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Keynote Speech at the Western Balkans Summit Business Breakfast

Johannes Hahn

VIENNA – Ladies and gentlemen, It is a great pleasure to be here with you today.

The Vienna summit and top-level events such as this meeting are an opportunity to focus on the Western Balkan’s region, the strategic importance of which has again become very obvious over the last weeks.

After the terrible wars of the 1990s, many welcomed that the region had moved out of the headlines. The current migratory pressures – now not so much from the region but through it – have brought South Europe back to the front pages. If anything, these challenges have shown yet again that the EU has a vital strategic self-interest to reach out, stabilize this region and bring it closer to the EU.

But beyond that, there is another story, a positive and encouraging one that can be told.

Since 2000, the Western Balkans experienced a significant economic transformation, accompanied by a probably even more significant political stabilization.

While a lot still needs to be done, also in terms of regional reconciliation, there is no doubt that the countries now concentrate on their common European future rather than on what divided them in the past. Fostering this momentum of European integration through regional cooperation is exactly what today’s Summit is about.

This generally positive climate allowed a combination of stability-oriented macroeconomic policies and structural reforms to lead to stronger growth – nearly 5% on average between 2000 and 2008.

The global financial crisis did of course hit this positive dynamic hard. Output has increased by an average of less than 1.5% since 2009. Unemployment, especially youth unemployment has risen and ranges from 36% to 63% across the region. Progress in reducing poverty was halted. Macroeconomic imbalances rose again with government deficits and long term debt both increasing.

This has had a direct impact on the lives of the people and also on the political process. The implementation of reforms has slowed as the political determination is weaker.

Still, the good news is that the potential for the future is there. And maybe even more importantly: that he political will is there. Across the region we see an increasing re-engagement in the reform process. Despite persisting risks and high uncertainties, growth prospects seem now to be much better than in the past years.

This means that the economic environment for the Western Balkans is more conducive to growth and reforms than ever since the start of the crisis. It is now time to accelerate the reforms to progress in the economic transformations in your countries.

Indeed, this transition process is far from complete. And very importantly, the economic transformation in the region goes in parallel with the process of accession to the European Union.

Under the Copenhagen criteria, transition to a functioning market economy, capable to withstand market forces and competitive pressure within the EU is part of the conditions for accession to the Union. Let’s be clear: this is absolutely fundamental, and the EU Commission will be very firm in policing this “economic conditionality”.

At the same time, functioning and competitive market economies are the key for growth, job creation and ultimately well-being of the people in the countries.

But our work is not only about economic reforms in the narrow sense of the word, and about negotiating the economic chapters in the accession negotiations. Good economic governance; respect for the rule of law and effective public administration reform are even more fundamental as ingredients of prosperity.

So the countries need to work on those “fundamentals first”! Without them, economic actors will not have the confidence and certainty they require to undertake much needed investment.

Foreign Direct Investment levels are low and fluctuating across the region with only Montenegro having seen average FDI flows in excess of 5% of GDP over the last decade. Not only will these measures boost inflows, they will also help boost their effectiveness.

For these reasons I am attaching increasing importance to economic governance in its broadest sense across the Western Balkans. Not in terms of simply ticking the boxes of sector reforms, but in terms of helping to create an overall investment climate, in cooperation with the private sector.

The contribution of the business community to this endeavour is most important. Business co-operation should accompany the political and economic co-operation.

Enlargement negotiations is not a mere procedure; it is above all a process. a process through which the countries adapt their  legislation but most importantly their society and the way you do things .

And in this process everything is interlinked. We need rule of law and an efficient public administration to create the right business environment , to attract foreign direct investment , to stimulate entrepreneurship, turn brain drain into brain circulation and create jobs. Through this process you will become ready to join the EU but above all offer a better quality of life for your citizens.

So I would like to urge you and encourage you to get involve in the accession process in your countries and to continue to create links with partners in the EU

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