DOCUMENT A/1859

2 June 2004

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The European Union's stabilisation missions in south-east Europe

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Document A/1859

2 June 2004

The European Union's stabilisation missions in south-east Europe

REPORT¹

submitted on behalf of the Political Committee²
by Mr Wilkinson, Rapporteur (United Kingdom, Federated Group)

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¹ Adopted unanimously by the Committee on 10 May 2004.

² Members of the Committee: Mr Martínez Casañ (Chairman) (Alternate: Agramunt); MM Pangalos, Hancock (Vice-Chairmen); MM André, de Assis, Mrs Azevedo, Mr van Baalen, Mrs Bolognesi (Alternate: Manzella), Mr Delattre, Mrs Delvaux-Stehres, Mrs Durrieu, MM Goutry, Guardans I Cambó, Höfer, Hörster, van der Linden (Alternate: van Winsen), Lintner, Marshall (Alternate: Lord Judd), Masseret, Meimarakis, Nazaré Pereira, Mrs Paoletti Tangheroni, Mrs Papadimitriou, MM Piscitello, Poty, Provera, Puche Rodríguez, de Puig, Rizzi, Rochebloine, Roth, Van Thijn, Ms Tritz, Lord Tomlinson, MM Versnick, Vis, Wilkinson.

Associate members: MM Akçam, Ates, Benediktsson, Çavusoglu, Fajmon, Mrs Grabowska, Mr Hegyi, Mrs Herczog, MM Kaminski, Kasal, Kobielusz, Livanelli, Marthinsen, Nemeth, Pelc, Width, Wojciechowski.

N.B. The names of those taking part in the vote are printed in italics.

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RECOMMENDATION 744¹

The Assembly,

(i) Welcoming the accession of eight central and eastern European countries to the EU, thus anchoring them solidly in a region where stability and security are a mutual interest;

(ii) Recalling that the EU represents a unique exercise in reconciliation and common purpose among democratic states committed to a social market economy and the rule of law;

(iii) Aware that following the 1 May 2004 wave of accessions, much needs to be achieved before the countries of the western Balkans can meet the obligations for EU membership;

(iv) Accepting the European Commission's recommendation to start accession negotiations with Croatia, which now meets the Copenhagen political criteria and is cooperating with the International Criminal Tribunal for the Former Yugoslavia (ICTY);

(v) Satisfied that with its Stabilisation and Association Process, the EU has established a comprehensive programme to help the remaining countries of the western Balkans (Albania, Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, and Serbia and Montenegro) make progress towards a realistic application for EU membership;

(vi) Recognising that this process has already resulted in significant improvements in the region in terms of stability, functioning democracy and implementation of the reform agenda;

(vii) Noting that the 2003 Thessaloniki European Council reinforced the SAP by including in it new instruments, and that this year European Partnerships are being introduced for each SAP country, which set both short- and medium-term priorities for action;

(viii) Appreciating the fact that the EU, in preparing the western Balkan countries for possible future membership, is also assuming military and police responsibilities aimed at creating a secure environment and helping countries develop effective police forces which operate in accordance with western European standards;

(ix) Concerned by the prevalence and extent of organised crime in Albania, which has also spread to other countries in the region and into western Europe;

(x) Regretting that the political will of successive Albanian governments has been insufficient to address this problem, which is adversely affecting healthy economic development and constitutes a serious obstacle to greater transparency in politics;

(xi) Observing that WEU's Multinational Advisory Police Element (MAPE) was replaced by an EU Police Mission with a far narrower mandate, whereas the Albanian police is, as yet, far from fully prepared to cope with the demanding task of fighting organised crime which challenges the rule of law;

(xii) Judging that in the light of the European Commission's assessment which states that the fight against organised crime and corruption and the functioning of the judicial system are of particular concern, the EU should expand the mandate and size of its police mission in Albania in order to help the country meet Copenhagen standards of law enforcement and prevent the further spread of crime of Albanian origin into neighbouring countries and beyond;

(xiii) Agreeing that the EU can open negotiations with Bosnia and Herzegovina on a Stabilisation and Association Agreement only when the country has made sufficient progress in the 16 areas for reform indicated in the Feasibility Study, achievement of which has so far been hampered by the slow process of political adaptation to EU standards and the under-development of its national and governmental institutions;

(xiv) Regretting, however, that progress on improving the political situation has been slow and that the institutions of government and state are still under-developed;

(xv) Regretting also that too much power in Bosnia and Herzegovina rests in institutions of local and regional government with strong ethnic and nationalist allegiances;

(xvi) Welcoming the recent defence reform establishing a unitary State Ministry of Defence to oversee the single command of the country's two separate armies and hopeful that the reforms will also be implemented in practice;

(xvii) Recognising the activities of the EU Police Mission in Bosnia and Herzegovina but regretting that, due to the reduced mandate and size of this mission, it is unable to guide and accompany the Bosnia and Herzegovina police on a number of core tasks, such as the fight against organised crime;

(xviii) Noting the EU's intention to take over responsibility from NATO's SFOR as the foreign military presence which for some time to come will remain essential to maintain peace and security in Bosnia and Herzegovina and whose authority must be established ab initio;

(xix) Insisting that the future EU force will need to include a robust "gendarmerie-type" element to perform those tasks for which most military personnel are not trained and which normal police forces cannot perform;

(xx) Noting that the closest coordination in the fight against terrorism between all military forces, police and civilian authorities is absolutely essential, and that in Bosnia and Herzegovina this issue must not become the subject of disputes between national and international authorities over their respective areas of competence and should be handled in cooperation with both the EU and NATO;

(xxi) Paying tribute to the late President Boris Trajkovski of the former Yugoslav Republic of Macedonia for his steadfast endeavours as a moderate leader who supported national unity and the early integration of his country in the Euro-Atlantic structures;

(xxii) Conscious of the social importance of religious, historical and cultural traditions, and insisting that religious and cultural sites must be effectively safeguarded and that mutual confidence and respect must exist between communities, enhanced by a progressive educational system;

(xxiii) Convinced that the Provisional Institutions of Self-Government have an important role to play in Kosovo in combating extremism and intolerance among the population;

(xxiv) Believing that any further postponement of discussions on the issue of a final status for Kosovo can only contribute to a deterioration of the present situation in which the lack of economic development and massive unemployment are leading to even greater frustration and tension owing to the uncertainty over Kosovo's long-term future;

(xxv) Considering that there is an urgent need for UNMIK to revitalise the economy with all possible support for sound privatisation;

(xxvi) Recognising that cohabitation of different ethnic groups in a multi-ethnic society cannot be imposed on the communities concerned from without and that, in order to provide security and social services for Serb communities within Kosovo, the parallel structures established for the purpose may have to be recognised, regularised and, if need be, supported by the Provisional Institutions of Self-Government,

1. Maintain a high priority for a strong European multi-dimensional effort using all available instruments to increase the prosperity, stability and security of the western Balkan region as a whole;
2. Insist that NATO continue to keep a substantial visible presence in the western Balkans, especially in Bosnia and Herzegovina and Kosovo with adequate trained reserves available for rapid deployment to the Balkan theatre;
3. Deploy adequate, well-trained forces to Bosnia and Herzegovina to assume the role currently being carried out by SFOR, with an experienced commander and staff to carry authority from the first day of their mandate;
4. Work towards the closest cooperation between the EU Stabilisation Force in Bosnia and Herzegovina and the residual NATO presence in that country to ensure a clear delineation of the roles and responsibilities established between the two organisations;
5. Coordinate with the United Nations a further steady, progressive hand-over of responsibilities for domestic governance in Kosovo from UNMIK to the elected provisional government in Pristina from November 2004;
6. Insist that the Contact Group of five nations on Kosovo agree by early 2005 a strategy for the definition of an internationally recognised status for Kosovo which commands the confidence of the people of Kosovo across the community divides and which will be acceptable to its neighbours;
7. Urge NATO to implement a thorough reform of the Kosovo Protection Corps to render it more cost-effective with the training, equipment and personnel necessary for the full implementation of its designated roles;
8. Encourage, where appropriate with EU assistance, training and support for an educational system and further development of public services throughout the western Balkans, combining professional competence and reliability with full accountability to their democratically elected governments;
9. Support the establishment of a strong judicial and penal system based upon human rights to underpin with consistency the rule of law and to ensure that this system is properly resourced;
10. Maintain its commitment to a full recognition of the necessity for minorities to participate actively in the governance and the institutional, social and cultural development of the countries in which they live;
11. Demonstrate its political, diplomatic and, if necessary, military support for the integration of the western Balkans in the Euro-Atlantic structures.

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EXPLANATORY MEMORANDUM

1. At a very early stage after the cold war, central and eastern European countries made it clear that it was their ambition to become members of the EU and, for a number of them, that ambition was fulfilled on 1 May of this year. With the exception of Slovenia, the constituent parts of the Federal Republic of Yugoslavia have been through a difficult period of dissociation and transition, which has not yet ended.
2. The conflicts in the western Balkans led to serious delays in preparing the countries concerned for their future EU membership. After the Dayton Agreements, the EU therefore made a special effort to bring stability and prosperity to the region and also to motivate the countries to step up reconstruction and reform efforts in order to make up for the precious time lost during a series of conflicts, and move closer to the goal of European integration.
3. In 1990, the EU developed the Stabilisation and Association Process (SAP) for the western Balkan countries (Albania, Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia and the former Yugoslav Republic of Macedonia), as the central part of the Stability Pact.
4. The SAP concentrates on six key target areas:

5. At the November 2000 Zagreb summit, the countries of the region agreed to a clear and detailed set of objectives and conditions. In return for the EU's offer of the prospect of accession on the basis of the Treaty on European Union (TEU), the 1993 Copenhagen criteria and an assistance programme to meet the objective of EU membership, they undertook to abide by the conditions set by the EU and use the Stabilisation and Association Process and, in particular, Stabilisation and Association Agreements (SAAs), in order to make the preparations necessary to meet accession requirements.
6. Each country is expected to conclude an SAA, which is tailored to its specific circumstances, but the final objective is always full association with the EU after a transitional period during which it must fulfil core obligations. Effective implementation of an SAA is a prerequisite for any further assessment by the EU of a country's prospects of accession.
7. SAAs place the emphasis on respect for democratic principles and strengthening links between western Balkan countries and the European Union's single market. They make provision for the establishment of a free trade area with the EU and set out rights and obligations in areas such as competition and state aid rules and intellectual property, thus enabling countries to begin to align their economies with those of the EU member states.
8. An essential part of the SAP is the EU's CARDS (Community Assistance for Reconstruction, Development and Stabilisation) programme. It consists of support for the reforms and institution-building needed to comply with SAA obligations. SAAs also include a clear commitment to regional cooperation.
9. The June 2003 European Council confirmed the European perspective for the western Balkan countries as potential EU candidates and decided that the Stabilisation and Association Process would be enhanced by new initiatives designed to provide them with even more support in their endeavours to become members of the European Union.
10. The European Council² endorsed the General Affairs Council's conclusions of 16 June 2003, including "The Thessaloniki Agenda for the Western Balkans: moving towards European Integration" aimed at strengthening relations between the EU and the western Balkans through an "enriched Stabilisation and Association Process"³. The Thessaloniki Agenda proposes that a number of instruments that proved successful in the pre-accession process followed by the first group of new central and eastern European member states be incorporated in the SAP. The most far-reaching of these are the European Partnerships. These will be drawn up for each SAP country and will identify priorities for action and serve as a checklist against which to measure progress and provide guidance for financial assistance. The countries concerned are expected to draw up national plans for the implementation of the partnerships. Progress will be monitored in the Commission's Annual Reports. The Thessaloniki Agenda for the Western Balkans also states that "the EU will invite, as appropriate, the SAP countries to align themselves with the EU démarches, declarations and common positions on CFSP issues". Moreover, the parliaments of the SAP countries are encouraged to establish contacts with those of the member states.
11. An EU-Western Balkans Summit was held in Thessaloniki, Greece, on 21 June 2003, immediately after the European Council meeting. The heads of state and government of the EU member states, the acceding candidate states and Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia and Serbia and Montenegro as "potential candidates", adopted a Declaration in which they agreed to meet periodically, within the framework of a high-level multilateral forum, the "EU-Western Balkan Forum" to "discuss issues of common concern, to review progress of the countries of the region on their road to Europe, and to exchange views on major developments in the EU"⁴. The new EU-Western Balkan Forum is an integral part of the Stabilisation and Association Process. As well as meetings of heads of state and government, it anticipates annual meetings of foreign ministers, ministers responsible for justice and home affairs and meetings of other ministers, where appropriate, to promote political dialogue and cooperation in the area of the Common Foreign and Security Policy. The first meetings within the framework of the EU-Western Balkan Forum of foreign ministers and of ministers responsible for justice and home affairs took place, respectively, on 9 December and 28 November 2003.
12. On 12 December 2003, in Brussels, the European Council⁵ called on the countries of the western Balkans "to intensify their reform efforts, especially in areas which are essential for EU integration, in particular public administration, the judicial system and the fight against organised crime and corruption". It also stated that it expected all countries of the region and the parties concerned to cooperate fully with the International Criminal Tribunal for the former Yugoslavia (ICTY).
13. Enhanced Community financial support will also be provided to western Balkan countries. The SAP is already underpinned by substantial EU financial assistance. According to the European Commission's Third Annual Report on the SAP (2004), the EU has allocated around €5 billion to the CARDS programme for the period 2000-2006. The main focus of Community assistance has gradually shifted from infrastructure rehabilitation and democratic stabilisation (including aid to refugees) to institution building and justice and home affairs.
14. The 2004 Annual Commission Report on the SAP for south-eastern Europe⁶ gives a general review of the situation and an individual assessment of the SAP countries. It states that "many challenges remain for the countries to complete their transition to fully functioning democracies and market economies and to be able to sustain a closer relationship with the EU. The countries need to ensure the proper functioning of democratic institutions and to uphold the rule of law. Their administrative capacity and ability to implement and enforce legislation and reforms need to be strengthened. (...) Further efforts are needed to achieve reconciliation in the region. (...) Several countries are still not fully cooperating with the ICTY, a legal obligation which must be respected and a condition for a closer relationship with the EU. All countries need to fight more vigorously organised crime and corruption which continue to hamper reform and economic development. (...) The countries need to improve the business climate and the competitiveness of their industries, attract foreign direct investments and increase the pace of reforms. (...) Recent events in Kosovo were a serious setback and confirm that the Kosovo question remains critical for the stability of the region".
15. The enlargement of the EU to take in ten new member states (1 May 2004) is not expected to have a negative impact on the countries of the western Balkans which are participating in the SAP. Indeed, none of these countries can as yet claim to have achieved stability and prosperity. The main reasons for the lack of economic development are the all too well-known endemic problems of the region such as organised crime, corruption and the lack of proper legal systems, combined with a weak and unreliable judiciary and police forces with serious shortcomings. This also explains why so few foreign investors are attracted to the region.
16. With the SAP, the financial assistance programme and increasing responsibilities in military and police operations in the region, the EU is making a dedicated effort to prepare the western Balkans for integration in the European institutions, but this strategy can succeed only if the countries concerned are themselves prepared to make a serious effort to meet their obligations.
17. The difficulty is that most countries will in fact not be ready for accession for a long time. It also has to be said that although the political leaders and parties in power in a number of countries publicly state their support for EU integration, they do not see this as serving their own designs. The present state of affairs provides them with a degree of influence and economic power which they will lose once their country has adapted to EU rules and regulations. While professing their dedication to reform, they are skilfully delaying the adaptation and transition process, often with the support of the electorate as a result of long-standing traditions of ethnic and political clans in the region.
18. In the following chapters, your Rapporteur will examine the problems besetting each of the countries concerned.

