In this episode of Real Economy, we focus on the EU’s macro-financial assistance – emergency financial assistance given to neighboring countries in times of crisis to help stabilize their economies.
Over the past 30 years, 77 MFA operations worth €16 billion have been carried out, helping 27 countries. Recent example was the 1.2 billion euros allocated to Ukraine in solidarity with the Ukrainian people.
Macro Financial Assistance (MFA) comes mainly in the form of loans with very favorable terms and low interest rates. To receive the money, countries must have signed a financing program with the IMF, meet the conditions of respect for human rights and anti-corruption, and undertake democratic, economic, and governance reforms.
The broader aim is to help ensure stability and prosperity outside the EU.
North Macedonia
EU candidate country North Macedonia has received €160 million in macro-financial assistance to help stabilize the country’s economy after the shock caused by COVID-19.
The furloughing of a large number of workers led to a kind of scissor effect: on the one hand there was sluggish tax revenue, on the other hand this led to a sharp increase in public spending.
In addition, foreign direct investment has dried up, reducing the country’s trade balance.
The effect on young people
North Macedonia’s youth unemployment rate has been falling steadily since 2005, but in 2020 it has skyrocketed.
Marija Sepetovska, 23, found a job thanks to that EU Youth Guaranteeset up by the state agency for job seekers.
“Of course it was a stressful time for starting a career in the pandemic and especially for young people. I’m actually getting more and more confident, especially when I see that there are many programs supporting our country.”
Marija admits that some of her friends weren’t so lucky.
“It was very easy for me, but unfortunately that is not the case for many other Macedonian youth. Some of them have a very hard time finding the big opportunity. So it’s still not the best here,” she adds.
The first tranche of macro-financial assistance was provided as emergency aid. For the second payment, North Macedonia had to meet a list of conditions. This included the establishment of a youth unemployment office.
The head of the unit, Goran Petkovski, told Real Economy: “First of all, they are involved in the development of the active labor market measures under the operational plan and how we can better target young people with these active market measures that we have. They are also responsible for coordinating the work of the youth counselors within the local employment office and of course for monitoring and reporting on the Youth Guarantee.”
The €160 million emergency loans have helped North Macedonia weather a difficult economic period, but Shenaj Hadzimustafa, associate professor of business administration at South East European University, believes the benefits will last for a long time.
“The money was needed for this period to fund part of the budget and balance of payments needs. But on the other hand, the reforms are the ones that will remain and will have a positive impact on the country. So these reforms, I think that should not only have an impact in the short term, but also in the medium and long term.”
The EU, now in its fourth decade, recently provided €1.2 billion in macro-financial assistance to support Ukraine. That said EU economic chief Paolo Gentiloni real economy such support is vital.
“We have an interest in the stability of the region. Stability for migration. Stability for peace, etc. And finally, as trading partners of these countries, we have a huge interest because, by and large, the member states of the European Union are the main trading partners of all these countries,” he said.
To learn more about how the EU’s macro-financial assistance has helped North Macedonia, Real Economy’s Naomi Lloyd spoke to the country’s Prime Minister, Dimitar Kovačevski.
Naomi Lloyd, Euronews:
“How much difference has EU macro-financial assistance made to the country?”
Dimitar Kovačevski, Prime Minister of North Macedonia:
“The EU’s macro-financial assistance has helped us a lot, not only from the perspective of pure financial assistance, but also to continue the reforms that we have started in the area of public finance management and in the other areas. But it was also a clear signal to the other international and financial institutions and donors we work with that we have stable economic policies in times of crisis.”
Naomi Lloyd, Euronews:
“How difficult were these reforms to implement?”
Dimitar Kovačevski, Prime Minister of North Macedonia:
“The fight against crime and corruption has produced results as we have improved our position on Transparency International reports. We have now gone to a country with democratic conditions because in the past, in the past, there were shortcomings in the democratization procedures in the country. We’re very, very happy about that.”
Naomi Lloyd, Euronews:
“How do you ensure that the reforms do not stop here, but are fully implemented in the future?”
Dimitar Kovačevski, Prime Minister of North Macedonia:
“We have made sure that we liaise regularly with the institutions of the European Union and the European Commission, so we have regular reporting. We have also done a lot of work on implementing internal mechanisms in the country and in the public institutions to ensure that these reforms are done.”
Naomi Lloyd, Euronews:
“North Macedonia is now an EU accession candidate. The next step is accession talks. How hopeful are you that these will begin soon?”
Dimitar Kovacevski. Prime Minister of North Macedonia:
“North Macedonia has a clear strategic goal to become a full member of the Euro-Atlantic Associations. Last year we celebrated the 30th anniversary of our independence and this was accompanied by our becoming the 30th member of NATO. We’re already in the 17th year and still haven’t started negotiations. Unfortunately, last year there was another challenge imposed by the former Bulgarian government. With the two new governments we started a new dialogue, so together with the Prime Minister of Bulgaria we already had a meeting in Skopje to restore trust and confidence.
