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Lord Anderson of Swansea: My Lords, I congratulate the noble Earl, Lord Dundee, on raising the issue of Croatia and its relations with Europe. I agree with him that Croatia is a European country by most definitions, culturally and geographically. It has made substantial strides towards incorporating the acquis. No doubt, as the process moves along, further such progress will be made.

It is therefore important, as the noble Earl stressed, to see Croatia as a stabilising factor in part of the near-abroad of the European Union. He was also right to see the process of the accession of Croatia as part of the enlargement process as a whole. Although there may be hesitation about the European credentials, size and cultural credentials of certain other countries, there can be no such hesitation in respect of Croatia.

Croatians do not see themselves as a Balkan country, because of the pejorative connotation of "Balkan". They no doubt feel upset when they think of Metternich's suggestion that the Balkans begin at the Landstrasse from Vienna. They view themselves as central European. Having spent one afternoon in the cathedral in Zagreb, looking at the way that the different phases of architecture exactly paralleled those in western Europe, I can well see the reasons for that pride in being part of central Europe. One should therefore, perhaps, not talk so much of the enlargement of the European Union, more of a process of reunification.

After Slovenia, in terms of its prosperity and culture, Croatia is next in line. If there are some who see, somewhere in the Balkans, the collision of the tectonic plates of the Austro-Hungarian and Ottoman empires, and if there is to be a divide there, Croatia is very firmly on the western, Christian, Catholic side. Hence the strong commitment of Austria to Croatia, not only in the early 1990s—some say with a somewhat negative effect—during the period of Alois Mock, but now with Wolfgang Schüssel, with the rather murky events at the beginning of October.

We must recognise, however, that, for that reason, Austria has been consistent. There have been suggestions that the decision to compensate and restitute German expellees from Croatia, which coincided almost exactly with the change in October, was part of a pay-off. My Austrian friends deny that,
 
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however, and say that the agreement was the end part of a long period of negotiation. It will be interesting to see how Her Majesty's Government construe it.

The proper self-image of the Croatians is wholly European. There was a delay compared to other countries, similar to that in Slovakia under Meciar, because, under the Tudjman regime from 1992 to 1999, Croatia remained a poor Balkan country. During the last 18 months, however, there has, in my judgment, been a profound transformation, and under the same party as Tudjman, the HDZ. Prime Minister Sanader deserves considerable credit for that. There has been a real effort at internal reconciliation in Krajina and external co-operation with other countries in the region. There has also been recognition of the responsibility for war crimes in the 1990s and even with regard to the crimes against the Jewish population in the Second World War.

I mentioned the volte-face of the ICTY in respect of Mr Gotovina. It happened, according to some commentators, between 1 and 4 October. It was a Damascene conversion in that context. However, others allege that our press has misconstrued what happened over that time and that the conversion was neither miraculous nor suspicious. I am not aware of any objective evidence of a major change in respect of Gotovina, and it may well be that Carla del Ponte did her office no good and may have created further difficulties for the War Crimes Tribunal in respect of Serbia. But what is done is done, and we have much that is positive to say about Croatia.

The economy is in good shape. It had substantial growth last year, and tourist receipts are buoyant. However, it needs to move from an opaque to a more open and mature government structure and to open up its banking sector, particularly the financial services sector. The World Bank report in May this year concluded that the overall fiduciary risk was "significant", resulting from deficiencies in public financial management. Therefore, much needs to be done in the interim period. British American Tobacco recently threatened to withdraw because of the effect on investors there. The World Bank and the IFC survey ranked Croatia behind 134 other countries in the protection of investments.

In terms of the simultaneous move towards NATO, Croatia is a member of the membership action plan, but there needs to be a substantial transformation of its armed forces to make it NATO-compatible. The last figure that I saw showed that three-quarters of its defence expenditure was spent on personnel and only 8 per cent on new investment. The personnel of its armed forces are extremely old.

What can we in the United Kingdom do to bring Croatia closer to the European Union? What progress has been made? Some examples were given by the noble Earl. What is the current target date for accession? Clearly, the Croatian target date of 2007–08 is unrealistic, but in our contribution, we should look at the well tried instruments of twinning with local authorities, of more parliamentary exchanges, and of placements in the public service of
 
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particular help to the police and the army in exorcising the ghosts of the communists and the period of Tudjman. There are particular problems in justice and home affairs, the functioning of the courts and the quality of the judiciary. I know that Austria has been particularly active here.

What efforts have been made to promote regional co-operation using the committed neighbours—Austria, Hungary and Slovenia—as mentors? Important, too, are regional infrastructure projects promoting regional agreements such as the agreement reached in November on the south-east Europe energy convention. What pressure will there be on Croatia to accelerate the integration of Serbs in the Krajina and also in the regranting of citizenship to Serb former citizens? Obviously, there should be help, too, to eliminate the non-tariff barriers in that region because it is important that the countries of the region work together closely.