19. On 8 July 1997, at the NATO Madrid Summit, the Czech Republic, Hungary and Poland were invited to begin accession talks with the Organisation. The NATO heads of state and government reaffirmed on that occasion that the Alliance remained open to new members in a position to contribute to security in the Euro-Atlantic area. They decided to review the enlargement process when they next met in 1999. To support this process, aspiring members were strongly encouraged to participate actively in the Euro-Atlantic Partnership Council and the Partnership for Peace. The NATO heads of state and government recognised the positive steps taken to establish democracy and the rule of law in a number of south-eastern European countries, especially Romania and Slovenia.
20. The Czech Republic, Hungary and Poland became full members of NATO in March 1999. At the Washington Summit on 24 April 1999, NATO members offered practical support to aspiring countries through the Membership Action Plan (MAP)⁷. The heads of state and government underlined that their commitment to enlargement was part of a broader strategy of projecting stability and working together with NATO partners to build a "Europe whole and free". They welcomed the progress made by a number of countries aspiring to join the Alliance towards meeting the responsibilities and obligations of membership. In this context, they mentioned the former Yugoslav Republic of Macedonia's progress on reforms.
21. On 21 November 2002, at the NATO Prague Summit, seven of the 10 aspirant nations were invited to join NATO. On 29 March 2004, Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia and Slovenia became parties to the North Atlantic Treaty and members of NATO. In Prague, the NATO heads of state and government commended the former Yugoslav Republic of Macedonia "for the significant progress it has achieved in its reform process and for its strong support for Alliance operations, as well as for the important steps it has made in overcoming its internal challenges and advancing democracy, stability and ethnic reconciliation". They pointed out that they would continue to help both the former Yugoslav Republic of Macedonia and Albania, including through the MAP, to achieve stability, security and prosperity, so that they could meet the obligations of membership. In this context, they also agreed "to improve their capacity to contribute to Albania's continued reform, and to further assist defence and security sector reform in the former Yugoslav Republic of Macedonia through the NATO presence". They encouraged both countries to redouble their reform efforts emphasising that "they remain under consideration for future membership"⁸.
22. On 3 June 2003, the NATO Foreign Ministers reaffirmed that the present round of enlargement would not be the last. NATO's door remained open. They commended "Albania, the former Yugoslav Republic of Macedonia and Croatia for their continuing reform efforts and their pursuit of regional cooperation", maintaining that those countries would "need to continue to implement the extensive political, economic, defence and other reforms identified through the MAP process, in order to advance their candidacies. (...) The Membership Action Plan will remain the vehicle to keep aspirants' progress under review, and we encourage each aspirant to take ownership of the reform process and to pursue vigorously their key reform objectives" ⁹.
23. Senior NATO officials are not expecting any country to be invited to join the organisation at the next NATO summit, to be held in Istanbul on 28 and 29 June. Even if the door remains open, their common understanding is that countries like Albania, Croatia and the former Yugoslav Republic of Macedonia, are not yet ready. Nevertheless, the latter's accession to NATO is seen in some circles as urgent and vital for shoring up stability (internally and externally). They therefore recommend that the government and NATO redouble their efforts to ensure the country qualifies for entry to NATO no later than the next major round of enlargement.

1. Recent political developments

24. Albania has been going through a difficult period of transition. Just twelve years ago it was the most isolated country in Europe. Early efforts to introduce democracy and build a market economy were severely hampered by the lawlessness and economic collapse which followed the failure of the pyramid schemes in 1997. In 1999, at the height of the Kosovo crisis, Albania had to contend with the influx of over 460 000 refugees.
25. The country has made some progress since 1999. Although there has been a considerable decline in its economy (averaging 6.0% to 6.5%), government revenues have been secured through a reform of the customs and tax services. Albania's trade regime has been modernised and liberalised, and the country became a member of the World Trade Organisation (WTO) in September 2000. Small and medium-sized enterprises have been privatised but the process of privatising larger companies is not making enough progress. In spite of some achievements in modernising the economy, a great deal remains to be done.
26. Tensions between the main political parties and within the ruling Socialist Party (SP) are threatening the country's stability. In mid-December 2003, the SP re-elected Prime Minister Fatos Nano as party leader by 465 votes to 65 for the former President, Rexhep Mejdani, and 41 for Tirana's mayor, Edi Rama. Within the SP tensions continued to run high between Prime Minister Nano and former Prime Minister Ilir Meta, who resigned as Deputy Prime Minister and Minister for Foreign Affairs in July 2003 following a quarrel with Prime Minister Nano. Mr Meta's supporters joined forces with the opposition to block Mr Nano's attempts to appoint new ministers. Eventually, on 29 December, Prime Minister Nano succeeded in winning parliamentary approval for a major reshuffle after the SP had signed a coalition agreement with smaller parties including the Social Democratic Party of Albania (PSD) and the Union for Human Rights (PBDNj)¹⁰. On 7 January 2004, Namik Dokle was appointed Deputy Prime Minister and Kastriot Islami Foreign Affairs Minister.
27. At the beginning of February 2004, the opposition parties staged violent demonstrations in Tirana, which were condemned by both the EU and the United States. Supporters of the PSD, led by former President Sali Berisha, demanded Mr Nano's resignation and protested against the government's failure to improve living standards. The EU's representative in Albania, Lutz Saltzmann, praised the restrained action taken by the police, which fired shots into the air to deter the demonstrators.
28. As the Political Committee observed in last year's report on the region, it has to be accepted that for as long as Fatos Nano and Sali Berisha, who are sworn adversaries, continue to have a preponderant influence over politics in Albania, the country cannot be expected to make any real progress.
29. In addition to power struggles, which are not conducive to healthy political activity, there are also plenty of other problems to be addressed. Despite EU support through the CARDS programme¹¹, the economy is still in a very bad state and the country is plagued by corruption, the organised trafficking in human beings and illegal trade and smuggling.
30. Albania is keen to become a member of NATO and successive Albanian governments have opted for a strategic partnership with the former Yugoslav Republic of Macedonia, which is pursuing the same objective. Albania has been a member of NATO's Partnership for Peace programme since 1994. Since 1999, it has also taken part in NATO's Membership Action Plan (MAP), set up in order to offer practical support to aspiring countries. On 21 November 2002, at the NATO Prague Summit, seven of the 10 aspirant nations were invited to join NATO. Albania was not among them but the NATO heads of state and government pointed out that they would continue to help Albania to achieve stability, security and prosperity so that it could meet the obligations of membership. In this context, they agreed "to improve their capacity to contribute to Albania's continued reform" and emphasised that Albania remained "under consideration for future membership"¹². At the Prague Summit, Allies and Partners also decided to intensify their links through Individual Partnership Action Plans (IPAP) and Albania subscribed to this enhanced cooperation process. No country is expected to be invited to join the organisation at the next NATO summit, to be held in Istanbul on 28 and 29 June. Even though the door remains open, it is a common understanding that Albania and other south-eastern European countries are not yet ready for membership. Nevertheless, through the Partnership activities, Albania is very active within NATO and sent 70 soldiers to Bosnia and Herzegovina as part of Operation SFOR and 23 soldiers to Afghanistan as part of Operation ISAF. It also sent the same number to Iraq to support the international military coalition led by the United States.

2. Albania in the EU's Stabilisation and Association Process

31. As is the case for the other countries of the western Balkans, the European Union's relations with Albania are anchored in the Stabilisation and Association Process (SAP). Albania has made steady progress under the SAP as demonstrated by the fact that on 31 January 2003 it began Stabilisation and Association Agreement talks with the EU. Negotiations are continuing and in all probability it will be quite some time before they can be concluded.
32. The main objectives of the SAP in respect of Albania are as follows:

33. Over the period 1991-2004 the EU allocated a total of 1273.1 million euros to Albania of which the main contributions were made under the PHARE programme and, from 2001 onwards, under the CARDS programme. The second largest contribution took the form of loans from the European Investment Bank (EIB) and of humanitarian assistance, which ended in 2001.
34. According to the EU¹³, what Albania needs to do at present is to concentrate on the following tasks in particular: preserving political stability, strengthening democracy, ensuring that elections are free and fair and that human and minority rights are respected, intensifying the fight against fraud, corruption, organised crime and trafficking, substantially increasing law-enforcement capabilities (notably through an improved public order system and a more effective judiciary), reinforcing the structures responsible for channelling international financial aid, improving fiscal sustainability, completing the privatisation process in all strategic sectors, properly addressing the energy crisis, resolving issues related to the ownership of land and developing an efficient property market.
35. In its 2004 Stabilisation and Association country report on Albania¹⁴, the European Commission underlines that "despite some progress in specific areas, many of the recommendations included in the 2003 Stabilisation and Association Process (SAP) report have not been properly implemented. The political climate has not allowed for sound reform implementation. (...) The medium-term sustainability of economic growth as well as the country's ability to alleviate poverty are being jeopardised by political uncertainty and limited reform focus. (...) Of particular concern are those issues central to the rule of law. These include the fight against organised crime and corruption and the functioning of the judicial system", as well as public administration reform.
36. In a meeting with the Albanian Foreign Minister, Kastriot Islami, High Representative Javier Solana urged Albania to accelerate reforms in the areas of the rule of law and the fight against corruption and organised crime. It was made clear that negotiations on a Stabilisation and Association Agreement could be accelerated, but only subject to the explicit condition that concrete and rapid reforms were made in these three areas¹⁵.
37. Further progress now depends on Albania's ability to address the serious challenges it is facing in the many areas referred to. Other areas in which it is working with the EU are customs, statistics, the development of infrastructure, local community development, agriculture, cross-border cooperation, the environment and education.

3. A Police Assistance Mission of the European Community to Albania (PAMECA)
and Small Arms and Light Weapons (SALW)

38. A Police Assistance Mission of the European Community to Albania (PAMECA) was set up on 21 December 2002. The mission continued the work done by the Multinational Advisory Police Element (MAPE) led by WEU, which operated in Albania between May 1997 and June 2001. In the autumn of 2001, the European Commission established a PHARE-funded police assistance project (ECPA) in order to ensure continuity and a smooth transition from the MAPE mission to the PAMECA mission. The EU Police Mission consists of some 15 international staff from EU member states and 21 local staff. The scope of the mission is to provide advice, training and expertise to the Ministries of Public Order and Justice. Advice is provided to both ministries on how to improve cooperation between the police and prosecution services. Training and expertise are provided to the Albanian police force in important areas such as the fight against organised crime and counterfeiting and in the use of information technology in the service. The long-term aim of the project is to help establish a more effective police service in Albania so that it can investigate and prevent criminal activities and ensure public order in the country, working in full cooperation with the judiciary.
39. One major question is whether the EU police mission will be able to implement its mandate successfully in its present set-up and size, given the scale of the problems it is supposed to solve.
40. The EU is also helping with the destruction of ammunition for small arms and light weapons (SALW) in support of a NAMSA (NATO Maintenance and Supply Agency) project¹⁶. This project, which started on 31 July 2003 under Canada's responsibility, is due to be completed by December 2006 at a cost of some 6.4 million euros funded by 15 NATO member and partner states and by the European Union¹⁷.

