WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

In cooperation with

By Branimir Jovanović and Andreas Knapp

image credit: Permanent Representation of Austria to the EU

• The EU needs a new strategy for dealing with the Western Balkans
• Higher incomes via more EU transfers are the key to the economic development of the region
• Access to the EU budget before membership would be a game-changer
• Russia could destabilise the region if the EU does not act

The Russian invasion of Ukraine poses significant risks for the Western Balkans, where memories of war are still present and ethnic disputes have never been settled. After spending almost two decades in the EU waiting room, sentiments towards the block are cooling. Without a credible EU perspective, the region is becoming vulnerable to geopolitical power games and democratic backsliding.

Against this background, on 10 November 2022, Martin Hojni, Austrian Ambassador to the Political and Security Committee of the EU at the Permanent Representation of Austria to the EU invited experts from the Vienna Institute for International Economic Studies (wiiw) and the Bertelsmann Stiftung to present their joint study The long way round: Lessons from EU-CEE for improving integration and development in the Western Balkans. The audience consisted of the EU ambassadors of the Western Balkan countries and the European Parliament delegates for the Western Balkans and EU enlargement. The aim of the event with Ambassador Hojni was to initiate a debate and a fruitful exchange between the academic and diplomatic spheres on this topic.

The study provides some valuable input for this debate. It analyses the EU accession process of the East European member states since 2004 and compares it to that of the Western Balkan countries. It makes the case for a necessary change in the EU’s strategy towards the Western Balkans, a strategy which has failed to deliver both the envisioned regional integration and economic development.

In his presentation Branimir Jovanović, wiiw expert for the Balkans and co-author of the study, pointed to the painfully long accession process and the fact that economic convergence with EU income levels has also proved to be very slow over the past two decades, leaving the Western Balkan countries with real incomes per capita at less than 50 percent of the EU level. This has caused deep disappointment with the EU and diminishing support for EU membership in the region. According to the survey Balkan Barometer, support fell for the first time in 2022.

Looking at the new EU member states in Eastern Europe, Jovanovic stressed that EU accession had indeed improved the regional economic integration of these countries, especially with regard to trade. The dominant mechanism by which this has happened has been through higher incomes – EU accession has increased incomes which, in turn, have boosted demand for and the supply of goods and services from the region and finally has led to increased intraregional trade. Moreover, EU accession alone caused incomes to increase, mainly due to the substantial transfers these countries received, amounting to 33% of GDP on average.

Granting access to the EU budget 

The implications of these findings are obvious. ‘The best way to improve regional cooperation in the Western Balkans is to have policies aimed at raising incomes,’ as Stefani Weiss, Senior Expert at the Bertelsmann Stiftung and co-author of the study, pointed out. Accordingly, the most effective way for the EU to achieve this would be higher transfers from the EU budget to the countries of the Western Balkans. This could be done by granting their economies full access to the EU budget. Such a decision would come at relatively minor costs for the existing EU member states but would have a major impact on the economic development of Albania, Bosnia-Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia.

At the presentation, Mario Holzner, wiiw Executive Director and co-author of the study, added that one way the EU could support the economies of the Western Balkans would be to provide direct financial support to municipalities in the region that are struggling to implement major infrastructure projects and often do not have the funds to do so.