Keynote speech of Commissioner Várhelyi at the “Towards a Common Future” conference of SEEDEM

Speech of Commissioner Várhelyi

Ladies and gentlemen,

Good morning.

Of course, I am very delighted to be with you today, and I think that these are the crucial days when we need to discuss all of these topics that have been just enlisted. Because we see that the geopolitical, geostrategic landscape in Europe and around Europe has changed considerably in the last two years. And unfortunately, it looks that these changes are not over yet.

There is one positive takeaway – if there is one – of this change, is that enlargement has become one of the top priorities by now, not only in the European Union, but also around the European Union. If you look at the reactions we have seen emerging from the countries the most affected by Russia's invasion of Ukraine, you will see that it did not take them more than a week to apply for EU membership. This has also shown to us the value of enlargement once again. After a period of ‘easy-going' in the policy, we have been reminded very strongly by our very neighbours what the value of EU enlargement is.

And the message is clear. The value of EU enlargement is long-term peace, stability, security and prosperity. This is why three of our neighbours, three countries, all of them are now candidate countries – did not take them two years to get there, and two of them are just about to start actually the accession negotiations – have demonstrated to us that Europe has to take enlargement much more seriously than it has done in the previous mandate. Because we have seen that Ukraine, Georgia and Moldova had been very quick in reaction, and they have been also very quick in a major political push for this.

If I look at the Balkans – I have many colleagues here from the Balkans – what I see is that it has been 21 years now that the Western Balkans have been promised EU accession. We can of course dwell on the whys and hows of these 21 years, that it took so long, but I think by now it is clear that our leaders considered this enlargement with the Western Balkans and with the Eastern partners to be one of the top three priorities of the next mandate. So, we do hope that the next Commission is going to be an enlargement Commission. And we do hope that we will have very clear decisions also pointed towards this during the year, during the institutional transition. Because the 21 years had its toll on all of us, not only on Europe where it has been popular to say that there is enlargement fatigue, but also on the Western Balkans. It had its toll, but now I think there is a wake-up call that if Europe does not deliver enlargement for its own sake, for its own interest, Europe might run the risk of losing long-term peace, stability and security even in Europe.

And I think this is the new approach that we have tried to establish during this mandate. It has been a long time, I fully agree. And of course, this is also coming with a transformation process, which is a long one, no question about that. But it is also clear that it is high time now that we make it clear that we will very soon have new members.

Our answer to the Western Balkans is a clear ‘yes'. And it has been made very clear for them from the very beginning of 2019, and now we are working even harder to be ready to welcome them. Of course, this is not a one-way street, because as much as we want to welcome new members, it means also that there are criteria to be met. Because after all, the enlargement process, as I said, is not only a transformation process, but it is also a process of integrating the new members into the European Union. Integrating new members into the European Union means that they should be able to participate in the four freedoms, which means that they should have a legal system that is capable of enforcing all the rules that we have here. And it goes without saying that the Copenhagen criteria is very clear about the basics of this, meaning that there has to be a solid democracy, there has to be a rule of law which prevails, and there has to be a clear engagement in good neighbourly relations, and there has to be the will and action to create long-term peace and security in the European Union.

So of course, we can want them as much as we want, but they have to achieve this and we are going to help them of course in this, but it means that it is not only the European Union that needs to deliver enlargement, but the European Union can only deliver enlargement once the conditions are met. So, on our side, what I can tell you is that we are working on 2 tracks. Because here in Brussels – it was mentioned by the introduction – that this is the hub, this is the meeting point of Europe. But we like to have our own gibberish, you know – and it has its, we call it ‘logic', but from the outside it does not look like that all the time. But we have, I think, two major strands of this process.

First is of course the political one – the political drive and how to create the political drive to get us there. And there is the other one of course, which is linked to this – that is the institutional. And in Brussels we love to talk about institutional, as you know, we love to talk about chapters, we love to talk about benchmarks – opening, interim, closing – and I can go on and on and on. IGCs and agendas for IGCs and EU common positions, and so on, but to be frank with you, that does not make any sense. It does not make any sense because this is like when you are driving on a highway, and you want to read up all the signs on the way. It does not make sense. What makes sense is that you know where you want to get to. And this is why we have put very clear and strong effort on the other part of the whole enlargement process, which is the real integration, as I like to call it.