1. General state of affairs

41. Although there has been a significant economic recovery since the war, helped by a massive international reconstruction effort and some 5 billion euros in aid, domestic economic potential has not yet been adequately mobilised and growth has slowed down. GDP in Bosnia and Herzegovina is still at around 60% of its pre-war level.
42. Officially, up to 40% of the population is unemployed, while around 20% lives below the poverty line and a further 30% close to it. However, economic data in Bosnia and Herzegovina has to be interpreted cautiously, as statistics are unreliable and a large black market economy distorts the picture. The privatisation process is making progress but is mostly limited to small-scale businesses. For large enterprises (more than 50 employees) privatisation has been slower and only very few strategically important companies have been privatised. Lack of political will (large, key enterprises are considered to be "cash cows" for political parties), social concerns, company debt and corruption have all put off potential foreign investors. All this means that privatisation in Bosnia and Herzegovina is lagging behind compared with neighbouring countries.
43. The High Representative's "Bulldozer Initiative", whose objective is to remove administrative and bureaucratic obstacles to business and investment, has yielded encouraging results. The first phase led to the adoption of 50 reforms by the government in May 2003, while a second phase resulted in another 50 reform recommendations being submitted to the government in November 2003. Partly as a result of this initiative, investment levels in Bosnia and Herzegovina have continued to rise.
44. In November 2003, the European Commission published a Feasibility Study reviewing Bosnia and Herzegovina's state of readiness with a view to opening negotiations on a Stabilisation and Association Agreement with the EU. On that occasion, the Commission expressed the hope that it would be in a position to recommend opening these negotiations in 2004. However, that would only be done if Bosnia and Herzegovina made sufficient progress in 16 reform areas which were identified in the Feasibility Study.
45. In a working paper giving an update on the present state of affairs, published on 1 April 2004, the Commission expressed mixed feelings and very moderate optimism. It stated that progress on improving the political situation had been sluggish and that government and state-level institutions were still underdeveloped. As regards the economy, international aid was on the decline while the government still had to establish a framework favouring much-needed private investment.
46. It is still of concern that in too many areas where progress has been achieved it has been possible only as a result of international pressure and there is no evidence of significant improvement in the contributions of the government and parliament.
47. All judges and prosecutors have recently been going through a process of re-selection. The Bosnia and Herzegovina State Court and the Prosecutor's Office are now operational but dependent on international funding and staff.
48. Some success has been recorded in fighting organised crime, and trafficking cases have been brought to successful prosecution. There has also been an improvement in cooperation between the Bosnia and Herzegovina Public Prosecutor, the police and the State Border Service.

2. Defence reform

49. Defence reform is an important condition for Bosnia and Herzegovina's integration into international institutions and for its membership of NATO's Partnership for Peace programme.
50. This defence reform should result in a unified army under civilian control. Since the Defence Reform Commission was established in May 2003, some major progress has been made. It proposed a legislative package defining state-level defence structures, including a unitary state ministry of defence, state-level command and control, parliamentary oversight and a significant reduction in the size of the armed forces. Parliament adopted this package in December 2003 and the legislation is now being implemented, although there have been some delays.
51. The first state defence minister of Bosnia and Herzegovina, Nikola Radovanovic, a Bosnian Serb, was appointed on 15 March 2003. Minister Radovanovic has one Bosnian Croat and one Bosnian Muslim deputy and will oversee the single command of the country's two separate armies, the army of the Federation of Bosnia and Herzegovina (VF) divided into a Bosniac (VF-B) component and a Bosnian Croat (VF-H) component, and the army of Republika Srpska (VRS).
52. Under the new legislation, the Minister will reduce the ministry's civilian staff by 25% while a large part of its military staff will be replaced by civilians. The Minister will continue to comply with the principle of equal representation of the country's ethnic groups in the armed forces. At present, all army units are still composed of troops belonging to the same ethnic group and the Minister argues that it may take another few years before units become multi-ethnic.
53. As the armed forces still do not have the appropriate training facilities, a number of NATO member states provide Bosnia and Herzegovina's army with training for peacekeeping operations. However, from September 2004 a national training centre will start to train soldiers, warrant officers and peacekeeping officers. The ultimate goal is to have a fully professional army, but due to budgetary constraints the army will consist of a combination of professionals and conscripts for the foreseeable future.

3. The European Union Police Mission

54. The European Commission's November 2003 Feasibility Study on Bosnia and Herzegovina emphasised that the complexity of the existing multiple police forces added to costs and complicated coordination and effectiveness. In a country of less than four million inhabitants, there are ten Federation of Bosnia and Herzegovina cantonal police forces, one police force for Brcko, one for the Federation of Bosnia and Herzegovina, one for Republika Srpska, the State Border Service (SBS), the State Information and Protection Agency (SIPA), judicial police and financial police. In all there are some 17 000 staff costing € 180 million. Over the years, cooperation and effectiveness have improved but there are still many operational difficulties, such as the lack of a central database, different forces using different information systems, and the fact that "hot pursuit" into another entity is not permitted. Apart from that, costs are spiralling because of duplication in training and equipment and crime-fighting abilities are limited because of financial and technical constraints.
55. An EU Police Mission (EUPM) is helping reform police forces in Bosnia and Herzegovina with the aim of establishing and consolidating sustainable policing arrangements in accordance with best European and international practice. Its present mandate runs from January 2003 to December 2005. The current strength of the EUPM is 887, consisting of 489 international police officers (390 from the EU member states and 99 from 18 non-EU member states and Canada; 61 civilian experts and 337 local staff).
56. The EUPM's strategic priorities are:

57. In order to meet these priorities, seven main programmes have been established covering the following thematic subjects and specific branches: crime police, criminal justice, police administration, internal affairs, public law and order, state information and protection agency and state border service. EUPM guides, monitors and inspects with the aim of enhancing police managerial and operational capabilities and also monitors the exercise of appropriate control over the police.
58. In operational terms, EUPM priorities are to develop an intelligence-led approach to fighting organised crime and to reinforce the security of returnees. Recently, a state commission presented proposals for a single state-level intelligence agency which, due to political disagreement, was rejected by the Council of Ministers. The High Representative then requested the Council to forward the draft law to parliament, which adopted it in March 2004. This new intelligence agency starts work on 1 May 2004, with oversight by a parliamentary committee.

4. The transition of SFOR to a future EU force

59. Although the security situation in Bosnia and Herzegovina has improved significantly since the end of the war in 1995 and conventional military threats are virtually non-existent, there are still a number of threats to security in the country which require attention, in particular those emanating from organised crime and corruption, international terrorism, civil unrest and ethnic tension.
60. The NATO-led Stabilisation Force (SFOR) is therefore still engaged in a mission which is vital for maintaining peace and security in Bosnia and Herzegovina, helping to ensure sustained stability and deterring a renewed outbreak of violence.
61. SFOR is currently concentrating on:

62. At its Brussels Summit on 4 December 2003, NATO stated that the improved security environment in Bosnia and Herzegovina allowed for a further reduction of SFOR. In implementing this decision, SFOR aims to reduce its troops from 11 000 at the beginning of 2004 to 7 000 by 1 June 2004.
63. That same day, after a NATO-EU ministerial meeting, the NATO Secretary-General and the EU Presidency stated that: "NATO allies will assess options for the future size and structure of SFOR including the possible termination of SFOR by the end of 2004 with the possible transition to a new EU mission within the framework of the "Berlin Plus" arrangements and to a new NATO Headquarters Sarajevo".
64. The United States is keen to pass as much of the burden of maintaining military forces in the Balkans to the Europeans, but at the same time it wants to maintain some political influence over EU military missions in the region. It has already decided that it will keep its large military base near Tuzla.
65. Since December 2003, NATO and the EU have been working together in close consultation with the authorities of Bosnia and Herzegovina in order to ensure a smooth transition from SFOR to its successor, assuming that in June 2004 the EU will take the decision to accept that responsibility by the end of the year.
66. As a firm advocate of the EU taking on more operations and burden-sharing, the United Kingdom is one of the candidates for commanding the EU force in Bosnia and Herzegovina, which is expected to be given an initial three-year mandate. However, many details regarding the respective responsibilities of NATO and the EU force still remain to be discussed.
67. It has already been decided that NATO will keep a headquarters in Sarajevo with some 240-250 military and civilian staff. The primary role of this headquarters will be to continue NATO's dialogue with Bosnia and Herzegovina on defence reform. Bosnia and Herzegovina hopes to be granted future membership of the Partnership for Peace at NATO's summit in Istanbul in June 2004. NATO is therefore keeping a careful watch on developments in the country. It wants to have the main responsibility in Bosnia and Herzegovina for the fight against terrorism and all matters regarding the search for indicted war criminals. It also wishes to keep the special force of around 500 Italian carabinieri under its own command rather than placing it under EU command.
68. While the EU is aware that NATO will have to continue to have an important role in Bosnia and Herzegovina, it argues that its future military force will be able to assume all its responsibilities, including the search for indicted war criminals and their transfer to The Hague.
69. EU military specialists argue that the EU force will have to include a robust "gendarme-type" element in order to perform those tasks for which the military have not been trained and which normal police forces cannot perform. They add that in the foreseeable future Bosnia and Herzegovina will continue to need the back-up of a well-equipped and trained international "gendarme-type" force. This is partly because the EU Police Mission has a non-executive mandate under which it can only give advice and monitor developments.
70. Specialists agree that SFOR now has an excellent knowledge of illegal activities in Bosnia which it shares, if it deems it appropriate, with the country's police authorities. The EU will have to decide how it is to continue this essential activity.
71. In order to maintain its situation awareness and its deterrent presence despite a reduction in troop levels, SFOR has recently deployed a network of small military teams to live among the population in "host houses" and it is thought that the future EU force will adopt this practice.
72. Although it is generally assumed that Bosnia and Herzegovina is not a specific target for international terrorism, military observers argue that it is a country where terrorists can hide, where trafficking for terrorist purposes is still relatively easy and where illegal training camps can operate and weapons can be kept in hiding or be transferred illegally. Close cooperation between all military forces, police and civilian authorities in the fight against terrorism is absolutely essential and it would be counterproductive if this issue were to become the subject of a dispute between different authorities over their respective areas of competence.
73. As recent events in Kosovo have demonstrated, it will be very important for the EU force to have up-to-date situation awareness and sufficient over-the-horizon reserves at its disposal in order to be able to cope with a possible deterioration of the security situation.
74. Due attention should be paid to ensure that all the different national units of a future EU force will operate under similar instructions. Specific national operating restrictions could result in reduced effectiveness of the EU force.
75. As mentioned earlier, the EU military operation in Bosnia and Herzegovina will be conducted under the Berlin Plus rules, with NATO providing assets and capabilities and, logically, the United States having some influence over the operation. It is therefore vital for the EU and NATO to prevent any ambiguity in the relations between the European Commander of the EU force and the US Commander of NATO headquarters in Sarajevo. Likewise, there should be no misunderstandings over the command chain between the EU force commander in Bosnia and Herzegovina and Deputy SACEUR in SHAPE, who is a European, which, according to some, could run via the American AFSOUTH Commander.
76. Finally, the EU is preparing to give its final approval for the handover of SFOR operations to an EU force in June 2004. Preparations for this handover cannot, however, wait until then. Work has started on the drafting of a full list of tasks and a mandate, the command structure, the location and staffing of the two regional headquarters, a combined joint statement of requirements and arrangements for the sharing of intelligence. The creation of a planning cell and the drafting of a list of contributing nations are tasks that have to be tackled as soon as possible.
77. At its meeting on 26 April in Luxembourg, the EU General Affairs Council adopted the general concept of the EU mission. This text defines the short, middle and long-term objectives of the mission, the command chain and a number of strategic aspects. The EU is now ready to take over from NATO which is expected to take the necessary decision at its Istanbul summit.

5. Refugee returns

78. Considerable progress has been made with refugee returns. So far, around one million refugees and displaced persons have returned to their pre-war homes. This represents just under 500 000 returns of refugees from minority groups.
79. In January 2004, Bosnia and Herzegovina formally assumed responsibility for refugee returns, which still continue, but at a lower rate. The transfer of the Commission for Real Property Claims (CRPC) to Bosnia and Herzegovina has been delayed due to opposition from the Federation, but practically all property claims have now been resolved, with implementation of the property law nearing completion in all but a few municipalities.
80. Many of the remaining refugees and displaced persons do not wish to return to their homes because of the inadequate economic and social conditions in their area of origin.

