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5.20 p.m.

Lord Russell-Johnston rose to call attention to the stability pact for the Balkans; and to move for Papers.

The noble Lord said: My Lords, I think I should begin by declaring an interest or, perhaps more accurately, an involvement in the stability pact. I am chairman of the governing board of the International Institute for Democracy—a small but, I believe, extremely efficient and effective French-registered NGO located in Strasbourg. It was established 12 years ago jointly by the European Parliament and the Parliamentary Assembly of the Council of Europe, which is in itself unique, and has the support of some 25 parliaments in Europe, although, unfortunately, national constitutional arrangements preclude parliaments of certain large countries—such as our own, Germany and France—from making financial contributions to such an organisation.

The institute has an agreement with the stability pact to take the lead, under Table 1 which deals with democracy, in promoting what I would generally describe as "Parliamentary Standards". To that end, we have promoted a series of seminars throughout the region and continue so to do.

Secondly, it might be helpful to your Lordships, and an aid to recollection, if I briefly sketch the background to the stability pact and how it works. This might also save some of the Minister's breath later on. Credit for initiation goes to the French. In 1993, Edouard Baladur, then French Prime Minister, suggested a,

At that time he was thinking more about Hungarian minorities in Romania and Slovakia than Yugoslavia. Remember, this was when the Bosnian war was at its height. Srebrenica did not fall until July 1995.

However, after the Dayton Peace Agreement in November 1995, the French pushed their ideas further by proposing a,

    "process for stability and good neighbourliness in south-east Europe"

—the so-called "Royaumont Process"—which, in due course, fused into the stability pact for south-east Europe, which was signed in Cologne on 10th June 1999; the Germans at that time being in the chair of the European Union and solemnly adopted by the heads of state at the Sarajevo summit on 30th July 1999.

The intention was to seek to stabilise the Balkans, not only by encouraging reconciliation and the development of democracy and human rights but also, most importantly, by economic support. The stability

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pact was and is organised and directed by the European Union. Essentially, it is a co-ordinating mechanism seeking to match the offers of donor countries which, apart from the European Union itself, are notably the United States, Canada and Japan from the G8, with smaller but still significant contributions from countries such as Switzerland and Norway, and match that to the needs of the recipient countries.

There is a co-ordinator—the first being Bodo Hombach who has since been succeeded by Erhard Busek. The co-ordinator chairs the regional table or standing conference which oversees the work of the three working tables: Table 1 on democracy, Table 2 on economic questions, and Table 3 on security and justice. It may sound a little complicated to your Lordships, but perhaps that is because it is.

The first two years of the stability pact coincided with the two concluding years of my period as President of the Parliamentary Assembly of the Council of Europe, during which time I moved around the Balkans a lot and attended a number of conferences whose main focus was the stability pact. It is on the basis of that experience that I want to make a few comments and ask some questions.

There is no doubt that the stability pact was launched with many fanfares of trumpets and great clashing of cymbals which were repeated at the first funding conference in Brussels at the end of March 2000 when the so-called "Quick-Start package" was unveiled. That created a high level of expectation among the recipient countries which, in turn, during the two years which followed, slid into disillusionment. I remember one leading Romanian politician saying to me that there were,

    "too many tables and too little on them to eat".

Whether that could have been avoided is a question which will be long debated, but which needs to be debated.

The recipient countries "in transition", as the euphemism has it, were already struggling with the realisation that transition from communist dictatorship to pluralist democracy did not automatically and swiftly produce prosperity; indeed, for many, it created impoverishment. The stability pact was therefore seen as a kind of saviour; a kind of Balkan Marshall Plan. And it was not or is yet so to become.

No major environmental project has, so far as I know, been completed. I sometimes think that, from the point of view of political presentation and also the acceptance of the necessary degree of transparency in tendering and implementing projects, there should have been an early concentration on one major project—the most obvious being the clearance of the Danube and the reconstruction of the bridges at Novi Sad, destroyed by the NATO bombings. That would have yielded widely-spread benefit throughout the whole region, not least in Romania and Bulgaria at the bottom, which gave us necessary but, for them, extremely politically difficult support during the intervention in Kosova.

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The extent of the mismatch between the standards required by the Brussels bureaucracy and the capacities of the recipient bureaucracies was, I do not think, fully anticipated and caused many delays. There was always, of course, the shadow of corruption which was and still is widespread in many of the recipient countries. I remember sitting for nearly three hours with President Voronin of Moldova while he graphically described to me the extent of corruption in his country at every level which he had inherited and which I think explained the seeming paradox of the communists being re-elected there.

Can the Minister give us any idea of the extent to which progress is being achieved in this very difficult area? There is no doubt that Bodo Hombach is a brilliant man, but the personality of Erhard Busek may prove better suited to the task of co-ordinator.

I noted in particular one phrase in his report on setting priorities for 2003 and beyond. He said:

    "While the Pact remains committed to promote long-term trends, the Special Co-ordinator recognises the need to deliver tangible results on an annual basis".

People want to see evidence of progress.

My second question for the Minister concerns resources. Obviously there must be clear accountability of expenditure—for example, wastage of money on Bosnian houses which were never built. The issue in Albania which I do not believe we need to go into again, and others, were matters that gave great concern. However, if we accept that there is improved confidence in the way things are done, is there any serious resource default? In other words, do they need more money to achieve what could otherwise be achieved? Perhaps the Minister could also give us an idea of the level of contribution made by the main donors; that is, the European Union, the United States, Canada and Japan. I realise that it is a complicated matter because some gave not money but paid in kind.

In the time at my disposal, it is not possible to cover all aspects of the work done through the stability pact, but I think especial credit ought to be given to the development of free trade arrangements in the region; to the work done in the transport and energy fields; to the training of administrators; and to the tackling of organised crime.

One most important piece of feedback that I get is the emergence of a much more strongly articulated determination throughout the region to put its own house in order and not to blame the inadequacy of external help for its own shortcomings. When I was in Skopje at the end of November, I heard that very strongly expressed. Of course, it will continue to need nurturing on quite a large scale for a long time, but where this proceeds against a growing mood of self-reliance—or the wish for self-reliance—the chances of success improve.

I want to make three further points in conclusion. In November 2001, I spoke at a conference organised by the Congress of Regional and Local Authorities of the Council of Europe in Istanbul, which was concerned to encourage "economic twinning", if I can call it that,

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between western cities and regions and cities and regions in the Balkans. The idea was mainly to provide expertise but in some cases also direct assistance. Has the Minister any information on how that is proceeding? Are any British cities involved?

