The former Yugoslav Republic of Macedonia – Economic and monetary affairs
Candidate countries conduct negotiations with the European Union (EU) in order to prepare themselves for accession. The accession negotiations cover the adoption and implementation of European legislation (acquis) and, more specifically, the priorities identified jointly by the Commission and the candidate countries in the analytical assessment (or ‘screening’) of the EU’s political and legislative acquis. Each year, the Commission reviews the progress made by candidates and evaluates the efforts required before their accession. This monitoring is the subject of annual reports presented to the Council and the European Parliament.
Commission Report [COM(2011) 666 final – SEC(2011) 1203 – Not published in the Official Journal].
The Former Yugoslav Republic of Macedonia was granted candidate country status for European Union (EU) membership in 2005. The Accession Partnership, adopted by the Council in 2008, supports the country’s preparations in view of its future membership and the alignment of its legislation with the Community acquis. In 2008, the accession negotiations had not yet been opened, as some progress still needed to be made on the objectives and conditions set out in the partnership.
The 2011 Report states that some progress has been made on economic and monetary policy matters. The country has made good progress in establishing a functioning market economy and has improved dialogue with the business community. However, weaknesses in the rule of law continue to impede the proper functioning of the internal market of the former Yugoslav Republic of Macedonia. In addition, financial supervisory bodies still lack independence.
EUROPEAN UNION ACQUIS (according to the Commission’s words)
EU legislation on economic and monetary policy contains specific rules requiring the independence of central banks in Member States, prohibiting direct financing of the public sector by the Central Bank and prohibiting privileged access of the public sector to financial institutions. Upon accession, new Member States will be expected to coordinate their economic policies and will be subject to the provisions of the Stability and Growth Pact on budget monitoring matters. These States are also committed to complying with the criteria laid down in the Treaty in order to be able to adopt the euro. Until their adoption of the euro, they will participate in Economic and Monetary Union as a Member State with derogation and will treat their exchange rates as a matter of common concern.
EVALUATION (according to the Commission’s words)
The economy of the former Yugoslav Republic of Macedonia started to recover in the second half of 2010, benefitting from external demand and increased investment, in particular in construction. In late 2010, the government agreed with the IMF on a pre-cautionary credit line. This should strengthen international markets confidence. Structural reforms have continued. However, high structural unemployment, in particular among the young and poorly educated, remains a major cause of concern. Institutional capacities of the public administration and of regulatory and supervisory agencies are still inadequate.
As regards the economic criteria, the former Yugoslav Republic of Macedonia continues to be well advanced. In some areas, it has made further progress towards becoming a functioning market economy, notably by facilitating company registration, accelerating judiciary procedures, improving the functioning of financial markets, further simplifying the regulatory framework and improving communication with the business community. The country should be able to cope with competitive pressures and market forces within the Union in the medium term, provided that it vigorously implements its reform programme in order to reduce significant structural weaknesses.
The country has maintained a broad consensus on the essentials of economic policies. The economic dialogue with the business community has improved. The stance of monetary policy, based on the de facto peg to the euro, supported growth and contributed to macroeconomic stability. Fiscal policy maintained its stability orientation. Some further progress has been achieved in facilitating market entry and in simplifying the regulatory framework. The duration of bankruptcy procedures has been further reduced and real estate registration is practically completed. The financial sector started to recover from the global financial crisis. Competition in this sector has slightly improved, as well as the level of financial intermediation.
Weaknesses in the rule of law continue to impede the proper functioning of the market economy. Public administration efficiency is still low, reflecting heavy procedures, weaknesses in staffing and a high turnover of officials. Some regulatory and supervisory agencies continue to lack the necessary independence and resource allocation to fulfil their functions effectively. Contract enforcement is still difficult, which hampers the business environment, in particular for small and medium sized enterprises. The quality of education and of the human capital is low. Physical capital needs further modernisation and deepening.
There was significant progress in the area of economic and monetary policy, especially in adoption of the relevant central bank legislation. The quality of the pre-accession economic programme has improved. There was good progress in several areas of statistics; substantial efforts are still needed to improve in particular economic statistics.
Progress in the area of financial control was related mainly to legislative alignment, and efforts are called for to ensure its implementation, especially in relation to the establishment of Financial Management and Control systems. The State Audit Office's administrative capacity has been further strengthened; however its independence remains to be anchored in the Constitution. There is no particular progress to report under financial and budgetary provisions. The administrative framework for the application of the own resources framework is still not in place.
- The website of the Directorate-General for Enlargement, Enlargement Strategy and Progress Reports 2011