Presentation on challenges in the context of the SAP
by Therese Sobieski, External Relations Directorate-General, The European Commission

Ministers,

Ladies and Gentlemen,

Today's meeting provides an excellent opportunity to recognise the important progress already achieved by Serbia and Montenegro. We attach great value to this progress, because we want Serbia and Montenegro to be a pole of stability and an engine of economic growth for the region.

It is a crucial moment to encourage and support the country in its efforts to take on the challenges that still lie ahead.

Firstly, since the last meeting, the country's constitutional framework has changed. As we all know, the restructuring of the Federal Republic of Yugoslavia, has absorbed much of the country's political energy.

Therefore, today's meeting can provide an impulse to increase the momentum of implementing key elements of the constitution: building a viable state, efficient and fully democratic institutions and a truly internal market in the country.

Secondly, this donor co-ordination meeting also comes at an important moment in the relations of Serbia and Montenegro with the EU, because the State wants to advance towards a Stabilisation and Association Agreement with the EU. An Association with the EU is a very far-reaching and demanding venture. Therefore, Serbia and Montenegro needs to be a credible interlocutor able to meet the obligations that are enshrined in such an agreement.

The Commission is currently assessing the readiness of Serbia and Montenegro to enter into such contractual relations with the EU. Practical work on the Feasibility Report has started in September, after the adoption of the Internal Market and Trade Action Plan by the Assembly of Serbia and Montenegro.

The European Union is still especially concerned about the remaining key issues relating to the Action Plan, which we have repeatedly highlighted

• The need for harmonisation of agricultural tariffs

• The need for harmonised import levies

• Institutional reinforcement of key structures, such as for instance a joint customs office with sufficient executive powers.

These issues must be tackled quickly due to the importance that the establishment of a single trade policy and an internal market in the country plays for the association with the EU.

Let me remind you again that Association with the EU is NOT just about the Action Plan. Continued respect for the basic political conditions, e.g. democratic standards, notably functioning and accountable institutions, the rule of law, respect of human rights, freedom of media, full cooperation with ICTY and further market economic reforms, will also stand at the heart of the assessment.

Implementing the reforms, in particular the constitutional ones, is key for advancing towards the SAA. This is why the European Commission has regularly advised the authorities through the Consultative Task Force and the Enhanced Permanent Dialogue and given clear recommendations on what needs to be done.

Let me stress one point: these reforms are not just requirements in the relations with the EU - persistent legal uncertainty and unclear frameworks are simply not conducive to attracting foreign investment either. Tackling these obstacles will enable the country to benefit from its great potential. This is in the interest of the country as a whole.

The European Union has assisted the transition process over the last three years, notably in the economic field, with policy advice supported with financial aid.

In total to date, EC assistance to Serbia and Montenegro (excl. Kosovo) has amounted to more than €1.5 billion since October 2000: more than € 885 m have been provided under CARDS assistance and more than € 130 m as humanitarian assistance. Now, the humanitarian office of the EC and other relief agencies are leaving from Serbia and Montenegro. This is a positive development: The country can support its most vulnerable itself now. The hand-over of the vulnerable case-load will need to be managed with care, and we all should ensure the linkage of relief to development.

Moreover, since 2001 the EC provided two packages of macro-financial assistance in the context of IMF stabilisation programmes, totalling € 475 m. In addition, the Commission adopted in August a proposal to increase this support with an additional package of up to €70 m to comfort financing needs identified by IMF for the remainder of the programme period, and we expect the respective Council Decision to be adopted by the end of this month.

For 2004, the Commission has earmarked €240 million of CARDS assistance for the State, which is in the early programming stage.

At the Thessaloniki Summit (21st June 2003), the EU sent a strong message that the Western Balkans is a crucial priority for Europe.

The European Partnerships will provide a new framework for Serbia and Montenegro to accelerate its progress in the SAp. This new instrument should help to guide future assistance of the EU and other donors, so that the State can fulfil its aspiration of integrating in the European Union in a not-too-distant future.

Let me close by reiterating the European Union's deep commitment to aiding the reform process in Serbia and Montenegro. We want to help and we want to make things work. There is no alternative to the European future of Serbia and Montenegro. Turning this into reality requires political will and stamina. I am confident that today's meeting will help to provide a further impetus to this end.

Thank you.