Regulation (EU) 2024/1449 of the European Parliament and of the Council of 14 May 2024 on establishing the Reform and Growth Facility for the Western Balkans

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 212 and Article 322(1) thereof,

Having regard to the proposal from the European Commission,

Having regard to the opinion of the Court of Auditors (1),

Acting in accordance with the ordinary legislative procedure (2),

Whereas:

(1) The Union is founded on the values referred to in Article 2 of the Treaty on the European Union (TEU), which include democracy, the rule of law and respect for human rights. Those values form part of the accession criteria established at the Copenhagen European Council in June 1993 (‘Copenhagen criteria’), which constitute the conditions of eligibility for the Union membership.

(2) The enlargement process is built on established criteria, fair and rigorous conditionality and the principle of own merits. A firm commitment to ‘fundamentals first’ approach, which requires a strong focus on the rule of law, fundamental rights, the functioning of democratic institutions and public administration reform, as well as on economic criteria, remains essential. Progress depends on each beneficiary’s implementation of the necessary reforms to align with the Union acquis. Regional cooperation and good neighbourly relations remain essential elements of the enlargement process.

(3) Russia’s war of aggression against Ukraine further showed that enlargement is a geo-strategic investment in peace, security and stability. Recalling the Union’s full and unequivocal commitment to the Union membership perspective of the Western Balkans, the Western Balkans partners’ orientation and commitment towards the Union is a strong expression of their strategic choice and place in a community of values. The Western Balkans partners’ EU path needs to be firmly anchored in tangible and concrete progress on reforms.

(4) It is in the common interest of the Union and its Western Balkans partners, namely Albania, Bosnia and Herzegovina, Kosovo (*1), Montenegro, North Macedonia and Serbia (the ‘beneficiaries’), to advance efforts to reform their political, legal and economic systems with a view to their future Union membership and to support their accession process. The prospect of Union membership has a powerful transformative effect, embedding positive democratic, political, economic and societal change.

(5) It is necessary to bring forward some of the advantages of Union membership before accession. Economic convergence is at the heart of those benefits. Currently, the convergence of Western Balkans in terms of GDP per capita expressed in purchasing power standards remains low at between 30 % and 50 % of the Union average and is not progressing fast enough.

(6) To reduce that disparity, the Commission in its Communication of 8 November 2023, entitled ‘New Growth Plan for the Western Balkans’ set out a new growth plan for the Western Balkans based on four pillars: (a) increasing integration with the EU’s Single Market; (b) boosting regional economic integration, based on EU rules and standards, by fully implementing the existing Common Regional Market Action Plan; (c) deepening reforms aiming at accelerating growth in the region, promoting economic convergence and strengthening regional stability; and (d) establishing a new financing instrument: the Reform and Growth Facility for the Western Balkans (the ‘Facility’).

(7) The implementation of the New Growth Plan for the Western Balkans requires increased funding under a dedicated new financing instrument, the Facility to assist the region in implementing reforms for sustainable economic growth, regional integration and the Common Regional Market.

(8) To achieve the goals of the New Growth Plan for the Western Balkans, special emphasis with respect to investment areas should be placed on sectors that are likely to function as key multipliers for social and economic development: connectivity, including sustainable transport, decarbonisation, energy, green and digital transitions, as well as education and skills development, with a particular focus to youth.

(9) Sustainable transport infrastructure is essential to improve connectivity between the beneficiaries and with the Union. It should contribute to the integration of the Western Balkan region in the Union. In its proposal revising the trans-European transport network (TEN-T), the Commission included a new Corridor crossing the Western Balkan region (Western Balkans-Eastern Mediterranean corridor). The TEN-T network is the reference for funding sustainable transport infrastructure in that region, including for environmentally friendly means of transport, such as railways.

(10) The Facility should support investment and reforms that promote the beneficiaries’ path to the digital transformation of the economy and society in line with the Union vision for 2030 presented in the Commission communication of 9 March 2021, entitled ‘2030 Digital Compass: the European way for the Digital Decade’, fostering an inclusive digital economy that benefits all citizens. The Facility should strive to facilitate the beneficiaries’ achievement of the general objectives and digital targets with regard to the Union. As outlined by the Commission in its communication of 15 June 2023, entitled ‘Implementation of the 5G cybersecurity Toolbox’, the 5G cybersecurity Toolbox should be the reference for Union funding to ensure security, resilience and the protection of integrity of digital infrastructure projects in the region.

