 
stepped up, but the methodology used needs to become more consistent. The lack of adequate 
infrastructure  and  equipment  continues  to  hinder  judicial  efficiency.  Full  publicity  of  court 
rulings needs to be ensured.  

In  the  field  of  anti-corruption  policy,  progress  has  been  made  in  the  implementation  of  the 
government's  anti-corruption  strategy  and  action  plan,  which  is  one  of  the  key  priorities  set 
out  in  the  Opinion.  The  strategic  and  legislative  framework  on  anti-corruption  has  been 
strengthened in the key areas of political party financing, conflict of interest, incriminations, 
protection  of  whistleblowers  and  public  procurement.  Risk  analysis  in  vulnerable  areas  has 
been  completed  with  a  view  to  further  refining  prevention  policies.  Technical  and 
administrative  capacity  for  preventing  and  combating  corruption  has  been  upgraded,  and 
several  investigations  of  corruption  cases  have  been  carried  out.  Steps  have  been  made  to 
establish  a  solid  track  record  of  proactive  investigations,  prosecutions  and  convictions  in 

EN 

45 

   EN 

 
corruption  cases  at  all  efforts,  which  is  part  of  the  Opinion  key  priority  on  anti-corruption. 
Yet, efforts need to be stepped up to further develop it. The number of final convictions, in 
particular for high-level corruption cases, remains low. Use of special investigative measures 
continues to be impeded by the lack of adequate equipment and specialised human resources. 
Inter-agency coordination and, in particular, cooperation between prosecutors and the police 
need  to  be  further  improved.  Implementation  of  the  legislative  framework  is  uneven.  The 
newly enacted provisions in the areas of conflict of interest and political party financing need 
to be implemented with determination. There continues to be a need for stronger monitoring 
of corruption and conflicts of interest in the judiciary. Corruption remains prevalent in many 
areas and continues to be a serious problem. 

Respect  of  human  rights  and  protection  of  minorities  in  Montenegro  is  broadly  ensured. 
Efforts were made to further improve the relevant legal and institutional framework. Effective 
implementation of existing legislation and strengthening of administrative capacities need to 
be ensured. 

As regards promotion and enforcement of human rights, limited progress has been made. The 
authority and influence of the Protector of Human Rights and Freedoms (Ombudsman) Office 
have been considerably enhanced: the new Law on the Ombudsman, establishing the latter as 
the national mechanism for protection against torture and discrimination, was adopted in July. 
However, the Ombudsman's Office continues to face shortcomings regarding its financial and 
administrative capacity to carry out its tasks efficiently. Some limited progress has been made 
as  regards  ill-treatment  and  fight  against  impunity.  Relevant  staff  have  undergone  further 
training. Occasional cases of violence continue to be reported, in particular in police stations. 
Processing  of  reported  cases  is  still  slow.  As  regards  the  prison  system,  the  legal  and 
regulatory  framework  for  the  establishment  of  a  system  for  alternative  sanctions  and 
implementation of criminal sanctions  has been developed. Prison conditions still  need  to be 
further  aligned  with  international  standards,  in  particular  as  regards  provision  of  medical 
treatment and family rooms. The issue of effective implementation of sanctions also needs to 
be addressed. 

Progress was made in the area of freedom of expression, one of the key priorities set out in the 
Opinion.  Defamation  and  libel  were  fully  decriminalised.  The  Supreme  Court  adopted 
guidelines  sent  to  the  national  Courts  regulating  the  level  of  pecuniary  compensation  in 
defamation cases against the media, in line with European standards and the case law of the 
European  Court  of  Human  Rights.  However,  previous  cases  of  violence  and  current  threats 
against journalists have still not been properly investigated and prosecuted. 

Freedom  of  assembly  and  association  is  broadly  respected.  Very  good  progress  has  been 
made in the cooperation of State institutions with civil society organisations, one of the key 
priorities set out in the Opinion. The Law on NGOs was adopted in July. The highest State 
authorities  have  maintained  regular  contacts  with  NGOs  and  overall  open  and  constructive 
cooperation  with  relevant  stakeholders.  Efforts  have  also  been  undertaken  to  improve 
cooperation with civil society at local level. 

Montenegro  made  progress  as  regards  anti-discrimination  policies,  which  is  one  of  the  key 
priorities  set  out  in  the  Opinion.  The  Law  on  the  Ombudsman  was  passed  in  July;  the 
Ombudsman  has  now  responsibility  over  cases  of  anti-discrimination.  An  advisor  on  anti-
discrimination was appointed in September in the Prime Minister's office. Roma, Ashkali and 
Egyptians, persons with disabilities as well as lesbian, gay, bisexual and transgender (LGBT) 
including  by  public  entities.  Effective 
persons  continue 

face  discrimination, 

to 

EN 

46 

   EN 

 
implementation  of  the  anti-discrimination  law  needs  to  be  demonstrated  by  enhancing  the 
capacity  of  the  Ombudsman  Office  and  of  law  enforcement  bodies  to  proper  process 
discrimination  cases.  Progress  has  been  made  with  regard  to  the  enforcement  of  rights  of 
persons with disabilities. The Law on anti-discrimination against persons with disabilities and 
the Law on Professional rehabilitation and employment of persons with disabilities have been 
adopted. Inclusive education activities have been launched and some efforts have been made 
to promote their employment. However, the legal framework presents shortcomings, notably 
regarding  positive  action  and  sanctions  mechanisms,  and  these  persons  continue  to  face 
discrimination notably as regards employment and access to public places. Conditions in the 
Komanski Most remain a cause of concern. Some progress has been made with regard to the 
promotion of the respect of women's rights, but the enforcement of these rights, in particular 
as regards protection of victims of domestic violence, remains limited. Access of women to 
decision-making positions needs to be improved. 

Limited  progress  has  been  made  as  regards  property  rights.  The  process  of  restitution 
continues  to  be  very  slow  and  needs  to  be  accelerated.  Due  to  several  cases  of  forgery  of 
property documents, measures have been taken to strengthen control over the cadastre offices. 
The  Parliament  adopted  in  July  amendments  to  the  law  on  state  survey  and  immovable 
property cadastre; yet, functioning of the cadastre system remains to be further improved, in 
particular as regards the completeness and accuracy of data, and its national coverage. 

Interethnic relations have remained stable in Montenegro. Efforts have been made to improve 
minority political  representation, amending the Law on minority rights to harmonize it with 
the  Constitution.  Progress  in  the  economic,  social  and  political  inclusion  of  Roma,  Ashkali 
and Egyptian persons is still rather limited, despite the continuing efforts of the authorities at 
national  and  local  levels.  Limited  progress  has  been  achieved  in  terms  of  improving  the 
situation of displaced persons, one of the key priorities set out in the Opinion. Despite efforts 
by the authorities to provide these persons with legal status, the cumbersome procedures mean 
that only a small number of persons have so far obtained legal resident status.  

Regarding regional issues and international obligations, Montenegro continues to satisfy the 
conditionality of the Stabilisation and Association Process on cooperation with the ICTY and 
regional  cooperation.  Montenegro  pursued  its  active  participation  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).  In 
2010-2011, it held the chairmanship of the Central European Initiative (CEI), the South-East 
European Cooperation Process (SEECP) and the Adriatic-Ionian Initiative (AII). The country 
continues  to  be  strongly  committed  to  regional  cooperation  and  to  playing  a  constructive 
regional role. Outstanding bilateral issues remain to be resolved.  

Significant progress was made in relation to the Sarajevo Declaration Process. Following the 
meetings  of  June  and  September  2011,  Bosnia  and  Herzegovina,  Croatia,  Montenegro  and 
Serbia agreed on a number of issues, including on the text of a joint declaration to be signed at 
a ministerial conference in November 2011 in Belgrade.  

As regards the International Criminal Court, the 2003 bilateral immunity agreement with the 
United  States  does  not  comply  with  the  EU  Common  Positions  and  guiding  principles. 
Montenegro needs to align with the EU position.  

The economy of Montenegro started to recover in 2010 from the effects of the crisis which 
challenged  the  country's  economic  policy  framework.  The  absence  of  standard  monetary 

EN 

47 

   EN 

 
policy  tools19  left  fiscal  policy  with  the  difficult  mission  of  striking  a  balance  between 
restoring  growth  and  proceeding  with  consolidation.  Nevertheless,  the  country  managed  to 
improve overall macroeconomic stability and the quality of public finances, and kept up the 
pace  of  reforms.  The  recovery  process  of  the  Montenegrin  economy  is  still  fragile.  The 
competitiveness of the economy remains limited with low diversification across the sectors. 
Shortcomings remain concerning the rule of law, public administration, human resources and 
infrastructure.  

As  regards  the  economic  criteria,  Montenegro  has  made  further  progress  towards  a 
functioning  market  economy  as  a  result  of  progress  in  stabilising  the  banking  sector  and 
maintaining  a  relatively  prudent  fiscal  stance,  thus  reinforcing  macroeconomic  stability. 
Montenegro should be able to cope with competitive pressures and market forces within the 
Union in the medium-term, provided that it addresses existing structural weaknesses through 
the implementation of its reform programme. 

The  recovery  of  export-oriented  industries  stimulated  economic  growth  and,  together  with 
subdued domestic demand and positive developments in tourism, contributed to a reduction of 
the  still  high  external  imbalances.  The  economic  policy  remained  consistent  and  some 
structural reforms advanced. The reform of public pensions is a step towards a higher quality 
and sustainability of public finances. Market entry and exit mechanisms, contract enforcement 
as  well  as  business  and  property  registration  procedures  were  further  improved.  Financial 
legislation was developed with a view to improving the resilience of the sector.  

However, the financial intermediation role of banks remained subdued as banks pursued the 
consolidation of their balance sheets. The very high share of non-performing loans remains a 
serious  concern  for  financial  stability.  Businesses  continue  to  be  confronted  with  tight  and 
expensive  credit  conditions.  Unemployment  is  high.  Budget  financing  needs  led  to  the 
expansion of public debt while contingent liabilities from state guarantees and budget arrears 
increased  significantly.  The  privatisation  process  suffered  from  the  negative  global 
environment.  Besides  tourism  and  exports  of  commodities,  economic  activity  remains 
concentrated  on  non-tradable  sectors.  The  informal  sector  remains  an  important  challenge. 
Persisting  weaknesses  in  the  rule  of  law  negatively  affect  the  investment  and  business 
environment. 

Montenegro  has  made  good  progress  in  improving  its  ability  to  assume  the  obligations  of 
membership,  in  particular  in  the  areas  of  public  procurement,  company  law,  statistics, 
financial  services,  judiciary  and  fundamental  rights,  science  and  research,  education,  youth 
and  culture.  Progress  has  been  limited  in  other  areas  such  as  free  movement  of  workers, 
freedom  to  provide  services,  agriculture,  environment,  regional  policy  and  coordination  of 
structural funds. Overall, Montenegro continued to smoothly implement the obligations under 
the Stabilisation and Association Agreement (SAA). However, some gaps remain as regards 
State aids and transit traffic, where further efforts towards alignment are needed.  

In  the  field  of  free  movement  of  goods,  there  has  been  some  progress  in  standardisation, 
accreditation,  metrology  and  market  surveillance.  Alignment  of  the  horizontal  legal 
framework  with  the  acquis  is  not  very  advanced,  and  transposition  of  the  product  specific 
acquis has not yet fully started. There was little progress in the area of freedom of movement 
of workers, mainly in the field of coordination of the social security systems. Alignment of the 

19 

Montenegro unilaterally uses the euro as the sole legal tender. 

EN 

48 

   EN 

 
                                                 
legislative framework with the acquis is still in the early stages. Little progress has been made 
in  the  area  of  the  right  of  establishment  and  freedom  to  provide  services,  in  particular  in 
relation  to  the  issuance  of  construction  permits.  Full  independence  of  the  Agency  for 
Electronic Communications and Postal Services is not ensured. Efforts to align with the EU 
Services  Directive  need  to  be  strengthened.  There  was  some  progress  in  the  area  of  free 
movement  of  capital,  more  particularly  on  combating  money  laundering,  action  to  counter 
financing  of  terrorism  and  cooperation  between  the  financial  supervisory  authorities  and 
enforcement agencies. Administrative and supervisory capacities remain weak. Good progress 
can  be  reported  in  the  area  of  public  procurement.  Administrative  capacity  has  been 
strengthened and transparency of the procedures has improved. The overall institutional set-
up for public procurement raises some concerns. Montenegro has made good progress in the 
field  of  company  law.  There  were  advances  in  the  alignment  of  the  legislation  on  business 
organisation, accounting and auditing and takeover bids with the acquis.  

Some  progress  was  made  in  the  area  of  intellectual  property  law,  in  particular  regarding 
alignment  of  the  legislation  with  the  acquis  in  the  fields  of  Copyrights  and  Related  Rights, 
trademarks  and  protection  of  industrial  designs.  Additional  strengthening  of  administrative 
capacity is vital for further progress in this area.  

In  the  field  of  competition  policy,  some  progress  was  made  in  aligning  national  legislation 
with  the  acquis.  Yet,  challenges  remain  on  the  administrative  capacity  of  the  Competition 
Protection  Administration  and  the  State  aid  bodies.  Furthermore,  the  alignment  of  the  legal 
framework on State aid control to EU rules has not been completed. The lack of full respect of 
the  State  aid  commitments  under  the  Stabilisation  and  Association  Agreement  remains  a 
cause for concern. The operational independence of the State aid authority needs to be further 
guaranteed. As regards the metal industry, authorities need to ensure full transparency on the 
amount  of  State  aid  provided  to  the  aluminium  and  steel  companies.  Decisions  about  the 
ownership of the steel company which was declared bankrupt need to be taken without delay.  

Montenegro made uneven progress in the field of financial services, particularly in banking. 
Cooperation  between  the  three  regulatory  institutions  has  been  strengthened.  Legislative 
alignment in the areas of insurance, financial infrastructure, securities markets and investment 
services is still at an early stage, and the situation of the occupational pension funds needs to 
be addressed.  

As  regards  information  society  and  media,  there  has  been  further  progress  in  terms  of 
legislative  alignment.  In  the  area  of  electronic  communications  and  information  society, 
independence of the regulatory authority improved but remains endangered. Efforts remain to 
be made to implement the legislation fully and to introduce competitive safeguards ensuring 
level  playing  field  for  all  operators.  In  the  area  of  audiovisual  policy,  the  Agency  for 
Electronic  media  has  been  strengthened,  but  its  capacity  to  monitor  the  market  effectively 
remains inadequate. 

There has been some progress in the area of agriculture and rural development. A basis for 
accurate  agricultural  statistics  is  being  established.  Progress  on  policy  development  and  on 
using  the  available  financial  assistance  in  the  field  of  rural  development  has  been  fairly 
limited.  

Some progress was made in the area of food safety, veterinary and phytosanitary policy, on 
strengthening capacity in the field of food safety and alignment with the acquis in the field of 
phytosanitary and veterinary policy. Some progress was made in the area of fisheries, mainly 

EN 

49 

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with  regard  to  upgrading  administrative  capacity,  enhancing  inspection  and  monitoring  of 
marine  fishery  resources  and  in  collecting  data  in  a  more  systematic  manner.  Management 
and inspection capacity of the fisheries administration remain weak. 

Some progress was made in the field of transport policy in terms of aligning with the acquis, 
particularly in the areas of road and air transport. Further efforts are to be made in order to 
fully  align  the  transport  acquis,  in  particular  with  the  third  railway  package.  Decisions  to 
abolish discriminatory road charges towards EU vehicles have been adopted. Yet, they need 
to  be  fully  implemented.Montenegro  has  made  some  progress  in  the  field  of  energy,  in 
particular in the field of renewable energy. A new strategy on energy policy until 2030 was 
adopted.  Further  efforts  should  be  made  towards  adopting  legislation  concerning  oil  stocks 
and  setting  up  a  regulatory  environment  that  would  foster  the  increased  use  of  renewable 
energy sources in all the sectors. Administrative capacity is still limited.  

Montenegro made some progress in the field of taxation, principally through the development 
of a computerised registration and collection system. Administrative capacities in the field of 
information  technologies  (IT)  and  effectiveness  of  the  data  systems  in  the  fields  of 
administrative cooperation and internal control remain weak.  

