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Wide Angle Shot: Chasing the EU dream with twists, turns, and trade

The €6 billion EU Growth Plan aims to accelerate the socioeconomic development and EU integration of the Western Balkans through investments in key areas like clean energy and digitalization. Tailored strategies are necessary to address unique economic challenges and leverage global shifts, enhancing regional economic prospects. The region’s potential for nearshoring further boosts growth opportunities. However, progress depends on resolving bilateral disputes and implementing essential reforms, particularly in governance and rule of law.

Key conclusions


  1. Catalyst for Regional Integration and Development: The EU Growth Plan aims to accelerate the Western Balkans’ socioeconomic development and integration into the EU by providing €6 billion in grants and loans. Focusing on key areas such as sustainable transport, clean energy, digitalization, private sector growth, and human capital development, the plan seeks to address pressing regional challenges, stimulate economic growth, and advance the path toward EU membership for the Western Balkan countries.

  2. Economic Growth and Divergent Paths: Central Europe’s experience demonstrates that EU membership can accelerate economic growth and convergence with Western Europe. However, Western Balkan countries must navigate different economic landscapes, including smaller manufacturing sectors and diverse trade relationships, which necessitate tailored strategies to leverage ongoing global changes, such as shifts in trade and green and digital transitions.

  3. Nearshoring Opportunities: The Western Balkans’ diversified trade partners and relatively low wages position the region as a strong candidate for nearshoring, particularly in light of global disruptions like the pandemic and geopolitical shifts. This presents a potential advantage for attracting European firms looking to establish closer manufacturing bases, potentially boosting regional economic integration and growth.

  4. Normalization with Serbia: Kosovo’s EU membership prospects hinge on achieving a comprehensive and legally binding agreement with Serbia. This normalization is crucial for regional stability and economic growth.

  5. Pending Reform Approval: Bosnia and Herzegovina needs to complete and address the EU’s recommendations on its reform agenda to unlock Growth Plan funds and progress in EU integration.

  6. Stalled Negotiations: Serbia’s progress towards EU membership has been slow, with significant reforms in areas like the rule of law and judicial independence required. The new Growth Plan and financial incentives through the Instrument for Reform and Growth will drive future progress.

  7. Continued Reforms: Albania’s recent opening of its first negotiating chapter marks significant progress. Sustained political commitment and continuous reform in justice and rule of law will be crucial as it aims for EU membership by 2030.

  8. Resolve Bilateral Disputes: North Macedonia faces delays due to disputes with Bulgaria and its relations with Greece. Resolving these bilateral issues is essential for resuming EU accession talks and advancing the integration process.

  9. Close to EU Membership: Montenegro is progressing well, having opened all negotiation chapters. However, issues like corruption and political stability need addressing to meet EU standards fully and advance toward membership.

EU Investment & Growth Plans: A Game Changer for the Western Balkans

The Western Balkans, a region historically intertwined with the European Union, stands on the cusp of a significant transformation. This transformation is embodied by the comprehensive EU Economic and Investment Plan (EIP) and EU Growth Plan (EGP), launched to propel the region toward sustainable growth and deeper integration with the EU. The European Union's 2 plans for the Western Balkans are a comprehensive strategy designed to accelerate the region's socioeconomic development. The EIP aims to address the region's pressing challenges, including youth brain drain, by focusing on key areas such as sustainable transport, clean energy, digitalization, private sector growth, and human capital development.

Economic Impact and Funding

Launched in 2020, the EIP is backed by a significant financial commitment of €9 billion under the Instrument for Pre-Accession Assistance (IPA III). This funding is complemented by the Western Balkans Guarantee, which has the potential to leverage up to €20 billion in investments. The combined impact of these initiatives is expected to boost the region's annual GDP growth by approximately 1.3%.

The EIP places a strong emphasis on enhancing the private sector, recognizing its crucial role in job creation and economic growth. A robust private sector is essential for the socio-economic development and regional integration of the Western Balkans. Small and Medium Enterprises (SMEs) are the backbone of this sector, representing 99% of all enterprises, generating roughly 65% of business sector value added, and accounting for 73% of employment. The EU plans to improve access to finance and risk capital for SMEs through various programs and guarantee schemes. Additionally, the development of a Common Regional Market is strongly encouraged, as it has the potential to deliver substantial economic benefits. According to a World Bank study, such a market union could result in an additional 6.7% GDP growth. The Plan dedicates 50% of EU private sector funding to innovation and green growth, emphasizing the importance of sustainable development.

