South East Europe: Revisiting Convergence – Diagnosis and Prognosis

Jonathan Scheele

SEESOX, at the invitation of the Global Strategy Forum, addressed a well-attended seminar at the House of Lords on 19 March.  It was co-chaired by Lord Lothian (the former Michael Ancram) and Jack Straw MP.  SEESOX provided three speakers – David Madden, Max Watson and Jonathan Scheele.  The theme was “South East Europe: Revisiting Convergence – Diagnosis and Prognosis”.

David Madden launched the discussion, highlighting the background to and the thinking behind, the SEESOX Hilary Term seminar series and posing – and partially answering - three questions:

• Do the countries of South East Europe have an alternative to EU accession? Probably No.
• He did not believe that even Turkey has a long-term alternative to EU membership.
• Can the EU exercise conditionality? Probably Yes.
• And does the EU have a transformative effect? Possibly Yes.

He pointed to some positive elements in the situation – enlargement was still on the radar, with Montenegro probably leading the other states in South East Europe; there appeared to be openings between Serbia and Kosovo; the election of Nicos Anastassiades brought a champion of solution to the tackling of the Cyprus problem, though he no doubt had other more pressing concerns at the moment; and there appeared to be some stirrings in Paris, particularly, and Berlin on EU/Turkey. On the negative side of the ledger was the growing level of asperity in the region about the credibility of the accession process; the lack of a really committed champion of accession in Continental Europe (though partial champions have caused a few problems in the past); and the possibility of proliferating vetoes, even if countries get near the finishing line.

He also noted the emergence of a big new issue in the region: Cyprus Gas. This potentially involved all the main actors in the East Mediterranean region, including Israel, and some from outside, including the US and Russia. He felt it could have bad consequences or good.  While he hoped the latter would be the case, he believed that, whatever happened, Cyprus Gas would certainly exercise enormous influence in the region for years to come.

Domestic politics - democratic regression?

David Madden

On 4 March, the SEESOX seminar series  “Revisiting Convergence” looked at Democratic Regression: mainly in South East Europe (SEE), but also straying into Southern and Central Europe. The speakers were Iveta Radicova, Othon Anastasakis and Kerem Oktem; and Jonathan Scheele was an active chair. This brief post cannot do justice to the richness and texture of the presentations and subsequent discussion, but picks out some themes.

   The EU perspective is not as credible now as previously, and the accession process has tended to stagnate. Traditionally “Brussels” was seen as “better” than national institutions, though this is less the case now. Nevertheless there is no better model for political and economic reform in SEE than the EU.

   Divisions in Europe are North/South, East/West, large countries/small countries. Also old democracies/new democracies. In the former there is little evidence of long term decline of trust in government, and relative satisfaction with the performance of democracy over time. By contrast, the 1989 revolutions were a positive event, but it is not possible to say that the majority has enthusiastically embraced the new way of life and the accompanying social and economic transformation.

Power sharing – can the EU impose sustainable arrangements?

David Madden

18 February saw the sixth seminar in this term’s series on “Revisiting Convergence in South East Europe”. The title was “Power-Sharing: can the EU impose sustainable arrangements". The speakers were James Ker-Lindsay and Cvete Koneska, the discussant Richard Caplan, and I chaired, and agreed to report for our blog. Discussion covered all the relevant subjects: Cyprus, Kosovo, Bosnia-Herzegovina and Macedonia. There was a detailed and valuable Q and A session, with many challenging points from the audience.
   Cyprus represented a failure, in that it entered the EU without a political solution. But there were mitigating circumstances. This was a complicated and long-running problem. Once the Treaty of Accession was signed in April 2003, there was less scope for influencing the Greek Cypriots, and moves on the Turkish and Turkish Cypriot sides counted for less. The EU had little way of advocating the Annan plan, and there was considerable misrepresentation of what it contained, during the referendum campaign. The situation was also complicated by the fact that there were 10 entrants: future enlargements were more likely to see trickle candidacies. Some important principles were established. Countries outside the EU, e.g. Turkey and Russia, had no right to say who could or could not accede.

1st South East European Ministerial Conference

Jonathan Scheele

Some 140 participants attended the First SE Europe Ministerial Conference jointly organised, on 14 February, by the International Business and Development Exchange (IBDE) and SEESOX, at Europe House, Smith Square, London SW1. Key speakers included: Mimoza Kusari-Lila, Deputy PM of Kosovo, Majlinda Bregu, Albania’s EU Integration Minister, Alexandar Pejovic, Montenegro’s Chief Accession Negotiator, Alain Bregant of the Bled Strategic Forum, Oleg Levitin, Senior Political Advisor at the EBRD, Rudi Guraziu CEO of IBDE, and David Madden, Jonathan Scheele and Max Watson from SEESOX.