"Balkanisation" is a kind of swear word in the British political vocabulary. While it dates back perhaps more than a century, it still persists as a negative idea. Some politicians, especially those in large countries, are deeply attached to the development of the grand design and the emergence of new small countries is anathema to them, despite the evident success of the Baltic States and Slovenia.

That brings me to Kosovo. Kosovo is in drift and in my opinion that drift will not be arrested until the United Nations bites the bullet, accepts that after what took place re-absorption into Serbia—or Serbia-Montenegro, as it may become—is completely unacceptable to the Albanian Kosovans and that it should become what we still call "a sovereign state".

Unfortunately, I was not well yesterday and so was unable to participate in the debate on the Convention on the Future of Europe which I had intended and wanted to do. That is the background. The enlargement of the European Union and foreseen further enlargement, the work of the Council of Europe in reducing the importance of borders without necessarily removing them, and the emergence within our established, though not so very old, so-called "nation" states of pressures for greater self-determination in Catalonia, in the Basque country, in Bavaria and—dare I say it?—in Scotland and Wales, have created a new scenario. What used to be called "independence" is not seen as being contradictory to the fullest cross-border co-operation or to the achievement of regional or European-wide common standards, policies and institutions.

It seems a contradiction, but I believe that Kosovo and Serbia will co-operate much better if they are apart than if they are forced together. Post-war Europe found it convenient, if perhaps necessary, to found its diplomacy on territorial integrity and non-interference in the states' internal affairs. With the blessed growth of the recognition of the universality of human rights, these notions are changing and becoming out-dated.

Finally, can the Minister say whether the European Union has set any time-scale on the operation of the stability pact? When I ask that question I receive different answers: some say six months; some say a year; some say that it is open-ended. I think, at this stage, with so many continuing uncertainties, it must be open-ended.

The stability pact began hesitantly but it has done much constructive work. It has much still to do, but without it we would not have made the progress we have. I beg to move for Papers.

5.35 p.m.

Lord Lea of Crondall: My Lords, I am pleased that this debate is taking place. We are indebted to the noble Lord, Lord Russell-Johnston, for tabling it. My take on the whole of the West Balkans stability pact issue is different from his. That will become clear as we

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go along. My main knowledge arises from the report which we prepared in Sub-committee A of the European Union Committee under the distinguished chairmanship of the noble Lord, Lord Grenfell. He was such a distinguished chairman that he has now been promoted.

We visited Sarajevo, Belgrade, Zagreb and so forth about a year ago and concluded our report, HL107, published on 16th April. It goes under the jazzy title, Responding to the Balkan Challenge; The Role of EU Aid. As the noble Lord, Lord Russell-Johnston, said, there are a considerable number of countries in the stability pact; far more than the 15 in the EU. There are the G8 comprising America, Canada, Japan and so forth and there are many others in eastern Europe which are not in the EU or even located in the Balkans. The noble Lord hinted at the criticism, which I would put more strongly, that the stability pact was grossly overhyped in France and Germany at the start. It led people in all the places we visited, as well as in Romania and so forth, to believe that there would be new money on the table.

An official DfID citation states:

    "The Stability Pact has no funds of its own and what the Pact Secretariat describes as Stability Pact assistance to SE Europe is in fact made up of assistance from individual donor states and the Commission, plus infrastructure lending and grants from IFIs".

That is the position, and it highlights the fact that probably 90 per cent of all the money we are talking about is EU money. I would say that it is nearly all multilateral. Ten or 15 per cent add-on is bilateral from Britain, Switzerland and so forth, but it is essentially EU money. In broad, ball park terms, it amounts to 5 billion euros over five years.

I want to contrast that figure with 5 billion euros over one year for the military. The name of the game should be to ask, first, how can we get more of the military into the civil side so that the military can go home. It is an expensive operation. However, people such as General Kiszely, whom we met, confirmed the evidence of our own eyes. The military cannot be allowed to go home if that means the whole place sinking back into chaos. That is a generalisation. But there are parts of the Balkans—I do not need to specify which—where that would still be the case, although progress is being made. I would give a good seven or eight out of 10 to the EU aid programme and the improvements that have been made over the past three years in particular.

Chris Patten is doing a very good job in Brussels in reconstructing the aid programme, and the European Agency for Reconstruction, particularly in the Serbia/Kosovo area, is giving much more ownership and involvement to people on the ground. I believe there is now a 10 to one ratio in terms of locals working on a job and people working for Brussels. That is a very important statistic because no one in their right mind believes you can get the involvement of local authorities, magistrates' courts, trade unions, the police and so on. Private investment is obviously the biggest need, but you cannot get any of that by just having officials turning up. There needs to be a lot of ownership on the ground.

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The stability pact has acted as a catalyst for some of this broader thinking to get through to people. It also has the advantage, unlike individual aid programmes, of the so-called country strategy paper—the EU road map—being negotiated with each country, which is very important. The stability pact has given a regional dimension to the whole area.

Let me say a word about what I mean by the "whole area" because it is a rather interesting question. We use the "Balkans" word. Some people do not like the "Balkans" word. We use "West Balkans" as a term. Some people do not like it. However, there is another concept floating around in the area which is even more interesting. It is what I would call the "south-east Europe hinge".

Let me explain what I mean by that because at the next EU summit in Thessoloniki in June we shall hear much more about it. It involves the roles of Greece and Turkey and Greek-Turkish relations bilaterally with Skopje, Sofia, Bucharest and so on. I made a brief visit to Macedonia just over a year ago to carry out work for the Foreign Office on the industrial/trade union position on employment, which has been very negative as a result of the catastrophic way in which the privatisations have been carried out, a point made by the noble Lord, Lord Russell-Johnston.

My programme involved a meeting with all the trade unions in the stability pact in Thessoloniki. There is a European college there which is a convenient place for everyone to meet. Our ambassador in Skopje came down to meet me—I suspect that he wanted to see the Greek museum of anthropology rather than to pick me up—and drove me three hours up the road to Skopje. When you get to Skopje, Europe is not there in Brussels but is down in Salonika and Athens. This will be the hinge of the area in future—from Ankara to Athens to Bulgaria to Romania and most of the Balkans—for work which is changing the Greek/Turkish relationship.