Rule of Law and EU Integration

The rule of law is a cornerstone for attracting foreign direct investments (FDIs) and fostering the economic recovery of the Western Balkans. The EU’s performance-based assessment adjusts funding based on reform progress. Effective implementation of reforms aligns countries closer to the EU, providing accelerated access to the EU market and participation in EU programs.

Key reform areas include the free movement of capital, reduction of tax burdens, and affordable cross-border payments. Preparations for joining the Single Euro Payment Area (SEPA) are underway. Additionally, initiatives like trade liberalization, regional e-commerce, a unified tourist package, and upgrading automotive value chains aim to attract further FDI.

One of the most pressing issues in the Western Balkans is the significant brain drain, particularly among the youth. With a historical context of high unemployment rates, the region has seen substantial emigration, especially from Bosnia and Herzegovina, Kosovo, and Albania. Young workers, facing two to three times the unemployment rates of their older peers, are particularly vulnerable.

The EU’s plan addresses youth brain drain by focusing on the needs of young people. Modeled after the EU Youth Guarantee scheme, it aims to provide quality employment, ongoing education, apprenticeships, and traineeships. This not only offers solutions and perspectives for young people but also addresses the Not in Employment, Education, or Training (NEET) rates. This approach aims to provide solutions and perspectives that can counter the brain drain and ensure a more prosperous future for the region's youth.

Geostrategic Importance and EU Integration

The Western Balkans is a region of geostrategic importance for the EU. Despite recent challenges in the integration process, the EU remains committed to supporting the region's path towards EU membership. The EU Foreign Affairs Council has repeatedly emphasized the region's strategic importance and urged progress on EU-related reforms.

The Council called for the advancement of accession processes for Albania and North Macedonia and expedited EU integration for Serbia and Montenegro. It also pressed for the swift resumption of the Belgrade-Pristina dialogue.

The EU Investment Plan has already seen substantial progress, with several flagship projects underway. For instance, the Peace Highway between Niš (Serbia) and Pristina (Kosovo) is being constructed to enhance regional trade and mobility (more info here: Flagship Endorsed Investments).

Both the EU Economic and Investment Plan (EIP) and the New Growth Plan place a strong emphasis on green investments, recognizing the critical role of sustainable development in the future of the Western Balkans. The plans envision substantial investments in renewable energy projects, such as wind farms and solar power plants, particularly in North Macedonia and Albania. These initiatives aim to reduce the region’s carbon footprint and transition to cleaner energy sources. Additionally, the plans allocate significant funding to improve energy efficiency, support the development of green infrastructure, and encourage the adoption of sustainable practices across various industries. By prioritizing green growth and innovation, these EU initiatives aim not only to address environmental challenges but also to create new economic opportunities, making the Western Balkans a competitive, environmentally sustainable, and resilient region.

CO2 emissions (kg per PPP $ of GDP)

Source: World Bank

The EU New Growth Plan, adopted in 2023, aims to further accelerate the region's path towards EU membership by focusing on reforms, increased financial assistance, and sustainable economic growth. It aims to bolster sustainable economic development, enhance competitiveness, and create jobs in the Western Balkans, ultimately facilitating their path towards EU membership. A key component of this plan is the gradual integration of Western Balkan countries into the EU single market in specific areas, providing them with early access to some of the benefits of full membership. This phased approach targets critical sectors such as the free movement of goods and services, road transport, energy, electricity, and the digital economy, including e-commerce and cybersecurity. By incrementally aligning these sectors with EU standards, the plan seeks to bridge economic gaps, stimulate growth, and foster regional cooperation, accelerating the convergence of the Western Balkans with the broader European market.

While the EIP & EGP present significant opportunities for the Western Balkans, it also faces several challenges. Political instability, corruption, and weak institutional capacities are among the key obstacles that need to be addressed for successful implementation.

The EU adopted the New Growth Plan further accelerates the region’s path towards EU membership, focusing on four key objectives:

  • Accelerating Reforms - Strengthening governance, rule of law, justice, and public administration.
  • EU Membership Path - Enhancing integration benefits like access to certain EU single market areas.
  • Sustainable Economic Growth - Promoting investments in green and digital transitions while fostering regional cooperation.
  • Increased Financial Assistance - Introducing the Reform and Growth Facility, providing grants and concessional loans.

New Growth Plan Funding: €6 billion in grants and loans

Additionally, the region's economic development is constrained by factors such as limited infrastructure and a lack of competitiveness.