1. General state of affairs - political and economic situation

81. On 26 February 2004, President Boris Trajkovski died in an air accident. The Speaker of the Parliament, Ljubco Jordanovski, replaced him until after the presidential elections. On 28 April, Branko Crvenkovski (SDSM) won the second round of the presidential election with 62.66% of the vote against 37.34% for Sasko Kedev (VMRO-DPMNE). The turnout was 53.39%. However, according to the VMRO-DPME, it was only 44%, well below the minimum 50% required by the electoral law. The party therefore contested the results and lodged a complaint about electoral fraud. The OSCE Observation Mission agreed that the election had been marked by major irregularities, but added that these were nevertheless "local" in a small number of polling stations. The European Commission acknowledged the election of the new President and High Representative Javier Solana called it an "example of maturity and responsibility" and "a positive sign for the region".
82. Fortunately, the tragic loss of Trajkovski - a moderate leader who supported national unity and the country joining the EU - did not have destabilising consequences for the internal political situation. The coalition government, led by Prime Minister Branko Crvenkovski, has had a fair degree of success since his Social and Democratic Union (SDSM) teamed up with former Albanian rebel leader Ali Ahmeti's Democratic Union for Integration (DUI) after winning the 2002 parliamentary elections. Both are committed to the implementation of the 2001 Ohrid Framework Agreement¹⁸, national unity and to the country's integration in the Euro-Atlantic structures, one of the government's top priorities on which there is a general consensus among all political parties. They have acted responsibly, at times courageously even, on sensitive issues like moves to establish a third state university in Tetovo and the use of the Albanian language in parliament and on passports. However, progress on security sector reform has been faltering and complex provisions on decentralisation and equitable representation - all key components of the Ohrid Agreement - have not yet yielded any tangible results. Corruption is still widespread, law and order still needs reinforcing and economic reform has so far proved unproductive. Official unemployment is running close to 30% and investment is insufficient for creating new jobs.
83. The government has now tabled draft laws on decentralisation and political leaders are confident that they will be adopted before the summer of this year. Implementation will follow rapidly and it is thought that the new laws will have a stabilising influence on the local elections to be held in late October or early November 2004. Most observers agree that the country's stability will remain precarious until the Ohrid Agreement has been implemented in full¹⁹. That also explains why, on 10 February 2004, the EU Council decided to adopt a Common Position for a period of 12 months in order "to restrict travel into or through the EU by individuals who actively promote or take part in violent extremist activities challenging the Ohrid Framework Agreement's basic principles of stability, territorial integrity and the unitary and multi-ethnic character of the State. The restriction would also apply to individuals who deliberately, repeatedly and illegitimately undermine and obstruct the concrete implementation of the Framework Agreement by actions outside the democratic process"²⁰. Indeed, some politicians such as former Prime Minister Ljubco Georgievski and senior Albanian politician Arben Xhaferi have played on anxieties and animosities, openly undermining Ohrid, and have even suggested that Macedonia be partitioned along ethnic lines.
84. Criminals and extremists continue to present a direct threat. The police force, although increasingly representative of the country's multi-ethnic make-up, still struggles to impose law and order. Poor communication on security matters often stokes ethnic tension within government and between communities. The prospect of more instability keeps foreign investment low and exerts a stranglehold on the economy. Full security may be difficult to guarantee in former crisis areas with an ethnic Albanian majority but the situation is under control and has continued to improve. Recently, a number of notorious criminal elements were arrested to the relief of the population, which had suffered from their activities in banditry and racketeering.
85. What happens in Kosovo may affect peace and stability in the region as a whole and especially in the former Yugoslav Republic of Macedonia. Albanians in that country are linked by their shared history as citizens of former Yugoslavia and by strong family and kinship ties²¹. A resurgence of ethnic violence in mid-March 2004 resulted in an immediate reinforcement of KFOR and stability in Kosovo remains precarious. However, during that crisis, political leaders and also the media in the former Yugoslav Republic of Macedonia reacted with the greatest possible restraint, and nobody tried to take advantage of the tension in the area.
86. The official position of the government is that a stable Kosovo under the rule of law is in the greatest interest of its neighbours, including the former Yugoslav Republic of Macedonia. The main political parties including the government's Democratic Union for Integration (DUI) under Ali Ahmeti take the view that the final status of Kosovo is an issue that should be resolved by the international community, together with the citizens of Kosovo and Serbia.
87. The first steps towards police reform²² have been taken with the dismantling of the former paramilitary unit known as the "Lions" and by encouraging equitable representation of ethnic groups within the force. The government has identified the main strategic priorities and the Strategy adopted in August 2003 was completed in January 2004 in accordance with European Commission recommendations. These priorities now have to be converted into a concrete action plan for all parts of the Ministry of the Interior. In the area of integrated border management, initial measures have been taken to transfer the responsibility for border control from the Ministry of Defence to the Ministry of the Interior. The priorities of the National Plan for the Fight against Organised Crime also needs to be implemented as a matter of urgency. In order to meet its obligations under the EU Stabilisation and Association Process, the country should further strengthen the police, both in its confidence-building role in society and its central task of fighting organised crime. Success in the area of police reform needs to be consolidated by through-going reform of the judiciary in order to ensure that the legal system as a whole is completely sound and compliant with European standards on the rule of law.
88. It is sad to have to acknowledge that after more than ten years of UN-sponsored discussions, there is still no solution in sight to the country's dispute with Greece over recognition of its constitutional name, Macedonia. One wonders whether more EU involvement in these discussions might not help the parties to make more progress.

2. Defence reform and NATO integration

89. A Strategic Defence Review process is currently under way in the former Yugoslav Republic of Macedonia's defence sector in order to determine the country's long-term defence goals and structures. A restructuring of the armed forces is focused on developing the capabilities of the country's Special Forces. With assistance from NATO advisers to ensure compatibility, the armed forces are being trained and equipped, and their command structures reformed, in line with the new shift of emphasis. Instead of main battle tanks, heavy armour and attack aircraft, the former Yugoslav Republic of Macedonia is planning to procure light vehicles and light tactical transport aircraft for special forces. Recently, 60 of the army's 84 T-55 main battle tanks were scrapped and the air force's SU-25 attack aircraft are for sale. According to Defence Minister Vlado Buchkovski²³, the government is aiming for a light, mobile, professional army able to respond to internal threats - such as those posed by terrorist and extremist groups - and to participate in a variety of international missions abroad, particularly within the NATO framework. The goal is to have a 70% professional army and reduce the period of national service for conscripts from nine to six months. The Defence Minister has suggested that conscription will probably end in 2007. By the end of 2007, the Army will have shed 700 officers and 1 700 civil and military personnel in compliance with NATO standards. The former Yugoslav Republic of Macedonia aims to field a three-brigade force of around 13 000 troops, of which 8 000 will be an active service and 5 000 will be reserves. In consultation with NATO's advisory team, the Defence Minister is now setting up a special training programme for reserves. The Defence Ministry is actively engaged in efforts to attain the level of ethnic representation in the armed forces required under the Ohrid Framework Agreement and is aiming to reach a 25% rate of representation of ethnic Albanians in the armed forces. At present, they account for more than 10% of NCOs and soldiers. The process of reaching a fair rate of representation in the officers' ranks will take more time but special efforts are being made to achieve satisfactory results. To combat regional instability, the government has decided to work closely with regional partners, notably Albania, through joint exercises.
90. Defence Minister Vlado Buchkovski has observed that the "NATO Prague Summit took serious steps to address the evolving needs of the Partners, particularly through the adoption of the Individual Partnership Action Plans" but feels that "it is time to take this commitment further. (...) This will require a move towards a differentiated relationship with subgroups of partners along functional and geographic lines"²⁴. In particular, he thinks that NATO could do more to unify its approach to the Balkans, which would encourage greater regional cooperation on issues of common concern and enable the partners in the region to carry out NATO tasks jointly. A focused and unified approach such as this would generate impetus to make progress in regional security and defence cooperation. In particular, it might focus on: (a) stimulating defence interdependence through burden sharing and capability specialisation across the region; (b) improving information-sharing and situational awareness, and encouraging mutual support in areas of defence and general emergency planning; (c) developing PfP regional training centres into centres for specialised training focused on capabilities relevant for the new missions and threats.
91. The former Yugoslav Republic of Macedonia currently contributes troops to the International Security Assistance Force (ISAF) in Afghanistan (11 military personnel) and to the international coalition forces in Iraq (some 30 military personnel). It hopes to be included in the next wave of NATO enlargement, together with Albania and Croatia.

3. Progress towards EU membership through
an enhanced Stabilisation and Association Process

92. Over 90% of the population support EU membership²⁵. Immediately prior to his untimely death on 26 February 2004, President Trajkovski had announced plans for the former Yugoslav Republic of Macedonia to submit its application for EU membership, making it the third country of former Yugoslavia²⁶ to apply for EU membership. In Dublin, on 22 March 2004, Prime Minister Crvenkovski formally submitted his country's application. On that occasion, Javier Solana, EU High Representative for the CFSP, observed: "The application is only the start of a long and difficult journey. Thorough implementation of the 2001 Framework Agreement and far-reaching reforms across the whole spectrum of society will be required to move this process forward"²⁷.
93. On 23 February 2004, the EU General Affairs Council adopted a Council and Commission Decision approving the conclusion of the Stabilisation and Association Agreement²⁸ between the EU and the former Yugoslav Republic of Macedonia, following completion of the ratification process in the member states. The Agreement took effect on 1 April 2004 and Mr Solana acknowledged that "this (...) the first of its kind to complete the ratification procedures by all national parliaments, put the bilateral relationship on a new and closer basis"²⁹. The aims of the agreement are: to provide an appropriate framework for political dialogue which will allow the development of close political relations between the EU and the former Yugoslav Republic of Macedonia; to support the former Yugoslav Republic of Macedonia's efforts to develop its economic and international cooperation by approximating its legislation to that of the Community; to promote harmonious economic relations and gradually develop a free trade area between the Community and the former Yugoslav Republic of Macedonia; and finally to foster regional cooperation.
94. At the end of March 2004, the EU submitted a "proposal for a Council decision on the principles, priorities and conditions contained in the European Partnership with the former Yugoslav Republic of Macedonia"³⁰. It lists short and medium-term priorities for the former Yugoslav Republic of Macedonia's preparations for further integration with the European Union, identified in the Commission's 2004 Annual Report, and serves as a checklist against which to measure progress. The former Yugoslav Republic of Macedonia is expected to respond to the European Partnership by preparing a plan with a timetable and details of how it intends to address the priorities specified in the Partnership. Progress in implementing those priorities will be monitored regularly by the Commission.
95. The EU's Special Representative in Skopje has pointed out that the most urgent task is to establish the rule of law, which includes judicial and police reform. Such reforms are badly needed to attract the foreign investors who are vital for developing the economy. Until now, these reforms have been blocked or delayed by vested interests but with pressure from the EU and other international organisations mounting, the government has become aware that it has no longer any choice. A concentrated campaign against organised crime has also been put off for too long but, in this regard, the EU's Proxima mission is expected to make a vital contribution to the government's policy.
96. With reference to the former Yugoslav Republic of Macedonia, the European Commission's Stabilisation and Association report for 2004³¹ states that: "in many areas, the reform process is still in its infancy and will need further efforts to be converted into concrete changes and bring the expected benefits. (...) Many challenges still lie ahead, whether on decentralisation, good governance, reform of the security sector or the rule of law. Implementing the reforms will also imply strengthening administrative capacity, by transforming the public administration into a modern and accountable public service. (...) Foreign direct investment has been particularly low, and is likely to increase significantly only if institutional and political stability continue to improve and reforms are pushed forward. Serious progress in establishing the rule of law will also be crucial". Javier Solana has emphasised that the overall direction of developments is right but that the pace could, and should, be quicker³².
97. Between 1992 and 2003 the former Yugoslav Republic of Macedonia benefited from European Union assistance totalling some €677 million. In 2003, €43.5 million was allocated to the country under the CARDS³³ Programme. Implementation of financial assistance takes place through the European Agency for Reconstruction³⁴. In 2003 the programme concentrated on the following sectors: democracy and rule of law (inter-ethnic relations and support to civil society); economic and social development (private and financial sector development, trade, local infrastructure development, social cohesion and education); justice and home affairs (integrated border management, immigration and asylum, the fight against crime) and the environment. In the CARDS Programme 2004 (€51 million) priority will be given to selected key projects designed to help the country move forward in implementing the Framework Agreement and, in particular, in the sector of equitable representation of minority ethnic communities in public administrations, especially during decentralisation.
98. Besides this, the Commission has now completed implementation of the EU macro-financial assistance agreed by the Council in November 1999 (€80 million) and increased by €18 million in December 2001. The third tranche (a €10 million grant and a €10 million loan) was released in May-June 2003. The fourth and last tranche (an €18 million loan and an €8 million grant) was released in December 2003. Moreover, as of 31 December 2003, the European Investment Bank supported projects in the former Yugoslav Republic of Macedonia to the tune of €163 million, concentrated in the areas of transport, small and medium-sized enterprise financing and the energy sector.

4. WEU and the former Yugoslav Republic of Macedonia (FYROM)

99. The conclusion of the Stabilisation and Association Agreement between the EU and the former Yugoslav Republic of Macedonia could pave the way for the country to become a WEU associate partner. In recognition of the progress made by western Balkan countries in developing democratic systems and moving closer to the European Union through the EU Stabilisation and Association Process, and wishing to give the national parliaments of those countries greater opportunities to participate in it's work, the Assembly decided to offer them "increased possibilities for participation as observers in the work of the Assembly and its committees"³⁵. To that end, the Assembly has already invited the parliament of the former Yugoslav Republic of Macedonia (together with those of Albania, Bosnia and Herzegovina, Croatia and Serbia and Montenegro) to become "special guests" of the Assembly³⁶. This means that: (a) the former Yugoslav Republic of Macedonia parliament may appoint a delegation of two representatives to the Assembly; (b) the delegation may participate regularly in the Assembly's plenary sessions - with the right to speak, but without voting rights - and likewise in any colloquies and seminars organised by the Assembly; (c) the delegation may designate one representative to attend meetings of the Political Committee, the Defence Committee, the Technological and Aerospace Committee and the Committee for Parliamentary and Public Relations. That representative would have the right to speak but not to vote. These are thought to be useful political steps towards familiarising the western Balkan countries, including the former Yugoslav Republic of Macedonia, with the democratic dimension of European security and defence policy.

