The Growth Plan and Serbia: On the Brink of Significant and Permanent Losses

In recent days and weeks, there has been a flurry of comments, assessments and analyses about the fate of the infamous Cluster 3 (Competitiveness and Inclusive Growth). This is understandable, as this Cluster has become a litmus test for Serbia’s path towards the EU. Technically, it concerns three still-unopened negotiating chapters; politically, it is about whether Brussels is prepared to give the green light to Belgrade’s current conduct. In such a context, the question of the Growth Plan has been pushed into the background. Unlike Cluster 3, however, the Growth Plan comes with a calendar – and a price for missing its deadlines. So how much is actually at stake?

A race against deadlines

When the European Commission presented the new Growth Plan for the Western Balkans in November 2023, it announced a historic shift in the Union’s relationship with the region. One of its key components is the Reform and Growth Facility for the Western Balkans introduced in May 2024, which replaces the previous logic of pre-accession funding with the principle of “performance-based financing” under which every euro is disbursed only once beneficiaries have actually implemented the previously agreed reform steps. By adopting the Reform Agenda in October 2024, Serbia fulfilled the first requirement for gaining access to its envelope worth €1.58 billion (out of a total available amount of €5.6 billion in grants and loans for the entire region).[1] That funding, however, is conditional upon the fulfilment of 98 concrete, measurable and pre-defined reform steps within clearly established deadlines. Under this framework, delayed reforms carry an immediate and measurable cost.

To grasp the scale of Serbia’s opportunity cost up to January 2026 – when the Commission gave the green light for the release of funds for the first and, so far, only time, in response to the fulfilment of both the preconditions and certain reform steps – one has to consider how much funding was available for that period. After deducting the pre-financing from the total pre-defined amount per semester,[2] the figures come to €104.1 million for the second semester of 2024, €151.5 million for the first semester of 2025, and €246.3 million for the second semester of 2025. This means that, had Belgrade done everything it originally committed to within the given deadlines, it would now have had €501.9 million at its disposal. Instead, the Commission responded positively only to Serbia’s first request, establishing that merely three out of seven steps had been fulfilled, thereby releasing only €56.5 million net (after the deduction of pre-financing). This indicates that as much as 89% of the funds envisaged for the given period remained undrawn, amounting to a serious opportunity cost of €445.4 million.

What is at stake this summer

All eyes are now on the Commission, which has yet to assess whether Serbia meets the democratic preconditions.[3] It has already sent a clear message that Serbia is falling behind, given that Montenegro, Albania and North Macedonia were granted new funds back in May 2026, while Belgrade has received no additional funding since January. This gap emerged amid a substantial deterioration following the adoption of the so-called Mrdić laws, which called into question whether Serbia continued to meet the democratic preconditions for drawing down the funds. This is also why there has been no response so far to Serbia’s second, third and fourth requests for the release of funds. Although the Commission has in the meantime found that a degree of progress has been made – both in undoing the damage done to judicial reform and through certain formal steps forward regarding the media regulatory body (the REM Council) and the electoral legal framework – it has yet to issue its official assessment which would offer clear insight into how it evaluates the “situation on the ground” from the perspective of the Facility. Until that happens, the funds remain de facto frozen.

Nevertheless, it is reasonable to assume that the Commission’s suddenly intensified support for the opening of Cluster 3 reflects its readiness to soon officially confirm that Serbia once again meets the preconditions. This raises the question of how much funding Serbia could count on in that case. In fact, by cross-referencing the number of reform steps planned per semester in the Reform Agenda with the percentage of reform steps Serbia has fulfilled – recently revealed by the Director-General for Enlargement, Gert Jan Koopman – it is possible to draw conclusions about what lies ahead. While Montenegro and Albania are implementing around 80% of their reform commitments, and North Macedonia half of them, Serbia stands at a mere 35% – only Bosnia and Herzegovina and Kosovo, both blocked by internal political crises, rank lower. As for the concrete steps, out of a total of 98 steps envisaged by the end of 2027, Serbia committed to seven for the second semester of 2024, 10 for the first semester of 2025 and 20 for the second semester of 2025.[4] Cross-referencing Koopman’s assessment with the total of 37 steps for the period in question suggests that Serbia has fulfilled 13 reform steps – at least from the Commission’s point of view.[5] This means that even in the event of a positive assessment of the preconditions, Belgrade could not count on the automatic release of a significant share of the frozen funds for the given period.