Hence, the EIP focuses on several key sectors that are crucial for the region's economic growth and development:

  • Agriculture and Food Processing: The Western Balkans has a strong agricultural sector, but it faces challenges such as low productivity and limited access to markets. The EIP aims to support the modernization of the agricultural sector and promote value-added food processing.
  • Tourism: The region has significant tourism potential, but it needs to invest in infrastructure, marketing, and sustainable tourism practices. The EIP supports the development of tourism infrastructure and the promotion of the region's cultural heritage.
  • Mining and Minerals: The Western Balkans is rich in mineral resources, but the mining sector faces challenges such as environmental concerns and corruption. The EIP promotes responsible mining practices and supports the development of value-added industries based on mineral resources.
  • Manufacturing: The region has a growing manufacturing sector, but it needs to diversify and improve its competitiveness. The EIP supports the development of manufacturing clusters and the promotion of innovation and technology.
  • Services: The services sector is a major contributor to the region's economy, and it has significant growth potential. The EIP supports the development of the services sector, particularly in areas such as IT, business process outsourcing, and tourism.

European Union is on the verge of finalizing the procedures necessary for approving the reform agendas presented by the Western Balkan countries, a prerequisite for benefiting from the Growth Plan package worth 6 billion euros. The Commission is expected to give its final consent to five of the six countries that submitted their reform and growth agendas, enabling the first payments from the package. However, Bosnia and Herzegovina’s agenda remains pending approval, as the submitted document did not comprehensively address all the European Commission’s recommendations. However, before these payments can be made, the beneficiary countries must sign and ratify the agreements in their national parliaments. Of the 6 billion euros, 2 billion will be non-refundable grants, and the rest will come as soft loans, which obligates the countries to ratify the agreements to manage the repayment of the loans.

The European Union’s objective is that all countries whose reform and growth agendas have been approved will receive a “pre-financing payment” amounting to 7% of their allocated funds. Kosovo, for example, stands to benefit over 880 million euros, with an initial pre-financing payment of approximately 61 million euros. Albania will benefit from a total of 922 million euros, with 64.5 million euros in pre-financing. North Macedonia is allotted 750 million euros in total, with a first payment of 52.5 million euros. Serbia will receive 1.58 billion euros in total, with an initial payment of 111 million euros. Montenegro will receive 383 million euros, including a pre-financing amount of 26.8 million euros. Bosnia and Herzegovina, once its agenda is approved, stands to receive 1.085 billion euros, with an initial payment of 76 million euros.

Effective implementation of the EIP and the New Growth Plan requires strong partnerships and rigorous monitoring. Collaborations with international financial institutions such as the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), alongside regional entities, are crucial.

The EU Investment Plan and the New Growth Plan represent a pivotal moment for the Western Balkans, offering a roadmap for sustainable growth, enhanced connectivity, and regional stability. These initiatives address critical infrastructure and economic challenges, paving the way for the region’s integration into the EU, with potential enlargement by 2030.

The journey toward EU integration is complex and requires overcoming political instability, corruption, and ensuring strong institutional capacities. By addressing these challenges and effectively implementing these plans, the Western Balkans can achieve sustainable economic growth and accelerate their convergence with the EU.

Fast growth in Central Europe after EU entry
Source: Eurostat, RBI/Raiffeisen Research

Lessons from Central Europe

The experience of the 20 years of Central European countries in the European Union shows that joining it can accelerate economic growth and the pace of convergence with the West of Europe as seen after 2004. At the same time, the development that took place after CE countries joined the EU would not have happened without the preparations that took place earlier and that included crucial institutional changes - a cornerstone for successful economic path and integration. This only strengthens the importance of the latest developments that led to accelerated efforts to proceed with EU enlargement in Western Balkans and of the phased approach to reforms which we believe is set to support growth in the region even before the actual EU entry.

Nevertheless, implications from CE to Western Balkans are not straightforward not only because of the differences between those regions but also because of the currently ongoing major changes like shifts in global trade, or green and digital transitions which provide in our view some opportunities, especially if the Western Balkan countries take into account the experience of CE, what to focus on, and what to avoid.

In terms of comparisons and conclusions from CE to WB it should be stressed that Central European economies are much more open as well as more connected (in terms of trade) with the West of Europe. Meanwhile, in the Western Balkan countries, the role of the manufacturing sector is much smaller, and reliance on Western Europe or Germany is also lower.

