Econostrum | Economic News in the Mediterranean



Where does the Euro-Mediterranean Partnership stand?

By Henry Marty-Gauquié, member of the Euromed IHEDN Scientific Council

(photo: F. Dubessy)
(photo: F. Dubessy)
The European Union, which has been involved in financing third countries in the Mediterranean since the 1970s, significantly improved its offer of aid for regional integration with the Barcelona Agreements of 25 November 1995. In the wake of the Oslo Accords, signed in Washington between Yasser Arafat and Yitzhak Rabin on 13 September 1993, the EU's ten Mediterranean Partner Countries (MPCs)1 were offered a global partnership based on three components: firstly, a political component aimed at creating an area of peace and stability shared between the shores of the "common sea"; secondly, an economic component, aimed at creating a regional free trade area and joint management of the major risks in the region and, finally, a social and cultural component focusing on the mobility of civil societies and the development of cultural cooperation between the two shores of the Mediterranean basin.
For fifteen years, from 1995 to 2010, the "Barcelona Partnership" has had tangible effects, bringing the economies of both shores closer together and initiating a significant reduction in poverty in the MPC. The resources put on the table by the EU were significant both in volume (more than €4 billion per year) and in kind, the range of products being adapted to the different facets of the development of emerging economies.
Implemented by the European Commission and the European Investment Bank (EIB), the "financial arm of the European Union", the financial offer included grants to support the modernisation of non-market sectors, technical assistance funds for reforms and for the design and implementation of investments, long-term loans at below-market rates for enterprises and public services, credit lines to the local banking sector for the financing of SMEs and the development of microfinance and, finally, equity or profit-sharing loans for the creation or development of start-ups, especially those working on exports or those created by entrepreneurs from the MPC diasporas established in Europe.

Partner countries have not achieved their employment targets

In October 2002, in response to the situation created by the attacks of 11 September 2001, the European Union decided, under the Spanish Presidency, to further strengthen Euro-Mediterranean links. The EIB was asked not only to increase its financing but above all to diversify its action by adding a political dimension.
The new grouping, called FEMIP2, established an annual meeting of the partners’ and the EU’s finance ministers ("the Mediterranean ECOFIN Council3 ") and sectoral ministerial meetings to coordinate joint responses to subjects of regional interest (e.g. energy, pollution, the environment, urbanisation, demography and mobility, etc.). Finally, a technical section was developed to strengthen cooperation between technicians and experts from both shores around "action programmes" such as the fight against coastal pollution, regional logistics chains, the "Mediterranean Solar Plan", the collection and valorisation of savings, etc.
Despite a "rain of calamities"4 , the Barcelona Process has borne fruit: growing economic integration of both shores, mutual willingness to cooperate on major issues, development of foreign direct investment (FDI) and technology transfers, relaxation of pressure on issues of personal mobility and interaction between civil societies, development of university and cultural cooperation, etc. And, above all, average annual growth of 6% in the MPCs (i.e. three times more than the European performance). However, the partner countries did not achieve their employment objectives: job creation was insufficient to absorb the demographic curve and the supply of graduates did not allow them to be retained in the country, thus encouraging a "brain drain"; likewise, the participation of women in the labour market remained limited to between 10 and 15%, which is notoriously insufficient to establish an emancipation policy.
The cause of these failures was not so much the EU as the shortcomings of the regimes in all the partner countries, which had drifted towards hereditary temptation and were surrounded by an elite (often praetorian) practising a captor and corrupt capitalism that diverted the bulk of national wealth to a tiny number of beneficiaries.