Further progress was made in the field of economic and monetary policy, consisting mainly of 
an improvement of the legal framework, with the adoption of detailed provisions on reserve 
requirements,  on  the  credit  registry  and  on  the  withdrawal,  replacement  and  destruction  of 
worn out banknotes and coins.  

Good  progress  was  made  in  the  area  of  statistics.  Montenegro  successfully  carried  out  the 
population and housing census in April 2011 and published the first complete results in July. 
Yet, further considerable efforts are needed to address identified weaknesses and to improve 
statistical infrastructure in view of reaching a satisfactory level of alignment with the acquis 
in statistics.  

Little progress has been made with regard to alignment with the acquis in the area of social 
policy and employment, in particular in the area of health and safety at work, social inclusion 
and  social  protection.  Some  progress  has  been  made  on  social  dialogue.  Efforts  have  been 
made  in  the  area  of  anti-discrimination,  particularly  through  the  adoption  of  Law  on  the 
Ombudsman  and  awareness  raising  activities.  Both  the  capacity  of  the  Public  Employment 
service  and  active  labour  market  measures  remain  weak  when  it  comes  to  addressing  low 
activity  and  employment  rates,  and  the  mismatch  between  needs  and  the  skills  available. 
Overall, the situation of public finance negatively affects reforms in the social area. 

There has been some progress in the field of enterprise and industrial policy, particularly as 
regards policy development in favour of SMEs. However, efforts to develop industrial policy 
and policy in strategically important manufacturing sectors need to be intensified.  

There  has  been  little  progress  in  the  area  of  trans-European  networks.  Regarding  TEN-T 
infrastructures,  further  work  remains  to  be  done  on  improving  road  and  rail  links.  Progress 
regarding  the  TEN-E  network  was  mainly  linked  to  the  improvement  of  electricity 
interconnection lines.  

Little  progress  has  been  made  in  the  field  of  regional  policy  and  coordination  of  structural 
instruments, mainly towards the establishment of relevant implementation structures for IPA 
components  III  and  IV.  These  structures  need  to  be  completed  as  a  matter  of  urgency. 

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Appropriate administrative capacity needs to be developed, notably in areas such as strategic 
planning, project development, project management and financial management and control.  

In  the  area  of  judiciary  and  fundamental  rights,  Montenegro  has  made  some  progress,  in 
particular in addressing the relevant key priorities set out in the Commission Opinion. Further 
sustained  efforts  will  be  needed  to  align  with  the  acquis  in  this  chapter,  in  particular  to 
implement  and  enforce  it  effectively  in  the  medium  term.  The  track  record  in  combating 
serious  crime,  notably  high-level  corruption,  has  to  be  further  developed.  As  regards 
fundamental  rights,  although  some  progress  has  been  made  in  reinforcing  the  legal  and 
institutional  framework,  the  existing  legal  guarantees  need  to  be  fully  enforced  and 
administrative capacities strengthened. 

As regards justice, freedom and security, good progress has been achieved on strengthening 
judicial  cooperation,  particularly  in  criminal  matters.  Some  progress  has  been  made  in  the 
field of migration and asylum. Progress has been also made in the area of border management. 
A  new  strategy  was  adopted  for  fighting  terrorism.  Progress  has  been  made  on  addressing 
challenges in the fight against organised crime, in particular in the form of closer international 
and regional cooperation. The number of related investigations and arrests, notably in the area 
of drugs trafficking, increased slightly. Financial investigations in two major cases led to the 
temporary  seizure  of  assets  of  significant  amount.  Yet,  the  overall  number  of  financial 
investigations and confiscations of criminal assets remains low. Intelligence-led policing and 
inter-agency  cooperation  need  to  be  improved.  Investigation  and  prosecution  mechanisms 
have to be strengthened, in particular in the areas of trafficking in human beings and money 
laundering. Amendments to the laws on internal affairs and on preventing money laundering 
are still pending. Visa policy requires further alignment. Further efforts are needed to ensure 
proper reception conditions for asylum-seekers and irregular migrants.  

Good  progress  was  made  in  the  area  of  research  and  innovation.  The  institutional  and 
legislative  framework  for  scientific  research  activities  has  been  strengthened  and  several 
measures  have  been  taken  to  improve  the  mobility  of  researchers.  Preparations  for  the 
Innovation Union need to be duly considered. 

Some progress can be reported in the areas of education and culture in particular in aligning 
with the acquis. Further efforts are still necessary to ensure inclusive education for vulnerable 
groups and children with special needs.  

Montenegro has made little progress with alignment and implementation of the acquis in the 
field  of  environment  and  climate  change.  Progress  is  mainly  a  result  of  the  adoption  of 
implementing  legislation  in  waste  management  and  nature  areas  and  the  ratification  of 
international  environmental  agreements.  The  administrative  capacity  of  the  Environmental 
Protection  Agency  (EPA)  has  improved,  but  still  needs  considerable  strengthening  in 
particular in the field of inspections. Montenegro needs to speed up its strategic planning in 
all  sectors,  integrate  more  systematically  environment  in  other  sectors  to  find  sustainable 
funding for implementation. The capacity of the administration for environment and climate 
change at local and national level requires strengthening responsible.  

In  the  field  of  consumer  and  health  protection,  Montenegro  is  making  progress  towards 
alignment with the EU consumer policy and the EU health strategy. However, further efforts 
are required to align national legislation with the acquis and build up administrative capacity. 
Support for consumer organisations and awareness-raising activities remains low. 

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Some  progress  has  been  achieved  in  the  area  of  Customs  Union,  especially  in  aligning  the 
combined nomenclature and abolishing customs fees that are not in line with the acquis and 
SAA  obligations.  Further  efforts  remain  necessary  in  areas  such  as  management  of  quotas, 
security-related provisions and alignment with the EU Customs Code.  

Some progress has been made in the area of external relations. Strengthening of institutional 
and administrative capacity is needed as regards commercial, development and humanitarian 
policies. Montenegro has continued to make progress regarding foreign, security and defence 
policy. In particular, it has continued to make a strong contribution to regional stability. 

Montenegro has made progress in the field of financial control, in particular in the fields of 
internal and external audit. However, the country's implementation capacities in fields related 
to  financial  management  and  control  still  need  strengthening  in  order  to  implement  the 
legislation fully and effectively. In the field of financial and budgetary provisions, there are 
no  major  differences  between  the  systems  in  Montenegro  and  the  EU  in  terms  of  the  basic 
principles and institutions in the policy areas underlying the application of the own resources 
rules, however, the administrative framework for the application of the own resources rules is 
not yet in place. 

Albania  

Albania's  domestic  political  scene  has  been  dominated  by  the  continuation  of  the  political 
stalemate  and  the  partial  boycott  of  Parliament  by  the  opposition.  This  political  deadlock 
dates  back  to  the  June  2009  general  elections.  The  outcome  of  these  elections,  which  were 
considered  by  OSCE/ODIHR  to  meet  most  international  standards  although  marked  by 
shortcomings, was contested by the Socialist Party. The violent incidents of 21 January 2011, 
which led to the death of four demonstrators, exacerbated the climate of mistrust between the 
two larger political parties and also towards certain State institutions. The local elections of 8 
May, as a result of the controversial vote count of misplaced ballots and contested results in 
Tirana, further accentuated the polarization between ruling majority and opposition. All these 
events diverted political attention away from much needed EU policy reforms. 

Against  this  background,  the  government  made  some  efforts  to  move  ahead  with  the  EU 
integration agenda and in particular to prepare an action plan to address the recommendations 
of the Commission's 2010 Opinion. These efforts were mirrored by good cooperation between 
the ruling majority and the opposition on the Action Plan in the parliamentary committee for 
European integration and joint work to achieve agreement on necessary reforms. The efforts, 
also  to  launch  working  groups  on  electoral  reform,  eventually  stalled.  On  5  September,  the 
opposition ended its boycott and returned to parliamentary work. 

Overall, Albania has made limited progress in fulfilling the political criteria for membership 
of  the  EU.  Important  EU-related  reforms  have  been  hampered  by  the  political  stalemate. 
Progress in addressing the key priorities20 and the other challenges identified in the Opinion 
has  been  uneven.  There  has  been  some  progress  on  implementing  measures  to  combat 

20 

The  key  priorities  concern  the  following  areas:  the  proper  functioning  of  parliament;  adopting 
reinforced  majority  laws;  appointment  procedures  and  appointments  for  key  institutions;  electoral 
reform; the conduct of elections; public administration reform; rule of law and judicial reform; fighting 
corruption;  fighting  organised  crime;  addressing  property  issues;  reinforcing  human  rights  and 
implementing  anti-discrimination  policies;  improving  the  treatment  of  detainees  and  applying 
recommendations of the Ombudsman. For the full text of the key priorities, please see COM(2010) 680. 

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organised crime, on improving the treatment of detained persons in prisons, and on children's 
rights. However, there was only limited progress regarding the work of parliament, elections, 
the  judiciary,  anti-corruption  policy,  property  rights  and  improving  the  living  conditions  of 
the  Roma  community.  Albania  will  need  to  make  considerable  and  sustained  efforts  on  all 
areas identified in last year's Opinion.  

As  regards  democracy  and  rule  of  law,  the  continuation  of  the  political  stalemate,  further 
confrontational developments and increasing mistrust between majority and opposition have 
negatively impacted on Albania's reform agenda. Key reform areas are still work in progress 
and important pieces of legislation are awaiting adoption or finalisation.  

Despite  some  improvements  in  parliamentary  rules  and  practice  and  some  increase  of  the 
parliament's  administrative  capacities,  the  performance  of  the  Parliament  on  legislative  and 
oversight functions, a key priority of the Opinion, remains insufficient. The political stalemate 
has seriously hampered parliamentary work, as well as the need for sustained and constructive 
political  dialogue.  It  has  also  prevented  the  establishment  of  a  consensus  enabling  the 
implementation  of  relevant  EU  reforms.  The  opposition's  partial  boycott  has  obstructed 
parliamentary  business,  including  hampering  the  adoption  of  laws  requiring  a  three-fifths 
majority.  The  end  of  the  opposition's  boycott  and  their  return  to  parliamentary  work  on  5 
September is a positive step towards the normalisation of political dialogue and cooperation. 
An inclusive political environment conducive to cross-party consensus needs to be fostered in 
Parliament.  The  climate  of  polarization  and  mistrust  between  the  government  and  the 
opposition affected the local elections of 8 May. There are areas where international standards 
were met, in the conduct of these elections, a key priority of the Opinion, and areas where this 
was  not  the  case.  Electoral  reform,  which  is  a  key  priority  of  the  Opinion,  has  stalled. 
Parliament has not yet ensured an orderly hearing and voting procedure for constitutional and 
high court appointments, a key priority of the Opinion. 

Efforts have been made by the government and by the parliamentary committee for European 
integration  to  advance  and  coordinate  reforms  on  EU  integration  including  to  develop  and 
conduct consultations on an action plan to address the recommendations in the Commission's 
Opinion,  and  in  particular  the  12  key  priorities.  The  quality  of  legislative  drafting  and 
consultation with third parties need to be significantly improved. The decentralisation reform 
process  was  adversely  affected  by  the  difficult  relationship  between  central  and  local 
government. 

Essential  steps  in  public  administration  reform,  which  is  a  key  priority  of  the  Opinion, 
including amendments to the civil service law, have not been completed. Despite some reform 
measures  such  as  the  Council  of  Ministers'  decision  on  the  structure  and  organisation  of 
public bodies of June 2011, adoption of essential legislation is still pending and contingent on 
overcoming  fully  and  in  a  sustained  way  the  political  stalemate  as  it  requires  adoption  by 
three-fifths  majority  vote  in  Parliament.  Implementation  of  existing  laws  and  administrative 
acts  remains  weak.  The  Department  of  Public  Administration  (DOPA)  still  lacks  sufficient 
authority  in  the  institutional  context  to  fully  assume  its  role.  Establishing  an  independent, 
merit-based  and  professional  civil  service  free  from  political  interference  has  still  to  be 
achieved. Appointment of the Ombudsman is still pending. 

As regards the judiciary, limited progress has been made in completing judicial reform, which 
is a key priority of the Opinion. The judicial reform strategy and its action plan were adopted 
in July. They form a good basis for reform efforts. Implementation will require the allocation 
of  adequate  human  and  financial  resources  as  well  as  sound  inter-institutional  cooperation. 

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Important legislation requiring adoption by a three-fifths majority vote in Parliament such as 
the Law on Administrative Courts is pending adoption. The efficiency of the judicial system 
is undermined by lengthy court proceedings leading to backlogs. Budgetary appropriations for 
the judiciary remain generally insufficient. The rate of enforcement of decisions is still weak. 
No  concrete  steps  have  been  taken  to  combat  corruption  in  the  judiciary,  including  through 
limiting or abolishing the immunity of judges. 

Limited progress was made in the field of anti-corruption policy, which is a key priority of 
the  Opinion.  The  legal  framework  and  inter-agency  structures  are  mostly  in  place,  but 
implementation  of  specific  actions  remains  overall  ineffective  and  results  are  insufficient. 
Public  awareness  campaigns  are  only  starting.  The  immunity  of  certain  public  officials,  the 
absence  of  a  proactive  approach  and  lack  of  resources  and  equipment  continue  to  seriously 
obstruct effective investigation. A track record of investigations, prosecutions and convictions 
is lacking at all levels. Corruption prevails in many areas and continues to  be a particularly 
serious problem. 

Albania has further enhanced the legal and institutional framework for human rights and the 
protection  of  minorities.  There  has  been  progress  in  certain  key  priority  areas,  such  as 
strengthening the protection of children's rights through the adoption of a comprehensive law 
and  improvements  in  the  conditions  of  detained  persons  in  prison  and  the  development  of 
alternatives to detention. Progress  in  the field  of  human rights has nonetheless been uneven 
and  renewed  concerns  have  emerged  in  certain  areas,  such  as  freedom  of  media,  where 
editorial independence continues to be hampered by political and business interests. Effective 
implementation and enforcement of legislative and policy tools governing human rights and 
protection of minorities needs to be substantially reinforced.  

Property rights remain an issue of great concern. There has been little progress towards the 
adoption and implementation of a coherent property reform strategy and action plan. This is a 
key  priority  of  the  Opinion.  The  fragmentation  of  responsibilities  and  lack  of  coordination 
between  the  various  institutions  involved  hampers  effective  policy  implementation  and 
creates legal insecurity and a systemic risk of corruption.  

There has been partial progress on addressing the key priority which calls for reinforcing the 
protection  of  human  rights,  notably  for  women,  children  and  Roma,  and  the  effective 
implementation  of  anti-discrimination  policies.  There  have  been  developments  in  this  area, 
including the adoption of the new National strategy on gender equality and the fight against 
domestic violence; the start of implementation of the Law on Protection from Discrimination. 
Some important legislative gaps remain, in particular with regard to persons with disabilities, 
and Albania needs to ensure the consistent implementation of existing legislative and policy 
tools.  General  awareness  of  anti-discrimination  legislation  and  the  complaints  mechanism 
needs  to  be  increased.  Concerns  remain  over  continued  discrimination  against  certain 
vulnerable  groups,  such  as  lesbian  gay  bisexual  and  transgender  persons  and  Roma.  The 
Roma  community  continues  to  be  marginalised  and  lacks  access  to  social  protection  and 
services.  

Some progress has been made towards addressing the key priority on improving the treatment 
of  detainees  and  application  of  the  recommendations  of  the  Ombudsman  in  this  field. 
Measures  have  been  taken  to  improve  the  conditions  of  detention  and  to  systematise  the 
follow-up  of  the  Ombudsman's  recommendations.  However,  cases  of  ill-treatment  are  still 
being  reported,  notably  during  arrest  and  police  custody.  The  treatment  of  mentally  ill 

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offenders  still  needs  to  be  improved.  The  lack  of  a  permanent  appropriate  solution  for  the 
placement of those under obligatory treatment remains a serious concern.  

Regarding regional issues and international obligations, Albania has continued to contribute 
to  regional  stability  by  fostering  positive  relations  with  neighbours  and  regional  partners.  It 
now  has  a  visa-free  regime  in  place  with  all  Western  Balkan  countries.  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). 

