Rationale and design of the programme
The new growth plan for the Western Balkans has the aim of bringing the Western Balkan partners closer to the EU through offering some of the benefits of EU membership to the region in advance of accession, boosting economic growth and accelerating socioeconomic convergence.
Insufficient socioeconomic convergence between the Western Balkans and the EU has been a long-standing issue, exacerbated by the economic impact of Russia’s unprovoked and unjustified war of aggression against Ukraine and before that by the COVID-19 pandemic. The Western Balkans’ level of economic convergence in terms of GDP per capita in purchasing power standards, currently stands at 30% to 50% of the EU average and is not progressing at a satisfactory pace.
The facility is an integral part of the new growth plan for the Western Balkans, which is structured around four pillars and aims to:
- Enhance economic integration with the European Union’s single market, subject to the Western Balkans aligning with single market rules and opening the relevant sectors and areas to all their neighbours at the same time, in line with the Common Regional Market.
- Boost economic integration within the Western Balkans through the Common Regional Market, based on EU rules and standards, which could potentially boost their economic growth by 10%.
- Accelerate fundamental reforms, including on the fundamentals cluster, supporting the Western Balkans’ path towards EU membership, improving sustainable economic growth including through attracting foreign investments and strengthening regional stability;
- Increase financial assistance to support the reforms through a Reform and Growth Facility for the Western Balkans for the 2024-2027 period with a new instrument worth EUR 6 billion, consisting of EUR 2 billion in grants and EUR 4 billion in concessional loans, with payment conditioned on the Western Balkans partners fulfilling specific socioeconomic and fundamental reforms.
It is essential for the Western Balkans, for the European Union and for the accession process that this rate of convergence accelerates. A higher level of convergence will greatly facilitate the integration of the Western Balkans into the EU. Economic convergence is a key benefit of EU membership, as seen in the fifth round of enlargement where some newer Member States have achieved income levels close to the EU average. This shows how economic integration and market access through the single market, combined with cohesion policy, can drive economic convergence. Given the specificities of the region, progressive integration into the single market even prior to accession may be able to unlock some of the benefits earlier. Prior to such progressive integration, it is crucial to engage in through regional cooperation and integration as a preparatory measure.
The facility will introduce an innovative mix of grants and loans, disbursed upon fulfilment of ex ante conditionality set out in tailor made plans, the reform agendas. It represents a performance-based instrument whereby all payments are directly linked to successful delivery of key socioeconomic and fundamental reforms.
The general objectives of the facility shall be to:
a) support the enlargement process by accelerating the alignment with EU values, laws, rules, standards, policies and practices (the acquis) through the adoption and implementation of reforms with a view to future EU membership;
b) accelerate regional economic integration and progressive integration into the EU’s single market;
c) accelerate the socioeconomic convergence of the beneficiaries’ economies with the EU;
d) Foster regional cooperation, good neighbourly relations, reconciliation and the settlement of disputes in the Western Balkans, as well as people-to-people contact
The specific objectives of the facility shall be to:
- further strengthen the fundamentals of the enlargement process, including the rule of law and fundamental rights, the functioning of democratic institutions, including at regional and local level and including de-polarisation, public administration and fulfil the economic criteria; this includes promoting an independent judiciary, reinforcing security and stability in the region, strengthening the fight against fraud and all forms of corruption, including high-level corruption and nepotism, organised crime, cross-border crime and money laundering as well as terrorism financing, tax evasion and tax fraud, tax avoidance; increasing compliance with international law; strengthening freedom and independence of media and academic freedom; combating hate speech; enabling an environment for civil society, fostering social dialogue; promoting gender equality, gender mainstreaming and the empowerment of women and girls, non-discrimination and tolerance, to ensure and strengthen respect for the rights of persons belonging to minorities, including national minorities and Roma, as well as rights of lesbian, gay, bisexual, transgender and intersex persons;
- move towards full alignment of the beneficiaries with the EU’s common foreign and security policy, including EU restrictive measures;
