High costs of (non) accession: Debate organised by CEP and the EU Delegation

May 27, 2021 – A panel discussion “How much does it cost (not) to be a member of the European Union?” organized by the European Policy Centre – CEP and the Delegation of the European Union to Serbia was held today at the EU Info Center in Belgrade.

If it does not become a member of the European Union soon and does not use that membership for its economic growth, Serbia risks becoming the “nursing home” of Europe, said the founder of the European Policy Centre – CEP, Nebojša Lazarević.

On average, Serbia receives around 200 million euros from EU pre-accession funds. Its potential membership in the European Union brings with it major political, legal, and economic changes, financial benefits, but also costs. Regarding the expected benefits, once it becomes a member Serbia will receive seven to eight times the amount of funds it receives today. As for the costs of EU membership, the “membership fee” amounts to about 1% of its budget. Unlike funds, which are determined by how much a country is able to spend, the costs of membership are fixed. Currently, Serbia is not even able to spend all the money it receives from pre-accession funds, raising a question whether the country will benefit economically from EU membership or will be at a loss.

“Spending funds has proven to be a problem in all Central and Eastern European countries,” Lazarević said. “However, after some time, the countries started to learn, and now we have the example of Poland which spends more than 100% of the funds, meaning that it uses funds not spent by other countries.”

Prof. Dr. Mojmir Mrak from the Faculty of Economics, University of Ljubljana agreed that this is an important issue every country should pay attention to during the accession process. “Without membership, a country does not lose anything financially, and it gains as much as it manages to withdraw. Once it becomes a member, a country has a fixed cost, while gains depend on how much it manages to spend which can sometimes be less than the membership fee. In that case, a country is at a loss for being in the European Union”, said Mrak.

One should also consider the opportunity cost of Serbia not being a member. “The opportunity costs of still not being members of the EU are high for the Western Balkan countries – in the previous seven years, each citizen of the Western Balkans has received on average 500 euros from the EU, while each citizen of Croatia has received around 5,000 euros – which is ten times more”, said Dušan Reljić, Head of the Brussels office of the German Institute for International and Security Affairs (SWP).

Reljić added that there has been a noticeable decline in support for democracy in the former Yugoslavia, making this region a fertile ground for corruption and autocracy. In that context, it was “much harder to work on accession to the European Union”, he said.

Talking about costs, one should take into account human costs, not only financial ones. “Many young, hard-working and educated people have either left the country or are considering leaving. Once we become a member of the EU, departures will be even easier. However, whether the trend of leaving continues or not is entirely up to us – it depends on whether we plan to just “live” on European aid or use the membership for our economic development”, said Lazarević. “If Serbia continues like this, it certainly risks becoming the “nursing home” of Europe”, Lazarević concluded.

On that note, Reljić added that “in the whole world, it is normal for children to live better than their parents had – the same cannot be said for Serbia. Children live better only if they move out of here”.

In the case of membership, Lazarević pointed out that Serbia’s contribution to the EU budget would amount to around half a billion euros, while the potential benefit would reach one and a half billion euros. However, the disbursement of these funds would depend on the Serbia’s administrative capacity. He also referred to the indirect costs of membership, specifically the estimate from 2011 that harmonization with EU standards in the area of environmental protection and climate change would cost Serbia 10.6 billion euros. Today, he estimates that Serbia would need to set aside around 15 billion euros. Commenting on Reljić’s remark that the Union and the Western Balkans are divided by the Berlin Wall, he stated that Serbia could really become the “nursing home” of Europe if the brain drain continues.

Prof. Dr. Mrak commented on the new temporary instrument Next Generation EU, which, in his opinion, could become a long-term instrument. Referring to the observations made by previous panelists, he agreed that the gap between the projected and actual balance depends on the absorption capacity of the member states. The main challenge is to take advantage of the additional opportunities that membership provides, Mrak concluded.

To illustrate Mr. Mrak’s message, Lazarević used a gym metaphor – the result does not depend on the membership payment, but how that membership is used. The contribution to the EU budget is known and fixed, but it is still necessary to improve the capacity of the public administration to plan, contract and spend money in an appropriate and wise manner. The key here is in good negotiators, Lazarević said.

Reljić added that the absorption capacity of EU funds is a distant concern for the countries of the Western Balkans. On the other hand, the outflow of human capital from the candidate countries in the direction of the EU (250 thousand in 2019 and 230 thousand in 2018), represents an immediate “cost for which the region does not receive compensation”. With reference to the frequently mentioned term “captured state”, Reljić claimed that it is the citizens of the Western Balkan countries who are captured. On a final note, he explained that there is no direct connection between economic development and the rule of law. However, due to the danger of money sticking to the fingers of state officials, the EU must participate in all stages, from planning, through implementation to funds control.