The conference was divided into two sessions, the first on the challenges of political reform and regional cooperation, and the second on progress on economic reform. Inevitably, these two areas are not independent and the discussion switched between the two throughout the afternoon. As well as the main speakers, there were also some challenging questions raised from the floor.

Economic uncertainties and political risks

Max Watson

In South East Europe, the impact of the global and euro area crises has been particularly severe, with political as well as economic implications. The crisis arrested the incomplete progress made over the previous decade in overcoming a number of historic vulnerabilities. If the decline in employment and living standards is not soon reversed, there are risks that serious political-economic tensions in the region could re-surface. These were among the key messages from the fourth seminar in this term's core SEESOX series, which asked whether the impact of the crisis on the region will prove reversible.

In this region, it was pointed out, the crisis had affected particularly seriously the most vulnerable groups in society. The response of governing elites had been piecemeal and not very effective, and this had further undermined the population's trust in public administrations. Moreover, the apparent failure of the previous decade's growth model had raised questions about the EU as a catalyst of economic convergence. So far, the impact of the crisis had been cushioned to some degree by work in the informal sector, and by family-based support mechanisms; but if today's recessionary conditions were not soon reversed, the limits of such cushions might be reached.

Europeanisation of the Balkans or Balkanisation of EU?

Renee Hirscon

On 28th January, a stimulating and provocative seminar by Alina Mungiu-Pippidi Europeanization of the Balkans- the Corruption Test addresses a key question : whether “the process of Europeanization is capable of changing the governance in the accession countries if it is different from the European norm?”. Three generations of countries were noted: previous – Italy, Greece, Spain; current – Romania, Bulgaria; next-- Croatia, Macedonia. The presentation contained rich information, statistically based and drawn from international sources, centring on a series of slides with various indices of corruption in the 27 countries of the EU. Not surprisingly, the clusters of least corrupt countries were those of northwestern Europe /Scandinavia while those of central, southern and SEE were spread in various distributions, highlighting the variability and specificity of each country’s response to accession.

The speaker noted some of the constraints which would be effective in bringing about good governance, such as an independent and accountable judiciary, and the capacity of the population to check that the state becomes autonomous from private interest, through media, civil society, enlightened voters (with Internet access). She also noted that certain policies favour corruption- allocating more funds to areas prone to discretionary spending, like big projects (for instance EU funds) instead of universal health coverage is associated with more corruption. The same happens with lack of fiscal transparency and red tape as they create a favourable environment for corruption that no prosecutors can afterwards cure.

Europeanisation of the Balkans: The corruption test

David Madden

On 28 January, the SEESOX Hilary Term seminar series on Revisiting Convergence looked at its third theme: “Europeanisation of the Balkans or Balkanisation of the EU?” Alina Mungiu-Pippidi presented, Renee Hirschon chaired, and there was lively discussion of the main theme of corruption.

Trying to summarise academic discussion is not the easiest task for a rookie blogger, but there seemed broad agreement on the following (though I am open to being proved wrong by dissentient voices).

• corruption represented a considerable obstacle to economic development in South East Europe (SEE)
• the record in Central Europe and the Balkans was worse than in Western Europe and North America, but enormously better than in the countries of the former Soviet Union
• generally the Balkans performed less well than the Baltics in countering corruption
• the situation in SEE didn’t appear to be improving, though perceptions might obscure the real picture
• the main constraints on corruption were legal (assuming an autonomous and effective system) and normative
• “Europeanisation” was not proving a magic cure. It tended to be bureaucratic and non-transparent, undermining good governance. Misuse of EU funds in e.g. Italy and Greece had not lead to an avoidance of bad practice in Romania and Bulgaria. Transition could actually foster corruption, given the scope for misuse of privatisation and public funds; though e.g. Estonia in the Baltics was an example of good transition. The EU could impose normative constraints only pre-accession
• Companies disadvantaged by corruption tended not to go to the ECJ, appearing to sit back thinking their turn would come if they played their cards correctly
• Countries with a history of recent ethnic strife were particularly susceptible to corruption
• SEE countries could be sustainably reformed only from within, and through active civil societies

The tone of the seminar was therefore rather sombre, but like all good seminars ended with a good joke. A neophyte Minister of Development from country A is invited by a long-serving Minister of Development in country B. He is amazed by his colleague’s villa, swimming pool etc. etc. He asks the obvious question. His colleague takes him to the window. “You see that highway? 10%. You see that bridge? 10%. Easy.”  A few years later, there is a return visit. This time it is the more senior Minister’s turn to be amazed: by the villa, tennis court, solarium etc. etc. He asks: “How?” He is taken to the window, and shown the empty wastes outside. “You see that highway?” “No”  “Exactly. 100%”.