Source: IMF, RBI/Raiffeisen Research

Especially, for example, Albania has a more diversified group of trade partners than CE, also consisting of a relatively higher share of non-EU countries (beyond Western Balkans the top trade export partners are China and Turkey). With the global changes to trade, the already more diversified profile, with a larger share of extra-EU partners, serves as a good base for taking advantage of those changes. This in fact presents an opportunity for the whole of Europe, as in terms of location, relatively low wages and skilled workforce, the Western Balkans serve as a good target for nearshoring for those firms that want to be on the European market. In particular, according to a recent WIIW study, even though the nearshoring discussion (after the pandemic and war in Ukraine) is relatively new, some signs could already point to nearshoring activities in the Western Balkans.

An interesting conclusion that came out of our studies into Central Europe’s path in the EU is the fact that joining the EU only strengthened the trade model developed already in the 90s during the big transformation of these post-Soviet economies. In fact, export growth has been as high or even higher in pre accession years vs after joining the EU (and much slower after 2009) and the ongoing high share of exports of electronics, machinery and automotive developed ahead of the EU accession. However, again, while this experience may serve as a learning for the Western Balkans, the ongoing large shifts in terms of global trade, as well as ongoing green and digital transitions imply large changes throughout Europe which will likely alter it massively. Thus for Western Balkans, it should be more relevant now to reap potential opportunities stemming from those new trends, rather than repeating past experiences and for example, trying to replace CE's place as the manufacturing hub for Europe. Again Western Balkans have some significant advantages here, being less reliant on energy imports and with the example of Albania which is already heavily based on renewable energy.

Energy imports dependency (%)
% of net imports in gross available energy
Source: Eurostat, RBI/Raiffeisen Research
Share of energy from renewable sources (%, 2022)
Source: Eurostat, RBI/Raiffeisen Research

Of course, these opportunities require a strategic approach (like prioritising renewables) but more importantly, dealing with the key challenges faced by the Western Balkan countries that include governance and institutional environment. Reforms in these areas in advance of EU accession have laid the groundwork for the convergence and development of Central Europe in the coming years. Therefore, it is also a crucial and necessary stage for the WB countries.

Kosovo’s EU Dream: Struggles and Strides on the Path to Integration

Since declaring independence in 2008, Kosovo has sought to gain international recognition and develop political and legal frameworks in line with EU standards. Despite these efforts, Kosovo’s path to EU membership is complicated by both domestic issues and geopolitical intricacies. Achieving a comprehensive and legally binding agreement with Serbia remains a pivotal hurdle. The EU has consistently urged the normalization of relations between Kosovo and Serbia, mediated through the EU-facilitated dialogue. Normalizing relations is vital for regional stability, economic growth, and the overall success of Kosovo’s EU integration efforts.

A specific area of concern is North Kosovo, where tensions have periodically flared, complicating regional stability and governance. Prime Minister Albin Kurti’s government has made unilateral decisions, such as closing nine Serbian Post branches and opening the Ibar Bridge, ostensibly to assert greater governmental control over northern regions with significant ethnic Serb populations. These actions have sparked considerable backlash. From Serbia’s perspective, these moves are seen as attacks on Serb autonomy, disrupting vital services and potentially inciting unrest. Adding to the tension is Kosovo’s decision to prohibit payments in Serbian dinars within its territory, which has met with strong resistance from the Serb community.

Recent efforts to hold elections in four municipalities with a Serbian majority failed due to low voter turnout, as only 0.5% of eligible voters participated. The failure of these elections underscores the complexity and volatility of the political landscape in Northern Kosovo. The unresolved issue of establishing the Association of Serb-Majority Municipalities remains a significant point of contention. While it was agreed upon in the Brussels Agreement, its implementation remains stalled, causing frustration and deepening the divide between the two communities.

The EU and U.S. have been ramping up efforts to nudge Kosovo and Serbia toward a normalized relationship. The international pressure on both sides to fulfil their obligations under the Ohrid Agreement, including the creation of the Association of Serb-Majority Municipalities within Kosovo, is seen as a crucial step toward normalization. Serbia’s de facto recognition of Kosovo is expected as part of the agreement. Given the tense political climate, significant advances in the dialogue with Serbia are not expected until after the parliamentary elections in February 2025.

Kosovo has made some progress on its EU path, yet high unemployment rates, especially among the youth, and a lack of economic diversification hinder sustainable development. The EU’s Economic and Investment Plan (EIP) and New Growth Plan (EGP) aim to address these issues by focusing on sustainable transport, clean energy, digitalization, private sector growth, and human capital development. Enhancing economic infrastructure and providing opportunities for young people are critical for curbing the significant brain drain that Kosovo experiences.

