Experts argue EU’s New Growth Plan is too small to make a difference

Experts argue EU’s New Growth Plan is too small to make a difference
Proposed plan for Western Balkans involves integration into the EU single market, with a €6bn financial package.
By bne IntelliNews December 4, 2023

Experts on a panel organised by think-tank Bruegel argue that the EU’s new growth plan for the Western Balkans, recently announced by European Commission President Ursula von der Leyen, is too small to make a difference to the region’s economies. 

Initially introduced by von der Leyen during the Tirana Summit in October, the plan involves speeding up the integration of the Western Balkans into the EU single market, establishing a unified regional market for the Western Balkans, and supporting structural reforms and investments through a newly allocated €6bn fund. The financial allocation would comprise €2bn in grants and €4bn in loans.

The plan was announced at a time when there is a new emphasis on enlargement sparked by Russia’s invasion of Ukraine in February 2022. After years during which enthusiasm for enlargement flagged, leading to a loss of hope among the countries of the Western Balkans, there was a new consensus in the EU on the need to embrace the countries to the south and east of the bloc. This led to the admission of Bosnia & Herzegovina, Moldova and Ukraine as candidate countries, and the long-awaited nod to start accession talks for Albania and North Macedonia. 

Von der Leyen said when announcing the plan that its primary objective is to narrow the gap between the EU and the Western Balkan countries. Currently, there is a considerable disparity between the Western Balkan economies, which are at 35% of the EU average GDP per capita (on a PPP basis). 

According to the European Commission president, the plan has the potential to double the size of the Western Balkan economies in the next decade.

However, as addressed in the Bruegel panel, it has raised a number of questions such as how might the Western Balkan nations, all either candidate countries or aspiring candidates, capitalise on the plan? Will it provide motivation for challenging structural changes, and ultimately, can it speed up the European Union accession process?

As outlined by Bernhard Windisch, head of the European Commission unit for financing instruments in the EU neighbourhood, the plan rests on four pillars: progressive integration in the EU single market; integration into the regional common market; faster reforms; and increased financial assistance. The four pillars, he stressed, are not independent of each other.

“Becoming a member of the single market is more or less becoming a member of [the] EU,” Windisch told the event titled “How should Western Balkan countries seize the opportunity of the EU’s new growth plan?”

“We are seeing how we can already bring forward certain benefits of accession into the current state … this is the logic underlying the entire plan,” added Windish.

“Instead of a cliff edge where we had a relatively low level of assistance before accession then a relatively high level afterwards, we are moving something that looks more smooth in line.” 

He pointed to the significant incentive of access to the single market, telling the panel: “In the past, enlargements have shown this is a key growth driver of post-accession gains.” 

Matteo Bonomi, senior fellow at the Istituto Affari Internazionali, said the plan was welcome because for the first time the focus has been put on the convergence gap and economic development. However, he added, “as we have heard, the plan has some clear limitations”. 

Krisela Hackaj, executive director of the Cooperation and Development Institute in Albania, pointed out that people in the Western Balkans have lost some of their patience with the accession process, noting, for example, the increase in emigration over the last decade. 

“We welcome [the] new growth plan as a step towards acknowledging the gap between the Western Balkans and the EU, and a first step to reforming enlargement,” she said. 

However, she added, this should go hand in hand with reforming enlargement policy. In addition, she said, the envelope proposed with the growth plan is not enough to close the gap with EU members.

“This is not the real convergence we hoped for,” she concluded. 

Branimir Jovanovic, economist and country expert for North Macedonia and Serbia at the Vienna Institute for International Economic Studies (wiiw), made similar points. “The new plan is a change but not in a good direction,” he said, also pointing to the small size of the package, which at €6bn is dwarfed by the earlier €30bn Economic and Investment Plan for the Western Balkans.

The previous plan “was five times bigger and we know it didn’t achieve anything substantial, so why should we expect the new growth plan to achieve anything?” Jovanovic said, stressing that €2bn is just 0.3% of the combined GDP of the region. “How can we expect the new plan to bring substantial change when it’s so small?”  

Moreover, while Jovanovic said that access to the single market for the Western Balkan countries is a good idea, “when you look into the details there is nothing substantial there”. 

He argued that the main problems Western Balkan companies face with access to the single market will still be there, namely non-tariff barriers. To tackle these, both technical and possibly financial support is needed. 

The plan comes at what Windish stressed was a window of opportunity for the region, after the invasion of Ukraine but before European Parliament elections and votes in several EU member states scheduled for next year. Yet most of the Bruegel panellists believed that despite the positive signal, the sums involved were not enough to make a real leap towards convergence.