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 economy of Albania maintained macroeconomic stability and positive growth during and 
in the aftermath of the global crisis. However, the political stalemate hampered the capacity of 
the  government  to  implement  necessary  structural  reforms.  The  economy  grew  by  3.8%  in 
2010, thanks to exports, while domestic demand was muted. Monetary policy has successfully 
assisted  in  keeping  inflation  stable,  also  against  heightened  international  commodity  prices. 
Shortcomings regarding the enforceability of contracts and the rule of law, together with weak 
infrastructure  and  human  capital  and  the  informal  economy  continue  to  hinder  economic 
development. 

As  regards  the  economic  criteria,  Albania  made  some  progress  towards  becoming  a 
functioning market economy by reducing the fiscal and external deficits and keeping inflation 
expectations anchored thereby reinforcing macroeconomic stability. Albania should be able to 
cope  with  competitive  pressures  and  market  forces  within  the  Union  in  the  medium  term, 
provided  that  it  steps-up  structural  reforms,  including  by  reinforcing  the  legal  system  and 
strengthening physical and human capital. 

Despite  a  more  polarised  political  landscape,  a  broad  agreement  on  the  key  essentials  of  a 
market  economy  was  maintained.  The  Albanian  economy  continued  to  grow,  albeit  at  a 
slower pace and notwithstanding the weak economic conditions in important trading partners. 
Monetary policy remained sound, maintaining price stability while inflation stayed within the 
target  range.  The  current  account  deficit  and  the  fiscal  imbalance  declined  in  2010.  State 
involvement in the economy is low and subsidies remain limited. The banking sector remains 
well-capitalised  and  liquid.  Some  progress  was  made  to  further  facilitate  market  entry.  The 
EU continues to be Albania's main trade and investment partner.  

However, a lasting reduction of the relatively high public debt has not been achieved. Further 
narrowing  of  the  external  imbalances  may  prove  challenging  especially  if  the  decline  in 
workers'  remittances  persists.  Labour  market  performance  deteriorated  in  2010,  while 
unemployment remains high. Implementation of bankruptcy procedures remains incomplete, 
while  the  weak  rule  of  law  hampers  the  enforceability  of  contracts  and  the  business 
environment in general. The issue of property rights remains unaddressed. The high level of 
non-performing loans in the banking system continues to be an issue of concern. Investment 
in  human  capital  and  infrastructure  remain  inadequate.  The  informal  sector  remains  a 
challenge. The concentration of the production in terms of sectors and export markets leaves 
the economy vulnerable to external shocks.  

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Albania  has  made  some  progress  in  improving  its  ability  to  assume  the  obligations  of 
membership, in particular in the areas of free movement of goods, enterprise and industrial 
policy,  justice,  freedom  and  security,  external  relations  and  financial  control.  Progress  has 
been  limited  in  other  areas  such  as  free  movement  of  workers,  public  procurement, 
intellectual property law, information society and media as well as energy, environment and 
air  transport.  Overall,  sustained  efforts  are  needed  to  strengthen  administrative  capacity  for 
the implementation and enforcement of legislation. Additional efforts are required to ensure 
the  timely  implementation  of  commitments  under  the  Stabilisation  and  Association 
Agreement.  

In  the  area  of  free  movement  of  goods  there  has  been  good  progress  in  standardisation.  An 
adequate  market  surveillance  structure  needs  to  be  established.  In  the  area  of  freedom  of 
movement of workers, there was little progress and preparations are at an early stage. There 
was  some  progress  in  the  area  of  right  of  establishment  and  freedom  to  provide  services, 
mainly in the area of postal services. There was some progress in the area of free movement of 
capital  as  regards  the  legislative  framework  on  payment  systems  and  combating  money 
laundering.  Further  efforts  are  required  to  effectively  implement  the  national  strategy  to 
combat money laundering and financial crime.  

Little  progress  was  made  in  the  area  of  public  procurement.  Institutional  capacity  remains 
weak  and  there  is  a  lack  of  a  clear  definition  and  distribution  of  competencies  in  all  public 
procurement institutions. Preparations in this field are moderately advanced. There was some 
progress  in  the  area  of  company  law.  However,  the  capacity  of  the  National  Accounting 
Council and the operational independence of the Public Oversight Board remain weak. There 
was  limited  progress  in  the  area  of  intellectual  property  law,  and  preparations  are  not  very 
advanced.  Effective  enforcement  of  intellectual  and  industrial  property  rights  remains  poor. 
Albania has not succeeded in meeting on-time its SAA obligation of guaranteeing a level of 
protection  similar  to  that  in  the  EU,  including  as  regards  enforcement.  There  was  moderate 
progress in the area of competition, in the fields of both antitrust and State aid. However, the 
responsible  authorities  lack  the  appropriate  administrative  capacity.  The  operational 
independence of the State Aid Commission must be safeguarded. Preparations in this area are 
on track.  

There was some progress in the area of financial services. The regulatory framework on risk 
management and capital adequacy improved. Supervisory capacity in the non-banking sector 
remains weak. 

There has been uneven progress in the field of information society and media. Alignment with 
the acquis and market liberalisation on electronic communications are improving. However, 
media  legislation  is  not  yet  aligned  with  the  Audiovisual  Media  Services  Directive  and  the 
capacity  of  the  radio  and  television  regulatory  authority  remains  weak.  Preparations  in  this 
field are not very advanced.  

Some progress was made in the area of agriculture and rural development. Progress in setting 
up  the  structures  for  the  implementation  of  rural  development  was  made.  However,  the 
capacities  to  carry  out  analyses,  as  well  as  to  design  and  implement  rural  development 
policies remain weak. There has been some progress, albeit uneven, in the area of food safety, 
veterinary and phytosanitary policy. The operational capacity of the National Food Authority 
was significantly enhanced and there were improvements in the legislative framework on food 
safety and veterinary issues. Overall capacity and inter-service cooperation and definition of 
competencies remain weak. There was some progress in the field of fisheries, particularly as 

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regards inspection and control. Enforcement of the regulatory framework remains poor due to 
lack of physical and financial resources and poor inter-institutional cooperation. 

There was some progress, albeit uneven, in the area of transport policy. Although alignment 
advanced  in  the  areas  of  road  transport  and  air  traffic  management,  air  safety  remains  a 
concern. The rail and maritime transport sectors require further efforts. There has been limited 
progress on energy. Security of supply improved slightly, but market reform in the electricity 
sector has not yet been effectively achieved and ensuring its economic viability will require 
further  efforts.  The  capacities  and  institutional  independence  of  the  electricity,  gas,  and 
radiation  protection  regulatory  authorities  need  strengthening.  Preparations  in  this  field  are 
advancing slowly. 

Although  some  progress  was  made  in  aligning  taxation  legislation  with  the  acquis,  and 
preparations  are  advancing,  further  efforts  are  required  in  the  administrative  and  technical 
capacity, including in the area of tax fraud and avoidance. There is no progress to report in the 
area  of  economic  and  monetary  policy.  Progress  was  made  in  the  field  of  statistics, 
particularly as regards classifications and statistical infrastructure. Progress as regards sector 
statistics was uneven.  

Progress in the area of social policy and employment has been uneven. Although there were 
some  positive  developments  in  the  fields  of  health  and  safety  at  work,  social  dialogue,  and 
social  protection,  high  levels  of  informality  and  inactivity  continue  in  the  labour  market. 
Overall  implementation  of  policies  also  remains  insufficient,  particularly  as  far  as  social 
inclusion is concerned. Preparations in this field are not very advanced. 

There has been progress in the field of enterprise and industrial policy, particularly as regards 
improving  the  regulatory  framework  for  business  and  on  access  to  finance  to  SMEs. 
Institutions  have  been  established  to  facilitate  innovation  and  technological  development. 
Preparations in this field are advancing. 

Some  progress  was  made  in  the  area  of  trans-European  networks.  Completion  of  road 
corridors advanced and a new electricity interconnection became operational.  

There has been limited progress in the area of regional policy and coordination of structural 
funds.  Considerable  efforts  are  needed  to  establish  the  necessary  institutional  and 
administrative  capacity  and  to  develop  a  mature  pipeline  of  projects  in  the  area  of  regional 
development. Preparations in this area are still at an early stage. 

to  develop 

As regards judiciary and fundamental rights, there are still some important gaps despite some 
efforts 
the 
implementation  of  legislative  and  policy  tools  remains  insufficient  overall  and  presents  a 
major challenge. Albania's alignment with European standards and the acquis in the field of 
judiciary and fundamental rights is at an early stage. 

line  with  European  standards.  Furthermore, 

legislation 

in 

Albania has made progress in the area of justice, freedom and security. Visa-free travel to the 
Schengen area entered into force in December 2010 for citizens holding biometric passports. 
Progress  has  been  made  on  fighting  organised  crime,  notably  through  good  international 
cooperation  and  implementation  of  the  'anti-mafia'  law  including  confiscation  of  criminal 
assets. Nevertheless, organised crime remains a challenge. Efforts need to be maintained for 
the  effective  implementation  of  the  legislative  framework  and  in  strengthening  the  fight 
against organised crime, which is a key priority of the Commission's Opinion. This includes 

EN 

57 

   EN 

 
the building up of a credible track record of proactive investigations, prosecutions and, where 
the  expertise  and  empowerment  of 
increase 
appropriate,  convictions.  Measures 
investigators  and  the  cooperation  of  law  enforcement  agencies  should  be  actively  pursued. 
The  fight  against  drug  trafficking,  money  laundering,  trafficking  in  human  beings  and 
protection  of  its  victims  must  be  intensified  and  conducted  systematically,  and  the  legal 
framework for the confiscation of criminal assets systematically enforced. 

to 

There  is  progress  to  report  as  regards  the  capacity  to  implement  the  acquis  in  the  area  of 
science and research. Administrative capacity relating to participation in the 7th EU Research 
Framework  Programme  improved,  although  national  research  capacity  remains  low.  Some 
progress was made in the areas of education and culture, in particular as regards Vocational 
and Educational Training.  

There was little overall progress as regards legislative alignment in the field of environment. 
Overall  implementation  and  enforcement  of  legislation  remains  weak.  Strengthening 
administrative  capacity  and  inter-institutional  cooperation  require  further  efforts.  Regarding 
climate change, Albania has made no progress overall and institutional capacities remain very 
weak.  

Some progress has been made in the area of consumer and health protection. There was also 
progress  in  consumer  protection  regulation  and  enforcement.  The  legislative  framework 
improved overall. As regards public health, advances were made in legislation on health care 
insurance  and  there  were positive developments in the fields  of communicable diseases and 
mental health. However, inequalities on access to primary health care remain.  

In  the  area  of  customs  union  there  was  some  progress  on  legislative  alignment  and 
preparations  in  this  field  are  advancing.  However,  the  use  of  reference  prices  in  customs 
valuation remains high by EU standards and further efforts are required as regards simplified 
procedures and trade facilitation. Enforcement capacity and management of human resources 
remain weak.  

Some  progress  was  made  in  the  area  of  external  relations,  in  particular  as  regards  the 
common  commercial  policy.  Strengthening  the  institutional  and  administrative  capacity  is 
needed.  There  has  been  progress  in  the  area  of  foreign,  security  and  defence  policy.  The 
country  aligned  with  most  EU  declarations  and  common  positions,  and  continued  to 
participate in CSDP operations.  

There  was  progress  as  regards  financial  control.  The  primary  legal  framework  for  Public 
Internal  Financial  Control  and  centralised  budget  inspection  improved.  Administrative 
capacity  in  the  field  of  internal  control  requires  strengthening.  Preparations  in  the  area  of 
protection of EU's financial interests are at an early stage. 

In the field of financial and budgetary provisions, the basic principles and institutions for the 
underlying  policy  areas  affecting  the  own  resources  system  are  in  place.  The  administrative 
framework for the application of the own resources rules is not yet in place.  

Bosnia and Herzegovina 

Bosnia and Herzegovina has made limited progress in addressing the political criteria.  

In the areas of democracy and the rule of law, one year after the general elections held on 3 
October 2010, the process of establishing executive and legislative authorities remains to be 

EN 

58 

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completed with the establishment of a State-level Government. This long delay has hampered 
Bosnia and Herzegovina's progress on much needed reforms. 

The  lack  of  a  credible  process  for  the  harmonisation  of  the  Constitution  with  the  European 
Convention on Human Rights remains an issue of serious concern. The first inter-institutional 
Working  Group  which  was  set  up  to  implement  the  European  Court  of  Human  Rights 
(ECtHR) decision in the Sejdić-Finci21 case failed to reach an agreement. The establishment 
of a new Working Group, as recommended by the Council of Ministers, is outstanding.  

The  RS  National  Assembly  (RSNA)  adopted  Conclusions  and  a  decision  on  holding  a 
referendum  challenging  the  State  level  judiciary  institutions.  Following  the  EU  facilitation, 
the RSNA repealed the decision on the referendum and amended the Conclusions on 1 June. 
Within  the  established  framework  of  the  Stabilisation  and  Association  Process,  Bosnia  and 
Herzegovina has engaged with the EU in a Structured Dialogue on Justice.  

The administrative capacity of the Parliament improved but lack of coordination between the 
State  and  Entity  parliaments  and  political  discord  between  the  Entities  has  continued  to 
hamper the work of the Parliamentary Assembly. The functioning of government institutions, 
at different levels, continued to be affected by fragmented, uncoordinated policy-making. The 
three  Presidency  members  improved  efforts  at  joint  policy  formulation  and  implementation 
but  foreign  policy  coordination  remained  subject  to  disagreements  on  some  issues.  An 
effective coordination mechanism between the State and the Entities remains to be established 
on EU matters including on programming of financial assistance under the Instrument for Pre-
Accession Assistance (IPA).  

Limited progress has been made in the area of public administration reform. Implementation 
of the public administration reform strategy is continuing. However, coordination between the 
various administrations remains weak and the public administration reform process lacks the 
necessary  political  support.  Sustained  efforts  remain  necessary  to  prevent  political 
interference.  A  State-level  Ombudsman  is  in  place  but  staffing  and  financial  constraints 
hamper  its  effectiveness.  The  establishment  of  a  professional,  accountable,  transparent  and 
efficient civil service based on merit and competence remains an issue to be addressed.  

Bosnia and Herzegovina has made limited progress in improving the judicial system. An EU-
Bosnia and Herzegovina Structured Dialogue on Justice, aiming at ensuring an independent, 
effective,  impartial  and  accountable  judicial  system,  was  launched.  Implementation  of  the 
Justice  Sector  Reform  Strategy  and  the  War  Crimes  Strategy  needs  to  be  stepped  up. 
Measures were taken to reduce the backlog of cases, particularly of utility bills cases, but the 
overall backlog remains high. The fragmented legal framework across all jurisdictions places 
significant  legislative  and  financial  burdens  on  the  judiciary.  The  lack  of  streamlined 
budgetary  responsibilities  continues  to  affect  the  independence  and  effectiveness  of  the 
judiciary.  The  frequent  political  attacks  on  the  judiciary  and  the  backlog  of  cases  remain 
causes for serious concern. 

Bosnia  and  Herzegovina  has  achieved  very  limited  progress  in  tackling  corruption,  which 
remains a serious problem and is prevalent in many areas throughout the public and private 
sector.  Implementation  of  the  anti-corruption  strategy  and  action  plan  remains  weak.  The 

21 

The Sejdić-Finci vs. Bosnia and Herzegovina case, December 2009, regarding ethnic discrimination for 
representation in the institutions of the country for persons not belonging to one of the three Constituent 
Peoples. 

EN 

59 

   EN 

 
                                                 
Anti-Corruption  Authority  is  not  yet  fully  operational.  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 stronger political commitment and 
determined action against corruption.  

Respect  for  human  rights  and  protection  of  minorities  is  broadly  ensured.  Bosnia  and 
Herzegovina  has 
rights  conventions,  but 
implementation is lagging behind.  

international  human 

the  major 

ratified 

Civil  and  political  rights  are  broadly  respected.  Little  progress  has  been  made  towards 
harmonising  criminal  sanctions  across  the  country.  Adoption  of  the  Framework  law  on  free 
legal  aid,  needed  to  comply  with  the  ECHR,  remains  outstanding.  Access  to  justice  in  civil 
and  criminal  trials  needs  to  be  ensured.  There  has  been  some  improvement  in  prison 
conditions,  particularly  in  psychiatric  facilities,  but  overcrowding  and  ill-treatment  of 
detainees remain issues to be addressed.  

