I believe the Stability Pact serves as an excellent vehicle for examining the nature of this cooperation. I will address the questions of lessons learned and the new challenges ahead in Southeastern Europe, and whether we will be able to maintain a pattern of constructive transatlantic cooperation in the support of the region or if this will be overwhelmed by competitive tendencies. 

For the past five years or so, the EU and U.S. have tried to genuinely pursue foreign policy cooperation through the framework of the New Transatlantic Agenda with, frankly, varying degrees of success.  With respect to Southeastern Europe, the dialogue was initially informative, but without much consequence because the NTA could not produce the commitment or the tools needed to promote substantive cooperation in the region.  Each side followed its own plan and at best tried to inform its transatlantic partner about some of its activity. The separate approaches the EU and the US took with the Royaumont Process and SECI are only one example of this.

This has changed considerably through the Stability Pact.  To start with, the very existence of the Pact is an acknowledgment on both sides of the Atlantic that the challenges in Southeastern Europe cannot be confronted single-handedly.  It was also an attempt to redress the perceived imbalance at the end of the Kosovo conflict, which saw the U.S. play a disproportionate role in the military action, and led Europe to pledge a greater role in reconstruction and regional stabilization.  

In these and many other respects, the Stability Pact was the consequence of lessons learned in the Balkans, throughout history but especially in the last ten years of bloody conflicts. I will only mention three of these lessons:

• For decades, countries in the region preferred having a big brother outside to cooperating with their neighbors. In parallel, the countries in Europe preferred to deal bilaterally with their counterparts in the Balkans. There was no unified approach. This type of bilateralism led to situations where conflicts in the Balkans could easily ignite conflict all over Europe or to a situation of “proxy” wars in the region.

• The last decade saw the International Community involved in a reactive, not a preventive mode when dealing with the challenges in South Eastern Europe, and saw them trying to cure the symptoms rather than going to the roots of the conflicts. National economies shouldered the resulting financial burdens: for conflict management, reconstruction, flows of refugees etc. Germany spent about 10 Billion Dollars alone on its 350,000 refugees from Bosnia and Herzegovina. The lesson “conflict prevention is cost prevention” had not yet been internalized.

• It took the International Community at large and the European Union in particular a long time - and ultimately the Kosovo war - to realize that the problems in Southeastern Europe are indeed our problems. If we do not project stability into this region, we will continue to import instability from there. If we had not shown them the light at the end of the tunnel - the prospect of EU accession, the countries in South Eastern Europe would have no serious incentive for the necessary reforms.

Because of that, the Stability Pact marked a departure from the earlier deficiencies. For the first time a comprehensive approach to conflict prevention existed. The approach unites the entire International Community.  The EU, G8, OSCE, Council of Europe, NATO, the International Finance Institutions and all the countries in South Eastern Europe have joined forces to tackle the causes of conflict in the region. 

The Stability Pact is a two-way street. It establishes conditionality between reforms and regional cooperation on the one hand, and outside assistance to these efforts and an EU perspective on the other. 

Thus, it draws on the two success stories of post-War Europe: European unification and the Helsinki Process. Like the Helsinki Process it created a triple track approach: Democratization and Human Rights – Economic Development – a Sustainable Security Environment. In short: there will be no peace and security without democracy and economic development. But there is also no economic prosperity without peace and democratic institutions.

Now, which lessons can we draw from almost two years of the Stability Pact? 

First of all, the idea works. The EU has taken the lead role and by designing the Stabilization and Association Process has made all countries in South Eastern Europe potential EU accession candidates. This has spurred the reform processes in all countries of the region, even though much remains to be done. All the countries of the region have now become thoughtful and productive co-chairs of one of our three working tables.  Many, such as Hungary, Slovenia, the Czech Republic, Poland and Slovakia, have become donors, whose help to promote democracy in Yugoslavia was particularly welcome. 

We were greatly encouraged by the democratic change of tide in Croatia and Yugoslavia. The Stability Pact contributed to the fall of Milosevic through the Szeged Process, a program which worked with the democratic opposition through a series of city partnerships as well as special efforts to provide timely support to the free media in the FRY.