What are the benefits to the European Union of the welcome accession of Croatia? Negatively, it will help to reduce the dangers of Croatia and the region being used as a transit route to the European Union for drugs, people and arms smuggling by organised gangs. There is a long history along the Dalmatian coast, but Montenegro and Albania are probably worse offenders, certainly in terms of corruption. Positively, it is an opportunity to show to the region that, if a country does things that are right, it will be rewarded. I hope that Serbia and Montenegro, Albania and Macedonia will be able to co-operate with Croatia and in time follow Croatia along that route. Certainly Croatia's geo-strategic position and its increasing respect for minorities will help to stabilise a key and potentially vulnerable region for the European Union. The progress made thus far should be recognised with approval, and we should encourage Croatia to continue further along that route.

7.55 pm

Lord Hannay of Chiswick: My Lords, two months ago, the negotiations for Croatia's accession to the European Union were begun, so the noble Earl's Question comes at an opportune moment to take stock of that important event and to look ahead.

The process that led up to the opening of negotiations was far from straightforward or trouble-free. In normal circumstances, negotiations would have been opened some months earlier, but they were delayed in the light of the view expressed by the chief prosecutor of the international tribunal for the former Yugoslavia—to which the noble Lord, Lord Anderson, referred—that Croatia was not co-operating fully with the task of bringing before the court one of its nationals who had been indicted for war crimes. That delay was much criticised in Croatia. It was even suggested that it could cause many Croatians to have second thoughts about the desirability of joining the European Union. I think that the EU was entirely justified in the position it took and in refusing to move ahead until the prosecutor was satisfied that she was getting full co-operation. I hope
 
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that the corollary to that position—namely, that should the prosecutor again find that she is not getting full co-operation, the negotiations will have to be suspended—is also true. I hope that the noble Lord, Lord Triesman, will confirm that is the case, as was indicated at the time of the Government's Statement to this House on the opening of negotiations. I say that out of no prejudice against the Government of Croatia or of any desire to see negotiations retarded or suspended. Quite the contrary: I am convinced that if the EU is clear and forthright on this point, the matter will never be put to the test.

The significance of Croatia's co-operation with the international tribunal is a reminder—as is the wording of the noble Earl's Question, which speaks of peace and stability—of the need to look at Croatia's accession in a much wider context than just that of one country's application for membership. A mere 10 years ago, the guns had only just fallen silent on one of Europe's most sanguinary civil wars, because although the wars in the former Yugoslavia had some of the characteristics of wars between states, they also had many of the characteristics of wars within states—that modern paradigm which the international community is still having a good deal of difficulty in grasping and even more in handling.

Europe's track record of that time was less than glorious, as was Croatia's. The Bosnian conflict had subjected both to enormous strains and many mistakes both of omission and commission were made. But my purpose in mentioning this is not to rake over the ashes of old conflicts but rather to register what a remarkable turnaround occurred soon after the low point of Srebrenica. In the next few years, not only did Croatia put behind it the temptations of interference in its Bosnian neighbour's affairs, but the European Union moved gradually but effectively into a central role in keeping the peace and securing a stable future for the Balkans. No European policy has contributed more to this increased influence and effectiveness than the conditional opening of the door to eventual accession by all the countries of the region. In that context, I would welcome an indication from the Minister on whether the EU is now working to ensure the return of the Serb residents of the Krajina who were forcibly expelled in 1995.

It is odd how long it took to be fully understood what a powerful transformational instrument the prospect and, eventually, the actuality of EU accession can be. After all, it worked well in Greece, then it worked well in Spain and Portugal, and then it worked well with former communist countries of central and eastern Europe. Now it is beginning to work in the western Balkans. It has become one of the most significant demonstrations of what is often called "soft power". It is the glue that holds together the other instruments the EU possesses and deploys: peacekeeping troops, civilian police training and economic aid. It is what has enabled the European Union to play an ever growing role in securing peace and stability in its own backyard. Of course, it works only if the conditionality implied in the Copenhagen criteria for membership is rigorously applied and
 
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implemented. That will, no doubt, lead to some difficult moments, not just for Croatia, but for every candidate for accession from now onwards. It is in the interests of neither the European Union nor the citizens of the candidates for membership that those criteria should be fudged or applied in a haphazard fashion.

When, following the rejection of the European constitutional treaty in the French and Dutch referendums, a dark shadow fell over the prospects for further enlargement, most people were thinking about the implications for Turkey when they should have been thinking just as much about the implications for the west Balkans. That was what made the decisions taken on 3 October to open negotiations with Turkey and Croatia so very important and why it is only fair to give real credit to Britain's EU presidency for standing firm and thus, for the time being at least, dissipating that dark shadow. No doubt further enlargement will remain a fraught subject in the European Union, never again likely to be as comfortably uncontentious as it was in the 1980s and 1990s. So we will need not for a moment to forget how much is riding on it and how damaging the consequences are likely to be if we turn away from it.

Coming back from these wider perspectives to the candidacy of Croatia itself, it will be important to move these negotiations ahead purposefully and with determination on both sides. The European Union will need to avoid being distracted by its other preoccupations; Croatia will need to find the political will to overcome the problems that inevitably arise in such complex negotiations. I hope that this House and the All-Party Parliamentary Group on Enlargement, chaired by the noble Lord, Lord Dubs, will be able to assist in a modest way on both sides of that equation. It would be surprising indeed if Croatia was not to become the 28th member of the Union, and I, for one, fully expect it to do so.

8.03 pm


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