The State and the Entity Constitutions provide for the freedom of expression and media, the 
freedom  of  assembly  and  association  and  for  the  freedom  of  religion.  However,  better 
implementation  of  existing  legislation  is  needed.  The  self-regulatory  activities  of  the  Press 
Council  improved.  Citizens'  complaints  to  the  Press  Council  about  violations  of  the  Press 
Code are on the rise. The capacity of the Press Council to enforce  professional standards is 
hampered  by  lack  of  resources.  Political  pressure  on  the  media  continued,  as  did  its  ethnic 
bias.  Cases  of  intimidation  against  journalists  also  continued.  The  implementation  of  the 
public  broadcasting  reform  remains  outstanding.  The  independence  of  the  Communications 
Regulatory  Agency  continued  to  be  undermined  and  Board  appointments  remain  pending. 
The  development  of  civil  society  requires  further  support  and  transparency  in  funding 
allocations.  

is 

law 

in  place  but 

Economic  and  social  rights  are  guaranteed  by  the  existing  legal  framework,  but 
implementation  remained  weak  due  to  fragmented  levels  of  competence.  A  comprehensive 
State-level  anti-discrimination 
limited  and 
implementation  weak.  The  protection  of  women  against  violence  needs  to  improve,  as  does 
the social protection of children. In terms of inter-ethnic relations, despite the establishment 
of a coordination body in the Federation, the number of divided schools ('two schools under 
one roof') and mono-ethnic schools remains a cause for concern. The system of social benefits 
is based on rights instead of needs, which has an adverse impact on the situation of vulnerable 
groups,  including  the  mentally  disabled.  Social  dialogue  and  the  exercise  of  labour  rights 
continued  to  be  hampered  by  the  lack  of  recognition  of  State-level  social  partners  and  a 
fragmented legislative framework.  

its  scope  remains 

Respect  for  and  protection  of  minorities22  and  cultural  rights  are  broadly  ensured.  Progress 
was made in implementing the Roma action plans on housing and employment. Efforts need 
to  be  stepped  up  to  ensure  effective  implementation  of  the  action  plans  on  health  and 
education  and  to  improve  resources  and  sustainability  with  regard  to  the  action  plans.  The 
Roma minority continues to face very difficult living conditions and discrimination. The lack 

22 

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 

60 

   EN 

 
                                                 
of  birth  registration  and  of  access  to  free  legal  aid  for  civil  registration  continues  to  hinder 
their access to basic social and economic rights. Further steps are needed in order to improve 
implementation of the Law on national minorities and to guarantee minority rights.  

Some progress has been achieved concerning refugees and internally displaced persons. The 
revised strategy supporting the return process and ensuring proper implementation of Annex 7 
to  the  Dayton/Paris  Peace  Agreement  (DPA)  is  in  place.  Some  steps  have  been  taken  to 
implement  the  strategy,  notably  as  regards  funding  to  deal  with  vulnerable  groups  living  in 
collective centres. However, procedures for allocating return assistance are not fully in place 
yet. Lack of employment opportunities and of access to social protection continues to hamper 
the sustainability of return and of local integration.  

As  regards  regional  issues  and  international  obligations,  implementation  of  the  DPA  has 
continued  but  political  representatives  in  Republika  Srpska  frequently  challenged  the 
territorial  integrity  of  the  country.  Cooperation  with  the  International  Criminal  Tribunal  for 
the former Yugoslavia has remained satisfactory.  

The EUSR mandate was transferred from the Office of the High Representative to a single EU 
Representative  acting  under  a  double-hatted  mandate  as  EUSR  and  Head  of  the  EU 
Delegation.  

Cooperation  between  the  courts  and  prosecutors  from  Bosnia  and  Herzegovina,  Croatia  and 
Serbia  continued.  Implementation  of  bilateral  agreements  on  the  mutual  recognition  and 
enforcement of court rulings in criminal matters is ongoing. However, efforts at prosecuting 
war  crime  cases  continued  to  be  hampered  by  legal  obstacles  to  extradition  in  the  Criminal 
Procedural Code. 

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. 

Significant  progress  was  made  with  regard  to  the  Sarajevo  Declaration  Process.  Following 
the meetings in June and September 2011, Bosnia and Herzegovina, Croatia, Montenegro and 
Serbia agreed on a number of issues, including on the text of a joint declaration to be signed at 
a ministerial conference in Belgrade.  

Bosnia and Herzegovina 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. In September, Bosnia and 
Herzegovina adopted a decision to recognise the customs stamps of Kosovo. However, some 
border-related issues with neighbouring countries remain open. 

The economy of Bosnia and Herzegovina gained some speed in 2011 after a modest growth 
in  2010.  The  recovery  is  nevertheless  still  subdued  and  mainly  driven  by  external  demand. 
Unemployment remained at very high levels. The fiscal situation eased somewhat as a result 
of  fiscal  adjustment  measures  implemented  under  the  programme  of  the  International 
Monetary  Fund  and  increased  revenues.  However,  medium-term  fiscal  sustainability  was 
severely  hampered  by  the  failure  to  adopt  the  Global  Framework  for  Fiscal  Policies  2011-
2013.  The  commitment  to  structural  reforms  and  sound  public  finances  remained  weak  and 
uneven across the country, and the quality of public finances remained low. 

EN 

61 

   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  to  enable  the  country  to  cope  over  the  long  term  with  competitive  pressure  and 
market forces within the Union. 

The  recovery  is  mainly  driven  by  external  demand,  but  domestic  demand  also  picked  up, 
supported  by  resuming  credit  activities.  Industrial  production  is  growing.  Trade  activities 
significantly increased and the level of trade integration with the EU remained high. Financial 
and monetary stability was preserved. The currency board arrangement continued to enjoy a 
high degree of credibility. Some improvements in the business environment can be reported 
with  regard  to  business  registration  and  the  streamlining  of  administrative  procedures  in 
general.  

However, the failure to adopt the Global Framework for Fiscal Policies 2011-2013 severely 
hampered the sustainability and credibility of fiscal policy in Bosnia and Herzegovina and left 
fiscal authorities without an agreement on the general fiscal line. The political stalemate in the 
country  resulted  in  a  significant  delay  of  the  2011  State-level  budget  adoption  and 
postponement of further programme discussions with the International Monetary Fund on the 
implementation  of  the  Stand-By  Arrangement.  The  quality  of  public  finances  remained  low 
with  high  shares  of  current  expenditures  to  GDP.  External  imbalances,  in  particular  the 
current  account  deficit,  have  been  rising  and  inflation  picked  up.  The  business  environment 
continued  to  be  affected  by  administrative  inefficiencies  and  the  weak  rule  of  law.  Planned 
privatisation,  restructuring  of  public  enterprises  and  the  liberalisation  of  network  industries 
did not advance. 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,  poorly  targeted  social  transfers  and  low  labour 
mobility continue to hamper job creation. Unemployment continued to be very high and the 
informal sector remains an important challenge.  

Bosnia  and  Herzegovina  made  limited  progress  in  aligning  its  legislation  and  policies  with 
European  standards.  Some  progress  was  noted  in  the  areas  of  intellectual  property,  State 
aid, research, culture, transport and a number of justice, freedom and security-related matters. 
Particular efforts remain necessary on free movement of goods, persons and services, customs 
and  taxation,  competition,  public  procurement,  employment  and  social  policies,  education, 
industry  and  SMEs,  agriculture  and  fisheries,  food  safety,  veterinary  and  phytosanitary 
sectors,  environment  and  climate  change,  energy,  information  society  and  media  and 
statistics.  

On  the  whole,  the  implementation  of  the  Interim  Agreement  (IA)  remained  uneven.  The 
country  is  in  breach  of  the  IA  due  to  non-compliance  with  the  European  Convention  on 
Human  Rights  and  with  the  rules  on  State  aid.  The  State-level  State  aid  law,  required  for 
compliance with the Stabilisation and Association Agreement, was adopted by the Council of 
Ministers  in  August  but  adoption  by  the  Parliament  is  pending.  The  State-level  census  law, 
necessary  for  the  country's  social  and  economic  development,  remains  to  be  adopted  as  a 
matter of priority. 

Bosnia  and  Herzegovina  made  some  progress  in  internal  market  areas.  Regarding  free 
movement of goods, some progress was made in market surveillance and consumer protection. 
Substantial  efforts  remain  necessary  to  approximate  the  legal  framework  to  EU  legislation, 
improve administrative capacity and achieve a single economic space. 

EN 

62 

   EN 

 
In the area of movement of persons, services and right of establishment limited progress was 
made.  Both  Entities  adopted  implementing  legislation  on  financial  services  and  the 
coordination of banking supervision improved. Further simplification of company registration 
and alignment of the legislative framework for postal services will be essential.  

There  was  no  progress  in  the  area  of  free  movement  of  capital.  Further  alignment  with  the 
acquis  as  well  as  country-wide  harmonisation  of  legislation  is  needed.  Good,  but  uneven 
progress can be reported in the areas of customs and taxation. Further alignment of legislation 
and  capacity  building  to  ensure  effective  implementation  and  enforcement  of  intellectual 
property rights remain essential. 

Bosnia  and  Herzegovina  made  some  progress  with  the  enforcement  of  competition  rules. 
There was no progress in the area of public procurement, particularly regarding full alignment 
of the Public Procurement Law. Progress continued in the area of intellectual property rights.  

There  was  little  progress  in  the  area  of  social  and  employment  policies  and  public  health 
policy. Country-wide strategy papers exist or are being prepared, but policies and legislation 
remain fragmented. Framework laws and strategies are in place in the field of education but 
implementation  is  pending.  Some  progress  was  made  on  culture.  Progress  continued  in  the 
field of research and preparations for the Innovation Union started. Negotiations to join the 
World Trade Organisation further advanced. 

Bosnia  and  Herzegovina  made  little  progress  towards  meeting  European  standards  on  a 
number  of  sectoral  policies.  Regarding  industry  and  small  and  medium  sized  enterprises 
(SMEs),  a  country  development  strategy  including  industrial  policy  elements  remains  to  be 
adopted  and  the  SME  strategy  implemented.  There  was  some  progress  in  the  areas  of  food 
safety,  veterinary  and  phytosanitary  policy  and  fisheries.  Progress  in  agriculture  and  rural 
development remained limited. Closer coordination between the State and Entities in aligning 
with the acquis in these fields remains essential. The lack of progress had a negative impact 
on trade in agricultural products.  

Bosnia  and  Herzegovina's  preparations  in  the  field  of  the  environment  remained  at  an  early 
stage. A harmonised legal framework for environmental protection and a State Environmental 
Agency remain to be established. The administrative capacity is weak and the horizontal and 
vertical  communication  between  the  different  authorities  requires  strengthening.  Regarding 
climate change, further efforts are needed towards the adoption of a State-level  strategy for 
climate change, alignment with the acquis and awareness-raising.  

Bosnia  and  Herzegovina  made  progress  in  the  transport  sector.  There  were  some  positive 
developments regarding the trans-European transport networks, road and air transport, rail and 
inland waterways sectors. The Law on Transport of Dangerous Goods remains to be adopted. 
The upgrading of transport infrastructure remains an issue to be addressed. Preparations in the 
field of energy are not very advanced. As party to the Energy Community Treaty, Bosnia and 
Herzegovina  needs  to  implement  the  relevant  EU  energy  legislation.  Some  progress  was 
achieved  regarding  the  supply  of  electricity  to  Brčko  District  and  the  launch  of  a 
comprehensive review of the electricity legislation at all levels of Government. To guarantee 
the security of electricity supply, a country-wide functioning national transmission company 
needs to be in place and a comprehensive energy strategy adopted. 

Progress in information society and media was limited. Harmonisation of the legal framework 
for public broadcasting remains outstanding. The continuing challenges to the independence 

EN 

63 

   EN 

 
of  the  Communications  Regulatory  Authority,  political  pressure  and  the  slow  pace  of 
implementation of the public broadcasting reform remained causes for serious concern.  

Some progress can be reported in the area of financial control. Central Harmonisation Units 
exist  at  State  and  Entity  level  and  the  introduction  of  internal  audit  started.  The  financial 
management and control systems need further development. The independence of the State-
level  audit  office  remained  an  issue  of  concern.  Some  progress  was  made  in  the  area  of 
statistics  with  regard  to  classifications  and  registers.  Sector  Statistics  such  as  national 
accounts or business and agriculture statistics need to be improved. Cooperation between the 
country's  statistical  institutions  at  State  and  Entity  level  and  other  relevant  State-level 
agencies remained insufficient.  

In  the  area  of  justice,  freedom  and  security,  some  progress  has  been  made  in  the  different 
areas.  In  the  area  of  visa  policy,  priorities  continued  to  be  addressed.  The  visa  facilitation 
agreement between the EU and Bosnia and Herzegovina and the readmission agreement have 
continued  to  be  implemented  smoothly.  Visa-free  travel  to  the  Schengen  area  entered  into 
force in December 2010 for citizens of Bosnia and Herzegovina holding biometric passports. 

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  continued  to  improve.  However,  the  infrastructure  at  some 
border  crossing  points  requires  strengthening.  Little  progress  has  been  made  in  the  fight 
against  money  laundering.  The  implementation  of  the  strategy  and  action  plan  for  the 
prevention  of  money  laundering  remains  limited.  There  has  been  little  progress  in  the  fight 
against  drugs.  The  absence  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  the  police  are  advancing.  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  effective  coordination  between  law  enforcement  agencies. 
Organised  crime  remains  a  serious  concern  that  affects  the  rule  of  law  and  the  business 
environment.  Efforts  to  fight  trafficking  in  human  beings  need  to  be  intensified  and 
deficiencies  in  identification  of  victims  of  trafficking  addressed.  Bosnia  and  Herzegovina 
made  some  progress  in  fighting  terrorism.  The  Joint  Task  Force  to  fight  terrorism  was  re-
established.  However,  the  implementation  of  the  strategy  for  preventing  and  combating 
terrorism needs to be enhanced. 

Preparations  for  the  protection  of  personal  data  have  continued,  but  further  efforts  are 
necessary  on  law  enforcement  and  to  ensure  the  independence  of  the  supervisory  agency. 
Well-functioning  personal  data  protection  is  crucial  in  order  for  Bosnia  and  Herzegovina  to 
conclude agreements with Europol and Eurojust. 

Kosovo  

The political situation in Kosovo was marked by both parliamentary and presidential elections 
in  the  period  from  October  2010  to  April  2011.  The  conduct  of  the  general  elections  was 
marred  by  serious  shortcomings  and  technical difficulties.  A  new  coalition  government  was 
formed in February and a new president elected in April.  

EN 

64 

   EN 

 
The President and the government  have demonstrated commitment to the European  agenda. 
Coordination  of  EU-related  reforms  has  been  strengthened.  Elections  have  delayed  the 
implementation of many key reforms. Sustained efforts are now needed to accelerate reforms 
and  their  effective  implementation.  Public  administration  and  the  judiciary  are  both  weak. 
Much more needs to be done to tackle organised crime and corruption, including in the area of 
public procurement. The economic situation is also serious and the government needs to take 
urgent  steps  to  improve  the  budgetary  situation  in  close  coordination  with  the  International 
Monetary  Fund.  On  a  more  positive  perspective,  Kosovo  has  continued  to  make  sustained 
efforts to deliver on key areas of its European agenda such as visa and trade.  

On  the  basis  of  the  UN  General  Assembly  resolution  adopted  on  9  September  2010,  which 
had  been  tabled  jointly  by  Serbia  and  the  27  EU  Member  States,  a  process  of  dialogue 
between Belgrade and Pristina started in March. It was conducted in a generally constructive 
spirit until September and has led to agreements on several issues: free movement of goods 
and  persons,  civil  registry  and  cadastre.  The  agreements  reached  to  date  need  to  be 
implemented in good faith. Further results remain to be achieved to implement, as a matter of 
priority,  the  principles  of  inclusive  and  functioning  regional  cooperation  and  to  provide 
sustainable solutions on EU acquis related matters in sectors such as energy and telecoms.  

During the reporting period,  integration of the Serb community south  of the River  Ibër/Ibar 
has  improved.  Serbs  have  benefited  from  the  legal  framework  protecting  their  rights.  Their 
participation  in  general  elections  increased  and  they  also  participated  in  the  census.  The 
teaching staff of Serbia-supported schools has started to sign contracts with Kosovo municipal 
education directorates. 