Regional cooperation in South Eastern Europe remains one of the centerpieces of the Stability Pact. It has improved drastically. We have helped the South Eastern European Cooperation Process to become more operational. Long-standing bilateral problems like the Vidin-Calafat Bridge between Romania and Bulgaria have been solved. We have set on track successful negotiations for the removal of intra-regional trade barriers by promoting a network of bilateral free trade agreements among all the countries of the region.  This unprecedented spirit of cooperation and mutual trust led to the region speaking with one voice during the latest Macedonia crisis. This would have been unthinkable in all previous conflicts.

In 2000 the Stability Pact has mobilized 2.4 Billion Euros for Quick Start Projects in South Eastern Europe and is heading for a second Regional Conference this year. Last year, private investment in the region almost doubled. The EBRD attributes a large part of this success to the Stability Pact.  Indeed, the continued growth of private investment is absolutely critical to the economic recovery of the region and must be at the top of our priority list in the coming months.

But it is not all about success stories.  Although we delivered aid faster to South Eastern Europe than ever before, it still takes too long from political commitment to actual delivery of assistance. The daily fight with slowness and bureaucracy sometimes seems to become my main task. With Commissioner Chris Patten and the High Representative Javier Solana in Brussels I have powerful allies in this struggle.  The European Commission has implemented the winter aid to Serbia with unprecedented speed. However, other commitments in the field of infrastructure are lagging behind, often because of bureaucratic obstacles both on the donors’ and the recipients’ side.

The original Stability Pact principles remain valid. Progress can only be achieved if we push democratization, economic development and security issues at the same time. However, we must not spread ourselves out too thin. I have a team of about thirty people: to monitor, coordinate and often lead the activities of the entire International Community in South Eastern Europe. Together with our major partners we are now focusing Stability Pact activities, to improve the value added by the Pact. I will be glad to discuss this later on.

The recent Macedonia crisis has shown that conflict prevention tools need to be developed further. A trio of instruments is needed. Two already exist. On the one hand, there is massive military coercion, like that used by NATO in the Kosovo conflict. On the other, there is the Stability Pact as a medium and long-term tool for crisis prevention. Despite this, the ability to take robust action as soon as a low-level conflict looms is not yet developed. A third tool is needed: a flexible set of measures, limited in scope and time, that combine the political, military and economic elements.  Negotiations must be backed up, when necessary, by a timely and demonstrative military presence.  In the cases of Presevo and Macedonia, a line in the sand drawn earlier by NATO would have helped to prevent the outbreak of hostilities.

Speaking about these recent trouble spots leads me to the question on the nature of the new challenges in the Balkans. There has been a definite improvement here over the last two years. Now, none of the  countries in South Eastern Europe consider war any longer as a means of politics. There are democratic and market oriented regimes in all countries. Economic growth rates are promising and private investment, although still much too low, is steadily rising.  However, to some extent the new challenges for the next decade are the old ones. And a very major challenge, to adequately deal with the aspirations of ethnic minorities in the region, remains. This will require additional, tailor-made efforts by the International Community and a joint approach, mostly by the EU and the US.

After the elections in Montenegro it seems that Podgorica will have a referendum on its independence. I clearly prefer the option of a negotiated solution within the federal structure of FRY. Montenegrin independence could set a precedent, and this could trigger destabilizing developments in the whole region. At the same time it is clear that we must accept a result which has been achieved in a democratic fashion, by abiding with constitutional rules and through dialogue with Belgrade.

For Kosovo, Security Council Resolution 1244 remains the sole basis for further action. I cannot be convinced that the time is ripe to tackle the status question now. It is important that the Kosovars be given ownership over the political processes within the framework of their substantial autonomy. The Kosovo elections later this year will therefore be of great importance. Belgrade, on the other hand, must be encouraged: to take constructive steps towards stabilizing the situation in Kosovo and to develop a coherent policy, starting with reviving the economic links with Pristina.  We want to play a proactive role in this process by fully involving Kosovo in our various initiatives for region cooperation.

