The European Parliament recently adopted a resolution on the EU’s new enlargement strategy, which proposes that access to all EU funds that “benefit the Serbian authorities” be reviewed to be in line with the “strategic interests of the Union”, which is again linked to alignment with common foreign and security policy. Although the EP resolutions are not binding, they are probably the last warning that Brussels will toughen its stance towards Belgrade if it remains neutral towards the war in Ukraine.
The problem in the current “application” of EU financial aid is twofold. First, the citizens of Serbia are not sufficiently familiar with the amount of money that is at risk here (according to the most optimistic and conservative estimate, over 200 million euros per year), because the Serbian government either minimizes or keeps silent about the importance of this aid in its public appearances. Therefore, more and more citizens are indifferent to future membership in the EU, according to the latest research conducted by CRTA at the end of September and beginning of October.
Another problem is that due to the lack of technical capacity (or political will), Serbia did not use all the money that the EU allocated to it, writes European Western Balkans.
These two facts make the decision easier for official Belgrade in case it considers refusing to harmonize positions with Brussels, which would stop further progress towards EU membership, but also lose a huge amount of money ahead of the economic crisis.
The attempt to turn this financial “carrot” into a stick is not new. In May, the German Bundestag proposed that candidate countries that refuse to impose sanctions on Russia be denied funds. On the list of those “countries” there is only one – Serbia.
The war in Ukraine intensified the questioning of the use of common funds, given that there are dissonant voices in the ranks of the member states, not only in connection with the common foreign and security policy. For example, Poland is currently at risk of losing 110 billion euros in grants and cohesion funds until 2027 due to a conflict with the European Commission over judicial reforms.
This money, at least according to the politicians in power (because we don’t have any additional information for now), will be used to settle already existing debts that are coming due.
Such sources of financing are preferable for official Belgrade, due to strict spending controls imposed by all EU institutions as a prerequisite for receiving money.
Between free money from the EU, which would be accessed according to strict procedures and without “curves”, Serbia thus chooses a more expensive and non-transparent path. The analysis of the budget for 2023 indicates that Serbia will lack as much as 8.7 billion euros for regular state funding, which we will get either through borrowing or by selling public assets. Borrowing is becoming more expensive due to rising interest rates.
How much does Serbia receive from the European Union today?
So far, Serbia has received over 3.7 billion euros in donations from the European Union: for strengthening the rule of law, public administration reform, environmental protection and the like. Through instruments for pre-accession assistance (IPA fund), Serbia can receive over 200 million euros per year. This money was used, among other things, to build roads and bridges, as well as new landfills in several municipalities in Serbia.
According to the data of the Delegation of the European Union, in the period 2007-2020. In 2008, the EU invested around 2.8 billion euros in grants and another 6.5 billion euros in soft loans in around 300 projects.
Through the IPARD program (Instrument for pre-accession assistance in the field of rural development), a special part of the IPA fund, an additional 230 million euros have been allocated for farmers until 2020, mostly unspent.
Serbia also receives indirect aid through EU programs, such as “Erasmus Mundus” or “Tempus” Foundations, funds for support programs for civil society and refugees, within the Regional Housing Program and the like.
One of the main purposes of the IPA instrument is to build administrative capacities for access to funds intended for EU member states through the Cohesion Policy of the European Union. Cohesion funds, as evidenced by the aforementioned example of Poland, are significantly more generous than pre-accession funds.
Calculating what Serbia has already lost because it did not join the EU is a matter of rough estimation.
The price of a long trip to Europe
The analysis conducted by the European Movement in Serbia last year indicates that in the period from 2014 (when it opened accession negotiations) to 2020 (when the corona crisis began), Serbia received 1, 1 billion euros net, or 7.7 billion euros in total, said Vladimir Medjak, a former member of the negotiating team of the Serbian government for EU accession.
Medjak believes that the funds available to EU member states are many times larger, which means that due to the absence of membership in the EU, Serbia has lost several tens of billions of euros in the last couple of decades.
“In the period from 1990 to 2027, Bulgaria received and will receive 43 billion from EU funds. Serbia has a total of about four billion. That’s why Bulgaria has no problem with borrowing, it doesn’t have to think about who is going to lend to them, what are the conditions. The economic differences between Serbia on the one hand and Bulgaria, Romania, and Hungary on the other – will only increase. Because we simply don’t play the same game”, said Medjak.
For example, after the COVID-19 pandemic, Serbia quickly took out a loan of two billion euros, while Croatia requested 10.5 billion by 2027. More than half of that money is non-refundable, the rest is at a more favorable interest rate than the one that Serbia receives.
Medjak estimates that the utilization of IPA funds was quite high, that in some years it amounted to 100 percent, but that in recent years it has been decreasing to “30, 40, 80 percent”.
He also states that the countries of the Western Balkans have been proposing for years that progress in the European integration process be “rewarded” by increasing pre-accession aid, because at the moment of entry into the EU, cohesion funds for less developed members will reach almost two percent of GDP, which in the case of Serbia in this at the time amounted to about one billion euros.
