Thewesternbalkans
In its Statement of estimates for the financial year 2025 from 17 of June 2024, the European Commission presented its proposal for the budget of the EU for the year 2025.
It is an extremely important proposal not only for the member states, but also for the candidate countries and especially for those from the Western Balkans.
The Commission has proposed an annual EU budget of almost €200 billion for 2025, reinforced by €72 billion raised under the post-COVID recovery plan, NextGenerationEU. It is meant to finance EU priorities and help tackle current and future challenges. The Commission’s proposal will be discussed and adopted by the new European Parliament and the Council of the EU.
Following the Commission’s proposal, the funds from the 2025 budget will be spent where they can make the greatest difference, based on the needs of EU countries and the EU’s partners worldwide. The money will foster the green and digital transitions, create jobs, finance EU support to Ukraine, and help address migration challenges and the crisis in the Middle East. It will also boost our capacity to respond to natural disasters and fund support for key critical technologies. In addition, the budget will fund all ongoing EU projects and policies in the areas of agriculture, regional development, research and innovation, climate action, defence, health, security, satellite infrastructure and many more.
“The draft budget 2025 also includes elements of the new Strategic Technologies for Europe Platform (STEP) Regulation, through both targeted and effective mobilisation of key existing programmes, including flexibilities under cohesion policy funds, and a top-up to the European Defence Fund (EDF) for STEP projects. To support the Union’s long-term competitiveness in critical technologies, STEP is set to channel investments into critical projects in digital and deep tech, biotech and cleantech, drive innovation and contribute to addressing skills shortages in STEP sectors. In particular, STEP reorients 11 EU programmes towards STEP sectors and objectives” the document said.
In the EC proposal we can find also that the existing financial programming shows increased funding for flagship programmes such as Erasmus+, the Connecting Europe Facility (CEF) and the Single Market Programme (SMP), while the large-scale funding of research and innovation activities under Horizon Europe stays broadly stable until 2027. The draft budget also provides the necessary funding for other recently agreed EU initiatives or shared priorities, such as the European Chips Act, the Union Secure Connectivity Programme, the set-up of the Carbon Border Adjustment Mechanism (CBAM), the Anti-Money Laundering Authority (AMLA) and the European Defence Industry Programme (EDIP), which aims at strengthening the competitiveness and responsiveness of the European Defence Technological and Industrial Base and ensure the availability and supply of defence products.
The most important part of the EU Commission proposal for the Balkan countries is the Heading 6 – Neighbourhood and the world.
The document say that in a context of extraordinary geopolitical tensions, the mid-term revision of the multiannual financial framework has provided significant additional resources to reinforce priorities for external policies, including in Heading 6. These include effective migration cooperation with third countries, including new support for Syrian refugees in Türkiye and the broader region, as well as the continuation of actions previously supported through the EU Trust Fund for Africa. It includes support to the Western Balkans and the Southern Neighbourhood, including partnerships and funding for the migration routes and border management.
Following the agreement on the MFF revision, the above priorities are being reinforced by EUR 7,6 billion over the period 2024–2027.
Russia’s war of aggression against Ukraine is expected to continue causing significant disruptions globally. As of 2024, Ukraine will receive funds through a dedicated financing instrument outside the ceilings – the newly established Ukraine Facility, providing stable, predictable and flexible support. The Facility foresees up to EUR 50 billion from 2024 to 2027, of which EUR 33 billion in the form of loans and EUR 17 billion in nonrepayable support. The loans are funded by borrowings on the capital markets and fully guaranteed by the EU budget headroom, while the non-repayable support is funded over and above the MFF ceilings, via the Ukraine Reserve, a newly established MFF special instrument.
EU pre–accession assistance will continue supporting necessary reforms to prepare candidates and potential candidates on their respective accession paths. To better support this process in the Western Balkan region, and to further incentivise the accession related reforms, a new financial instrument, the Reform and Growth Facility for the Western Balkans is established for the period 2024–2027 with an overall support of EUR 6 billion, of which EUR 2 billion in non–repayable support stemming from the top ups provided in the MFF mid-term revision. The Facility aims to support key investments and fundamental reforms in those countries, boosting economic growth and accelerating socio-economic convergence.
In the document of the EC we can find also that the priorities for the Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI – GE) are based on the EU’s strategic interests and are currently subject to a mid–term review of the programming. The funding will address specific regional/country needs, and cover areas such as: green transition, digital transformation, sustainable investment and jobs, migration and mobility, peace, human development, security and governance. Support to Moldova and Georgia that have both become candidate countries for EU accession, will continue to be provided through the Eastern Neighbourhood geographic line, while Ukraine benefits from a stand-alone instrument, the Ukraine Facility. Further support to countries of the Southern neighbourhood will also continue, including those most affected by the neighbouring conflict in Gaza.
Support for migration actions in the Southern Neighbourhood will continue being provided at the level of EUR 208 million in 2025.