5. The European Union Police Mission (EUPOL Proxima)

100. In 2001, ethnic tension leading to armed skirmishes between ethnic Albanian guerrillas and the army brought the country to the brink of civil war. The crisis was defused in August 2001 when the various parties signed the EU-sponsored Ohrid Framework Agreement. The NATO weapons collection operation "Essential Harvest" was followed by two further NATO operations: "Amber Fox" and "Allied Harmony", each with a 1000-strong force and a mandate to enforce peace on the territory of the former Yugoslav Republic of Macedonia. On 17 January 2003, the late President Trajkovski formally invited the European Union to take over NATO's Allied Harmony operation and on 27 January, the Council of Ministers adopted a joint action³⁷ allowing the first EU-led military operation, "Concordia"³⁸, to be launched on 31 March 2003. This was the first implementation of the arrangements made under the "Berlin plus" formula agreed in December 2002, allowing the EU to avail itself of NATO assets and capabilities for EU-led operations. The 400-strong mission, with an initial 6-month mandate, was extended on 29 July 2003³⁹ to run until 15 December 2003.
101. On 16 September 2003, the Prime Minister asked the EU to send a police mission to support the country's police reform strategy. The invitation was the result of the active role played by EU High Representative/WEU Secretary-General Javier Solana and the then EU Special Representative in Skopje, Alexis Brouhns. On 29 September 2003, the EU Council adopted a joint action⁴⁰ establishing the European Union Police Mission in the former Yugoslav Republic of Macedonia (EUPOL "Proxima"). NATO has maintained an assistance mission and continues to play an active role in security reform.
102. Operation Concordia ended on 15 December 2003⁴¹ and the operational phase of EUPOL Proxima began on the same day. This, then, is the second civilian policing mission⁴² and the fourth operation under the European Security and Defence Policy (ESDP). EU police experts will monitor, guide and advise the former Yugoslav Republic of Macedonia police, thus promoting the introduction of European policing standards. The mission mandate is valid for 12 months. The mission started its effective operational work somewhat later, due to the fact that the acquisition of equipment is subject to the laborious European Commission tender procedures and to delays in force generation. Negotiations on a one-year extension of the mission will soon start. Experts note that it may need three years to be cost-effective and there may be a further extension in a different format. Its main goals are to support: (a) consolidation of law and order, including the fight against organised crime, focusing on the most sensitive areas; (b) practical implementation of the comprehensive reform of the Interior Ministry including the police; (c) the operational transition towards, and the creation of, a border police as a part of the wider EU effort to promote integrated border management; (d) the local police, in building confidence among the population.
103. On 17 November 2003, along with the acceding states, the EU Council invited candidate countries, non-European NATO members and potential partners to make offers of contributions to EUPOL Proxima. Similarly to the Police Mission in Bosnia and Herzegovina, third countries participate in EUPOL Proxima provided that this is "without prejudice to the decision-making autonomy of the EU and the single institutional framework". On 10 February 2004, the Political and Security Committee (PSC) accepted contributions from some non-EU countries: Norway, Switzerland, Turkey and Ukraine. Early in March 2004, negotiations were opened with a view to concluding individual agreements with all third countries wishing to take part in EUPOL Proxima. The mission is made up of contingents from 19 EU member states, and four third countries. Other potential partners (Canada, Russia and the United States) have been invited to contribute.
104. Around 200 personnel from EU member states and other countries are taking part in the mission (uniformed police and international civilian personnel). Police officers are seconded by member states. International civilian and local staff are recruited on a contractual basis by EUPOL Proxima and may also be seconded by contributing states. Chief Commissioner Bart d'Hooge (Belgium) is the Head of the Police Mission⁴³. The security of Proxima personnel is the responsibility of the Macedonian security forces. However, during the planning phase and on the basis of the risk assessment, it was decided to back up Proxima personnel with a small (some 30-strong) armed unit or "Proxima Protectional Element" (PPE). Its presence in the former Yugoslav Republic of Macedonia will be reviewed by the EU Council every three months. As provided by the Council joint action, Proxima's headquarters is in Skopje. A central co-location unit of up to 10 officers is based in the Ministry of the Interior. Its job is to advise on the fight against organised crime and on transforming the local police into a multi-ethnic service, as provided under the Ohrid Framework Agreement. Some 30 officers are stationed at border crossings with Kosovo, Albania and Serbia, where most of the drugs, arms and human trafficking takes place. A further 150 officers are deployed around the country (in Skopje, Tetovo, Kumanovo, Gostivar and Ohrid) and operate at local police-station level.
105. The chain of command is as follows: EUPOL Proxima is led by the Head of Mission/Police Commissioner, who takes responsibility for its day-to-day management; the EU Special Representative reports to the Council through the High Representative. On 1 February 2004, Søren Jessen-Petersen (Denmark) took over from Ambassador Brouhns as the EU Special Representative in the former Yugoslav Republic of Macedonia. The Political and Security Committee (PSC) now has political control and strategic direction of Operation Proxima as was previously the case with Concordia. Consequently, it falls within the area of responsibility of the EU Council of Ministers, which retains power of decision over the objectives and termination of the mission.
106. Under the EU Council joint action⁴⁴, the budget for the mission is €15 million for the first year. This breaks down as follows: (a) a maximum of €7.3 million for mission start-up costs; (b) a maximum of €650 000 for running costs for 2003, including per diem of €100 per person; (c) a maximum of €7 056 million in running costs for 2004, non-inclusive of per diem, all to be financed from the Community budget⁴⁵.
107. Although the situation in the former Yugoslav Republic of Macedonia seems generally to be under control, there are still sensitive areas of the country where political violence might flare up. Despite local support and OSCE complementary activities⁴⁶ on the ground, EUPOL Proxima's task is an ambitious one, bearing in mind the modest capabilities made available by the contributing states. The EU police mission faces two main challenges⁴⁷. The first of these is a shortage of personnel: as with earlier police missions, the force generation process for Proxima has shown that member states still face difficulties in meeting needs and filling vacant positions in the mission. Shortfalls are also due to financial considerations and in this case were connected with the issue of whether per diem costs should be covered from the Community budget or by member states - an issue still decided on a case-by-case basis for ESDP civilian operations. At present, the mission is 10% understaffed and this may well be a permanent problem. The second is __procurement procedures: as mentioned above, EUPOL Proxima is obliged to follow European Commission tender regulations which are known to be cumbersome. In practice, this can lead to a lack of essential materials or equipment. On the ground, Proxima has so far benefited from the support and cooperation of local authorities and police forces. Initial problems over intelligence sharing and unrestricted access to classified information between EU countries and the former Yugoslav Republic of Macedonia, especially in the fight against organised crime have now been solved.
108. The EU's Proxima mission will therefore address glaring police weaknesses, including poor communications, coordination and intelligence sharing, a lack of information technology and communication equipment, overly centralised control, weak multi-ethnic teams, and continuing reliance on heavy-handed tactics. In particular, "Proxima" plans not merely to monitor but actively to assist in situations on the ground, and explore ways of improving intelligence gathering and sharing. There is also a need to introduce a merit-based system of career planning and a method of updating knowledge on a regular basis. Overall, and in view of recent violence in Kosovo, the EU's police presence is considered to be a particularly useful and stabilising element.

1. Political situation in Serbia

109. Some of the important issues in the western Balkans are still without a satisfactory solution, in particular the future status of Kosovo, cooperation with the ICTY, politics in Republika Srpska and its further integration in Bosnia and Herzegovina. All these issues are in one way or another related to the situation in Serbia and Montenegro, officially united in a State Union with strong centrifugal tendencies. Therefore, there can be little doubt that the political situation in Serbia and Montenegro is one of the keys to peace and stability in the western Balkans.
110. The last Committee report on "Developments in South-Eastern Europe"⁴⁸ argued that the network of nationalist elements in the police, army, political elite, state security structures and organised crime gangs were still the greatest threat to regional security in the Balkans. In return for their loyalty to the regime, oligarchs had gained a monopoly over a range of profitable businesses, acquired exclusive state licences for lucrative import and export activities and extended their influence to the electronic media and printed press. After the fall of the Milosevic regime in October 2000, the new government, instead of limiting their power, even helped new oligarchs to gain power.
111. The oligarchs deny that they manipulate the media to support their political and business interests, but political reformists fear that the whole range of their activities constitute a threat to democratisation, and an obstacle to Serbia's economic stabilisation and its rapprochement with the EU. Reformists in Prime Minister Kostunica's government are determined to fight the oligarchs and all forms of crime through legislation, combined with a fundamental reform of the Serbian judiciary and police, but it may be some time before the results become visible.
112. The government of Zoran Zivkovic, Zoran Djindjic's successor, has not been able to engage in any significant political or economic reform, partly because of increasing inter- and intra-party disputes. The Democratic Opposition of Serbia (DOS) coalition was born out of necessity and was not based on close ideological and political views. For two years the coalition suffered from the defection of key members, allegations of corruption and declining public support. The profound differences between the two main parties - the Democratic Party (DS) formerly led by Djindjic, and Kostunica's Democratic Party of Serbia (DSS) − were the main reason for their failure to secure a stronger coalition. The biggest disagreement within the DOS was over the extradition of those indicted for war crimes, especially Milosevic. The DS is the party most in favour of cooperation with the ICTY. The DOS coalition was also accused of being associated with organised crime and Milosevic-era elements, and of not respecting institutions and the rule of law. In July 2003 the DOS was involved in a parliamentary vote manipulation scandal involving the dismissal of an opposition party vice-president from his role as governor of the country's national bank. The narrow DOS majority in parliament led to the DS being accused of turning to the Socialist Party of Serbia (SPS) and other right-wing nationalist parties in order to obtain the support needed to pass legislation.
113. As a result, the reformist coalition, which had ruled the country since the fall of the Milosevic regime, was officially dissolved in November 2003. Early general elections took place on 28 December, a year ahead of schedule. The elections were peaceful, free and fair. Voters had a choice of 19 political parties. For a party to obtain any seats in parliament, it needed at least 5 % of the vote. Six parties managed to secure seats in the 250-seat Assembly of Serbia, but no party obtained enough to govern without coalition partners.
114. The elections resulted in success for Vojislav Seselj's ultra-nationalist Serbian Radical Party (SRS), which won 82 seats. Seselj, indicted for war crimes, had given himself up to the ICTY in February 2003. Vojislav Kostunica's moderate nationalist party, the Democratic Party of Serbia (DSS), won 53 seats. The central reformist party of the former DOS coalition, the Democratic Party (DS), won only 37 seats. It had lost support with the electorate because of corruption scandals and economic decline in the country. The former G17 Plus expert group of Miroljub Labus obtained 34 seats. The Serbian Renewal Movement - New Serbia (SPO-NS) won 23 seats and former President Slobodan Milosevic's Socialist Party of Serbia (SPS) secured 21 seats.
115. In February 2004, Dragan Marsicanin of the DSS was elected Speaker of the Serb Parliament and as such acting President of Serbia. Vojislav Kostunica was appointed Prime Minister after having managed to form a minority coalition supported by a total of 109 seats in Parliament. The DSS holds nine ministries in the new government, while the G17 Plus and the coalition of the Serbian Renewal Movement and New Serbia each have four. The G17 Plus leader, Miroljub Labus, is Deputy Prime Minister in charge of European integration. The minority government is supported by the SPS with the votes of its 22 parliamentarians. The ultra-nationalist SRS, which is openly anti-Western and deeply hostile to cooperation with the ICTY, heads the opposition.
116. Dragan Marsicanin resigned from the post of Speaker to take up the post of Minister of the Economy and was replaced by Predrag Markovic, the G17 Plus deputy leader.
117. Prime Minister Kostunica's government has identified the following as being among its priorities: determining the status of the union with Montenegro, resolving the Kosovo issue, drafting a new constitution, adopting anti-corruption legislation, strengthening the state institutions in Serbia and the state union with Montenegro. It aims to reduce public spending and taxes, maintain a stable currency, control foreign debt, encourage the start-up of small and medium-sized businesses, attract foreign investment and increase exports. Mr Kostunica has promised to continue with the process of privatisation that began under the previous government, but has said corruption allegations will be investigated.
118. A top priority for the Serbian government is the drafting of a new constitution, planned to be adopted by the end of June 2004. The new government has pledged to bring the Serbian Constitution into line with the Constitutional Charter of Serbia and Montenegro.
119. It has also expressed its determination to reform the security service. Serbia's justice and interior ministers have said they are committed to pursuing the reforms and liberating the judiciary and police from political influence. Interior Minister Dragan Jocic has said there will be changes in senior police personnel, but has emphasised that no revenge tactics will be used. New police legislation is to be introduced and the government has also pledged to continue its fight against organised crime.
120. The status of the once-feared secret police force, known as the Security Information Agency, and the control it exercises are a subject of debate within the leading parties. Experts on the agency claim the parties' diverging interests may leave it at a crossroads, with one road leading towards more democratic accountability, and another towards politicisation and potential abuse⁴⁹. The Serbian government has appointed Rade Bulatovic, a former security adviser to Kostunica, to be the new director of the state's Security Information Agency, replacing Misa Milicevic, appointed in January 2003 by Prime Minister Djindjic. The SPO-NS is a strong advocate of de-politicising the agency.
121. On 25 February 2004, the National Assembly of Serbia adopted amendments to the Law on the Election of Deputies, abolishing inter alia the 5% electoral threshold for parties of national minorities. The Republican Electoral Commission will determine, on the basis of their respective programmes, which parties are to have the right to represent national minorities.
122. The DS elected Boris Tadic, former defence minister in the Serbia and Montenegro federal government, as its new leader.

2. Presidential elections

123. Serbia has not had an elected President since January 2003 when former President Milan Milutinovic surrendered to the war crimes tribunal in The Hague. The most recent presidential election, held on 16 November 2003, was declared invalid due to an insufficient voter turnout (36%). For an election to be valid, Serbian election law formerly required at least 50% of those eligible to cast a vote. Tomislav Nikolic, the candidate of the nationalist, pro-Slobodan Milosevic Radical Party, obtained 46% of the vote.
124. The newly elected national assembly of Serbia adopted amendments to the Law on the Election of the President of the Republic. The amended law abolished the 50% voter turnout required for a successful first electoral round. This controversial requirement had prevented the election of presidents in the past. The changes in electoral provisions are in line with the EU's recommendations for facilitating the electoral process.
125. Thus, Serbia's new president will be elected by a simple majority and presidential elections will be held in June. Tomislav Nikolic will stand again as the candidate of the ultra-nationalist SRS. Other candidates are the Minister of the Economy, Dragan Marsicanin, who has the support of the government coalition, and Boris Tadic, leader of the Democratic Party. It is obvious that an electoral victory for Nikolic would enhance the nationalist revival in Serbia, but recent opinion polls seem to indicate that Boris Tadic still has a fair chance of winning the election⁵⁰.