In northern Kosovo, Serbia-supported structures have continued to be in place and integration 
has not progressed. The Serbia-supported municipalities opposed the conduct of the census in 
the north and the turnout of Serbs from northern Kosovo in general elections was negligible. 
Serbs in the north also challenged the mandate of EULEX. The situation in northern Kosovo 
and the issue of the control of the border/boundary have led to outbreaks of violence, which 
resulted  in  injuries  and  one  dead  in  July  and  September.  The  situation  has  also  led  to  more 
frequent inflammatory rhetoric by the Kosovo leadership. All sides need to play their part in 
defusing tensions in northern Kosovo and allow for the free movement of persons and goods, 
for the benefit of the people in the region.  

The authorities are cooperating with EULEX in the investigation of the allegations raised in 
the resolution adopted by the Parliamentary Assembly of the Council of Europe on inhuman 
treatment of people and illicit trafficking in human organs in Kosovo. Kosovo authorities also 
need to ensure consistent and effective cooperation with EULEX in all areas of its mandate. 

As regards democracy and rule of law, the rule of law in particular continues to be an issue of 
serious  concern  and  needs  urgent  attention  from  the  government,  assembly  and  judicial 
authorities of Kosovo. 

The  fourth  mandate  of  the  assembly  was  inaugurated  on  21  February  following  general 
elections.  There  were  serious  shortcomings  in  the  electoral  process.  Kosovo  needs  to  take 
urgent steps to address these by simplifying the system, following international standards, and 
investigating and prosecuting cases of electoral fraud. The assembly adopted a budget and a 
range of key reform laws relevant to the European agenda. The capacity of the assembly to 
scrutinise the draft legislation and work of the government remains weak. There are concerns 
that the rules of procedure of the assembly are not always followed.  

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A new coalition government took office on 22 February. In March, the government adopted a 
regulation  establishing  and  strengthening  the  role  of  the  European  integration  departments 
within  ministries.  The  Ministry  of  European  Integration  has  strengthened  its  role  as 
coordinator  of  the  European  agenda  and  donors,  and  pressed  to  accelerate  reforms.  Further 
efforts are necessary to identify specific goals and measurable results, which would guide the 
government better in its reform activities. The efforts on decentralisation have continued. The 
government  needs  to  find  solutions  for  the  long-term  sustainability  of  the  newly-founded 
Serb-majority municipalities. At the same time, Serbia-supported structures have continued to 
operate within Kosovo preventing full implementation of decentralisation. 

There  has  been  limited  progress  as  regards  public  administration  reform.  The  regulatory 
framework  was  strengthened,  but  still  needs  to  be  completed.  The  revised  public 
administration  strategy  2010-2013  has  not  yet  been  implemented.  Public  administration 
reform  remains  a  major  challenge  and  public  administration  is  very  weak.  The  office  of 
Ombudsperson lacks adequate resources, premises and political support. 

There has been progress as regards the judicial system, notably in the form of key judgements 
by the Constitutional Court. The assembly adopted important legislation such as the laws on 
witness protection, on criminal liability of legal persons for criminal offences and the law on 
international legal cooperation. The reform process needs to continue. Implementation of the 
four  reform  laws  adopted  in  the  previous  reporting  period  has  continued  satisfactorily.  The 
Division for International Legal Cooperation in the Ministry of Justice increased its capacity 
and has handled cases professionally. The Kosovo Judicial Council has started addressing key 
priorities.  All  nine  members  of  the  Kosovo  Prosecutorial  Council  were  appointed  and  the 
Council  has  started  to  function.  Salaries  of  judges  and  prosecutors  were  increased.  At  the 
same time, the judicial system in Kosovo remains weak. Significant backlogs of cases persist. 
There  are  still  reports  of  threats  and  intimidation  to  judges  and  political  interference  in  the 
work of the judiciary is still an issue of concern. A more proactive approach by prosecutors 
and  judges  is  needed  to  investigate  and  adjudicate  organised  crime  and  corruption  cases. 
There are also serious concerns about transparency in implementation of the law on pardons.  

Kosovo has made some progress in addressing corruption, notably by starting to tackle some 
of  the  corruption  cases.  Corruption  remains  prevalent  in  many  areas  and  continues  to  be  a 
very serious concern which also affects access by citizens to services. The anti-corruption task 
force  was  strengthened.  The  legislative  framework  for  the  fight  against  corruption  was 
improved by adopting several important laws, even if it is still not complete and needs to be 
further  strengthened.  The  law  on  financing  of  political  parties  has  major  shortcomings  and 
monitoring of its implementation also needs to be improved. Breaches of procurement rules 
continue to be an issue of concern in the context of corruption. Declarations of assets continue 
to show discrepancies between declared assets and actual revenue.  

The Constitution of Kosovo has strong provisions to secure international standards of human 
rights  and  respect  for  and  protection  of  minorities.  The  different  institutions  dealing  with 
promoting,  enforcing  and  monitoring  fundamental  rights  do  not  coordinate  their  activities 
adequately. Bodies in the executive branch of government suffer from a shortage of capacity, 
and poorly-defined responsibilities and authority, which frequently overlap with other bodies. 
Their  political  and  practical  impact  is  limited.  More  needs  to  be  done  to  enforce  legal  and 
administrative remedies for infringements of human rights. Integration of the members of the 
Serb community has improved, notably south of the River Ibër/Ibar. More efforts are needed 
to address the needs of the Serbs across Kosovo, but in particular in the north. 

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Limited  progress  has  been  achieved  in  the  area  of  civil  and  political  rights.  Efforts  by  the 
government need to continue as regards prevention of torture and ill-treatment. Further steps 
are necessary to eliminate impunity. In some prisons the lack of space and overcrowding need 
to  be  resolved.  Access 
in  northern 
Mitrovicë/Mitrovica  where  the  district  court  is  functioning  with  limited  capacity  under 
EULEX. This undermines rule of law in this part of Kosovo. 

is  not  fully  guaranteed,  notably 

justice 

to 

As  regards  freedom  of  expression,  limited  progress  can  be  reported.  The  transparency  of 
media ownership is guaranteed by a law and the law is properly enforced. Journalists continue 
to  face  political  pressure  and  threats.  The  independence  and  impartiality  of  the  public 
broadcaster  (RTK)  is  not  guaranteed.  Freedom  of  assembly  and  association  is  largely 
respected. The right to association is secured with the adoption of the amendments to the law 
on freedom of association in NGOs. The environment in which civil society operates needs to 
be significantly improved. The government needs to use civil society expertise better. 

In  the  area  of  freedom  of  thought,  conscience  and  religion,  the  police  have  continued  to 
manage well the transfer of responsibility for guarding historical and religious sites, including 
Serbian Orthodox ones, from KFOR. Kosovo has advanced its renovation activities of Serbian 
Orthodox sites in cooperation with relevant participants from the Church and from the Serbian 
authorities. 

Further efforts are needed in order to fully guarantee economic and social rights. There has 
been some progress in relation to women's rights, notably by increasing their representation in 
politics  and  improving  legislative  framework  to  guarantee  their  rights.  The  relevant 
institutions need to be strengthened and the budget increased in order for the legislation to be 
implemented.  Protection  of  children's  rights  has  improved  with  the  implementation  of  the 
juvenile  justice  code.  The  Council  for  Child  Protection  and  Justice  for  Children  was 
established.  Child  protection  remains  weak  and  child  poverty  high.  There  has  been  limited 
progress  on  socially  vulnerable  groups  and  persons  with  disabilities.  A  report  on  the 
implementation of the action plan for persons with disabilities was published. Implementation 
of  the  action  plan  and  relevant  laws  in  this  sector  needs  to  be  enhanced,  particularly  at 
municipal level, notably by securing the access to schools for disabled pupils. 

The  government  carried  out  awareness-raising  campaigns  on  the  anti-discrimination  law. 
Discrimination remains a cause for concern. As regards labour and trade unions rights, some 
progress can be reported. The labour law was adopted as well as the law on trade unions and 
the law on the Economic and Social Council. There has been a mixed progress in the area of 
property  rights.  The  legislative  framework  was  improved  and  a  property  rights  coordinator 
was appointed. The significant backlog of cases in this area prevents people from exercising 
their property rights. More efforts are needed to enforce the existing legislation. 

Kosovo  has  achieved  some  progress  regarding  respect  for  and  protection  of  minorities  and 
cultural  rights.  The  newly-founded  Serb-majority  municipalities  are  facing  a  number  of 
challenges  such  as  land  management.  Limited  progress  has  been  achieved  on  access  to 
education  for  minority  communities.  The  Serb  community  both  north  and  south  of  the 
Ibër/Ibar  still  relies  on  textbooks  and  an  education  system  provided  by  Serbia.  Kosovo 
authorities  need  to  offer  an  alternative  and  to  develop  a  Serbian  curriculum.  Serbian  is  not 
available as the second official language in schools outside the predominantly Serb-populated 
areas. There has been little progress with regard to the use of languages. Implementation of 
the legal framework is inadequate. Multilingual public services are not in place. The position 
of Serbian minority media has improved, notably by the launch of "TV Mreža". 

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With  regard  to  the  relocation  of  Roma,  Ashkali  and  Egyptian  families  from  areas 
contaminated  by  lead,  the  Çesmin  Lug/Česmin  Lug  camp  was  closed  in  October  2010.  The 
Osterode camp is not closed because an alternative public land was not allocated in northern 
Mitrovicë/Mitrovica.  The  government  has  promoted 
these 
communities, including by organising registration free of charge. A report on implementation 
of the Strategy for Integration of Roma, Ashkali and Egyptian Communities was published. 
At the same time, the living conditions of these communities and their access to employment, 
education, health care and social protection remain very serious concerns. 

the  civil  registration  of 

The  return  of  refugees  and  internally  displaced  persons  remains  a  challenge  for  Kosovo 
institutions.  Public  budget  allocated  to  return  was  reduced  by  40%  and  is  very  low.  Issues 
such as delayed property restitution proceedings, and the scarcity of economic opportunities 
continue to be major obstacles to voluntary and sustainable returns. Many displaced persons 
are  still  living  in  difficult  conditions.  Regarding  enforcement  of  cultural  rights,  limited 
progress  can  be  reported.  Cooperation  between  the  relevant  ministries  and  between  central 
and municipal levels has improved. The legislation on the protection of cultural heritage and 
implementation of the laws remain weak. 

As regards regional and international obligations, Kosovo has continued to cooperate with 
the  International  Criminal  Tribunal  for  the  former  Yugoslavia.  EULEX  has  conducted  a 
number of  operations,  including  arrests and convictions in war crime cases, some  involving 
senior political figures, including a former minister. The law on missing persons, adopted in 
August,  is  an  important  development.  The  law  guarantees  the  recognition  of  the  families' 
right-to-know, right-to-reparation and provides for the legal status of the missing persons. The 
government needs to step up its efforts on providing information and resources to clarify the 
fate  of  the  missing  persons.  The  January  resolution  of  the  Parliamentary  Assembly  of  the 
Council  of  Europe  raised  serious  allegations  related  to  the  conflict  of  1999.  EULEX  has 
established  a  Brussels-based  task  force  with  a  liaison  office  in  Pristina  to  investigate  these 
allegations. The authorities are cooperating with EULEX in this investigation. 

Kosovo participated in the Regional Cooperation Council meeting in Montenegro in June for 
the first time since summer 2010. Kosovo has chaired CEFTA meetings satisfactorily in 2011. 
Within the Belgrade/Pristina dialogue, an agreement has been found on the customs stamps. 
An agreement remains to be found on a sustainable solution for the participation of Kosovo in 
regional  fora.  The  principles  of  inclusive  and  functioning  regional  cooperation  need  to  be 
fully implemented by all concerned. 

The economy of Kosovo has continued to be characterised by fragile growth and significant 
domestic  and  external  imbalances,  aggravated  by  an  unpredictable  fiscal  policy  stance.  The 
high inflation and dysfunctional labour market represent major challenges for economic and 
social  cohesion.  A  series  of  ad  hoc  measures  and  lack  of  commitment  by  the  authorities 
derailed  the  Stand-By  Arrangement  with  the  International  Monetary  Fund  (IMF).  The  new 
non-disbursing agreement with the IMF, to run until the end of 2011, is an important test for 
Kosovo  to  regain  credibility  in  economic  and  fiscal  policy.  High  uncertainty  remained  an 
obstacle to private sector development. Firms are confronted with weak administration, lack 
of reliable electricity supply, deficient skills of workers, poor infrastructure and deficient rule 
of law. 

As  regards  the  economic  criteria,  Kosovo  has  made  no  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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The monetary framework has continued to function relatively well, although there is scope for 
improvements,  in  particular  in  financial  sector  regulation  and  supervision.  Financial 
intermediation  has  continued  to  deepen  and  the  banking  sector  has  remained  stable  and 
profitable,  despite  increasing  non-performing  loans.  There  has  been  some  progress  with  the 
privatisation process.  

The proper functioning of the macroeconomic policy mix has been increasingly threatened by 
an  unpredictable  fiscal  policy,  unsustainable  government  expenditure  growth  and  limited 
financing options. Poor governance and ad hoc measures have negative impact on the private 
sector and deep structural problems continue to hamper the economy. Inflation has been high 
and volatile. Unemployment has remained very high and not enough jobs have been created to 
reduce pressures on the labour market and offer employment opportunities, especially to the 
young new entrants. The external imbalances have also remained high, especially in the trade 
in  goods,  and  production-enhancing  foreign  investment  inflows  have  remained  limited.  The 
public  electricity  company  have  continued  to  receive  substantial  subsidies  from  the  state 
budget  and  loans  for  financing  of  its  investment  programme.  The  weak  rule  of  law  and 
challenges  related  to  property  rights  have  continued  to  impact  negatively  on  the  business 
environment. The informal sector remains an important challenge. 

The electoral campaign ahead of the early general elections, followed by the process to form a 
new government and to elect a president, left only a short period of time for the assembly and 
the  government  to  adopt  legislation  and  policies  in  line  with  European  standards.  The 
progress  has  been  mixed.  The  system  for  capital  movements  is  well  advanced.  Kosovo  has 
made progress in the field of asylum and migration, notably on readmission and reintegration 
of repatriated persons. 

There has been some legislative progress regarding competition policy, the energy sector and 
the  information  society  and  media.  Some  progress  has  been  noted  in  the  following  areas: 
taxation, intellectual property rights, employment, social policies and public health, financial 
control,  statistics,  border  management  and  tackling  trafficking  in  human  beings.  Transport 
infrastructure  needs  further  development.  Limited  results  have  been  achieved  on  the 
environment,  agriculture  and  food  safety,  drug-trafficking,  organised  crime  and  the  fight 
against  terrorism.  Little  has  been  done  to  align  legislation  with  the  acquis  on  movement  of 
persons, services and right of establishment, money-laundering, and personal data protection. 

Regarding  the  EU  internal  market,  there  has  been  some  progress  as  regards  legislation 
related to free movement of goods. Some progress has been noted on conformity assessment, 
accreditation,  metrology  and  market  surveillance.  Limited  progress  has  been  achieved  on 
standardisation.  No  legislative  progress  took  place  concerning  consumer  protection. 
Approximation with the EU acquis in the area of free movement of goods is limited. Better 
coordination  of  and  a  strategy  for  the  alignment  process  for  the  whole  of  the  acquis  in  this 
area are needed. The administrative capacity, the necessary implementation and enforcement 
measures  are  inadequate.  Alignment  with  the  acquis  in  the  areas  of  movement  of  persons, 
services and right of establishment and also company law is at an early stage. The system for 
capital movements is very liberal and well advanced. Further reform is desirable to introduce 
Basel II risk requirements and to establish a legal framework fully in line with EU standards. 

Kosovo customs legislation is largely in line with the EU Customs Code. Efforts need to be 
pursued further  concerning the fight against smuggling and counterfeiting. The  Independent 
Review Board needs to function more effectively and to reduce the backlog of cases. There 
has  been  some  progress  in  the  area  of  taxation,  mostly  related  to  the  implementation  of 

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reforms  to  support  the  tax  compliance  strategy.  Administrative  capacity  to  enforce  tax 
payments and reduce the large informal sector remains low. 