Geopolitical risks further complicate Kosovo’s EU aspirations. The potential for regional instability, exacerbated by the unresolved issues in Northern Kosovo, poses a significant challenge. The international community, particularly the EU and the U.S., has expressed strong disapproval of Kosovo’s recent unilateral actions and has warned of potential sanctions, including financial penalties and reductions in EU funding. Such measures could jeopardize Kosovo’s benefits from the EU Growth Plan for the Western Balkans, which aims to foster economic development and integration in the region.

As Kosovo heads toward the parliamentary elections in February 2025, the government’s assertive measures might be seen as an effort to consolidate power. While such actions demonstrate strong governance and control, they risk exacerbating ethnic tensions and straining relations with international allies, including the EU and the U.S. Balancing assertiveness with diplomacy is crucial in ensuring Kosovo’s stability and advancing its EU integration efforts. Significant advances in the dialogue with Serbia are unlikely until after the upcoming elections, adding to the hurdles Kosovo must navigate.

Serbia: Progress stalls, new reform agenda sets stage for future integration

Negotiations on the accession of the Republic of Serbia to the European Union were formally opened by the Intergovernmental Conference on January 21, 2014 in Brussels. Since then, Serbia opened 22 chapters out of 33 of which two provisionally closed. Since December 2021, there has been no progress in the negotiations due to a lack of reforms in the fundamental reform areas.

Serbia will be allocated around EUR 1.6 bn by the end of 2027 via the Economic and Investment Plan (EIP). Nonetheless, the funds will be available upon the preparation of the Reform agenda and funds withdrawal will depend on the fulfilment of the reforms.

As a response to the new enlargement policy, the government passed in October this year a draft of the Reform Agenda. It consists of 98 measures divided into four big areas:

  • Business environment and private sector development (26 steps for disbursement),
  • Green and digital transition (39 steps for disbursement),
  • Human capital (12 steps for disbursement),
  • Fundamentals, i.e. measures in the rule of law area (21 steps for disbursement).

The European Commission will be able to monitor the implementation of all activities under the Reform Agenda already at the beginning of 2025, and then every six months until the end of 2027, when all measures are planned to be implemented and upon which the country can withdraw the entire amount of EUR 1.58 bn from the Instrument for Reform and Growth. In addition, Serbia is expecting intensive legislative activity in the field of criminal and family law, as well as the imminent adoption of the Action Plan for the fight against corruption.

Serbia is not a full member of the Single Euro Payments Area (SEPA), but it has taken steps to align with SEPA regulations and standards. Serbia has expressed interest in joining SEPA as part of its broader efforts to integrate its financial system with the EU. Progress in this area is often tied to broader financial and economic reforms, as well as its overall EU accession process.

As of now, there is no specific date set for Serbia’s entry into the European Union. The accession process is complex, depending on Serbia meeting all the necessary EU criteria, including reforms in the rule of law, judicial independence, tackling corruption and success in negotiation with Kosovo. Some estimates suggest it could happen roughly around 2030, however, this is uncertain and subject to Serbia's reform process.

Albania’s EU Odyssey: Paving the Way to 2030 Membership

Albania’s journey toward European Union (EU) membership has reached a pivotal phase with the opening of its first negotiating chapter on October 15, 2024. This milestone marks a significant endorsement of Albania’s efforts to align with EU standards and is a crucial step in the EU accession process. However, predicting how fast Albania will move forward requires a nuanced understanding of the various factors at play.

The first chapter, focusing on justice and the rule of law, will set the tone for Albania’s entire accession process. These areas are foundational and critically scrutinized, as they underpin the credibility and stability of a candidate country’s governance. Success in these chapters is not just about meeting technical benchmarks but also about demonstrating real, sustained progress in combating corruption, enhancing judicial independence, and ensuring the rule of law. Meeting these stringent requirements will likely take several years of continuous effort and reform.

Albania’s journey toward EU membership has been marked by significant reforms, persistent challenges, and renewed optimism driven by the EU’s comprehensive strategies like the Economic and Investment Plan (EIP) and the New Growth Plan (EGP). Designed to accelerate socioeconomic development and regional integration, these plans have infused substantial resources into Albania and the broader Western Balkans.

