European Western Balkans
European Integration

Key findings of the 2021 European Commission Report on Serbia

Serbia and EU flags; Photo: European Council

BRUSSELS – European Commission has published the 2021 country reports for the six Western Balkans states and Turkey. Here we present the key findings in the country report on Serbia.

The fundamentals of the accession process

As regards the political criteria, the Serbian Parliament and political forces continued to engage in the inter-party dialogue led by the European Parliament, with a view to forging broad cross-party consensus on EU-related reforms, which is vital for the country’s progress on its EU path. However, the political climate during the reporting period remained polarised. For the process to be successful, all political actors need to engage constructively and in good faith, and implement the measures identified in September 2021 by the Co-facilitators from the European and Serbian Parliament during the inter-party dialogue.

On elections, Serbia started addressing long-standing recommendations by the Office for Democratic Institutions and Human Rights of the Organisation for Security and Cooperation in Europe (OSCE/ODIHR) and the government reinstated the relevant working group on elections. All key recommendations should be implemented in an inclusive and transparent manner, based on wider political consensus and well ahead of the next elections.

The Serbian Parliament’s mandate, which was formally constituted in August 2020, has been limited in time from the start, as the political leadership announced new elections for no later than spring 2022. Overall, the Parliament significantly reduced the use of urgent procedures and adopted a new code of conduct for Members of Parliament. However, inflammatory language against political opponents and representatives of other institutions expressing diverging political views was still used during parliamentary debates. All politicians should counter hate speech and contribute to a political dialogue on EU-related reforms, particularly on the fundamentals of democracy and the rule of law.

A newly created Ministry for human and minority rights and social dialogue initiated a series of public dialogues. However, further efforts are still needed to ensure systematic cooperation between the government and civil society. An enabling environment for developing and financing civil society organisations (CSOs) still needs to be established on the ground, as verbal attacks against CSOs continued, including in Parliament.

Serbia is moderately prepared in the area of public administration reform. Limited progress was made overall during the reporting period. Serbia still needs to ensure (i) merit-based recruitment and a reduction in the excessive number of acting senior manager positions, (ii) a strong quality control role for the Public Policy Secretariat in policy development and coordination, and (iii) a single mechanism for prioritising all investments regardless of the type and source of financing.

Serbia’s judicial system has some level of preparation. Limited progress was made over the reporting period. The constitutional reform of the judiciary was relaunched in December 2020, and it is planned to be finalised by the end of 2021. The system for judicial appointments and for evaluating the work of judges and prosecutors needs to be thoroughly revised following the adoption of the constitutional amendments, to allow for merit-based judicial recruitments and careers since the current legal framework does not provide sufficient guarantees against potential political influence over the judiciary.

Serbia has some level of preparation in the fight against corruption. Limited progress was made over the reporting period. As regards the prevention of corruption, the Council of Europe’s Group of States against Corruption (GRECO) concluded that its recommendation on the Agency for the Prevention of Corruption was fulfilled in a satisfactory manner. This recommendation concerned the need for an adequate degree of independence and financial and personnel resources as well as on extending the Agency’s competence. Serbia has yet to adopt a new anti-corruption strategy accompanied by an action plan and to establish an effective coordination mechanism to operationalise prevention or repression policy goals and effectively address corruption. The number of indictments and the number of first instance convictions for high-level corruption cases further decreased compared to previous years. Serbia should increase its efforts in addressing these shortcomings and step up the prevention and repression of corruption.

In the fight against organised crime, Serbia has some level of preparation. Limited progress was made over the reporting period. Serbia has yet to establish a convincing track record of effective investigations, prosecutions and final convictions in serious and organised crime cases, including financial investigations leading to a track record of freezing and confiscating criminal assets. The number of convictions for organised crime decreased compared to 2019. Serbia should adapt its approach from one based on cases to a strategy against organisations, and from focusing on cases of low or medium importance to high profile cases aiming at dismantling big and internationally spread organisations and seizing the assets.

Serbia’s legislative and institutional framework for upholding fundamental rights is broadly in place. However, it needs to ensure the framework is consistently and efficiently implemented. Human rights institutions need to be strengthened and their independence guaranteed, including by means of allocating the necessary financial and human resources. Regarding freedom of expression, limited progress was made by adopting and starting to implement a limited number of measures under the action plan related to the media strategy. However, verbal attacks against journalists by high-level officials continued and cases of threats and violence remain a concern. Most media associations withdrew from the group on the safety of journalists in March 2021, citing hate speech and smear campaigns against journalists and civil society representatives, including by the head of the ruling party caucus in Parliament. These verbal attacks in Parliament took place even after a code of conduct was adopted in December 2020. The overall environment for exercising freedom of expression without hindrance still needs to be further strengthened in practice.