- fight disinformation and foreign information manipulation and interference against the EU and its values;
- move towards harmonisation of visa policies with the EU;
- reinforce the effectiveness of public administration, build local capacities and invest in administrative staff in the beneficiaries; ensure access to information, public scrutiny and the involvement of civil society in decision-making processes; support transparency, accountability, structural reforms and good governance at all levels, including as regards their powers of oversight and inquiry over the distribution of and access to public funds as well as in the areas of public financial management and public procurement and State aid control; support initiatives and bodies involved in supporting and enforcing international justice in the beneficiaries;
- accelerate the transition of the beneficiaries to sustainable, climate-neutral and inclusive economies, that are capable of withstanding competitive market pressures of the EU’s single market, and to a stable investment environment and reduce their strategic dependencies;
- boost regional economic integration in particular through progress in the establishment of the Common Regional Market;
- foster economic integration of the beneficiaries with the EU’s single market, in particular through increased trade and investment flows, and resilient value chains;
- support regional economic integration and enhanced integration with the EU’s single market through improved and sustainable connectivity in the region in line with trans-European networks to reinforce regional cooperation, good neighbourly relations, reconciliation, as well as people-to-people contact;
- accelerate the inclusive and sustainable green transition to climate neutrality by 2050, in accordance with the Paris Agreement and the Green Deal, in line with the 2020 green agenda for the Western Balkans and covering all economic sectors, particularly energy, including the transition towards a de-carbonised, climate-neutral, climate-resilient and circular economy, while ensuring that investments respect the ‘do no significant harm’ principle;
- promote the digital transformation and digital skills as an enabler of sustainable development and inclusive growth;
- boost innovation, research, and cooperation between academic institutions and industry in support of the green and digital transitions, promoting local industries with a particular emphasis on locally based micro, small and medium-sized enterprises and start-ups;
- boost quality education, training, reskilling and upskilling at all levels, with a particular focus on youth, including tackling youth unemployment, preventing brain drain and supporting vulnerable communities and support employment policies, including labour rights, in line with the European Pillar of Social Rights, and fighting poverty.
Actions carried out through the programme will be based on reform agendas of each beneficiary. Those will represent a comprehensive, coherent and prioritised set of targeted reforms and priority investment areas in each beneficiary, including payment conditions that indicate satisfactory progress or completion of related measures, and an indicative timetable for their implementation. They will focus on key socioeconomic reforms, as well as reforms related to the fundamentals of the enlargement process. Upon fulfilment of a given payment condition, a pre-defined amount will be released either directly to the beneficiary’s treasury, or to the Western Balkans Investment Framework Operation Board for consideration of eligible projects.
The current financial assistance to the Western Balkans and Türkiye under the Instrument for Pre-Accession Assistance will continue in its current form and target the increasing alignment of national legislation and public administration to the EU acquis and standards with a view to future EU membership. The new facility will therefore complement the approach of the Instrument for Pre-Accession Assistance by focusing on the specific determinants for social and economic growth. In addition, this new facility will have a payment mechanism based on ex ante conditionality, mixing in an innovative manner grants and loans, which will bring about a stronger incentive to implement key structural reforms by the beneficiaries. Such delivery, as well as setting of ex ante conditionality, is not possible under the Instrument for Pre-Accession Assistance.
The funds under this facility will be disbursed through two delivery mechanisms:
- Direct financial assistance will follow the logic of budget support and will be released in the form of loans.
- Investments will be delivered through the Western Balkans Investment Framework using a mix of loans and grants. These investments will target sectors that will function as key multipliers for socioeconomic development: connectivity, including transport, energy, green and digital transitions, education and skills development. Related projects or programmes will be implemented in cooperation with international financial institutions and EU Member States development banks and will attract additional investments from them and the private sector.