The EU’s strategic decision to treat Albania’s accession process independently from North Macedonia signifies a critical shift, allowing Albania to progress based on its own merits. This separation emphasizes a merit-based approach and highlights the EU’s commitment to recognizing individual national efforts. While this provides Albania with an opportunity to move forward without being held back by regional issues, it also underscores the importance of continuous and dedicated reform efforts.

The Albanian government must maintain a strong political will to drive reforms forward. Past experiences show that political commitment can wane due to domestic challenges or changes in government priorities. Sustained commitment will be essential for maintaining momentum. Additionally, Albania’s ability to implement and enforce reforms, especially in areas highlighted by the EU, such as corruption and judicial independence, will be a decisive factor. The EU’s performance-based assessment system, which adjusts support based on progress, will be critical in this regard.

The overall stability of the Western Balkans will influence Albania’s accession timeline. Regional issues, such as North Macedonia’s stalled progress due to bilateral disputes with Bulgaria, could have indirect impacts on Albania’s pace. Furthermore, the EU’s internal dynamics, including the enlargement fatigue in some member states and the rise of euroscepticism, could also affect the pace of enlargement. Political changes within the EU and the shifting priorities of member states will play a significant role.

Economically, Albania is making strides to enhance its financial systems and economic growth, which are crucial for EU accession. The country is in the final phase of implementing the Single Euro Payment Area (SEPA), aligning its regulatory frameworks and financial systems with SEPA’s technical and operational standards. This involves collaboration with domestic financial institutions and European bodies, and the Bank of Albania is modernizing national payment systems and IT infrastructures. Full implementation of SEPA will facilitate smoother, quicker, and more cost-effective euro transactions, boosting Albania’s economic connectivity with EU member states, attracting foreign investment, and enhancing trade.

In addition to SEPA, Albania is implementing substantial revenue reforms as outlined in the “Economic and Financial Program of Albania 2023-2025”. These reforms aim to enhance tax collection efficiency, reduce fiscal evasion, and modernize the fiscal infrastructure. Projections indicate that these measures could boost Albania’s GDP up to 1.5% by 2025. The goal is to increase government revenues by 2.5% of GDP in the mid-term, which would provide a sustainable basis for financing public projects and social programs, thereby supporting long-term economic stability and growth.

Given these factors, a realistic prediction for Albania’s EU membership would likely be a decade-long process. If Albania maintains a steady pace of reforms and demonstrates significant progress in the areas covered by the first cluster, it could potentially join the EU around 2030. This timeline aligns with the broader EU strategy for the Western Balkans, which aims for integration of the region within the next decade.

Bosnia and Herzegovina: Progress amidst challenges

The European Council formally agreeing to initiate membership negotiations with Bosnia and Herzegovina (BiH) on the 22nd of March 2024, marked a major milestone in the country’s aspiration to join the EU bloc, acknowledging its dedication to align with EU standards and setting the course for united future within the European community. By March 2024, BiH had made substantial progress in reforming legal and institutional frameworks with key reforms including laws on conflict of interest, anti-money laundering, judicial governance and public procurement, along with alignment of BiH’s foreign and security policies with the EU. Even European Commission President, Ursula von der Leyen, noted that BiH had achieved more progress in one year, since granting candidate status, than in the previous decade.

However, getting the green light to open negotiation talks is just the beginning of a journey that will require sustained effort and cooperation at all levels of decision-making. Political consensus on reforms remained a challenge, particularly regarding the comprehensive Reform Agenda which was a precondition for participation in the Western Balkan Growth Plan facility. The importance of WB Growth plan facility for the BiH is unquestionable due to both necessary reforms and the portion of funds that should come to the country i.e. EUR 0.97 bn. The elected working group worked closely with the European Commission (EC) and a major part of the Reform Agenda was aligned with EC and fulfilled, but lack of political consensus to complete the whole agenda timely cost BiH absence of the first tranche in the amount of EUR 80 mn in 2024 as the EC marked submitted Reform Agenda insufficient. To complete the reform agenda, authorities should focus on the nomination of judges of the Constitutional Court and the implementation of the decisions of the Constitutional Court and the seat of the Supreme Court. Negotiations on the Election Law are still ongoing, meanwhile, Local Elections 2024 held in October 2024, were conducted in line with imposed „technical amendments” by High Representative to B&H Electoral Law.

Furthermore, in order to get funds, BiH needs to adjust the visa regime with the EU as there are still some differences for certain countries, as well as to introduce better financial management and control, internal audits and reporting in the public sector (PIFC app / Public Internal Financial Control) with a nominated coordinator. It is reasonable to expect that these preconditions could be met by the end of 2024. After that, the country could expect the first tranche from the Western Balkan Facility Fund.