3. Cooperation with the International Criminal Tribunal
for the former Yugoslavia (ICTY)

126. Both the EU and the US have made full cooperation with the ICTY a prerequisite for Serbia and Montenegro's integration in the Euro-Atlantic structures. As from April 2004, the US Administration suspended its financial aid to Serbia and Montenegro, arguing that it did not meet the criteria of good cooperation with the ICTY. Out of $ 100 million earmarked for 2004, $ 43 million had already been spent.
127. Many consider Serbia a "safe haven" for war criminals and in all some 15 Serbs indicted by the UN court are believed to be hiding in Serbia, including four top police officers and army generals accused of war crimes in Kosovo.
128. Prime Minister Kostunica is a declared opponent of the ICTY and has said that he is not prepared to extradite indicted Serbs. He has also accused the ICTY of an anti-Serb bias. This position is not shared by his partners in the minority coalition but is appreciated by both the SPS and the opposition SRS and large sections of the population.
129. The Prime Minister wants all Serbs indicted by the court to stand trial in Serbia and Montenegro. He has said he will try to meet all the conditions necessary for those indicted to stand trial before national courts, rather than be extradited to the tribunal. He has also said that his government will seek a deal with the UN to allow those convicted by The Hague to serve their sentences in Serbia. He is determined to seek a form of "two-way cooperation". For reasons of time constraint, the ICTY has now made clear it that it will allow mid- and low- level cases to be transferred to local courts.
130. In March 2004, the trial of six Serbs charged with killing more than 200 civilians in the Croatian town of Vukovar in 1991 opened in a special Serbian court. This is the first major war-crimes trial held in Serbia. Human rights groups have said the Serbian authorities may use the trial to attempt to prove that only the suspects, not those who issued orders to them, are guilty. The new government has announced legislative changes to guarantee the judiciary's independence and improve the country's handling of war crimes. It has already established a Commission for Judiciary Reform.
131. The newly-elected Serbian Parliament has adopted a controversial bill, the Act on the Rights of The Hague Tribunal Indictees, which gives war crime suspects the right to financial compensation and state benefits. This legislation divided the coalition government: the DSS, SRS and SPS voted in favour while the SPA and the NS opposed it and the G17 Plus abstained. Serbia's Constitutional Court has now imposed a temporary ban on this controversial law. The government is presently seeking ways of abolishing the special Serbian Court for judging war and mafia crimes, established by the previous government.

4. Kosovo

132. On 17 and 18 March 2004, an outburst of ethnic violence in Kosovo spread from the divided city of Mitrovica to the rest of the province. A very large number of homes were damaged or destroyed, together with schools, medical facilities, many churches and some monasteries. UNMIK property and staff also came under attack. The violence left 19 people dead, eleven of whom were Albanian and eight Serb, while some 900 were injured. A total of some 4 000 Serbs were displaced⁵¹. KFOR immediately called in reinforcements and after two days the violence stopped. In the aftermath, two UN police officers were killed. Some 2 600 soldiers from NATO's Strategic Reserve Force were drafted in to reinforce KFOR which, at the outbreak of the violence, had some 18 500 troops engaged in its peacekeeping operation in the province. The first reserve troops arrived in Pristina within one day, at around midday on 18 March, and a total of 2 621 supplementary troops had arrived by 25 March.
133. According to a report⁵² published by the International Crisis Group, the two days of violence were not organised by any one body. There was "a series of local outbursts and actions without central planning, but with a high degree of local planning". There is no doubt that radical, extremist and criminal elements exploited the existing unrest to their own advantage.
134. Apparently, neither UNMIK nor KFOR was prepared for the level of violence. KFOR had gradually abandoned its policy of having a fixed position, replacing it by one of ensuring security in specific areas. Since mid-2002 in particular, many duties previously carried out by the UN police (CIVPOL) have been transferred to the Kosovo Police Service (KPS). In November 2003, KFOR handed over responsibility for the main Ibar bridge in Mitrovica, a recurrent flashpoint, to CIVPOL and the KPS, on the grounds that the situation had gradually improved enough for further normalisation. Generally speaking, where the division of tasks is unclear, coordination proves difficult in times of unrest.
135. During the March riots there was no coherent response from any single force component. The KFOR troops reacted very differently depending on their national customs, priorities and caveats. KFOR was considerably disadvantaged by the fact that it has composite headquarters in which an average 20-25% of posts are unfilled. There is little cohesion or experience among its staff, consisting of both NATO and non-NATO officers, and staff members rotate frequently. CIVPOL, whose police officers come from even more widely divergent national backgrounds, was unable to take appropriate action. The KPS suffered from a lack of clear central guidance with each unit reacting as it thought best.
136. During the two days of violence the Serbian Government kept army units on alert near the demarcation line with Kosovo in case they had to intervene to protect Serbs. However, the Government was persuaded to exercise restraint and refrain from intervention. In any event, KFOR would probably not have had enough forces to control all the riots and at the same time deter a Serbian military incursion.
137. In recent years, KFOR has been scaled down from some 50 000 troops in 1999 to its present size. Police forces have increased and Kosovo now has 3 600 UN police and 6 000 local police officers. In the province, apart from religious buildings, some 200 minority enclaves and 3 000 isolated farms need protection.
138. Prime Minister Rexhepi showed political courage in visiting troubled areas to defuse tensions and recognised that it was the duty of his government to put things right. A reconstruction fund with an initial budget of €5 million has been set up and the government has promised to take swift action to repair damaged property so that people can return to their homes as soon as possible.
139. The outburst of ethnic violence was a grim reminder of the fact that notwithstanding a considerable international military and civilian presence and €2 billion of EU money having been spent, not including defence costs, durable peace and stability have not yet been established. Both the international organisations present and the Provisional Institutions of Self-Government (PISG) of Kosovo fear that more violence may follow if the economic development and future status of Kosovo remain in the present deadlock.

140. The events in March refocused some of the international community's attention on a situation which has arisen with its active involvement. Logically, the present situation was not meant to last. In the foreseeable future, a proper solution must be found for the status of Kosovo which is acceptable to all, or at least to the largest possible majority of those living in the province. The following paragraphs set out in some detail the opinions of those closely involved in the issue.

- UNMIK

141. In accordance with UN Security Council Resolution 1244, Kosovo has been under the United Nations Interim Administration Mission in Kosovo (UNMIK) since 1999. UNMIK has responsibility for organising and overseeing "the development of provisional institutions for democratic and autonomous self-government, pending a political settlement". It is also responsible for "facilitating a political process designed to determine Kosovo's future status, taking into account the Rambouillet accords". The resolution also stated that during the interim administration, the people of Kosovo could "enjoy substantial autonomy within the Federal Republic of Yugoslavia".
142. Such wording is somewhat ambiguous but in 1999, after a military operation which initially did not have the approval of the UN Security Council and with President Milosevic still in power in Serbia, there was no possibility of finding a better text which would not be vetoed. At present, the situation appears to be in deadlock, with neither Serb nor Albanian Kosovars satisfied.
143. Today UNMIK is still responsible for security, the police force and the judiciary and also has the task of overseeing the management of the province.
144. The Provisional Institutions of Self-Government (PISG) started functioning in 2002. They already have substantial responsibilities for budgetary matters, taxation and fiscal control but UNMIK is still reluctant to hand over too many of what it considers to be vital responsibilities. It argues that the PISG lack professionalism and experience, but the PISG argue that they can only gain these through practice.
145. In December 2003, the UN High Representative in Kosovo, Harri Holkeri. launched UNMIK's "Standards for Kosovo" document⁵³ setting out what the PISG need to achieve before the province's future status can be decided. The standards cover a number of areas, including democratic institutions, the rule of law, freedom of movement, returns and reintegration, the economy, property rights and dialogue with Belgrade. Mr Holkeri has pointed out that the standards have been set precisely with the interests of the Serb community and other non-Albanian communities in Kosovo in mind. He has sought clarification from the Serbian government about its call for "substantial autonomy for the Serb community in Kosovo".
146. The UN High Representative has clearly ruled out any partitioning of the province and expressed disappointment that Serbs in Kosovo have not yet participated in the drawing up of a plan for applying the international community's standards. Together with UNMIK's partners, he considers it essential to meet those standards before talks on the province's eventual status can begin.
147. Embarrassed by the violence which it was unable to prevent or control, UNMIK released a Kosovo Standards Implementation Plan on 31 March in which it tried to give fresh impetus to its earlier "standards before status" document, proposing the implementation by the provisional authorities of eight key standards which should be met before talks on Kosovo's final status can start in mid-2005.
148. The issues concerned are institution-building, the rule of law, freedom of movement, refugee returns, economic growth, property rights, dialogue between Pristina and Belgrade and professionalism in the Kosovo Protection Corps (KPC). It may be difficult to meet the standards because of the dire state of ethnic relations, continuing extremism on both sides, divisions within the Albanian population and the prevailing feeling that the international community is reluctant to deal with the final status issue. Therefore it is important that local politicians are fully involved in implementing the standards, allowing different ethnic communities to live together without violence while participating in the work of democratic institutions.

- The European Union

149. After the violence in March 2004, High Representative Javier Solana and Commissioner Chris Patten immediately paid a visit to Kosovo, insisting that they did not want to give up on a multi-ethnic Kosovo in which all ethnic groups could live freely and without fear⁵⁴.
150. Early in April 2004, the European Commission approved the CARDS programme under which €15 million was earmarked for institution-building and good governance and helping the PISG to become more efficient and enhance the rule of law. The largest part, €31 million, was earmarked for reconstruction and economic reforms.
151. A document presented at the EU External Relations Council on 16-17 April 2004 describes the situation in Kosovo as explosive. It argues that massive dissatisfaction among the population about living conditions and the international presence is fertile ground for extremist groups. It emphasises the urgent need to guarantee security, protect minorities and repair material damage. Kosovars will have to comply with democratic criteria before a final status can be defined. Some EU member states agree with this, while others wish to accelerate that process.
152. The European Commission is now preparing a project for a European Partnership for Kosovo which might give it an incentive to meet the standards set. A document presented by Javier Solana argues that the position of UNMIK no longer meets present requirements. UNMIK needs to be restructured to reinforce its political leadership role, transformed from an executive organ into a body for strategic planning and control, and allowed to redefine the role of the various international organisations active in Kosovo⁵⁵. For the problems of the divided city of Mitrovica, High Representative Javier Solana has promised a solution before mid-2005 and a new EU-sponsored plan proposes creating two separate municipalities on condition that property belonging to displaced persons on either side is returned to its rightful owners. However, Albanians, who are in the majority, do not want a formal division and Serbs, who might accept a division, do not wish to return property to displaced Albanians.
153. The EU member states' foreign ministers had a thorough discussion of the EU's policy regarding Kosovo at their informal meeting in Tullamore on 19 April 2004. They reaffirmed that the economic and political criteria mentioned in UN Security Council Resolution 1244 would have to be met before the province's final status could be examined. An evaluation of the criteria is to take place in mid-2005. A top priority for them is to ensure the security of minorities, the reconstruction or repair of demolished or damaged churches and houses and the return of displaced persons.
154. According to High Representative Javier Solana, the dialogue between Belgrade and Pristina and between Kosovar Serbs and Albanians has to be stepped up before the province's final status can be discussed. In the framework of decentralisation, more competences should be transferred, not only to enhance the credibility of moderate leaders but also to ensure the protection and security of minorities and to build a multi-ethnic society with the participation of Kosovar Serbs.
155. However, unlike Javier Solana, who thinks that one should "not talk too much" about a final status until ethnic minorities in the province are better protected, a number of foreign ministers take the view that the discussion over Kosovo's status cannot be postponed any longer because neither Serbs nor Albanians are interested in the status quo.
156. Other ministers have suggested a "europeanisation" of the region, because they believe that the prospect of association with the EU will mitigate the question of independence or autonomy. This last suggestion seems to suit all those trying to circumvent the inevitable final status discussion.
157. At its meeting of 26-27 April 2004, the EU Council stated once again that it:

- NATO

158. The NATO Secretary-General, Jaap de Hoop Scheffer, has said that the international community should not change course on Kosovo and must keep telling Kosovar political leaders that the standards that have been set must be met. A detailed new analysis is now being carried out which should help NATO decide whether to continue with the downsizing of KFOR or not, and suggest what conclusions might have to be drawn for the whole process of force restructuring in the Balkans.
159. On 22 April 2004, the North Atlantic Council visited Kosovo. In discussions with Kosovar Albanian leaders, NATO's Secretary-General expressed his disappointment. He said that he expected them to assume their responsibilities and take a leading role in condemning ethnic violence, which should never be allowed to happen again. He reaffirmed his strong support for the "standards before status" principle. NATO's message was that the use of violence against minorities would postpone the discussion on the province's future status, rather than move it forward. The Alliance is now examining the possibility of appointing a political representative in Kosovo.

- A view from the outside

160. A recent study published by the Bertelsmann Foundation has once again clearly pointed to the quagmire into which the parties involved are sinking. It argues that in practice the unresolved final status issue stands in the way of peace, security and prosperity, thus constituting a source of ethnic tension.
161. The study argues that the only way out of the present stalemate for the international community is to replace Serbia's legal responsibility with a UN Security Council mandate for an indefinite period. The present situation, it says, created by Resolution 1244, cannot be prolonged for too long and does not allow for a real rapprochement between Serbs and Albanians. It also notes that any proposal in the UN Security Council to grant Kosovo independence will be vetoed because of Chechnya and Tibet, while the idea of restoring Serbia's sovereignty is not feasible.

- The Kosovar Albanian population and the PISG

162. Kosovo's ethnic Albanians, who make up over 90% of the population, are overwhelmingly committed to the cause of independence. The Kosovar Prime Minister, Bajram Rexhepi, has dismissed calls for the partition of the province and has recently stated that Kosovar Albanians will not accept anything short of independence. In making that claim he is voicing the opinion of practically all Kosovar Albanians.
163. The Kosovar Albanian authorities have made it clear that they do not agree with UNMIK's demand for the removal of municipal authorities and political leaders who have contributed to violence against community members through public statements and actions.
164. Recently, Prime Minister Rexhepi said that if no substantive progress is made by September 2005, the Provisional Government might unilaterally decide to hold a referendum on the status of the province or even issue a declaration of independence⁵⁶. He would prefer a gradual transition, suggesting two years of "monitored independence" which would allow a Provisional Government to assume full control while still being subject to strict international scrutiny. He argues that the peaceful and negotiated separation between Czechs and Slovaks could be an example for Kosovo and Serbia to follow.
165. Prime Minister Rexhepi recognises that the violence in March constitutes a setback for political developments, and he is leading efforts to repair the material, political and psychological damage caused by the events. There has to be a fair and thorough investigation and the culprits must be brought to justice. He thinks that a continuing presence of KFOR is important for stability in Kosovo and the region as a whole. He argues, however, that UNMIK should transfer responsibility for the judiciary and police to the PISG, which would then set up a Ministry of the Interior. The Kosovo Police Service (KPS) would subsequently be able to guarantee the safety and security of the population and the protection of orthodox monasteries and churches under the responsibility of the Provisional Government.
166. The Provisional Government is aware that it will never be able to build a strong armed force. Defence requirements could only be met in close cooperation with NATO. The Prime Minister is concerned about the economic stagnation in Kosovo. Rapid privatisation is essential but foreign investors are unlikely to be attracted until the legal situation is clarified, the rule of law can unambiguously be guaranteed and the final status has been defined.
167. Prime Minister Rexhepi recognises that his Provisional Government has great difficulty in competing with the diplomatic experience of Serbia and Montenegro which, as a member of most international organisations and having all the institutional and administrative advantages at its disposal, can represent its interests in all the relevant capitals and organisations in the world. Discussions with UNMIK have resulted in the High Representative's agreement that the Provisional Government can establish an office for foreign relations.