There has been some legislative progress regarding competition policy, in particular antitrust 
policy as well as State aid by adopting law on State aid. Implementation of the antitrust policy 
is improving. Progress can be reported in the area of public procurement, with the adoption of 
the  amended  public  procurement  law  that  constitutes  a  step  towards  alignment  with  EU 
standards.  The  legal  framework  remains  to  be  completed  and  cooperation  between  the 
institutions responsible needs to be improved. 

There  has  been  some  progress  in  the  area  of  intellectual  property  rights,  in  particular 
concerning  industrial  property  rights.  The  legislative  framework  is  still  not  complete  and 
enforcement  of  the  intellectual  property  rights  rules  is  insufficient.  Some  progress  can  be 
reported  on  legislative  alignment  of  employment,  social  and  public  health  policies  with  EU 
standards. The implementation of this legislative framework is crucial to help the unemployed 
and  other  vulnerable  groups  to  improve  their  living  standards.  Administrative  capacity  in 
these areas also remains limited, notably at municipal level. Some progress has been made on 
the  alignment  with  European  standards  on  education  and  research.  Capacity  at  central  and 
municipal level needs to be strengthened to ensure effective implementation of the legal and 
strategic framework. In the field of research and innovation, limited progress has been made. 
Serious  efforts  are  needed  to  create  the  necessary  research  and  innovation  capacity.  The 
implementation  of  the  legislative  framework  needs  to  be  enhanced  by  inter  alia  improving 
coordination between central and local levels. In order to fully benefit from donors' support, 
adequate human resources have to be allocated to education and research projects. 

Regarding  sectoral  policies,  the  implementation  plan  for  the  SME  and  industrial  strategies 
needs to be adopted, an adequate budget needs to be allocated and the authorities responsible 
need  to  be  strengthened.  Coordination  and  cooperation  between  stakeholders  remain  a 
challenge.  Kosovo  has  made  limited  progress  in  the  areas  of  agriculture  and  food  safety. 
Efforts  have  been  made  to  develop  administrative  capacity,  particularly  in  the  area  of  food 
safety.  Mainly  due  to  insufficient  budgetary  allocations,  limited  progress  has  been  made  on 
strengthening the legislative and administrative framework in the area of the environment and 
climate change. 

Transport  infrastructure  needs  further  development.  Kosovo's  main  road  infrastructure 
project, construction of the highway from Kosovo to the Albanian border, remains a cause for 
concern  given  its  disproportionately  high  costs  and  level  of  investment  required  in  the  long 
term. Some progress has been made in the field of aviation. 

In the energy sector, some progress has been made on legal alignment and on implementing 
the Energy Community Treaty. In order to attract investment, continued efforts are needed to 
improve  electricity  billing  and  collection  performance  and  to  put  in  place  a  non-subsidised, 
cost reflective tariff. The planned new Kosovo power plant has suffered delays. This has had 
an impact on the timetable to close the heavily-polluting Kosovo A plant. Due to differences 
over status, Kosovo remains unable to participate in regional power transit mechanisms. This 
imperils  the  stability  of  Kosovo's  power  system  and  means  Kosovo  loses  out  on  transit 
revenue. 

the 

the  area  of 

In 
information  society  and  media,  Kosovo  has  adopted  some 
telecommunications regulations to apply EU standards. Important laws on sustainable funding 
of  the  public  service  broadcaster  and  on  the  Independent  Media  Commission  were  pulled 
from  the  Assembly's  agenda  as  they  neither  meet  EU  standards  nor  protected  the 

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independence of the Commission and the public service broadcaster. Both issues need to be 
resolved as a matter of urgency.  

Some  progress  has  been  achieved  on  financial  control.  Public  internal  financial  control 
practice remains at an early stage. Awareness needs to be raised among managers in budget 
organisations  about  the  relevance  of  financial  management  and  control.  In  the  area  of 
statistics,  Kosovo  has  achieved  some  progress,  notably  by  carrying  out  the  population  and 
housing census satisfactorily. 

Kosovo has achieved mixed progress in the area of justice, freedom and security. Steps have 
been  taken  by  the  Ministry  of  Internal  Affairs  to  prepare  Kosovo  for  issuing  biometric 
passports. Good progress has been achieved by adopting adequate legislation and improving 
the  reliability  of  civil  registries.  Further  efforts  are  still  needed  to  ensure  security  of 
documents.  

Some  progress  has  been  achieved  in  border  management.  A  joint  task  force  involving 
customs  and  the  police  was  established  to  fight  cross-border  crime.  The  agencies  have 
organised joint patrols along the border and joint operations at border crossing  points. Joint 
and synchronised police patrols have been conducted with counterparts from Albania and the 
former Yugoslav Republic of Macedonia. The police took over further responsibilities from 
KFOR for protecting the green border with the former Yugoslav Republic of Macedonia and 
Montenegro. The quality and consistency of border checks still need to be improved. 

In the area of asylum, progress has been achieved. Kosovo has faced an increased number of 
asylum-seekers. A number of decisions were taken on asylum requests. Shortcomings remain 
in the asylum procedure, notably lack of interpretation, determination of the origin of persons 
and  appeal  procedures.  Kosovo  has  achieved  progress  in  the  field  of  migration.  It  has 
continued signing new readmission agreements with European countries. The Department for 
Citizenship,  Asylum  and  Migration  has  continued  dealing  with  readmission  requests  from 
European countries efficiently. Kosovo has achieved considerable progress with regard to the 
reintegration  of  repatriated  persons,  including  at  the  municipal  level.  Sustained  efforts  are 
needed to ensure effective implementation. 

Kosovo  has  made  limited  progress  on  addressing  money-laundering  and  economic/financial 
crime.  A  gradual  transfer  of  the  responsibilities  of  the  financial  intelligence  centre  from 
EULEX  to  Kosovo  authorities  has  started.  Kosovo's  capacity  to  investigate  and  prosecute 
economic  crimes  remains  limited.  Economic/financial  crime  and  money-laundering  remain 
serious concerns. 

The  police  increased  the  number  of  seizures  and  arrests  for  narcotics  offences,  including 
trafficking, but the amounts seized are still limited. Efforts to fight drug-trafficking need to be 
significantly stepped up to match the scale of the challenge Kosovo is facing. Some progress 
has  been  achieved  in  policing.  The  police  took  on  increased  responsibilities  from  KFOR. 
Now, they need to address structural and organisational challenges and improve their ability 
to fight complex types of organised crime. 

Limited progress has been made on tackling organised crime. A number of searches, arrests, 
indictments and convictions have been achieved in organised crime cases. A more proactive 
approach  by  the  law  enforcement  agencies  and  judicial  authorities  is  needed  to  tackle 
organised  crime.  Human  and  technical  capacity  need  to  be  strengthened  and  the  quality  of 
investigations considerably enhanced. Kosovo's capacity to fight organised crime is still at an 

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early  stage.  Serious  efforts  are  needed  to  address  this  challenge.  Kosovo  has  made  some 
progress  with  tackling  trafficking  in  human  beings.  The  number  of  victims  identified  has 
increased slightly during the reporting period. The strategy and action plan against trafficking 
of  human  beings  for  2011-2014  was  adopted.  The  efficiency  of  the  police  Directorate  for 
Investigation of Trafficking in Human Beings improved. At the same time, the capacity of the 
Kosovo  prosecutors  and  courts  to  investigate,  prosecute  and  sentence  cases  of  trafficking  is 
still weak.  

Kosovo has made limited progress in the fight against terrorism. Kosovo's capacity to enforce 
relevant  legislation  and  strategy  papers  such  as  the  law  on  prevention  of  money-laundering 
and terrorist financing, the counter-terrorism strategy, etc. remains weak. There has been little 
progress on personal data protection and this is a serious concern.  

Turkey 

Turkey  continues  to  sufficiently  fulfil  the  political  criteria.  Free  and  fair  parliamentary 
elections took place on 12 June 2011. Work on implementing the 2010 Constitutional reform 
package was launched by the government. The prevailing political climate lacks an adequate 
dialogue and spirit of compromise between political parties relations between key institutions 
are strained; this atmosphere hampered the continuation of the reform process. A new process 
to reform the constitution started after the elections. Significant further efforts are required to 
guarantee  fundamental  rights  in  most  areas.  This  relates,  in  particular,  to  freedom  of 
expression,  where  the  number  of  court  cases  against  writers  and  journalists,  and  the  still 
frequent disproportionate website bans, raised serious concerns. 

As regards democracy and the rule of law, the Ergenekon investigation and the probes into 
other  alleged  coup  plans  still  provide  an  opportunity  for  Turkey  to  shed  light  on  alleged 
criminal  activities  against  democracy  and,  thus,  to  strengthen  confidence  in  the  proper 
functioning  of  its  democratic  institutions  and  the  rule  of  law.  There  were,  however,  serious 
concerns  over  the  conduct  of  investigations,  judicial  proceedings  and  the  application  of 
criminal procedures, which put at risk the rights of the defence and affected the legitimacy of 
the cases. 

As regards public administration reform, there has been some progress in legislative reform. 
Attention needs to be paid to the establishment of the institution of the ombudsman. Increased 
political support is needed for public administration reform and decentralisation. 

Good progress has been made in consolidating the principle of civilian oversight of security 
forces.  In  particular,  civilian  oversight  of  military  expenditure  was  reinforced.  Decisions  of 
the  Supreme  Military  Council  were  opened  to  civilian  judicial  review.  Further  reforms  are 
still  required  in  order  to  consolidate  civilian  oversight  in  the  domestic  security  sector,  in 
particular  of  the  gendarmerie,  and  to  continue  progress  in  the  area  of  the  military  justice 
system. 

Progress has been made in the area of the judiciary. The adoption of legislation on the High 
Council  of  Judges  and  Prosecutors  and  on  the  Constitutional  Court  provides  the  framework 
for enhanced independence and impartiality of the judiciary. Measures have also been taken 
to improve the efficiency of the judiciary and address the increasing backlog of pending cases. 
Further steps are still needed in all areas, including the criminal justice system. Turkey has a 
large  backlog  of  pending  criminal  serious  cases  while  a  large  proportion  of  the  prison 
population  is  not  finally  sentenced.  In  addition,  implementation  needs  to  be  monitored,  as 

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measures taken to date have divided the country's legal community and civil society. Judicial 
proceedings  are  not  sufficiently  transparent.  Courts  and  prosecution  offices  do  not  inform 
stakeholders  or  the  public  at  large  on  issues  of  public  interest.  The  judicial  reform  strategy 
needs to be revised with the participation of all stakeholders, the Turkish legal community and 
civil society. 

The implementation of the strategy and the anti-corruption action plan is at an initial stage. 
Corruption  remains  prevalent  in  many  areas.  The  lack  of  transparency  of  political  party 
financing and the scope of immunities remain major challenges. Increased political support is 
needed in order to strengthen and implement the legislative framework on anti-corruption. As 
regards  investigation  into  the  charity  association  Deniz  Feneri,  concerning  a  fraud  case  in 
Germany,  a  former  head  of  the  Radio  and  Television  Supreme  Council  (RTUK)  and  four 
senior  executives  of  television  network  Kanal  7  were  detained.  Turkey  needs  to  develop  a 
track record of investigations, indictments and convictions in the area of corruption. 

Concerning human rights and the protection of minorities, limited progress has been made. 
Significant efforts are needed in most areas, in particular freedom of expression and freedom 
of religion. 

As  regards  the  observance  of  international  human  rights  law  some  progress  was  made, 
notably  through  the  ratification  of  the  Optional  Protocol  to  the  UN  Convention  against 
Torture (OPCAT). A number of reforms have been outstanding for several years. Legislation 
on human rights' institutions needs to be brought fully into line with UN principles. 

The positive trend on the prevention of torture and ill-treatment, as regards both the incidence 
and severity of ill-treatment by law enforcement officials, continued. Disproportionate force 
has still been used by these officials, in particular outside official places of detention. Credible 
allegations of physical ill-treatment were received, which concerned mainly excessive use of 
force  during  arrest.  There  is  no  progress  on  tackling  impunity,  including  the  processing  of 
cases of alleged ill-treatment brought to the judiciary. 

As regards prisons, the increase in the prison population is leading to serious overcrowding, 
which  hampers  attempts  to  improve  the  conditions  of  detention.  An  overhaul  of  the 
complaints  system  in  prisons  is  overdue.  Implementation  of  the  OPCAT  is  expected  to 
contribute  to  tackling  some  of  these  matters.  Medical  services  for  inmates,  as  well  as  the 
conditions for the detention of juveniles, are matters requiring special efforts. 

With  regard  to  freedom  of  expression,  an  open  debate  continued  on  topics  perceived  as 
sensitive, such as the Kurdish and Armenian issues, minority and cultural rights and the role 
of  the  military.  However,  the  right  to  freedom  of  expression  is  undermined  by  the  large 
number  of  legal  cases  and  investigations  against  journalists,  writers,  academics  and  human 
rights  defenders.  This  leads  to  self-censorship  and,  together  with  undue  pressures  on  the 
media, raises serious concerns. Present legislation does not sufficiently guarantee freedom of 
expression in line with the ECHR and the case law of the ECtHR, and it permits restrictive 
interpretation  by  the  judiciary.  Frequent  website  bans  are  also  a  cause  for  serious  concern. 
Overall,  Turkey's  legislation  and  judicial  practice  are  obstacles  to  the  free  exchange  of 
information and ideas. 

As  regards  freedom  of  assembly,  there  has  been  progress  on  the  ground:  various 
demonstrations, including Newroz (the Kurdish New Year) and 1 May, took place peacefully. 
Demonstrations in the Southeast of the country and in other provinces related to the Kurdish 

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issue, students' rights, the activities of the higher education supervisory board YÖK and trade 
union rights were marked by a disproportionate use of force. 

Legislation on freedom of association is broadly in line with EU standards. Excessive controls 
and restrictive interpretation of the law still remain. There were no developments as regards 
the amendment of legal provisions on the closure of political parties. 

There has been limited progress on freedom of thought, conscience and religion. Freedom of 
worship  is  generally  respected.  The  dialogue  with  the  Alevis  and  with  the  non-Muslim 
religious  communities  continued.  Members  of  minority  religions  continued  to  be  subject  to 
threats by extremists. A legal framework in line with the ECHR has yet to be established, so 
that  all  non-Muslim  religious  communities  and  the  Alevi  community  can  function  without 
undue constraints. 

Protecting women's rights, promoting gender equality and combating violence against women 
remain  major  challenges.  The  legal  framework  guaranteeing  women's  rights  and  gender 
equality is broadly in place. Further substantial efforts are needed in order to turn this legal 
framework into political, social and economic reality. Legislation has yet to be implemented 
consistently  across  the  country.  Honour  killings,  early  and  forced  marriages  and  domestic 
violence against women remain serious problems. Further training and awareness-raising on 
women's rights and gender equality are required, in particular for the police. 

With  respect  to  children's  rights,  an  adequate  number  of  juvenile  courts  in  line  with  the 
legislation  in  force  have  yet  to  be  established.  Children  are  not  detained  for  the  minimum 
necessary  period  of  time  or  in  appropriate  conditions.  Efforts,  including  on  preventive  and 
rehabilitative  measures,  need  to  be  strengthened  in  all  areas,  such  as  education,  combating 
child labour, health, administrative capacity and coordination. 

Efforts to improve the situation of socially vulnerable persons and/or persons with disabilities 
continued.  Further  measures  are  still  required  in  order  to  increase  the  participation  of  those 
persons in social and economic life. 

Further  efforts  are  required  in  the  fight  against  discrimination.  Comprehensive  anti-
discrimination legislation is lacking. 

Many  challenges  remain  in  the  area  of  labour  and  trade  union  rights.  The  current  legal 
framework is not in line with EU standards and ILO Conventions. Persisting disagreements 
among social partners and lack of adequate political will, have prevented progress in this area. 

As regards property rights, a new piece of legislation amending the 2008 Law on foundations 
facilitates the return of immovable properties to non-Muslim religious communities.  

Turkey's  approach  to  minorities  remains  restrictive.  Full  respect  for  and  protection  of 
language, culture and fundamental rights, in accordance with European standards, has yet to 
be  achieved.  Turkey  needs  to  make  further  efforts  to  enhance  tolerance  and  promote 
inclusiveness vis-à-vis minorities. The comprehensive revision of existing legislation and the 
establishment  of  protection  mechanisms  or  specific  bodies  to  combat  racism,  xenophobia, 
anti-Semitism and intolerance are still outstanding. 