I have made several visits to Athens when I have found it absolutely impossible to complete a sentence without someone screaming abuse at me for making the wrong use of the word "Macedonia" or for a wrong thought about the relations between people in Greece and the country that we now call the former Yugoslav republic of Macedonia. That situation is now easing. When I got to Skopje, I found that when I suggested meetings between the trade unions in Macedonia and Athens—in construction, forestry, travel, transport and so on—they all said yes. That would have been unheard of five years previously.

I believe that the penny has now dropped. I shall probably be chopped into little pieces by the noble Lord, Lord Hannay, who is to speak shortly, for saying that I detect more strategic rethinking now on these issues in Athens and Ankara—not only because of Cyprus but because, at the next stage of EU enlargement in 2010, or whenever, all of these issues will raise important questions. Before the lead up to the EU summit in Thessoloniki in June, the Government should ponder the significance of the Thessoloniki venue and realise that this is a big issue

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on which I have been trying to put my finger. Regional co-operation is a delicate matter—but it is there, and this summit will be rather different from the Corfu summit, the last time, I believe, a summit was held in Greece, some six or seven years ago.

There is also a rethink going on—in part under the umbrella of the stability pact—in regard to the ethnic business. I reflected when we were in Sarejevo—a little knowledge is a dangerous thing, but that has never stood in my way—that the people in the Ottoman empire in 1600 who went to Constantinople to work as janissaries and so on for 25 years were Muslims when they came back. Some people said that that made them ethnically different. That is nonsense. They were not ethnically different; they were Muslims instead of Christians.

All of these issues can be interpreted in several ways but I suspect that once people have stopped screaming at each other, there is a lot of scope for them to get on rather better than they have in the past.

Returning to the issue of the 5 billion euros a year for military and 5 billion euros over five years for civil aid, we need to have rather more of a neo-colonial relationship with the Balkans, just as we do in Africa and other places, because, although it is not Bokassa's diamonds, we cannot afford to hand out money and not care where it goes. That is not the kind of accountability our taxpayers want. They want very much to see us succeed because, in saloon bar speak, if we do not succeed in getting economic stability over there, they will all come over here. That is the kind of thinking that drives voters in Europe. There has to be much more involvement on the ground with how the money is spent.

This requires a lot of ownership on the ground. At the moment there is still a big problem getting underneath governmental layers. As Chris Patten told us, the more we want accountability for every penny, and hold up every penny of expenditure until we have the accountability and everything else pinned down, the more we are singing a different song to the one that we have been singing about ownership, encouraging micro-businesses and encouraging people to do their own thing.

What is emerging is an interesting new concept—nothing is new under the sun, of course, but it is fairly new in the scale in which it is operating—namely, that the EU road map is becoming "owned", in the new way in which that term is used, at many levels, by many layers of society, in many of the West Balkan countries, from Zagreb through to Albania. It is "owned" by these people because it rings a bell with them. A road map is something you chuck on the back seat of the car; no one tells you that you have to look at it. But you certainly do have to look at it when you get to the T-junction in order to figure out that if you want to go to one destination you turn right and if you want to go to another you turn left. That is playing with words, but there is, psychologically, quite an important change in thinking in the West Balkans. People want to aspire to the stabilisation and association agreement.

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Incidentally, the words "stabilisation and association agreement" bring in the word "stabilisation" in a confusingly similar way to the word "stable", as in "stability pact", but they are not the same animal.

Under the stabilisation and association agreement, the country's strategy papers—which concern banking, water supply, infrastructure, magistrates' courts, border zones, VAT and so on—are an important new way of doing business.

In conclusion, although I believe that the stability pact was over-hyped, there is scope for regional co-operation, which is a pre-requisite to private investment. I do not believe that anyone will invest in an "itsy-bitsy" place where the market is only two peanuts. If the growth and stability pact and the country strategy papers are worked on against this umbrella, there can be some scope for viewing with confidence the future of the West Balkans.

5.50 p.m.

Baroness Hooper: My Lords, I, too, welcome this debate on an area of Europe which is very important to its future. I speak as a member of the Parliamentary Assembly of the Council of Europe. I am grateful to the noble Lord, Lord Russell-Johnston, for giving us this opportunity to debate and perhaps raise the profile of the stability pact for the Balkans. The noble Lord's expertise on the area is considerable. He set out the issues very clearly in his opening remarks.

I did not know the area well. Like many people, I had been on a very happy holiday to Split and Dubrovnik many years ago. This autumn, however, I went as an official observer to the elections in Bosnia-Herzegovina and subsequently attended the parliamentary conference entitled "Enhancing Security and Political Stability through Economic Co-operation"—a progress report conference on the stability pact for south-eastern Europe.

As the noble Lord, Lord Russell-Johnston, has explained, a parliamentary troika sponsorship system for the activities of the stability pact was established in June 2001. The European Parliament and the Parliamentary Assemblies of the Council of Europe and the OSCE each take the lead on a six-months rotating basis. The first conference was chaired by the European Parliament and took place in Brussels in 2001. The Parliamentary Assembly of the Organisation for Security and Co-operation in Europe chaired the second conference, which took place in Bucharest in June 2002. The Tirana conference—chaired by the Parliamentary Assembly of the Council of Europe—took place in October 2002. On that occasion, as a representative of the Economic Affairs Committee of the Council of Europe Parliamentary Assembly, I was appointed as Rapporteur of the proceedings. We shall have a debate on the report in the coming January session of the Council of Europe, which it is hoped will take matters forward to some extent.

What I learnt from that conference—indeed, it is generally self-evident—is that no country or region can remain in isolation any more. South-eastern Europe has some 55 million people. If we add these to the 112 million consumers who form part of the central European free trade area, this creates a potential market with huge possible benefits.

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The practical steps for bringing together the countries of the stability pact for the Balkans are very important. That is what we were monitoring at the conference. One of the ways in which matters were being taken forward from the first two conferences was the creation of free trade agreements between the various countries.

Twenty-one such agreements had originally been proposed. In October, it was reported that 10 out of the 21 had been signed. At a subsequent meeting that I attended in November, I understood that matters had moved on: that some 12 agreements were complete and nine were actively under way. So we are approaching the target of 21.

It seemed to me that, although it is desirable to have the free trade agreements completed, the mere fact that such agreements are being set up between countries in the region is an important step forward for political as well as economic reasons.