On the economic criteria, Serbia has made some progress and is moderately prepared/at a good level of preparation in developing a functioning market economy. The Serbian economy recorded only a mild contraction in 2020 as the impact of the COVID-19 crisis was mitigated by a strong pre-crisis momentum, sizeable and timely fiscal and monetary support measures, the sectoral structure of the economy and a relatively low average stringency of containment measures. External imbalances narrowed in the crisis while their financing continued to be fully covered by Foreign Direct Investment (FDI) inflows. The fiscal space created prior to the crisis allowed Serbia to provide substantial fiscal support for crisis mitigation in 2020 and 2021 and to substantially increase capital spending. Banking sector stability was preserved and lending growth was robust, supported by monetary easing, loan moratoria and liquidity-enhancing measures. The labour market has recorded a further decrease in unemployment in 2020, reflecting in particular lower participation rates during the crisis.

There has been some progress with tax administration reforms and the privatisation of state-owned banks. However, other major structural reforms of public administration and state‑owned enterprises (SOEs) continued to advance slowly, prolonging long‑standing inefficiencies. There has been no progress in strengthening the fiscal rules to anchor fiscal policy. The state retains a strong footprint in the economy and the private sector is underdeveloped and hampered by weaknesses in the rule of law, in particular corruption and judicial inefficiency, and in the enforcement of fair competition.

Serbia has made some progress and is moderately prepared to cope with competitive pressure and market forces within the EU. The structure of the economy improved further and economic integration with the EU remained high. However, despite some progress, the quality and relevance of education and training does not fully meet labour market needs. Public investment has continued to increase with the aim to address serious infrastructure gaps after years of underinvestment. Although the cost of borrowing for small and medium-sized enterprises (SMEs) has declined, they still face a number of challenges, including a volatile business environment and unfair competition.

On good neighbourly relations and regional cooperation, Serbia overall remained committed to bilateral relations with other enlargement countries and neighbouring EU Member States. However, relations with Montenegro have been marked by continued tensions. In general, Serbia actively participates in regional cooperation.

Regarding the normalisation of relations with Kosovo, the EU-facilitated dialogue continued with high-level meetings on 15 June and 19 July 2021, as well as three chief negotiators’ meetings. During the reporting period, both parties appointed new chief negotiators and negotiating teams. Serbia needs to make further substantial efforts on the implementation of all past agreements and contribute to reaching a comprehensive legally binding normalisation agreement with Kosovo. Such an agreement is urgent and crucial so that Kosovo and Serbia can advance on their respective European paths.

Concerning Serbia’s ability to assume the obligations of EU membership, the country has carried out important work on alignment with EU acquis over many areas, particularly on taxation and energy.

The cluster on internal market is key for Serbia’s preparations for meeting the requirements of the EU’s internal market and is highly relevant for possible early integration measures and the development of the Common Regional Market. Progress was made on legislative alignment on company law, freedom of movement for workers and the establishment and freedom to provide services. However, no progress was made in the areas of free movement of capital, financial services, and consumer and health protection.

The competitiveness and inclusive growth cluster has significant links to Serbia’s Economic Reform Programme. Progress was made in the areas of taxation, social policy and employment, industrial policy, scientific and technological development and education. On taxation, social policy and employment, Serbia has also met the opening benchmarks. However, no progress was made on strengthening fiscal rules to anchor fiscal policy.

The Green agenda and sustainable connectivity cluster is at the heart of the Green Agenda for the Western Balkans endorsed by Serbia in November 2020 and closely linked to Serbia’s Economic Reform Programme and the Commission’s Economic and Investment Plan. Serbia has met the opening benchmarks on energy. The country made progress on road safety and rail reform. It also adopted a climate law, as well as a package of major energy laws, including new laws on renewables and energy efficiency.

The cluster on resources, agriculture and cohesion comprises policies linked to EU structural funds and to developing the capacities to assume the responsibilities of a future Member State. It also comprises some of the key policy areas crucial for ensuring sustainable food systems and helping rural communities to develop and diversify economically. Serbia made progress on food safety by recruiting staff at the national reference laboratories and by drafting an action plan on fisheries; on financial and budgetary as regards the management of own resources; and on regional policy as regards financial management.

On the external relations cluster, Serbia’s overall patterns in aligning with the EU’s common foreign and security policy remained broadly unchanged. A number of actions by Serbia went contrary to EU positions on foreign policy. In 2020, Serbia’s alignment rate with relevant High Representative statements on behalf of the EU and Council Decisions stood at 56%, but rose to 61% as of August 2021. Serbia continued to participate in EU crisis management missions and operations under the common security and defence policy. No concrete progress was made towards finalising the accession negotiations with the World Trade Organisation.

Serbia continued to significantly help manage the mixed migrationflows towards the EU by playing an active and constructive role and cooperating effectively with its neighbours and EU Member States. It also continued to effectively implement the integrated border management strategy and its action plan.

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