The EU’s Failing Policy Initiative for Bosnia and Herzegovina

Executive Summary

In late 2014, the European Union adopted as its new strategy for Bosnia and Herzegovina a policy initiative jointly developed and promoted by Germany and the United Kingdom. The initiative focused on structural socio-economic reforms that were to be rewarded with advances in BiH’s EU integration process – a response to violent social protests against unaccountable politics in February 2014 that highlighted popular dissatisfaction in BiH with the EU’s policy failure over the previous decade.

The new EU BiH initiative did yield some initial successes in 2015 and 2016. BiH authorities agreed a ‘Reform Agenda 2015-18’ with the EU and International Financial Institutions (IFIs), a broad blueprint for socio-economic reform that, if fully implemented, could have broken the country’s patronage system. Some initial implementation of the Reform Agenda and the formal fulfillment of some additional EU conditions prompted the EU’s General Affairs Council in September 2016 to grant the final reward in EU integration envisioned in the initiative – a referral of BiH’s membership application to the European Commission for its Opinion on granting candidate status. In December 2016 the Commission took the next step and handed over its Questionnaire to BiH. More significantly, the International Monetary Fund (IMF) signed a loan arrangement with BiH in September 2016 designed to support the Reform Agenda, based on exceptionally strict financial conditionality and prompting the governments in BiH to concede on some previously unimaginable reforms.
However, these successes were short-lived, limited and superficial. From early 2017, it became evident that the initiative would be a failure when it formally concludes at the end of 2018. Throughout 2017, implementation on all fronts came to an almost complete standstill, although EU representatives and other international officials continue to pretend the initiative is still alive. Extensive interviews with key officials make it clear that the performance of the EU itself led to this unfortunate failure:

1. In the face of resistance from political elites defending their entrenched patronage interests, the EU did not stick to strict conditionality, but resorted to old habits of lowering the bar and negotiating with BiH officials and political leaders behind closed doors, in effect colluding with the opponents of reform and making a mockery of the EU integration process.

2. From 2016 onwards, the relationship between the EU and the IFIs faltered as they began to diverge in their approaches to strict conditionality. In 2017, EU institutions began to undermine the IFIs’ push for economic reform, and by the end of the year EU representatives successfully pressured the IMF to give up its policy of strict financial conditionality.

3. Strengthening the rule of law was vital for any initiative aimed at promoting a market economy free of political interference. Yet the EU aimed exceptionally low on rule of law reforms under the Reform Agenda, creating a weak foundation for systemic reform. At the same time, EU representatives pushed for the non-transparent parliamentary adoption of key Agenda measures, lending tacit support to the gross violation of parliamentary rules of procedure by the ruling coalitions, further undermining of the rule of law.
While a combination of factors has contributed to this failure, the underlying cause is the EU’s failure to embed the mostly technical initiative in a comprehensive and genuinely political strategy.

As an epilogue to the failure of this initiative, the EU is now faced with a political challenge related to constitutional reform for which it is ill-prepared: amending the BiH Election Law following the Constitutional Court ruling in the Ljubić case. At the same time, the Croatian government’s explicit support of the ethno-nationalistic agenda of the HDZ BiH poses a serious threat to EU unity in its approach to BiH, particularly related to constitutional reform. The EU – so eager to avoid any discussion of constitutional reform – has now found itself painted into a corner.

Against this background, there is a high likelihood that following the October 2018 general elections the EU will be forced to face the country’s biggest constitutional crisis since the end of the war and the failure of its BiH initiative.