For Syrian Refugees in Türkiye, the Commission proposed an overall increase of EUR 3,5 billion over the period 2024–2027 in the MFF mid-term revision while the final agreement provides for a reinforcement of EUR 2,0 billion. Consequently, the total funding for 2024-2027 will be EUR 2,5 billion, of which EUR 750 million in 2025. Of this amount, EUR 450 million will be financed under the NDICI-GE Resilience line, to support projects including increased resilience and self-reliance of refugees, and EUR 300 million under IPA III. The amounts for this year and the remainder of the period reflect the need to ensure continuity of vital assistance in areas such as education and socio-economic support, albeit at lower levels than previous years, as agreed in the MFF mid-term revision.
The roll-out of Global Gateway will continue to accompany the twin green and digital transitions beyond European borders, by promoting smart, clean and secure links in the digital, energy, climate, transport areas, and supporting the strengthening of health, education and research systems around the world. This will notably contribute to delivering against the objectives set at the February 2022 EU-African Union Summit, the December 2022 EU-ASEAN Summit and the July 2023 EU-CELAC Summit that have set high partnership goals.
In terms of implementing modalities, the NDICI–GE demonstrates a shift from traditional grant funding to a larger use of financial instruments and budgetary guarantees, thus creating a leverage effect for increased investments. The EU’s policy initiative for fostering connectivity in and with partner countries, the Global Gateway, will take full advantage of this modality mix.
The Instrument for Pre–Accession Assistance (IPA III) continues to support candidate countries and potential candidates in meeting the requirements of the EU’s enhanced accession process with the aim of implementing agreed political, institutional, legal, administrative, social and economic reforms to progressively align with EU rules, standards, policies and practices, with a view to future EU membership.
The design of the financial assistance to the Western Balkans under IPA III is composed by the Economic and Investment Plan for the Western Balkans together with the Green Agenda for the Western Balkans which frame the objectives of a substantial investment package for the region to support competitiveness and inclusive growth, sustainable connectivity, and the green and digital transition. The intention is to direct most of this support towards key productive investments and sustainable infrastructure in the Western Balkans, notably in the fields of sustainable transport, clean energy, environment and climate, digital future, private sector competitiveness and human capital infrastructures. Pre-accession instruments contribute to the achievement of broader European objectives of ensuring stability, security and prosperity in the immediate neighbourhood of the EU. The priorities of IPA III also reflect developments in relations with Türkiye taking into account the Joint Communication of the High Representative and Commission on the state of play of EU-Türkiye political, economic and trade relations obligations in relation to hosting of refugees as well as the outcome of the MFF mid-term revision.
Regulation (EU) 2021/1529 of the European Parliament and of the Council Complementary to support under IPA III, the Reform and Growth Facility for the Western Balkans, established for the period 2024-2027, aims to accelerate the Western Balkans’ convergence with the Union and their preparations for EU accession. Framed by the New growth plan for the Western Balkans, these objectives will be achieved by incentivising EU-related reforms required from Western Balkans beneficiaries, in particular socio-economic reforms as well as reforms concerning the fundamentals of the enlargement process.
In 2025 the implementation of the Reform Agendas is expected to reach cruise speed, with progress already made under each policy areas of the agendas: Rule of Law and fundamentals, green and digital transition, human capital development and business environment. As regards the investments side of the Facility, the Western Balkans Investment Framework WBIF Board is expected to start approving a number of infrastructure investment projects related to transport, energy, digital and human capital in 2025. However, payments to the WBIF are expected only as of 2026. The release of amounts is subject to the fulfilment of conditions (to be assessed by the Commission) set in the Reform Agendas of each beneficiary country.
Macro–financial assistance and Macro–financial assistance+ loans
Macro-financial assistance (MFA) is a form of financial aid extended to partner countries that are geographically, economically and politically close to the Union. It is complementary to the other crisis response mechanisms and financial instruments, and its primary objective is to help countries overcome acute economic crises and restore their economy on a sustainable growth path, to be achieved through economic adjustments and structural reforms set out in policy conditionalities. MFA takes the form of medium/long-term loans or grants, or a combination of these. The provisioning of the MFA loans is funded by NDICI-GE and IPA III.
The EU financial instrument Macro–financial Assistance Plus (MFA+) was used for providing support to Ukraine in the form of loans for EUR 18 billion in 2023. These loans are guaranteed through the headroom of the EU budget and are highly concessional, to be repaid in the course of a maximum of 35 years starting in 2033. The EU also seeks to provide Ukraine with a subsidy of the loan-related interest rate costs, which is to be financed by contributions of the EU Member States in the form of external assigned revenue to the EU budget and any other eventual availability under the Union budget, until the end of 2027.
Comments: The EU budget enables EU countries to achieve more together than they could on their own, for instance by financing infrastructure projects or responding to crises. By pooling resources, standing together and helping all EU countries, their citizens and beyond, the EU budget strengthens Europe’s economy and geopolitical standing.
The EU budget is complementary to EU countries’ national budgets: it prevents the duplication of efforts and comes into play when it is more effective to spend money at EU level than at local, regional or national level.
On the other side, the European Commission always used its power to distribute the budget for political (and economical) pressure on the countries that have a different opinion about the foreign policy and especially about the power and competencies of the Commission.
For the Western Balkan countries there are a lot of financial instruments to stimulate the reforms and for their preparation for the future membership in the EU. Of course, the WB countries should be very careful and to follow all of the European Commission recommendations to have the possibility to use those money.