- The Kosovar Serbs and the Serbian Government

168. The recent appointment of a new Serbian government with pronounced nationalist leanings has intensified the debate on Kosovo's future status. Immediately after taking office, the Serbian Prime Minister, Mr Kostunica, told Parliament that he would not allow Kosovo with its majority of ethnic Albanians to gain independence. He called for the cantonisation of Kosovo or its division along ethnic lines and stressed there could be no resolution of Kosovo's final status without the involvement of Serbia and the State Union of Serbia and Montenegro. In his inaugural address, the Prime Minister proposed "substantial autonomy for the Serb community in Kosovo, meaning territorial autonomy, the partition into entities or the cantonisation of Kosovo"⁵⁷. These opinions were confirmed by the Serbian Parliament at the end of March 2004.
169. Despite the fact that UNMIK and the international organisations present in Kosovo all insist on the importance of a multi-ethnic society, there has been very little integration between Serbs and Albanians. Serbs have continued to live in their own enclaves and, with the support of the Serbian Government in Belgrade, illegal parallel structures have been developed which make Serbian integration even more unlikely. These parallel structures are providing Serbs with identity papers, building a Serbian health and education system, paying pensions and providing other services. They have also established a Serbian security force.
170. Despite the good intentions shown by the PISG under Prime Minister Rexhepi and the numerous statements by UNMIK, the EU and other international organisations actively involved in Kosovo, reassuring Kosovar Serbs that they will be protected, the recent violence seems to have led to a situation in which many displaced Serbs do not want to return to their homes in Serb enclaves in other parts of Kosovo, preferring to remain in the northern enclaves adjoining Mitrovica.
171. At the same time, many Serbian politicians are coming to see that it is highly unlikely that Serbia will bring the whole of Kosovo back under its authority. They are therefore now aiming at a "cantonisation" of Kosovo, effectively resulting in a division of the province into two different parts, with the northern part, while remaining under the protection of international forces, de facto ruled under the authority of Serbia.
172. Discussing this option is officially taboo both for the Kosovar Albanians and for the international community. Prime Minister Kostunica doubts that UNMIK's "Standards for Kosovo" process will improve the position of Serbs or promote respect for human rights in Kosovo. He says that recent events have shown that Belgrade's constructive stance towards UNMIK has not brought about positive changes in this field and he therefore thinks that both sides should work on the decentralisation of Kosovo-Metohija. He maintains that territorial and cultural autonomy for the Serb community would help break the deadlock in the field of human rights practices. He has also said that changes to this end should be treated as a separate issue from that of Kosovo-Metohija's status⁵⁸.
173. In the meantime, Kosovar Serbs are not making it easy for the Provisional Government to meet the standards either. They are determined not to do anything that might lead to Kosovo's independence and have refused to participate in UNMIK's standards policy. Many observers, however, agree that any delay in dealing with the final status issue will lead to radicalisation in the ranks of Kosovar Albanians.

174. The dialogue between Belgrade and Pristina is one of the eight standards that have to be met so that negotiations on the province's final status can be launched in mid-2005.
175. The negotiating process sponsored by UNMIK started with the opening of talks in Vienna in October 2003. These have focused on practical issues such as energy, missing persons, the return of Serb refugees to Kosovo, transport and communications. However, the effort to conduct a dialogue has been marred by tension concerning Kosovo's status. Kosovo's Prime Minister, Bajram Rexhepi, refused to attend the talks. The dialogue between Serbia and Kosovo resumed in March this year. A Serbian delegation has already visited Pristina, this being the first official visit by Serbian officials to the province since the Kosovo conflict in 1999.
176. The EU High Representative for the Common Foreign and Security Policy, Javier Solana, welcomed the first meeting at working group level between Belgrade and Pristina on energy issues. He urged political leaders from Belgrade and Pristina to fulfil the promises they had made at the beginning of the dialogue in Vienna and confirm their resolve to replace a policy of confrontation by one of dialogue as a way of resolving the region's problems.
177. The second working group meeting, on missing and kidnapped people, has focused on people reported missing before, during and after armed conflicts in the province. The Belgrade delegation included representatives of the Serbian government, the Kosovo Coordination Centre, the Serbian Red Cross and the Association of Families of Missing Serbs. The Pristina delegation included UNMIK officials of Kosovo's Provisional Institutions of Self-Government (PISG) and representatives of the families of missing Albanians.
178. The Chairman of the meeting, Francois Stam, who is a senior official of the International Committee of the Red Cross (ICRC), told a press conference after the meeting that the two sides had agreed that the meeting should continue in Belgrade in late April. Mr Stam said the meeting had been constructive because both sides had expressed a willingness to cooperate. He expressed the hope that the problem of the missing and kidnapped persons in Kosovo-Metohija would not be politicised, since it was first and foremost a humanitarian problem. He pointed out that Serbs, ethnic Albanians and other communities all have different lists and data on the missing persons. According to data provided by ICRC, over the period between January 1998 and late 2000, a total of 3 272 persons from all ethnic communities went missing. The parties agreed that the ICRC would draft rules of procedure for the working group, to be approved at meetings in the near future. The ICRC believes that resolving the sensitive issue of missing persons is essential if progress is to be made on reconciliation.

179. There can be no doubt that during and after the March riots, the Kosovar Albanians did not react as the EU and other parties which have been trying to help them in recent years would have hoped. However, Serbia and the Kosovar Serbs appear to have forgotten their actions of the past in Kosovo, particularly over the period 1989-99. One example is the pressure they have exerted to slow down the process of privatisation in Kosovo, owing to their claim of Serb ownership of what were previously socially-owned enterprises, which were often the result of changes of ownership during the Milosevic era.
180. Five years after the 1999 military operations in Kosovo and following NATO's much-heralded arrival in the province, the Kosovar Albanian population is extremely frustrated and the image of UNMIK with its "four-pillar" system has suffered considerably. Economic development and progress with privatisation have been far too slow. As a result some 60% of the population are unemployed with an additional 30 000 to 40 000 young people coming on to the labour market every year with very little prospect of work. If privatisation had gone ahead more quickly, it would have stimulated the economy and generated funds from investors for further development. Under UNMIK's Pillar IV, run by the EU, a great deal of time was spent on drawing up a privatisation plan but it came to nothing because of protests from Serbia at the end of 2003. It was decided that the Kosovo Trust Agency should carry out an exhaustive study of the ownership of each company prior to privatisation. This cumbersome procedure was bound to cause further delays.
181. The Pillar IV policy has not done anything to improve Kosovo's economic development and the decision to suspend the privatisation process has dealt a heavy blow to the potential for progress, discouraging and demotivating Kosovar Albanian investors who had been prepared to take financial risks to help develop the economy. The international community has also been far too reticent in addressing the admittedly difficult problem of the province's final status. The "standards before status" process, which was the right approach, came too late for it to be seen as anything other than delaying tactics by the majority of the population.
182. The Contact Group has now set up a "Support Group" for Kosovo involving the main international players, who visit the province every six weeks to keep abreast of developments. It has also reaffirmed its commitment to implementation of the "standards before status" plan and announced a mid-2005 progress review.
183. It is difficult to see how the standards set for returns, the rights of communities and freedom of movement for all can be met by that deadline. However, a specially adapted policy of decentralisation involving all citizens of different ethnic denominations in local government may be a realistic solution for implementing those standards. Another problem is that the Provisional Government and its authorities are not ready to take on all UNMIK's responsibilities. But they are going to have to learn the ropes quickly to ensure that there is no further delay with the gradual transfer of responsibilities. In this process it is important that they continue to receive advice from the international community, which must also keep a watchful eye on developments.
184. European Union assistance to Kosovo has gone down from 336 million euros in 2001 to an annual amount of some 55-60 million euros for the period 2004-2006. The EU should continue to provide Kosovo with substantial economic aid until the final status issue has been resolved. Maintaining the status quo in a situation in which the frustration of both the Kosovar Albanians and Serbs has reached a dangerous level is a recipe for disaster. It is no longer feasible to put off a discussion on the prospects for the province's final status based on a realistic road map. Concentrating the minds of all the citizens of Kosovo on building a state will be possible only if there are real prospects for establishing such a state in the future.

5. Montenegro

185. The political situation in Montenegro is far from conducive to the country's healthy development. Filip Vujanovic was elected President of Montenegro in May 2003 after two earlier presidential election failures in December 2002 and February 2003 because the minimum turnout required by law was not attained. The electoral law was then amended to abolish that requirement. The present government of Prime Minister Milo Djukanovic came to power in January 2003 but because of a chronic lack of resources, important ministries such as the Ministry of International Economic Relations and European Integration are unable to do their job properly. Moreover, the government has been facing growing hostility and obstruction from the opposition.
186. In September 2003, the opposition parties withdrew from Parliament, contesting the decision of the new board of management of the public television network to stop live broadcasts of parliamentary sessions. They set a number of conditions for their return, including the holding of early parliamentary elections, which have not yet been met. As a consequence, parliamentary work has been hampered. There has been intense legislative activity but the implementation of reforms has been slow.
187. The present coalition government, consisting of Prime Minister Milo Djukanovic's Democratic Party of Socialists (DPS) and Ranko Krivokapic's Social Democratic Party (SDP), is in favour of independence while the opposition is in favour of the State Union with Serbia, in accordance with the Belgrade Agreement which Montenegro signed in March 2002 under pressure from the EU. The moratorium on a referendum on independence included in that agreement will expire in March 2006. The government is now determined to organise such a referendum and suggests that the elections for a federal parliament, officially due for January 2005, before a possible referendum date, would not make much sense. In Montenegro support for independence is declining and a September 2003 survey showed that 40.6 % of the population are in favour of it while 37.4% are against.
188. Corruption and smuggling are endemic and continue to cause alarm. Allegations of government officials' involvement in human trafficking and cigarette smuggling have provoked political disputes and public indignation. The government was forced under increasing international pressure to investigate these cases and to introduce urgent criminal legislation⁵⁹. In December 2003 the Criminal Code, Criminal Procedure Code and Law on the Public Prosecutor's Office were adopted. The new legislation establishes the Office of Prosecutor for Organised Crime. The Law on Financing of Political Parties in Serbia was adopted in July 2003 followed by the Anti-Money Laundering Law in September 2003. However, anti-corruption policies are still deficient and according to some experts, the government has not even started reforming the police or the judiciary.
189. Despite the introduction of more intensive stability-oriented macroeconomic policies and the conclusion of some privatisation measures, the economic situation in Montenegro remains unsatisfactory. The annual inflation rate - 9% in 2002 - was brought down to around 7% at the end of 2003. At around 35% unemployment continues to be a structural problem and, according to some, two thirds of the adult population are unemployed. The average monthly salary is 170 euros. However, the real figure may be lower, as official data are incomplete and unreliable⁶⁰. A certain increase in growth has been recorded in the industry and tourism sectors.

6. The Union of Serbia and Montenegro and its integration into the European Union

190. The Political Committee's earlier report on developments in south-eastern Europe⁶¹ discussed the establishment of the Union of Serbia and Montenegro under strong pressure from the European Union in February 2003. This also paved the way for its integration in European structures.
191. The EU wants to admit the federation as a single entity, though officials have not ruled out the integration of two separate republics if Belgrade and Podgorica decide, after the period of three years included in the Belgrade Agreement, to use the opt-out clause.
192. The Montenegrin President, Filip Vujanovic, is in favour of separation along the lines of the Czech-Slovak model. He has said that if there is no consensus on separation, a referendum on independence should be held. Moreover, Montenegrin officials see the government of Serbia as a threat to Montenegro's development and blame Serbian politics for the delay in the European integration process. Recently, the Montenegrin President of the State Union, Mr Marovic, openly voiced his support for an independent Montenegro⁶².
193. The Serbian government insists on keeping the Union as it is. Mr Kostunica has emphasised the importance of a long-lasting friendship between the two nations and said that he expects progress in the functioning of the Union's institutions very soon. He thinks this should enable Serbia and Montenegro to continue its accession negotiations with the European Union.
194. However, two years after coming into existence, the State Union does not even have a coat of arms, a flag or a national anthem. Justice systems, economic systems and currencies remain divided and there is an internal customs border. The EU has insisted on the creation of a single economic space with a single customs service, a single market and thorough reforms of the judiciary, police and armed forces. At present, the State Union institutions have no authority to implement any of Europe's demands.
195. Despite their differences, it would appear that the governments of Serbia and Montenegro are committed to continue cooperation through regular working contacts between the two governments and their respective ministries. They have also announced their willingness to align their constitutions with the State Union's Constitutional Charter, a commitment which they had so far failed to meet.
196. Since the Constitutional Charter makes provision for the nomination of members of the State Union Parliament for the first two years by allowing the parties elected to the republic's parliament to designate representatives to the State Union Parliament after their national parliamentary elections, the Serbs drastically changed the composition of the Serbian component in that assembly. The SRS, DSS and SPS, which are opposed to Montenegrin independence aspirations, have a two-thirds majority and this is not expected to improve relations between Serbia and Montenegro.
197. The differences between the DSS and the G17 concerning the union with Montenegro could lead to disputes in the newly formed government of Serbia. The DSS is a strong advocate of consolidating the Union, while the G17 sees it as an obstacle to EU accession. It argues that harmonising tax, customs and other regulations is not in Serbia's interest.