The release of funds under the facility will be fully dependent on meeting of all layers of conditionality, including: - Preconditions: the beneficiaries will need to uphold and respect effective democratic mechanisms, including a multiparty parliamentary system, free and fair elections, pluralistic media, an independent judiciary and the rule of law, and guarantee respect for all human rights obligations, including the rights of persons belonging to minorities. A specific precondition will be that Kosovo (1) and Serbia engage constructively with measurable progress and tangible results in the normalisation of their relations with a view to fully implementing all of their respective obligations stemming from the Agreement on the Path to Normalisation and its Implementation Annex as well as all past dialogue agreements and engage in negotiations on the Comprehensive Agreement on normalisation of relations.
- General conditions: macrofinancial stability, sound public financial management, transparency and oversight of the budget, representing the founding conditions for budget support.
- Payment conditions: tailored conditions for the release of funds that take the form of observable and measurable qualitative or quantitative steps to be implemented by a beneficiary, as set out in the reform agenda.
In case of non-fulfilment of a given payment condition as per the indicative timeline set in the decision approving the reform agenda, the disbursement of funds corresponding to that condition will be withheld. The beneficiary will be given up to twelve months after the original deadline set out in the indicative timeline to fulfil the payment conditions. In the first year of implementation, that deadline should be extended to 24 months from the initial negative assessment. Should a beneficiary fail to meet the conditions after the grace period, the amounts will be reduced and may be redistributed among other beneficiaries.
(1) This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence.
The facility has a total budget of EUR 6 billion, provided in the following forms.
- Loans: EUR 4 billion, raised by the Commission on behalf of the EU on the capital markets or from financial institutions in accordance with Article 220a of the financial regulation.
- Grants: EUR 2 billion, granted in the revision of the multiannual financial framework. Provisioning for loans at 9% provisioning rate, as well as administrative and technical assistance are provided from the grant component.
The facility shall be implemented in accordance either in direct management or in indirect management. It will be implemented through two delivery mechanisms:- as direct financial assistance disbursed directly to the beneficiaries’ treasuries only the form of loans, or
- through the existing Western Balkans Investment Framework in the form of loans and grants, representing at least 50% of the total budget.
- New growth plan for the Western Balkans
- Commission welcomes political agreement
- Website Latest news: EU enhance engagement with the Western Balkans – European Commission (europa.eu).
- Communication from the Commission: New growth plan for the Western Balkans
- Regulation of the European Parliament and of the Council
Budget
Budget programming (million EUR):
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Financial programming:
- EUR 0.0 million (+ 0.0)
compared to the legal basis *
(*) Top-ups pursuant to Article 5 of the multiannual framework regulation are excluded from financial programming in this comparison.
Implementation of the facility will start over the course of 2024, pending adoption of the legal basis
Implementation of the facility will start over the course of 2024, following adoption of the legal basis on 14 May 2024.
Budget performance – implementation
Cumulative implementation rate at the end of 2023 (million EUR):
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Voted budget implementation (million EUR):
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Implementation of the facility will start over the course of 2024, following adoption of the legal basis on 14 May 2024.
Contribution to horizontal priorities
Green budgeting
Contribution to green budgeting priorities (million EUR):
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- Activities under the facility will support progress towards EU social, climate and environmental standards and support progress towards the United Nations’ sustainable development goals (SDGs), the Paris Agreement adopted under the United Nations Framework Convention on Climate Change, the United Nations Convention on Biological Diversity and the United Nations Convention to Combat Desertification. Activities should not contribute to environmental degradation or cause harm to the environment or the climate.
- Measures funded under the facility will be in line with the beneficiaries’ energy and climate plans, their nationally determined contribution and their ambition to reach climate neutrality by 2050. The facility will contribute to the mitigation of climate change and to the ability to adapt to its adverse effects, and will foster climate resilience. In particular, funding under the facility will promote the transition towards a decarbonised, climate-neutral, climate-resilient and circular economy.