The real integration, meaning, how are we going to get the societies and the economies fully integrated into the European one, because this is the big question of any enlargement. We have seen the previous enlargement, where the institutional went ahead and the real started only after accession. And this is why the first ten years have been marked with major difficulties in terms of integrating the new members. So, our historic lesson was that if we want to make enlargement happen, we also have to devote at least the same effort, or if not a bigger one, to make sure that these countries will integrate already before they join the European Union. Of course, I could go one by one, where we are with the different countries. What is interesting, I think, at this point, is to look at the whole process with the broader lens, and that is, that now, I think we have the politics behind getting a new wave of enlargements. And I think that we have the politics also building up when the new Commission will take office, how to make it happen and when to make it happen. I hope that this year is going to be a critical year in that sense.

And if you look at the process where we are now, the institutional, you will see that we have candidate countries that are negotiating for many, many years. It means that we have to make enlargement negotiations much faster, much more effective, so that it delivers. It delivers not only the reforms and the integration and the adaptation of the national legal systems to the EU's, but it is capable of delivering enlargement. Because we hear many, many criticisms that the process is so complex that it is not sure that it was designed to deliver enlargement. I want to reassure you, it may have not been designed to deliver enlargement, but we have tried to improve it so that it does. This is why already back in 2019, we revised the methodology to give it a boost, but also restore the credibility both in front of the Member States and in front of the candidate countries, so that everybody knows what to expect. Now that we have that in place, we need to use it. I have our colleague from Montenegro in front of me who are just about to start the final phase of the accession negotiations, and I do hope that this is going to be the semester when we will have this decision in place. And this will show also to our political leadership that it is perfectly possible to do it. I have our colleague from Albania sitting on the other side, they are waiting for the first cluster to be opened. First cluster to be opened – does not make much sense out of this time, but it means that basically the actual negotiations on the first and most critical part of the discussions, meaning, democracy and the rule of law, could start. But we would have to have a new mindset for this to produce enlargement at the end, which is that we negotiate so that we get enlargement.

Now, of course, for this year to be a success, we need all the political stars to align, but while we are working on that, we have put in place, I think, a programme which is about the real integration. And that was already back in 2020 when we have established the Economic and Investment Plan for the Western Balkans. This is a plan which is mobilising roughly 1/3 of the GDP of the entire Western Balkans put together – EUR 30 billion we are talking about – the GDP of the Balkans is roughly EUR 100 billion. And this programme was designed together with the Balkans, and it had two novelties. First is that we wanted to help the Balkans to overcome the main bottlenecks it has in front of its own development. Development, meaning, getting up to speed when it comes to being an attractive investors hub of foreign direct investments, meaning, being capable of producing more growth and jobs locally for the people, and meaning, that the Balkans, if they are to catch up with Europe in terms of economic and social development, they would have to have at least double the growth rate of the EU.

If you look at precisely what are the big bottlenecks, which was a hard sell in this town, but by now I think everybody agrees with us, that you cannot have a modern European Western Balkans without, for example, trade routes. If you want to drive from Sarajevo to Tirana, good luck. It will take you half a day easily, and it is not even 300 kilometres – in the 21st century. If you want to drive a lorry, it will take you at least a day, and on top of it, at the border you would have to wait at least another day. This is not the investors climate. This is not the European standard that will attract investors, that will create business opportunities for the locals or an economic and social predictability for the youth in this region.

This is why we have focused our attention on the key bottlenecks – connectivity, so trade routes, meaning highways, railways, connecting up all the capitals of the Western Balkans with one another, but also with the EU. This is why broadband internet connectivity, which is the other bottleneck in front of the digital economy, the energy system, where we have energy scarcity, while the most polluting energy generation capacities by now, most probably even globally because of the extensive use of coal. And on the footnote to this, we have overcome the major difficulty which is the monopoly of Russian gas on the Western Balkans. By now there is no monopoly of Russian gas, but it took us a lot of investment, a lot of work with the locals to deliver that. And this is already changing the environment. If you look at the foreign direct investment rate in the last three years of each and every single Western Balkan country, you see records are being broken every year, and not by 5-10 percentage points, but by 20-30 percentage points each. So, I think that that it starts to work. We are at a quite impressive level of implementation; we are talking about 65% of project implementation now. We have a seven-year budget window always, we are in the middle of it, and we have already implemented more than half of the budget. This is one of the most successful parts of the EU budget actually. And this shows the local ownership, and this shows how big the interest is in closing the gap between the EU and the Western Balkans, because you cannot integrate new members with a gap of 36% on average EU GDP per capita. Now, the Western Balkans is there. You cannot have real competition in the EU market without the Western Balkans losing on that competition with such a huge gap. This is why we have insisted on this, and this is why we have frontloaded this instrument. This instrument, I think, is delivering the real integration.