Turkey has made progress on cultural rights, especially as regards the use of languages other 
than  Turkish  by  all  national  radio  and  television  stations,  as  well  as  the  use  of  multiple 
languages by municipalities. The opening of a Kurdish Language and Literature Department 

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in  Muş  Alparslan  University  has  been  authorised.  Restrictions  still  remain  on  the  use  of 
languages other than Turkish in political life, in contacts with public services and in prisons. 
The  legal  framework  on  the  use  of  languages  other  than  Turkish  is  open  to  restrictive 
interpretation, and implementation remains inconsistent across the country. 

There  has  been  some  progress  as  regards  the  Roma,  in  particular  on  amendment  of 
discriminatory  legislation.  There  is  no  comprehensive  policy  to  address  the  situation  of  the 
Roma. 

As regards the East and Southeast, the 2009 democratic opening was not followed through. 
The  detention  of  elected  politicians  and  human  rights  defenders  raised  concerns.  The  truth 
about  extra-judicial  killings  and  torture  carried  out  in  the  Southeast  in  the  1980s  and  1990s 
has yet to be established following the due process of law. Landmines and the village guard 
system are still causes for concern. 

Terrorist attacks intensified. The PKK is on the EU list of terrorist organisations. 

Compensation of internally displaced persons (IDPs) has continued. The overall effectiveness 
of the scheme has yet to be assessed. A national strategy, in order to better address IDP needs, 
has not been developed yet. Despite some improvements, the lack of a comprehensive legal 
framework  for  refugees  and  asylum-seekers  is  an  impediment  to  the  provision  of  adequate 
treatment. The general conditions in foreigners' detention centres need to be further improved. 

With regard to regional issues and international obligations, Turkey reiterated its support to 
the negotiations between the leaders of the two communities under the good offices of the UN 
Secretary-General  to  find  a  comprehensive  settlement  to  the  Cyprus  problem.  However, 
despite repeated calls by the Council and the Commission, Turkey has still not complied with 
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, 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 
2010 conclusions. There is no progress towards normalisation of bilateral relations with the 
Republic of Cyprus.  

As  regards  relations  with  Greece,  there  are  continued  efforts  to  improve  bilateral  relations. 
The  bilateral  exploratory  talks  continued.  A  substantial  number  of  formal  complaints  were 
made  by  Greece  about  continued  violations  of  its  territorial  waters  and  airspace  by  Turkey, 
including flights over Greek islands. 

Turkey  has  significantly  intensified  contacts  in  the  Western  Balkans,  expressing  a  firm 
commitment to the promotion of peace and stability in the region. 

The  economy  of  Turkey  is  currently  experiencing  a  robust  economic  recovery.  Public 
finances are improving and confidence in a lasting transformation of the country's economic 
prospects and stability is increasing. Nevertheless, the rapid expansion of economic activity, 
driven by strong domestic demand, has led to significant and rising external imbalances that 
pose a threat to macroeconomic stability.  

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  accelerates  the  implementation  of  its  comprehensive  structural  reform 
programme. 

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The  economy  expanded  rapidly  in  2010  and  in  the  first  half  of  2011.  Along  with  the  high 
GDP growth, strong employment growth allowed for a decrease in unemployment. As a result 
of primarily higher cyclical revenues and a lower interest burden, the consolidation of public 
finances  remained  on  track.  The  financial  sector  has  shown  considerable  strength  thanks  to 
earlier  reforms  while  the  legal  system  continues  to  function  relatively  well.  Moreover,  the 
new law on State aid monitoring and the operation of the regulatory authority may increase 
transparency and lead to a reduction of State aid. The free interplay of market forces has been 
confirmed.  Privatisation  has  accelerated.  The  EU  remains  Turkey's  most  important  trade 
partner and investor.  

However, trade and current account deficits have been rising and external imbalances are now 
significant. Monetary policy has been only mildly successful in curbing credit growth, which 
along  with  high  commodity  prices,  continues  to  feed  Turkey's  growing  current  account 
deficit.  More  support  from  the  fiscal  side,  and  some  specific  and  targeted  micro-prudential 
measures  are  being  elaborated,  including  by  the  banking  regulator,  in  order  to  help 
engineering  a  soft  landing  of  the  economy  and  ease  the  burden  placed  on  monetary  policy. 
Turkey's price and cost export competitiveness has slightly worsened. Inflation has started to 
rise, in large part due to pressures stemming from energy and food inputs, buoyant economic 
activity  and  hikes  in  administrative  prices.  A  more  resolute  implementation  of  structural 
reforms  is  awaited.  Measures  to  increase  fiscal  transparency  and  better  anchor  fiscal  policy 
were  modest,  while  they  could  help  Turkey  to  gain  credibility  in  the  markets.  Market  exit 
remains difficult and bankruptcy proceedings are still relatively cumbersome.  

Turkey continued improving its ability to take on the obligations of membership. Progress 
was  made  in  most  areas.  Alignment is advanced in certain areas, such as free movement of 
goods, anti-trust policy and State aid, energy, economic and monetary policy, enterprise and 
industrial policy, consumer protection, statistics, Trans-European Networks, and science and 
research.  Efforts  need  to  continue  towards  alignment  in  areas  such  as  environment,  public 
procurement,  freedom  to  provide  services,  social  policy  and  employment  and  taxation. 
Enforcement  needs  to  be  strengthened  in  areas  such  as  intellectual  property  rights  and  anti-
money laundering. As regards the Customs Union and external relations, alignment needs to 
be  completed,  particularly  in  areas  such  as  the  general  system  of  preferences.  A  number  of 
longstanding  trade  irritants  remain  unresolved.  It  is  essential  that  Turkey  fully  respects  its 
commitments under the Customs Union. For most areas it is crucial that Turkey improves its 
administrative capacity to cope with the acquis. 

As  regards  free  movement  of  goods,  legislative  alignment  is  advanced,  but  limited  progress 
was  made  in  the  reporting  period.  Technical  barriers  to  trade  continue  to  prevent  free 
movement of goods in breach of Turkey's obligations under the Customs Union. Hardly any 
progress can be reported in the area of freedom of movement for workers where preparations 
for  applying  the  acquis  remain  in  the  early  stages.  Alignment  in  the  areas  of  right  of 
establishment and freedom to provide services also remains at an early stage. No progress has 
been recorded in the field of right of establishment, freedom to provide cross border services, 
postal services and the mutual recognition of professional qualifications. As regards the free 
movement  of  capital,  Turkey  made  some  progress,  in  particular  on  capital  movements  and 
payments. There has been no progress in the gradual liberalisation of real estate acquisition by 
foreigners,  where  various  obstacles  remain.  Restrictions  on  capital  movements  remain  in 
place  in  a  number  of  sectors,  including  on  direct  investments  originating  from  the  EU.  The 
legal framework against financing of terrorism remains incomplete and the Financial Action 
Task Force has blacklisted Turkey for its strategic deficiencies in this area.  

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Limited progress can be reported in the area of public procurement. The institutional set-up is 
in place, but administrative capacity needs improvement. The draft alignment strategy with a 
time-bound action plan is ready but has yet to be adopted. Turkey still maintains derogations 
contradicting  the  acquis.  It  needs  to  further  align  its  legislation,  particularly  on  utilities, 
concessions  and  public-private  partnerships.  As  regards  company  law,  significant  progress 
can be noted following adoption of the new Turkish Commercial Code, which is expected to 
promote  openness,  transparency  and  adherence  to  international  accounting  and  auditing 
standards.  The  legal  and  institutional  framework  for  auditing  is  not  yet  in  place,  nor  is  the 
necessary enhanced capacity of the commercial judiciary. Alignment on intellectual property 
law is relatively advanced but enforcement remains poor. The recently launched IPR Working 
Group  with  the  Commission  addresses  a  key  element  for  the  accession  negotiations.  The 
adoption of updated draft laws regulating intellectual and industrial property rights, including 
deterrent  criminal  sanctions,  is  still  pending.  Coordination  and  cooperation  between  the 
different IPR stakeholders and public bodies is essential, as are general awareness campaigns 
on the risks of IPR infringements. 

On competition policy, Turkey's alignment record in the field of anti-trust and merger control 
is  high.  The  Competition  Authority  enforces  antitrust  rules  effectively,  with  a  satisfactory 
level of independence. Good progress has been made in the area of State aid. In particular, the 
State  Aid  Monitoring  Authority  is  now  set  up.  However,  a  number  of  important  State  aid 
schemes remain to be aligned with the rules of the Customs Union. 

There  has  been  further  progress  in  the  area  of  financial  services;  in  particular,  the  banking 
regulator took measures to strengthen financial stability. However, overall alignment with the 
acquis, in particular in the insurance sector, is not yet complete. With regard to information 
society  and  the  media,  some  progress  can  be  reported  in  the  area  of  electronic 
communications and also good progress on audiovisual policy.  

There is some progress to report in the area of agriculture and rural development. Significant 
progress has been made in the implementation of the Instrument for Pre-Accession Assistance 
for Rural Development (IPARD) programme, leading to the Commission Decision to confer 
the management of EU funds, as well as in preparations achieved for the second phase of the 
IPARD programme. Agricultural support policy differs substantially from the CAP and there 
is still no strategy for its alignment. The failure to fully remove barriers to beef imports also 
constitutes a major shortcoming. As regards food safety, veterinary and phytosanitary policy, 
progress  towards  transposition  and  implementation  of  the  acquis  has  been  achieved.  The 
restructuring  of  the  Ministry  of  Agriculture  and  Rural  Affairs  is  a  positive  step  towards 
strengthening the official control system. The overall control system is still not fully in line 
with the EU acquis. Considerable effort is needed in the area of animal health and in bringing 
agri-food establishments into compliance with the EU hygiene and structural requirements. In 
fisheries, some progress can be reported overall. In particular some progress has been made 
on setting up administrative structures as well as on resource and fleet management. Turkey is 
expected to make further progress in other areas such as inspections and controls. 

Some progress has been achieved in alignment of the transport sector, except for the railway 
sector.  Alignment  in  maritime  and  land  transport  remains  at  an  advanced  level  and  air 
transport  is  following  at  a  slower  pace.  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, the Voluntary IMO Member State Audit Scheme is expected to 
create positive results for becoming a party to international conventions. The implementation 
capacity is limited, particularly for dangerous goods in land and maritime transport. 

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In the energy sector, progress has been uneven. There has been good progress on the internal 
market for electricity and on renewable energy. Measures are particularly needed in order to 
ensure  the  highest  possible  standards  for  nuclear  safety,  security,  safeguards  and  non-
proliferation. Developments on security of supply, the gas sector and energy efficiency also 
require further efforts. 

On  taxation,  there  has  been  limited  progress  on  legislative  alignment,  particularly  towards 
eliminating  some  discriminatory  practices  in the  taxation  of  tobacco.  The  increase  in  excise 
duty  on  spirits  contradicts  the  Action  plan  agreed  with  the  Commission  on  that  issue. 
Abolition  of  discriminatory  practices  in  taxation  is  key  to  making  further  progress  in  this 
chapter. No progress can be reported on direct taxation. 

Turkey has made some progress on economic and monetary policy. The Central Bank adopted 
a new policy mix to ensure financial stability, reducing policy rates while increasing reserve 
requirements  for  the  banking  sector.  Turkey's  alignment  with  the  acquis  on  economic  and 
monetary policy is not complete, particularly as regards the full independence of the Central 
Bank and the prohibition of privileged access of the public sector to financial institutions. The 
overall level of preparedness is advanced. 

There has been good progress in the area of statistics, in which the overall level of alignment 
with the acquis is advanced. Further progress is needed, particularly in national accounts and 
in agriculture statistics. 

Turkey  made  limited  progress  in  the  field  of  social  policy  and  employment.  Administrative 
capacity showed some improvement. Constitutional amendments regarding trade union rights 
have not resulted in further changes of the legislation aimed at granting full trade union rights 
in line with EU standards and ILO conventions. The reduction of large-scale undeclared work 
and  the  increase  of  female  employment  rates  are  still  matters  of  concern.  The  scope  of  the 
labour law remains limited. Enforcement of health and safety at work legislation needs to be 
stepped up. The risk of poverty remains very high, especially for the rural population and for 
children. Legislation establishing an equality body has not yet been adopted. 

Turkey  has  made  further  progress  in  the  area  of  enterprise  and  industrial  policy,  where 
Turkey maintains a sufficient level of alignment with the acquis. The progress relates to the 
adoption of an Industrial Strategy and Action Plan covering the period 2011-2014, the wider 
availability of enterprise and industrial policy instruments, the adoption of sectoral strategies 
and alignment on combating late payment in commercial transactions. 

Turkey has made progress in the area of Trans-European networks, in particular in the TEN 
transport area. Further efforts are needed as regards reliable transport data. There is also some 
progress to report in the TEN energy area. 

Some  progress  was  made  in  the  field  of  regional  policy  and  co-ordination  of  structural 
instruments. There are delays in establishing the bodies to take over the financial management 
and  control  responsibilities  of  pre-accession  funds  in  this  policy  area.  Although  the 
institutional framework for implementation of pre-accession funds has been finalised and the 
administrative  capacity  has  been  improved,  there  is  a  need  for  further  strengthening  of  this 
capacity  and  improved  coordination  between  all  relevant  institutions  in  order  to  accelerate 
implementation. 

Overall, progress has been made in the area of the judiciary.  

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to  anti-corruption, 

With  respect 
the 
implementation of the strategy and action plan on anti-corruption. The lack of transparency in 
political  party  financing  and  the  scope  of  immunities  remain  major  shortcomings.  Turkey 
needs to develop a track record of investigation, indictments and convictions. 

limited  progress  has  been  made  as  regards 

Progress achieved in the area of justice, freedom and security has been uneven. The adoption 
of  the  Law  on  Foreigners  and  International  Protection  remains  a  priority  to  ensure  a  sound 
legal basis for an efficient asylum and migration management system, as well as safeguards 
for the rights of migrants and refugees. There is only limited progress to report in the area of 
judicial cooperation in criminal and civil matters. Some progress can be reported in the area 
of  drugs  and  organised  crime.  Limited  progress  can  be  reported  in  the  area  of  police 
cooperation  and  terrorism.  Limited  progress  has  been  achieved  on  visa  policy  and  customs 
cooperation. Very limited progress can be reported in the area of border management where 
the key issues are the adoption of a law on the establishment of new Border Security Agency 
and inter-agency cooperation. Turkey remains an important country of transit and destination 
of  irregular  migrants.  Efforts  are  needed  to  prevent  irregular  migration  and  to  readmit 
irregular migrants. 

Turkey is well prepared for accession in the area of science and research. Good progress has 
been  made  towards  integration  into  the  European  Research  Area  and  preparations  for  the 
Innovation  Union.  Overall,  Turkey's  participation  and  success  rate  in  the  EU  Seventh 
Framework  Programme  are  growing,  but  further  efforts  are  needed  in  order  to  meet  the 
excellence requirement and competitive participation in the EU research programmes. 

In  education  and  culture  there  has  been  progress,  in  particular  in  the  area  of  education  and 
training.  Interest  in  the  Community  Programmes  continued  to  grow.  There  has  been  some 
progress in the area of culture, but no progress on legislative alignment. 

In the environment area, Turkey has made good progress on waste management, whereas only 
limited progress can be reported on horizontal legislation, air quality and industrial pollution 
control and risk management. Turkey made very limited progress on water quality, chemicals 
and on administrative capacity. No progress can be reported on nature protection. Regarding 
climate  change,  Turkey  made  limited  progress  on  awareness-raising  on  EU  climate 
requirements,  but  a  more  robust  and  ambitious  climate  policy,  both  domestically  and 
internationally, has yet to be established. There is a need to enhance administrative capacity . 

Some progress can be reported on consumer and health protection. In the area of consumer 
protection,  revised  framework  laws  for  consumer  protection  and  general  product  safety  are 
still  to  be  adopted.  Improvement  of  market  surveillance  activities  requires  the  allocation  of 
further  financial  and  human  resources,  while  cooperation  with  consumer  NGOs  needs 
strengthening.  In  the  area  of  public  health,  Turkey  has  not  yet  completed  the  legislative 
alignment  process  nor  built  up  the  administrative  capacity  to  improve  the  enforcement  of 
legislation in order to enhance the health and safety status of the population. 