It was clear from the discussions—which were attended by representatives of all the countries involved—that the negotiations themselves have proved very efficient tools for easing tensions between countries. The agreements serve as connecting links, to establish co-operation which was either non-existent or had been severely disrupted by years of conflict.

The pact's intention to transfer the ownership of its activities to the beneficiary countries themselves was also made clear. In doing this, the pact has managed to instil a new spirit of co-operation between officials and experts of the countries concerned. As a result, we now see former adversaries sitting around the same table, jointly drawing up and implementing the agreements. A few years ago, this would have been unthinkable for many of the countries.

The free trade agreements also demonstrate the region's institutional and human capacity for applying and implementing Council of Europe and other international standards on good governance, openness and transparency in all the institutions involved.

It is important in this context to recognise that all the efforts and changes are not exclusively for the countries in the stability pact region of south-eastern Europe. So long as the European Union member countries perpetuate policies such as the common agricultural policy and its system of subsidies, the more we prevent less developed countries, often relying on primary agricultural products, from making economic progress and standing on their own two feet. I am probably getting on everyone's nerves by repeating this every time I speak on the subject, and in many different contexts, but I believe that reform of the common agricultural policy is something about which all of us, as parliamentarians, must keep reminding the Government.

As well as co-operation between the member countries of the region, we need to see on-going co-operation between the many international organisations, such as the World Bank, the EBRD, the Council of Europe Development Bank and the European Investment Bank, which are all involved in the stability pact process. Ensuring that kind of co-operation and co-ordination is

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clearly a task for the special co-ordinator, Mr Busek, and his team. It is also a theme to be pursued at subsequent parliamentary troika conferences of the nature of the one I attended in Tirana.

However, I wish to point out in this context—as a plug for the Council of Europe—that the Council has an additional unique opportunity to monitor and ensure such co-operation, since all the global and European organisations involved in the stability pact attend our sessions in Strasbourg at least once a year to report back and to answer our questions. I believe that this is the only parliamentary forum where we can call to account representatives of the World Bank, the EBRD, the OECD and other such institutions. We left Tirana agreeing that in our various assemblies—the European Parliament and national parliaments—we would put pressure not only on our governments but also only on those institutions.

Providing a framework is important. Signing up to free trade agreements is important. However, as the noble Lord, Lord Russell-Johnston, said, the crucial factor in terms of public perception is the practical steps which are taken.

The co-ordinator provided us with a list of 46 quick-start projects of which cross border/trade facilitation projects constitute to date only six. But to those can be added the development of the regional electricity market. I hope that at future conferences we shall hear of further progress.

Perhaps I may read out the Tirana Declaration. It called for the creation of a parliamentary structure involving the countries concerned; a continued push for the speediest completion of infrastructure projects, including the transport, energy and water management sectors and simultaneously the systematic introduction in each sector by a strategic approach to infrastructure development in the region; the timely conclusion of the remaining 10 (as it then was) regional free trade agreements before the deadline of December 2002, followed by their rapid implementation; renewed efforts to develop, by appropriate agreements, the free movement of people across the region; an intensified fight against corruption and organised crime, including trafficking in human beings, drugs and arms; creating conditions conducive to the voluntary return of refugees and displaced persons and ensuring protection of minorities; and UNMIK to provide conditions necessary to promote the participation of Kosovo in regional co-operation. That point was made by the noble Lord, Lord Russell-Johnston. The extract from the final declaration will provide the agenda for the next parliamentary troika conference. In January we shall debate the issue in the parliamentary assembly in the Council of Europe in Strasbourg. I shall be happy to furnish any noble Lords who would like more detail on the subject with a copy of the report and the Tirana Declaration.

It is important that we continue to raise awareness of the work of the stability pact whenever an opportunity arises. High expectations were raised regarding the consequences of the stability pact, with the expectation of a possible Marshall Plan for the Balkans. Since it will be a slow process it is important

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that the people with obligations do not forget them; and that the people on the ground have patience. I look forward to hearing the Minister's response.

6.5 p.m.

Lord Hannay of Chiswick: My Lords, I should like to add my thanks to the noble Lord, Lord Russell-Johnston, not only for raising a topical and important foreign policy issue—the stability pact in the Balkans—but also for thus enabling the House to repair an omission of its own making: the failure so far to debate the report to which the noble Lord, Lord Lea, referred, on the European Union's aid to the Balkans, which was submitted by its European Union Committee in the first half of last year.

I hope that I may be forgiven for raising this seemingly rather parochial point about the scheduling of debates on reports of the European Union Select Committee, but it is important. It is all very well having a scrutiny procedure which is the envy of other parliaments in the European Union and respected in Brussels for the quality of its reports; but, if we cannot find the time to debate the reports in a timely manner, that surely deprives the whole process of a good deal of its meaning. That is one among a number of other points being raised by the Select Committee in its report on ways to improve our European Union scrutiny procedures. Is it too much to hope that this rather striking example of current shortcomings will attract the attention of the "usual channels" and lead to some remedy in the future?

When Bismarck made his much quoted remark about the Balkans not being worth the bones of a single Pomeranian grenadier, he was perhaps making a valid point about the undesirability of the European powers meddling in the sanguinary ethnic quarrels of the Balkans. But the history of the twentieth century also demonstrated, no less than three times, how difficult, indeed impossible, it was for the rest of Europe to insulate itself from turmoil and instability in that region. It is after all an integral part of our continent. It is totally dependent for its trade, investment and prosperity on the rest of Europe. In the most obvious sense it is Europe's backyard and, therefore, somewhere where Europe's common foreign and security policy has to begin, if not to end.

If we had been holding this debate 10 years ago, in the first month of 1993, the atmosphere would have been a good deal more fraught, the mood one close to despair, as the different parts of the former Yugoslavia slid deeper into the quagmire of war and massive human rights abuses and the efforts of the international community to counter this slide proved inadequate or unavailing.

In Bosnia a full scale war was raging; in Croatia a fragile and unstable truce showed no signs of durability; in Kosovo repression by the Serbs was the order of the day; in Macedonia a new multi-ethnic state faced challenges from all its neighbours; and, in Belgrade, Milosevic, the great destabiliser of the Balkans now facing trial for war crimes at The Hague,

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ruled unchallenged and was master of the most powerful military machine in the Balkans, which he showed no hesitation about using to further his ambitions. Faced with that daunting prospect, the international community was a prey to divided counsels and infirmity of purpose. And three international organisations—the United Nations Security Council, NATO and the European Union—on whose strengths and effectiveness our security and prosperity crucially depended, were being mocked and sidelined and made to look feeble in a way which many commentators predicted would inflict permanent damage on them.

