On eve of Serbia vote, E.U. pact means more aid

Serbia will sign a premembership deal with the E.U. today that could bolster trailing pro-Western parties and give it greater access to record funding for the Balkans.

If this small Balkan country had a soundtrack, it would be the music of hammer, drill, and saw.

A 25-house development for the downtrodden Roma minority is in the works in Bernane. The coastal highway between Budva and Bar is getting a facelift. Gleaming buildings are going up here in the capital. Bridge and sewer projects abound. Towns are building new schools.

"Everything is under construction," says Milija Bozovic, a Budva tour guide.

Footing the bill for much of this? The European Union. The EU is pouring record funds into the western Balkans: €710 million ($1.1 billion) budgeted in 2008 alone – a 16 percent increase over last year, according to EU figures.

The EU's official line is that the assistance reflects the progress Montenegro and its neighbors are making toward eventual membership in the bloc. But some analysts and diplomats say the aid is playing a more important role: to shore up EU loyalty in the region at a time when its largest country, Serbia, is at a critical crossroads in its relationship with Brussels.

Ahead of May 11 parliamentary elections, polls show Serbia's pro-Western coalition trailing the ultranationalist Radical Party by a slim margin.

In an effort to tip the balance in favor of the pro-Western parties, the EU has been pushing its members to offer a new pre-membership aid-and-trade pact to Serbia. On Tuesday, EU foreign ministers meeting in Luxembourg agreed to sign the so-called Stabilization and Association Agreement (SAA) with Serbia later in the day, though it will not be implemented immediately.

While more than two-thirds of Serbs support eventual membership in the bloc, Serbia's Radical Party is using Kosovo's independence, backed by much of the EU but opposed by most Serbs, to fuel opposition to the EU.

Serbia's government fell on March 8, largely over the Kosovo issue. Three weeks later, the EU presented a plan to accelerate the accession process for Balkan countries.

"The EU can set the road sign, but it is up to Serbia to decide the direction," says Krisztina Nagy, spokeswoman for EU Enlargement Commissioner Olli Rehn, in an e-mail to the Monitor. "This is a crucial choice to make: Serbia can either turn to the European future or risk self-imposed isolation."

Serbia's neighbors are already embracing that future, and being rewarded for it.

Montenegro and Albania have signed SAAs with the EU, the first step toward eventual membership. Montenegrins reelected a pro-EU president earlier this month, and Bosnia says it intends to sign the SAA this year. Macedonia and Croatia are both officially EU candidates, with Croatia set to join as early as next year.

A Monitor analysis of EU aid to the western Balkans shows that assistance to Serbia's neighbors is budgeted to increase 10 percent from now until 2011, compared with 1.7 percent for Serbia, which receives around €200 million a year.

Kosovo is set to receive the biggest boost: a doubling of aid over last year to €125 million, largely due to its anticipated declaration of independence on Feb. 17. "The increase might have come, but maybe not in this order of magnitude," says Rainer Freund, director of the Montenegro branch of the European Agency for Reconstruction, which was set up in the region following the Balkan wars of the 1990s.

By 2011, the EU expects to spend €3.5 billion in the western Balkans, a per capita high for EU aid. Some of that will go to building schools like the Dragisa Ivanovic Elementary School, built five years ago in Podgorica.

The bright white building stands out in a derelict neighborhood of tall grass and garbage. It was built for 900 students, but 1,500 attend – a fact that attests to its value to the community, says Principal Niko Raicevic. "This school has meant a lot to this part of town," he says.

Throughout the region, EU aid is funding basic infrastructure improvements and economic reform, like a €1.6 million investment in Kosovo's livestock sector.

But the money is also supporting more abstract things like institution building and "good governance."

Assistance projects run the gamut in scale, from spending €82.1 million to fight organized crime and build up policing in Macedonia to €1.8 million for an environmental monitoring system in Albania.

Montenegro, a nation smaller than Connecticut and historically the poorest region of the former Yugoslavia, is budgeted to receive €32.6 million in EU assistance this year – at nearly €50 per citizen the most in the region save for Kosovo. That has helped fuel rapid progress within the country's institutions and economy since it declared independence from Serbia two years ago.

Montenegro has reduced its unemployment to 12 percent, the lowest in the region. For two years, the government has run a budget surplus, and capital investment is up 80 percent.

"If the Radicals come to power [in Serbia], the EU is going to hold up Montenegro as a small little success story," says James Lyons, a Balkan expert with the International Crisis Group. "Really, Montenegro is the little country that could."

Ana Vukadinovic, head of Montenegro's Office for European Integration, says the country is now focused on fully implementing its SAA, bringing the institutions and policies in line with EU standards. She mentions 2012.

"We are not talking about this as an EU entry date, but about this as a date for being ready to join," she says. Polls show 75 percent of Montenegrins want to join the EU.

But while financial aid might continue to foster goodwill for the EU in the region, it doesn't smooth out everything, says Kristof Bender, a Balkan expert at the European Stability Initiative in Germany.

Mr. Bender points to divisiveness in the bloc's support of Kosovo's declaration of independence and the blow Greece delivered last month by blocking Macedonia's NATO's bid. "That was a major set-back to the EU's Balkan policy," he says. "Right now, I don't think there is a visible strategy."