- The facility will contribute to the achievement of an overall target of 30% of EU budget expenditure supporting climate objectives, and of 7.5% of expenditure in 2024 and 10% in 2026 and 2027 supporting biodiversity objectives.
- At least 37% of the non-repayable financial support channelled through the Western Balkans Investment Framework should go towards climate objectives. That amount should be calculated using the Rio markers following the obligation to report the EU’s international climate finance to the Organisation for Economic Co-operation and Development, along with other international agreements or frameworks. As early as June 2025, the EU climate coefficients, applicable across all programmes under the 2021-2027 multiannual financial framework and set out in the Commission staff working document entitled ‘Climate mainstreaming architecture in the 2021-2027 multiannual financial framework’ (SWD(2022) 225), will also be applied to climate expenditure under the multiannual financial framework’s heading 6 (‘Neighbourhood and the world’). The facility will align with the approach of other heading 6 instruments, including the Instrument for Pre-Accession Assistance, in order to ensure consistent climate reporting in the region.
- The facility should support activities that fully respect the climate and environmental standards and priorities of the EU and the principle of ‘do no significant harm’ within the meaning of Article 17 of Regulation (EU) 2020/852 of the European Parliament and of the Council.
- The reform agendas will be consistent with and support the reform priorities identified in the context of the beneficiary’s accession path, and other relevant documents, such as the stabilisation and association agreement, the national energy and climate plan, the nationally determined contribution under the Paris Agreement and the ambition to reach climate neutrality by 2050.
- Each reform agenda will include an explanation of the extent to which the measures are expected to contribute to climate and environmental objectives and their compatibility with the ‘do no significant harm’ principle.
- Implementation of the facility will start in the course of 2024, pending the adoption of the legal basis. Estimates of contribution to horizontal priorities will be calculated once implementation starts.
Gender
Contribution to gender equality (million EUR) (*):
- Activities under the facility will mainstream gender equality.
- Beneficiaries and the Commission will ensure that gender equality, gender mainstreaming and the integration of a gender perspective are taken into account and promoted throughout the preparation of the reform agendas and the implementation of the facility. Beneficiaries and the Commission will take appropriate steps to prevent any discrimination based upon gender, racial or ethnic origin, religion or belief, disability, age or sexual orientation. The Commission will report on these measures in the context of its regular reporting under the gender action plans.
- Each reform agenda will contain an explanation of the extent to which the measures are expected to contribute to gender equality and the empowerment of women and girls, and the promotion of women and girls’ rights.
- Implementation of the facility will start over the course of 2024, following adoption of the legal basis on 14 May 2024.
Digital
Contribution to the digital transition (million EUR):
- Digitalisation is one of the key components of the facility. It represents both one of the key areas for reforms, to be identified under the reform agendas, and one of the key priority areas for investment under the Western Balkans Investment Framework.
- The specific objectives of this facility include promoting digital transformation and digital skills as an enabler of sustainable development and inclusive growth and boosting innovation, research and cooperation between academic institutions and industry in support of the green and digital transitions.
- The facility should support investment and reforms that promote the beneficiaries’ path to the digital transformation of their economy and society in line with the EU vision for 2030 presented in the Commission communication ‘2030 digital compass’.
- Implementation of the facility will start over the course of 2024, following adoption of the legal basis on 14 May 2024.
Each reform agenda will contain an explanation of the extent to which the measures are expected to contribute to digital transformation.
Budget performance – outcomes
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(*) % of target achieved by the end of 2023.
Link to file with complete set of EU core performance indicators
- Implementation of the facility will start over the course of 2024, following adoption of the legal basis on 14 May 2024.
Sustainable development goals
Contribution to the sustainable development goals
Those activities financed by the Reform and Growth Facility for the Western Balkans will support progress towards the UN SDGs.
Implementation of the facility will start over the course of 2024, following adoption of the legal basis on 14 May 2024. Action level information will only be available after the adoption of the reform agendas.
| SDG | Does the programme contribute to the goal? | Example |
|---|---|---|
| NA |