Now, 10 years on, we can look back with some relief and perhaps a very modest degree of satisfaction to the fact that many of these Doomsday scenarios did not materialise; but, more importantly, we can seek to learn from and to apply the lessons from that earlier, dismal period. The first of those was that divided counsels, either between the Europeans themselves or between the Europeans and the United States were a recipe for disaster and for the frustration of the objectives of each of us. The second was that we should never send a large but under-equipped peacekeeping force into a region where there was no peace to keep in the first place. A determination to meet aggression and massive human rights abuses by the use of force, if necessary, was an essential part of any successful strategy. The third was that if we were to manoeuvre the Balkan countries out of the dead end of mutual hostility and economic collapse in which the break-up of the former Yugoslavia had left them, we needed a judicious blend of sticks and carrots, the most important of the latter being the long-term perspective of becoming a member of the European Union; and that we also needed—all of us—a long-term commitment to the region. The fourth was that the three vital international organisations—which I mentioned—to which we belong are much more robust and adaptable than we once feared. All three now play a crucial role in the post-conflict peace-building in the Balkans of which the stability pact is an important part.

That is the good news; but we certainly cannot yet afford to take the stability of the Balkans as a given or assume that these damaged countries, with their pitifully weak economies, can be left to fend for themselves. After all, by no means all the signals that reach us from that region are very positive. The region is a prey to organised crime, corruption and drug and human trafficking. As such, it adversely affects our own security. Democracy is shallow-rooted at best and still far too obviously based on ethnic divisions. A situation whereby recently in Serbia and Montenegro more than 50 per cent of the population could not be persuaded to vote in a democratic election is hardly a recipe for long-term durability. Legitimate economic activity remains anaemic and inadequate to provide a living, let alone prosperity, for the populations, whose tendency then is to be sucked as illegal immigrants towards the more prosperous countries to the north and west.

It would be remarkably feckless to assume that the Balkans can, in the foreseeable future, dispense with the pro-active engagement of the international

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community. But we must face the fact that that engagement will require a strong leadership role by the European Union. For some time now the balance of external involvement has been shifting in that direction. The European Union has taken over from the United Nations the responsibility for the civilian police mission in Bosnia. It is ready to succeed NATO in Macedonia, and, thanks to the Copenhagen meeting's welcome resolution of the outstanding problems on European security and defence policy, this will take place in full co-operation with NATO, and with full NATO backing. The European Union may, at a later date, need to do the same in Bosnia.

All that makes good sense; but it needs to be approached with caution and without excessive European bragging. There was quite a lot of that at the beginning of the 1990s, and it left us with egg on our faces. It remains critically important that the United States continues to be fully engaged as an active partner, not just in spirit but on the ground.

Although the establishment of the stability pact took place on the initiative of the European Union, it includes the United States and other non-European countries as full participants. It is thus part of the cement provided by that wide external engagement needed to hold together the Balkan region and to prevent regression to the practices of the past. Its launch may have been accompanied, as other noble Lords said, by excessive expectations. Its early history may have been marred by turf fighting and duplication. But its tasks of co-ordination among the external donors, building confidence and security among the Balkan neighbours, exercising downward pressure on their military spending and intentions, and increasing respect for human rights are as essential and valuable as they were at the outset.

However, it is important to ensure that the stability pact is fitted into a coherent overall approach to the problems of the Balkan region. It does not have, or need, an independent role of its own. It needs to be fitted in with everything else being undertaken in the region, in particular by the European Union.

Among all the institutional complexities, the task of the stability pact is simple: to work itself out of a job. If in 10 years' time, or perhaps more, we can conclude that the countries of the Balkans are just normal European countries that have definitively renounced the use of force, either between themselves or in their internal affairs, and which are applying systematically the European standards of human rights, we should also be able to conclude that the stability pact has played its role in bringing about that desirable objective.

6.15 p.m.

Lord Wallace of Saltaire: My Lords, I welcome the opportunity to debate an important issue and an excellent EU Committee report, which I read with much value yesterday while preparing for this debate. I am reminded of previous debates with the noble Lord, Lord Russell-Johnston, on the relationship between Scotland and the rest of the United Kingdom,

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stretching back in my case to Liberal Party conferences in 1968 and earlier. We never agreed entirely on how far devolution should go.

As the EU Committee report and the Government in their response remarked, the stability pact had over-optimistic beginnings. And, as the noble Lord, Lord Hannay, remarked, in the early stages of Yugoslavia's collapse there was much over-hyping of what the European Union was capable of. But we have all learned from the bitter experience of the past two years. What worries me now is that the stability pact implies a scale of commitment over a timescale that few in national parliaments—and, I suspect, some in governments—fully appreciate yet. As the noble Lord, Lord Hannay, said, we are talking of a 10-year or 15-year to 20-year period that ends with the states becoming full members of the European Union.

That will cost a great deal of money over a long period. The EU Committee report remarks on the scale of the financial transfers already under way. Commissioner Patten has made speeches remarking that the European Union must adjust to the extent to which calls upon the common budget will come increasingly for the purpose of dealing with the European Union's near neighbours rather than spending on our own agricultural and other problems. I am not sure that these issues are yet fully appreciated by enough people at national policy-making level. Therefore, EU governments need to absorb the implications of the commitments they have agreed. It is a road map to full membership. It is a financial commitment that the French and German governments were willing to talk about in principle but not to follow through in negotiations on the future of the EU budget. It, therefore, has major implications for the overall priorities of the EU budget.

A commitment is given to nation-building and state-rebuilding, which is still very unfashionable on the other side of the Atlantic. But the European Union is taking it on here and perhaps more so in Afghanistan and elsewhere. If it cannot be done successfully in south-eastern Europe, this is the test that will show our failure to do so outside Europe.

We are all conscious that the costs of failure are immediate, even as far as Britain. The KLA was, after all, raising funds from the Albanian community in London at an early stage in the development of the Kosovo conflict. There are Albanian groups in trans-national organised crime. I am told that they have been involved in smuggling drugs and people into Britain. Many trans-national people-smuggling networks across Europe have strong connections with the western Balkans in one region or another. So, Britain is concerned with what the noble Lord, Lord Hannay, called not just Europe's backyard, but our backyard. We cannot disengage.