The opportunity cost grows considerably once one takes into account that fulfilment of the reform steps planned for the first semester of 2026 will also be assessed in the period ahead. There are ten of them in total. Adding the €183.1 million allocated for the first semester of this year (likewise calculated after deducting the pre-financing share) to the previously mentioned €501.9 million for the first three semesters (July 2024 – December 2025) brings the amount at stake to €685 million. With only €56.5 million drawn down, Serbia has so far made use of just 8% of that potentially available amount. The risk that this percentage will not increase significantly is underscored by the fact that, by January 2026, Serbia had failed to fulfil nearly two-thirds of the envisaged reform steps on time, making it difficult to expect dramatically better performance in the first half of this year. Without clear political prioritisation of the timely implementation of reform steps and, in essence, a credible commitment to European integration, there is a serious risk that the largest part of the total available amount will remain undrawn, further deepening the gap between the promises contained in the Reform Agenda and Serbia’s actual reform performance.

The potential damage keeps growing

Even if the Commission were to release new funds on account of the fulfilment of a further ten reform steps – assuming that it once again decides to confirm that Serbia meets the democratic preconditions – Serbia risks irreversibly losing a significant portion of the money. Namely, the Facility included so-called “grace periods” for the fulfilment of reforms from the outset as it was correctly anticipated that countries across the region would miss some deadlines. For reforms scheduled for the second semester of 2024, the rules granted a two-year grace period, i.e. the possibility of completing them by the end of 2026. For all other semesters, the grace period is one year. In this context, it is therefore particularly relevant that the end of June 2026 marked the first turning point, as that was when the first grace period expired – the one for reforms originally planned for completion by the end of June 2025. The exact amount Serbia stands to lose will become clear once the Commission publishes how much of the total €151.5 million it is entitled to on the basis of the reform steps fulfilled. Should the Commission adhere strictly to the rules, the unallocated funds would amount to Serbia’s first irreversible financial loss and would then be redistributed to other countries in the region.

Although there have been warnings that Serbia is on the brink of losing between €109 million and €136 million, the potential damage grows further if we look towards the end of 2026. That will be the second turning point, as no fewer than two grace periods will expire: one for the reforms planned for the end of 2024 and the other for the reforms envisaged for the end of 2025. For the former, the net amount is €104.1 million, and for the latter, €246.3 million. Adding these two amounts to the one whose grace period expired at the end of June this year – and subtracting the €56.5 million already unlocked – yields a figure of up to €445.4 million that Serbia could irreversibly lose by the end of the year, with the final figure depending on the number of reform steps Serbia manages to fulfil before the relevant grace periods expire. Given the anticipated elections in Serbia – and the Commission’s warnings in its annual reports that electoral periods are times when reform progress tends to stall – the possibility that Serbia will make only minimal use of the Growth Plan should be taken seriously. Citizens would ultimately bear the greatest cost, particularly given that the Growth Plan was designed to help accelerate the accession process, strengthen domestic economic opportunities and, consequently, reduce the socio-economic gap with EU countries.

[1] The €5.6 billion figure represents what is genuinely available to the beneficiaries, as it excludes administrative and technical costs, as well as around €360 million set aside as insurance against loan default, from the total of €6 billion.

[2] In the summer of 2025, Serbia received pre-financing of €111 million, which was expected to serve as an initial impetus for the remaining reforms. That amount forms part of Serbia’s total allocation, and the calculations throughout the text deduct it proportionally to arrive at net figures.

[3] The Scoreboard under the Facility shows that Serbia has fulfilled 8% of the reform steps in its Reform Agenda for the period up to December 2025. That percentage has not been updated, even though Serbia has in the meantime fulfilled certain steps, because the preconditions had been called into question. Article 5 of the Facility stipulates that, alongside the dialogue on normalisation between Belgrade and Pristina, the preconditions require beneficiaries of the funds to uphold and respect effective democratic mechanisms, including a multi-party parliamentary system, free and fair elections, pluralistic media, an independent judiciary and the rule of law, and to guarantee respect for all human rights obligations, including the rights of persons belonging to minorities.

[4]Although ten steps are envisaged for the first semester of 2026, it is unlikely that Koopman had that semester in mind as well, since the implementation deadline had only recently expired, meaning that the Commission will assess their fulfilment only in the period ahead.

[5] That is four steps more than civil society identified in its first independent monitoring report. The difference does not necessarily point to leniency on the Commission’s part, but rather to the fact that it has access to documentation that state institutions have not made available to civil society, as well as to the stricter criterion applied by the working group, according to which a step must not only be implemented but also be publicly verifiable.

Originally posted by Belgrade open school.