Turkey has achieved a high level of alignment in the field of customs legislation thanks to its 
Customs  Union  with  the  EU.  Duty  free  status  of  the  shops  established  at  entry  points  and 
requirements for importers of products in free circulation in the EU to submit information of 
origin  in  any  format  prior  to  customs  clearance  is  not  in  line  with  the  Customs  Union. 
Legislation on free zones, surveillance and tariff quotas are yet to be aligned. Improved risk-
based  controls  and  simplified  procedures  would  facilitate  legitimate  trade  by  reducing  the 

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number  of  physical  controls.  There  is  still  no  effective  enforcement  of  intellectual  property 
rights at customs and measures to tackle counterfeit goods are still lacking. 

Turkey has achieved a high level of alignment in the area of external relations, owing to the 
Customs  Union.  Some  discrepancies  still  remain  in  areas  such  as  the  general  system  of 
preferences in terms of its geographical coverage. 

Turkey's alignment with the EU's common foreign and security policy has continued; overall 
Turkish alignment with CFSP declarations fell during the reporting period and Turkey did not 
align with EU restrictive measures on Iran, Libya or Syria. Turkey has sought dialogue and 
consultation with the EU on various foreign policy issues. Turkey made efforts to normalise 
relations  with  its  neighbouring  countries,  such  as  Iraq,  including  the  Kurdish  regional 
government. No progress was made in the normalisation of ties with Armenia. Relations with 
Israel further deteriorated since the Gaza Flotilla incident in 2010. After the publication of the 
independent  UN  report,  Turkey  downgraded  relations  with  Israel  and  suspended  military 
agreements with Israel.  

Turkey  is  continuing  to  contribute  to  CSDP  and  is  seeking  greater  involvement  in  CSDP 
activities. The issue of EU-NATO cooperation, which would involve all EU Member States 
beyond the "Berlin plus arrangements", remains to be resolved. Turkey has not aligned itself 
with the EU position on membership of the Wassenaar Arrangement. 

There is some progress to report in the area of financial  control, which already has a  fairly 
advanced level of alignment. Legislation implementing the Public Financial Management and 
Control  Law  is  fully  in  force.  The  Public  Internal  Financial  Control  Policy  Paper  and  the 
action  plan  need  to  be  revised.  The  adoption  of  the  Turkish  Court  of  Accounts  Law  was  a 
significant  step  in  further  aligning  external  audit  with  relevant  international  standards.  The 
Turkish  Anti-Fraud  Cooperation  Structure  needs  to  continue  reinforcing  its  coordination 
function, its operational independence and its operational network.  

There  is  limited  progress  to  report  in  the  area  of  financial  and  budgetary  provisions. 
Administrative preparations for setting up the own resources system are at a very early stage. 

Iceland 

Iceland  continues  to  meet  the  political  criteria.  Iceland  is  a  functioning  democracy  with 
strong  institutions  and  deeply  rooted  traditions  of  representative  democracy.  The  country's 
judicial  system  continues  to  be  of  a  high  standard,  and  Iceland  is  ensuring  the  continuous 
strengthening of its already high level of protection on fundamental rights.  

The unity of the coalition government was tested on several occasions, but remained stable. 
The  domestic  scene  is  characterised  by  diverging  views  among  the  political  forces  and  the 
population on the prospect of EU accession. Communication activities promoting an informed 
debate about Iceland's accession process have started. 

Both  government  and  parliament  have  continued  to  function  well.  A  constitutional  council 
was  set  up  in  April  2011  to  review  the  Constitution  and  propose  constitutional  changes. 
Legislation  was  also  drafted  to  further  strengthen  the  efficiency  of  the  parliament  and  the 
public administration. 

Good progress can be reported in the further implementation of the recommendations of the 
Special  Investigation  Committee  on  the  political  and  administrative  consequences  of  the 

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financial  crisis.  In  accordance  with  these  recommendations,  the  Court  of  Impeachment  was 
convened in March 2011 to rule on a case against the former Prime Minister. This led to his 
indictment for gross negligence in May 2011. In parallel, the Office of the Special Prosecutor 
continued its work efficiently. It investigated numerous cases for alleged fraudulent business 
practices in the banking sector, which led to some arrests. 

Progress  can  be  reported  in  further  strengthening  of  the  efficiency  of  the  judiciary  and  the 
anti-corruption framework. A number of judges were appointed in accordance with the rules 
of  the  amended  Judiciary  Act,  and  the  UN  Convention  against  corruption  was  ratified  in 
February 2011. As regards conflict of interests, Iceland has begun to frame specialised codes 
of conduct for ministers and for a number of categories of employees.  

Iceland continued to safeguard fundamental rights, including economic and social rights. The 
Council of Europe Framework Convention for the Protection of National Minorities remains 
to be ratified. 

The economy of  Iceland  is  slowly recovering from the fallout of its financial crisis and the 
deep and long recession that followed, but growth prospects remain weak as households and 
firms continue to suffer from a high level of indebtedness. Economic policies continued to be 
oriented  towards  stabilisation,  firmly  anchored  by  the  successful  completion  of  an  IMF 
programme.  Recently  rising  inflation  prompted  the  central  bank  to  increase  interest  rates 
whereas  fiscal  policy  was  somewhat  relaxed.  Expenditure-led  fiscal  adjustment  to  reduce 
public  debt  to  sustainable  levels  remains  a  challenge.  Unemployment  is  high,  particularly 
among youth and long-term unemployed. Despite progress in banking sector restructuring, the 
economy still suffers from a dysfunctional financial sector and the removal of capital controls 
represents a key challenge.  

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  should  be  able  to  cope  with  competitive  pressures 
and  market  forces  within  the  Union  over  the  medium  term,  provided  that  it  continues  to 
address  current  structural  weaknesses  through  appropriate  macroeconomic  policies  and 
structural reforms.  

The policy mix with a strong focus on exchange rate stabilisation and fiscal consolidation has 
been supportive in re-establishing a higher degree of macroeconomic stability. In response to 
trade  surpluses  and  an  appreciating  exchange  rate  the  central  bank  continued  to  reduce  its 
policy  rate  in  the  second  half  of  2010,  but  reacted  with  a  modest  tightening  of  monetary 
policy  as  of  August  2011  in  reaction  to  a  weaker  currency  and  significantly  rising  annual 
inflation. Efforts to strengthen public revenues and implement spending cuts have continued. 
In view of the high level of public debt, measures were taken to reduce refinancing risks and 
to strengthen local government finances. Foreign exchange reserves continued to increase and 
recent  central  bank  estimates  point  to  a  more  manageable  external  debt  position.  New 
measures  were  taken  to  accelerate  private  sector  debt  restructuring.  A  revised  strategy  for 
capital  account  liberalisation  was  adopted  and  its  implementation  remains  a  challenge.  The 
labour  market  remained  flexible  and  participation  rates  relatively  high.  The  country  enjoys 
good basic infrastructure, abundant natural resources, and overall a well-educated population. 

However,  macro-financial  risks  remain  elevated.  Domestic  demand  has  picked  up,  but  the 
recovery is largely based on temporary measures which supported private consumption. Risks 
and uncertainties with respect to future sources of growth and its sustainability remain. The 

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financial  sector  is  still  suffering  from  weak  asset  quality  and  an  efficient  financial 
intermediation remains hampered by the incomplete private sector debt restructuring process. 
Public debt has risen above 90% of GDP. The fiscal consolidation path has been somewhat 
relaxed  and  public  finances  remain  confronted  with  the  challenge  to  implement  severe 
spending cuts to enhance long-term sustainability. Fiscal risks arise from sizeable contingent 
liabilities  and  the  unresolved  Icesave  issue.  The  labour  market  continues  to  be  seriously 
affected  by  the  deep  post-crisis  recession  with  unemployment  unprecedentedly  high  for  the 
country,  particularly  among  the  youth  and  with  the  large  share  of  long-term  unemployed. 
Growth,  investment  and  development  are  hampered  by  weaknesses  in  the  business 
environment, such as high barriers to market entry in certain sectors. The industrial structure 
remained little diversified. 

In  line  with  the  methodology  of  the  first  progress  report,  Iceland's  ability  to  assume  the 
obligations  of  membership  continued  to  be  assessed  in  the  light  of  its  participation  in  the 
European  Economic  Area  (EEA)  and  taking  into  account  the  exemptions  granted  under  the 
EEA, as well as the EU legislation falling outside the scope of 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.  In  spite  of  negotiating  efforts,  the  new  bill  on  the 
terms and conditions for the loan repayment to the UK and the Netherlands in a referendum 
was  rejected  in  April  2011.  The  government  confirmed  that  the  outcome  of  the  referendum 
would not affect the commencement of the payments to the UK and the Netherlands, which 
are due to start in late 2011. In May 2011, the government sent its reply to the letter of formal 
notice of May 2010 of the EFTA Surveillance Authority (ESA). In June 2011, ESA proceeded 
with  the  second  stage  of  the  infringement  procedure,  namely  the  issuance  of  the  reasoned 
opinion.  This  opinion  reiterates  in  full  the  findings  of  the  previous  letter  of  formal  notice, 
namely that Iceland acted in breach of the deposit guarantee scheme directive. The European 
Commission shares the legal analysis of ESA.  Iceland's  government  provided the  answer to 
the EFTA Surveillance Authority's reasoned opinion at the end of September. The Authority 
is now examining the response in detail before deciding on further action in this case. At this 
stage, the Icesave dispute remains unresolved. 

Preparations to take on the obligations of membership continued, albeit relatively slowly, in 
areas  partly  covered  by  the  EEA  as  well  as  in  chapters  not  covered  by  the  EEA.  Iceland 
remains largely in line 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,  the  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. 

The progress report confirms that the following areas are likely to present challenges in the 
accession  process:  financial  services,  agriculture  and  rural  development,  environment, 
fisheries, free movement of capital as well as food safety, veterinary and phytosanitary policy, 
taxation and customs.  

From the point of view of administrative capacity, attention should be paid to ensuring that 
human  and  financial  resources  are  made  available  and  remain  available  for  the  necessary 
preparations associated with the process of EU accession. 

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Iceland continues to be closely in line with the acquis on free movement of goods. However, 
there are no new legislative developments in Iceland to report as far as horizontal measures 
and product legislation under the 'Old Approach' are concerned. Transposition still needs to be 
completed in a number of areas where new EU acquis was adopted.  

Iceland maintains a high level of alignment with the acquis in the area of free movement of 
workers.  

Legislation on the right of establishment and freedom to provide services remains broadly in 
line,  with  the  exception  of  the  postal  services  directive.  The  implementation  of  the  services 
directive was notified in July 2011. 

Iceland  largely  applies  the  acquis  on  free  movement  of  capital,  with  some  exceptions. 
However, in the aftermath of the financial crisis, Iceland continues to apply capital controls 
which will need to be removed by the time of EU accession. . 

In  the  field  of  public  procurement  Iceland  remains  broadly  aligned  with  the  acquis. 
Alignment with remedies and defence procurement remains outstanding. 

Iceland  has  already  reached  a  high  level  of  alignment  and  applies  a  substantial  part  of  the 
acquis in  the  field  of company  law. However, full alignment with accounting  standards  and 
international audit standards remains to be achieved. 

Iceland maintains a high level of alignment with the acquis on intellectual property law and 
has  the  administrative  capacity  necessary  to  implement  it.  There  is  a  need  to  implement  a 
comprehensive enforcement policy. 

Iceland maintains a high level of alignment in the field of competition policy. Monitoring of 
the State aid measures taken in response to the financial crisis is proceeding satisfactorily. 

Further  efforts  are  needed  in  order  to  implement  the  acquis  on  financial  services  and  in 
particular to ensure its effective enforcement and the adequate supervision of the sector. The 
Icesave dispute remains unresolved. 

Some gaps in transposition remain in the field of information society and media. 

Iceland's policy on agriculture and rural development is overall not in line with the acquis, 
and the appropriate administrative framework for implemention needs to be set up.  

Parts of Iceland's legislation and administrative framework are not in line with the acquis on 
food  safety,  veterinary  and  phytosanitary  policy.  Particular  attention  is  needed  in  order  to 
close the remaining  gaps with  EU legislation on  live  animals, plant protection  products and 
novel food. 

In  the  area  of  fisheries,  Iceland  has  not  begun  to  align  with  the  EU  acquis  or  to  set  up  the 
mechanisms for implementing and monitoring EU support measures. The existing restrictions 
on foreign investment in fisheries, which remain in place, are not in line with the acquis. 

Some  progress  has  been  made  in  the  transport  field,  in  particular  on  road  and  maritime 
transport. However, there are still several areas where Iceland needs to transpose relevant EU 
legislation. 

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Legislation on energy continues to be broadly in line, except for oil stocks, the independence 
of the regulatory authority and energy efficiency. 

Iceland's tax legislation remains partially aligned with the acquis. A strategy for achieving IT 
interconnectivity and interoperability with EU IT systems for taxation needs to be defined. 

On  economic  and  monetary  union,  alignment  with  the  acquis  on  monetary  policy  remains 
incomplete and the relevant administrative structures require further strengthening. 

Availability of statistics in line with EU methods, in particular in business, labour market and 
agriculture statistics, remains to be further improved.  

Iceland continues to apply and implement a substantial part of the acquis on social policy and 
employment. A comprehensive employment strategy has yet to be drafted. 

Iceland's state of preparation in the area of enterprise and industrial policy remains at a high 
level. Access to SME finance is still affected by the financial crisis. 

Iceland  maintains  a  good  level  of  alignment  with  the  EU  standards  on  trans-European 
networks. 

On  regional  policy  and  coordination  of  structural  instruments  Iceland  needs  to  identify  the 
institutions responsible for the implementation of the cohesion policy.  

Preparations  in  the  area  of  judiciary  and  fundamental  rights  continue  to  be  well  on  track. 
Progress  was  made  in  further  reinforcing  the  independence  of  the  judiciary  and  the  anti-
corruption policy framework. Further monitoring of the implementation of these measures is 
needed. The legislation on citizen's rights and data protection is not yet in line with the acquis.  

Iceland continues to apply the Schengen Agreement and is well advanced in aligning with the 
acquis in the area of justice, freedom and security. Further efforts are still needed to ratify and 
implement international instruments.  

Iceland  continues  to  be  well  advanced  in  terms  of  preparation  for  EU  accession  and 
integration into the European Research Area. 

Iceland maintains its already high level of alignment in the field of education and culture. 

Some progress has been made in strengthening the legislative and administrative framework 
on environment and climate change. Full compliance with the acquis on nature protection and 
water quality has yet to be achieved. Iceland needs to gradually align with the EU positions in 
the  international  environmental  fora,  as  well  as  to  ratify  the  outstanding  multilateral 
agreements.  

Iceland  maintains  a  good  level  of  alignment  with  the  acquis  on  health  and  consumer 
protection. However, further efforts are necessary in the field of consumer protection.  

The customs legislation continues to be partially in line with the acquis. Significant efforts are 
needed  in  order  to  address  the  discrepancies  in  the  legislation,  in  particular  in  the  fields  of 
customs rules, procedures with economic impact, duty free and security aspects. Preparations 
for  effective  implementation  of  the  acquis  upon  accession  still  have  to  be  initiated,  in 
particular as regards the development of interconnectivity with the EU IT customs systems. 

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Further progress has been made in external relations, in particular in the field of development 
cooperation  and  humanitarian  aid.  Iceland  still  needs  to  become  member  of  the  Kimberly 
process.  

Iceland maintains a high level of alignment in the area of foreign, security and defence policy. 
Iceland's  emphasis  on  Arctic  policy  underlines  its  commitment  to  play  an  active  role  in 
regional organisations in Northern Europe. 

There has been limited progress in legislating on financial control. Further efforts are needed 
in order to prepare a public internal financial control policy paper and to ensure the separation 
between  internal  and  external  audit.  Preparations  for  the  protection  of  the  EU's  financial 
interests still have to be enhanced.  

With  regard  to  financial  and  budgetary  provisions,  Iceland  has  reached  a  good  level  of 
alignment in the policy areas underlying and affecting this chapter. It has continued to identify 
the required alignment with the acquis. Administrative preparations and concepts for setting 
up  the  own  resources  system  are  needed.  A  coordination  structure  remains  to  be  formally 
established.  

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