But this is not going to be enough, and we have realised it already last year that if we want enlargement and we want the next Commission to be able to accomplish enlargement at the end of its mandate, we need to do more. Because we need to help the Balkans to speed up its reform agenda as well, and we need to have a more regional mindset to it. And for that reason, we came up with another idea, which is the Growth Plan. And the idea behind the Growth Plan was to try to translate all the major efforts that need to be accomplished for enlargement, meaning reforms. Every year, have a plan from our Western Balkan partners, so that we can speed up the Reform Agendas. This is why now the European Parliament is to have its final vote next week – we have proposed it in November. Next week the Facility will be created, and on the back of it, we will have Reform Agendas coming from each and every single Western Balkan country. And it is also very encouraging to see their level of engagement in establishing this, meaning that now they see also the perspective that we are going to get there. So, it is not only that we want them to improve, but this is to get enlargement happen. The whole Facility and the Growth Plan has, I think, three or four tasks to deliver.

First is to help to accelerate the reforms. This is a clear requirement of our Member States because they want to see how the Balkans is going to level up and meet all the requirements for enlargement. And not only in broad terms, but also in foreseeable and annually programmable way. This is one element.

The other element is, of course, the possibility to integrate our partners earlier into the benefits of membership. This is the so-called gradual integration. We had that already in mind in 2019 and then it became a public debate last year, which also helped us to make it even more paramount in the Growth Plan. The idea being that there are very many areas where the Western Balkans should be able to enjoy the benefits of EU membership, and not only the countries in broad terms, but the local businesses and the people. Because after all, we all are doing this for the people of the Western Balkans. It is not only a political design or a project, but this is something that should pay dividends for the locals immediately. And this is why it is crucial that anywhere where they are able to implement fully the EU conditions and laws, they should be able to enjoy the benefits of that area.

I give you one example: the Single Euro Payments Area. This is for this year. The Single Euro Payments Area means in the European Union that you can bank, meaning, transfer money or doing other bank transactions within the European Union, as if you were doing it in your own Member State. So, the transfer of funds from Warsaw to Berlin is the same as from Berlin to Frankfurt. Since the banking sector in the Western Balkans is 85% owned and run by EU banks, it should not be a big deal for them to apply the same rules as they apply back home. But it also means that in the Western Balkans, this will bring a complete overhaul of the financial services sector before we can integrate them. And the answer was not only a clear yes, but it was a rush. Who could get there first? And I do hope that we will have all of them by the end of the year, complying and applying it, because only with this we can save at least half a billion euros each year for the citizens and the businesses of the Western Balkans. In the Western Balkans, remittances represent a significant income for the society, but also international budgets, so cutting down only the transactional costs by half a billion euros will give a major boost. And this is only one of the steps that we can do. There are many more that we are preparing now, many more that can bring benefits.

But of course, if you look at the Single Market, you also have to be mindful of the fact that in the Single Market, there is clear and heavy competition that one has to face. And if there was one lesson learned to be learned from the previous enlargement, that was that if you have new members who are joining the Single Market without being at level in terms of economic development and having to withstand the pressure of competition, you have to have a financial support to speed up the uptake of EU reforms, so that the costs of competing on the Single Market becomes fair. This is why we have also put an additional financial instrument to the Growth Plan of EUR 6 billion, because with this, we can not only boost the reforms that these countries are making, but we can also help them to level the competition. The Facility will provide therefore, together with the Economic and Investment Plan and the IPA support – so all the financial support the EU is making – by 2027 a comparable level of aid intensity as we see in the current cohesion and structural funds countries in the European Union. Meaning 90% by 2027. And from there on, you can start contemplating that from there on, nothing prevents the Western Balkans to be ready to join the European Union.

So, I think the next Commission is going to be full of challenges, but it will have the beauty of welcoming new members.

Thank you!