The European Union is now effectively in a protectorate situation with Bosnia and Kosovo, which, again, we shall have to manage for many years to come. With Serbia and Montenegro and with Albania and Macedonia we are in a situation of trying to impose tough conditions on weak governments, surrounded by rather corrupt actors who are, therefore, not entirely in

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control of their states. We need to offer assistance with training of all kinds to help change the domestic culture. The weaknesses of the region are very obvious.

Some months ago, when I had to spend a week, first, in Sofia and then travel to Serbia/Montenegro, I was extremely grateful to the British embassies there for the assistance that they gave me as regards learning about the region. I was especially interested when they told me that I could travel by land from Sofia to Belgrade if I was willing to spend a day in Nis in southern Serbia—a place where the British embassy had had no contact since the Kosovo war. I wish that they had told me before, but I spent some time in the university where it seems that I was the first western speaker to deliver a public lecture since 30 of its students had been killed during the bombing of the Kosovo war. Thus, I received a rather warm welcome.

The experience gave me a sense of the desperate isolation from the outside world experienced both by the teachers and the students over the past 10 years. I recognised how much we can do to help in terms of recreating exchanges—inviting people out of the country—and by offering education to the younger generation so that they will have a greater sense of being back in a European network. We need to educate them together with people from other countries in the region.

I was very pleased and proud in Belgrade to be asked to give a lecture to the Diplomatic Academy and to discover that its deputy director was someone who I taught 10 years ago. He was one of the first students for whom George Soros paid, coming out of Serbia as Yugoslavia collapsed. I refer to the teaching of Serbs, Bosnians, Croats and others at the Central European University. After the lecture, I was particularly pleased to hear older Serbs saying that the active way in which students at their diplomatic academy ask questions throughout the seminar was very un-Serbian and very European. That is something upon which I encourage the British Government to spend more money. Please may we have more scholarships—more Chevenings—to bring people out and get them together. We need to send more British exchange scholars into the region and more British academics should be attached to its universities. We also need more British policemen helping in the training of their police forces, and so on. That is very much the sort of thing that we can do well. In summary, it means educating the next generation, and providing assistance of all kinds.

We are also necessarily concerned with the immense economic weakness of the western Balkans. There are too many small and weak states with out-moded systems of manufacturing and of agriculture, as well as an astonishing lack of regional integration. One of the biggest shocks that I experienced arose during the short while during which I was transferred from one car to another at the Bulgarian/Serbian frontier, which, I was told, was one of only two crossing places. At 10 o'clock in the morning, I observed that there were almost no trucks crossing from one side to the other. I was astonished by the absence of regional economic integration, which is the real problem.

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When we talk about the western Balkans, it is very important that Romania and Bulgaria should also be treated as part of the larger region. We need to rebuild a sense of what was, after all, one integrated region under the Ottoman empire and what is now a relatively small and concentrated area. Therefore, infrastructure spending does matter, but it has not yet been entirely rebuilt. Stable government and non-corrupt government also matters. The problem of corruption and organised crime was recently evident both in Sofia and in Serbia and Montenegro. I refer not just to the clan links and the traditional black economy but also to the former socialist networks—the KGB, and others—which, as many people know, have privatised themselves very effectively. In Serbia there are the former Milosevic networks that continue to maintain important stakes in the economy, which leads to a very delicate situation where one is trying to revive economic growth.

There have been some weaknesses in the western approach. It seemed to many of us that part of the problem in the early stages was the fact that too many bodies were involved. It was not just a case of NATO, the EU, the UN; it was also the OSCE. I remember at least one occasion when it involved a conference at the UN Economic Commission for Europe. Not surprisingly, there were too many meetings with not enough going on. It is much better to move towards a situation in which the EU becomes the main responsible actor. I agree with the noble Lord, Lord Hannay, that keeping the United States and Russia engaged and linked in with what is underway is important in the process, but this is primarily an EU responsibility. Indeed, our American friends tell us on regular and repeated occasions that they regard it as largely an EU responsibility. Again, I worry a little whether here, as in other areas of common foreign and security policy, too much may be left to the Commission, without there being sufficient continuing political and national involvement. It is an underlying weakness in CFSP that some national governments, especially some of the smaller ones, can slip into the assumption that when the EU is dealing with a matter they can leave it there rather than recognising that this means that we are all in the process together and we all have a part to play.

I turn to the question of state building and the number of states involved. The noble Lord, Lord Russell-Johnston, may be right to say that there is no alternative in the future of Kosovo but independence. Many of us would regret that, and many of us accept that it is quite right to postpone answering that question for as long as possible. As for Montenegro, I hope that all pressure from outside will be put on trying to maintain Serbia and Montenegro together. As I remember from MoD briefings during the war, Kosovo is roughly the size of Ulster, with the same population. Montenegro is roughly the size of Cyprus, with the same population as Bradford. Its main economic activity this time round was cigarette smuggling. In the early period of independence, Montenegro survived on a very small national budget, largely through mountain agriculture. It was only

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when I took my children to see the "Merry Widow" that I realised that Franz Lehar had written an entire opera making fun of the idea that Montenegro could, indeed, be independent, and that its entire national debt could easily be owned by one widow—thus the threat to the future of this "joke state", as he wanted to put it.

What we need is integration in the region, not disintegration. We have a long-term commitment of 10, or perhaps 20, years, which will end with EU membership—indeed, we discussed yesterday where Europe ends—and will include at least two, possibly three, majority Muslim states. We should be saying that to the Turks as we discuss the question of whether we wish to exclude Muslim countries with them. We all have shared national interests at stake, and there is a valued British contribution that we need to be making in our enlightened self-interest. Clearly, the stability pact is a useful framework for the way forward through stability and association agreements to partnership agreements. Eventually, perhaps in 10 years' time or longer, it will lead to entry into the European Union. That has to be the long-term goal. It will provide the leverage for conditionality to bring the western Balkans back into the European family.

6.29 p.m.

Baroness Rawlings: My Lords, I, too, should like to thank the noble Lord, Lord Russell-Johnston, for initiating, with his great experience, today's debate on a subject that is close to my heart. It was fascinating to hear first-hand from the noble Lord. At this stage I must declare an interest as a member of the British Association of Central and Eastern Europe. When I was a Member of the European Parliament and vice-president of the Bulgarian and Romanian delegation, I took the Bulgarian/Europe agreements through Parliament. I am also a governor of the American University in Blageovgrad and still visit the Balkans frequently.