(11) The support under the Facility should be provided to meet general and specific objectives, based on established criteria and with clear payment conditions. Those general and specific objectives should be pursued in a mutually reinforcing manner. The Facility should support the enlargement process by accelerating the alignment with Union values, laws, rules, standards, policies and practices (‘acquis’) with a view to Union membership, accelerate regional economic integration and progressive integrations of the beneficiaries in the Union single market, and accelerate their socio-economic convergence with the Union. The Facility should also foster regional cooperation, good neighbourly relations, as well as reconciliation and settlement of disputes.

(12) In addition to boosting socio-economic convergence, the Facility should also help accelerate reforms related to fundamentals of the enlargement process including rule of law, fundamental rights, inter alia, the rights of persons belonging to minorities, including national minorities and Roma, as well as the rights of lesbian, gay, bisexual, transgender and intersex (LGBTI) persons. It should also improve the functioning of democratic institutions and public administrations; public procurement, State aid control and public finance management; the fight against all forms of corruption and organised crime; quality education and training as well as employment policies; the region’s green transition, climate and environmental objectives.

(13) Union support under the Facility should complement the bilateral and regional support provided under Regulation (EU) 2021/1529 of the European Parliament and of the Council (3), which remains the main instrument for preparing the beneficiaries for Union membership, while using already existing mechanisms and structures, where possible, and maximising synergies. The approach should build on the existing enlargement methodology, in particular the 2020 Revised Methodology presented by the Commission in its communication of 5 February 2020, entitled ‘Enhancing the accession process — A credible EU perspective for the Western Balkans’, and the Economic and Investment Plan for the Western Balkans adopted by the Commission on 6 October 2020.

(14) The Facility should complement the existing Economic and Financial Dialogue without compromising its scope, thereby enhancing economic integration and preparation for the Union’s multilateral surveillance of economic policies.

(15) The Facility should promote the development of effectiveness principles, respecting additionality to and complementarity with the support provided under other Union programmes and instruments and striving to avoid duplication and ensure synergies between assistance under this Regulation and other assistance, including integrated financial packages composed of both export and development financing provided by the Union, the Member States, third countries, multilateral and regional organisations and entities.

(16) In line with the principle of inclusive partnerships, the Commission should strive to ensure that relevant stakeholders in the beneficiaries, including beneficiaries’ parliaments, local and regional authorities, social partners and civil society organisations are duly consulted and have timely access to relevant information to allow them to play a meaningful role during the design and implementation of programmes and the related monitoring processes.

(17) Tailor-made and targeted technical assistance, as well as cross-border cooperation assistance, should continue to be provided in support of the objectives of this Facility and in order to strengthen the relevant capacities of the beneficiaries to implement the Reform Agendas.

(18) The Facility should ensure consistency with, and support for the general objectives of Union external action as laid down in Article 21 of the TEU, including the respect for fundamental rights as enshrined in the Charter of Fundamental Rights of the European Union. It should in particular ensure the protection and promotion of human rights, and the rule of law.

(19) The Facility should 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;

(20) The beneficiaries should demonstrate a credible commitment to European values, including through their alignment with the Union’s Common Foreign and Security Policy, including Union restrictive measures.

(21) In the implementation of the Facility, account should be taken of the Union’s strategic autonomy as well as of the Union and its Member States’ strategic interests and the values on which the Union is founded.

(22) Activities under the Facility should support progress towards Union social, climate and environmental standards, and support progress towards the United Nations Sustainable Development Goals, 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 and should not contribute to environmental degradation or cause harm to the environment or climate. Measures funded under the Facility should be in line with the beneficiaries’ Energy and Climate Plans, their Nationally Determined Contribution and ambition to reach climate neutrality by 2050. The Facility should contribute to the mitigation of climate change and to the ability to adapt to its adverse effects, and foster climate resilience. In particular, funding under the Facility should promote the transition towards a decarbonised, climate-neutral, climate-resilient and circular economy.

(23) The implementation of this Regulation should be guided by the principles of equality and non-discrimination, as elaborated in the Union of Equality strategies. It should promote and advance gender equality and mainstreaming, ensure meaningful participation of women in decision-making processes, and the empowerment of women and girls, and seek to protect and promote women’s and girls’ rights, as well as prevent and combat violence against women and domestic violence, taking into consideration relevant EU Gender Action Plans and relevant Council conclusions and international conventions. Furthermore, this Regulation should be implemented in full respect of the European Pillar of Social Rights, including on child protection and labour rights. The implementation of the Facility should be in line with the United Nations Convention on the Rights of Persons with Disabilities (4) and its protocol and ensure accessibility in its investments and technical assistance, in line with Directive (EU) 2019/882 of the European Parliament and of the Council (5).