I came back from Bosnia and Herzegovina only ten days ago. I was very much encouraged by what I heard from the new leaders in Sarajevo. I think for the first time since Dayton we have a realistic chance to gradually overcome the ethnic divide, propel refugee return and attract more foreign investment. I therefore wholeheartedly support the tough stance taken by the High Representative Wolfgang Petritsch in order to marginalize the Croatian nationalists in Herzegovina.

Recent extremist activities by ethnic Albanian guerillas in Southern Serbia and Macedonia were clearly a backlash in our overall stabilization efforts for the Balkans. We should however also see that in comparison with former crises new and positive developments have emerged. Both governments in Belgrade and Skopje acted with restraint. The regional solidarity against terrorism was unprecedented. The International Community and in particular the EU with the High Representative Javier Solana acted faster and more unified than ever before. I made my input to these efforts by convening in Skopje the first all-party caucus on inter-ethnic dialogue. Consequently, I called upon the EU to further facilitate such talks, under the umbrella of the Stabilization and Association Agreement. I very much hope that these all-party talks being facilitated by the EU (in what is now the “Europe Committee”) will soon produce the first tangible results. The recent visit to Skopje by US Secretary of State Colin Powell has had a most welcome catalyst effect to this end. We must all be aware that the threat of terrorism has not been banished yet.

If we analyze the nature of these challenges, will the future in South Eastern Europe be determined by US-EU cooperation or competition? 

We need only to look at the identical interests we are pursuing in South Eastern Europe on both sides of the Atlantic to conclude that we are damned to cooperation. These interests lie broadly in peace, stability and prosperity for the whole of the region. We agree that that the countries in South Eastern Europe should be led towards and ultimately into the EU and that our actions must be geared to this objective. We agree that the EU has the lead in this common endeavor. Both of us have been engaged considerably in military peacekeeping through SFOR and KFOR. Secretary Powell’s statement “We went in together and we will leave together" is the best indicator for a cooperative mode in the transatlantic partnership in Balkan matters.

At the same time I would go so far as to say that there cannot be good transatlantic cooperation in South Eastern Europe without healthy competition. Not competition about objectives or about the EU lead role, but a competition over the concepts of problem solving, over the speed of delivering assistance and over developing the markets in the region for our industries. 

To quote a few examples, the swiftness of the American assistance to Montenegro last year had a positive impact on the speed of EU aid to Montenegro and later on to the FRY. The comparative speed of aid delivery is a recurring theme in my talks in Brussels, while I have to remind Washington from time-to-time of the comparative volume of aid given to South Eastern Europe. I had a similar experience during my last trip here when I found out that the US system on investment guarantees is more flexible and ultimately more generous than many European schemes. I have been using this argument ever since and it has made an impact on some governments in the EU.

When it comes to future EU-US-German cooperation in the Stability Pact I am optimistic. President Bush and Federal Chancellor Schroeder said in their statement that the Stability Pact remains an important instrument of our joint policies in South Eastern Europe. I also believe this is in the interest of the United States. 

First, such a cooperation gives substance to the Transatlantic Agenda, based on common ideals and interests. Second, if both the EU and the US want the EU to take the leading role in the stabilization of South Eastern Europe, the United States needs to remain actively involved. The EU has all the potential to lead and is proving that it is beginning to do so: witness Javier Solana’s determined action in the Macedonia crisis. But we will need strong US engagement for a while to back up the EU actions. A point in case is the EU’s underdeveloped security policy.

Lastly, on military engagement I fully agree with those who believe that one should know the way out before one goes in. In the case of South Eastern Europe, both the US and Europe are in already. The Stability Pact is their joint endeavor to address the root causes of conflict through democratic institution building, economic development and enhancement of security. Massive investment in these sectors will, in the medium and long-term, create the conditions for the gradual withdrawal of our peacekeepers from the Balkans. This is why the Stability Pact continues to make sense.