We have had an interesting and constructive debate, with few speakers, but ones who are genuinely interested in the subject and the area. It has been a debate of exceptionally high quality; what one would expect from your Lordships' House.

I support the noble Lord, Lord Wallace of Saltaire, in congratulating the noble Lord, Lord Grenfell, on his report.

Just think, it may soon be possible to drive from Vienna to Sofia in seven hours, much the same amount of time as it takes to drive to Scotland. I will not mention how long it takes at present. This part of the infrastructure plan is just one of the noble aims of the stability pact, to which I shall return later.

Why is the stability pact so important? It was established in 1999 as a German initiative during its presidency. I am grateful to the noble Lord, Lord Russell-Johnston, for filling in the background to its establishment. It was designed to bring lasting peace, prosperity and security by tackling the formidable problems of south-eastern Europe, which had suffered critical injury following almost a decade of war and internal conflict.

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We all remember the past problems that haunted the Balkans. To quote Vladimir Philipov, the distinguished co-ordinator in the area,

    "The understanding underpinning it was that the problems of the Balkans are problems of Europe and that the efforts of all European states were required to solve them. The Pact had to live up to huge positive public expectations".

Many people called it the new Marshall Plan and everyone had high expectations. But it was not that simple, as we heard from the noble Lord, Lord Lea, and others. Huge demands were soon being made from countries in other parts of the world. Those countries' financial problems were soon pulling at all the Western powers' purse strings. But, despite the lack of expected funds and a certain amount of paternalism, there have been considerable successes.

Reading through the many speeches by the special co-ordinator Erhard Busek shows that much has been achieved in the relatively short space of three years. The possibility of conflict between any of the countries, which gripped the headlines of the last decade, has become remote.In Prague in November 2002 the invitation was extended to seven countries including Bulgaria and Romania to join NATO. This is an enormous step forward towards future stability in the area. The way is now being paved towards future membership of the European Union in 2007.

These are giant strides from an area that was often called "the forgotten Europe" during the Cold War, and by Bulgaria, which in those days risked being the forgotten country. The Balkans are an integral part of our continent, as the noble Lord, Lord Hannay, rightly stressed. There will be other exciting developments to look forward to during the Greek presidency engaging south-east Europe, culminating in the Thessaloniki summit at the end of June.

There have been several other achievements and many issues are still in progress: free trade agreements; problems with refugees; dealing with the abolition of small arms and light weapons; organised crime; and trafficking in human beings. All are vital to the future of the area.

In the short time available I shall concentrate on one issue: infrastructure. I strongly believe that one of the most important issues is the development of infrastructure in the region; figuratively speaking we need a revolution in the infrastructure sector. Infrastructure can play the role coal and steel played as a core for western European integration, both for the security and for the development of the Balkans. It will stimulate the emerging spirit of co-operation among the new generation in the region.

In the Bulgarian case, this was manifested best in the assistance to find a solution to the problem of where to locate the second bridge across the river Danube. The former special co-ordinator Mr Hombach was personally involved in solving the Danube bridge problems. Will the Minister tell the House about the progress that has been made in restoring full navigability to the Danube and its tributaries, and the cross-Danube road and rail links in Serbia? How much progress has been made with the project for the Sofia-Nish highway?

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I support the noble Lord, Lord Russell-Johnston, in remembering the help that the Bulgarians, under difficult circumstances, gave during the Kosovo war. The land communications between the Black Sea and the Adriatic are being improved, largely through the corridor VIII road and the rail project to link Burgas and Durres. These will bring further co-operation and trade and make it less likely that the area should descend into further conflict.

I should like to ask the Minister about the EC stabilisation and association agreement with Croatia. The agreement's ratification was suspended by the Government last year because, as I understand it, of the Croatian Government's refusal to hand over General Janko Bobetko to The Hague tribunal. I am sure the House would be interested to hear what the current state of play is, what the prospects are for a renewal of ratification and what conditions the Government have set Croatia for any renewal.

The stability pact is ultimately meant to lead to EU membership for the nations of south-eastern Europe. I welcome the fact that the target of 2007 is still there for Bulgaria and Romania. It is noticeable that Bulgaria's progress in the accession chapters has been stronger than Romania's. How does the Minister think that Romania can be encouraged to make faster progress?

The special co-ordinator Mr Busek is looking to increase the focus of the stability pact on regional trade. What are the Government doing to help this aim? The enlargements of 2004 and 2007 will pose challenges to the Balkan economies, as we heard from the noble Lord, Lord Wallace of Saltaire.

I would like to conclude by putting forward an idea of Mr Vladimir Philipov. He suggests that the word "development" be inserted in the name of the pact in order that it should reflect the new situation, expectations and approach, and for it to be called in future, "the stability and development pact". I ask the Minister to consider raising that idea.

6.38 p.m.

Baroness Symons of Vernham Dean: My Lords, I too am grateful to the noble Lord, Lord Russell-Johnston, for promoting the debate. I commend him for his considerable knowledge of the region and the hard work he undertakes there. I also thank my noble friend Lord Lea of Crondall for drawing our attention to the hard work of the Select Committee and members, including my noble friend Lord Grenfell, in compiling their report. I have some sympathy with the point made by the noble Lord, Lord Hannay, about the timeliness or otherwise of debating these reports, but those are matters for the usual channels.

As all have noted, this is a region with a great deal of history. The wars and nationalism in the first half of the last century shaped and damaged the region as much as any region in the world; so in the second half of the 20th century did the divisions of the Cold War and the dictatorial imposition of state socialism. The falling away of the Iron Curtain and the collapse of the

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former Yugoslavia were momentous events. The latter led to some of the worst atrocities in Europe since the Second World War, notably the Srebrenica massacre.

It is now seven years since the Dayton/Paris peace accord. So the peace in Bosnia has now lasted twice as long as the war did. I commend the leadership of the noble Lord, Lord Ashdown of Norton-sub-Hamdon, as the High Representative. That leadership is gradually restoring normality, building on the considerable work of his predecessors.