(24) This Regulation should promote the Green Agenda for the Western Balkans included in the Commission Communication of 6 October 2020, entitled ‘An Economic and Investment Plan for the Western Balkans’, by reinforcing environmental protection and restoration, contributing to the mitigation of climate change and increasing resilience to climate change, and accelerating the shift towards a low-carbon economy.

(25) Reflecting the European Green Deal as Europe’s sustainable growth strategy and the importance of tackling climate and biodiversity objectives in line with the commitments of the Interinstitutional Agreement, the Facility should contribute to the achievement of an overall target of 30 % of Union budget expenditure supporting climate objectives and 7,5 % in 2024 and 10 % in 2026 and 2027 to biodiversity objectives. At least 37 % of the non-repayable financial support channelled through the Western Balkan Investment Framework (WBIF) should account to climate objectives. That amount should be calculated using the Rio markers following the obligation to report the EU’s international climate finance to the OECD, as well as other international agreements or frameworks. As early as June 2025, the EU climate coefficients, applicable across all programmes under the 2021-2027 Multi-annual Financing Framework (MFF) 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 MFF’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 (IPA III), 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 Union 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 (6).

(26) The Commission, in cooperation with the Member States and the beneficiaries, should ensure the compliance, coherence, consistency and complementarity, increased transparency and accountability in the delivery of assistance, including by implementing appropriate internal control systems and anti-fraud policies. The support under the Facility should be made available under the preconditions that each of the beneficiaries upholds and respects effective democratic mechanisms, including a multi-party parliamentary system, free and fair elections, pluralistic media, an independent judiciary and the rule of law, and to guarantee respect for all human rights obligations, including the rights of persons belonging to minorities. Another pre-condition should be that Serbia and Kosovo engage constructively with measurable progress and tangible results in the normalisation of their relations in order to fully implement 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.

(27) The overall maximum amount for the Union support through the Facility should be EUR 6 billion in current prices for the period from 2024 to 2027, of which up to EUR 2 billion in the form of non-repayable support and EUR 4 billion in concessional financial-assistance loans provided by the Union and provisioned from the EUR 2 billion. At least half of the total amount should be allocated through the WBIF, including the entire amount of the non-repayable support, after deduction of 1,5 % for technical and administrative assistance, and the amounts necessary for provisioning of the loans.

(28) This Regulation lays down a financial envelope for the entire duration of the Facility, which is to constitute the prime reference amount, within the meaning of point 18 of the Interinstitutional Agreement of 16 December 2020 between the European Parliament, the Council of the European Union and the European Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, as well as on new own resources, including a roadmap towards the introduction of new own resources (7), for the European Parliament and the Council during the annual budgetary procedure.

(29) The financial liability from loans under the Facility should not be supported by the External Action Guarantee, by way of derogation from Article 31(3), second sentence of Regulation (EU) 2021/947 of the European Parliament and of the Council (8). Support in the form of loans under this Facility should constitute financial assistance within the meaning of Article 220(1) of Regulation (EU, Euratom) 2018/1046 (9) (the ‘Financial Regulation’). An indicative amount of financing for each beneficiary should be calculated based on the formula laid down in the Annex, combining the population share of a beneficiary over the overall population of the Western Balkans region and the average GDP per capita for the Western Balkans region over the GDP per capita of the respective beneficiary, with a weighing factor of 60 % and 40 % respectively. If the payment conditions for the release of funds are not met, the Commission should be able to redistribute part of or the entire amount among other beneficiaries.

(30) Horizontal financial rules adopted by the European Parliament and the Council on the basis of Article 322 of the Treaty on the Functioning of the European Union (TFEU) should apply to this Regulation. Those rules are laid down in the Financial Regulation and determine in particular the procedure for establishing and implementing the budget through grants, procurement, indirect management, financial assistance, blending operations and the reimbursement of external experts, and provide for checks on the responsibility of financial actors.

(31) Restrictions on eligibility in award procedures under the Facility should be provided for, where appropriate, given the specific nature of the activity or when the activity affects security or public order.