“If we were to jump from 200 million to one billion euros in one day – we would not be able to spend that money.” This is exactly what happened to the countries, that the funds remain unused for years after accession, because you do not have the capacity to use them. Already now, Serbia must rapidly build capacities (for access to additional funds). “We have a big problem because many people are leaving the administration”, adds Medjak.
Despite the good use of structural, IPA funds, according to him, Serbia “missed the opportunity” to make better use of IPARD funds, intended for strengthening agriculture. For example, Croatia’s annual EU aid for agriculture has been increased 14 times since it joined the Union.
“That’s where we scheduled it. The information I have is that Serbia used only ten million of the 175 million euros allocated for agriculture”, Međak emphasizes.
According to him, domestic institutions did not approach or explain the possibility of using that money to the average Serbian farmer.
“The administration must first be able to enable them to access those funds.” Even if we were to join the EU now, we would not be able to use the money for agriculture, and we, as an agricultural country, would have to benefit enormously from that. Over 175 million from IPARD is currently focused primarily on infrastructure, less on production or irrigation, where we are trotting. And then we will have to return that money, because that money cannot stay forever in Serbia’s account – everything that is not used will be returned to the EU”, Medjak said.
In the meantime, all public opinion surveys in Serbia indicate that citizens overestimate the help of other foreign policy actors, such as Russia and China, and that funds from the EU are underestimated. Medjak believes that the ten-year campaign led by government representatives is responsible for this.
“Why does the EU give money and keep silent – that’s their problem.” They will have to explain to their taxpayers why they give their money to someone who has been running an anti-EU, anti-NATO, anti-Western campaign for ten years, which Serbia either finances or helps. The European Parliament recognized this. If you lie to citizens for ten years, and they don’t bother to find out what the truth is, then it’s no wonder that people are far from reality”, Medjak believes.
In order to bring the potential direct benefits of EU money closer to the citizens, it is necessary that this campaign of fake news stops.
“For example, the EU finances the intermodal terminal in Batajnica, you have media reports and photos from the opening, and on the pages of our newspapers, the flags of the European Union are plastered over the headlines.” Only Vučić, his entourage, the Serbian flag can be seen, but the EU flag is nowhere to be seen. This is done on purpose. On the other hand, you have letters of thanks to China on billboards in the city center”, Medjak concluded.
At a time when the world economic crisis is on the horizon, with an enormous increase in the cost of borrowing, no country can afford to give up any financial assistance. Agriculture is particularly hard hit by the current prices of diesel and fertilizers.
Accession funds are preparation for EU membership
Strahinja Subotić, program manager and senior researcher at the Center for European Policies (CEP), states that during the transition from IPA 2 to IPA 3, the funds did not increase significantly, and that including inflation, they may be even smaller.
There were no political criteria for the use of funds, at least until recently, since IPA 3 was not created for the needs of Serbia, but for the entire Western Balkans and Turkey.
“The goal of IPA 3 was not to talk about national packages, but about a regional approach, in which countries should work on themselves and create mutual competition, in order to fight as much as possible for EU funds.” By adopting the regulation for IPA 3, the Union outlined a clear set of goals, they were transparent and clear about what they wanted to achieve. However, the withdrawal of these funds requires considerable administrative capacity, which means that these are not funds that are obtained lightly”, explains Subotić.
Precisely because of the lack of administrative capacity, no country in the Western Balkans has managed to use all the resources available. “Member states themselves have problems withdrawing structural funds”, adds Subotic.
The freezing of funds is a relatively new “explicit threat” that the European Parliament started mentioning only this summer, with the argument that it will not tolerate further democratic backsliding in Serbia, according to the CEP representative.
“The European Commission is lenient towards the region, legally they have the option (to withhold funds), however, the political reality is different. “Serbia will continue to lose allies within the EU who support or at least tolerate it”, he said.
According to Subotic, the opinion that EU funds are a “piggy bank” that follows Serbia regardless of progress in democratic reforms is harmful. The funds themselves were created in order to reduce the socio-economic gap between candidates for membership and members of the Union.
“We see that this gap is not decreasing too much, and that democracy is regressing.” The money allocated does not fully achieve the goals for which it is intended. Everything we do now should not only enable us to live better now, but to prepare us to be an effective member state. CEP’s internal assessment is that Serbia, as a member state, will have to contribute 500 million euros per year to the common European budget. Maybe that figure will increase in the meantime, depending on when we become a member of the EU. Also, membership means that the size of the funds will increase five to seven times. Mandatory payment to the common budget and conditional funds mean that the EU is an expensive toy for irresponsible states”, Subotić believes.
According to him, Serbia already needs to develop long-term projects for which it will apply, to develop personnel and, of course, to depoliticize the entire structure in order to maximize the benefits not only of the pre-accession process, but also of future membership, Danas reports.