New governments have turned away from a regional vision

The European Union's partnership policy in the Mediterranean suffered a triple shock at the turn of the 2010s. First of all, the Arab democratic movement, which, after a few moments of intellectual euphoria in Europe, quickly reactivated the security agenda and, above all, awakened a negative perception of the Arab world with widespread political and civil instability, the outbreak of three civil wars and the resurgence of international terrorism in the Middle East, Libya and the Sahel. Moreover, the new governments in the MPCs, faced with difficult internal situations, have turned away from any regional vision in favour of optimising bilateral links with the Union or its member states, which has called into question the very philosophy of the Partnership.
The second factor that contributed to the European disengagement from the Mediterranean was the eurozone crisis: technically, this was triggered at the beginning of 2009 by the declaration of Greece's bankruptcy, but it gained momentum in 2010-2011 with the reaction of the international markets regarding the credibility of the currency and the solvency of some of its member countries. The frantic search for firewalls and then the setting up of European financial solidarity mechanisms, initially provisional and then institutionalised, overwhelmed all European perspectives, which were already blurred by the internal divisions between the Mediterranean and the North. In this respect, tribute should be paid to the action of President Sarkozy who, in these difficult times and with his own temperament, was able to call everyone to their senses and reconstitute the foundations of European cohesion in the face of what was indeed the first international crisis to hit the new currency created ten years earlier.
The third factor, more anecdotal, is that of the rapid sinking of the Union for the Mediterranean (UfM) project (in 2008), a victim of the original errors of its creation, the antics of the Sarkozy presidency and, above all, the two aforementioned crises that have removed the interest in regional governance of the Euro-Mediterranean area. The point is worth mentioning for the lasting damage this failure has done to the credibility of French initiatives for the Mediterranean, as evidenced by the very relative success of the (June 2019) "Sommet des deux Rives" initiative.

Regional integration as the best political option

The formalisation of this lack of interest comes at the time of the European negotiations for the Union's multiannual budgetary framework for 2014-2020: funding for the Mediterranean is reduced to €9.6 billion for seven years and the share of financing "at the EIB's own risk" (i.e. on market terms) is increased by three billion. Of course, this can be explained by the virtual cessation of activity in countries experiencing civil war or political instability, but it also reflects the partner countries' lack of interest in Mediterranean integration; indeed, each country prefers privileged bilateral relations to collective regional action and neglects a Community mechanism which appears to them to be complex, fastidious and remote from their concerns.
In fact, the last FEMIP ministerial conference was held in 2014, the last EIB activity report in the Mediterranean was published in 2015, European aid is decentralised to the capitals of the beneficiary countries and the figure for European aid to the Mediterranean countries has dropped to around 1.5 billion per year. More seriously, there is a concentration on large countries such as Egypt (close to 50% of the annual total), Morocco and Tunisia and a predominance of industrial or solvent infrastructure projects which, admittedly, contribute to development but have little effect on reducing inequalities or ensuring access to essential public goods for the greatest number. Finally, one third of loans are not disbursed.
A recent OECD report, commissioned by the UfM (thus including the Balkans and Turkey in addition to the MPCs)5 , analyses economic integration in the Mediterranean over the past decade. The main conclusions are as follows: some countries have succeeded in diversifying their economies and integrating them into regional value chains; these are Morocco (automobile, aeronautics, port logistics), Tunisia (medical equipment, electrical wiring) and Egypt (electromechanics). Trade (pre-pandemic) has developed but at a lower rate than world growth and the EU is totally dominant since it represents the origin or destination of 97% of intra-Mediterranean trade. Finally, inequalities in development are increasing, whether between the Mashreq and the Maghreb or between the social classes within each country.
What should we conclude from this? That regional integration is undoubtedly the best political option for the region, but that it cannot be left to market forces alone; regional governance and multilateral cooperation are more than necessary. At a time when conflict continues to grow and the American umbrella continues to withdraw, leaders on both sides of the Mediterranean would do well to keep this objective in mind...

1 Algeria, Egypt, Israel, Jordan, Lebanon, Libya (subject to the stabilisation of the political situation), Morocco, Palestine, Syria and Tunisia. Turkey, an EU candidate country and beneficiary of a 'deep and comprehensive free trade area' (DCFTA), falls under the pre-accession mechanism. It alone benefited from between €1.6 and 2 billion/year.
2 Facility for Euro-Mediterranean Investment and Partnership.
3 Economic and Financial Affairs Council, abbreviated as ECOFIN Council
4 Among others: 2nd Palestinian Intifada and Israeli response (2000-2005); Hezbollah's investment in Lebanon (2000), 11 September 2001 attacks, 3rd Israeli-Lebanese conflict (2006), Hamas takeover in Gaza and civil war with Fatah (June 2007), 2008-2011 oil shock, ''Arab Spring'' (2011), etc.
5 Published on 27 May 2021 and funded by the German Development Cooperation (GIZ):

Thursday, July 1st 2021

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