In the next phases of disbursements, all funds disbursed through this facility would be pre-conditioned with indicative priorities under the five pillars: Governance, Public Administration Reform, and Public Financial Management, Private sector development and business environment, Energy and green transition – Digitalisation, Human capital and Fundamentals/ Rule of law. In the case of all countries and B&H, half of the amount would be distributed through the Ministry of Finances of B&H and entities as budget support, while the other half would be disbursed as soft loans in cooperation with IF’s and local banks.

BiH authorities nominated corresponding reforms for all pillars and each reform would have a “price tag” for the sake of transparency of the disbursements. Payments will be made twice a year (end of June, end of December), based on requests submitted by the country after verification by the EC whether the relevant preconditions have been met. The country will have 1-2 years to fulfil all the conditions, otherwise, the amount will be redistributed to others in the following years. Besides the mentioned priorities within 5 areas of the Growth Plan, the EU is insisting on opening the Single market to partners from the Western Balkans, and also on the Common Regional market which would be supported through IPA funds and projects. Even though BiH's accession to SEPA (Single Euro Payments Area) would mean closer integration into the European financial system leading to improved access to financing and investment opportunities, as well as increased stability of the banking sector, currently there is no political consensus on this matter as in case of other Western Balkan countries which will join it.

Bosnia and Herzegovina has made notable progress on its path toward EU accession between 2022 and 2024, gaining EU candidacy status in December 2022 after years of efforts, and further making significant steps in aligning its laws with EU standards getting the green light for negotiations talks. However, challenges remain, particularly in achieving consensus on comprehensive reforms and meeting all 14 key priorities set by the European Commission. The EU's 6 billion EUR Growth Plan offers financial incentives to accelerate reforms, but BiH must overcome internal political hurdles to fully benefit from this support. While progress has been made, particularly in recent year, continued political will and successful implementation of reforms are crucial for BiH to open formal EU accession negotiations, likely at the beginning of 2025.


North Macedonia’s EU Pursuit: Balancing Identity and Integration

North Macedonia’s journey toward European Union (EU) membership has been marked by both significant achievements and notable obstacles. The country has been an EU candidate since 2005 and has made considerable efforts to align its policies and institutions with EU standards, particularly in areas such as judicial independence, human rights, and anti-corruption. A major breakthrough came with the signing of the Prespa Agreement with Greece in 2018, which resolved the long-standing name dispute and resulted in the country’s official change of name to North Macedonia. This agreement was a pivotal moment, removing a major obstacle to EU accession and NATO membership.

However, North Macedonia’s EU accession talks have faced significant delays due to bilateral disputes, particularly with Bulgaria. The dispute centres on historical, linguistic, and cultural issues, leading to a Bulgarian veto that has stalled North Macedonia’s progress. This standoff reflects the broader challenge of balancing national identity issues with regional cooperation and EU integration. The European Union has stressed the importance of resolving these bilateral issues, viewing them as essential for the resumption of accession talks.

Domestically, North Macedonia faces significant challenges that hinder its EU accession progress. Corruption remains a pervasive issue, undermining public trust in institutions and impeding effective governance. Judicial reforms have been implemented, but concerns about the independence and efficiency of the judiciary persist. Furthermore, political instability poses a continuous challenge. Frequent changes in government and political disputes detract from the country’s ability to consistently pursue and implement necessary reforms.

Despite these challenges, the EU remains supportive of North Macedonia’s aspirations. However, the recent rise of a more nationalistic government in North Macedonia has significantly impacted the country’s aspirations to join the European Union. This administration has reignited fruitless disputes with Greece over the use of the constitutional name “North Macedonia” versus “Macedonia,” stalling progress in diplomatic relations. Additionally, tensions with Bulgaria have escalated due to the government’s reluctance to implement necessary constitutional changes agreed upon in the EU accession process. These internal and external conflicts are contributing to a stalling of the country’s EU integration efforts, hindering its path to membership.

Montenegro’s Ascent: Leading the Balkans Toward EU Membership

Montenegro is often seen as one of the Western Balkans’ frontrunners in the quest for European Union (EU) membership. Since obtaining candidate status in 2010 and beginning accession negotiations in 2012, Montenegro has made notable progress. The country has opened all 33 negotiation chapters and provisionally closed several, marking significant milestones in its alignment with EU standards. Montenegro’s path toward EU integration has been advanced, particularly in areas like judicial reform, rule of law, and public administration improvements.

