Bosnia plan could spark budget fight

Date: 12/10/1995

By Tim Jones and Elizabeth Wise

BUDGETARY disagreements are threatening to take the gloss off the European Union's wish to lead the effort to rebuild Bosnia just as two peace conferences fuel fresh hopes of an end to four years of war.

The European Commission's services are this week putting the finishing touches to a new programme for the reconstruction of former Yugoslavia.

The EU is still unclear on who the recipients of aid should be. Peace envoy Carl Bildt has called for aid to the whole region, while the Commission paper will focus on Bosnia with some assistance to Croatia and the Former Yugoslav Republic of Macedonia.

While no cash promises will be made to Bosnian government leaders when they meet Commission President Jacques Santer today (12 October), officials acknowledge that the World Bank's 4.5-billion-ecu estimate is as good a forecast as any. The US administration has already made it clear that the EU will be expected to take the leading financial role in this relief effort.

But the EU's efforts to define its role has opened up divisions between the member states.

The UK's ambassador to the Union, Stephen Wall, surprised his counterparts last week by calling for the question of funding to go to the 23 October meeting of finance ministers. Only then would the issue be considered by foreign ministers on 30 October.

But the Spanish presidency, France and Germany opposed the idea.

The UK wants to ensure that the burden of funding reconstruction is shared by the US, Japan, Arab states and other traditional donors, while the World Bank's experience in post-war reconstruction should give it the lead in the programme.

“Sooner or later, you have got to discuss the money,” said a UK official. “The ministers who move the money around should be involved early on.”

But other member states do not agree. In a recent letter, the German and French foreign ministers called for the EU to have a “preponderant role” in the aid effort. Opposing Wall's request, Spain, France and Germany said it was too early for finance ministers to get their hands on the Bosnia dossier.

“To talk of burden-sharing now is premature,” said a Commission official involved in drafting the reconstruction proposal.

Some member states even suspect the UK of stalling the peace effort; a suggestion that its officials firmly deny, pointing out that British troops are bound to make up a large part of the estimated 60,000 needed to enforce the peace settlement.

“If anyone wants to make sure this is handled quickly and efficiently, then it is us. There is no suggestion of foot-dragging,” said a UK official. “But you can't breeze on without addressing the consequences of spending. You have to go into it with your eyes open.”

The EU is already facing a budgetary squeeze on external lending even before this programme gets underway. Other member states' financial experts believe this is the hidden agenda behind the UK's position.

The UK is already unhappy that a loan guarantee fund, created only three years ago and designed to bring budgetary discipline into the area of foreign lending, will be breached by the end of 1997, even before the Bosnian scheme is taken into account.

“They are concerned that the very good intentions of the loan guarantee mechanism are being overruled by political considerations,” says a sympathetic official from another member state. “It's not really anything to do with Bosnia.”

The Commission's number-crunchers are searching for money from the PHARE technical assistance programme for Eastern Europe, the ECHO humanitarian aid office and even from the Mediterranean programme.

None of this will be easy and it is already causing ripples within these two projects. Bosnia is not a member of PHARE while Croatian funds were frozen in July after the offensive against Krajina.

Supporters of Mediterranean spending, who fought for the 900-million-ecu budget awarded to the region in 1996 by EU leaders at the Cannes summit in June, oppose the move.

“The countries eligible for Mediterranean funding are clearly fixed on paper,” said one Commission official. “The former Yugoslavia is included in spending for Eastern Europe. This is just sniping.”

For foreign ministers, this all misses the point. Jesus Atienza, spokesman for Spanish Foreign Minister Javier Solana, said: “Money will be involved, but [the reconstruction] is a question of political will and political initiative.”