198. The EU has expressed concern about political developments in Serbia and the formation of a government reliant on the votes of the SPS. EU foreign policy chief Javier Solana has said that such a government would have great difficulty in its political and economic relations with the international community. Even though it has been in office for only a short time, the policies of the new Serbian government have put relations with the EU under a heavy strain. In particular, its reluctance to cooperate with the ICTY, and its position on Kosovo are not considered to be consistent with the standards set by the EU.
199. Vojislav Kostunica has stated that his government will remain on course for European integration, moving Serbia forward on a pro-Europe policy. The government will be pursuing a policy of association with the EU and has started work on adapting Serbia's legislation to bring it into line with that of the EU. Compared with its Balkan neighbours, however, both Serbia and Montenegro are lagging far behind with EU integration.
200. The institutionalised dialogue between the EU and the authorities of Serbia and Montenegro re-opened in July 2003 following decisions taken by the Thessaloniki European Council in the form of an "Enhanced Permanent Dialogue". In July 2003, the parliaments of Serbia and Montenegro adopted an Action Plan to harmonise the economic systems of the members of the Union for the purpose of removing obstacles to the free movement of people, goods, services and capital. The first meetings took place in July and October 2003.
201. In August, the Union Government established a "Council for European Integration", whose members include the President of Serbia and Montenegro and the Prime Ministers of both republics. In March 2004 Serbia and Montenegro ratified the European Convention on Human Rights and the European Convention for the Prevention of Torture.
202. According to the 2004 Annual Commission SAP Report as regards Serbia and Montenegro: "the level of progress in political reforms has varied: steady progress in army reform; further progress in the areas of minority rights and regional cooperation; slower than hoped-for reform of the police and judiciary. (....) Economic stability has been preserved. However, the pace of structural reforms has slowed considerably, mainly due to the political disputes that have hampered the functioning of the institutions"⁶³.
203. Following the adoption of the Action Plan by Serbia and Montenegro in mid-2003, the EU Commission launched a feasibility study as the next step in the Stabilisation and Association Process. The Feasibility Report looks into the possibility of opening negotiations on a Stabilisation and Association Agreement on the basis of a number of criteria: the degree of compliance with SAP political and economic conditions, the overall functioning of the State Union, the existence of a single trade policy and a single market, progress on sectoral reforms and on those institutions that are necessary at state level to implement an SAA⁶⁴. However, mainly as a result of recent political instability, the feasibility study, which had been expected in March 2004, has been delayed and will now be completed later. It was postponed in order to give the authorities more time to address the remaining key issues including, in particular, political conditionality, constitutional issues and the Action Plan.
204. Altogether, it can be said that the process leading to European integration has been delayed by slow progress on creating a single market and central institutions that function properly. Montenegro's dislike of strong central institutions is not helpful. Political consensus among all those involved is needed in order to accelerate the EU integration process.
205. The EU may have to accept that a real State Union between Serbia and Montenegro is not feasible in the foreseeable future. As a consequence, it may have to consider a more flexible and realistic approach for the time being while trying to work out in more detail with both Serbia and Montenegro what role a State Union could play in the longer term.

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¹ Adopted unanimously and without amendment by the Assembly on 2 June 2004 (2^nd sitting).

² On the western Balkans, see the Thessaloniki Presidency Conclusions, 19 and 20 June 2003, paras. 40-43, http://ue.eu.int.

³ Cf. Annex A, General Affairs and External Relations Council meeting, Luxembourg, 16 June 2003, Document 10369/03 (Presse 166); http://ue.eu.int.

⁴ Cf. Document 10229/03 (Presse 163); http://ue.eu.int.

⁵ On the western Balkans, see the Brussels Presidency Conclusions, 12 December 2003, paras. 43 to 45, http://ue.eu.int.

⁶ Cf. Third Annual Report from the European Commission on "The Stabilisation and Association Process for South East Europe", March 2004 (Point 6: Conclusions); http://europa.eu.int/ .

⁷ Membership Action Plan (MAP), 24 April 1999, NAC-S(99)66; http://www.nato.int/.

⁸ Prague Summit Declaration, 21 November 2002, paragraph 6.

⁹ Final Communiqué, Ministerial Meeting of the North Atlantic Council, Madrid on 3 June 2003, paragraph 16.

¹⁰ In legislative elections held in June and July 2002, the Socialist Party of Albania (SP) won 73 of the 140 seats in the People's Assembly (the single chamber legislature), the Social Democratic Party of Albania (PSD) won four seats and the Union for Human Rights (PBDNj) three seats.

¹¹ In 2003, under the Community Assistance for Reconstruction, Development and Stabilisation Programme (CARDS), the European Commission allocated a total of 46.5 million euros in aid to Albania: 20 million was earmarked as support for the rule of law and 17.5 million for economic development; 1 million euros was intended to help with the establishment of democracy and 8 million to strengthen the public administration system.

¹² Prague Summit Declaration, 21 November 2002, paragraph 6.

¹³ See European Commission; External Relations; Albania - the European contribution; Main areas of ongoing support; http://europa.eu.int.

¹⁴ "Albania : Stabilisation and Association country report 2004", and Third Annual Report from the European Commission on "The Stabilisation and Association Process for South East Europe", March 2004,
http://europa.eu.int/.

¹⁵ Bulletin Quotidien Europe 8698, 4 May 2004.

¹⁶ Another Partnership for Peace Trust Fund project involved the destruction de 1.6 million landmines, thus enabling Albania to meet its obligations under the Ottawa Convention on the Prohibition of the Use, Stockpiling, Production, and Transfer of Anti-Personnel Mines and on Their Destruction.

¹⁷ See EU Council Decision 2003/276/CFSP of 14 April 2003 and Atlantic News, 21 August 2003.

¹⁸ The Ohrid Framework Agreement, signed by the country's political leaders on 13 August 2001, makes provision for constitutional amendments and political reform to improve the status of ethnic Albanian minority while maintaining the unity of the Macedonian state.

¹⁹ For more details, see "Macedonia: No time for complacency", Europe Report No. 149, 23 October 2003, International Crisis Group; www.crisisweb.org.

²⁰ Cf. EU External Relations Council meeting, Brussels, 26 January 2004 and Document 5908/04 (Press 42); 10 February 2004; http://ue.eu.int.

²¹ "Pan-Albanianism: How big a threat to Balkan stability?" Europe Report No.153, 25 February 2004, International Crisis Group; www.crisisweb.org.

²² "Achievements of the Ministry of the Interior in the EU Integration Process - next steps and needs", event held in the Round Hall of the Government Building, Skopje, 24 February 2004. Presentation by the Head of the European Commission Delegation, Ambassador Chiarini. See European Commission Delegation to the former Yugoslav Republic of Macedonia: www.delmkd.cec.eu.int/.

²³ See Interview with Mr Vlado Buchkovski, the former Yugoslav Republic of Macedonia Defence Minister, 13 August 2003, Jane's Defence Weekly, page 32.

²⁴ Cf. Speech by the Minister for Defence of the former Yugoslav Republic of Macedonia, Mr Vlado Buchkovski, on "Partnership's Role in Defence Reform: Between Prague and Istanbul" at the Euro-Atlantic Partnership Council meeting in Foreign Ministers' session with invitees, 2 December 2003.

²⁵ Some 87% according to The Financial Times, 26 February 2004; over 90% according to the document "FYROM: Stabilisation and Association country report 2004", published by the European Commission in March 2004 (Point 6 on "Perception of the EU"); http://europa.eu.int/ .

²⁶ Slovenia joined the EU on 1 May 2004. Croatia submitted its formal application in February 2003.

²⁷ Statement by Javier Solana, EU High Representative for the CFSP, on the occasion of the application for EU membership by the former Yugoslav Republic of Macedonia", Brussels, 22 March 2004, http://europa.eu.int/ .

²⁸ The country was the first of the region to sign such an agreement. The "Stabilisation and Association Agreement between the EC and their Member States and the former Yugoslav Republic of Macedonia" was signed in Luxembourg on 9 April 2001 (Entry into force: 1 April 2004).

²⁹ Cf. Declaration of the EU High Representative Javier Solana welcoming the entering into force of the Stabilisation and Association Agreement between the EU and the former Yugoslav Republic of Macedonia, Doc. S0096/04, Brussels, 1 April 2004.

³⁰ See http://europa.eu.int/.

³¹ Cf. "FYROM: Stabilisation and Association country report 2004", http://europa.eu.int/ .

³² Cf. Intervention by EU CFSP High Representative Javier Solana, at the EU-Western Balkans Foreign Ministers' meeting on 9 December 2003.

³³ CARDS: Community Assistance for Reconstruction, Development and Stabilisation. CARDS is the programme set up in 2000 to support countries in the framework of the Stabilisation and Association Process.

³⁴ For further information, see the European Agency for Reconstruction website: www.ear.eu.int/ .

³⁵ Cf. Order 118 adopted unanimously by the Assembly on 3 June 2003.

³⁶ Cf. Decision 26 on the follow up to Order 118 on security policy in an enlarged Europe, adopted by the Standing Committee of the Assembly on 22 September 2003.

³⁷ Council Joint Action 2003/92/CFSP adopted on 27 January 2003.

³⁸ For background information on the previous EU military force in the former Yugoslav Republic of Macedonia, see Assembly Document 1820 on "Developments in south-eastern Europe", Report submitted on behalf of the Political Committee by Mr Hancock, Rapporteur, 4 June 2003, http://assembly.weu.int.

³⁹ Council Decision 2003/563/CFSP adopted on 29 July 2003.

⁴⁰ Cf. EU Council Joint Action 2003/681/CFSP adopted on 29 September 2003.

⁴¹ The six-week voluntary disarmament programme (led by the Government of the former Yugoslav Republic of Macedonia and the United Nations Development Programme) also finished on 15 December, yielding about 8 000 illegal weapons. Estimates of the number of illegal weapons in the country range from 100 000-170 000, but compared to similar initiatives in the region, the campaign was a success.

⁴² The European Union Police Mission (EUPM) in Bosnia and Herzegovina started on 1 January 2003.

⁴³ Cf. EU Council Decision 2003/682/CFSP of 29 September 2003.

⁴⁴ Cf. EU Council Joint Action 2003/681/CFSP adopted on 29 September 2003.

⁴⁵ The mission is to be partly funded from the Community budget. In addition, each contributing state will bear the costs related to police officers seconded by it. Those costs include salaries, medical coverage, allowances, other than the per diem, and travel expenses. However, on 26 January 2004, the EU Foreign Ministers, meeting as the General Affairs Council, adopted a Joint Action amending Joint Action 2003/681/CFSP, which sets € 6 555 million as the maximum per diem amount for mission personnel funded from the Community budget in 2004 (Cf. EU General Affairs Council meeting, Brussels, 26 January 2004).

⁴⁶ The OSCE has had a Spillover Monitor Mission in Skopje since 1992 to help prevent ethnic tension "spilling over" the country's borders. With the conclusion of the 2001 Ohrid Framework Agreement, the Mission acquired a stronger mandate. The OSCE is involved in such activities as confidence-building and multi-ethnic training for the police (through its Police Development Unit) and also in projects relating to the rule of law, media development, local self-government and inter-ethnic relations. For further information: see http://www.osce.org/skopje/.

⁴⁷ These challenges are identified by Daniela Manca, in European Security Review, "The EU Police Mission Proxima in Macedonia", Number 21, February 2004, pp. 5-7; www.isis-europe.org.

⁴⁸ Assembly Document 1820 on "Developments in south-eastern Europe", Report submitted on behalf of the Political Committee by Mr Hancock, Rapporteur, 4 June 2003, http://assembly.weu.int.

⁴⁹ Z. Cnijanovic: "Parties wrestle over Serbia's secret police", www.iwpr.net, Balkan Crisis Report No. 482, 26 February 2004.

⁵⁰ Opinion poll by Faktor Plus, published in Politika, 28 April 2004.

⁵¹ Of the 130 000 Serbs who left or were chased from Kosovo after the end of NATO's military operation in 1999, only 5 000 returned between 2000 and 2004.

⁵² "Collapse in Kosovo", International Crisis Group Report No. 155, 22 April 2004.

⁵³ UNMIK, "Standards for Kosovo": http://www.unmikonline.org/press/2003/pressr/pr1078.pdf.

⁵⁴ Commissioner Chris Patten in the European Parliament, 30 March 2004.

⁵⁵ Bulletin Quotidien Europe 8687.

⁵⁶ Financial Times, 19 April 2004.

⁵⁷ http://www.serbia.sr.gov.yu/.

⁵⁸ Serbian Government press release : http://www.serbia.sr.gov.yu .

⁵⁹ For more details , see "Montenegrin Trafficking Scandals Deepens", Balkan Crisis Report No. 468, 13 November 2003, Institute for War and Peace Reporting, http://www.iwpr.net.

⁶⁰ Cf. "Serbia and Montenegro: Stabilisation and Association Report 2004", http://europa.eu.int.

⁶¹ Assembly Document 1820 on "Developments in south-eastern Europe", Report submitted on behalf of the Political Committee by Mr Hancock, Rapporteur, 4 June 2003.

http://www.assembly-weu.org/en/documents/sessions_ordinaires/rpt/2003/1820.pdf.

⁶² IWPR, Balkan Crisis Report No. 493, part II.

⁶³ Cf. "Serbia and Montenegro : Stabilisation and Association Report 2004", http://europa.eu.int/.

⁶⁴ Idem.