The economics – is the Brussels-Washington model still applicable?

Adam Bennett

The seminar which I chaired on the future of the Brussels-Washington model for the development and convergence of South-east Europe generated a lively discussion and some interesting observations.

The Brussels-Washington model never was a single immutable model. The model was and remains multifaceted and has kept evolving in light of events. The first phase of reforms emanated mainly from Washington and eschewed gradualism in favour shock therapy—with recommendations to cut fiscal deficits, open up capital accounts, privatize as quickly as possible, and liberalize prices across the board. This version of the model ran into the Acemoğlu dilemma—economic reform without political reform can bring new problems, especially in governance. Sequencing became a watchword in a more differentiated second phase. The third phase saw the lure of EU accession as a key driver of the region’s systemic transformation, with the acquis communautaire and associated reform programs devised in Brussels. The multiplicity of reform targets and their wide range over social and economic issues, however, threatened to overburden the accession countries, and seemed untargeted. This was in contrast with the Washington side of the model which was ramping down structural elements in its programs. The fourth phase, which is where we are now, has seen the model go through some serious soul-searching, as first the global banking crisis and then the Eurozone crisis both rocked the economic foundations of South-east Europe and also raised profound questions about the benefits of accession, as well as about the appetite of the EU for further enlargement.

Solidarity and convergence at risk...

Convergence – in the sense of economic catching-up – is not a goal specified in European Treaties, one seminar participant observed on January 14th. But convergence and political reconciliation have in practice operated as the mutually-reinforcing drivers of the EU machine, and especially of the Enlargement process. In the case of South East Europe, with its deep reform challenges, some problems had emerged in implementing this formula before the crisis, and one silver lining (it was noted) has been to remove the ‘deniability’ of such problems. But the risk is that the crisis may have gone beyond this and fundamentally shaken faith in solidarity – North and South, East and West, core and periphery.

The question was also raised, in light of the crisis, whether the EU’s economic paradigm truly works. If not only Greece but even Ireland can descend into crisis, and at times appear politically isolated, then what are the prospects for the candidate countries in the South East European region. Is the convergence model still valid? – That is indeed the question to be addressed centrally in the second seminar on Monday 21^st...

Max Watson

Europeanisation and convergence in practice – in neutral or in reverse?

Jonathan Scheele

The first seminar, on Monday 14 January, focused on the state of convergence in the region in practice; is it in neutral or reverse? The panel of speakers, Kalypso Nicolaïdis, Dimitar Bechev and Jonathan Scheele, laid a good foundation for the rest of the series, which will look at future prospects.

Key ideas which emerged included:

• the current crisis in Europe means that the EU, in promoting convergence, needs to go much deeper into addressing the structural obstacles to reform in the region, but at the same time should be more humble in its prescriptions for specific reforms.
• convergence tends to be seen in terms of accession to the EU, but there is a historical continuity with efforts, going back to the 19th century, by the periphery in SE Europe to join "the centre" (represented by Western Europe).
• the demand for convergence in the region is mediated by national elites so as to preserve their advantages as far as possible; they seek modernisation, but not at any cost and not too quickly.
• much has in fact been achieved in the Balkans; there is more stability and little ethnic violence. But economic integration has made the region more vulnerable to external shocks; while recovery in the Euro zone is necessary for the Balkans to grow again, it will not be sufficient on its own. And periodic elections do not on their own ensure real democratic accountability, so that Brussels is still seen as a legitimate counter-balance to poor quality national governance.
• within the region there is no perceived realistic alternative to convergence towards the EU by accession. But enlargement in the region is no longer, for the EU, the geo-strategic imperative that it was in 1993 up to 2004.

As a result, if convergence (= EU accession) does not move forward at a steady pace, to what extent does this pose risks for political stability in the countries of the region? If the goal of convergence provides a common agenda for opposing political groups, what else will preserve that stability if the goal begins to be seen as unattainable in a realistic timescale?

South East Europe: Revisiting convergence

David Madden

In the good old days, it was a relatively straightforward process for European countries to join the EU. One met the political and economic criteria for membership, received the formal avis or tick of approval from the European Commission (a bit like giving one’s coin to Charon), passed the entrance exam of satisfying the acquis communautaire (all the rules and regulations painstakingly negotiated and agreed by ones future partners) and entered as a full member. Countries joined individually or as in groups: diplomats spoke of regattas and flotillas - the land-lubbers in Brussels tending to favour nautical terminology. Easy!!
   One joined a club where there were agreed norms, rules and values. Joining it showed that one had arrived, and that one belonged: that one was entitled to the benefits of membership; and even had an equal voice on the Council with eg Germany. Not bad for a country of the size of Cyprus or Slovenia. More, joining pointed the way towards transition, economic convergence and strengthened democracy.