The Kosovo conflict is more recent. Since 1999, the United Nations—thanks to Michael Steiner, the Secretary-General's special representative in Kosovo, and his predecessors—has been working with KFOR, the EU and the OSCE to restore stability and peace. There is therefore little present or immediate threat of renewed war in either conflict. Britain has played a major part in bringing that about, working with our NATO allies, EU partners, Russia, the UN, the OSCE and others in the region including the EU special representative in Macedonia, now Ambassador Brouhns.

The noble Lord, Lord Russell-Johnston, specifically asked about Kosovo's status. The United Kingdom fully supports Special Representative Steiner's approach of "standards before status". The provisional institutions of self-government have come to prove that they are committed to making Kosovo work before status can be discussed, and that includes establishing a dialogue with Belgrade. The United Nations Security Council said in Resolution 1244 that Kosovo is part of FRY. It has agreed that final status must be resolved in due course through dialogue between political leaders in Belgrade and Pristina, but neither side has yet demonstrated its full commitment to the benchmark that the special representative has laid out.

Having dealt quickly with the past, much of which the noble Lord, Lord Russell-Johnston, sketched out, perhaps I may turn to some issues concerning the future. The relative peace in the region and the turning of the corner in history gives the region a real future to which it can look forward. Peace offers the people of the region optimism—optimism fuelled by a desire for peace, prosperity, freedom and security, all of which are very natural desires. Those same desires, and indeed the same principles, underpinned the drive to create what became the European Union. And those values are at the heart of the EU.

Soon, on 1st May 2004, as the Copenhagen Council confirmed, more countries will be joining us. As the Copenhagen Council also made clear, the EU has underlined our determination to support the efforts of the Western Balkans to move closer to the Union. In order to move closer, the countries of the Western Balkans have to take the right steps—steps set out in the EU's stabilisation and association agreements. The agreements state clearly how the countries of the region can become part of a modern European Union.

As the noble Lord, Lord Russell-Johnston, said, the stability pact goes a great deal wider than that. Much has changed in the region since the creation of the pact at the Cologne Council in the wake of the Kosovo

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conflict. The pact offered a brighter future for the region. Now, however, the pact is changing to reflect the very changes in the region itself. It is increasing its focus, prioritising better, streamlining its operations and working to hand activity over to the region. I commend its special co-ordinator, Ambassador Busek, on all his work on all these fronts.

As the noble Lord, Lord Russell-Johnston, noted, the pact's current mandate and the associated budget provided for by the EU expires at the end of June 2003. The EU Balkan summit, scheduled by the Greek EU presidency for June, will provide the opportunity to review the mandate. In answer to the specific point raised by the noble Lord, it is very much as he suspected: there is no end date. It will end when the integration to Europe is sufficiently well advanced—when it has, as the noble Lord, Lord Hannay, said, effectively worked itself out of a job.

Despite the problems that the noble Lord, Lord Russell-Johnston, described, there has been some real progress. I look forward to the continuation of that progress and the added value which the pact is able to bring in promoting integration of the Western Balkans towards the EU. For example, the free trade initiative to complete a free trade area across south-eastern Europe is a commendable goal and one which I was very pleased to hear the noble Lord himself applaud. The latest free trade agreement was concluded only last week by Croatia and the Federal Republic of Yugoslavia.

I am therefore happy to tell the noble Baroness, Lady Hooper, that we still hope that by mid-February there will be 21 bilateral free trade agreements, as she indicated she hoped there would be, between all the countries of the region and that they will be completed. Thereafter, the pact plans to work on practical implementation of those free trade agreements. Clearly there will still be a great deal of work to do on them.

I hope that I do not have to remind the noble Baroness, Lady Hooper, how strongly I agree with her on the points she made about full reform of the common agricultural policy if we really are to open up trade between the EU and the countries of the Western Balkans. She appealed to her colleagues in your Lordships' House to lobby the Government on this issue, but perhaps I should try to persuade her that there is no need because we are convinced. I suggest that your Lordships' energies would be far better deployed lobbying some of our colleagues elsewhere in Europe and, perhaps more pertinently, asking some of the Balkan countries themselves also to lobby some of our colleagues in Europe.

The noble Lord, Lord Hannay, forcefully made the point about why the Balkans are so important to the United Kingdom. Many other noble Lords also touched on that point. Our support is firm because the region is so important to the United Kingdom. It is true that the region is not under the daily spotlight as it once was, but that is in itself a healthy development: it means that the appalling and tragic events which newspapers and the other media have to record and

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place before us daily are no longer occurring in the region. If the region flourishes, then—for all the reasons spelled out so eloquently by the noble Lord, Lord Hannay—the rest of the European Union will flourish. Britain also benefits from a safer and more prosperous Europe. By the same token, if the region fails, we in Britain and our fellow citizens across the European Union will be more at risk—more at risk from crime, drugs and human trafficking, much as the noble Lord, Lord Wallace of Saltaire, described.

So Britain and our EU partners have a real stake in success in the region. That is why the biggest investment of European money, troops and political effort ever made in one region has been going into the Balkans over the past few years. The noble Lord, Lord Russell-Johnston, asked specifically about resources. The European Union is the biggest donor in the region, providing about 4.5 billion euros of aid assistance between 2002 and 2006. We in the United Kingdom contribute approximately 20 per cent of that sum, totalling about 600 million over six years. We do not have the figures for the US, Canada and other donors which the noble Lord requested because the stability pact does not ask donors to publish their contributions.

We in the United Kingdom not only provide that aid but have bilateral programmes in the region outside the EU's assistance. Those programmes amount to more than 35 million in cash terms and much more when the cost of troops, police officers and liaison officers posted across the region are included.

My noble friend Lord Lea of Crondall made a powerful point about the sums spent on aid and the military presence and said how much better it would be to use the money spent on the military on aid and development programmes. It would of course be better, but the conditions would have to be right to enable us to do so. I spent time with our military in both Bosnia and Kosovo. British peacekeeping is so sought after because it is so good and so effective. Soldiers know the members of the various communities in which they are working and where they live. They can tell who is likely not to get on with someone down the road. They know which elderly people are targeted by some of the tough locals and who, for example, cannot get out to do their shopping. They know which children are liable to cause trouble. That is really important. It is also important that our peacekeepers know where drugs are traded; who handles suspect money and who may be corrupt in politics and public life.

I sympathise with the noble Lord in his overall objective, but I ask him to go very carefully when calling for a switch of money at the moment from the military who are doing such a terrific job in these areas.

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