Nearly two-thirds of the European Union’s flagship €1bn energy crisis package for the Western Balkans has been spent without clear traceability or proof of long-term impact, environmental watchdog CEE Bankwatch Network said on July 23, calling for transparency and a rethink of Brussels’ approach in the region.

The funds, disbursed in the aftermath of Europe’s energy crisis to help countries weather price shocks and accelerate the green transition, were intended to support vulnerable households and advance the region’s clean energy goals. But more than two years after most of the money was transferred, out of the €1bn, “we could only make a direct connection with advancing the Green Agenda for €163.1mn funds being spent, mostly consisting of direct WBIF [Western Balkans Investment Framework] investments”, Bankwatch said in its new report.

“The lack of public information on the EU’s energy crisis package for the Western Balkans is beyond comprehension,” Pippa Gallop, Southeast Europe energy policy officer at Bankwatch, said in the report. “Hastily set up indicator-based funds are becoming the Commission’s modus operandi in the region, but without coherent spending plans, public consultations, regular progress updates and accountability, billions of euros of public funds risk being wasted.”

The European Commission announced the €1bn package in November 2022 to ease the immediate energy crisis impacts and support long-term reforms in Albania, Bosnia & Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia. Half the funds (€500mn) were delivered via the WBIF, with the other half as budget support channelled through governments to subsidise vulnerable consumers and small businesses.

Opaque spending, weak targeting

According to Bankwatch, the budget support component, disbursed mainly between February and May 2023, often supported existing schemes rather than additional measures and was dominated by short-term energy bill subsidies.

“Although the stated aim of the package was to support vulnerable consumers, in some of the countries (e.g. Albania) the measures only covered existing schemes and their existing users, or provided one-time payments with no longer term effect (Montenegro, Serbia),” the report said. North Macedonia “appears to have subsidised all household electricity bills by giving money straight to the state-owned electricity generator, ESM, instead of targeting the vulnerable.”

Montenegro and Serbia also included “energy security” measures in their plans that effectively subsidised fossil fuels, including the purchase of oil stocks, Bankwatch said.

The watchdog could confirm only €41.1mn of the €500mn budget support as contributing to sustainable energy transition objectives.

“The main energy crisis passed long ago, so it’s high time for the governments and the Commission to answer the billion euro question: what has been done and what has it achieved?” said Davor Pehchevski, Balkan energy coordinator at Bankwatch. “In a region known for its nepotism and corruption, it’s unbelievable that so much money was disbursed upfront, with so few conditions attached.”

Accountability gaps

Bankwatch’s Gallop told bne IntelliNews the €500mn budget support model concentrated on governments achieving pre-agreed indicators rather than tracking actual spending, creating significant accountability gaps.

“the main monitoring is done by the governments themselves, and they report to the EU Delegations in the countries on the progress towards the indicators, not on the actual spending,” Gallop explained. “Once the government considers it has completed the indicators, it requests the disbursement of the final 10 per cent tranche and as far as we understand, it is the EU Delegations that make a decision on whether enough has been achieved.”

She noted that in Bosnia, the EU Delegation engaged external consultants to verify indicator compliance, but it was unclear if this practice was used elsewhere. “We already asked DG ENEST in Brussels about the progress with the Package and they directed us to the EU Delegations in the countries, so we've contacted them twice with information requests, in January and June this year,” Gallop told bne IntelliNews. “We'll certainly be approaching the Commission directly again now with our results and requests.”

A wider pattern

Bankwatch’s report underlines a systemic lack of transparency, with the final Action Plans adopted by Albania, Bosnia, Kosovo and North Macedonia unavailable online, and many measures lacking detailed funding allocations. The group warned that reprogramming IPA pre-accession funds for poorly monitored spending risks undermining future green investments in the region.

“Overall, much too much money was allocated for spending in an extremely short-term way, just supporting bills, and ultimately the electricity generation and trading companies,” the report said.

In some cases, countries received EU funds for measures they were already obliged to implement under the Energy Community Treaty or other donor agreements, “meaning the countries were rewarded for doing what they were already obliged to do long ago,” Bankwatch said.

Calls for transparency and reform

Bankwatch urged the European Commission to publicly disclose systematic information on the results of the package, clarify plans for its evaluation and involve civil society in the process. The report also calls for reduced upfront disbursements in future packages, improved indicators linked more directly to disbursements, and the publication of spending allocations in Action Plans.

“Requiring that the countries carry out public – not selective – consultations on planned measures and draft action plans is also a must, as well as regular, public reporting,” the report said.

The Commission, which has repeatedly highlighted rule-of-law and corruption concerns in the Western Balkans, has not yet publicly responded to the report’s findings. A thorough evaluation of the package is due to be conducted, but Bankwatch said it could find no evidence that this process has begun.