However, Montenegro still faces several domestic challenges that slow its progress toward full EU membership. Corruption and organized crime remain significant issues, eroding trust in public institutions and hindering effective governance. While the government has undertaken substantial judicial reforms, ensuring the judiciary’s independence and efficiency continues to be a challenge. Political stability is another crucial factor for Montenegro’s EU aspirations. Recent political developments, including frequent governmental changes and allegations of corruption among political elites, underscore the necessity for consistent and effective governance. These domestic issues not only slow the reform process but also impact the country’s international image and negotiations with the EU.

Economic development in Montenegro has been gradual, supported by investments in infrastructure, tourism, and energy. However, the country still faces structural economic challenges that need addressing to meet EU standards fully. The EU’s Economic and Investment Plan (EIP) and New Growth Plan (EGP) are designed to support Montenegro’s development by prioritizing key areas such as clean energy, digitalization, and private sector growth.

Montenegro’s accession path also benefits from the EU’s strategic emphasis on the Western Balkans. The recent call by the European Commission’s Enlargement Commissioner-designate to prioritize expansion in the next mandate highlights the EU’s renewed focus on timely and well-supported accession processes. This strategic push, coupled with Montenegro’s continued commitment to reforms, represents a promising path toward EU membership.

The adoption of the Interim Benchmark Assessment Report (IBAR) is a pivotal moment in Montenegro’s EU accession negotiations, signaling a major advancement not just for Montenegro but for the entire Western Balkans region. Montenegro is set to become the first EU candidate country to receive this report, showcasing significant progress in meeting EU standards. According to the revised accession methodology accepted in February 2020, no negotiation chapters can be closed until the IBAR is received, making this a crucial step forward. The consensus within the EU that Montenegro should receive the IBAR underscores the country’s readiness to advance to the next phase of alignment with EU standards.

Securing a two-thirds majority in parliament for the highest judicial appointments marked a significant turning point and a clear signal of Montenegro’s commitment to accelerating EU negotiations. The recent adoption of 12 system laws and four strategies further confirms the government’s focus on improving governance. After receiving the IBAR, competent institutions will continue working on all areas covered by negotiation chapters 23 and 24, ensuring compliance with the EU legal acquis and adhering to the best European standards and practices. The European Union’s support, combined with each country’s commitment to addressing these challenges, will be crucial in transforming their EU aspirations into reality.

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Fjorent RRUSHI

location iconAlbania   

Fjorent is the head of ALM & Research for Raiffeisen Bank Albania. After a MSc in International Business from the University of Trieste and an MBA from MIB School of Management in Italy he started as an Investor Relations financial analyst at the aerospace & defense company Leonardo in Rome. After that he moved to the Italian Stock Exchange in Milan promoting blue chip companies through roadshows with institutional investors and after the merger with London Stock Exchange was in charge of primary markets of potential to be listed companies in Eastern Europe. In 2011 moved back to his native country to join Raiffeisen Bank in ALM & Research team in charge of fund transfer pricing, liquidity management and IRRBB. After a period at Intesa Sanpaolo Bank Albania as Head of pricing starting from 2021 he is heading the ALM & Research of Raiffeisen Bank Albania. Apart from macroeconomic analysis of particular interest for him is the disruptive technological transformation impacting the banking system. Fjorent’s hobby is football and he enjoys theatre and has been an amateur player as a teenager.

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Ivona ZAMETICA

location iconBosnia Herzegovina   

Ivona Zametica has established B&H Research Team within Raiffeisen BANK d.d. Bosnia and Herzegovina back in March 2010. She graduated at Economic Faculty of Zagreb in Macroeconomics and Finance and further deepened her knowledge through the Master degree program in Advanced Financial Management and Markets. She has been among top 3 forecasters for economic indicators of B&H in Focus Economics pool in the past four years and granted the award as the best overall forecaster for 2021. She has been further deepening her knowledge about the Financial Markets and Investment Banking in several projects and transactions of the Bank and being part of the Working Group supporting establishing the local DCM market in B&H. She has been also author of several research papers and studies related to currency board in B&H, government debt management and access to finance of SME’s in B&H. Apart from current coverage of B&H market and interest in SEE and CEE region, she has been particularly interested in monetary policy and recent technological impacts on future of monetary policy and currencies. Ivona is passionate yoga practitioner while in the free time she enjoys the most with her family and friends in travelling, hiking while dancing, theater and music are her passions from the childhood which she shares now with her daughter.